I. GENERAL PROVISIONS (A.

TRANSFER OF PROPERTY, RIGHTS AND OBLIGTIONS)(ART 774, 776, 728)

1. G.R. No. 149926 February 23, 2005

UNION BANK OF THE PHILIPPINES, petitioner,

vs.
EDMUND SANTIBAÑEZ and FLORENCE SANTIBAÑEZ ARIOLA, respondents.

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court which seeks the reversal of the
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Decision of the Court of Appeals dated May 30, 2001 in CA-G.R. CV No. 48831 affirming the dismissal of the petitioner’s
complaint in Civil Case No. 18909 by the Regional Trial Court (RTC) of Makati City, Branch 63.

The antecedent facts are as follows:

On May 31, 1980, the First Countryside Credit Corporation (FCCC) and Efraim M. Santibañez entered into a loan
3
agreement in the amount of ₱128,000.00. The amount was intended for the payment of the purchase price of one (1) unit
Ford 6600 Agricultural All-Purpose Diesel Tractor. In view thereof, Efraim and his son, Edmund, executed a promissory
note in favor of the FCCC, the principal sum payable in five equal annual amortizations of ₱43,745.96 due on May 31,
1981 and every May 31st thereafter up to May 31, 1985.

4
On December 13, 1980, the FCCC and Efraim entered into another loan agreement, this time in the amount of
₱123,156.00. It was intended to pay the balance of the purchase price of another unit of Ford 6600 Agricultural All-
Purpose Diesel Tractor, with accessories, and one (1) unit Howard Rotamotor Model AR 60K. Again, Efraim and his son,
Edmund, executed a promissory note for the said amount in favor of the FCCC. Aside from such promissory note, they
5
also signed a Continuing Guaranty Agreement for the loan dated December 13, 1980.

6
Sometime in February 1981, Efraim died, leaving a holographic will. Subsequently in March 1981, testate proceedings
commenced before the RTC of Iloilo City, Branch 7, docketed as Special Proceedings No. 2706. On April 9, 1981,
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Edmund, as one of the heirs, was appointed as the special administrator of the estate of the decedent. During the
pendency of the testate proceedings, the surviving heirs, Edmund and his sister Florence Santibañez Ariola, executed a
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Joint Agreement dated July 22, 1981, wherein they agreed to divide between themselves and take possession of the
three (3) tractors; that is, two (2) tractors for Edmund and one (1) tractor for Florence. Each of them was to assume the
indebtedness of their late father to FCCC, corresponding to the tractor respectively taken by them.

9
On August 20, 1981, a Deed of Assignment with Assumption of Liabilities was executed by and between FCCC and
Union Savings and Mortgage Bank, wherein the FCCC as the assignor, among others, assigned all its assets and
liabilities to Union Savings and Mortgage Bank.

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Demand letters for the settlement of his account were sent by petitioner Union Bank of the Philippines (UBP) to Edmund,
11
but the latter failed to heed the same and refused to pay. Thus, on February 5, 1988, the petitioner filed a Complaint for
sum of money against the heirs of Efraim Santibañez, Edmund and Florence, before the RTC of Makati City, Branch 150,
docketed as Civil Case No. 18909. Summonses were issued against both, but the one intended for Edmund was not
served since he was in the United States and there was no information on his address or the date of his return to the
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Philippines. Accordingly, the complaint was narrowed down to respondent Florence S. Ariola.

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On December 7, 1988, respondent Florence S. Ariola filed her Answer and alleged that the loan documents did not bind
her since she was not a party thereto. Considering that the joint agreement signed by her and her brother Edmund was
not approved by the probate court, it was null and void; hence, she was not liable to the petitioner under the joint
agreement.

14
On January 29, 1990, the case was unloaded and re-raffled to the RTC of Makati City, Branch 63. Consequently, trial on
the merits ensued and a decision was subsequently rendered by the court dismissing the complaint for lack of merit. The
decretal portion of the RTC decision reads:

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WHEREFORE, judgment is hereby rendered DISMISSING the complaint for lack of merit.

The trial court found that the claim of the petitioner should have been filed with the probate court before which the testate
estate of the late Efraim Santibañez was pending, as the sum of money being claimed was an obligation incurred by the
said decedent. The trial court also found that the Joint Agreement apparently executed by his heirs, Edmund and
Florence, on July 22, 1981, was, in effect, a partition of the estate of the decedent. However, the said agreement was
void, considering that it had not been approved by the probate court, and that there can be no valid partition until after the
will has been probated. The trial court further declared that petitioner failed to prove that it was the now defunct Union
Savings and Mortgage Bank to which the FCCC had assigned its assets and liabilities. The court also agreed to the
contention of respondent Florence S. Ariola that the list of assets and liabilities of the FCCC assigned to Union Savings
and Mortgage Bank did not clearly refer to the decedent’s account. Ruling that the joint agreement executed by the heirs
was null and void, the trial court held that the petitioner’s cause of action against respondent Florence S. Ariola must
necessarily fail.
The petitioner appealed from the RTC decision and elevated its case to the Court of Appeals (CA), assigning the following
as errors of the trial court:

1. THE COURT A QUO ERRED IN FINDING THAT THE JOINT AGREEMENT (EXHIBIT A) SHOULD BE
APPROVED BY THE PROBATE COURT.

2. THE COURT A QUO ERRED IN FINDING THAT THERE CAN BE NO VALID PARTITION AMONG THE
HEIRS UNTIL AFTER THE WILL HAS BEEN PROBATED.

3. THE COURT A QUO ERRED IN NOT FINDING THAT THE DEFENDANT HAD WAIVED HER RIGHT TO
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HAVE THE CLAIM RE-LITIGATED IN THE ESTATE PROCEEDING.

The petitioner asserted before the CA that the obligation of the deceased had passed to his legitimate children and heirs,
in this case, Edmund and Florence; the unconditional signing of the joint agreement marked as Exhibit "A" estopped
respondent Florence S. Ariola, and that she cannot deny her liability under the said document; as the agreement had
been signed by both heirs in their personal capacity, it was no longer necessary to present the same before the probate
court for approval; the property partitioned in the agreement was not one of those enumerated in the holographic will
made by the deceased; and the active participation of the heirs, particularly respondent Florence S. Ariola, in the present
ordinary civil action was tantamount to a waiver to re-litigate the claim in the estate proceedings.

On the other hand, respondent Florence S. Ariola maintained that the money claim of the petitioner should have been
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presented before the probate court.

The appellate court found that the appeal was not meritorious and held that the petitioner should have filed its claim with
the probate court as provided under Sections 1 and 5, Rule 86 of the Rules of Court. It further held that the partition made
in the agreement was null and void, since no valid partition may be had until after the will has been probated. According to
the CA, page 2, paragraph (e) of the holographic will covered the subject properties (tractors) in generic terms when the
deceased referred to them as "all other properties." Moreover, the active participation of respondent Florence S. Ariola in
the case did not amount to a waiver. Thus, the CA affirmed the RTC decision, viz.:

WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court of Makati City, Branch 63, is
hereby AFFIRMED in toto.

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SO ORDERED.

In the present recourse, the petitioner ascribes the following errors to the CA:

I.

THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE JOINT AGREEMENT SHOULD BE
APPROVED BY THE PROBATE COURT.

II.

THE COURT OF APPEALS ERRED IN FINDING THAT THERE CAN BE NO VALID PARTITION AMONG THE HEIRS
OF THE LATE EFRAIM SANTIBAÑEZ UNTIL AFTER THE WILL HAS BEEN PROBATED.

III.

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE RESPONDENT HAD WAIVED HER RIGHT TO HAVE
THE CLAIM RE-LITIGATED IN THE ESTATE PROCEEDING.

IV.

RESPONDENTS CAN, IN FACT, BE HELD JOINTLY AND SEVERALLY LIABLE WITH THE PRINCIPAL DEBTOR THE
LATE EFRAIM SANTIBAÑEZ ON THE STRENGTH OF THE CONTINUING GUARANTY AGREEMENT EXECUTED IN
FAVOR OF PETITIONER-APPELLANT UNION BANK.

V.

THE PROMISSORY NOTES DATED MAY 31, 1980 IN THE SUM OF ₱128,000.00 AND DECEMBER 13, 1980 IN THE
AMOUNT OF ₱123,000.00 CATEGORICALLY ESTABLISHED THE FACT THAT THE RESPONDENTS BOUND
THEMSELVES JOINTLY AND SEVERALLY LIABLE WITH THE LATE DEBTOR EFRAIM SANTIBAÑEZ IN FAVOR OF
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PETITIONER UNION BANK.

The petitioner claims that the obligations of the deceased were transmitted to the heirs as provided in Article 774 of the
Civil Code; there was thus no need for the probate court to approve the joint agreement where the heirs partitioned the
tractors owned by the deceased and assumed the obligations related thereto. Since respondent Florence S. Ariola signed
the joint agreement without any condition, she is now estopped from asserting any position contrary thereto. The
petitioner also points out that the holographic will of the deceased did not include nor mention any of the tractors subject
of the complaint, and, as such was beyond the ambit of the said will. The active participation and resistance of respondent
Florence S. Ariola in the ordinary civil action against the petitioner’s claim amounts to a waiver of the right to have the
claim presented in the probate proceedings, and to allow any one of the heirs who executed the joint agreement to
escape liability to pay the value of the tractors under consideration would be equivalent to allowing the said heirs to enrich
themselves to the damage and prejudice of the petitioner.

The petitioner, likewise, avers that the decisions of both the trial and appellate courts failed to consider the fact that
respondent Florence S. Ariola and her brother Edmund executed loan documents, all establishing the vinculum jurisor the
legal bond between the late Efraim Santibañez and his heirs to be in the nature of a solidary obligation. Furthermore, the
Promissory Notes dated May 31, 1980 and December 13, 1980 executed by the late Efraim Santibañez, together with his
heirs, Edmund and respondent Florence, made the obligation solidary as far as the said heirs are concerned. The
petitioner also proffers that, considering the express provisions of the continuing guaranty agreement and the promissory
notes executed by the named respondents, the latter must be held liable jointly and severally liable thereon. Thus, there
was no need for the petitioner to file its money claim before the probate court. Finally, the petitioner stresses that both
surviving heirs are being sued in their respective personal capacities, not as heirs of the deceased.

In her comment to the petition, respondent Florence S. Ariola maintains that the petitioner is trying to recover a sum of
money from the deceased Efraim Santibañez; thus the claim should have been filed with the probate court. She points out
that at the time of the execution of the joint agreement there was already an existing probate proceedings of which the
petitioner knew about. However, to avoid a claim in the probate court which might delay payment of the obligation, the
petitioner opted to require them to execute the said agreement.1a\^/phi1.net

According to the respondent, the trial court and the CA did not err in declaring that the agreement was null and void. She
asserts that even if the agreement was voluntarily executed by her and her brother Edmund, it should still have been
subjected to the approval of the court as it may prejudice the estate, the heirs or third parties. Furthermore, she had not
waived any rights, as she even stated in her answer in the court a quo that the claim should be filed with the probate
court. Thus, the petitioner could not invoke or claim that she is in estoppel.

Respondent Florence S. Ariola further asserts that she had not signed any continuing guaranty agreement, nor was there
any document presented as evidence to show that she had caused herself to be bound by the obligation of her late father.

The petition is bereft of merit.

The Court is posed to resolve the following issues: a) whether or not the partition in the Agreement executed by the heirs
is valid; b) whether or not the heirs’ assumption of the indebtedness of the deceased is valid; and c) whether the petitioner
can hold the heirs liable on the obligation of the deceased.1awphi1.nét

At the outset, well-settled is the rule that a probate court has the jurisdiction to determine all the properties of the
deceased, to determine whether they should or should not be included in the inventory or list of properties to be
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administered. The said court is primarily concerned with the administration, liquidation and distribution of the estate.

In our jurisdiction, the rule is that there can be no valid partition among the heirs until after the will has been probated:

In testate succession, there can be no valid partition among the heirs until after the will has been probated. The law
enjoins the probate of a will and the public requires it, because unless a will is probated and notice thereof given to the
whole world, the right of a person to dispose of his property by will may be rendered nugatory. The authentication of a will
decides no other question than such as touch upon the capacity of the testator and the compliance with those
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requirements or solemnities which the law prescribes for the validity of a will.

23
This, of course, presupposes that the properties to be partitioned are the same properties embraced in the will. In the
24
present case, the deceased, Efraim Santibañez, left a holographic will which contained, inter alia, the provision which
reads as follows:

(e) All other properties, real or personal, which I own and may be discovered later after my demise, shall be distributed in
the proportion indicated in the immediately preceding paragraph in favor of Edmund and Florence, my children.

We agree with the appellate court that the above-quoted is an all-encompassing provision embracing all the properties left
by the decedent which might have escaped his mind at that time he was making his will, and other properties he may
acquire thereafter. Included therein are the three (3) subject tractors. This being so, any partition involving the said
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tractors among the heirs is not valid. The joint agreement executed by Edmund and Florence, partitioning the tractors
among themselves, is invalid, specially so since at the time of its execution, there was already a pending proceeding for
the probate of their late father’s holographic will covering the said tractors.

It must be stressed that the probate proceeding had already acquired jurisdiction over all the properties of the deceased,
including the three (3) tractors. To dispose of them in any way without the probate court’s approval is tantamount to
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divesting it with jurisdiction which the Court cannot allow. Every act intended to put an end to indivision among co-heirs
and legatees or devisees is deemed to be a partition, although it should purport to be a sale, an exchange, a compromise,
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or any other transaction. Thus, in executing any joint agreement which appears to be in the nature of an extra-judicial
partition, as in the case at bar, court approval is imperative, and the heirs cannot just divest the court of its jurisdiction
over that part of the estate. Moreover, it is within the jurisdiction of the probate court to determine the identity of the heirs
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of the decedent. In the instant case, there is no showing that the signatories in the joint agreement were the only heirs of
the decedent. When it was executed, the probate of the will was still pending before the court and the latter had yet to
determine who the heirs of the decedent were. Thus, for Edmund and respondent Florence S. Ariola to adjudicate unto
themselves the three (3) tractors was a premature act, and prejudicial to the other possible heirs and creditors who may
have a valid claim against the estate of the deceased.

The question that now comes to fore is whether the heirs’ assumption of the indebtedness of the decedent is binding. We
rule in the negative. Perusing the joint agreement, it provides that the heirs as parties thereto "have agreed to divide
between themselves and take possession and use the above-described chattel and each of them to assume the
indebtedness corresponding to the chattel taken as herein after stated which is in favor of First Countryside Credit
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Corp." The assumption of liability was conditioned upon the happening of an event, that is, that each heir shall take
possession and use of their respective share under the agreement. It was made dependent on the validity of the partition,
and that they were to assume the indebtedness corresponding to the chattel that they were each to receive. The partition
being invalid as earlier discussed, the heirs in effect did not receive any such tractor. It follows then that the assumption of
liability cannot be given any force and effect.

The Court notes that the loan was contracted by the decedent.l^vvphi1.net The petitioner, purportedly a creditor of the late
Efraim Santibañez, should have thus filed its money claim with the probate court in accordance with Section 5, Rule 86 of
the Revised Rules of Court, which provides:

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 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 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.

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The filing of a money claim against the decedent’s estate in the probate court is mandatory. As we held in the vintage
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case of Py Eng Chong v. Herrera:

… This requirement is for the purpose of protecting the estate of the deceased by informing the executor or administrator
of the claims against it, thus enabling him to examine each claim and to determine whether it is a proper one which should
be allowed. The plain and obvious design of the rule is the speedy settlement of the affairs of the deceased and the early
delivery of the property to the distributees, legatees, or heirs. `The law strictly requires the prompt presentation and
disposition of the claims against the decedent's estate in order to settle the affairs of the estate as soon as possible, pay
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off its debts and distribute the residue.

Perusing the records of the case, nothing therein could hold private respondent Florence S. Ariola accountable for any
liability incurred by her late father. The documentary evidence presented, particularly the promissory notes and the
continuing guaranty agreement, were executed and signed only by the late Efraim Santibañez and his son Edmund. As
the petitioner failed to file its money claim with the probate court, at most, it may only go after Edmund as co-maker of the
decedent under the said promissory notes and continuing guaranty, of course, subject to any defenses Edmund may have
as against the petitioner. As the court had not acquired jurisdiction over the person of Edmund, we find it unnecessary to
delve into the matter further.

We agree with the finding of the trial court that the petitioner had not sufficiently shown that it is the successor-in-interest
33
of the Union Savings and Mortgage Bank to which the FCCC assigned its assets and liabilities. The petitioner in its
complaint alleged that "by virtue of the Deed of Assignment dated August 20, 1981 executed by and between First
34 35
Countryside Credit Corporation and Union Bank of the Philippines…" However, the documentary evidence clearly
reflects that the parties in the deed of assignment with assumption of liabilities were the FCCC, and the Union Savings
and Mortgage Bank, with the conformity of Bancom Philippine Holdings, Inc. Nowhere can the petitioner’s participation
therein as a party be found. Furthermore, no documentary or testimonial evidence was presented during trial to show that
Union Savings and Mortgage Bank is now, in fact, petitioner Union Bank of the Philippines. As the trial court declared in
its decision:

… [T]he court also finds merit to the contention of defendant that plaintiff failed to prove or did not present evidence to
prove that Union Savings and Mortgage Bank is now the Union Bank of the Philippines. Judicial notice does not apply
here. "The power to take judicial notice is to [be] exercised by the courts with caution; care must be taken that the
requisite notoriety exists; and every reasonable doubt upon the subject should be promptly resolved in the negative."
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(Republic vs. Court of Appeals, 107 SCRA 504).

This being the case, the petitioner’s personality to file the complaint is wanting. Consequently, it failed to establish its
cause of action. Thus, the trial court did not err in dismissing the complaint, and the CA in affirming the same.

IN LIGHT OF ALL THE FOREGOING, the petition is hereby DENIED. The assailed Court of Appeals Decision is
AFFIRMED. No costs.

SO ORDERED.
 2.
[G.R. No. L-8437. November 28, 1956.]
ESTATE OF K. H. HEMADY, deceased, vs. LUZON SURETY CO., INC., claimant-Appellant.

DECISION
REYES, J. B. L., J.:
Appeal by Luzon Surety Co., Inc., from an order of the Court of First Instance of Rizal, presided by Judge Hermogenes Caluag,
dismissing its claim against the Estate of K. H. Hemady (Special Proceeding No. Q-293) for failure to state a cause of action.
The Luzon Surety Co. had filed a claim against the Estate based on twenty different indemnity agreements, or counter bonds, each
subscribed by a distinct principal and by the deceased K. H. Hemady, a surety solidary guarantor) in all of them, in consideration of
the Luzon Surety Co.’s of having guaranteed, the various principals in favor of different creditors. The twenty counterbonds, or
indemnity agreements, all contained the following stipulations:chanroblesvirtuallawlibrary
“Premiums. — As consideration for this suretyship, the undersigned jointly and severally, agree to pay the COMPANY the sum of
________________ (P______) pesos, Philippines Currency, in advance as premium there of for every __________ months or
fractions thereof, this ________ or any renewal or substitution thereof is in effect.
Indemnity. — The undersigned, jointly and severally, agree at all times to indemnify the COMPANY and keep it indemnified and hold
and save it harmless from and against any and all damages, losses, costs, stamps, taxes, penalties, charges, and expenses of
whatsoever kind and nature which the COMPANY shall or may, at any time sustain or incur in consequence of having become surety
upon this bond or any extension, renewal, substitution or alteration thereof made at the instance of the undersigned or any of them
or any order executed on behalf of the undersigned or any of them; chan roblesvirtualawlibraryand to pay, reimburse and make
good to the COMPANY, its successors and assigns, all sums and amount of money which it or its representatives shall pay or cause to
be paid, or become liable to pay, on account of the undersigned or any of them, of whatsoever kind and nature, including 15% of the
amount involved in the litigation or other matters growing out of or connected therewith for counsel or attorney’s fees, but in no
case less than P25. It is hereby further agreed that in case of extension or renewal of this ________ we equally bind ourselves for the
payment thereof under the same terms and conditions as above mentioned without the necessity of executing another indemnity
agreement for the purpose and that we hereby equally waive our right to be notified of any renewal or extension of this ________
which may be granted under this indemnity agreement.
Interest on amount paid by the Company. — Any and all sums of money so paid by the company shall bear interest at the rate of
12% per annum which interest, if not paid, will be accummulated and added to the capital quarterly order to earn the same
interests as the capital and the total sum thereof, the capital and interest, shall be paid to the COMPANY as soon as the COMPANY
shall have become liable therefore, whether it shall have paid out such sums of money or any part thereof or not.
xxx xxx xxx
Waiver. — It is hereby agreed upon by and between the undersigned that any question which may arise between them by reason of
this document and which has to be submitted for decision to Courts of Justice shall be brought before the Court of competent
jurisdiction in the City of Manila, waiving for this purpose any other venue. Our right to be notified of the acceptance and approval
of this indemnity agreement is hereby likewise waived.
xxx xxx xxx
Our Liability Hereunder. — It shall not be necessary for the COMPANY to bring suit against the principal upon his default, or to
exhaust the property of the principal, but the liability hereunder of the undersigned indemnitor shall be jointly and severally, a
primary one, the same as that of the principal, and shall be exigible immediately upon the occurrence of such default.” (Rec. App.
pp. 98- 102.)
The Luzon Surety Co., prayed for allowance, as a contingent claim, of the value of the twenty bonds it had executed in consideration
of the counterbonds, and further asked for judgment for the unpaid premiums and documentary stamps affixed to the bonds, with
12 per cent interest thereon.
Before answer was filed, and upon motion of the administratrix of Hemady’s estate, the lower court, by order of September 23,
1953, dismissed the claims of Luzon Surety Co., on two grounds:chanroblesvirtuallawlibrary (1) that the premiums due and cost of
documentary stamps were not contemplated under the indemnity agreements to be a part of the undertaking of the guarantor
(Hemady), since they were not liabilities incurred after the execution of the counterbonds; chan roblesvirtualawlibraryand (2) that
“whatever losses may occur after Hemady’s death, are not chargeable to his estate, because upon his death he ceased to be
guarantor.”
Taking up the latter point first, since it is the one more far reaching in effects, the reasoning of the court below ran as
follows:chanroblesvirtuallawlibrary
“The administratrix further contends that upon the death of Hemady, his liability as a guarantor terminated, and therefore, in the
absence of a showing that a loss or damage was suffered, the claim cannot be considered contingent. This Court believes that there
is merit in this contention and finds support in Article 2046 of the new Civil Code. It should be noted that a new requirement has
been added for a person to qualify as a guarantor, that is:chanroblesvirtuallawlibrary integrity. As correctly pointed out by the
Administratrix, integrity is something purely personal and is not transmissible. Upon the death of Hemady, his integrity was not
transmitted to his estate or successors. Whatever loss therefore, may occur after Hemady’s death, are not chargeable to his estate
because upon his death he ceased to be a guarantor.
Another clear and strong indication that the surety company has exclusively relied on the personality, character, honesty and
integrity of the now deceased K. H. Hemady, was the fact that in the printed form of the indemnity agreement there is a paragraph
entitled ‘Security by way of first mortgage, which was expressly waived and renounced by the security company. The security
company has not demanded from K. H. Hemady to comply with this requirement of giving security by way of first mortgage. In the
supporting papers of the claim presented by Luzon Surety Company, no real property was mentioned in the list of properties
mortgaged which appears at the back of the indemnity agreement.” (Rec. App., pp. 407-408).
We find this reasoning untenable. Under the present Civil Code (Article 1311), as well as under the Civil Code of 1889 (Article 1257),
the rule is that —
“Contracts take effect only as between the parties, their assigns and heirs, except in the case where the rights and obligations arising
from the contract are not transmissible by their nature, or by stipulation or by provision of law.”
While in our successional system the responsibility of the heirs for the debts of their decedent cannot exceed the value of the
inheritance they receive from him, the principle remains intact that these heirs succeed not only to the rights of the deceased but
also to his obligations. Articles 774 and 776 of the New Civil Code (and Articles 659 and 661 of the preceding one) expressly so
provide, thereby confirming Article 1311 already quoted.
“ART. 774. — Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of
the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law.”
“ART. 776. — The inheritance includes all the property, rights and obligations of a person which are not extinguished by his death.”
In Mojica vs. Fernandez, 9 Phil. 403, this Supreme Court ruled:chanroblesvirtuallawlibrary
“Under the Civil Code the heirs, by virtue of the rights of succession are subrogated to all the rights and obligations of the deceased
(Article 661) and cannot be regarded as third parties with respect to a contract to which the deceased was a party, touching the
estate of the deceased (Barrios vs. Dolor, 2 Phil. 44).
xxx xxx xxx
“The principle on which these decisions rest is not affected by the provisions of the new Code of Civil Procedure, and, in accordance
with that principle, the heirs of a deceased person cannot be held to be “third persons” in relation to any contracts touching the real
estate of their decedent which comes in to their hands by right of inheritance; chan roblesvirtualawlibrarythey take such property
subject to all the obligations resting thereon in the hands of him from whom they derive their rights.”
(See also Galasinao vs. Austria, 51 Off. Gaz. (No. 6) p. 2874 and de Guzman vs. Salak, 91 Phil., 265).
The binding effect of contracts upon the heirs of the deceased party is not altered by the provision in our Rules of Court that money
debts of a deceased must be liquidated and paid from his estate before the residue is distributed among said heirs (Rule 89). The
reason is that whatever payment is thus made from the estate is ultimately a payment by the heirs and distributees, since the
amount of the paid claim in fact diminishes or reduces the shares that the heirs would have been entitled to receive.
Under our law, therefore, the general rule is that a party’s contractual rights and obligations are transmissible to the successors. The
rule is a consequence of the progressive “depersonalization” of patrimonial rights and duties that, as observed by Victorio Polacco,
has characterized the history of these institutions. From the Roman concept of a relation from person to person, the obligation has
evolved into a relation from patrimony to patrimony, with the persons occupying only a representative position, barring those rare
cases where the obligation is strictly personal, i.e., is contracted intuitu personae, in consideration of its performance by a specific
person and by no other. The transition is marked by the disappearance of the imprisonment for debt.
Of the three exceptions fixed by Article 1311, the nature of the obligation of the surety or guarantor does not warrant the
conclusion that his peculiar individual qualities are contemplated as a principal inducement for the contract. What did the creditor
Luzon Surety Co. expect of K. H. Hemady when it accepted the latter as surety in the counterbonds? Nothing but the reimbursement
of the moneys that the Luzon Surety Co. might have to disburse on account of the obligations of the principal debtors. This
reimbursement is a payment of a sum of money, resulting from an obligation to give; chan roblesvirtualawlibraryand to the Luzon
Surety Co., it was indifferent that the reimbursement should be made by Hemady himself or by some one else in his behalf, so long
as the money was paid to it.
The second exception of Article 1311, p. 1, is intransmissibility by stipulation of the parties. Being exceptional and contrary to the
general rule, this intransmissibility should not be easily implied, but must be expressly established, or at the very least, clearly
inferable from the provisions of the contract itself, and the text of the agreements sued upon nowhere indicate that they are non-
transferable.
“(b) Intransmisibilidad por pacto. — Lo general es la transmisibilidad de darechos y obligaciones; chan roblesvirtualawlibraryle
excepcion, la intransmisibilidad. Mientras nada se diga en contrario impera el principio de la transmision, como elemento natural a
toda relacion juridica, salvo las personalisimas. Asi, para la no transmision, es menester el pacto expreso, porque si no, lo convenido
entre partes trasciende a sus herederos.
Siendo estos los continuadores de la personalidad del causante, sobre ellos recaen los efectos de los vinculos juridicos creados por
sus antecesores, y para evitarlo, si asi se quiere, es indespensable convension terminante en tal sentido.
Por su esencia, el derecho y la obligacion tienden a ir más allá de las personas que les dieron vida, y a ejercer presion sobre los
sucesores de esa persona; chan roblesvirtualawlibrarycuando no se quiera esto, se impone una estipulacion limitativa expresamente
de la transmisibilidad o de cuyos tirminos claramente se deduzca la concresion del concreto a las mismas personas que lo otorgon.”
(Scaevola, Codigo Civil, Tomo XX, p. 541-542) (Emphasis supplied.)
Because under the law (Article 1311), a person who enters into a contract is deemed to have contracted for himself and his heirs and
assigns, it is unnecessary for him to expressly stipulate to that effect; chan roblesvirtualawlibraryhence, his failure to do so is no sign
that he intended his bargain to terminate upon his death. Similarly, that the Luzon Surety Co., did not require bondsman Hemady to
execute a mortgage indicates nothing more than the company’s faith and confidence in the financial stability of the surety, but not
that his obligation was strictly personal.
The third exception to the transmissibility of obligations under Article 1311 exists when they are “not transmissible by operation of
law”. The provision makes reference to those cases where the law expresses that the rights or obligations are extinguished by death,
as is the case in legal support (Article 300), parental authority (Article 327), usufruct (Article 603), contracts for a piece of work
(Article 1726), partnership (Article 1830 and agency (Article 1919). By contract, the articles of the Civil Code that regulate guaranty
or suretyship (Articles 2047 to 2084) contain no provision that the guaranty is extinguished upon the death of the guarantor or the
surety.
The lower court sought to infer such a limitation from Art. 2056, to the effect that “one who is obliged to furnish a guarantor must
present a person who possesses integrity, capacity to bind himself, and sufficient property to answer for the obligation which he
guarantees”. It will be noted, however, that the law requires these qualities to be present only at the time of the perfection of the
contract of guaranty. It is self-evident that once the contract has become perfected and binding, the supervening incapacity of the
guarantor would not operate to exonerate him of the eventual liability he has contracted; chan roblesvirtualawlibraryand if that be
true of his capacity to bind himself, it should also be true of his integrity, which is a quality mentioned in the article alongside the
capacity.
The foregoing concept is confirmed by the next Article 2057, that runs as follows:chanroblesvirtuallawlibrary
“ART. 2057. — If the guarantor should be convicted in first instance of a crime involving dishonesty or should become insolvent, the
creditor may demand another who has all the qualifications required in the preceding article. The case is excepted where the
creditor has required and stipulated that a specified person should be guarantor.”
From this article it should be immediately apparent that the supervening dishonesty of the guarantor (that is to say, the
disappearance of his integrity after he has become bound) does not terminate the contract but merely entitles the creditor to
demand a replacement of the guarantor. But the step remains optional in the creditor:chanroblesvirtuallawlibrary it is his right, not
his duty; chan roblesvirtualawlibraryhe may waive it if he chooses, and hold the guarantor to his bargain. Hence Article 2057 of the
present Civil Code is incompatible with the trial court’s stand that the requirement of integrity in the guarantor or surety makes the
latter’s undertaking strictly personal, so linked to his individuality that the guaranty automatically terminates upon his death.
The contracts of suretyship entered into by K. H. Hemady in favor of Luzon Surety Co. not being rendered intransmissible due to the
nature of the undertaking, nor by the stipulations of the contracts themselves, nor by provision of law, his eventual liability
thereunder necessarily passed upon his death to his heirs. The contracts, therefore, give rise to contingent claims provable against
his estate under section 5, Rule 87 (2 Moran, 1952 ed., p. 437; chan roblesvirtualawlibraryGaskell & Co. vs. Tan Sit, 43 Phil. 810, 814).
“The most common example of the contigent claim is that which arises when a person is bound as surety or guarantor for a principal
who is insolvent or dead. Under the ordinary contract of suretyship the surety has no claim whatever against his principal until he
himself pays something by way of satisfaction upon the obligation which is secured. When he does this, there instantly arises in
favor of the surety the right to compel the principal to exonerate the surety. But until the surety has contributed something to the
payment of the debt, or has performed the secured obligation in whole or in part, he has no right of action against anybody — no
claim that could be reduced to judgment. (May vs. Vann, 15 Pla., 553; chan roblesvirtualawlibraryGibson vs. Mithell, 16 Pla.,
519; chan roblesvirtualawlibraryMaxey vs. Carter, 10 Yarg. [Tenn.], 521 Reeves vs. Pulliam, 7 Baxt. [Tenn.], 119; chan
roblesvirtualawlibraryErnst vs. Nou, 63 Wis., 134.)”
For Defendant administratrix it is averred that the above doctrine refers to a case where the surety files claims against the estate of
the principal debtor; chan roblesvirtualawlibraryand it is urged that the rule does not apply to the case before us, where the late
Hemady was a surety, not a principal debtor. The argument evinces a superficial view of the relations between parties. If under the
Gaskell ruling, the Luzon Surety Co., as guarantor, could file a contingent claim against the estate of the principal debtors if the latter
should die, there is absolutely no reason why it could not file such a claim against the estate of Hemady, since Hemady is a solidary
co-debtor of his principals. What the Luzon Surety Co. may claim from the estate of a principal debtor it may equally claim from the
estate of Hemady, since, in view of the existing solidarity, the latter does not even enjoy the benefit of exhaustion of the assets of
the principal debtor.
The foregoing ruling is of course without prejudice to the remedies of the administratrix against the principal debtors under Articles
2071 and 2067 of the New Civil Code.
Our conclusion is that the solidary guarantor’s liability is not extinguished by his death, and that in such event, the Luzon Surety Co.,
had the right to file against the estate a contingent claim for reimbursement. It becomes unnecessary now to discuss the estate’s
liability for premiums and stamp taxes, because irrespective of the solution to this question, the Luzon Surety’s claim did state a
cause of action, and its dismissal was erroneous.
Wherefore, the order appealed from is reversed, and the records are ordered remanded to the court of origin, with instructions to
proceed in accordance with law. Costs against the Administratrix- Appellee. SO ORDERED.
Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia and Felix, JJ., concur.
 3.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

ANGELA M. BUTTE, plaintiff-appellant,

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

Delgado, Flores and Macapagal for plaintiff-appellant.

Pelaez and Jalandoni for defendant-appellee.

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

Appeal from a decision of the Court of First instance of Manila dismissing the action for legal redemption filed by plaintiff-
appellant.

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

On October 20, 1951, Jose V. Ramirez died. Subsequently, Special Proceeding No. 15026 was instituted to settle his
estate, that included the one-sixth (1/6) undivided share in the aforementioned property. And although his last will and
testament, wherein he bequeathed his estate to his children and grandchildren and one-third (1/3) of the free portion to
Mrs. Angela M. Butte, hereinafter referred to as plaintiff-appellant, has been admitted to probate, the estate proceedings
are still pending up to the present on account of the claims of creditors which exceed the assets of the deceased. The
Bank of the Philippine Islands was appointed judicial administrator.

Meanwhile, on December 9, 1958, Mrs. Marie Garnier Vda. de Ramirez, one of the co-owners of the late Jose V. Ramirez
in the Sta. Cruz property, sold her undivided 1/6 share to Manuel Uy & Sons, Inc. defendant-appellant herein, for the sum
of P500,000.00. After the execution by her attorney-in-fact, Mrs. Elsa R. Chambers, of an affidavit to the effect that formal
notices of the sale had been sent to all possible redemptioners, the deed of sale was duly registered and Transfer
Certificate of Title No. 52789 was cancelled in lieu of which a new one was issued in the name of the vendee and the
other-co-owners.

On the same day (December 9, 1958), Manuel Uy & Sons, Inc. sent a letter to the Bank of the Philippine Islands as
judicial administrator of the estate of the late Jose V. Ramirez informing it of the above-mentioned sale. This letter,
together with that of the bank, was forwarded by the latter to Mrs. Butte c/o her counsel Delgado, Flores & Macapagal,
Escolta, Manila, and having received the same on December 10, 1958, said law office delivered them to plaintiff-
appellant's son, Mr. Miguel Papa, who in turn personally handed the letters to his mother, Mrs. Butte, on December 11
and 12, 1958. Aside from this letter of defendant-appellant, the vendor, thru her attorney-in-fact Mrs. Chambers, wrote
said bank on December 11, 1958 confirming vendee's letter regarding the sale of her 1/6 share in the Sta. Cruz property
for the sum of P500,000.00. Said letter was received by the bank on December 15, 1958 and having endorsed it to Mrs.
Butte's counsel, the latter received the same on December 16, 1958. Appellant received the letter on December 19, 1958.

On January 15, 1959, Mrs. Angela M. Butte, thru Atty. Resplandor Sobretodo, sent a letter and a Philippine National Bank
cashier's check in the amount of P500,000.00 to Manuel Uy & Sons, Inc. offering to redeem the 1/6 share sold by Mrs.
Marie Garnier Vda. de Ramirez. This tender having been refused, plaintiff on the same day consigned the amount in court
and filed the corresponding action for legal redemption. Without prejudice to the determination by the court of the
reasonable and fair market value of the property sold which she alleged to be grossly excessive, plaintiff prayed for
conveyance of the property, and for actual, moral and exemplary damages.

After the filing by defendant of its answer containing a counterclaim, and plaintiff's reply thereto, trial was held, after which
the court rendered decision on May 13, 1959, dismissing plaintiff's complaint on the grounds that she has no right to
redeem the property and that, if ever she had any, she exercised the same beyond the statutory 30-day period for legal
redemptions provided by the Civil Code. The counterclaim of defendant for damages was likewise dismissed for not being
sufficiently established. Both parties appealed directly to this Court.

Based on the foregoing facts, the main issues posed in this appeal are: (1) whether or not plaintiff-appellant, having been
bequeathed 1/3 of the free portion of the estate of Jose V. Ramirez, can exercise the right of legal redemption over the 1/6
share sold by Mrs. Marie Garnier Vda. de Ramirez despite the presence of the judicial administrator and pending the final
distribution of her share in the testate proceedings; and (2) whether or not she exercised the right of legal redemption
within the period prescribed by law.

The applicable law involved in the present case is contained in Articles 1620, p. 1, and 1623 of the Civil Code of the
Philippines, which read as follows:
 ART. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other-co-
owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the
redemptioner shall pay only a reasonable one.

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

ART. 1623. The right of legal predemption or redemption shall not be exercised except within thirty days from the
notice in writing by the respective vendor, or by the vendor, as the case may be. The deed of sale shall not be
accorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written
notice thereof at all possible redemptioners.

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

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

ART. 776. The inheritance includes all the property, rights and obligations of a person which are not extinguished
by his death. (659)

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

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

The principle of transmission as of the time of the predecessor's death is basic in our Civil Code, and is supported by
other related articles. Thus, the capacity of the heir is determined as of the time the decedent died (Art. 1034); the legitime
is to be computed as of the same moment(Art. 908), and so is the in officiousness of the donation inter vivos (Art. 771).
Similarly, the legacies of credit and remission are valid only in the amount due and outstanding at the death of the testator
(Art. 935),and the fruits accruing after that instant are deemed to pertain to the legatee (Art. 948).

As a consequence of this fundamental rule of succession, the heirs of Jose V. Ramirez acquired his undivided share in
the Sta. Cruz property from the moment of his death, and from that instant, they became co-owners in the aforesaid
property, together with the original surviving co-owners of their decedent (causante). A co-owner of an undivided share is
necessarily a co-owner of the whole. Wherefore, any one of the Ramirez heirs, as such co-owner, became entitled to
exercise the right of legal redemption (retracto de comuneros) as soon as another co-owner (Maria Garnier Vda. de
Ramirez) had sold her undivided share to a stranger, Manuel Uy & Sons, Inc. This right of redemption vested exclusively
in consideration of the redemptioner's share which the law nowhere takes into account.

The situation is in no wise altered by the existence of a judicial administrator of the estate of Jose V. Ramirez while under
the Rules of Court the administrator has the right to the possession of the real and personal estate of the deceased, so far
as needed for the payment of the decedent's debts and the expenses of administration (sec. 3, Rule 85), and the
administrator may bring or defend actions for the recovery or protection of the property or rights of the deceased (sec. 2,
Rule 88), such rights of possession and administration do not include the right of legal redemption of the undivided share
sold to Uy & Company by Mrs. Garnier Ramirez. The reason is obvious: this right of legal redemption only came into
existence when the sale to Uy & Sons, Inc. was perfected, eight (8) years after the death of Jose V. Ramirez, and formed
no part of his estate. The redemption right vested in the heirs originally, in their individual capacity, they did not
derivatively acquire it from their decedent, for when Jose V. Ramirez died, none of the other co-owners of the Sta. Cruz
property had as yet sold his undivided share to a stranger. Hence, there was nothing to redeem and no right of
redemption; and if the late Ramirez had no such right at his death, he could not transmit it to his own heirs. Much less
could Ramirez acquire such right of redemption eight years after his death, when the sale to Uy & Sons, Inc. was made;
because death extinguishes civil personality, and, therefore, all further juridical capacity to acquire or transmit rights and
obligations of any kind (Civil Code of the Phil., Art. 42).

It is argued that the actual share of appellant Mrs. Butte in the estate of Jose V. Ramirez has not been specifically
determined as yet, that it is still contingent; and that the liquidation of estate of Jose V. Ramirez may require the alienation
of the decedent's undivided portion in the Sta. Cruz property, in which event Mrs. Butte would have no interest in said
undivided portion. Even if it were true, the fact would remain that so long as that undivided share remains in the estate,
the heirs of Jose V. Ramirez own it, as the deceased did own it before his demise, so that his heirs are now as much co-
owners of the Sta. Cruz property as Jose V. Ramirez was himself a co-owner thereof during his lifetime. As co-owners of
the property, the heirs of Jose V. Ramirez, or any one of them, became personally vested with right of legal redemption as
soon as Mrs. Garnier sold her own pro-indiviso interest to Uy & Sons. Even if subsequently, the undivided share of
Ramirez (and of his heirs) should eventually be sold to satisfy the creditors of the estate, it would not destroy their
ownership of it before the sale, but would only convey or transfer it as in turn sold (of it actually is sold) to pay his
creditors. Hence, the right of any of the Ramirez heirs to redeem the Garnier share will not be retroactively affected. All
that the law requires is that the legal redemptioner should be a co-owner at the time the undivided share of another co-
owner is sold to a stranger. Whether or not the redemptioner will continue being a co-owner after exercising the legal
redemptioner is irrelevant for the purposes of law.
Nor it can be argued that if the original share of Ramirez is sold by the administrator, his heirs would stand in law as never
having acquired that share. This would only be true if the inheritance is repudiated or the heir's quality as such is voided.
But where the heirship is undisputed, the purchaser of hereditary property is not deemed to have acquired the title directly
from the deceased Ramirez, because a dead man can not convey title, nor from the administrator who owns no part of the
estate; the purchaser can only derive his title from the Ramirez heirs, represented by the administrator, as their trustee or
legal representative.

The right of appellant Angela M. Butte to make the redemption being established, the next point of inquiry is whether she
had made or tendered the redemption price within the 30 days from notices as prescribed by law. This period, be it noted,
is peremptory, because the policy of the law is not to leave the purchaser's title in uncertainty beyond the established 30-
day period. In considering whether or not the offer to redeem was timely, we think that the notice given by the vendee
(buyer) should not be taken into account. The text of Article 1623 clearly and expressly prescribes that the thirty days for
making the redemption are to be counted from notice in writing by the vendor. Under the old law (Civ. Code of 1889, Art.
1524), it was immaterial who gave the notice; so long as the redeeming co-owner learned of the alienation in favor of the
stranger, the redemption period began to run. It is thus apparent that the Philippine legislature in Article 1623 deliberately
selected a particular method of giving notice, and that method must be deemed exclusive (39 Am. Jur., 237; Payne vs.
State, 12 S.W. [2d] 528). As ruled in Wampler vs. Lecompte, 150 Atl. 458 (affd. in 75 Law Ed. [U.S.] 275) —

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

The reasons for requiring that the notice should be given by the seller, and not by the buyer, are easily divined. The seller
of an undivided interest is in the best position to know who are his co-owners that under the law must be notified of the
sale. Also, the notice by the seller removes all doubts as to the fact of the sale, its perfection; and its validity, the notice
being a reaffirmation thereof, so that the party need not entertain doubt that the seller may still contest the alienation. This
assurance would not exist if the notice should be given by the buyer.

The notice which became operative is that given by Mrs. Chambers, in her capacity as attorney-in-fact of the vendor Marie
Garnier Vda. de Ramirez. Under date of December 11, 1958, she wrote the Administrator Bank of the Philippine Islands
that her principal's one-sixth (1/6) share in the Sta. Cruz property had been sold to Manuel Uy & Sons, Inc. for
P500,000.00. The Bank received this notice on December 15, 1958, and on the same day endorsed it to Mrs. Butte, care
of Delgado, Flores and Macapagal (her attorneys), who received the same on December 16, 1958. Mrs. Butte tendered
redemption and upon the vendee's refusal, judicially consigned the price of P500,000.00 on January 15, 1959. The latter
date was the last one of the thirty days allowed by the Code for the redemption, counted by excluding December 16, 1958
and including January 15, 1959, pursuant to Article 13 of the Civil Code. Therefore, the redemption was made in due time.

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

We find no jurisdiction for appellant's claim that the P500,000,00. paid by Uy & Sons, Inc. for the Garnier share is grossly
excessive. Gross excess cannot be predicated on mere individual estimates of market price by a single realtor.

The redemption and consignation having been properly made, the Uy counterclaim for damages and attorney's fees
predicated on the assumption that plaintiff's action was clearly unfounded, becomes untenable.

PREMISES CONSIDERED, the judgment appealed from is hereby reversed and set aside, and another one entered:

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

(b) Declaring that said appellant properly exercised in due time the legal redemption of the one-sixth (1/6)
undivided portion of the land covered by Certificate of Title No. 59363 of the Office of the Register of Deeds of the
City of Manila, sold on December 9, 1958 by Marie Garnier Vda. de Ramirez to appellant Manuel Uy & Sons, Inc.

(c) Ordering appellant Manuel Uy & Sons, Inc. to accept the consigned price and to convey to Angela M. Butte the
undivided portion above referred to, within 30 days from the time our decision becomes final, and subsequently to
account for the rentals and fruits of the redeemed share from and after January 15, 1958, until its conveyance;
and.

(d) Ordering the return of the records to the court of origin for further proceedings conformable to this opinion.

Without finding as to costs.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera and Dizon, JJ., concur.
Paredes and De Leon, JJ., took no part.
4. G.R. No. 131953 June 5, 2002

MA. ESTELA MAGLASANG, NICOLAS CABATINGAN and MERLY S. CABATINGAN, petitioners,

vs.
THE HEIRS OF CORAZON CABATINGAN, namely, LUZ M. BOQUIA, PERLA M. ABELLA, ESTRELLA M. CAÑETE,
LOURDES M. YUSON, and JULIA L. MAYOL, HEIRS OF GENOVIVA C. NATIVIDAD namely, OSCAR C. NATIVIDAD,
OLGA NATIVIDAD, ODETTE NATIVIDAD, OPHELIA NATIVIDAD, RICHARD NATIVIDAD, RAYMUND NATIVIDAD,
RICHIE NATIVIDAD, SONIA NATIVIDAD and ENCARNACION CABATINGAN VDA. DE TRINIDAD, ALFREDO
CABATINGAN and JESUSA C. NAVADA, respondents.

AUSTRIA-MARTINEZ, J.:

Posed for resolution before the Court in this petition for review on certiorari filed under Rule 45 of the Rules of Court is the
sole issue of whether the donations made by the late Conchita Cabatingan are donations inter vivos or mortis causa.

The facts of the case are as follows:

On February 17, 1992, Conchita Cabatingan executed in favor of her brother, petitioner Nicolas Cabatingan, a "Deed of
Conditional of Donation (sic) Inter Vivos for House and Lot" covering one-half (½) portion of the former's house and lot
1
located at Cot-cot, Liloan, Cebu. Four (4) other deeds of donation were subsequently executed by Conchita Cabatingan
on January 14, 1995, bestowing upon: (a) petitioner Estela C. Maglasang, two (2) parcels of land - one located in Cogon,
Cebu (307 sq. m.) and the other, a portion of a parcel of land in Masbate (50,232 sq. m.); (b) petitioner Nicolas
Cabatingan, a portion of a parcel of land located in Masbate (80,000 sq. m.); and (c) petitioner Merly S. Cabatingan, a
2
portion of the Masbate property (80,000 sq. m.). These deeds of donation contain similar provisions, to wit:

"That for and in consideration of the love and affection of the DONOR for the DONEE, x x x the DONOR does
hereby, by these presents, transfer, convey, by way of donation, unto the DONEE the above-described property,
together with the buildings and all improvements existing thereon, to become effective upon the death of the
DONOR; PROVIDED, HOWEVER, that in the event that the DONEE should die before the DONOR, the
present donation shall be deemed automatically rescinded and of no further force and effect; x x
3
x" (Emphasis Ours)

On May 9, 1995, Conchita Cabatingan died.

Upon learning of the existence of the foregoing donations, respondents filed with the Regional Trial Court of Mandaue,
Branch 55, an action for Annulment And/Or Declaration of Nullity of Deeds of Donations and Accounting, docketed as
Civil Case No. MAN-2599, seeking the annulment of said four (4) deeds of donation executed on January 14, 1995.
Respondents allege, inter alia, that petitioners, through their sinister machinations and strategies and taking advantage of
Conchita Cabatingan's fragile condition, caused the execution of the deeds of donation, and, that the documents are void
for failing to comply with the provisions of the Civil Code regarding formalities of wills and testaments, considering that
4
these are donations mortis causa. Respondents prayed that a receiver be appointed in order to preserve the disputed
properties, and, that they be declared as co-owners of the properties in equal shares, together with petitioner Nicolas
5
Cabatingan.

Petitioners in their Amended Answer, deny respondents' allegations contending that Conchita Cabatingan freely,
6
knowingly and voluntarily caused the preparation of the instruments.

On respondents' motion, the court a quo rendered a partial judgment on the pleadings on December 2, 1997 in favor of
respondents, with the following dispositive portion:

"WHEREREFORE, and in consideration of all the foregoing, judgment is hereby rendered in favor of the plaintiffs
and against the defendant and unwilling co-plaintiff with regards (sic) to the four Deeds of Donation Annexes "A",
"A-1", "B" and Annex "C" which is the subject of this partial decision by:

Declaring the four Deeds of Donation as null and void ab initio for being a donation Mortis Causa and for
failure to comply with formal and solemn requisite under Art. 806 of the New Civil Code;

b) To declare the plaintiffs and defendants as well as unwilling co-plaintiff as the heirs of the deceased
Conchita Cabatingan and therefore hereditary co-owners of the properties subject of this partial decision,
as mandated under Art. 777 of the New Civil Code;

7
SO ORDERED."

The court a quo ruled that the donations are donations mortis causa and therefore the four (4) deeds in question executed
on January 14, 1995 are null and void for failure to comply with the requisites of Article 806 of the Civil Code on
8
solemnities of wills and testaments.

9
Raising questions of law, petitioners elevated the court a quo's decision to this Court, alleging that:

"THE LOWER COURT PALPABLY DISREGARDED THE LONG-AND-WELL-ESTABLISHED RULINGS OF THIS

HONORABLE SUPREME COURT ON THE CHARACTERIZATION OF DONATIONS AS INTER VIVOSOR
 MORTIS CAUSA AND, INSTEAD, PROCEEDED TO INTERPRET THE DONATIONS IN QUESTION IN A
10
MANNER CONTRARY THERETO."

Petitioners insist that the donations are inter vivos donations as these were made by the late Conchita Cabatingan "in
consideration of the love and affection of the donor" for the donee, and there is nothing in the deeds which indicate that
11
the donations were made in consideration of Cabatingan's death. In addition, petitioners contend that the stipulation on
rescission in case petitioners die ahead of Cabatingan is a resolutory condition that confirms the nature of the donation
as inter vivos.

Petitioners' arguments are bereft of merit.

12
In a donation mortis causa, "the right of disposition is not transferred to the donee while the donor is still alive." In
determining whether a donation is one of mortis causa, the following characteristics must be taken into account:

(1) It conveys no title or ownership to the transferee before the death of the transferor; or what amounts to the
same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive;

(2) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may
be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed;

and

13
(3) That the transfer should be void if the transferor should survive the transferee.

In the present case, the nature of the donations as mortis causa is confirmed by the fact that the donations do not contain
14
any clear provision that intends to pass proprietary rights to petitioners prior to Cabatingan's death. The phrase "to
become effective upon the death of the DONOR" admits of no other interpretation but that Cabatingan did not intend to
transfer the ownership of the properties to petitioners during her lifetime. Petitioners themselves expressly confirmed the
donations as mortis causa in the following Acceptance and Attestation clauses, uniformly found in the subject deeds of
donation, to wit:

"That the DONEE does hereby accept the foregoing donation mortis causa under the terms and conditions set
forth therein, and avail herself of this occasion to express her profound gratitude for the kindness and generosity
of the DONOR."

xxx

"SIGNED by the above-named DONOR and DONEE at the foot of this Deed of Donation mortis causa, which
15
consists of two (2) pages x x x."

That the donations were made "in consideration of the love and affection of the donor" does not qualify the donations
16
as inter vivos because transfers mortis causa may also be made for the same reason.

17
Well in point is National Treasurer of the Phils. v. Vda. de Meimban. In said case, the questioned donation contained
the provision:

"That for and in consideration of the love and affection which the DONOR has for the DONEE, the said Donor by
these presents does hereby give, transfer, and convey unto the DONEE, her heirs and assigns a portion of ONE
HUNDRED THOUSAND (100,000) SQUARE METERS, on the southeastern part Pro-indiviso of the above
described property. (The portion herein donated is within Lot 2-B of the proposed amendment Plan Subdivision of
Lots Nos. 1 and 2, Psu-109393), with all the buildings and improvements thereon, to become effective upon the
18
death of the DONOR. (italics supplied.)"

Notably, the foregoing provision is similar to that contained in the donation executed by Cabatingan. We held in Meimban
case that the donation is a mortis causa donation, and that the above quoted provision establishes the donor's intention to
transfer the ownership and possession of the donated property to the donee only after the former's death. Further:

"As the donation is in the nature of a mortis causa disposition, the formalities of a will should have been complied
with under Article 728 of the Civil Code, otherwise, the donation is void and would produce no effect. As we have
held in Alejandro v. Geraldez (78 SCRA 245,253), "If the donation is made in contemplation of the donor's death,
meaning that the full or naked ownership of the donated properties will pass to the donee because of the donor's
death, then it is at that time that the donation takes effect, and it is a donation mortis causa which should be
19
embodied in a last will and testament. (Citing Bonsato v. Court of Appeals, 95 Phil. 481)."

We apply the above rulings to the present case. The herein subject deeds expressly provide that the donation shall be
20
rescinded in case petitioners predecease Conchita Cabatingan. As stated in Reyes v. Mosqueda, one of the decisive
characteristics of a donation mortis causa is that the transfer should be considered void if the donor should survive the
donee. This is exactly what Cabatingan provided for in her donations. If she really intended that the donation should take
effect during her lifetime and that the ownership of the properties donated be transferred to the donee or independently of,
and not by reason of her death, she would have not expressed such proviso in the subject deeds.1âwphi1.nêt
Considering that the disputed donations are donations mortis causa, the same partake of the nature of testamentary
21
provisions and as such, said deeds must be executed in accordance with the requisites on solemnities of wills and
testaments under Articles 805 and 806 of the Civil Code, to wit:

"ART. 805. Every will, other than a holographic will, must be subscribed at the end thereof by the testator himself
or by the testator's name written by some other person in his presence, and by his express direction, and attested
and subscribed by three or more credible witnesses in the presence of the testator and of one another.

The testator or the person requested by him to write his name and the instrumental witnesses of the will, shall
also sign, as aforesaid, each and every page thereof, except the last, on the left margin, and all the pages shall
be numbered correlatively in letters placed on the upper part of each page.

The attestation shall state the number of pages used upon which the will is written , and the fact that the testator
signed the will and every page thereof, or caused some other person to write his name, under his express
direction, in the presence of the instrumental witnesses, and that the latter witnessed and signed the will and all
the pages thereof in the presence of the testator and of one another.

If the attestation clause is in a language not known to the witnesses, it shall be interpreted to them. (n)

ART. 806. Every will must be acknowledged before a notary public by the testator and the witnesses. The notary
public shall not be required to retain a copy of the will, or file another with the office of the Clerk of Court. (n)"

The deeds in question although acknowledged before a notary public of the donor and the donee, the documents were
not executed in the manner provided for under the above-quoted provisions of law.

Thus, the trial court did not commit any reversible error in declaring the subject deeds of donation null and void.

WHEREFORE, the petition is hereby DENIED for lack of merit.

SO ORDERED.
5. G.R. No. 146006 February 23, 2004

JOSE C. LEE AND ALMA AGGABAO, in their capacities as President and Corporate Secretary, respectively, of
Philippines International Life Insurance Company, and FILIPINO LOAN ASSISTANCE GROUP, petitioners
vs.
REGIONAL TRIAL COURT OF QUEZON CITY BRANCH 85 presided by JUDGE PEDRO M. AREOLA, BRANCH
CLERK OF COURT JANICE Y. ANTERO, DEPUTY SHERIFFS ADENAUER G. RIVERA and PEDRO L. BORJA, all of
the Regional Trial Court of Quezon City Branch 85, MA. DIVINA ENDERES claiming to be Special Administratrix,
and other persons/ public officers acting for and in their behalf, respondents.

DECISION

CORONA, J.:

1
This is a petition for review under Rule 45 of the Rules of Court seeking to reverse and set aside the decision of the
Court of Appeals, First Division, dated July 26, 2000, in CA G.R. 59736, which dismissed the petition for certiorari filed by
petitioners Jose C. Lee and Alma Aggabao (in their capacities as president and secretary, respectively, of Philippine
International Life Insurance Company) and Filipino Loan Assistance Group.

The antecedent facts follow.

Dr. Juvencio P. Ortañez incorporated the Philippine International Life Insurance Company, Inc. on July 6, 1956. At the
time of the company’s incorporation, Dr. Ortañez owned ninety percent (90%) of the subscribed capital stock.

On July 21, 1980, Dr. Ortañez died. He left behind a wife (Juliana Salgado Ortañez), three legitimate children (Rafael,
Jose and Antonio Ortañez) and five illegitimate children by Ligaya Novicio (herein private respondent Ma. Divina Ortañez-
2
Enderes and her siblings Jose, Romeo, Enrico Manuel and Cesar, all surnamed Ortañez).

On September 24, 1980, Rafael Ortañez filed before the Court of First Instance of Rizal, Quezon City Branch (now
Regional Trial Court of Quezon City) a petition for letters of administration of the intestate estate of Dr. Ortañez, docketed
as SP Proc. Q-30884 (which petition to date remains pending at Branch 85 thereof).

Private respondent Ma. Divina Ortañez-Enderes and her siblings filed an opposition to the petition for letters of
administration and, in a subsequent urgent motion, prayed that the intestate court appoint a special administrator.

On March 10, 1982, Judge Ernani Cruz Paño, then presiding judge of Branch 85, appointed Rafael and Jose Ortañez joint
special administrators of their father’s estate. Hearings continued for the appointment of a regular administrator (up to now
no regular administrator has been appointed).

As ordered by the intestate court, special administrators Rafael and Jose Ortañez submitted an inventory of the estate of
3
their father which included, among other properties, 2,029 shares of stock in Philippine International Life Insurance
Company (hereafter Philinterlife), representing 50.725% of the company’s outstanding capital stock.

4
On April 15, 1989, the decedent’s wife, Juliana S. Ortañez, claiming that she owned 1,014 Philinterlife shares of stock as
her conjugal share in the estate, sold said shares with right to repurchase in favor of herein petitioner Filipino Loan
Assistance Group (FLAG), represented by its president, herein petitioner Jose C. Lee. Juliana Ortañez failed to
repurchase the shares of stock within the stipulated period, thus ownership thereof was consolidated by petitioner FLAG
in its name.

On October 30, 1991, Special Administrator Jose Ortañez, acting in his personal capacity and claiming that he owned the
5
remaining 1,011 Philinterlife shares of stocks as his inheritance share in the estate, sold said shares with right to
repurchase also in favor of herein petitioner FLAG, represented by its president, herein petitioner Jose C. Lee. After one
year, petitioner FLAG consolidated in its name the ownership of the Philinterlife shares of stock when Jose Ortañez failed
to repurchase the same.

It appears that several years before (but already during the pendency of the intestate proceedings at the Regional Trial
Court of Quezon City, Branch 85), Juliana Ortañez and her two children, Special Administrators Rafael and Jose Ortañez,
entered into a memorandum of agreement dated March 4, 1982 for the extrajudicial settlement of the estate of Dr.
Juvencio Ortañez, partitioning the estate (including the Philinterlife shares of stock) among themselves. This was the
basis of the number of shares separately sold by Juliana Ortañez on April 15, 1989 (1,014 shares) and by Jose Ortañez
on October 30, 1991 (1,011 shares) in favor of herein petitioner FLAG.

On July 12, 1995, herein private respondent Ma. Divina Ortañez–Enderes and her siblings (hereafter referred to as private
respondents Enderes et al.) filed a motion for appointment of special administrator of Philinterlife shares of stock. This
move was opposed by Special Administrator Jose Ortañez.

On November 8, 1995, the intestate court granted the motion of private respondents Enderes et al. and appointed private
respondent Enderes special administratrix of the Philinterlife shares of stock.
On December 20, 1995, Special Administratrix Enderes filed an urgent motion to declare void ab initio the memorandum
of agreement dated March 4, 1982. On January 9, 1996, she filed a motion to declare the partial nullity of the extrajudicial
settlement of the decedent’s estate. These motions were opposed by Special Administrator Jose Ortañez.

On March 22, 1996, Special Administratrix Enderes filed an urgent motion to declare void ab initio the deeds of sale of
Philinterlife shares of stock, which move was again opposed by Special Administrator Jose Ortañez.

On February 4, 1997, Jose Ortañez filed an omnibus motion for (1) the approval of the deeds of sale of the Philinterlife
shares of stock and (2) the release of Ma. Divina Ortañez-Enderes as special administratrix of the Philinterlife shares of
stock on the ground that there were no longer any shares of stock for her to administer.

On August 11, 1997, the intestate court denied the omnibus motion of Special Administrator Jose Ortañez for the approval
of the deeds of sale for the reason that:

Under the Godoy case, supra, it was held in substance that a sale of a property of the estate without an Order of the
probate court is void and passes no title to the purchaser. Since the sales in question were entered into by Juliana S.
Ortañez and Jose S. Ortañez in their personal capacity without prior approval of the Court, the same is not binding upon
the Estate.

WHEREFORE, the OMNIBUS MOTION for the approval of the sale of Philinterlife shares of stock and release of Ma.
6
Divina Ortañez-Enderes as Special Administratrix is hereby denied.

On August 29, 1997, the intestate court issued another order granting the motion of Special Administratrix Enderes for the
annulment of the March 4, 1982 memorandum of agreement or extrajudicial partition of estate. The court reasoned that:

In consonance with the Order of this Court dated August 11, 1997 DENYING the approval of the sale of Philinterlife
shares of stocks and release of Ma. Divina Ortañez-Enderes as Special Administratrix, the "Urgent Motion to Declare
Void Ab Initio Memorandum of Agreement" dated December 19, 1995. . . is hereby impliedly partially resolved insofar as
the transfer/waiver/renunciation of the Philinterlife shares of stock are concerned, in particular, No. 5, 9(c), 10(b) and
11(d)(ii) of the Memorandum of Agreement.

WHEREFORE, this Court hereby declares the Memorandum of Agreement dated March 4, 1982 executed by Juliana S.
Ortañez, Rafael S. Ortañez and Jose S. Ortañez as partially void ab initio insofar as the transfer/waiver/renunciation of the
7
Philinterlife shares of stocks are concerned.

Aggrieved by the above-stated orders of the intestate court, Jose Ortañez filed, on December 22, 1997, a petition for
certiorari in the Court of Appeals. The appellate court denied his petition, however, ruling that there was no legal
justification whatsoever for the extrajudicial partition of the estate by Jose Ortañez, his brother Rafael Ortañez and mother
Juliana Ortañez during the pendency of the settlement of the estate of Dr. Ortañez, without the requisite approval of the
intestate court, when it was clear that there were other heirs to the estate who stood to be prejudiced thereby.
Consequently, the sale made by Jose Ortañez and his mother Juliana Ortañez to FLAG of the shares of stock they
8
invalidly appropriated for themselves, without approval of the intestate court, was void.

Special Administrator Jose Ortañez filed a motion for reconsideration of the Court of Appeals decision but it was denied.
He elevated the case to the Supreme Court via petition for review under Rule 45 which the Supreme Court dismissed on
October 5, 1998, on a technicality. His motion for reconsideration was denied with finality on January 13, 1999. On
February 23, 1999, the resolution of the Supreme Court dismissing the petition of Special Administrator Jose Ortañez
became final and was subsequently recorded in the book of entries of judgments.

Meanwhile, herein petitioners Jose Lee and Alma Aggabao, with the rest of the FLAG-controlled board of directors,
increased the authorized capital stock of Philinterlife, diluting in the process the 50.725% controlling interest of the
9
decedent, Dr. Juvencio Ortañez, in the insurance company. This became the subject of a separate action at the
Securities and Exchange Commission filed by private respondent-Special Administratrix Enderes against petitioner Jose
Lee and other members of the FLAG-controlled board of Philinterlife on November 7, 1994. Thereafter, various cases
were filed by Jose Lee as president of Philinterlife and Juliana Ortañez and her sons against private respondent-Special
10
Administratrix Enderes in the SEC and civil courts. Somehow, all these cases were connected to the core dispute on the
legality of the sale of decedent Dr. Ortañez’s Philinterlife shares of stock to petitioner FLAG, represented by its president,
herein petitioner Jose Lee who later became the president of Philinterlife after the controversial sale.

On May 2, 2000, private respondent-Special Administratrix Enderes and her siblings filed a motion for execution of the
Orders of the intestate court dated August 11 and August 29, 1997 because the orders of the intestate court nullifying the
sale (upheld by the Court of Appeals and the Supreme Court) had long became final. Respondent-Special Administratrix
Enderes served a copy of the motion to petitioners Jose Lee and Alma Aggabao as president and secretary, respectively,
11
of Philinterlife, but petitioners ignored the same.

On July 6, 2000, the intestate court granted the motion for execution, the dispositive portion of which read:

WHEREFORE, premises considered, let a writ of execution issue as follows:

1. Confirming the nullity of the sale of the 2,029 Philinterlife shares in the name of the Estate of Dr. Juvencio
Ortañez to Filipino Loan Assistance Group (FLAG);
 2. Commanding the President and the Corporate Secretary of Philinterlife to reinstate in the stock and transfer
book of Philinterlife the 2,029 Philinterlife shares of stock in the name of the Estate of Dr. Juvencio P. Ortañez as
the owner thereof without prejudice to other claims for violation of pre-emptive rights pertaining to the said 2,029
Philinterlife shares;

3. Directing the President and the Corporate Secretary of Philinterlife to issue stock certificates of Philinterlife for
2,029 shares in the name of the Estate of Dr. Juvencio P. Ortañez as the owner thereof without prejudice to other
claims for violations of pre-emptive rights pertaining to the said 2,029 Philinterlife shares and,

4. Confirming that only the Special Administratrix, Ma. Divina Ortañez-Enderes, has the power to exercise all the
rights appurtenant to the said shares, including the right to vote and to receive dividends.

5. Directing Philinterlife and/or any other person or persons claiming to represent it or otherwise, to acknowledge
and allow the said Special Administratrix to exercise all the aforesaid rights on the said shares and to refrain from
resorting to any action which may tend directly or indirectly to impede, obstruct or bar the free exercise thereof
under pain of contempt.

6. The President, Corporate Secretary, any responsible officer/s of Philinterlife, or any other person or persons
claiming to represent it or otherwise, are hereby directed to comply with this order within three (3) days from
receipt hereof under pain of contempt.

7. The Deputy Sheriffs Adenauer Rivera and Pedro Borja are hereby directed to implement the writ of execution
with dispatch to forestall any and/or further damage to the Estate.

12
SO ORDERED.

In the several occasions that the sheriff went to the office of petitioners to execute the writ of execution, he was barred by
the security guard upon petitioners’ instructions. Thus, private respondent-Special Administratrix Enderes filed a motion to
13
cite herein petitioners Jose Lee and Alma Aggabao (president and secretary, respectively, of Philinterlife) in contempt.

Petitioners Lee and Aggabao subsequently filed before the Court of Appeals a petition for certiorari, docketed as CA G.R.
SP No. 59736. Petitioners alleged that the intestate court gravely abused its discretion in (1) declaring that the ownership
of FLAG over the Philinterlife shares of stock was null and void; (2) ordering the execution of its order declaring such
nullity and (3) depriving the petitioners of their right to due process.

On July 26, 2000, the Court of Appeals dismissed the petition outright:

We are constrained to DISMISS OUTRIGHT the present petition for certiorari and prohibition with prayer for a temporary
restraining order and/or writ of preliminary injunction in the light of the following considerations:

1. The assailed Order dated August 11, 1997 of the respondent judge had long become final and executory;

2. The certification on non-forum shopping is signed by only one (1) of the three (3) petitioners in violation of the
Rules; and

3. Except for the assailed orders and writ of execution, deed of sale with right to repurchase, deed of sale of
shares of stocks and omnibus motion, the petition is not accompanied by such pleadings, documents and other
material portions of the record as would support the allegations therein in violation of the second paragraph, Rule
65 of the 1997 Rules of Civil Procedure, as amended.

Petition is DISMISSED.

14
SO ORDERED.

The motion for reconsideration filed by petitioners Lee and Aggabao of the above decision was denied by the Court of
Appeals on October 30, 2000:

This resolves the "urgent motion for reconsideration" filed by the petitioners of our resolution of July 26, 2000 dismissing
outrightly the above-entitled petition for the reason, among others, that the assailed Order dated August 11, 1997 of the
respondent Judge had long become final and executory.

Dura lex, sed lex.

WHEREFORE, the urgent motion for reconsideration is hereby DENIED, for lack of merit.

15
SO ORDERED.

On December 4, 2000, petitioners elevated the case to the Supreme Court through a petition for review under Rule 45 but
on December 13, 2000, we denied the petition because there was no showing that the Court of Appeals in CA G.R. SP
No. 59736 committed any reversible error to warrant the exercise by the Supreme Court of its discretionary appellate
16
jurisdiction.

However, upon motion for reconsideration filed by petitioners Lee and Aggabao, the Supreme Court granted the motion
and reinstated their petition on September 5, 2001. The parties were then required to submit their respective memoranda.

Meanwhile, private respondent-Special Administratrix Enderes, on July 19, 2000, filed a motion to direct the branch clerk
of court in lieu of herein petitioners Lee and Aggabao to reinstate the name of Dr. Ortañez in the stock and transfer book
of Philinterlife and issue the corresponding stock certificate pursuant to Section 10, Rule 39 of the Rules of Court which
provides that "the court may direct the act to be done at the cost of the disobedient party by some other person appointed
by the court and the act when so done shall have the effect as if done by the party." Petitioners Lee and Aggabao
opposed the motion on the ground that the intestate court should refrain from acting on the motion because the issues
raised therein were directly related to the issues raised by them in their petition for certiorari at the Court of Appeals
docketed as CA-G.R. SP No. 59736. On October 30, 2000, the intestate court granted the motion, ruling that there was no
prohibition for the intestate court to execute its orders inasmuch as the appellate court did not issue any TRO or writ of
preliminary injunction.

On December 3, 2000, petitioners Lee and Aggabao filed a petition for certiorari in the Court of Appeals, docketed as CA-
G.R. SP No. 62461, questioning this time the October 30, 2000 order of the intestate court directing the branch clerk of
court to issue the stock certificates. They also questioned in the Court of Appeals the order of the intestate court nullifying
the sale made in their favor by Juliana Ortañez and Jose Ortañez. On November 20, 2002, the Court of Appeals denied
their petition and upheld the power of the intestate court to execute its order. Petitioners Lee and Aggabao then filed
motion for reconsideration which at present is still pending resolution by the Court of Appeals.

Petitioners Jose Lee and Alma Aggabao (president and secretary, respectively, of Philinterlife) and FLAG now raise the
following errors for our consideration:

The Court of Appeals committed grave reversible ERROR:

A. In failing to reconsider its previous resolution denying the petition despite the fact that the appellate court’s
mistake in apprehending the facts had become patent and evident from the motion for reconsideration and the
comment of respondent Enderes which had admitted the factual allegations of petitioners in the petition as well as
in the motion for reconsideration. Moreover, the resolution of the appellate court denying the motion for
reconsideration was contained in only one page without even touching on the substantive merits of the exhaustive
discussion of facts and supporting law in the motion for reconsideration in violation of the Rule on administrative
due process;

B. in failing to set aside the void orders of the intestate court on the erroneous ground that the orders were final
and executory with regard to petitioners even as the latter were never notified of the proceedings or order
canceling its ownership;

C. in not finding that the intestate court committed grave abuse of discretion amounting to excess of jurisdiction
(1) when it issued the Omnibus Order nullifying the ownership of petitioner FLAG over shares of stock which were
alleged to be part of the estate and (2) when it issued a void writ of execution against petitioner FLAG as present
owner to implement merely provisional orders, thereby violating FLAG’s constitutional right against deprivation of
property without due process;

D. In failing to declare null and void the orders of the intestate court which nullified the sale of shares of stock
between the legitimate heir Jose S. Ortañez and petitioner FLAG because of settled law and jurisprudence, i.e.,
that an heir has the right to dispose of the decedent’s property even if the same is under administration pursuant
to Civil Code provision that possession of hereditary property is transmitted to the heir the moment of death of the
decedent (Acedebo vs. Abesamis, 217 SCRA 194);

E. In disregarding the final decision of the Supreme Court in G.R. No. 128525 dated December 17, 1999 involving
substantially the same parties, to wit, petitioners Jose C. Lee and Alma Aggabao were respondents in that case
while respondent Ma. Divina Enderes was the petitioner therein. That decision, which can be considered law of
the case, ruled that petitioners cannot be enjoined by respondent Enderes from exercising their power as
directors and officers of Philinterlife and that the intestate court in charge of the intestate proceedings cannot
adjudicate title to properties claimed to be part of the estate and which are equally CLAIMED BY petitioner
17
FLAG.

The petition has no merit.

Petitioners Jose Lee and Alma Aggabao, representing Philinterlife and FLAG, assail before us not only the validity of the
writ of execution issued by the intestate court dated July 7, 2000 but also the validity of the August 11, 1997 order of the
intestate court nullifying the sale of the 2,029 Philinterlife shares of stock made by Juliana Ortañez and Jose Ortañez, in
their personal capacities and without court approval, in favor of petitioner FLAG.

We cannot allow petitioners to reopen the issue of nullity of the sale of the Philinterlife shares of stock in their favor
because this was already settled a long time ago by the Court of Appeals in its decision dated June 23, 1998 in CA-G.R.
SP No. 46342. This decision was effectively upheld by us in our resolution dated October 9, 1998 in G.R. No. 135177
dismissing the petition for review on a technicality and thereafter denying the motion for reconsideration on January 13,
 18
1999 on the ground that there was no compelling reason to reconsider said denial. Our decision became final on
February 23, 1999 and was accordingly entered in the book of entry of judgments. For all intents and purposes therefore,
the nullity of the sale of the Philinterlife shares of stock made by Juliana Ortañez and Jose Ortañez in favor of petitioner
FLAG is already a closed case. To reopen said issue would set a bad precedent, opening the door wide open for
dissatisfied parties to relitigate unfavorable decisions no end. This is completely inimical to the orderly and efficient
administration of justice.

The said decision of the Court of Appeals in CA-G.R. SP No. 46342 affirming the nullity of the sale made by Jose Ortañez
and his mother Juliana Ortañez of the Philinterlife shares of stock read:

Petitioner’s asseverations relative to said [memorandum] agreement were scuttled during the hearing before this Court
thus:

JUSTICE AQUINO:

Counsel for petitioner, when the Memorandum of Agreement was executed, did the children of Juliana Salgado
know already that there was a claim for share in the inheritance of the children of Novicio?

ATTY. CALIMAG:

Your Honor please, at that time, Your Honor, it is already known to them.

JUSTICE AQUINO:

What can be your legal justification for extrajudicial settlement of a property subject of intestate proceedings when
there is an adverse claim of another set of heirs, alleged heirs? What would be the legal justification for extra-
judicially settling a property under administration without the approval of the intestate court?

ATTY. CALIMAG:

Well, Your Honor please, in that extra-judicial settlement there is an approval of the honorable court as to the
property’s partition x x x. There were as mentioned by the respondents’ counsel, Your Honor.

ATTY. BUYCO:

No…

JUSTICE AQUINO:

The point is, there can be no adjudication of a property under intestate proceedings without the approval of the
court. That is basic unless you can present justification on that. In fact, there are two steps: first, you ask leave
and then execute the document and then ask for approval of the document executed. Now, is there any legal
justification to exclude this particular transaction from those steps?

ATTY. CALIMAG:

None, Your Honor.

ATTY. BUYCO:

With that admission that there is no legal justification, Your Honor, we rest the case for the private respondent.
How can the lower court be accused of abusing its discretion? (pages 33-35, TSN of January 29, 1998).

Thus, We find merit in the following postulation by private respondent:

What we have here is a situation where some of the heirs of the decedent without securing court approval have
appropriated as their own personal property the properties of [the] Estate, to the exclusion and the extreme prejudice of
the other claimant/heirs. In other words, these heirs, without court approval, have distributed the asset of the estate
among themselves and proceeded to dispose the same to third parties even in the absence of an order of distribution by
the Estate Court. As admitted by petitioner’s counsel, there was absolutely no legal justification for this action by the heirs.
There being no legal justification, petitioner has no basis for demanding that public respondent [the intestate court]
approve the sale of the Philinterlife shares of the Estate by Juliana and Jose Ortañez in favor of the Filipino Loan
Assistance Group.

It is an undisputed fact that the parties to the Memorandum of Agreement dated March 4, 1982 (see Annex 7 of the
Comment). . . are not the only heirs claiming an interest in the estate left by Dr. Juvencio P. Ortañez. The records of this
case. . . clearly show that as early as March 3, 1981 an Opposition to the Application for Issuance of Letters of
Administration was filed by the acknowledged natural children of Dr. Juvencio P. Ortañez with Ligaya Novicio. . . This
claim by the acknowledged natural children of Dr. Juvencio P. Ortañez is admittedly known to the parties to the
Memorandum of Agreement before they executed the same. This much was admitted by petitioner’s counsel during the
oral argument. xxx

Given the foregoing facts, and the applicable jurisprudence, public respondent can never be faulted for not approving. . .
the subsequent sale by the petitioner [Jose Ortañez] and his mother [Juliana Ortañez] of the Philinterlife shares belonging
to the Estate of Dr. Juvencio P. Ortañez." (pages 3-4 of Private Respondent’s Memorandum; pages 243-244 of the Rollo)

Amidst the foregoing, We found no grave abuse of discretion amounting to excess or want of jurisdiction committed by
19
respondent judge.

From the above decision, it is clear that Juliana Ortañez, and her three sons, Jose, Rafael and Antonio, all surnamed
Ortañez, invalidly entered into a memorandum of agreement extrajudicially partitioning the intestate estate among
themselves, despite their knowledge that there were other heirs or claimants to the estate and before final settlement of
the estate by the intestate court. Since the appropriation of the estate properties by Juliana Ortañez and her children
(Jose, Rafael and Antonio Ortañez) was invalid, the subsequent sale thereof by Juliana and Jose to a third party (FLAG),
without court approval, was likewise void.

An heir can sell his right, interest, or participation in the property under administration under Art. 533 of the Civil Code
which provides that possession of hereditary property is deemed transmitted to the heir without interruption from the
20
moment of death of the decedent. However, an heir can only alienate such portion of the estate that may be allotted to
him in the division of the estate by the probate or intestate court after final adjudication, that is, after all debtors shall have
21
been paid or the devisees or legatees shall have been given their shares. This means that an heir may only sell his ideal
or undivided share in the estate, not any specific property therein. In the present case, Juliana Ortañez and Jose Ortañez
sold specific properties of the estate (1,014 and 1,011 shares of stock in Philinterlife) in favor of petitioner FLAG. This they
could not lawfully do pending the final adjudication of the estate by the intestate court because of the undue prejudice it
would cause the other claimants to the estate, as what happened in the present case.

Juliana Ortañez and Jose Ortañez sold specific properties of the estate, without court approval. It is well-settled that court
approval is necessary for the validity of any disposition of the decedent’s estate. In the early case of Godoy vs.
22
Orellano, we laid down the rule that the sale of the property of the estate by an administrator without the order of the
23
probate court is void and passes no title to the purchaser. And in the case of Dillena vs. Court of Appeals, we ruled that:

[I]t must be emphasized that the questioned properties (fishpond) were included in the inventory of properties of the estate
submitted by then Administratrix Fausta Carreon Herrera on November 14, 1974. Private respondent was appointed as
administratrix of the estate on March 3, 1976 in lieu of Fausta Carreon Herrera. On November 1, 1978, the questioned
deed of sale of the fishponds was executed between petitioner and private respondent without notice and approval of the
probate court. Even after the sale, administratrix Aurora Carreon still included the three fishponds as among the real
properties of the estate in her inventory submitted on August 13, 1981. In fact, as stated by the Court of Appeals,
petitioner, at the time of the sale of the fishponds in question, knew that the same were part of the estate under
administration.

xxx xxx xxx

The subject properties therefore are under the jurisdiction of the probate court which according to our settled
jurisprudence has the authority to approve any disposition regarding properties under administration. . . More emphatic is
the declaration We made in Estate of Olave vs. Reyes (123 SCRA 767) where We stated that when 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.

Only recently, in Manotok Realty, Inc. vs. Court of Appeals (149 SCRA 174), We held that the sale of an immovable
property belonging to the estate of a decedent, in a special proceedings, needs court approval. . . This pronouncement
finds support in the previous case of Dolores Vda. De Gil vs. Agustin Cancio (14 SCRA 797) wherein We emphasized that
it is within the jurisdiction of a probate court to approve the sale of properties of a deceased person by his prospective
heirs before final adjudication. x x x

It being settled that property under administration needs the approval of the probate court before it can be disposed of,
any unauthorized disposition does not bind the estate and is null and void. As early as 1921 in the case of Godoy vs.
Orellano (42 Phil 347), We laid down the rule that a sale by an administrator of property of the deceased, which is not
authorized by the probate court is null and void and title does not pass to the purchaser.

There is hardly any doubt that the probate court can declare null and void the disposition of the property under
administration, made by private respondent, the same having been effected without authority from said court. It is the
probate court that has the power to authorize and/or approve the sale (Section 4 and 7, Rule 89), hence, a fortiori, it is
said court that can declare it null and void for as long as the proceedings had not been closed or terminated. To uphold
petitioner’s contention that the probate court cannot annul the unauthorized sale, would render meaningless the power
pertaining to the said court. (Bonga vs. Soler, 2 SCRA 755). (emphasis ours)

Our jurisprudence is therefore clear that (1) any disposition of estate property by an administrator or prospective heir
pending final adjudication requires court approval and (2) any unauthorized disposition of estate property can be annulled
by the probate court, there being no need for a separate action to annul the unauthorized disposition.

The question now is: can the intestate or probate court execute its order nullifying the invalid sale?
We see no reason why it cannot. The intestate court has the power to execute its order with regard to the nullity of an
unauthorized sale of estate property, otherwise its power to annul the unauthorized or fraudulent disposition of estate
property would be meaningless. In other words, enforcement is a necessary adjunct of the intestate or probate court’s
power to annul unauthorized or fraudulent transactions to prevent the dissipation of estate property before final
adjudication.

Moreover, in this case, the order of the intestate court nullifying the sale was affirmed by the appellate courts (the Court of
Appeals in CA-G.R. SP No. 46342 dated June 23, 1998 and subsequently by the Supreme Court in G.R. No. 135177
dated October 9, 1998). The finality of the decision of the Supreme Court was entered in the book of entry of judgments
on February 23, 1999. Considering the finality of the order of the intestate court nullifying the sale, as affirmed by the
appellate courts, it was correct for private respondent-Special Administratrix Enderes to thereafter move for a writ of
execution and for the intestate court to grant it.

Petitioners Jose Lee, Alma Aggabao and FLAG, however, contend that the probate court could not issue a writ of
execution with regard to its order nullifying the sale because said order was merely provisional:

The only authority given by law is for respondent judge to determine provisionally whether said shares are included or
excluded in the inventory… In ordering the execution of the orders, respondent judge acted in excess of his jurisdiction
and grossly violated settled law and jurisprudence, i.e., that the determination by a probate or intestate court of whether a
property is included or excluded in the inventory of the estate being provisional in nature, cannot be the subject of
24
execution. (emphasis ours)

Petitioners’ argument is misplaced. There is no question, based on the facts of this case, that the Philinterlife shares of
stock were part of the estate of Dr. Juvencio Ortañez from the very start as in fact these shares were included in the
inventory of the properties of the estate submitted by Rafael Ortañez after he and his brother, Jose Ortañez, were
25
appointed special administrators by the intestate court.

The controversy here actually started when, during the pendency of the settlement of the estate of Dr. Ortañez, his wife
Juliana Ortañez sold the 1,014 Philinterlife shares of stock in favor petitioner FLAG without the approval of the intestate
court. Her son Jose Ortañez later sold the remaining 1,011 Philinterlife shares also in favor of FLAG without the approval
of the intestate court.

We are not dealing here with the issue of inclusion or exclusion of properties in the inventory of the estate because there
is no question that, from the very start, the Philinterlife shares of stock were owned by the decedent, Dr. Juvencio
Ortañez. Rather, we are concerned here with the effect of the sale made by the decedent’s heirs, Juliana Ortañez
and Jose Ortañez, without the required approval of the intestate court. This being so, the contention of petitioners
that the determination of the intestate court was merely provisional and should have been threshed out in a separate
proceeding is incorrect.

The petitioners Jose Lee and Alma Aggabao next contend that the writ of execution should not be executed against them
because they were not notified, nor they were aware, of the proceedings nullifying the sale of the shares of stock.

We are not persuaded. The title of the purchaser like herein petitioner FLAG can be struck down by the intestate court
after a clear showing of the nullity of the alienation. This is the logical consequence of our ruling in Godoy andin several
26
subsequent cases. The sale of any property of the estate by an administrator or prospective heir without order of
the probate or intestate court is void and passes no title to the purchaser. Thus, in Juan Lao et al. vs. Hon. Melencio
Geneto, G.R. No. 56451, June 19, 1985, we ordered the probate court to cancel the transfer certificate of title issued to
the vendees at the instance of the administrator after finding that the sale of real property under probate proceedings was
made without the prior approval of the court. The dispositive portion of our decision read:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the assailed Order dated February 18, 1981 of the respondent
Judge approving the questioned Amicable Settlement is declared NULL and VOID and hereby SET ASIDE.
Consequently, the sale in favor of Sotero Dioniosio III and by the latter to William Go is likewise declared NULL and VOID.
The Transfer Certificate of Title issued to the latter is hereby ordered cancelled.

It goes without saying that the increase in Philinterlife’s authorized capital stock, approved on the vote of petitioners’ non-
existent shareholdings and obviously calculated to make it difficult for Dr. Ortañez’s estate to reassume its controlling
interest in Philinterlife, was likewise void ab initio.

Petitioners next argue that they were denied due process.

We do not think so.

The facts show that petitioners, for reasons known only to them, did not appeal the decision of the intestate court nullifying
the sale of shares of stock in their favor. Only the vendor, Jose Ortañez, appealed the case. A careful review of the
records shows that petitioners had actual knowledge of the estate settlement proceedings and that they knew private
respondent Enderes was questioning therein the sale to them of the Philinterlife shares of stock.

It must be noted that private respondent-Special Administratrix Enderes filed before the intestate court (RTC of Quezon
City, Branch 85) a "Motion to Declare Void Ab Initio Deeds of Sale of Philinterlife Shares of Stock" on March 22, 1996. But
as early as 1994, petitioners already knew of the pending settlement proceedings and that the shares they bought were
under the administration by the intestate court because private respondent Ma. Divina Ortañez-Enderes and her mother
Ligaya Novicio had filed a case against them at the Securities and Exchange Commission on November 7, 1994,
docketed as SEC No. 11-94-4909, for annulment of transfer of shares of stock, annulment of sale of corporate properties,
annulment of subscriptions on increased capital stocks, accounting, inspection of corporate books and records and
27
damages with prayer for a writ of preliminary injunction and/or temporary restraining order. In said case, Enderes and
her mother questioned the sale of the aforesaid shares of stock to petitioners. The SEC hearing officer in fact, in his
resolution dated March 24, 1995, deferred to the jurisdiction of the intestate court to rule on the validity of the sale of
shares of stock sold to petitioners by Jose Ortañez and Juliana Ortañez:

Petitioners also averred that. . . the Philinterlife shares of Dr. Juvencio Ortañez who died, in 1980, are part of his estate
which is presently the subject matter of an intestate proceeding of the RTC of Quezon City, Branch 85. Although, private
respondents [Jose Lee et al.] presented the documents of partition whereby the foregoing share of stocks were allegedly
partitioned and conveyed to Jose S. Ortañez who allegedly assigned the same to the other private respondents, approval
of the Court was not presented. Thus, the assignments to the private respondents [Jose Lee et al.] of the subject shares
of stocks are void.

xxx xxx xxx

With respect to the alleged extrajudicial partition of the shares of stock owned by the late Dr. Juvencio Ortañez, we rule
that the matter properly belongs to the jurisdiction of the regular court where the intestate proceedings are currently
28
pending.

With this resolution of the SEC hearing officer dated as early as March 24, 1995 recognizing the jurisdiction of the
intestate court to determine the validity of the extrajudicial partition of the estate of Dr. Ortañez and the subsequent sale
by the heirs of the decedent of the Philinterlife shares of stock to petitioners, how can petitioners claim that they were not
aware of the intestate proceedings?

Furthermore, when the resolution of the SEC hearing officer reached the Supreme Court in 1996 (docketed as G.R.
128525), herein petitioners who were respondents therein filed their answer which contained statements showing that
they knew of the pending intestate proceedings:

[T]he subject matter of the complaint is not within the jurisdiction of the SEC but with the Regional Trial Court; Ligaya
Novicio and children represented themselves to be the common law wife and illegitimate children of the late Ortañez; that
on March 4, 1982, the surviving spouse Juliana Ortañez, on her behalf and for her minor son Antonio, executed a
Memorandum of Agreement with her other sons Rafael and Jose, both surnamed Ortañez, dividing the estate of the
deceased composed of his one-half (1/2) share in the conjugal properties; that in the said Memorandum of Agreement,
Jose S. Ortañez acquired as his share of the estate the 1,329 shares of stock in Philinterlife; that on March 4, 1982,
Juliana and Rafael assigned their respective shares of stock in Philinterlife to Jose; that contrary to the contentions of
petitioners, private respondents Jose Lee, Carlos Lee, Benjamin Lee and Alma Aggabao became stockholders of
Philinterlife on March 23, 1983 when Jose S. Ortañez, the principal stockholder at that time, executed a deed of sale of
his shares of stock to private respondents; and that the right of petitioners to question the Memorandum of Agreement
29
and the acquisition of shares of stock of private respondent is barred by prescription.

Also, private respondent-Special Administratrix Enderes offered additional proof of actual knowledge of the settlement
proceedings by petitioners which petitioners never denied: (1) that petitioners were represented by Atty. Ricardo Calimag
previously hired by the mother of private respondent Enderes to initiate cases against petitioners Jose Lee and Alma
Aggabao for the nullification of the sale of the shares of stock but said counsel made a conflicting turn-around and
appeared instead as counsel of petitioners, and (2) that the deeds of sale executed between petitioners and the heirs of
the decedent (vendors Juliana Ortañez and Jose Ortañez) were acknowledged before Atty. Ramon Carpio who, during
the pendency of the settlement proceedings, filed a motion for the approval of the sale of Philinterlife shares of stock to
30
the Knights of Columbus Fraternal Association, Inc. (which motion was, however, later abandoned). All this sufficiently
proves that petitioners, through their counsels, knew of the pending settlement proceedings.

Finally, petitioners filed several criminal cases such as libel (Criminal Case No. 97-7179-81), grave coercion (Criminal
Case No. 84624) and robbery (Criminal Case No. Q-96-67919) against private respondent’s mother Ligaya Novicio who
31
was a director of Philinterlife, all of which criminal cases were related to the questionable sale to petitioners of the
Philinterlife shares of stock.

Considering these circumstances, we cannot accept petitioners’ claim of denial of due process. The essence of due
process is the reasonable opportunity to be heard. Where the opportunity to be heard has been accorded, there is no
32
denial of due process. In this case, petitioners knew of the pending instestate proceedings for the settlement of Dr.
Juvencio Ortañez’s estate but for reasons they alone knew, they never intervened. When the court declared the nullity of
the sale, they did not bother to appeal. And when they were notified of the motion for execution of the Orders of the
intestate court, they ignored the same. Clearly, petitioners alone should bear the blame.

Petitioners next contend that we are bound by our ruling in G.R. No. 128525 entitled Ma. Divina Ortañez-Enderes vs.
Court of Appeals, dated December 17, 1999, where we allegedly ruled that the intestate court "may not pass upon the title
to a certain property for the purpose of determining whether the same should or should not be included in the inventory
but such determination is not conclusive and is subject to final decision in a separate action regarding ownership which
may be constituted by the parties."

We are not unaware of our decision in G.R. No. 128525. The issue therein was whether the Court of Appeals erred in
affirming the resolution of the SEC that Enderes et al. were not entitled to the issuance of the writ of preliminary injunction.
We ruled that the Court of Appeals was correct in affirming the resolution of the SEC denying the issuance of the writ of
preliminary injunction because injunction is not designed to protect contingent rights. Said case did not rule on the issue
of the validity of the sale of shares of stock belonging to the decedent’s estate without court approval nor of the validity of
the writ of execution issued by the intestate court. G.R. No. 128525 clearly involved a different issue and it does not
therefore apply to the present case.

Petitioners and all parties claiming rights under them are hereby warned not to further delay the execution of the Orders of
the intestate court dated August 11 and August 29, 1997.

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals in CA-G.R. S.P. No. 59736 dated
July 26, 2000, dismissing petitioners’ petition for certiorari and affirming the July 6, 2000 order of the trial court which
ordered the execution of its (trial court’s) August 11 and 29, 1997 orders, is hereby AFFIRMED.

SO ORDERED.
I. GENERAL PROVISIONS (B. OBLIGATIONS LIMITED TO VALUE OF INHERITANCE)(ART 774)

1.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

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

LAURA ALVAREZ, FLORA ALVAREZ and RAYMUNDO ALVAREZ, petitioners,

vs.
THE HONORABLE INTERMEDIATE APELLATE COURT and JESUS YANES, ESTELITA YANES, ANTONIO YANES,
ROSARIO YANES, and ILUMINADO YANES, respondents.

Francisco G. Banzon for petitioner.

Renecio R. Espiritu for private respondents.

FERNAN, C.J.:

This is a petition for review on certiorari seeking the reversal of: (a) the decision of the Fourth Civil Cases Division of the
Intermediate Appellate Court dated August 31, 1983 in AC-G.R. CV No. 56626 entitled "Jesus Yanes et al. v. Dr. Rodolfo
Siason et al." affirming the decision dated July 8, 1974 of the Court of First Instance of Negros Occidental insofar as it
ordered the petitioners to pay jointly and severally the private respondents the sum of P20,000.00 representing the actual
value of Lots Nos. 773-A and 773-B of the cadastral survey of Murcia, Negros Occidental and reversing the subject
decision insofar as it awarded the sums of P2,000.00, P5,000.00 and P2,000.00 as actual damages, moral damages and
attorney's fees, respectively and (b) the resolution of said appellate court dated May 30, 1984, denying the motion for
reconsideration of its decision.

The real properties involved are two parcels of land identified as Lot 773-A and Lot 773-B which were originally known as
Lot 773 of the cadastral survey of Murcia, Negros Occidental. Lot 773, with an area of 156,549 square meters, was
registered in the name of the heirs of Aniceto Yanes under Original Certificate of Title No. RO-4858 (8804) issued on
October 9, 1917 by the Register of Deeds of Occidental Negros (Exh. A).

Aniceto Yanes was survived by his children, Rufino, Felipe and Teodora. Herein private respondents, Estelita, Iluminado
and Jesus, are the children of Rufino who died in 1962 while the other private respondents, Antonio and Rosario Yanes,
1
are children of Felipe. Teodora was survived by her child, Jovita (Jovito) Alib. It is not clear why the latter is not included
as a party in this case.

Aniceto left his children Lots 773 and 823. Teodora cultivated only three hectares of Lot 823 as she could not attend to the
other portions of the two lots which had a total area of around twenty-four hectares. The record does not show whether
the children of Felipe also cultivated some portions of the lots but it is established that Rufino and his children left the
province to settle in other places as a result of the outbreak of World War II. According to Estelita, from the "Japanese
time up to peace time", they did not visit the parcels of land in question but "after liberation", when her brother went there
to get their share of the sugar produced therein, he was informed that Fortunato Santiago, Fuentebella (Puentevella) and
2
Alvarez were in possession of Lot 773.

It is on record that on May 19, 1938, Fortunato D. Santiago was issued Transfer Certificate of Title No. RF 2694 (29797)
3
covering Lot 773-A with an area of 37,818 square meters. TCT No. RF 2694 describes Lot 773-A as a portion of Lot 773
of the cadastral survey of Murcia and as originally registered under OCT No. 8804.

The bigger portion of Lot 773 with an area of 118,831 square meters was also registered in the name of Fortunato D.
4
Santiago on September 6, 1938 Under TCT No. RT-2695 (28192 ). Said transfer certificate of title also contains a
certification to the effect that Lot 773-B was originally registered under OCT No. 8804.

On May 30, 1955, Santiago sold Lots 773-A and 773-B to Monico B. Fuentebella, Jr. in consideration of the sum of
5 6
P7,000.00. Consequently, on February 20, 1956, TCT Nos. T-19291 and T-19292 were issued in Fuentebella's name.

After Fuentebella's death and during the settlement of his estate, the administratrix thereof (Arsenia R. Vda. de
Fuentebella, his wife) filed in Special Proceedings No. 4373 in the Court of First Instance of Negros Occidental, a motion
7 8
requesting authority to sell Lots 773-A and 773-B. By virtue of a court order granting said motion, on March 24, 1958,
9
Arsenia Vda. de Fuentebella sold said lots for P6,000.00 to Rosendo Alvarez. Hence, on April 1, 1958 TCT Nos. T-
10
23165 and T-23166 covering Lots 773-A and 773-B were respectively issued to Rosendo Alvarez.
Two years later or on May 26, 1960, Teodora Yanes and the children of her brother Rufino, namely, Estelita, Iluminado
and Jesus, filed in the Court of First Instance of Negros Occidental a complaint against Fortunato Santiago, Arsenia Vda.
de Fuentebella, Alvarez and the Register of Deeds of Negros Occidental for the "return" of the ownership and possession
of Lots 773 and 823. They also prayed that an accounting of the produce of the land from 1944 up to the filing of the
complaint be made by the defendants, that after court approval of said accounting, the share or money equivalent due the
plaintiffs be delivered to them, and that defendants be ordered to pay plaintiffs P500.00 as damages in the form of
11
attorney's fees.

During the pendency in court of said case or on November 13, 1961, Alvarez sold Lots 773-A, 773-B and another lot for
12 13
P25,000.00 to Dr. Rodolfo Siason. Accordingly, TCT Nos. 30919 and 30920 were issued to Siason, who thereafter,
14
declared the two lots in his name for assessment purposes.

Meanwhile, on November 6, 1962, Jesus Yanes, in his own behalf and in behalf of the other plaintiffs, and assisted by
their counsel, filed a manifestation in Civil Case No. 5022 stating that the therein plaintiffs "renounce, forfeit and quitclaims
(sic) any claim, monetary or otherwise, against the defendant Arsenia Vda. de Fuentebella in connection with the above-
15
entitled case."

On October 11, 1963, a decision was rendered by the Court of First Instance of Negros Occidental in Civil Case No. 5022,
the dispositive portion of which reads:

WHEREFORE, judgment is rendered, ordering the defendant Rosendo Alvarez to reconvey to the
plaintiffs lots Nos. 773 and 823 of the Cadastral Survey of Murcia, Negros Occidental, now covered by
Transfer Certificates of Title Nos. T-23165 and T-23166 in the name of said defendant, and thereafter to
deliver the possession of said lots to the plaintiffs. No special pronouncement as to costs.

16
SO ORDERED.

It will be noted that the above-mentioned manifestation of Jesus Yanes was not mentioned in the aforesaid decision.

However, execution of said decision proved unsuccessful with respect to Lot 773. In his return of service dated October
20, 1965, the sheriff stated that he discovered that Lot 773 had been subdivided into Lots 773-A and 773-B; that they
were "in the name" of Rodolfo Siason who had purchased them from Alvarez, and that Lot 773 could not be delivered to
17
the plaintiffs as Siason was "not a party per writ of execution."

The execution of the decision in Civil Case No. 5022 having met a hindrance, herein private respondents (the Yaneses)
filed on July 31, 1965, in the Court of First Instance of Negros Occidental a petition for the issuance of a new certificate of
18
title and for a declaration of nullity of TCT Nos. T-23165 and T-23166 issued to Rosendo Alvarez. Thereafter, the court
required Rodolfo Siason to produce the certificates of title covering Lots 773 and 823.

Expectedly, Siason filed a manifestation stating that he purchased Lots 773-A, 773-B and 658, not Lots 773 and 823, "in
good faith and for a valuable consideration without any knowledge of any lien or encumbrances against said properties";
19
that the decision in the cadastral proceeding could not be enforced against him as he was not a party thereto; and that
the decision in Civil Case No. 5022 could neither be enforced against him not only because he was not a party-litigant
20
therein but also because it had long become final and executory. Finding said manifestation to be well-founded, the
cadastral court, in its order of September 4, 1965, nullified its previous order requiring Siason to surrender the certificates
21
of title mentioned therein.

In 1968, the Yaneses filed an ex-parte motion for the issuance of an alias writ of execution in Civil Case No. 5022. Siason
22
opposed it. In its order of September 28, 1968 in Civil Case No. 5022, the lower court, noting that the Yaneses had
instituted another action for the recovery of the land in question, ruled that at the judgment therein could not be enforced
23
against Siason as he was not a party in the case.

24
The action filed by the Yaneses on February 21, 1968 was for recovery of real property with damages. Named
defendants therein were Dr. Rodolfo Siason, Laura Alvarez, Flora Alvarez, Raymundo Alvarez and the Register of Deeds
of Negros Occidental. The Yaneses prayed for the cancellation of TCT Nos. T-19291 and 19292 issued to Siason (sic) for
being null and void; the issuance of a new certificate of title in the name of the Yaneses "in accordance with the sheriffs
return of service dated October 20, 1965;" Siason's delivery of possession of Lot 773 to the Yaneses; and if, delivery
thereof could not be effected, or, if the issuance of a new title could not be made, that the Alvarez and Siason jointly and
severally pay the Yaneses the sum of P45,000.00. They also prayed that Siason render an accounting of the fruits of Lot
773 from November 13, 1961 until the filing of the complaint; and that the defendants jointly and severally pay the
25
Yaneses moral damages of P20,000.00 and exemplary damages of P10,000.00 plus attorney's fees of P4, 000.00.

In his answer to the complaint, Siason alleged that the validity of his titles to Lots 773-A and 773-B, having been passed
upon by the court in its order of September 4, 1965, had become res judicata and the Yaneses were estopped from
26
questioning said order. On their part, the Alvarez stated in their answer that the Yaneses' cause of action had been
27
"barred by res judicata, statute of limitation and estoppel."

In its decision of July 8, 1974, the lower court found that Rodolfo Siason, who purchased the properties in question thru an
agent as he was then in Mexico pursuing further medical studies, was a buyer in good faith for a valuable consideration.
Although the Yaneses were negligent in their failure to place a notice of lis pendens "before the Register of Deeds of
Negros Occidental in order to protect their rights over the property in question" in Civil Case No. 5022, equity demanded
that they recover the actual value of the land because the sale thereof executed between Alvarez and Siason was without
28
court approval. The dispositive portion of the decision states:

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

manner:

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

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

C. The cross-claim filed by the defendant Dr. Rodolfo Siason against the defendants, Laura, Flora and
Raymundo, all surnamed Alvarez is hereby dismissed.

D. Defendants, Laura, Flora and Raymundo, all surnamed Alvarez are hereby ordered to pay the costs of
this suit.

29
SO ORDERED.

30
The Alvarez appealed to the then Intermediate Appellate Court which in its decision of August 31, 1983 affirmed the
lower court's decision "insofar as it ordered defendants-appellants to pay jointly and severally the plaintiffs-appellees the
sum of P20,000.00 representing the actual value of Lots Nos. 773-A and 773-B of the cadastral survey of Murcia, Negros
Occidental, and is reversed insofar as it awarded the sums of P2,000.00, P5,000.00 and P2,000.00 as actual damages,
31
moral damages and attorney's fees, respectively." The dispositive portion of said decision reads:

WHEREFORE, the decision appealed from is affirmed insofar as it ordered defendants-appellants to pay
jointly and severally the plaintiffs- appellees the sum of P20,000.00 representing the actual value of Lots
Nos. 773-A and 773-B of the cadastral survey of Murcia, Negros Occidental, and is reversed insofar as it
awarded the sums of P2,000.00, P5,000.00 and P2,000.00 as actual damages, moral damages and
attorney's fees, respectively. No costs.

32
SO ORDERED.

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

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

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

2. Whether or not the cause and/or causes of action of the private respondents, if ever there are any, as
alleged in their complaint dated February 21, 1968 which has been docketed in the trial court as Civil
Case No. 8474 supra, are forever barred by statute of limitation and/or prescription of action and
estoppel.

3. Whether or not the late Rosendo Alvarez, a defendant in Civil Case No. 5022, supra and father of the
petitioners become a privy and/or party to the waiver (Exhibit 4-defendant Siason) in Civil Case No.
8474, supra where the private respondents had unqualifiedly and absolutely waived, renounced and
quitclaimed all their alleged rights and interests, if ever there is any, on Lots Nos. 773-A and 773-B of
Murcia Cadastre as appearing in their written manifestation dated November 6, 1962 (Exhibits "4" Siason)
which had not been controverted or even impliedly or indirectly denied by them.

4. Whether or not the liability or liabilities of Rosendo Alvarez arising from the sale of Lots Nos. 773-A and
773-B of Murcia Cadastre to Dr. Rodolfo Siason, if ever there is any, could be legally passed or
33
transmitted by operations (sic) of law to the petitioners without violation of law and due process .

The petition is devoid of merit.

As correctly ruled by the Court of Appeals, it is powerless and for that matter so is the Supreme Court, to review the
decision in Civil Case No. 5022 ordering Alvarez to reconvey the lots in dispute to herein private respondents. Said
decision had long become final and executory and with the possible exception of Dr. Siason, who was not a party to said
case, the decision in Civil Case No. 5022 is the law of the case between the parties thereto. It ended when Alvarez or his
34
heirs failed to appeal the decision against them.

Thus, it is axiomatic that when a right or fact has been judicially tried and determined by a court of competent jurisdiction,
so long as it remains unreversed, it should be conclusive upon the parties and those in privity with them in law or
 35
estate. As consistently ruled by this Court, every litigation must come to an end. Access to the court is guaranteed. But
there must be a limit to it. Once a litigant's right has been adjudicated in a valid final judgment of a competent court, he
should not be granted an unbridled license to return for another try. The prevailing party should not be harassed by
subsequent suits. For, if endless litigation were to be allowed, unscrupulous litigations will multiply in number to the
36
detriment of the administration of justice.

There is no dispute that the rights of the Yaneses to the properties in question have been finally adjudicated in Civil Case
No. 5022. As found by the lower court, from the uncontroverted evidence presented, the Yaneses have been illegally
37
deprived of ownership and possession of the lots in question. In fact, Civil Case No. 8474 now under review, arose from
the failure to execute Civil Case No. 5022, as subject lots can no longer be reconveyed to private respondents Yaneses,
the same having been sold during the pendency of the case by the petitioners' father to Dr. Siason who did not know
about the controversy, there being no lis pendens annotated on the titles. Hence, it was also settled beyond question that
Dr. Siason is a purchaser in good faith.

Under the circumstances, the trial court did not annul the sale executed by Alvarez in favor of Dr. Siason on November
11, 1961 but in fact sustained it. The trial court ordered the heirs of Rosendo Alvarez who lost in Civil Case No. 5022 to
pay the plaintiffs (private respondents herein) the amount of P20,000.00 representing the actual value of the subdivided
38
lots in dispute. It did not order defendant Siason to pay said amount.

As to the propriety of the present case, it has long been established that the sole remedy of the landowner whose property
has been wrongfully or erroneously registered in another's name is to bring an ordinary action in the ordinary court of
justice for reconveyance or, if the property has passed into the hands of an innocent purchaser for value, for
39
damages. "It is one thing to protect an innocent third party; it is entirely a different matter and one devoid of justification
if deceit would be rewarded by allowing the perpetrator to enjoy the fruits of his nefarious decided As clearly revealed by
the undeviating line of decisions coming from this Court, such an undesirable eventuality is precisely sought to be
40
guarded against."

The issue on the right to the properties in litigation having been finally adjudicated in Civil Case No. 5022 in favor of
private respondents, it cannot now be reopened in the instant case on the pretext that the defenses of prescription and
estoppel have not been properly considered by the lower court. Petitioners could have appealed in the former case but
they did not. They have therefore foreclosed their rights, if any, and they cannot now be heard to complain in another case
in order to defeat the enforcement of a judgment which has longing become final and executory.

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

Such contention is untenable for it overlooks the doctrine obtaining in this jurisdiction on the general transmissibility of the
rights and obligations of the deceased to his legitimate children and heirs. Thus, the pertinent provisions of the Civil Code
state:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the
extent of the value of the inheritance, of a person are transmitted through his death to another or others
either by his will or by operation of law.

Art. 776. The inheritance includes all the property, rights and obligations of a person which are not
extinguished by his death.

Art. 1311. Contract stake effect only between the parties, their assigns and heirs except in case where
the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation
or by provision of law. The heir is not liable beyond the value of the property received from the decedent.

As explained by this Court through Associate Justice J.B.L. Reyes in the case of Estate of Hemady vs. Luzon Surety Co.,
41
Inc.

The binding effect of contracts upon the heirs of the deceased party is not altered by the provision of our
Rules of Court that money debts of a deceased must be liquidated and paid from his estate before the
residue is distributed among said heirs (Rule 89). The reason is that whatever payment is thus made from
the state is ultimately a payment by the heirs or distributees, since the amount of the paid claim in fact
diminishes or reduces the shares that the heirs would have been entitled to receive.

Under our law, therefore. the general rule is that a party's contractual rights and obligations are
transmissible to the successors.

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

xxx xxx xxx

Petitioners being the heirs of the late Rosendo Alvarez, they cannot escape the legal consequences of their father's
transaction, which gave rise to the present claim for damages. That petitioners did not inherit the property involved herein
is of no moment because by legal fiction, the monetary equivalent thereof devolved into the mass of their father's
hereditary estate, and we have ruled that the hereditary assets are always liable in their totality for the payment of the
42
debts of the estate.

It must, however, be made clear that petitioners are liable only to the extent of the value of their inheritance. With this
clarification and considering petitioners' admission that there are other properties left by the deceased which are sufficient
to cover the amount adjudged in favor of private respondents, we see no cogent reason to disturb the findings and
conclusions of the Court of Appeals.

WHEREFORE, subject to the clarification herein above stated, the assailed decision of the Court of Appeals is hereby
AFFIRMED. Costs against petitioners.

SO ORDERED.
 2.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-44837 November 23, 1938

SOCORRO LEDESMA and ANA QUITCO LEDESMA, plaintiffs-appellees,

vs.
CONCHITA MCLACHLIN, ET AL., defendants-appellants.

Adriano T. de la Cruz for appellants.

Simeon Bitanga for appellees.

VILLA-REAL, J.:

This case is before us by virtue of an appeal taken by the defendants Conchita McLachlin, Lorenzo Quitco, Jr., Sabina
Quitco, Rafael Quitco and Marcela Quitco, from the decision of the Court of First Instance of Occidental Negros, the
dispositive part of which reads:

For the foregoing considerations, the court renders judgment in this case declaring Ana Quitco Ledesma an
acknowledged natural daughter of the deceased Lorenzo M. Quitco, for legal purposes, but absolving the
defendants as to the prayer in the first cause of action that the said Ana Quitco Ledesma be declared entitled to
share in the properties left by the deceased Eusebio Quitco.

As to the second cause of action, the said defendants are ordered to pay to the plaintiff Socorro Ledesma, jointly
and severally, only the sum of one thousand five hundred pesos(P1,500), with legal interest thereon from the filing
of this complaint until fully paid. No pronouncement is made as to the costs. So ordered.

In support of their appeal, the appellants assign the following errors allegedly committed by the trial court in its aforesaid
decision:

1. That the trial court erred in holding, that the action for the recovery of the sum of P1,500, representing the last
installment of the note Exhibit C has not yet prescribed.

2. That the trial court erred in holding that the property inherited by the defendants from their deceased
grandfather by the right of representation is subject to the debts and obligations of their deceased father who died
without any property whatsoever.lawphi1.net

3. That the trial court erred in condemning the defendants to pay jointly and severally the plaintiff Socorro
Ledesma the sum of P1,500.

The only facts to be considered in the determination of the legal questions raised in this appeal are those set out in the
appealed decision, which have been established at the trial, namely:

In the year 1916, the plaintiff Socorro Ledesma lived maritally with Lorenzo M. Quitco, while the latter was still
single, of which relation, lasting until the year 1921, was born a daughter who is the other plaintiff Ana Quitco
Ledesma. In 1921, it seems hat the relation between Socorro Ledesma and Lorenzo M. Quitco came to an end,
but the latter executed a deed (Exhibit A), acknowledging the plaintiff Ana Quitco Ledesma as his natural
daughter and on January 21, 1922, he issued in favor of the plaintiff Socorro Ledesma a promissory note (Exhibit
C), of the following tenor:

P2,000. For value received I promise to pay Miss Socorro Ledesma the sum of two thousand pesos (P2,000).
Philippine currency under the following terms: Two hundred and fifty pesos (P250) to be paid on the first day of
March 1922; another two hundred and fifty pesos (P250)to be paid on the first day of November 1922; the
remaining one thousand and five hundred (P1,500) to be paid two years from the date of the execution of this
note. San Enrique, Occ. Negros, P. I., Jan. 21, 1922.

Subsequently, Lorenzo M. Quitco married the defendant Conchita McLachlin, with whom he had four children,
who are the other defendants. On March 9, 1930, Lorenzo M. Quitco died (Exhibit 5), and, still later, that is, on
December 15, 1932, his father Eusebio Quitco also died, and as the latter left real and personal properties upon
his death, administration proceedings of said properties were instituted in this court, the said case being known as
the "Intestate of the deceased Eusebio Quitco," civil case No. 6153 of this court.

Upon the institution of the intestate of the deceased Eusebio Quitco and the appointment of the committee on
claims and appraisal, the plaintiff Socorro Ledesma, on August 26, 1935, filed before said committee the
aforequoted promissory note for payment, and the commissioners, upon receipt of said promissory note, instead
 of passing upon it, elevated the same to this court en consulta (Exhibit F), and as the Honorable Jose Lopez Vito,
presiding over the First Branch, returned said consulta and refrained from giving his opinion thereon (Exhibit C),
the aforesaid commissioners on claims and appraisal, alleging lack of jurisdiction to pass upon the claim, denied
he same (Exhibit H).

On November 14, 1933 (Exhibit I), the court issued an order of declaration of heirs in the intestate of the
deceased Eusebio Quitco, and as Ana Quitco Ledesma was not included among the declared heirs, Socorro
Ledesma, as mother of Ana Quitco Ledesma, asked for the reconsideration of said order, a petition which the
court denied. From the order denying the said petition no appeal was taken, and in lieu thereof there was filed the
complaint which gives rise to this case.

The first question to be decided in this appeal, raised in the first assignment of alleged error, is whether or not the action
to recover the sum of P1,500, representing the last installment for the payment of the promissory note Exhibit C, has
prescribed.

According to the promissory note Exhibit C, executed by the deceased Lorenzo M. Quitco, on January 21, 1922, the last
installment of P1,500 should be paid two years from the date of the execution of said promissory note, that is, on January
21, 1924. The complaint in the present case was filed on June 26, 1934, that is, more than ten years after he expiration of
the said period. The fact that the plaintiff Socorro Ledesma filed her claim, on August 26, 1933, with the committee on
claims and appraisal appointed in the intestate of Eusebio Quitco, does not suspend the running of the prescriptive period
of the judicial action for the recovery of said debt, because the claim for the unpaid balance of the amount of the
promissory note should no have been presented in the intestate of Eusebio Quitco, the said deceased not being the one
who executed the same, but in the intestate of Lorenzo M. Quitco, which should have been instituted by the said Socorro
Ledesma as provided in section 642 of the Code of Civil Procedure, authorizing a creditor to institute said case through
the appointment of an administrator for the purpose of collecting his credit. More than ten years having thus elapsed from
the expiration of the period for the payment of said debt of P1,500, the action for its recovery has prescribed under section
43, No. 1, of the Code of Civil Procedure.

The first assignment of alleged error is, therefore, well-founded.

As to the second assignment of alleged error, consisting in that the trial court erred in holding that the properties inherited
by the defendants from their deceased grandfather by representation are subject to the payment of debts and obligations
of their deceased father, who died without leaving any property, while it is true that under the provisions of articles 924 to
927 of the Civil Code, a children presents his father or mother who died before him in the properties of his grandfather or
grandmother, this right of representation does not make the said child answerable for the obligations contracted by his
deceased father or mother, because, as may be seen from the provisions of the Code of Civil Procedure referring to
partition of inheritances, the inheritance is received with the benefit of inventory, that is to say, the heirs only answer with
the properties received from their predecessor. The herein defendants, as heirs of Eusebio Quitco, in representation of
their father Lorenzo M. Quitco, are not bound to pay the indebtedness of their said father from whom they did not inherit
anything.

The second assignment of alleged error is also well-founded.

Being a mere sequel of the first two assignments of alleged errors, the third assignment of error is also well-founded.

For the foregoing considerations, we are of the opinion and so hold: (1) That the filing of a claim before the committee on
claims and appraisal, appointed in the intestate of the father, for a monetary obligation contracted by a son who died
before him, does not suspend the prescriptive period of the judicial action for the recovery of said indebtedness; (2) that
the claim for the payment of an indebtedness contracted by a deceased person cannot be filed for its collection before the
committee on claims and appraisal, appointed in the intestate of his father, and the propertiesinherited from the latter by
the children of said deceased do not answer for the payment of the indebtedness contracted during the lifetime of said
person.

Wherefore, the appealed judgment is reversed, and the defendants are absolved from the complaint, with the costs to the
appellees. So ordered.

Avanceña, C.J., Imperial, Diaz, Laurel and Concepcion, JJ., concur.

 3.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 171035 August 24, 2009

WILLIAM ONG GENATO, Petitioner,

vs.
BENJAMIN BAYHON, MELANIE BAYHON, BENJAMIN BAYHON, JR., BRENDA BAYHON, ALINA BAYHON-
CAMPOS, IRENE BAYHON-TOLOSA, and the minor GINO BAYHON, as represented herein by his natural mother
as guardian-ad-litem, JESUSITA M. BAYHON, Respondents.

DECISION

PUNO, CJ.:

1
At bar is a Petition for Review on Certiorari assailing the Decision of the Court of Appeals dated September 16, 2005 and
Resolution denying the petitioner’s motion for reconsideration issued on January 6, 2006.

This is a consolidated case stemming from two civil cases filed before the Regional Trial Court (RTC) – Civil Case No. Q-
90-7012 and Civil Case No. Q-90-7551.

Civil Case No. Q-90-7012

On October 18, 1990, respondents Benjamin M. Bayhon, Melanie Bayhon, Benjamin Bayhon Jr., Brenda Bayhon, Alina
Bayhon-Campos, Irene Bayhon-Tolosa and the minor Gino Bayhon, as represented by his mother Jesusita M. Bayhon,
filed an action before the RTC, Quezon City, Branch 76, docketed as Civil Case No. Q-90-7012. In their Complaint,
respondents sought the declaration of nullity of a dacion en pago allegedly executed by respondent Benjamin Bayhon in
2
favor of petitioner William Ong Genato.

Respondent Benjamin Bayhon alleged that on July 3, 1989, he obtained from the petitioner a loan amounting to PhP
3
1,000,000.00; that to cover the loan, he executed a Deed of Real Estate Mortgage over the property covered by Transfer
Certificate of Title (TCT) No. 38052; that, however, the execution of the Deed of Real Estate Mortgage was conditioned
upon the personal assurance of the petitioner that the said instrument is only a private memorandum of indebtedness and
4
that it would neither be notarized nor enforced according to its tenor.

Respondent further alleged that he filed a separate proceeding for the reconstitution of TCT No. 38052 before the RTC,
5
Quezon City, Branch 87. Petitioner William Ong Genato filed an Answer in Intervention in the said proceeding and
6
attached a copy of an alleged dacion en pago covering said lot. Respondent assailed the dacion en pago as a forgery
7
alleging that neither he nor his wife, who had died 3 years earlier, had executed it.

8
In his Answer, petitioner Genato denied the claim of the respondent regarding the death of the latter’s wife. He alleged
9
that on the date that the real estate mortgage was to be signed, respondent introduced to him a woman as his wife. He
10
alleged that the respondent signed the dacion en pago and that the execution of the instrument was above-board.

Civil Case No. Q-90-7551

On December 20, 1990, petitioner William Ong Genato filed Civil Case No. Q-90-7551, an action for specific performance,
before the RTC, Quezon City, Branch 79. In his Complaint, petitioner alleged that respondent obtained a loan from him in
the amount of PhP 1,000,000.00. Petitioner alleged further that respondent failed to pay the loan and executed on
October 21, 1989 a dacion en pago in favor of the petitioner. The dacion en pago was inscribed and recorded with the
11
Registry of Deeds of Quezon City.

Petitioner further averred that despite demands, respondent refused to execute the requisite documents to transfer to him
the ownership of the lot subject of the dacion en pago. Petitioner prayed, inter alia, for the court to order the respondent to
12
execute the final deed of sale and transfer of possession of the said lot.

Decision of the Consolidated Cases

The two cases were consolidated and transferred to the RTC, Quezon City, Branch 215. On October 9, 1997, the trial
court rendered its Decision. It found that respondent obtained a loan in the amount of PhP 1,000,000.00 from the
petitioner on July 3, 1989. The terms of the loan were interest payment at 5% per month with an additional 3% penalty in
13
case of nonpayment.

14
With respect to the dacion en pago, the trial court held that the parties have novated the agreement. It deduced the
novation from the subsequent payments made by the respondent to the petitioner. Of the principal amount, the sum of
PhP 102,870.00 had been paid: PhP 27,870.00 on March 23, 1990, PhP 55,000.00 on 26 March 1990 and PhP 20,000.00
15
on 16 November 1990. All payments were made after the purported execution of the dacion en pago.

The trial court likewise found that at the time of the execution of the real estate mortgage, the wife of respondent, Amparo
Mercado, was already dead. It held that the property covered by TCT No. 38052 was owned in common by the
respondents and not by respondent Benjamin Bayhon alone. It concluded that the said lot could not have been validly
mortgaged by the respondent alone; the deed of mortgage was not enforceable and only served as evidence of the
16
obligation of the respondent.

In sum, the trial court upheld the respondent’s liability to the petitioner and ordered the latter to pay the sum of Php
17
5,647,130.00. This amount included the principal, the stipulated interest of 5% per month, and the penalty; and, was
calculated from the date of demand until the date the RTC rendered its judgment.

Appeal to the Court of Appeals

Respondents appealed before the Court of Appeals. On March 28, 2002, respondent Benjamin Bayhon died while the
18
case was still pending decision. On September 16, 2005, the Court of Appeals rendered a decision reversing the trial
court.

The Court of Appeals held that the real estate mortgage and the dacion en pago were both void. The appellate court ruled
that at the time the real estate mortgage and the dacion en pago were executed, or on July 3, 1989 and October 21, 1989,
19
respectively, the wife of respondent Benjamin Bayhon was already dead. Thus, she could not have participated in the
execution of the two documents. The appellate court struck down both the dacion en pagoand the real estate mortgage as
20
being simulated or fictitious contracts pursuant to Article 1409 of the Civil Code.

The Court of Appeals held further that while the principal obligation is valid, the death of respondent Benjamin Bayhon
21 22
extinguished it. The heirs could not be ordered to pay the debts left by the deceased. Based on the foregoing, the
Court of Appeals dismissed petitioner’s appeal. Petitioner’s motion for reconsideration was denied in a resolution dated
23
January 6, 2006.

Petition for Review

Petitioner now comes before this Court assailing the decision of the Court of Appeals and raising the following issues:

Whether or not Benjamin Bayhon is liable to Mr. Genato in the amount of Php 5,647,130.00 in principal and interest as of
24
October 3, 1997 and 5% monthly interest thereafter until the account shall have been fully paid.

The Court of Appeals erred in declaring the Real Estate Mortgage dated July 3, 1989 and the Dacion en Pago dated
25
October 21, 1989, null and void.

We shall first tackle the nullity of the dacion en pago.

We affirm the ruling of the appellate court that the subject dacion en pago is a simulated or fictitious contract, and hence
void. The evidence shows that at the time it was allegedly signed by the wife of the respondent, his wife was already
dead. This finding of fact cannot be reversed.

We now go to the ruling of the appellate court extinguishing the obligation of respondent. As a general rule, obligations
derived from a contract are transmissible. Article 1311, par.1 of the Civil Code provides:

Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable
beyond the value of the property he received from the decedent.1avvphi1

26
In Estate of Hemady v. Luzon Surety Co., Inc., the Court, through Justice JBL Reyes, held:

While in our successional system the responsibility of the heirs for the debts of their decedent cannot exceed the value of
the inheritance they receive from him, the principle remains intact that these heirs succeed not only to the rights of the
deceased but also to his obligations. Articles 774 and 776 of the New Civil Code (and Articles 659 and 661 of the
preceding one) expressly so provide, thereby confirming Article 1311 already quoted.

"ART. 774. — Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent of
the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by
operation of law."

"ART. 776. — The inheritance includes all the property, rights and obligations of a person which are not extinguished by
27
his death." (Emphasis supplied)

The Court proceeded further to state the general rule:

Under our law, therefore, the general rule is that a party's contractual rights and obligations are transmissible to
the successors. The rule is a consequence of the progressive "depersonalization" of patrimonial rights and duties that,
as observed by Victorio Polacco, has characterized the history of these institutions. From the Roman concept of a relation
from person to person, the obligation has evolved into a relation from patrimony to patrimony, with the persons occupying
only a representative position, barring those rare cases where the obligation is strictly personal, i.e., is contracted intuitu
personae, in consideration of its performance by a specific person and by no other. The transition is marked by the
28
disappearance of the imprisonment for debt. (Emphasis supplied)

The loan in this case was contracted by respondent. He died while the case was pending before the Court of Appeals.
While he may no longer be compelled to pay the loan, the debt subsists against his estate. No property or portion of the
inheritance may be transmitted to his heirs unless the debt has first been satisfied. Notably, throughout the appellate
stage of this case, the estate has been amply represented by the heirs of the deceased, who are also his co-parties in
Civil Case No. Q-90-7012.

The procedure in vindicating monetary claims involving a defendant who dies before final judgment is governed by Rule 3,
Section 20 of the Rules of Civil Procedure, to wit:

When the action is for recovery of money arising from contract, express or implied, and the defendant dies before entry of
final judgment in the court in which the action was pending at the time of such death, it shall not be dismissed but shall
instead be allowed to continue until entry of final judgment. A favorable judgment obtained by the plaintiff therein shall be
enforced in the manner especially provided in these Rules for prosecuting claims against the estate of a deceased
person.

Pursuant to this provision, petitioner’s remedy lies in filing a claim against the estate of the deceased respondent.

We now go to the interest awarded by the trial court. We note that the interest has been pegged at 5% per month, or 60%
29
per annum. This is unconscionable, hence cannot be enforced. In light of this, the rate of interest for this kind of loan
30
transaction has been fixed in the case of Eastern Shipping Lines v. Court of Appeals, at 12% per annum, calculated
31
from October 3, 1989, the date of extrajudicial demand.

Following this formula, the total amount of the obligation of the estate of Benjamin Bayhon is as follows:

Plus: Interest

Principal Php 1,000,000.00

Less: Partial Payments 27,870.00

55,000.00

20,000.00

897,130.00

(12% per annum x 20 years) 2,153,552.00

TOTAL: Php 3,050,682.00

IN VIEW WHEREOF, the decision of the Court of Appeals dated September 16, 2005 is AFFIRMED with the
MODIFICATION that the obligation to pay the principal loan and interest contracted by the deceased Benjamin Bayhon
subsists against his estate and is computed at PhP 3,050,682.00.

No costs.

SO ORDERED.
I. GENERAL PROVISIONS (C. TRANSFER EITHER THROUGH WILL OR EPERATION OF LAW) (NO CASE) (ART.
774)

I. GENERAL PROVISIONS (D. TRANSMISSIBLE RIGHTS AND OBLIGATIONS)(ART 774)

1.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

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

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

Federico Paredes for petitioners.

Demetrio V. Pre for private respondents.

MARTIN, J:

1
This is a petition for review of the Order of the Court of First Instance of Abra in Civil Case No. 856, entitled Fortunata
Barcena vs. Leon Barcena, et al., denying the motions for reconsideration of its order dismissing the complaint in the
aforementioned case.

On March 31, 1975 Fortunata Barcena, mother of minors Rosalio Bonilla and Salvacion Bonilla and wife of Ponciano
Bonilla, instituted a civil action in the Court of First Instance of Abra, to quiet title over certain parcels of land located in
Abra.

On May 9, 1975, defendants filed a written motion to dismiss the complaint, but before the hearing of the motion to
dismiss, the counsel for the plaintiff moved to amend the complaint in order to include certain allegations therein. The
motion to amend the complaint was granted and on July 17, 1975, plaintiffs filed their amended complaint.

On August 4, 1975, the defendants filed another motion to dismiss the complaint on the ground that Fortunata Barcena is
dead and, therefore, has no legal capacity to sue. Said motion to dismiss was heard on August 14, 1975. In said hearing,
counsel for the plaintiff confirmed the death of Fortunata Barcena, and asked for substitution by her minor children and
her husband, the petitioners herein; but the court after the hearing immediately dismissed the case on the ground that a
dead person cannot be a real party in interest and has no legal personality to sue.

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

On August 28, 1975, the court denied the motion for reconsideration filed by counsel for the plaintiff for lack of merit. On
September 1, 1975, counsel for deceased plaintiff filed a written manifestation praying that the minors Rosalio Bonilla and
Salvacion Bonilla be allowed to substitute their deceased mother, but the court denied the counsel's prayer for lack of
merit. From the order, counsel for the deceased plaintiff filed a second motion for reconsideration of the order dismissing
the complaint claiming that the same is in violation of Sections 16 and 17 of Rule 3 of the Rules of Court but the same
was denied.

Hence, this petition for review.

The Court reverses the respondent Court and sets aside its order dismissing the complaint in Civil Case No. 856 and its
orders denying the motion for reconsideration of said order of dismissal. While it is true that a person who is dead cannot
sue in court, yet he can be substituted by his heirs in pursuing the case up to its completion. The records of this case
show that the death of Fortunata Barcena took place on July 9, 1975 while the complaint was filed on March 31, 1975.
This means that when the complaint was filed on March 31, 1975, Fortunata Barcena was still alive, and therefore, the
court had acquired jurisdiction over her person. If thereafter she died, the Rules of Court prescribes the procedure
whereby a party who died during the pendency of the proceeding can be substituted. Under Section 16, Rule 3 of the
Rules of Court "whenever a party to a pending case dies ... it shall be the duty of his attorney to inform the court promptly
of such death ... and to give the name and residence of his executor, administrator, guardian or other legal
representatives." This duty was complied with by the counsel for the deceased plaintiff when he manifested before the
respondent Court that Fortunata Barcena died on July 9, 1975 and asked for the proper substitution of parties in the case.
The respondent Court, however, instead of allowing the substitution, dismissed the complaint on the ground that a dead
person has no legal personality to sue. This is a grave error. Article 777 of the Civil Code provides "that the rights to the
succession are transmitted from the moment of the death of the decedent." From the moment of the death of the
decedent, the heirs become the absolute owners of his property, subject to the rights and obligations of the decedent, and
3
they cannot be deprived of their rights thereto except by the methods provided for by law. The moment of death is the
4
determining factor when the heirs acquire a definite right to the inheritance whether such right be pure or contingent. The
right of the heirs to the property of the deceased vests in them even before judicial declaration of their being heirs in the
5
testate or intestate proceedings. When Fortunata Barcena, therefore, died her claim or right to the parcels of land in
litigation in Civil Case No. 856, was not extinguished by her death but was transmitted to her heirs upon her death. Her
heirs have thus acquired interest in the properties in litigation and became parties in interest in the case. There is,
therefore, no reason for the respondent Court not to allow their substitution as parties in interest for the deceased plaintiff.

Under Section 17, Rule 3 of the Rules of Court "after a party dies and the claim is not thereby extinguished, the court shall
order, upon proper notice, the legal representative of the deceased to appear and be substituted for the deceased, within
such time as may be granted ... ." The question as to whether an action survives or not depends on the nature of the
6
action and the damage sued for. In the causes of action which survive the wrong complained affects primarily and
principally property and property rights, the injuries to the person being merely incidental, while in the causes of action
which do not survive the injury complained of is to the person, the property and rights of property affected being
7
incidental. Following the foregoing criterion the claim of the deceased plaintiff which is an action to quiet title over the
parcels of land in litigation affects primarily and principally property and property rights and therefore is one that survives
even after her death. It is, therefore, the duty of the respondent Court to order the legal representative of the deceased
plaintiff to appear and to be substituted for her. But what the respondent Court did, upon being informed by the counsel for
the deceased plaintiff that the latter was dead, was to dismiss the complaint. This should not have been done for under
the same Section 17, Rule 3 of the Rules of Court, it is even the duty of the court, if the legal representative fails to
appear, to order the opposing party to procure the appointment of a legal representative of the deceased. In the instant
case the respondent Court did not have to bother ordering the opposing party to procure the appointment of a legal
representative of the deceased because her counsel has not only asked that the minor children be substituted for her but
also suggested that their uncle be appointed as guardian ad litem for them because their father is busy in Manila earning
a living for the family. But the respondent Court refused the request for substitution on the ground that the children were
still minors and cannot sue in court. This is another grave error because the respondent Court ought to have known that
under the same Section 17, Rule 3 of the Rules of Court, the court is directed to appoint a guardian ad litem for the minor
heirs. Precisely in the instant case, the counsel for the deceased plaintiff has suggested to the respondent Court that the
uncle of the minors be appointed to act as guardian ad litem for them. Unquestionably, the respondent Court has gravely
abused its discretion in not complying with the clear provision of the Rules of Court in dismissing the complaint of the
plaintiff in Civil Case No. 856 and refusing the substitution of parties in the case.

IN VIEW OF THE FOREGOING, the order of the respondent Court dismissing the complaint in Civil Case No. 856 of the
Court of First Instance of Abra and the motions for reconsideration of the order of dismissal of said complaint are set aside
and the respondent Court is hereby directed to allow the substitution of the minor children, who are the petitioners therein
for the deceased plaintiff and to appoint a qualified person as guardian ad litem for them. Without pronouncement as to
costs.

SO ORDERED.

Footnotes

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

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

Section 17. Death of party.—After a party dies and the claim is not thereby extinguished, the court shall
order, upon proper notice, the legal representative of the deceased to appear and to be substituted for
deceased, within a period of thirty (30) days, or within such time as may be granted. If the legal
representative fails to appear within said time, the court may order the opposing party to procure the
appointment of a legal representative of the within a time to be specified by the court, and the
representative shall immediately appear for and on behalf of the interest of the deceased. The court
charges involved in procuring such appointment, if defrayed by the opposing party, may be recovered as
costs. The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator and the court may appoint guardian ad litemfor the minor
heirs.
 2.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-4275 March 23, 1909

PAULA CONDE, plaintiff-appellee,

vs.
ROMAN ABAYA, defendant-appellant.

C. Oben for appellant.

L. Joaquin for appellee.

ARELLANO, C.J.:

From the hearing of the appeal interposed by Roman Abaya in the special proceedings brought in the Court of First
Instance of La Laguna for the settlement of the intestate estate and the distribution of the property of Casiano Abaya it
appears:

I. As antecedents: that Casiano Abaya, unmarried, the son of Romualdo Abaya and Sabrina Labadia, died on the 6th of
April, 1899; that Paula Conde, as the mother of the natural children Jose and Teopista Conde, whom the states she had
by Casiano Abaya, on the 6th of November, 1905, moved the settlement of the said intestate succession; that an
administrator having been appointed for the said estate on the 25th of November, 1905, Roman Abaya, a son of the said
Romualdo Abaya and Sabrina Labadia, the parents of the late Casiano Abaya, came forward and opposed said
appointment and claimed it for himself as being the nearest relative of the deceased; that this was granted by the court
below on the 9th of January, 1906; that on the 17th of November, 1906, Roman Abaya moved that, after due process of
law, the court declare him to be the sole heir of Casiano Abaya, to the exclusion of all other persons, especially of Paula
Conde, and to be therefore entitled to take possession of all the property of said estate, and that it be adjudicated to him;
and that on November 22, 1906, the court ordered the publication of notices for the declaration of heirs and distribution of
the property of the estate.

II. That on the 28th of November, 1906, Paula Conde, in replying to the foregoing motion of Roman Abaya, filed a petition
wherein she stated that she acknowledged the relationship alleged by Roman Abaya, but that she considered that her
right was superior to his and moved for a hearing of the matter, and, in consequence of the evidence that she intended to
present she prayed that she be declared to have preferential rights to the property left by Casiano Abaya, and that the
same be adjudicated to her together with the corresponding products thereof.

III. That the trial was held, both parties presenting documentary and oral evidence, and the court below entered the
following judgment:

That the administrator of the estate of Casiano Abaya should recognize Teopista and Jose Conde as being
natural children of Casiano Abaya; that the petitioner Paula Conde should succeed to the hereditary rights of her
children with respect to the inheritance of their deceased natural father Casiano Abaya; and therefore, it is hereby
declared that she is the only heir to the property of the said intestate estate, to the exclusion of the administrator,
Roman Abaya.

IV. That Roman Abaya excepted to the foregoing judgment, appealed to this court, and presented the following statement
of errors:

1. The fact that the court below found that an ordinary action for the acknowledgment of natural children under articles
135 and 137 of the Civil Code, might be brought in special probate proceedings.

2. The finding that after the death of a person claimed to be an unacknowledged natural child, the mother of such
presumed natural child, as heir to the latter, may bring an action to enforce the acknowledgment of her deceased child in
accordance with articles 135 and 137 of the Civil Code.

3. The finding in the judgment that the alleged continuos possession of the deceased children of Paula Conde of the
status of natural children of the late Casiano Abaya, has been fully proven in these proceedings; and

4. On the hypothesis that it was proper to adjudicate the property of this intestate estate to Paula Conde, as improperly
found by the court below, the court erred in not having declared that said property should be reserved in favor of relatives
of Casiano Abaya to the third degree, and in not having previously demanded securities from Paula Conde to guarantee
the transmission of the property to those who might fall within the reservation.

As to the first error assigned, the question is set up as to whether in special proceedings for the administration and
distribution of an intestate estate, an action might be brought to enforce the acknowledgment of the natural child of the
person from whom the inheritance is derived, that is to say, whether one might appear as heir on the ground that he is a
recognized natural child of the deceased, not having been so recognized by the deceased either voluntarily or
compulsorily by reason of a preexisting judicial decision, but asking at the same time that, in the special proceeding itself,
he be recognized by the presumed legitimate heirs of the deceased who claim to be entitled to the succession opened in
the special proceeding.

According to section 782 of the Code of Civil Procedure —

If there shall be a controversy before the Court of First Instance as to who the lawful heirs of the deceased person
are, or as to the distributive share to which each person is entitled under the law, the testimony as to such
controversy shall be taken in writing by the judge, under oath, and signed by the witness. Any party in interest
whose distributive share is affected by the determination of such controversy, may appeal from the judgment of
the Court of First Instance determining such controversy to the Supreme Court, within the time and in the manner
provided in the last preceding section.

This court has decided the present question in the manner shown in the case of Juana Pimentel vs. Engracio Palanca (5
Phil. Rep., 436.)

The main question with regard to the second error assigned, is whether or not the mother of a natural child now
deceased, but who survived the person who, it is claimed, was his natural father, also deceased, may bring an action for
the acknowledgment of the natural filiation in favor of such child in order to appear in his behalf to receive the inheritance
from the person who is supposed to be his natural father.

In order to decide in the affirmative the court below has assigned the following as the only foundation:

In resolving a similar question Manresa says: "An acknowledgment can only be demanded by the natural child
and his descendants whom it shall benefit, and should they be minors or otherwise incapacitated, such person as
legally represents them; the mother may ask it in behalf of her child so long as he is under her authority." On this
point no positive declaration has been made, undoubtedly because it was not considered necessary. A private
action is in question and the general rule must be followed. Elsewhere the same author adds: "It may so happen
that the child dies before four years have expired after attaining majority, or that the document supporting his
petition for acknowledgment is discovered after his death, such death perhaps occurring after his parents had
died, as is supposed by article 137, or during their lifetime. In any case such right of action shall pertain to the
descendants of the child whom the acknowledgment may interest." (See Commentaries to arts. 135 and 137, Civil
Code, Vol. I.)

The above doctrine, advanced by one of the most eminent commentators of the Civil Code, lacks legal and doctrinal
foundation. The power to transmit the right of such action by the natural child to his descendants can not be sustained
under the law, and still less to his mother.

It is without any support in law because the rule laid down in the code is most positive, limiting in form, when establishing
the exception for the exercise of such right of action after the death of the presumed parents, as is shown hereafter. It is
not supported by any doctrine, because up to the present time no argument has been presented, upon which even an
approximate conclusion could be based.

Although the Civil Code considerably improved the condition of recognized natural children, granting them rights and
actions that they did not possess under the former laws, they were not, however, placed upon the same place as
legitimate ones. The difference that separates these two classes of children is still great, as proven by so many articles
dealing with the rights of the family and the succession in relation to the members thereof. It may be laid down as legal
maxim, that whatever the code does not grant to the legitimate children, or in connection with their rights, must still less be
understood as granted to recognized natural children or in connection with their rights. There is not a single exception in
its provisions.

If legitimacy is the attribute that constitutes the basis of the absolute family rights of the child, the acknowledgment of the
natural child is, among illegitimate ones, that which unites him to the family of the father or the mother who recognized
him, and affords him a participation in the rights of the family, relatively advantageous according to whether they are alone
or whether they concur with other individuals of the family of his purely natural father or mother.

Thus, in order to consider the spirit of the Civil Code, nothing is more logical than to establish a comparison between an
action to claim the legitimacy, and one to enforce acknowledgment.

ART. 118. The action to claim its legitimacy may be brought by the child at any time of its lifetime and shall be
transmitted to its heirs, should it die during minority or in a state of insanity. In such cases the heirs shall be
allowed a period of five years in which to institute the action.

The action already instituted by the child is transmitted by its death to the heirs, if it has not lapsed before then.

ART. 137. The actions for the acknowledgment of natural children can be instituted only during the life of the
presumed parents, except in the following cases:

1. If the father or mother died during the maturity of the child, in which case the latter may institute the action
before the expiration of the first four years of its maturity.
 2. If, after the death of the father or mother, some instrument, before unknown, should be discovered in which the
child is expressly acknowledged.

In this case the action must be instituted with the six months following the discovery of such instrument.

On this supposition the first difference that results between one action and the other consists in that the right of action for
legitimacy lasts during the whole lifetime of the child, that is, it can always be brought against the presumed parents or
their heirs by the child itself, while the right of action for the acknowledgment of a natural child does not last his whole
lifetime, and, as a general rule, it can not be instituted against the heirs of the presumed parents, inasmuch as it can be
exercised only during the life of the presumed parents.

With regard to the question at issue, that is, the transmission to the heirs of the presumed parents of the obligation to
admit the legitimate filiation, or to recognize the natural filiation, there exists the most radical difference in that the former
continues during the life of the child who claims to be legitimate, and he may demand it either directly and primarily from
the said presumed parents, or indirectly and secondarily from the heirs of the latter; while the second does not endure for
life; as a general rule, it only lasts during the life of the presumed parents. Hence the other difference, derived as a
consequence, that an action for legitimacy is always brought against the heirs of the presumed parents in case of the
death of the latter, while the action for acknowledgment is not brought against the heirs of such parents, with the
exception of the two cases prescribed by article 137 transcribed above.

So much for the passive transmission of the obligation to admit the legitimate filiation, or to acknowledge the natural
filiation.

As to the transmission to the heirs of the child of the latter's action to claim his legitimacy, or to obtain the
acknowledgment of his natural filiation, it is seen that the code grants it in the first case, but not in the second. It contains
provisions for the transmission of the right of action which, for the purpose claiming his legitimacy inheres in the child, but
it does not say a word with regard to the transmission of the right to obtain the acknowledgment of the natural filiation.

Therefore, the respective corollary of each of the two above-cited articles is: (1) That the right of action which devolves
upon the child to claim his legitimacy under article 118, may be transmitted to his heirs in certain cases designated in the
said article; (2) That the right of action for the acknowledgment of natural children to which article 137 refers, can never be
transmitted, for the reason that the code makes no mention of it in any case, not even as an exception.

It is most illogical and contrary to every rule of correct interpretation, that the right of action to secure acknowledgment by
the natural child should be presumed to be transmitted, independently, as a rule, to his heirs, while the right of action to
claim legitimacy from his predecessor is not expressly, independently, or, as a general rule, conceded to the heirs of the
legitimate child, but only relatively and as an exception. Consequently, the pretension that the right of action on the part of
the child to obtain the acknowledgment of his natural filiation is transmitted to his descendants is altogether unfounded.
No legal provision exists to sustain such pretension, nor can an argument of presumption be based on the lesser claim
when there is no basis for the greater one, and when it is only given as an exception in well-defined cases. It is placing the
heirs of the natural child on a better footing than the heirs of the legitimate one, when, as a matter of fact, the position of a
natural child is no better than, no even equal to, that of a legitimate child.

From the express and precise precepts of the code the following conclusions are derived:

The right of action that devolves upon the child to claim his legitimacy lasts during his whole life, while the right to claim
the acknowledgment of a natural child lasts only during the life of his presumed parents.

Inasmuch as the right of action accruing to the child to claim his legitimacy lasts during his whole life, he may exercise it
either against the presumed parents, or their heirs; while the right of action to secure the acknowledgment of a natural
child, since it does not last during his whole life, but depends on that of the presumed parents, as a general rule can only
be exercised against the latter.

Usually the right of action for legitimacy devolving upon the child is of a personal character and pertains exclusively to
him, only the child may exercise it at any time during his lifetime. As an exception, and in three cases only, it may be
transmitted to the heirs of the child, to wit, if he died during his minority, or while insane, or after action had been already
instituted.

An action for the acknowledgment of a natural child may, as an exception, be exercised against the heirs of the presumed
parents in two cases: first, in the event of the death of the latter during the minority of the child, and second, upon the
discovery of some instrument of express acknowledgment of the child, executed by the father or mother, the existence of
which was unknown during the life of the latter.

But such action for the acknowledgment of a natural child can only be exercised by him. It can not be transmitted to his
descendants, or his ascendants.

In support of the foregoing the following authorities may be cited:

Sanchez Roman, in his Treatise of Civil Law, propounds the question as to whether said action should be considered
transmissive to the heirs or descendants of the natural child, whether he had or had not exercised it up to the time of his
death, and decides it as follows:
 There is an entire absence of legal provisions, and at most, it might be deemed admissible as a solution, that the
right of action to claim the acknowledgment of a natural child is transmitted by the analogy to his heirs on the
same conditions and terms that it is transmitted to the descendants of a legitimate child, to claim his legitimacy,
under article 118, but nothing more; because on this point nothing warrants placing the heirs of a natural child on
a better footing than those of the legitimate child, and even to compare them would not fail to be a strained and
questionable matter, and one of great difficulty for decision by the courts, for the simple reason that for the heirs
of the legitimate child, the said article 118 exists, while for those of the natural child, as we have said, there is no
provision in the code authorizing the same, although on the other hand there is none that prohibits it. (Vol. V.)

Diaz Guijarro and Martinez Ruiz in their work on "The Civil Code as construed by the supreme court of Spain,"
commenting upon article 137, say:

Article 118, taking into account the privileges due to the legitimacy of children, grants them the right to claim said
legitimacy during their lifetime, and even authorizes the transmission of said right for the space of five years to the
heirs thereof, if the child die during his minority or in a state of insanity. But as article 137 is based on the
consideration that in the case of a natural child, ties are less strong and sacred in the eyes of the law, it does not
fix such a long and indefinite period for the exercise of the action; it limits it to the life of the parents, excepting in
the two cases mentioned in said article; and it does not allow, as does article 118, the action to pass on to the
heirs, inasmuch as, although it does not prohibit it, and for that reason it might be deemed on general principles of
law to consent to it, such a supposition is inadmissible for the reason that a comparison of both articles shows
that the silence of the law in the latter case is not, nor it can be, an omission, but a deliberate intent to establish a
wide difference between the advantages granted to a legitimate child and to a natural one.

(Ibid., Vol. II, 171.)

Navarro Amandi (Cuestionario del Código Civil) raises the question: "Can the heirs of a natural child claim the
acknowledgment in those cases wherein the father or mother are under obligation to acknowledge"? And says:

Opinions are widely divergent. The court of Rennes held (on April 13, 1844) that the right of investigation forms a
part of the estate of the child, and along with his patrimony is transmitted to his heirs. The affirmation is altogether
too categorical to be admissible. If it were correct the same thing would happen as when the legitimacy of a child
is claimed, and as already seen, the right of action to demand the legitimacy is not transmitted to the heirs in
every case and as an absolute right, but under certain limitations and circumstances. Now, were we to admit the
doctrine of the court of Rennes, the result would be that the claim for natural filiation would be more favored than
one for legitimate filiation. This would be absurd, because it can not be conceived that the legislator should have
granted a right of action to the heirs of the natural child, which is only granted under great limitations and in very
few cases to those of a legitimate one. Some persons insist that the same rules that govern legitimate filiation
apply by analogy to natural child are entitled to claim it in the cases prescribed by the article 118. The majority,
however, are inclined to consider the right to claim acknowledgment as a personal right, and consequently, not
transmissive to the heirs. Really there are no legal grounds to warrant the transmission. (Vol. 2, 229.)

In a decision like the present one it is impossible to bring forward the argument of analogy for the purpose of considering
that the heirs of the natural child are entitled to the right of action which article 118 concedes to the heirs of the legitimate
child. The existence of a provision for the one case and the absence thereof for the other is a conclusive argument
that inclusio unius est exclusio alterius, and it can not be understood that the provision of law should be the same when
the same reason does not hold in the one case as in the other.

The theory of law of transmission is also entirely inapplicable in this case. This theory, which in the Roman Law expressed
the general rule than an heir who did not accept an inheritance during his lifetime was incapacitated from transmitting it to
his own heirs, included at the same time the idea that if the inheritance was not transmitted because the heir did not
possess it, there were, however, certain things which the heir held and could transmit. Such was the law and the right to
accept the inheritance, for the existing reason that all rights, both real and personal, shall pass to the heir; quia haeres
representat defunctum in omnibus et per omnia. According to the article 659 of the Civil Code, "the inheritance includes all
the property, rights, and obligations of a person, which are not extinguished by his death." If the mother is the heir of her
natural child, and the latter, among other rights during his lifetime was entitled to exercise an action of his
acknowledgment against his father, during the life of the latter, if after his death in some of the excepting cases of article
137, such right, which is a portion of his inheritance, is transmitted to his mother as being his heir, and it was so
understood by the court of Rennes when it considered the right in question, not as a personal and exclusive right of the
child which is extinguished by his death, but a any other right which might be transmitted after his death. This right of
supposed transmission is even less tenable than that sought to be sustained by the argument of analogy.

The right of action pertaining to the child to claim his legitimacy is in all respects superior to that of the child who claims
acknowledgment as a natural child. And it is evident that the right of action to claim his legitimacy is not one of those
rights which the legitimate child may transmit by inheritance to his heirs; it forms no part of the component rights of his
inheritance. If it were so, there would have been no necessity to establish its transmissibility to heirs as an exception in
the terms and conditions of article 118 of the code. So that, in order that it may constitute a portion of the child's
inheritance, it is necessary that the conditions and the terms contained in article 118 shall be present, since without them,
the right that the child held during his lifetime, being personal and exclusive in principle, and therefore, as a general rule
not susceptible of transmission, would and should have been extinguished by his death. Therefore, where no express
provision like that of article 118 exists, the right of action for the acknowledgment of a natural child is, in principle and
without exception, extinguished by his death, and can not be transmitted as a portion of the inheritance of the deceased
child.
On the other hand, if said right of action formed a part of the child's inheritance, it would be necessary to establish the
doctrine that the right to claim such an acknowledgment from the presumed natural father and from his heirs is an
absolute right of the heirs of the child, not limited by certain circumstances as in the case of the heirs of a natural child
with a legitimate one to place the heirs of a natural child and his inheritance on a better footing than those of a legitimate
child would not only be unreasonable, but, as stated in one of the above citations, most absurd and illegal in the present
state of the law and in accordance with the general principles thereof.

For all of the foregoing reasons we hereby reverse the judgment appealed from in all its parts, without any special ruling
as to the costs of this instance.

Mapa, Johnson, Carson, and Willard, JJ., concur.

Separate Opinions

TORRES, J., dissenting:

The questions arising from the facts and points of law discussed in this litigation between the parties thereto, decided in
the judgment appealed from, and set up and discussed in this instance by the said parties in their respective briefs, are
subordinate in the first place to the main point, submitted among others to the decision of this court, that is, whether the
right of action brought to demand from the natural father, or from his heirs, the acknowledgment of the natural child which
the former left at his death was, by operation of the law, transmitted to the natural mother by reason of the death of the
said child acknowledged by her.

The second error assigned by the appellant in his brief refers exclusively to this important point of law.

Article 846 of the Civil Code prescribes:

The right of succession which the law grants natural children extends reciprocally in similar cases to the natural
father or mother.

Article 944 reads:

If the acknowledged natural or legitimized child should die without issue, either legitimate or acknowledged by it,
the father or mother who acknowledged it shall succeed to its entire estate, and if both acknowledged it and are
alive, they shall inherit from it share and share alike.

It can not be inferred from the above legal provisions that from the right succession which the law grants the natural father
or mother upon the death of their natural child, the right of heirs of any of the said parents to claim the acknowledgment of
the natural child is excluded. No article is to be found in the Civil Code that expressly provides for such exclusion or
elimination of the right of the heirs of the deceased child to claim his acknowledgment.

If under article 659 of said code, the inheritance includes all the property, rights, and obligations of a person, which are not
extinguished by his death, it is unquestionable that among such rights stands that which the natural child had, while alive,
to claim his acknowledgment as such from his natural father, or from the heirs of the latter. There is no reason or legal
provision whatever to prevent the consideration that the right to claim acknowledgment of the filiation of a deceased child
from his natural father, or from the heirs of the latter, is included in the hereditary succession of the deceased child in
favor of his natural mother.

It is to be regretted that such an eminent writer as Manresa is silent on this special point, or that he is not very explicit in
his comments on article 137 of the Civil Code. Among the various noted writers on law, Professor Sanchez Roman is the
only one who has given his opinion in a categorical manner as to whether or not the right of action for the
acknowledgment of a deceased natural child shall be considered transmissive to his heirs, as may bee seen from the
following:

In order to complete the explanation of this article 137 of the Civil Code, three points must be decided: (1) Against
whom shall an action for acknowledgment be brought under the cases and terms to which the two exceptions
indicate in paragraphs 1 and 2 of article 137 refer? (2) Who is to represent the minor in bringing this action when
neither the father nor the mother has acknowledged him? (3) Should this right of action be considered as
transmitted to the heirs or descendants of the natural child whether or not it was exercised at the time of his
death?

With respect to the third, there is an entire absence of legal provisions, and at most, it might be deemed
admissible as a solution, that the right of action to claim acknowledgment of a natural child is transmitted by
analogy to his heirs on the same conditions and terms that it is transmitted to the descendants of the legitimate
child, to claim his legitimacy, under article 118, but no more; because on his point nothing warrants placing the
heirs of a natural child on a better footing than those of the legitimate child, and even to compare them would not
fail to be strained and questionable matter, and one of great difficulty for decision by the courts, for the simple
reason that for the heirs of the legitimate child the said article 118 exists, while for those of the natural child, as we
 have said, there is no provision in the code authorizing the same, although on the other hand there is none that
prohibits it.

Certainly there is no article in the Civil Code, or any special law that bars the transmission to the heirs of a natural child,
particularly to his natural mother, of the right of action to claim the acknowledgment of said natural child from the heirs of
his deceased natural father.

According to the above-cited article 944 of the Civil Code, the only persons designated to succeed to the intestate estate
of a natural child who died during minority or without issue are its natural father or mother who acknowledged it;
consequently if by operation of the law his parents are his legal successors or heirs, it is unquestionable that by reason of
the child's death the property, rights, and obligations of the deceased minor were, as a matter of fact, transmitted to them,
among which was the right to demand the acknowledgment of the said deceased natural child from the heirs of the
deceased natural father or mother, respectively, on account of having enjoyed uninterruptedly the status of natural child of
the said deceased parents. (Arts. 135 and 136, Civil Code.)

At the death of the children, Teopista in 1902, and Jose in 1903, during their minority, and after the death of their natural
father which took place in 1899, the natural mother of the said minors, Paula Conde, succeeded them in all of their
property and rights, among which must necessarily appear and be included the right of action to claim the
acknowledgment of said two children from the heirs of Icasiano Abaya, their deceased natural father. There is no legal
provision or precept whatever excluding such right from those which, by operation of the law, were transmitted to the
mother, Paula Conde, or expressly declaring that the said right to claim such acknowledgment is extinguished by the
death of the natural children.

It is true that, as a general rule, an action for acknowledgment can not be brought by a surviving natural child after the
death of his parents, except in the event he was a minor at the time of the death of either of his parents, as was the case
with minors Teopista and Jose Conde, who, if living, would unquestionably be entitled to institute an action for
acknowledgment against the presumed heirs of their natural father; and as there is no law that provides that said right is
extinguished by the death of the same, and that the mother did not inherit it from the said minors, it is also unquestionable
that Paula Conde, the natural mother and successor to the rights of said minors, is entitled to exercise the corresponding
action for acknowledgment.

If the natural mother had no right of action against the heirs of the natural father, for the acknowledgment for her natural
child, the unlimited and unconditional reciprocity established by the article 846 of the code would neither be true nor
correct. It should be noticed that the relation of paternity and that of filiation between the above-mentioned father and
children are both natural in character; therefore, the intestate succession of the said children of Paula Conde is governed
exclusively by articles 944 and 945 of the said code.

It is true that nothing is provided by article 137 with reference to the transmission to the natural mother of the right to claim
the acknowledgment of her natural children, but, as Sanchez Roman says, it does not expressly prohibit it; and as
opposed to the silence of the said article, we find the provisions of articles 846 and 944 of the Civil Code, which expressly
recognize the right of the natural mother to succeed her natural child, a right which is transmitted to her by operation of
law from the moment that the child ceases to exist.

The question herein does not bear upon the right of a child to claim his legitimacy, as provided in article 118 of the code,
nor is it claimed that the rights of natural children and their mother are equal to those of legitimate ones, even by analogy.

The foundations of this opinion are based solely on the provisions of the above-mentioned articles of the code, and I
consider that they are sustainable so long as it is not positively proven that the so often-mentioned right of action for
acknowledgment is extinguished by the death of the minor natural child, and is not transmitted to the natural mother by
express declaration or prohibition of the law, together with the property and other rights in the intestate succession.

In view of the considerations above set forth it is my opinion that it should be held: that Paula Conde, as the natural
mother and sole heir of her children Teopista and Jose, was and is entitled to the right to institute proceedings to obtain
the acknowledgment of the latter as natural children of the late Icasiano Abaya, from Roman Abaya, as heir and
administrator of the estate of the said Icasiano Abaya; and that the said Teopista and Jose who died during their minority,
three years after the death of their father, should be considered and acknowledged as such natural children of the latter,
for the reason that while living they uninterruptedly enjoyed the status of his natural children. The judgment appealed from
should be affirmed without any special ruling as to costs.

With regard to the declaration that the property of the late Icasiano, which Paula Conde might take, are of a reservable
character, together with the other matter contained in the third error assigned by the appellant to the said judgment, the
writer withholds his opinion until such time as the question may be raised between the parties in proper form.
 3.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 173292 September 1, 2010

MEMORACION Z. CRUZ, represented by EDGARDO Z. CRUZ, Petitioner,

vs.
OSWALDO Z. CRUZ, Respondent.

DECISION

CARPIO, J.:

The Case

1 2
This is a petition for review of the Court of Appeals’ (CA) Decision dated 20 December 2005 and Resolution dated 21
3
June 2006 in CA-G.R. CV No. 80355. The CA affirmed with modification the Order dated 2 June 1997 of the Regional
Trial Court of the National Capital Judicial Region, Branch 30, Manila (RTC).

The Antecedent Facts

The undisputed facts, as summarized by the Court of Appeals, are as follows:

On October 18, 1993, Memoracion Z. Cruz filed with the Regional Trial Court in Manila a Complaint against her son,
defendant-appellee Oswaldo Z. Cruz, for "Annulment of Sale, Reconveyance and Damages."

Memoracion claimed that during her union with her common-law husband (deceased) Architect Guido M. Cruz, she
acquired a parcel of land located at Tabora corner Limay Streets, Bo. Obrero, Tondo Manila; that the said lot was
registered in her name under TCT No. 63467 at the Register of Deeds of Manila; that sometime in July 1992, she
discovered that the title to the said property was transferred by appellee and the latter’s wife in their names in August
1991 under TCT No. 0-199377 by virtue of a Deed of Sale dated February 12, 1973; that the said deed was executed
through fraud, forgery, misrepresentation and simulation, hence, null and void; that she, with the help of her husband’s
relatives, asked appellee to settle the problem; that despite repeated pleas and demands, appellee refused to reconvey to
her the said property; that she filed a complaint against appellee before the office of the Barangay having jurisdiction over
the subject property; and that since the matter was unsettled, the barangay x x x issued x x x a certification to file [an]
action in court, now the subject of controversy.

After Memoracion x x x finished presenting her evidence in chief, she died on October 30, 1996. Through a Manifestation,
Memoracion’s counsel, Atty. Roberto T. Neri, notified the trial court on January 13, 1997 of the fact of such death,
evidenced by a certificate thereof.

For his part, appellee filed a Motion to Dismiss on the grounds that (1) the plaintiff’s reconveyance action is a personal
action which does not survive a party’s death, pursuant to Section 21, Rule 3 of the Revised Rules of Court, and (2) to
allow the case to continue would result in legal absurdity whereby one heir is representing the defendant [and is a] co-
plaintiff in this case.

On June 2, 1997, the trial court issued the appealed Order in a disposition that reads:

"Wherefore, in view of the foregoing, this case is ordered dismissed without prejudice to the prosecution thereof in the
proper estate proceedings."

On October 17, 1997, Memoracion’s son-heir, Edgardo Z. Cruz, manifested to the trial court that he is retaining the
services of Atty. Neri for the plaintiff. Simultaneously, Atty. Neri filed a Motion for Reconsideration of the June 2, 1997
Order. However, the said motion was subsequently denied by Acting Presiding Judge Cielito N. Mindaro-Grulla [on
October 31, 2000].

Thereafter, Edgardo Cruz, as an heir of Memoracion Cruz, filed a notice of appeal in behalf of the deceased plaintiff,
signed by Atty. Neri, but the appeal was dismissed by Judge Mindaro-Grulla, [stating that] the proper remedy being
certiorari under Rule 65 of the Rules of Court. On appellant’s motion for reconsideration, Judge Lucia Pena Purugganan
4
granted the same, stating that the remedy under the circumstances is ordinary appeal.

The Court of Appeals’ Ruling

Petitioner Memoracion Z. Cruz, represented by Edgardo Z. Cruz, filed with the Court of Appeals a Petition for Review
under Rule 45 of the 1997 Revised Rules of Civil Procedure. On 20 December 2005, the CA rendered judgment affirming
with modification the RTC decision. We quote the dispositive portion of the CA’s decision below.

WHEREFORE, the appealed Order is AFFIRMED, with MODIFICATION. The trial court’s directive as to the prosecution
of the action in the proper estate proceedings is DELETED.

5
SO ORDERED.

6
Petitioner’s Motion for Reconsideration was denied by the CA in its Resolution of 21 June 2006.

Hence, this appeal.

The Issues

The issues for resolution in this case are:

1. Whether the Court of Appeals erred in ruling that Memoracion Z. Cruz’s Petition for Annulment of Deed of Sale,
Reconveyance and Damages is a purely personal action which did not survive her death; and

2. Whether the Court of Appeals erred in affirming with modification the RTC Order dismissing the Petition for
Annulment of Deed of Sale, Reconveyance and Damages.

The Court’s Ruling

We find the appeal meritorious.

The Petition for Annulment of Sale, Reconveyance

and Damages survived the death of petitioner

7
The criterion for determining whether an action survives the death of a petitioner was elucidated in Bonilla v. Barcena, to
wit:

The question as to whether an action survives or not depends on the nature of the action and the damage sued for. In the
causes of action which survive, the wrong complained [of] affects primarily and principally property and property rights, the
injuries to the person being merely incidental, while in the causes of action which do not survive, the injury complained of
8
is to the person, the property and rights of property affected being incidental.

If the case affects primarily and principally property and property rights, then it survives the death of the plaintiff or
9
petitioner. In Sumaljag v. Literato, we held that a Petition for Declaration of Nullity of Deed of Sale of Real Property is one
relating to property and property rights, and therefore, survives the death of the petitioner. Accordingly, the instant case
for annulment of sale of real property merits survival despite the death of petitioner Memoracion Z. Cruz.

The CA erred in affirming RTC’s dismissal of the

Petition for Annulment of Deed of Sale,
Reconveyance and Damages

When a party dies during the pendency of a case, Section 16, Rule 3 of the 1997 Revised Rules of Civil Procedure
necessarily applies, viz:

Sec. 16. Death of party; duty of counsel. - Whenever a party to a pending action dies, and the claim is not thereby
extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such death of the fact
thereof, and to give the name and address of his legal representative or representatives. Failure of counsel to comply with
this duty shall be a ground for disciplinary action.

The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an
executor or administrator and the court may appoint a guardian ad litem for the minor heirs.

The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of
thirty (30) days from notice.

If no legal representative is named by the counsel for the deceased party, or if the one so named shall fail to appear within
the specified period, the court may order the opposing party, within a specified time, to procure the appointment of an
executor or administrator for the estate of the deceased and the latter shall immediately appear for and on behalf of the
deceased. The court charges in procuring such appointment, if defrayed by the opposing party, may be recovered as
costs.

The foregoing section is a revision of Section 17, Rule 3 of the old Rules of Court:
SEC. 17. Death of party. - After a party dies and the claim is not thereby extinguished, the court shall order, upon proper
notice, the legal representative of the deceased to appear and to be substituted for the deceased, within a period of thirty
(30) days, or within such time as may be granted. If the legal representative fails to appear within said time, the court may
order the opposing party to procure the appointment of a legal representative of the deceased within a time to be specified
by the court, and the representative shall immediately appear for and on behalf of the interest of the deceased. The court
charges involved in procuring such appointment, if defrayed by the opposing party, may be recovered as costs. The heirs
of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an executor or
administrator and the court may appoint guardian ad litem for the minor heirs.

If the action survives despite death of a party, it is the duty of the deceased’s counsel to inform the court of such death,
and to give the names and addresses of the deceased’s legal representatives. The deceased may be substituted by his
heirs in the pending action. As explained in Bonilla:

x x x Article 777 of the Civil Code provides "that the rights to the succession are transmitted from the moment of the death
of the decedent." From the moment of the death of the decedent, the heirs become the absolute owners of his property,
subject to the rights and obligations of the decedent, and they cannot be deprived of their rights thereto except by the
methods provided for by law. The moment of death is the determining factor when the heirs acquire a definite right to the
inheritance whether such right be pure or contingent. The right of the heirs to the property of the deceased vests in them
even before judicial declaration of their being heirs in the testate or intestate proceedings. When [plaintiff], therefore,
died[,] her claim or right to the parcels of land x x x was not extinguished by her death but was transmitted to her heirs
upon her death. Her heirs have thus acquired interest in the properties in litigation and became parties in interest in the
case. There is, therefore, no reason for the respondent Court not to allow their substitution as parties in interest for the
10
deceased plaintiff.

If no legal representative is named by the counsel of the deceased, or the legal representative fails to appear within a
specified period, it is the duty of the court where the case is pending to order the opposing party to procure the
appointment of an executor or administrator for the estate of the deceased. The reason for this rule is to protect all
11
concerned who may be affected by the intervening death, particularly the deceased and his estate. 1avvphi1

In the instant case, petitioner (plaintiff) Memoracion Z. Cruz died on 30 October 1996. Her counsel, Atty. Roberto T. Neri,
notified the trial court of such death on 13 January 1997, through a Manifestation stating thus:

COMES NOW the undersigned counsel and to this Honorable Court respectfully gives notice that the plaintiff,
Memoracion Z. Cruz, died on October 30, 1996, in Manila as shown by a Certificate of Death, a certified true copy of
which is hereto attached as Annex "A" hereof.

The legal representative of the deceased plaintiff is her son EDGARDO CRUZ whose address is at No. 3231-E Tabora
St., Bo. Obrero, Tondo, Manila.

12
xxxx

On 24 January 1997, respondent (defendant) Oswaldo Z. Cruz moved to dismiss the case alleging that it did not survive
Memoracion’s death. The RTC granted the motion to dismiss in the assailed Order dated 2 June 1997.

We rule that it was error for the RTC to dismiss the case. As mentioned earlier, the petition for annulment of deed of sale
involves property and property rights, and hence, survives the death of petitioner Memoracion. The RTC was informed,
13
albeit belatedly, of the death of Memoracion, and was supplied with the name and address of her legal representative,
Edgardo Cruz. What the RTC could have done was to require Edgardo Cruz to appear in court and substitute
Memoracion as party to the pending case, pursuant to Section 16, Rule 3 of the 1997 Revised Rules of Civil Procedure,
and established jurisprudence.

We note that on 17 October 1997, Edgardo Cruz filed with the RTC a Manifestation, stating that he is retaining the
14
services of Atty. Roberto T. Neri. We quote:

UNDERSIGNED HEIR of the late Memoracion Z. Cruz respectfully manifests that he is retaining the services
of ATTY. ROBERTO T. NERI as counsel for the plaintiff.

(Sgd.) EDGARDO Z. CRUZ

Plaintiff

15
Consistent with our ruling in Heirs of Haberer v. Court of Appeals, we consider such Manifestation, signed by
Memoracion’s heir, Edgardo Cruz, and retaining Atty. Neri’s services as counsel, a formal substitution of deceased
Memoracion by her heir, Edgardo Cruz. It also needs mention that Oswaldo Cruz, although also an heir of Memoracion,
16
should be excluded as a legal representative in the case for being an adverse party therein.

WHEREFORE, we GRANT the petition. We REVERSE the Court of Appeals’ Decision dated 20 December 2005 and
Resolution dated 21 June 2006 in CA-G.R. CV No. 80355. We REMAND this case to the Regional Trial Court of the
National Capital Judicial Region, Branch 30, Manila, for further proceedings.

SO ORDERED.
 4.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 162784 June 22, 2007

NATIONAL HOUSING AUTHORITY, petitioner,

vs.
SEGUNDA ALMEIDA, COURT OF APPEALS, and RTC of SAN PEDRO, LAGUNA, BR. 31, respondents.

DECISION

PUNO, C.J.:

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

On June 28, 1959, the Land Tenure Administration (LTA) awarded to Margarita Herrera several portions of land which are
1
part of the Tunasan Estate in San Pedro, Laguna. The award is evidenced by an Agreement to Sell No. 3787. By virtue
of Republic Act No. 3488, the LTA was succeeded by the Department of Agrarian Reform (DAR). On July 31, 1975, the
2
DAR was succeeded by the NHA by virtue of Presidential Decree No. 757. NHA as the successor agency of LTA is the
petitioner in this case.

The records show that Margarita Herrera had two children: Beatriz Herrera-Mercado (the mother of private respondent)
and Francisca Herrera. Beatriz Herrera-Mercado predeceased her mother and left heirs.

3
Margarita Herrera passed away on October 27, 1971.

On August 22, 1974, Francisca Herrera, the remaining child of the late Margarita Herrera executed a Deed of Self-
Adjudication claiming that she is the only remaining relative, being the sole surviving daughter of the deceased. She also
claimed to be the exclusive legal heir of the late Margarita Herrera.

The Deed of Self-Adjudication was based on a Sinumpaang Salaysay dated October 7, 1960, allegedly executed by
Margarita Herrera. The pertinent portions of which are as follows:

SINUMPAANG SALAYSAY

SA SINO MAN KINAUUKULAN;

Akong si MARGARITA HERRERA, Filipina, may 83 taong gulang, balo, kasalukuyang naninirahan at
tumatanggap ng sulat sa Nayon ng San Vicente, San Pedro Laguna, sa ilalim ng panunumpa ay malaya at
kusang loob kong isinasaysay at pinagtitibay itong mga sumusunod:

1. Na ako ay may tinatangkilik na isang lagay na lupang tirikan (SOLAR), tumatayo sa Nayon ng San Vicente,
San Pedro, Laguna, mayroong PITONG DAAN AT PITUMPU'T ISANG (771) METRONG PARISUKAT ang laki,
humigit kumulang, at makikilala sa tawag na Lote 17, Bloke 55, at pag-aari ng Land Tenure Administration;

2. Na ang nasabing lote ay aking binibile, sa pamamagitan ng paghuhulog sa Land Tenure Administration, at
noong ika 30 ng Julio, 1959, ang Kasunduang sa Pagbibile (AGREEMENT TO SELL No. 3787) ay ginawa at
pinagtibay sa Lungsod ng Maynila, sa harap ng Notario Publico na si G. Jose C. Tolosa, at lumalabas sa
kaniyang Libro Notarial bilang Documento No. 13, Pagina No. 4; Libro No. IV, Serie ng 1959;

3. Na dahilan sa ako'y matanda na at walang ano mang hanap buhay, ako ay nakatira at pinagsisilbihan nang
aking anak na si Francisca Herrera, at ang tinitirikan o solar na nasasabi sa unahan ay binabayaran ng kaniyang
sariling cuarta sa Land Tenure Administration;

4. Na alang-alang sa nasasaysay sa unahan nito, sakaling ako'y bawian na ng Dios ng aking buhay, ang lupang
nasasabi sa unahan ay aking ipinagkakaloob sa nasabi kong anak na FRANCISCA HERRERA, Filipina, nasa
katamtamang gulang, kasal kay Macario Berroya, kasalukuyang naninirahan at tumatanggap ng sulat sa Nayong
ng San Vicente, San Pedro Laguna, o sa kaniyang mga tagapagmana at;

5. Na HINIHILING KO sa sino man kinauukulan, na sakaling ako nga ay bawian na ng Dios ng aking buhay ay
KILALANIN, IGALANG at PAGTIBAYIN ang nilalaman sa pangalan ng aking anak na si Francisca Herrera ang
loteng nasasabi sa unahan.
 SA KATUNAYAN NG LAHAT, ako ay nag-didiit ng hinlalaki ng kanan kong kamay sa ibaba nito at sa kaliwang
4
gilid ng unang dahon, dito sa Lungsod ng Maynila, ngayong ika 7 ng Octubre, 1960.

The said document was signed by two witnesses and notarized. The witnesses signed at the left-hand side of both pages
5
of the document with the said document having 2 pages in total. Margarita Herrera placed her thumbmark above her
name in the second page and at the left-hand margin of the first page of the document.

The surviving heirs of Beatriz Herrera-Mercado filed a case for annulment of the Deed of Self-Adjudication before the then
Court of First Instance of Laguna, Branch 1 in Binan, Laguna (now, Regional Trial Court Branch 25). The case for
6
annulment was docketed as Civil Case No. B-1263.

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

During trial on the merits of the case assailing the Deed of Self-Adjudication, Francisca Herrera filed an application with
the NHA to purchase the same lots submitting therewith a copy of the "Sinumpaang Salaysay" executed by her mother.
Private respondent Almeida, as heir of Beatriz Herrera-Mercado, protested the application.

8
In a Resolution dated February 5, 1986, the NHA granted the application made by Francisca Herrera, holding that:

From the evidence of the parties and the records of the lots in question, we gathered the following facts: the lots
in question are portions of the lot awarded and sold to the late Margarita Herrera on July 28, 1959 by the defunct
Land Tenure Administration; protestant is the daughter of the late Beatriz Herrera Mercado who was the sister of
the protestee; protestee and Beatriz are children of the late Margarita Herrera; Beatriz was the transferee from
Margarita of Lot Nos. 45, 46, 47, 48 and 49, Block 50; one of the lots transferred to Beatriz, e.g. Lot 47, with an
area of 148 square meters is in the name of the protestant; protestant occupied the lots in question with the
permission of the protestee; protestee is a resident of the Tunasan Homesite since birth; protestee was born on
the lots in question; protestee left the place only after marriage but resided in a lot situated in the same Tunasan
Homesite; her (protestee) son Roberto Herrera has been occupying the lots in question; he has been there even
before the death of the late Margarita Herrera; on October 7, 1960, Margarita Herrera executed a
"Sinumpaang Salaysay" whereby she waived or transferred all her rights and interest over the lots in
question in favor of the protestee; and protestee had paid the lots in question in full on March 8, 1966 with the
defunct Land Tenure Administration.

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

10
Private respondent Almeida appealed to the Office of the President. The NHA Resolution was affirmed by the Office of
11
the President in a Decision dated January 23, 1987.

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

Feeling aggrieved by the decision of the Office of the President and the resolution of the NHA, private respondent
Segunda Mercado-Almeida sought the cancellation of the titles issued in favor of the heirs of Francisca. She filed a
Complaint on February 8, 1988, for "Nullification of Government Lot's Award," with the Regional Trial Court of San
Pedro, Laguna, Branch 31.

In her complaint, private respondent Almeida invoked her forty-year occupation of the disputed properties, and re-raised
the fact that Francisca Herrera's declaration of self-adjudication has been adjudged as a nullity because the other heirs
were disregarded. The defendant heirs of Francisca Herrera alleged that the complaint was barred by laches and that the
14
decision of the Office of the President was already final and executory. They also contended that the transfer of
purchase of the subject lots is perfectly valid as the same was supported by a consideration and that Francisca Herrera
15
paid for the property with the use of her own money. Further, they argued that plaintiff's occupation of the property was
16
by mere tolerance and that they had been paying taxes thereon.

17
The Regional Trial Court issued an Order dated June 14, 1988 dismissing the case for lack of jurisdiction. The Court of
Appeals in a Decision dated June 26, 1989 reversed and held that the Regional Trial Court had jurisdiction to hear and
18
decide the case involving "title and possession to real property within its jurisdiction." The case was then remanded for
further proceedings on the merits.

A pre-trial was set after which trial ensued.

On March 9, 1998, the Regional Trial Court rendered a Decision setting aside the resolution of the NHA and the decision
of the Office of the President awarding the subject lots in favor of Francisca Herrera. It declared the deeds of sale
executed by NHA in favor of Herrera's heirs null and void. The Register of Deeds of Laguna, Calamba Branch was
ordered to cancel the Transfer Certificate of Title issued. Attorney's fees were also awarded to private respondent.
The Regional Trial Court ruled that the "Sinumpaang Salaysay" was not an assignment of rights but a disposition of
property which shall take effect upon death. It then held that the said document must first be submitted to probate before it
can transfer property.

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

On August 28, 2003, the Court of Appeals affirmed the decision of the Regional Trial Court, viz:

There is no dispute that the right to repurchase the subject lots was awarded to Margarita Herrera in 1959. There
is also no dispute that Margarita executed a "Sinumpaang Salaysay" on October 7, 1960. Defendant NHA claims
that the "Sinumpaang Salaysay" is, in effect, a waiver or transfer of rights and interest over the subject lots in
favor of Francisca Herrera. This Court is disposed to believe otherwise. After a perusal of the "Sinumpaang
Salaysay" of Margarita Herrera, it can be ascertained from its wordings taken in their ordinary and grammatical
sense that the document is a simple disposition of her estate to take effect after her death. Clearly the Court finds
that the "Sinumpaang Salaysay" is a will of Margarita Herrera. Evidently, if the intention of Margarita Herrera was
to merely assign her right over the lots to her daughter Francisca Herrera, she should have given her
"Sinumpaang Salaysay" to the defendant NHA or to Francisca Herrera for submission to the defendant NHA after
the full payment of the purchase price of the lots or even prior thereto but she did not. Hence it is apparent that
she intended the "Sinumpaang Salaysay" to be her last will and not an assignment of rights as what the NHA in
its resolution would want to make it appear. The intention of Margarita Herrera was shared no less by Francisca
Herrera who after the former's demise executed on August 22, 1974 a Deed of Self-Adjudication claiming that she
is her sole and legal heir. It was only when said deed was questioned in court by the surviving heirs of Margarita
Herrera's other daughter, Beatriz Mercado, that Francisca Herrera filed an application to purchase the subject lots
19
and presented the "Sinumpaang Salaysay" stating that it is a deed of assignment of rights.

The Court of Appeals ruled that the NHA acted arbitrarily in awarding the lots to the heirs of Francisca Herrera. It upheld
the trial court ruling that the "Sinumpaang Salaysay" was not an assignment of rights but one that involved disposition of
property which shall take effect upon death. The issue of whether it was a valid will must first be determined by probate.

Petitioner NHA elevated the case to this Court.

Petitioner NHA raised the following issues:

A. WHETHER OR NOT THE RESOLUTION OF THE NHA AND THE DECISION OF THE OFFICE OF THE
PRESIDENT HAVE ATTAINED FINALITY, AND IF SO, WHETHER OR NOT THE PRINCIPLE OF
ADMINISTRATIVE RES JUDICATA BARS THE COURT FROM FURTHER DETERMINING WHO BETWEEN
THE PARTIES HAS PREFERENTIAL RIGHTS FOR AWARD OVER THE SUBJECT LOTS;

B. WHETHER OR NOT THE COURT HAS JURISDICTION TO MAKE THE AWARD ON THE SUBJECT LOTS;
AND

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

We rule for the respondents.

Res judicata is a concept applied in review of lower court decisions in accordance with the hierarchy of courts. But
jurisprudence has also recognized the rule of administrative res judicata: "the rule which forbids the reopening of a matter
once judicially determined by competent authority applies as well to the judicial and quasi-judicial facts of public, executive
or administrative officers and boards acting within their jurisdiction as to the judgments of courts having general judicial
powers . . . It has been declared that whenever final adjudication of persons invested with power to decide on the property
and rights of the citizen is examinable by the Supreme Court, upon a writ of error or a certiorari, such final adjudication
20
may be pleaded as res judicata." To be sure, early jurisprudence were already mindful that the doctrine of res
judicata cannot be said to apply exclusively to decisions rendered by what are usually understood as courts without
unreasonably circumscribing the scope thereof and that the more equitable attitude is to allow extension of the defense to
decisions of bodies upon whom judicial powers have been conferred.

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

In fine, it should be remembered that quasi-judicial powers will always be subject to true judicial power—that which is held
by the courts. Quasi-judicial power is defined as that power of adjudication of an administrative agency for the "formulation
22
of a final order." This function applies to the actions, discretion and similar acts of public administrative officers or bodies
who are required to investigate facts, or ascertain the existence of facts, hold hearings, and draw conclusions from them,
23
as a basis for their official action and to exercise discretion of a judicial nature. However, administrative agencies are not
considered courts, in their strict sense. The doctrine of separation of powers reposes the three great powers into its three
(3) branches—the legislative, the executive, and the judiciary. Each department is co-equal and coordinate, and supreme
in its own sphere. Accordingly, the executive department may not, by its own fiat, impose the judgment of one of its
agencies, upon the judiciary. Indeed, under the expanded jurisdiction of the Supreme Court, it is empowered to
"determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part
24
of any branch or instrumentality of the Government." Courts have an expanded role under the 1987 Constitution in the
resolution of societal conflicts under the grave abuse clause of Article VIII which includes that duty to check whether the
other branches of government committed an act that falls under the category of grave abuse of discretion amounting to
25
lack or excess of jurisdiction.

26
Next, petitioner cites Batas Pambansa Blg. 129 or the Judiciary Reorganization Act of 1980 where it is therein provided
that the Intermediate Appellate Court (now, Court of Appeals) shall exercise the "exclusive appellate jurisdiction over all
final judgments, decisions, resolutions, orders or awards, of the Regional Trial Courts and Quasi-Judicial agencies,
instrumentalities, boards or commissions, except those falling within the jurisdiction of the Supreme Court in accordance
27
with the Constitution…" and contends that the Regional Trial Court has no jurisdiction to rule over awards made by the
NHA.

Well-within its jurisdiction, the Court of Appeals, in its decision of August 28, 2003, already ruled that the issue of the trial
court's authority to hear and decide the instant case has already been settled in the decision of the Court of Appeals
dated June 26, 1989 (which has become final and executory on August 20, 1989 as per entry of judgment dated October
28
10, 1989). We find no reason to disturb this ruling. Courts are duty-bound to put an end to controversies. The system of
29
judicial review should not be misused and abused to evade the operation of a final and executory judgment. The
30
appellate court's decision becomes the law of the case which must be adhered to by the parties by reason of policy.

Next, petitioner NHA contends that its resolution was grounded on meritorious grounds when it considered the application
for the purchase of lots. Petitioner argues that it was the daughter Francisca Herrera who filed her application on the
subject lot; that it considered the respective application and inquired whether she had all the qualifications and none of the
disqualifications of a possible awardee. It is the position of the petitioner that private respondent possessed all the
qualifications and none of the disqualifications for lot award and hence the award was not done arbitrarily.

31
The petitioner further argues that assuming that the "Sinumpaang Salaysay" was a will, it could not bind the NHA. That,
"insofar as [the] NHA is concerned, it is an evidence that the subject lots were indeed transferred by Margarita Herrera,
32
the original awardee, to Francisca Herrera was then applying to purchase the same before it."

We are not impressed. When the petitioner received the "Sinumpaang Salaysay," it should have noted that the effectivity
of the said document commences at the time of death of the author of the instrument; in her words "sakaling ako'y bawian
na ng Dios ng aking buhay…" Hence, in such period, all the interests of the person should cease to be hers and shall be
in the possession of her estate until they are transferred to her heirs by virtue of Article 774 of the Civil Code which
provides that:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the
extent of the value of the inheritance, of a person are transmitted through his death to another or others
33
either by his will or by operation of law.

By considering the document, petitioner NHA should have noted that the original applicant has already passed away.
34 35
Margarita Herrera passed away on October 27, 1971. The NHA issued its resolution on February 5, 1986. The NHA
gave due course to the application made by Francisca Herrera without considering that the initial applicant's death would
transfer all her property, rights and obligations to the estate including whatever interest she has or may have had over the
disputed properties. To the extent of the interest that the original owner had over the property, the same should go to her
estate. Margarita Herrera had an interest in the property and that interest should go to her estate upon her demise so as
to be able to properly distribute them later to her heirs—in accordance with a will or by operation of law.

The death of Margarita Herrera does not extinguish her interest over the property. Margarita Herrera had an existing
36
Contract to Sell with NHA as the seller. Upon Margarita Herrera's demise, this Contract to Sell was neither nullified nor
revoked. This Contract to Sell was an obligation on both parties—Margarita Herrera and NHA. Obligations are
37
transmissible. Margarita Herrera's obligation to pay became transmissible at the time of her death either by will or by
operation of law.

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

39
When the original buyer died, the NHA should have considered the estate of the decedent as the next "person" likely to
stand in to fulfill the obligation to pay the rest of the purchase price. The opposition of other heirs to the repurchase by
Francisca Herrera should have put the NHA on guard as to the award of the lots. Further, the Decision in the said Civil
40
Case No. B-1263 (questioning the Deed of Self-Adjudication) which rendered the deed therein null and void should have
alerted the NHA that there are other heirs to the interests and properties of the decedent who may claim the property after
a testate or intestate proceeding is concluded. The NHA therefore acted arbitrarily in the award of the lots.

We need not delve into the validity of the will. The issue is for the probate court to determine. We affirm the Court of
Appeals and the Regional Trial Court which noted that it has an element of testamentary disposition where (1) it devolved
41
and transferred property; (2) the effect of which shall transpire upon the death of the instrument maker.
IN VIEW WHEREOF, the petition of the National Housing Authority is DENIED. The decision of the Court of Appeals in
CA-G.R. No. 68370 dated August 28, 2003, affirming the decision of the Regional Trial Court of San Pedro, Laguna in
Civil Case No. B-2780 dated March 9, 1998, is hereby AFFIRMED.

No cost.

SO ORDERED.

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

Footnotes

2
A Decree Creating the National Housing Authority and Dissolving the Existing Housing Agencies, Defining Its
Powers and Functions, Providing Funds Therefor, and for Other Purposes, Presidential Decree No. 757,
promulgated July 31, 1975.

5
It should be noted that a thumbmark is considered a valid signature. As held in Payad v. Tolentino, 62 Phil. 848
(1936): "The testator's thumbprint is always valid and sufficient signature for the purpose of complying with the
requirement of the article. While in most of these cases, the testator was suffering from some infirmity which
made the writing of the testator's name difficult or impossible, there seems to be no basis for limiting the validity of
thumbprints only to cases of illness or infirmity."

13
Id., at 25-26. Francisca Herrera left behind her husband, Macario Berroya, and children: Ramon, Antonio,
Alberto, Rosita, Pacita, Bernabe, Gregorio, Josefina and Rustica. In the extra judicial settlement made by the said
heirs, Rosita, Pacita, Bernabe, Gregorio, Josefina and Rustica waived all their rights, interest and participation
therein in favor of their siblings Macario, Alberto, Ramon and Antonio. Deeds of sale involving the subject lots
were executed by the NHA in favor of Alberto, Antonio and Macario. Hence, TCT Nos. T-173557, T-173579, T-
173578 and T-183166 were issued to Macario, Alberto and Antonio, respectively.
I. GENERAL PROVISIONS (E. SUCCESSION OCCURS AT THE TIME OF DEATH)(ART 777)

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

MARIA USON, plaintiff-appellee,

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

This is an action for recovery of the ownership and possession of five (5) parcels of land situated in the Municipality of
Labrador, Province of Pangasinan, filed by Maria Uson against Maria del Rosario and her four children named
Concepcion, Conrado, Dominador, and Faustino, surnamed Nebreda, who are all of minor age, before the Court of First
Instance of Pangasinan.

Maria Uson was the lawful wife of Faustino Nebreda who upon his death in 1945 left the lands involved in this litigation.
Faustino Nebreda left no other heir except his widow Maria Uson. However, plaintiff claims that when Faustino Nebreda
died in 1945, his common-law wife Maria del Rosario took possession illegally of said lands thus depriving her of their
possession and enjoyment.

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

After trial, at which both parties presented their respective evidence, the court rendered decision ordering the defendants
to restore to the plaintiff the ownership and possession of the lands in dispute without special pronouncement as to costs.
Defendants interposed the present appeal.

There is no dispute that Maria Uson, plaintiff-appellee, is the lawful wife of Faustino Nebreda, former owner of the five
parcels of lands litigated in the present case. There is likewise no dispute that Maria del Rosario, one of the defendants-
appellants, was merely a common-law wife of the late Faustino Nebreda with whom she had four illegitimate children, her
now co-defendants. It likewise appears that Faustino Nebreda died in 1945 much prior to the effectivity of the new Civil
Code. With this background, it is evident that when Faustino Nebreda died in 1945 the five parcels of land he was seized
of at the time passed from the moment of his death to his only heir, his widow Maria Uson (Article 657, old Civil Code).As
this Court aptly said, "The property belongs to the heirs at the moment of the death of the ancestor as completely as if the
ancestor had executed and delivered to them a deed for the same before his death" (Ilustre vs. Alaras Frondosa, 17 Phil.,
321). From that moment, therefore, the rights of inheritance of Maria Uson over the lands in question became vested.

The claim of the defendants that Maria Uson had relinquished her right over the lands in question because she expressly
renounced to inherit any future property that her husband may acquire and leave upon his death in the deed of separation
they had entered into on February 21, 1931, cannot be entertained for the simple reason that future inheritance cannot be
the subject of a contract nor can it be renounced (1 Manresa, 123, sixth edition; Tolentino on Civil Code, p. 12; Osorio vs.
Osorio and Ynchausti Steamship Co., 41 Phil., 531).

But defendants contend that, while it is true that the four minor defendants are illegitimate children of the late Faustino
Nebreda and under the old Civil Code are not entitled to any successional rights, however, under the new Civil Code
which became in force in June, 1950, they are given the status and rights of natural children and are entitled to the
successional rights which the law accords to the latter (article 2264 and article 287, new Civil Code), and because these
successional rights were declared for the first time in the new code, they shall be given retroactive effect even though the
event which gave rise to them may have occurred under the prior legislation (Article 2253, new Civil Code).

There is no merit in this claim. Article 2253 above referred to provides indeed that rights which are declared for the first
time shall have retroactive effect even though the event which gave rise to them may have occurred under the former
legislation, but this is so only when the new rights do not prejudice any vested or acquired right of the same origin. Thus,
said article provides that "if a right should be declared for the first time in this Code, it shall be effective at once, even
though the act or event which gives rise thereto may have been done or may have occurred under the prior legislation,
provided said new right does not prejudice or impair any vested or acquired right, of the same origin." As already stated in
the early part of this decision, the right of ownership of Maria Uson over the lands in question became vested in 1945
upon the death of her late husband and this is so because of the imperative provision of the law which commands that the
rights to succession are transmitted from the moment of death (Article 657, old Civil Code). The new right recognized by
the new Civil Code in favor of the illegitimate children of the deceased cannot, therefore, be asserted to the impairment of
the vested right of Maria Uson over the lands in dispute.

As regards the claim that Maria Uson, while her deceased husband was lying in state, in a gesture of pity or compassion,
agreed to assign the lands in question to the minor children for the reason that they were acquired while the deceased
was living with their mother and Maria Uson wanted to assuage somewhat the wrong she has done to them, this much
can be said; apart from the fact that this claim is disputed, we are of the opinion that said assignment, if any, partakes of
the nature of a donation of real property, inasmuch as it involves no material consideration, and in order that it may be
valid it shall be made in a public document and must be accepted either in the same document or in a separate one
(Article 633, old Civil Code). Inasmuch as this essential formality has not been followed, it results that the alleged
assignment or donation has no valid effect.

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

 2.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

TESTATE ESTATE OF JOSEFA TANGCO, JOSE DE BORJA, administrator-appellee; JOSE DE BORJA, as

administrator, CAYETANO DE BORJA, MATILDE DE BORJA and CRISANTO DE BORJA (deceased) as Children of
Josefa Tangco, appellees,
vs.
TASIANA VDA. DE DE BORJA, Special Administratrix of the Testate Estate of Francisco de Borja, appellant. .

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

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

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

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

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

Of these cases, the first, numbered L-28040 is an appeal by Tasiana Ongsingco Vda. de de Borja, special administratrix
1
of the testate estate of Francisco de Borja, from the approval of a compromise agreement by the Court of First Instance
of Rizal, Branch I, in its Special Proceeding No. R-7866, entitled, "Testate Estate of Josefa Tangco, Jose de Borja,
Administrator".

Case No. L-28568 is an appeal by administrator Jose Borja from the disapproval of the same compromise agreement by
the Court of First Instance of Nueva Ecija, Branch II, in its Special Proceeding No. 832, entitled, "Testate Estate of
Francisco de Borja, Tasiana O. Vda. de de Borja, Special Administratrix".

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

It is uncontested that Francisco de Borja, upon the death of his wife Josefa Tangco on 6 October 1940, filed a petition for
the probate of her will which was docketed as Special Proceeding No. R-7866 of the Court of First Instance of Rizal,
Branch I. The will was probated on 2 April 1941. In 1946, Francisco de Borja was appointed executor and administrator: in
1952, their son, Jose de Borja, was appointed co-administrator. When Francisco died, on 14 April 1954, Jose became the
sole administrator of the testate estate of his mother, Josefa Tangco. While a widower Francisco de Borja allegedly took
unto himself a second wife, Tasiana Ongsingco. Upon Francisco's death, Tasiana instituted testate proceedings in the
Court of First Instance of Nueva Ecija, where, in 1955, she was appointed special administratrix. The validity of Tasiana's
marriage to Francisco was questioned in said proceeding.

The relationship between the children of the first marriage and Tasiana Ongsingco has been plagued with several court
suits and counter-suits; including the three cases at bar, some eighteen (18) cases remain pending determination in the
courts. The testate estate of Josefa Tangco alone has been unsettled for more than a quarter of a century. In order to put
2
an end to all these litigations, a compromise agreement was entered into on 12 October 1963, by and between "[T]he
heir and son of Francisco de Borja by his first marriage, namely, Jose de Borja personally and as administrator of the
Testate Estate of Josefa Tangco," and "[T]he heir and surviving spouse of Francisco de Borja by his second marriage,
Tasiana Ongsingco Vda. de Borja, assisted by her lawyer, Atty. Luis Panaguiton Jr." The terms and conditions of the
compromise agreement are as follows:

AGREEMENT

THIS AGREEMENT made and entered into by and between

 The heir and son of Francisco de Borja by his first marriage, namely, Jose de Borja personally and as
administrator of the Testate Estate of Josefa Tangco,

AND

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

WITNESSETH

THAT it is the mutual desire of all the parties herein terminate and settle, with finality, the various court
litigations, controversies, claims, counterclaims, etc., between them in connection with the administration,
settlement, partition, adjudication and distribution of the assets as well as liabilities of the estates of
Francisco de Borja and Josefa Tangco, first spouse of Francisco de Borja.

THAT with this end in view, the parties herein have agreed voluntarily and without any reservations to
enter into and execute this agreement under the following terms and conditions:

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

Linda al Norte con el Rio Puwang que la separa de la jurisdiccion del Municipio de Pililla
de la Provincia de Rizal, y con el pico del Monte Zambrano; al Oeste con Laguna de Bay;
por el Sur con los herederos de Marcelo de Borja; y por el Este con los terrenos de la
Familia Maronilla

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

2. That Jose de Borja agrees and obligates himself to pay Tasiana Ongsingco Vda. de de Borja the total
amount of Eight Hundred Thousand Pesos (P800,000) Philippine Currency, in cash, which represent
P200,000 as his share in the payment and P600,000 as pro-rata shares of the heirs Crisanto, Cayetano
and Matilde, all surnamed de Borja and this shall be considered as full and complete payment and
settlement of her hereditary share in the estate of the late Francisco de Borja as well as the estate of
Josefa Tangco, Sp. Proc. No. 832-Nueva Ecija and Sp. Proc. No. 7866-Rizal, respectively, and to any
properties bequeathed or devised in her favor by the late Francisco de Borja by Last Will and Testament
or by Donation Inter Vivos or Mortis Causa or purportedly conveyed to her for consideration or otherwise.
The funds for this payment shall be taken from and shall depend upon the receipt of full payment of the
proceeds of the sale of Jalajala, "Poblacion."

3. That Tasiana Ongsingco Vda. de de Borja hereby assumes payment of that particular obligation
incurred by the late Francisco de Borja in favor of the Rehabilitation Finance Corporation, now
Development Bank of the Philippines, amounting to approximately P30,000.00 and also assumes
payment of her 1/5 share of the Estate and Inheritance taxes on the Estate of the late Francisco de Borja
or the sum of P3,500.00, more or less, which shall be deducted by the buyer of Jalajala, "Poblacion" from
the payment to be made to Tasiana Ongsingco Vda. de Borja under paragraph 2 of this Agreement and
paid directly to the Development Bank of the Philippines and the heirs-children of Francisco de Borja.

4. Thereafter, the buyer of Jalajala "Poblacion" is hereby authorized to pay directly to Tasiana Ongsingco
Vda. de de Borja the balance of the payment due her under paragraph 2 of this Agreement
(approximately P766,500.00) and issue in the name of Tasiana Ongsingco Vda. de de Borja,
corresponding certified checks/treasury warrants, who, in turn, will issue the corresponding receipt to
Jose de Borja.

5. In consideration of above payment to Tasiana Ongsingco Vda. de de Borja, Jose de Borja personally
and as administrator of the Testate Estate of Josefa Tangco, and Tasiana Ongsingco Vda. de de Borja,
for themselves and for their heirs, successors, executors, administrators, and assigns, hereby forever
mutually renounce, withdraw, waive, remise, release and discharge any and all manner of action or
actions, cause or causes of action, suits, debts, sum or sums of money, accounts, damages, claims and
demands whatsoever, in law or in equity, which they ever had, or now have or may have against each
other, more specifically Sp. Proceedings Nos. 7866 and 1955, CFI-Rizal, and Sp. Proc. No. 832-Nueva
Ecija, Civil Case No. 3033, CFI Nueva Ecija and Civil Case No. 7452-CFI, Rizal, as well as the case filed
against Manuel Quijal for perjury with the Provincial Fiscal of Rizal, the intention being to completely,
absolutely and finally release each other, their heirs, successors, and assigns, from any and all liability,
arising wholly or partially, directly or indirectly, from the administration, settlement, and distribution of the
assets as well as liabilities of the estates of Francisco de Borja and Josefa Tangco, first spouse of
Francisco de Borja, and lastly, Tasiana Ongsingco Vda. de de Borja expressly and specifically renounce
absolutely her rights as heir over any hereditary share in the estate of Francisco de Borja.

6. That Tasiana Ongsingco Vda. de de Borja, upon receipt of the payment under paragraph 4 hereof,
shall deliver to the heir Jose de Borja all the papers, titles and documents belonging to Francisco de Borja
 which are in her possession and said heir Jose de Borja shall issue in turn the corresponding receive
thereof.

7. That this agreement shall take effect only upon the fulfillment of the sale of the properties mentioned
under paragraph 1 of this agreement and upon receipt of the total and full payment of the proceeds of the
sale of the Jalajala property "Poblacion", otherwise, the non-fulfillment of the said sale will render this
instrument NULL AND VOID AND WITHOUT EFFECT THEREAFTER.

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

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

The genuineness and due execution of the compromised agreement of 12 October 1963 is not disputed, but its validity is,
nevertheless, attacked by Tasiana Ongsingco on the ground that: (1) the heirs cannot enter into such kind of agreement
without first probating the will of Francisco de Borja; (2) that the same involves a compromise on the validity of the
marriage between Francisco de Borja and Tasiana Ongsingco; and (3) that even if it were valid, it has ceased to have
force and effect.

In assailing the validity of the agreement of 12 October 1963, Tasiana Ongsingco and the Probate Court of Nueva Ecija
rely on this Court's decision in Guevara vs. Guevara. 74 Phil. 479, wherein the Court's majority held the view that the
presentation of a will for probate is mandatory and that the settlement and distribution of an estate on the basis of
intestacy when the decedent left a will, is against the law and public policy. It is likewise pointed out by appellant Tasiana
Ongsingco that Section 1 of Rule 74 of the Revised Rules explicitly conditions the validity of an extrajudicial settlement of
a decedent's estate by agreement between heirs, upon the facts that "(if) the decedent left no will and no debts, and the
heirs are all of age, or the minors are represented by their judicial and legal representatives ..." The will of Francisco de
Borja having been submitted to the Nueva Ecija Court and still pending probate when the 1963 agreement was made,
those circumstances, it is argued, bar the validity of the agreement.

Upon the other hand, in claiming the validity of the compromise agreement, Jose de Borja stresses that at the time it was
entered into, on 12 October 1963, the governing provision was Section 1, Rule 74 of the original Rules of Court of 1940,
which allowed the extrajudicial settlement of the estate of a deceased person regardless of whether he left a will or not.
He also relies on the dissenting opinion of Justice Moran, in Guevara vs. Guevara, 74 Phil. 479, wherein was expressed
the view that if the parties have already divided the estate in accordance with a decedent's will, the probate of the will is a
useless ceremony; and if they have divided the estate in a different manner, the probate of the will is worse than useless.

The doctrine of Guevara vs. Guevara, ante, is not applicable to the case at bar. This is apparent from an examination of
the terms of the agreement between Jose de Borja and Tasiana Ongsingco. Paragraph 2 of said agreement specifically
stipulates that the sum of P800,000 payable to Tasiana Ongsingco —

shall be considered as full — complete payment — settlement of her hereditary share in the estate of the
late Francisco de Borja as well as the estate of Josefa Tangco, ... and to any properties bequeathed or
devised in her favor by the late Francisco de Borja by Last Will and Testament or by Donation Inter Vivos
or Mortis Causa or purportedly conveyed to her for consideration or otherwise.

This provision evidences beyond doubt that the ruling in the Guevara case is not applicable to the cases at bar. There
was here no attempt to settle or distribute the estate of Francisco de Borja among the heirs thereto before the probate of
his will. The clear object of the contract was merely the conveyance by Tasiana Ongsingco of any and all her individual
share and interest, actual or eventual in the estate of Francisco de Borja and Josefa Tangco. There is no stipulation as to
any other claimant, creditor or legatee. And as a hereditary share in a decedent's estate is transmitted or vested
immediately from the moment of the death of such causante or predecessor in interest (Civil Code of the Philippines, Art.
3
777) there is no legal bar to a successor (with requisite contracting capacity) disposing of her or his hereditary share
immediately after such death, even if the actual extent of such share is not determined until the subsequent liquidation of
4
the estate. Of course, the effect of such alienation is to be deemed limited to what is ultimately adjudicated to the vendor
heir. However, the aleatory character of the contract does not affect the validity of the transaction; neither does the
coetaneous agreement that the numerous litigations between the parties (the approving order of the Rizal Court
enumerates fourteen of them, Rec. App. pp. 79-82) are to be considered settled and should be dismissed, although such
stipulation, as noted by the Rizal Court, gives the contract the character of a compromise that the law favors, for obvious
reasons, if only because it serves to avoid a multiplicity of suits.

It is likewise worthy of note in this connection that as the surviving spouse of Francisco de Borja, Tasiana Ongsingco was
his compulsory heir under article 995 et seq. of the present Civil Code. Wherefore, barring unworthiness or valid
disinheritance, her successional interest existed independent of Francisco de Borja's last will and testament and would
exist even if such will were not probated at all. Thus, the prerequisite of a previous probate of the will, as established in
the Guevara and analogous cases, can not apply to the case of Tasiana Ongsingco Vda. de de Borja.
Since the compromise contract Annex A was entered into by and between "Jose de Borja personally and as administrator
of the Testate Estate of Josefa Tangco" on the one hand, and on the other, "the heir and surviving spouse of Francisco de
Borja by his second marriage, Tasiana Ongsingco Vda. de de Borja", it is clear that the transaction was binding on both in
their individual capacities, upon the perfection of the contract, even without previous authority of the Court to enter into the
same. The only difference between an extrajudicial compromise and one that is submitted and approved by the Court, is
that the latter can be enforced by execution proceedings. Art. 2037 of the Civil Code is explicit on the point:

8. Art. 2037. A compromise has upon the parties the effect and authority of res judicata; but there shall be
no execution except in compliance with a judicial compromise.

It is argued by Tasiana Ongsingco that while the agreement Annex A expressed no definite period for its
performance, the same was intended to have a resolutory period of 60 days for its effectiveness. In
support of such contention, it is averred that such a limit was expressly stipulated in an agreement in
similar terms entered into by said Ongsingco with the brothers and sister of Jose de Borja, to wit,
Crisanto, Matilde and Cayetano, all surnamed de Borja, except that the consideration was fixed at
P600,000 (Opposition, Annex/Rec. of Appeal, L-28040, pp. 39- 46) and which contained the following
clause:

III. That this agreement shall take effect only upon the consummation of the sale of the property
mentioned herein and upon receipt of the total and full payment of the proceeds of the sale by the herein
owner heirs-children of Francisco de Borja, namely, Crisanto, Cayetano and Matilde, all surnamed de
Borja; Provided that if no sale of the said property mentioned herein is consummated, or the non-receipt
of the purchase price thereof by the said owners within the period of sixty (60) days from the date hereof,
this agreement will become null and void and of no further effect.

Ongsingco's argument loses validity when it is considered that Jose de Borja was not a party to this particular contract
(Annex 1), and that the same appears not to have been finalized, since it bears no date, the day being left blank "this —
day of October 1963"; and while signed by the parties, it was not notarized, although plainly intended to be so done, since
it carries a proposed notarial ratification clause. Furthermore, the compromise contract with Jose de Borja (Annex A),
provides in its par. 2 heretofore transcribed that of the total consideration of P800, 000 to be paid to Ongsingco, P600,000
represent the "prorata share of the heirs Crisanto, Cayetano and Matilde all surnamed de Borja" which corresponds to the
consideration of P600,000 recited in Annex 1, and that circumstance is proof that the duly notarized contract entered into
wit Jose de Borja under date 12 October 1963 (Annex A), was designed to absorb and supersede the separate
unformalize agreement with the other three Borja heirs. Hence, the 60 days resolutory term in the contract with the latter
(Annex 1) not being repeated in Annex A, can not apply to the formal compromise with Jose de Borja. It is moreover
manifest that the stipulation that the sale of the Hacienda de Jalajala was to be made within sixty days from the date of
the agreement with Jose de Borja's co-heirs (Annex 1) was plainly omitted in Annex A as improper and ineffective, since
the Hacienda de Jalajala (Poblacion) that was to be sold to raise the P800,000 to be paid to Ongsingco for her share
formed part of the estate of Francisco de Borja and could not be sold until authorized by the Probate Court. The Court of
First Instance of Rizal so understood it, and in approving the compromise it fixed a term of 120 days counted from the
finality of the order now under appeal, for the carrying out by the parties for the terms of the contract.

This brings us to the plea that the Court of First Instance of Rizal had no jurisdiction to approve the compromise with Jose
de Borja (Annex A) because Tasiana Ongsingco was not an heir in the estate of Josefa Tangco pending settlement in the
Rizal Court, but she was an heir of Francisco de Borja, whose estate was the object of Special Proceeding No. 832 of the
Court of First Instance of Nueva Ecija. This circumstance is irrelevant, since what was sold by Tasiana Ongsingco was
only her eventual share in the estate of her late husband, not the estate itself; and as already shown, that eventual share
she owned from the time of Francisco's death and the Court of Nueva Ecija could not bar her selling it. As owner of her
undivided hereditary share, Tasiana could dispose of it in favor of whomsoever she chose. Such alienation is expressly
recognized and provided for by article 1088 of the present Civil Code:

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

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

Tasiana Ongsingco further argues that her contract with Jose de Borja (Annex "A") is void because it amounts to a
compromise as to her status and marriage with the late Francisco de Borja. The point is without merit, for the very
opening paragraph of the agreement with Jose de Borja (Annex "A") describes her as "the heir and surviving spouse of
Francisco de Borja by his second marriage, Tasiana Ongsingco Vda. de de Borja", which is in itself definite admission of
her civil status. There is nothing in the text of the agreement that would show that this recognition of Ongsingco's status
as the surviving spouse of Francisco de Borja was only made in consideration of the cession of her hereditary rights.

It is finally charged by appellant Ongsingco, as well as by the Court of First Instance of Nueva Ecija in its order of 21
September 1964, in Special Proceedings No. 832 (Amended Record on Appeal in L-28568, page 157), that the
compromise agreement of 13 October 1963 (Annex "A") had been abandoned, as shown by the fact that, after its
execution, the Court of First Instance of Nueva Ecija, in its order of 21 September 1964, had declared that "no amicable
settlement had been arrived at by the parties", and that Jose de Borja himself, in a motion of 17 June 1964, had stated
that the proposed amicable settlement "had failed to materialize".
It is difficult to believe, however, that the amicable settlement referred to in the order and motion above-mentioned was
the compromise agreement of 13 October 1963, which already had been formally signed and executed by the parties and
duly notarized. What the record discloses is that some time after its formalization, Ongsingco had unilaterally attempted to
back out from the compromise agreement, pleading various reasons restated in the opposition to the Court's approval of
Annex "A" (Record on Appeal, L-20840, page 23): that the same was invalid because of the lapse of the allegedly
intended resolutory period of 60 days and because the contract was not preceded by the probate of Francisco de Borja's
will, as required by this Court's Guevarra vs. Guevara ruling; that Annex "A" involved a compromise affecting Ongsingco's
status as wife and widow of Francisco de Borja, etc., all of which objections have been already discussed. It was natural
that in view of the widow's attitude, Jose de Borja should attempt to reach a new settlement or novatory agreement before
seeking judicial sanction and enforcement of Annex "A", since the latter step might ultimately entail a longer delay in
attaining final remedy. That the attempt to reach another settlement failed is apparent from the letter of Ongsingco's
counsel to Jose de Borja quoted in pages 35-36 of the brief for appellant Ongsingco in G.R. No. 28040; and it is more
than probable that the order of 21 September 1964 and the motion of 17 June 1964 referred to the failure of the parties'
quest for a more satisfactory compromise. But the inability to reach a novatory accord can not invalidate the original
compromise (Annex "A") and justifies the act of Jose de Borja in finally seeking a court order for its approval and
enforcement from the Court of First Instance of Rizal, which, as heretofore described, decreed that the agreement be
ultimately performed within 120 days from the finality of the order, now under appeal.

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

In her brief, Tasiana Ongsingco also pleads that the time elapsed in the appeal has affected her unfavorably, in that while
the purchasing power of the agreed price of P800,000 has diminished, the value of the Jalajala property has increased.
But the fact is that her delay in receiving the payment of the agreed price for her hereditary interest was primarily due to
her attempts to nullify the agreement (Annex "A") she had formally entered into with the advice of her counsel, Attorney
Panaguiton. And as to the devaluation de facto of our currency, what We said in Dizon Rivera vs. Dizon, L-24561, 30
June 1970, 33 SCRA 554, that "estates would never be settled if there were to be a revaluation with every subsequent
fluctuation in the values of currency and properties of the estate", is particularly opposite in the present case.

Coming now to Case G.R. No. L-28611, the issue is whether the Hacienda de Jalajala (Poblacion), concededly acquired
by Francisco de Borja during his marriage to his first wife, Josefa Tangco, is the husband's private property (as contended
by his second spouse, Tasiana Ongsingco), or whether it forms part of the conjugal (ganancial) partnership with Josefa
Tangco. The Court of First Instance of Rizal (Judge Herminio Mariano, presiding) declared that there was adequate
evidence to overcome the presumption in favor of its conjugal character established by Article 160 of the Civil Code.

We are of the opinion that this question as between Tasiana Ongsingco and Jose de Borja has become moot and
academic, in view of the conclusion reached by this Court in the two preceding cases (G.R. No. L-28568), upholding as
valid the cession of Tasiana Ongsingco's eventual share in the estate of her late husband, Francisco de Borja, for the sum
of P800,000 with the accompanying reciprocal quit-claims between the parties. But as the question may affect the rights
of possible creditors and legatees, its resolution is still imperative.

It is undisputed that the Hacienda Jalajala, of around 4,363 hectares, had been originally acquired jointly by Francisco de
Borja, Bernardo de Borja and Marcelo de Borja and their title thereto was duly registered in their names as co-owners in
Land Registration Case No. 528 of the province of Rizal, G.L.R.O. Rec. No. 26403 (De Barjo vs. Jugo, 54 Phil. 465).
Subsequently, in 1931, the Hacienda was partitioned among the co-owners: the Punta section went to Marcelo de Borja;
the Bagombong section to Bernardo de Borja, and the part in Jalajala proper (Poblacion) corresponded to Francisco de
Borja (V. De Borja vs. De Borja 101 Phil. 911, 932).

The lot allotted to Francisco was described as —

Una Parcela de terreno en Poblacion, Jalajala: N. Puang River; E. Hermogena Romero; S. Heirs of
Marcelo de Borja O. Laguna de Bay; containing an area of 13,488,870 sq. m. more or less, assessed at
P297,410. (Record on Appeal, pages 7 and 105)

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

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

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

After trial, the Court of First Instance of Rizal, per Judge Herminio Mariano, held that the plaintiff had adduced sufficient
evidence to rebut the presumption, and declared the Hacienda de Jalajala (Poblacion) to be the exclusive private property
of the late Francisco de Borja, and his Administratrix, Tasiana Ongsingco Vda. de Borja, to be entitled to its possession.
Defendant Jose de Borja then appealed to this Court.
The evidence reveals, and the appealed order admits, that the character of the Hacienda in question as owned by the
conjugal partnership De Borja-Tangco was solemnly admitted by the late Francisco de Borja no less than two times: first,
in the Reamended Inventory that, as executor of the estate of his deceased wife Josefa Tangco, he filed in the Special
Proceedings No. 7866 of the Court of First Instance of Rizal on 23 July 1953 (Exhibit "2"); and again, in the Reamended
Accounting of the same date, also filed in the proceedings aforesaid (Exhibit "7"). Similarly, the plaintiff Tasiana O. Vda.
de Borja, herself, as oppositor in the Estate of Josefa Tangco, submitted therein an inventory dated 7 September 1954
(Exhibit "3") listing the Jalajala property among the "Conjugal Properties of the Spouses Francisco de Borja and Josefa
Tangco". And once more, Tasiana Ongsingco, as administratrix of the Estate of Francisco de Borja, in Special
Proceedings No. 832 of the Court of First Instance of Nueva Ecija, submitted therein in December, 1955, an inventory
wherein she listed the Jalajala Hacienda under the heading "Conjugal Property of the Deceased Spouses Francisco de
Borja and Josefa Tangco, which are in the possession of the Administrator of the Testate Estate of the Deceased Josefa
Tangco in Special Proceedings No. 7866 of the Court of First Instance of Rizal" (Exhibit "4").

Notwithstanding the four statements aforesaid, and the fact that they are plain admissions against interest made by both
Francisco de Borja and the Administratrix of his estate, in the course of judicial proceedings in the Rizal and Nueva Ecija
Courts, supporting the legal presumption in favor of the conjugal community, the Court below declared that the Hacienda
de Jalajala (Poblacion) was not conjugal property, but the private exclusive property of the late Francisco de Borja. It did
so on the strength of the following evidences: (a) the sworn statement by Francis de Borja on 6 August 1951 (Exhibit "F")
that —

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

and (b) the testimony of Gregorio de Borja, son of Bernardo de Borja, that the entire Hacienda had been bought at a
foreclosure sale for P40,100.00, of which amount P25,100 was contributed by Bernardo de Borja and P15,000. by
Marcelo de Borja; that upon receipt of a subsequent demand from the provincial treasurer for realty taxes the sum of
P17,000, Marcelo told his brother Bernardo that Francisco (son of Marcelo) wanted also to be a co-owner, and upon
Bernardo's assent to the proposal, Marcelo issue a check for P17,000.00 to pay the back taxes and said that the amount
would represent Francisco's contribution in the purchase of the Hacienda. The witness further testified that —

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

The Court below, reasoning that not only Francisco's sworn statement overweighed the admissions in the inventories
relied upon by defendant-appellant Jose de Borja since probate courts can not finally determine questions of ownership of
inventoried property, but that the testimony of Gregorio de Borja showed that Francisco de Borja acquired his share of the
original Hacienda with his private funds, for which reason that share can not be regarded as conjugal partnership
property, but as exclusive property of the buyer, pursuant to Article 1396(4) of Civil Code of 1889 and Article 148(4) of the
Civil Code of the Philippines.

The following shall be the exclusive property of each spouse:

xxx xxx xxx

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

We find the conclusions of the lower court to be untenable. In the first place, witness Gregorio de Borja's testimony as to
the source of the money paid by Francisco for his share was plain hearsay, hence inadmissible and of no probative value,
since he was merely repeating what Marcelo de Borja had told him (Gregorio). There is no way of ascertaining the truth of
the statement, since both Marcelo and Francisco de Borja were already dead when Gregorio testified. In addition, the
statement itself is improbable, since there was no need or occasion for Marcelo de Borja to explain to Gregorio how and
when Francisco de Borja had earned the P17,000.00 entrusted to Marcelo. A ring of artificiality is clearly discernible in this
portion of Gregorio's testimony.

As to Francisco de Borja's affidavit, Exhibit "F", the quoted portion thereof (ante, page 14) does not clearly demonstrate
that the "mi terreno personal y exclusivo (Poblacion de Jalajala, Rizal) " refers precisely to the Hacienda in question. The
inventories (Exhibits 3 and 4) disclose that there were two real properties in Jalajala owned by Francisco de Borja, one of
72.038 sq. m., assessed at P44,600, and a much bigger one of 1,357.260.70 sq. m., which is evidently the Hacienda de
Jalajala (Poblacion). To which of these lands did the affidavit of Francisco de Borja (Exhibit "F") refer to? In addition,
Francisco's characterization of the land as "mi terreno personal y exclusivo" is plainly self-serving, and not admissible in
the absence of cross examination.

It may be true that the inventories relied upon by defendant-appellant (Exhibits "2", "3", "4" and "7") are not conclusive on
the conjugal character of the property in question; but as already noted, they are clear admissions against the pecuniary
interest of the declarants, Francisco de Borja and his executor-widow, Tasiana Ongsingco, and as such of much greater
probative weight than the self-serving statement of Francisco (Exhibit "F"). Plainly, the legal presumption in favor of the
conjugal character of the Hacienda de Jalajala (Poblacion) now in dispute has not been rebutted but actually confirmed by
proof. Hence, the appealed order should be reversed and the Hacienda de Jalajala (Poblacion) declared property of the
conjugal partnership of Francisco de Borja and Josefa Tangco.
No error having been assigned against the ruling of the lower court that claims for damages should be ventilated in the
corresponding special proceedings for the settlement of the estates of the deceased, the same requires no pro
announcement from this Court.

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

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

Fernando, J., took no part.

Footnotes

1 She died during the pendency of these appeals, being substituted by Atty. Luis Panaguiton Jr.,
administrator of the estate (S.C. Resolution, 27 February 1970).

2 Annex A, Record on Appeal, G.R. No. L-28040, pp. 16-21.

3 Also: Osorio vs. Osorio Steamship Co., 41 Phil. 531; Baun vs. Heirs of Baun, 53 Phil. 654; Barretto vs.
Tuason, 59 Phil. 845; Cuevas vs. Abesamis, 71 Phil. 147; Jayme vs. Gamboa, 75 Phil. 479; Iballe vs. Po.

4 Garcia vs. David, 67 Phil. 279; Jakosalem vs. Rafols, 73 Phil. 628.
 3.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-43082 June 18, 1937

PABLO LORENZO, as trustee of the estate of Thomas Hanley, deceased, plaintiff-appellant,

vs.
JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellant.

Pablo Lorenzo and Delfin Joven for plaintiff-appellant.

Office of the Solicitor-General Hilado for defendant-appellant.

LAUREL, J.:

On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity as trustee of the estate of Thomas Hanley, deceased,
brought this action in the Court of First Instance of Zamboanga against the defendant, Juan Posadas, Jr., then the
Collector of Internal Revenue, for the refund of the amount of P2,052.74, paid by the plaintiff as inheritance tax on the
estate of the deceased, and for the collection of interst thereon at the rate of 6 per cent per annum, computed from
September 15, 1932, the date when the aforesaid tax was [paid under protest. The defendant set up a counterclaim for
P1,191.27 alleged to be interest due on the tax in question and which was not included in the original assessment. From
the decision of the Court of First Instance of Zamboanga dismissing both the plaintiff's complaint and the defendant's
counterclaim, both parties appealed to this court.

It appears that on May 27, 1922, one Thomas Hanley died in Zamboanga, Zamboanga, leaving a will (Exhibit 5) and
considerable amount of real and personal properties. On june 14, 1922, proceedings for the probate of his will and the
settlement and distribution of his estate were begun in the Court of First Instance of Zamboanga. The will was admitted to
probate. Said will provides, among other things, as follows:

4. I direct that any money left by me be given to my nephew Matthew Hanley.

5. I direct that all real estate owned by me at the time of my death be not sold or otherwise disposed of for a
period of ten (10) years after my death, and that the same be handled and managed by the executors, and
proceeds thereof to be given to my nephew, Matthew Hanley, at Castlemore, Ballaghaderine, County of
Rosecommon, Ireland, and that he be directed that the same be used only for the education of my brother's
children and their descendants.

6. I direct that ten (10) years after my death my property be given to the above mentioned Matthew Hanley to be
disposed of in the way he thinks most advantageous.

xxx xxx xxx

8. I state at this time I have one brother living, named Malachi Hanley, and that my nephew, Matthew Hanley, is a
son of my said brother, Malachi Hanley.

The Court of First Instance of Zamboanga considered it proper for the best interests of ther estate to appoint a trustee to
administer the real properties which, under the will, were to pass to Matthew Hanley ten years after the two executors
named in the will, was, on March 8, 1924, appointed trustee. Moore took his oath of office and gave bond on March 10,
1924. He acted as trustee until February 29, 1932, when he resigned and the plaintiff herein was appointed in his stead.

During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue, alleging that the estate left
by the deceased at the time of his death consisted of realty valued at P27,920 and personalty valued at P1,465, and
allowing a deduction of P480.81, assessed against the estate an inheritance tax in the amount of P1,434.24 which,
together with the penalties for deliquency in payment consisting of a 1 per cent monthly interest from July 1, 1931 to the
date of payment and a surcharge of 25 per cent on the tax, amounted to P2,052.74. On March 15, 1932, the defendant
filed a motion in the testamentary proceedings pending before the Court of First Instance of Zamboanga (Special
proceedings No. 302) praying that the trustee, plaintiff herein, be ordered to pay to the Government the said sum of
P2,052.74. The motion was granted. On September 15, 1932, the plaintiff paid said amount under protest, notifying the
defendant at the same time that unless the amount was promptly refunded suit would be brought for its recovery. The
defendant overruled the plaintiff's protest and refused to refund the said amount hausted, plaintiff went to court with the
result herein above indicated.

In his appeal, plaintiff contends that the lower court erred:

I. In holding that the real property of Thomas Hanley, deceased, passed to his instituted heir, Matthew Hanley,
from the moment of the death of the former, and that from the time, the latter became the owner thereof.
 II. In holding, in effect, that there was deliquency in the payment of inheritance tax due on the estate of said
deceased.

III. In holding that the inheritance tax in question be based upon the value of the estate upon the death of the
testator, and not, as it should have been held, upon the value thereof at the expiration of the period of ten years
after which, according to the testator's will, the property could be and was to be delivered to the instituted heir.

IV. In not allowing as lawful deductions, in the determination of the net amount of the estate subject to said tax,
the amounts allowed by the court as compensation to the "trustees" and paid to them from the decedent's estate.

V. In not rendering judgment in favor of the plaintiff and in denying his motion for new trial.

The defendant-appellant contradicts the theories of the plaintiff and assigns the following error besides:

The lower court erred in not ordering the plaintiff to pay to the defendant the sum of P1,191.27, representing part
of the interest at the rate of 1 per cent per month from April 10, 1924, to June 30, 1931, which the plaintiff had
failed to pay on the inheritance tax assessed by the defendant against the estate of Thomas Hanley.

The following are the principal questions to be decided by this court in this appeal: (a) When does the inheritance tax
accrue and when must it be satisfied? (b) Should the inheritance tax be computed on the basis of the value of the estate
at the time of the testator's death, or on its value ten years later? (c) In determining the net value of the estate subject to
tax, is it proper to deduct the compensation due to trustees? (d) What law governs the case at bar? Should the provisions
of Act No. 3606 favorable to the tax-payer be given retroactive effect? (e) Has there been deliquency in the payment of
the inheritance tax? If so, should the additional interest claimed by the defendant in his appeal be paid by the estate?
Other points of incidental importance, raised by the parties in their briefs, will be touched upon in the course of this
opinion.

(a) The accrual of the inheritance tax is distinct from the obligation to pay the same. Section 1536 as amended, of the
Administrative Code, imposes the tax upon "every transmission by virtue of inheritance, devise, bequest, gift mortis causa,
or advance in anticipation of inheritance,devise, or bequest." The tax therefore is upon transmission or the transfer or
devolution of property of a decedent, made effective by his death. (61 C. J., p. 1592.) It is in reality an excise or privilege
tax imposed on the right to succeed to, receive, or take property by or under a will or the intestacy law, or deed, grant, or
gift to become operative at or after death. Acording to article 657 of the Civil Code, "the rights to the succession of a
person are transmitted from the moment of his death." "In other words", said Arellano, C. J., ". . . the heirs succeed
immediately to all of the property of the deceased ancestor. The property belongs to the heirs at the moment of the death
of the ancestor as completely as if the ancestor had executed and delivered to them a deed for the same before his
death." (Bondad vs. Bondad, 34 Phil., 232. See also, Mijares vs. Nery, 3 Phil., 195; Suilong & Co., vs. Chio-Taysan, 12
Phil., 13; Lubrico vs. Arbado, 12 Phil., 391; Innocencio vs. Gat-Pandan, 14 Phil., 491; Aliasas vs.Alcantara, 16 Phil., 489;
Ilustre vs. Alaras Frondosa, 17 Phil., 321; Malahacan vs. Ignacio, 19 Phil., 434; Bowa vs. Briones, 38 Phil., 27; Osario vs.
Osario & Yuchausti Steamship Co., 41 Phil., 531; Fule vs. Fule, 46 Phil., 317; Dais vs. Court of First Instance of Capiz, 51
Phil., 396; Baun vs. Heirs of Baun, 53 Phil., 654.) Plaintiff, however, asserts that while article 657 of the Civil Code is
applicable to testate as well as intestate succession, it operates only in so far as forced heirs are concerned. But the
language of article 657 of the Civil Code is broad and makes no distinction between different classes of heirs. That article
does not speak of forced heirs; it does not even use the word "heir". It speaks of the rights of succession and the
transmission thereof from the moment of death. The provision of section 625 of the Code of Civil Procedure regarding the
authentication and probate of a will as a necessary condition to effect transmission of property does not affect the general
rule laid down in article 657 of the Civil Code. The authentication of a will implies its due execution but once probated and
allowed the transmission is effective as of the death of the testator in accordance with article 657 of the Civil Code.
Whatever may be the time when actual transmission of the inheritance takes place, succession takes place in any event
at the moment of the decedent's death. The time when the heirs legally succeed to the inheritance may differ from the
time when the heirs actually receive such inheritance. "Poco importa", says Manresa commenting on article 657 of the
Civil Code, "que desde el falleimiento del causante, hasta que el heredero o legatario entre en posesion de los bienes de
la herencia o del legado, transcurra mucho o poco tiempo, pues la adquisicion ha de retrotraerse al momento de la
muerte, y asi lo ordena el articulo 989, que debe considerarse como complemento del presente." (5 Manresa, 305; see
also, art. 440, par. 1, Civil Code.) Thomas Hanley having died on May 27, 1922, the inheritance tax accrued as of the
date.

From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow that the obligation to pay the tax
arose as of the date. The time for the payment on inheritance tax is clearly fixed by section 1544 of the Revised
Administrative Code as amended by Act No. 3031, in relation to section 1543 of the same Code. The two sections follow:

SEC. 1543. Exemption of certain acquisitions and transmissions. — The following shall not be taxed:

(a) The merger of the usufruct in the owner of the naked title.

(b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the
trustees.

(c) The transmission from the first heir, legatee, or donee in favor of another beneficiary, in accordance
with the desire of the predecessor.
 In the last two cases, if the scale of taxation appropriate to the new beneficiary is greater than that paid by the
first, the former must pay the difference.

SEC. 1544. When tax to be paid. — The tax fixed in this article shall be paid:

(a) In the second and third cases of the next preceding section, before entrance into possession of the
property.

(b) In other cases, within the six months subsequent to the death of the predecessor; but if judicial
testamentary or intestate proceedings shall be instituted prior to the expiration of said period, the payment
shall be made by the executor or administrator before delivering to each beneficiary his share.

If the tax is not paid within the time hereinbefore prescribed, interest at the rate of twelve per centum per annum
shall be added as part of the tax; and to the tax and interest due and unpaid within ten days after the date of
notice and demand thereof by the collector, there shall be further added a surcharge of twenty-five per centum.

A certified of all letters testamentary or of admisitration shall be furnished the Collector of Internal Revenue by the
Clerk of Court within thirty days after their issuance.

It should be observed in passing that the word "trustee", appearing in subsection (b) of section 1543, should read
"fideicommissary" or "cestui que trust". There was an obvious mistake in translation from the Spanish to the English
version.

The instant case does fall under subsection (a), but under subsection (b), of section 1544 above-quoted, as there is here
no fiduciary heirs, first heirs, legatee or donee. Under the subsection, the tax should have been paid before the delivery of
the properties in question to P. J. M. Moore as trustee on March 10, 1924.

(b) The plaintiff contends that the estate of Thomas Hanley, in so far as the real properties are concerned, did not and
could not legally pass to the instituted heir, Matthew Hanley, until after the expiration of ten years from the death of the
testator on May 27, 1922 and, that the inheritance tax should be based on the value of the estate in 1932, or ten years
after the testator's death. The plaintiff introduced evidence tending to show that in 1932 the real properties in question had
a reasonable value of only P5,787. This amount added to the value of the personal property left by the deceased, which
the plaintiff admits is P1,465, would generate an inheritance tax which, excluding deductions, interest and surcharge,
would amount only to about P169.52.

If death is the generating source from which the power of the estate to impose inheritance taxes takes its being and if,
upon the death of the decedent, succession takes place and the right of the estate to tax vests instantly, the tax should be
measured by the vlaue of the estate as it stood at the time of the decedent's death, regardless of any subsequent
contingency value of any subsequent increase or decrease in value. (61 C. J., pp. 1692, 1693; 26 R. C. L., p. 232;
Blakemore and Bancroft, Inheritance Taxes, p. 137. See also Knowlton vs. Moore, 178 U.S., 41; 20 Sup. Ct. Rep., 747;
44 Law. ed., 969.) "The right of the state to an inheritance tax accrues at the moment of death, and hence is ordinarily
measured as to any beneficiary by the value at that time of such property as passes to him. Subsequent appreciation or
depriciation is immaterial." (Ross, Inheritance Taxation, p. 72.)

Our attention is directed to the statement of the rule in Cyclopedia of Law of and Procedure (vol. 37, pp. 1574, 1575) that,
in the case of contingent remainders, taxation is postponed until the estate vests in possession or the contingency is
settled. This rule was formerly followed in New York and has been adopted in Illinois, Minnesota, Massachusetts, Ohio,
Pennsylvania and Wisconsin. This rule, horever, is by no means entirely satisfactory either to the estate or to those
interested in the property (26 R. C. L., p. 231.). Realizing, perhaps, the defects of its anterior system, we find upon
examination of cases and authorities that New York has varied and now requires the immediate appraisal of the
postponed estate at its clear market value and the payment forthwith of the tax on its out of the corpus of the estate
transferred. (In re Vanderbilt, 172 N. Y., 69; 69 N. E., 782; In re Huber, 86 N. Y. App. Div., 458; 83 N. Y. Supp., 769;
Estate of Tracy, 179 N. Y., 501; 72 N. Y., 519; Estate of Brez, 172 N. Y., 609; 64 N. E., 958; Estate of Post, 85 App. Div.,
611; 82 N. Y. Supp., 1079. Vide also, Saltoun vs. Lord Advocate, 1 Peter. Sc. App., 970; 3 Macq. H. L., 659; 23 Eng. Rul.
Cas., 888.) California adheres to this new rule (Stats. 1905, sec. 5, p. 343).

But whatever may be the rule in other jurisdictions, we hold that a transmission by inheritance is taxable at the time of the
predecessor's death, notwithstanding the postponement of the actual possession or enjoyment of the estate by the
beneficiary, and the tax measured by the value of the property transmitted at that time regardless of its appreciation or
depreciation.

(c) Certain items are required by law to be deducted from the appraised gross in arriving at the net value of the estate on
which the inheritance tax is to be computed (sec. 1539, Revised Administrative Code). In the case at bar, the defendant
and the trial court allowed a deduction of only P480.81. This sum represents the expenses and disbursements of the
executors until March 10, 1924, among which were their fees and the proven debts of the deceased. The plaintiff
contends that the compensation and fees of the trustees, which aggregate P1,187.28 (Exhibits C, AA, EE, PP, HH, JJ, LL,
NN, OO), should also be deducted under section 1539 of the Revised Administrative Code which provides, in part, as
follows: "In order to determine the net sum which must bear the tax, when an inheritance is concerned, there shall be
deducted, in case of a resident, . . . the judicial expenses of the testamentary or intestate proceedings, . . . ."

A trustee, no doubt, is entitled to receive a fair compensation for his services (Barney vs. Saunders, 16 How., 535; 14
Law. ed., 1047). But from this it does not follow that the compensation due him may lawfully be deducted in arriving at the
net value of the estate subject to tax. There is no statute in the Philippines which requires trustees' commissions to be
deducted in determining the net value of the estate subject to inheritance tax (61 C. J., p. 1705). Furthermore, though a
testamentary trust has been created, it does not appear that the testator intended that the duties of his executors and
trustees should be separated. (Ibid.; In re Vanneck's Estate, 161 N. Y. Supp., 893; 175 App. Div., 363; In re Collard's
Estate, 161 N. Y. Supp., 455.) On the contrary, in paragraph 5 of his will, the testator expressed the desire that his real
estate be handled and managed by his executors until the expiration of the period of ten years therein provided. Judicial
expenses are expenses of administration (61 C. J., p. 1705) but, in State vs. Hennepin County Probate Court (112 N. W.,
878; 101 Minn., 485), it was said: ". . . The compensation of a trustee, earned, not in the administration of the estate, but
in the management thereof for the benefit of the legatees or devises, does not come properly within the class or reason
for exempting administration expenses. . . . Service rendered in that behalf have no reference to closing the estate for the
purpose of a distribution thereof to those entitled to it, and are not required or essential to the perfection of the rights of the
heirs or legatees. . . . Trusts . . . of the character of that here before the court, are created for the the benefit of those to
whom the property ultimately passes, are of voluntary creation, and intended for the preservation of the estate. No sound
reason is given to support the contention that such expenses should be taken into consideration in fixing the value of the
estate for the purpose of this tax."

(d) The defendant levied and assessed the inheritance tax due from the estate of Thomas Hanley under the provisions of
section 1544 of the Revised Administrative Code, as amended by section 3 of Act No. 3606. But Act No. 3606 went into
effect on January 1, 1930. It, therefore, was not the law in force when the testator died on May 27, 1922. The law at the
time was section 1544 above-mentioned, as amended by Act No. 3031, which took effect on March 9, 1922.

It is well-settled that inheritance taxation is governed by the statute in force at the time of the death of the decedent (26 R.
C. L., p. 206; 4 Cooley on Taxation, 4th ed., p. 3461). The taxpayer can not foresee and ought not to be required to guess
the outcome of pending measures. Of course, a tax statute may be made retroactive in its operation. Liability for taxes
under retroactive legislation has been "one of the incidents of social life." (Seattle vs. Kelleher, 195 U. S., 360; 49 Law.
ed., 232 Sup. Ct. Rep., 44.) But legislative intent that a tax statute should operate retroactively should be perfectly clear.
(Scwab vs. Doyle, 42 Sup. Ct. Rep., 491; Smietanka vs. First Trust & Savings Bank, 257 U. S., 602; Stockdale vs.
Insurance Co., 20 Wall., 323; Lunch vs. Turrish, 247 U. S., 221.) "A statute should be considered as prospective in its
operation, whether it enacts, amends, or repeals an inheritance tax, unless the language of the statute clearly demands or
expresses that it shall have a retroactive effect, . . . ." (61 C. J., P. 1602.) Though the last paragraph of section 5 of
Regulations No. 65 of the Department of Finance makes section 3 of Act No. 3606, amending section 1544 of the Revised
Administrative Code, applicable to all estates the inheritance taxes due from which have not been paid, Act No. 3606 itself
contains no provisions indicating legislative intent to give it retroactive effect. No such effect can begiven the statute by
this court.

The defendant Collector of Internal Revenue maintains, however, that certain provisions of Act No. 3606 are more
favorable to the taxpayer than those of Act No. 3031, that said provisions are penal in nature and, therefore, should
operate retroactively in conformity with the provisions of article 22 of the Revised Penal Code. This is the reason why he
applied Act No. 3606 instead of Act No. 3031. Indeed, under Act No. 3606, (1) the surcharge of 25 per cent is based on
the tax only, instead of on both the tax and the interest, as provided for in Act No. 3031, and (2) the taxpayer is allowed
twenty days from notice and demand by rthe Collector of Internal Revenue within which to pay the tax, instead of ten days
only as required by the old law.

Properly speaking, a statute is penal when it imposes punishment for an offense committed against the state which, under
the Constitution, the Executive has the power to pardon. In common use, however, this sense has been enlarged to
include within the term "penal statutes" all status which command or prohibit certain acts, and establish penalties for their
violation, and even those which, without expressly prohibiting certain acts, impose a penalty upon their commission (59 C.
J., p. 1110). Revenue laws, generally, which impose taxes collected by the means ordinarily resorted to for the collection
of taxes are not classed as penal laws, although there are authorities to the contrary. (See Sutherland, Statutory
Construction, 361; Twine Co. vs. Worthington, 141 U. S., 468; 12 Sup. Ct., 55; Rice vs. U. S., 4 C. C. A., 104; 53 Fed.,
910; Com. vs. Standard Oil Co., 101 Pa. St., 150; State vs. Wheeler, 44 P., 430; 25 Nev. 143.) Article 22 of the Revised
Penal Code is not applicable to the case at bar, and in the absence of clear legislative intent, we cannot give Act No. 3606
a retroactive effect.

(e) The plaintiff correctly states that the liability to pay a tax may arise at a certain time and the tax may be paid within
another given time. As stated by this court, "the mere failure to pay one's tax does not render one delinqent until and
unless the entire period has eplased within which the taxpayer is authorized by law to make such payment without being
subjected to the payment of penalties for fasilure to pay his taxes within the prescribed period." (U. S. vs. Labadan, 26
Phil., 239.)

The defendant maintains that it was the duty of the executor to pay the inheritance tax before the delivery of the
decedent's property to the trustee. Stated otherwise, the defendant contends that delivery to the trustee was delivery to
the cestui que trust, the beneficiery in this case, within the meaning of the first paragraph of subsection (b) of section 1544
of the Revised Administrative Code. This contention is well taken and is sustained. The appointment of P. J. M. Moore as
trustee was made by the trial court in conformity with the wishes of the testator as expressed in his will. It is true that the
word "trust" is not mentioned or used in the will but the intention to create one is clear. No particular or technical words are
required to create a testamentary trust (69 C. J., p. 711). The words "trust" and "trustee", though apt for the purpose, are
not necessary. In fact, the use of these two words is not conclusive on the question that a trust is created (69 C. J., p.
714). "To create a trust by will the testator must indicate in the will his intention so to do by using language sufficient to
separate the legal from the equitable estate, and with sufficient certainty designate the beneficiaries, their interest in the
ttrust, the purpose or object of the trust, and the property or subject matter thereof. Stated otherwise, to constitute a valid
testamentary trust there must be a concurrence of three circumstances: (1) Sufficient words to raise a trust; (2) a definite
subject; (3) a certain or ascertain object; statutes in some jurisdictions expressly or in effect so providing." (69 C. J., pp.
705,706.) There is no doubt that the testator intended to create a trust. He ordered in his will that certain of his properties
be kept together undisposed during a fixed period, for a stated purpose. The probate court certainly exercised sound
judgment in appointment a trustee to carry into effect the provisions of the will (see sec. 582, Code of Civil Procedure).

P. J. M. Moore became trustee on March 10, 1924. On that date trust estate vested in him (sec. 582 in relation to sec.
590, Code of Civil Procedure). The mere fact that the estate of the deceased was placed in trust did not remove it from
the operation of our inheritance tax laws or exempt it from the payment of the inheritance tax. The corresponding
inheritance tax should have been paid on or before March 10, 1924, to escape the penalties of the laws. This is so for the
reason already stated that the delivery of the estate to the trustee was in esse delivery of the same estate to the cestui
que trust, the beneficiary in this case. A trustee is but an instrument or agent for the cestui que trust (Shelton vs. King, 299
U. S., 90; 33 Sup. Ct. Rep., 689; 57 Law. ed., 1086). When Moore accepted the trust and took possesson of the trust
estate he thereby admitted that the estate belonged not to him but to his cestui que trust (Tolentino vs. Vitug, 39 Phil.,126,
cited in 65 C. J., p. 692, n. 63). He did not acquire any beneficial interest in the estate. He took such legal estate only as
the proper execution of the trust required (65 C. J., p. 528) and, his estate ceased upon the fulfillment of the testator's
wishes. The estate then vested absolutely in the beneficiary (65 C. J., p. 542).

The highest considerations of public policy also justify the conclusion we have reached. Were we to hold that the payment
of the tax could be postponed or delayed by the creation of a trust of the type at hand, the result would be plainly
disastrous. Testators may provide, as Thomas Hanley has provided, that their estates be not delivered to their
beneficiaries until after the lapse of a certain period of time. In the case at bar, the period is ten years. In other cases, the
trust may last for fifty years, or for a longer period which does not offend the rule against petuities. The collection of the
tax would then be left to the will of a private individual. The mere suggestion of this result is a sufficient warning against
the accpetance of the essential to the very exeistence of government. (Dobbins vs. Erie Country, 16 Pet., 435; 10 Law.
ed., 1022; Kirkland vs. Hotchkiss, 100 U. S., 491; 25 Law. ed., 558; Lane County vs. Oregon, 7 Wall., 71; 19 Law. ed.,
101; Union Refrigerator Transit Co. vs. Kentucky, 199 U. S., 194; 26 Sup. Ct. Rep., 36; 50 Law. ed., 150; Charles River
Bridge vs. Warren Bridge, 11 Pet., 420; 9 Law. ed., 773.) The obligation to pay taxes rests not upon the privileges enjoyed
by, or the protection afforded to, a citizen by the government but upon the necessity of money for the support of the state
(Dobbins vs. Erie Country, supra). For this reason, no one is allowed to object to or resist the payment of taxes solely
because no personal benefit to him can be pointed out. (Thomas vs. Gay, 169 U. S., 264; 18 Sup. Ct. Rep., 340; 43 Law.
ed., 740.) While courts will not enlarge, by construction, the government's power of taxation (Bromley vs. McCaughn, 280
U. S., 124; 74 Law. ed., 226; 50 Sup. Ct. Rep., 46) they also will not place upon tax laws so loose a construction as to
permit evasions on merely fanciful and insubstantial distictions. (U. S. vs. Watts, 1 Bond., 580; Fed. Cas. No. 16,653; U.
S. vs. Wigglesirth, 2 Story, 369; Fed. Cas. No. 16,690, followed in Froelich & Kuttner vs. Collector of Customs, 18 Phil.,
461, 481; Castle Bros., Wolf & Sons vs. McCoy, 21 Phil., 300; Muñoz & Co. vs. Hord, 12 Phil., 624; Hongkong &
Shanghai Banking Corporation vs. Rafferty, 39 Phil., 145; Luzon Stevedoring Co. vs. Trinidad, 43 Phil., 803.) When
proper, a tax statute should be construed to avoid the possibilities of tax evasion. Construed this way, the statute, without
resulting in injustice to the taxpayer, becomes fair to the government.

That taxes must be collected promptly is a policy deeply intrenched in our tax system. Thus, no court is allowed to grant
injunction to restrain the collection of any internal revenue tax ( sec. 1578, Revised Administrative Code; Sarasola vs.
Trinidad, 40 Phil., 252). In the case of Lim Co Chui vs. Posadas (47 Phil., 461), this court had occassion to demonstrate
trenchment adherence to this policy of the law. It held that "the fact that on account of riots directed against the Chinese
on October 18, 19, and 20, 1924, they were prevented from praying their internal revenue taxes on time and by mutual
agreement closed their homes and stores and remained therein, does not authorize the Collector of Internal Revenue to
extend the time prescribed for the payment of the taxes or to accept them without the additional penalty of twenty five per
cent." (Syllabus, No. 3.)

". . . It is of the utmost importance," said the Supreme Court of the United States, ". . . that the modes adopted to enforce
the taxes levied should be interfered with as little as possible. Any delay in the proceedings of the officers, upon whom the
duty is developed of collecting the taxes, may derange the operations of government, and thereby, cause serious
detriment to the public." (Dows vs. Chicago, 11 Wall., 108; 20 Law. ed., 65, 66; Churchill and Tait vs. Rafferty, 32 Phil.,
580.)

It results that the estate which plaintiff represents has been delinquent in the payment of inheritance tax and, therefore,
liable for the payment of interest and surcharge provided by law in such cases.

The delinquency in payment occurred on March 10, 1924, the date when Moore became trustee. The interest due should
be computed from that date and it is error on the part of the defendant to compute it one month later. The provisions
cases is mandatory (see and cf. Lim Co Chui vs. Posadas, supra), and neither the Collector of Internal Revenuen or this
court may remit or decrease such interest, no matter how heavily it may burden the taxpayer.

To the tax and interest due and unpaid within ten days after the date of notice and demand thereof by the Collector of
Internal Revenue, a surcharge of twenty-five per centum should be added (sec. 1544, subsec. (b), par. 2, Revised
Administrative Code). Demand was made by the Deputy Collector of Internal Revenue upon Moore in a communiction
dated October 16, 1931 (Exhibit 29). The date fixed for the payment of the tax and interest was November 30, 1931.
November 30 being an official holiday, the tenth day fell on December 1, 1931. As the tax and interest due were not paid
on that date, the estate became liable for the payment of the surcharge.

In view of the foregoing, it becomes unnecessary for us to discuss the fifth error assigned by the plaintiff in his brief.

We shall now compute the tax, together with the interest and surcharge due from the estate of Thomas Hanley
inaccordance with the conclusions we have reached.
At the time of his death, the deceased left real properties valued at P27,920 and personal properties worth P1,465, or a
total of P29,385. Deducting from this amount the sum of P480.81, representing allowable deductions under secftion 1539
of the Revised Administrative Code, we have P28,904.19 as the net value of the estate subject to inheritance tax.

The primary tax, according to section 1536, subsection (c), of the Revised Administrative Code, should be imposed at the
rate of one per centum upon the first ten thousand pesos and two per centum upon the amount by which the share
exceed thirty thousand pesos, plus an additional two hundred per centum. One per centum of ten thousand pesos is
P100. Two per centum of P18,904.19 is P378.08. Adding to these two sums an additional two hundred per centum, or
P965.16, we have as primary tax, correctly computed by the defendant, the sum of P1,434.24.

To the primary tax thus computed should be added the sums collectible under section 1544 of the Revised Administrative
Code. First should be added P1,465.31 which stands for interest at the rate of twelve per centum per annum from March
10, 1924, the date of delinquency, to September 15, 1932, the date of payment under protest, a period covering 8 years, 6
months and 5 days. To the tax and interest thus computed should be added the sum of P724.88, representing a
surhcarge of 25 per cent on both the tax and interest, and also P10, the compromise sum fixed by the defendant (Exh.
29), giving a grand total of P3,634.43.

As the plaintiff has already paid the sum of P2,052.74, only the sums of P1,581.69 is legally due from the estate. This last
sum is P390.42 more than the amount demanded by the defendant in his counterclaim. But, as we cannot give the
defendant more than what he claims, we must hold that the plaintiff is liable only in the sum of P1,191.27 the amount
stated in the counterclaim.

The judgment of the lower court is accordingly modified, with costs against the plaintiff in both instances. So ordered.

Avanceña, C.J., Abad Santos, Imperial, Diaz and Concepcion, JJ., concur.
Villa-Real, J., concurs.
4. 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.

1
This Petition for Review on Certiorari, under Rule 45 of the Rules of Court, seeks to set aside the Decision of the Court of
2
Appeals in CA-G.R. SP No. 42053 dated January 31, 1997, as well as its Resolution 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
3
located in Angeles City, Dagupan City and Kalookan City. 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,
4
Christopher P. Orfinada, Alfonso Mike P. Orfinada (deceased) and Angelo P. Orfinada.

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
5 6
the subsistence of his marriage to Esperanza sometime in 1965, and co-petitioners Veronica , Alberto and Rowena.

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
7
Mortgage over the properties subject of the extra-judicial settlement.

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
8
the estate of Alfonso P. Orfinada, Jr. be issued to him.

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,
9
Inc. and the Register of Deeds of Dagupan City before the Regional Trial Court, Branch 42, Dagupan City.

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
10
Teodora Riofero and that the titles thereof were delivered to her as an advance inheritance but the decedent had
11
managed to register them in his name. 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
12 13
proceedings. On April 29, 1996, petitioners filed a Motion to Set Affirmative Defenses for Hearing on the aforesaid
ground.

14
The lower court denied the motion in its Order 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.
15 16
Petitioners moved for its reconsideration but the motion was likewise denied.

This prompted petitioners to file before the Court of Appeals their Petition for Certiorari under Rule 65 of the Rules of
17
Court docketed as CA G.R. S.P. No. 42053. 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
18
respondents.

19
The Court of Appeals rendered the assailed Decision 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.

20
A Motion for Reconsideration was filed by petitioners but it was denied. 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
21
belonging to the deceased subsequent to the commencement of the administration proceedings.

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
22
thereon as if a motion to dismiss had been filed. (Emphasis supplied.)

Certainly, the incorporation of the word "may" in the provision is clearly indicative of the optional character of the
23
preliminary hearing. The word denotes discretion and cannot be construed as having a mandatory effect. Subsequently,
the electivity of the proceeding was firmed up beyond cavil by the 1997 Rules of Civil Procedure with the inclusion of the
24
phrase "in the discretion of the Court", apart from the retention of the word "may" in Section 6, 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
25
through his death to another or others by his will or by operation of law.

Even if administration proceedings have already been commenced, the heirs may still bring the suit if an administrator has
not yet been appointed. This is the proper modality despite the total lack of advertence to the heirs in the rules on party
26 27
representation, namely Section 3, Rule 3 and Section 2, Rule 87 of the Rules of Court. In fact, in the case of Gochan v.
28
Young, 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:

29
The above-quoted rules, 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
30
administrator is unwilling or refuses to bring suit; and (2) when the administrator is alleged to have participated in the act
31 32
complained of and he is made a party defendant. 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.

Puno, (Chairman), Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.

Footnotes

5
The Complaint for Annulment/Rescission of the Extrajudicial Settlement of the Estate of a Deceased Person
dated December 2, 1995 contains an allegation under paragraph 9 that Veronica is not one of the illegitimate
children of the decedent Alfonso P. Orfinada, Jr. by Teodora Riofero but of one Alonzo Orfinada.

22
Rule 16 of the Rules of Court. It is Section 6, Rule 16 of the 1997 Rules of Civil Procedure which reads:
 Section 6. Pleading grounds as affirmative defenses. – If no motion to dismiss has been filed, any of the
grounds for dismissal provided for in this Rule may be pleaded as an affirmative defense in the answer
and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss
had been filed.

The dismissal of the complaint under this section shall be without prejudice to the prosecution in the same
or separate action of a counterclaim pleaded in the answer. (Emphasis supplied)

26
Section 3 of Rule 3 of the Rules of Court:

Sec. 3. Representatives as parties. - Where the action is allowed to be prosecuted or defended by a

representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of
the case and shall be deemed to be the real party in interest. A representative may be a trustee of an
express trust, a guardian, an executor or administrator, or a party authorized by law or these Rules. An
agent acting in his own name and for the benefit of an undisclosed principal may sue or be sued without
joining the principal except when the contract involves things belonging to the principal.

27
Section 2 of Rule 87:

Sec. 2. Executor or administrator may bring or defend actions which survive. — For the recovery or
protection of the property or rights of the deceased, an executor or administrator may bring or defend, in
the right of the deceased, actions for causes which survive."
 5.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 165554 July 26, 2010

LAZARO PASCO and LAURO PASCO, Petitioners,

vs.
HEIRS OF FILOMENA DE GUZMAN, represented by CRESENCIA DE GUZMAN-PRINCIPE, Respondents.

DECISION

DEL CASTILLO, J.:

No court should shield a party from compliance with valid obligations based on wholly unsubstantiated claims of mistake
or fraud. Having refused to abide by a compromise agreement, the aggrieved party may either enforce it or regard it as
rescinded and insist upon the original demand.

1 2
This Petition for Review on Certiorari assails the May 13, 2004 Decision of the Court of Appeals (CA) and its October 5,
3
2004 Resolution in CA-G.R. SP No. 81464 which dismissed petitioners’ appeal and affirmed the validity of the parties’
Compromise Agreement.

Factual Antecedents

4
The present petition began with a Complaint for Sum of Money and Damages filed on December 13, 2000 by
respondents, the heirs of Filomena de Guzman (Filomena), represented by Cresencia de Guzman-Principe (Cresencia),
against petitioners Lauro Pasco (Lauro) and Lazaro Pasco (Lazaro). The case was filed before the Municipal Trial Court
5
(MTC) of Bocaue, Bulacan, and docketed as Civil Case No. MM-3191.

6
In their Complaint, herein respondents alleged that on February 7, 1997, petitioners obtained a loan in the amount of
₱140,000.00 from Filomena (now deceased). To secure the petitioners’ loan, Lauro executed a chattel mortgage on his
Isuzu Jeep in favor of Filomena. Upon her death, her heirs sought to collect from the petitioners, to no avail. Despite
numerous demands, petitioners refused to either pay the balance of the loan or surrender the Isuzu Jeep to the
respondents. Thus, respondents were constrained to file the collection case to compel the petitioners to pay the principal
amount of ₱140,000.00 plus damages in the amount of 5% monthly interest from February 7, 1997, 25% attorney’s fees,
exemplary damages, and expenses of litigation.

Filomena’s heirs, consisting of Avelina de Guzman-Cumplido, Cecilia de Guzman, Rosita de Guzman, Natividad de
Guzman, and Cresencia de Guzman-Principe, authorized Cresencia to act as their attorney-in-fact through a Special
7
Power of Attorney (SPA) dated April 6, 1999. The SPA authorized Cresencia to do the following on behalf of the co-heirs:

1) To represent us on all matters concerning the intestate estate of our deceased sister, Filomena de Guzman;

2) To file cases for collection of all accounts due said Filomena de Guzman or her estate, including the power to
file petition for foreclosure of mortgaged properties;

3) To do and perform all other acts necessary to carry out the powers hereinabove conferred.

During the pre-trial of the case on February 15, 2002, the parties verbally agreed to settle the case. On February 21,
8
2002, the parties jointly filed a Compromise Agreement that was signed by the parties and their respective counsel. Said
9
Compromise Agreement, approved by the MTC in an Order dated April 4, 2002, contained the following salient
provisions:

1. That [petitioners] admit their principal loan and obligation to the [respondents] in the sum of One Hundred Forty
Thousand Pesos (₱140,000.00) Philippine currency; in addition to the incidental and other miscellaneous
expenses that they have incurred in the pursuit of this case, in the further sum of ₱18,700.00;

2. That, [petitioners] undertake to pay to the [respondents] their aforementioned obligations, together with
attorney’s fees equivalent to ten percentum (10%) of the total sum thereof, directly at the BULACAN OFFICE of
the [respondents’] counsel, located at No. 24 Hornbill Street, St. Francis Subdivision, Bo. Pandayan,
Meycauayan, Bulacan, WITHOUT NEED OF FURTHER DEMAND in the following specific manner, to wit:

₱60,000.00 – to be paid on or before May 15, 2002

₱10,000.00 – monthly payments thereafter, starting June 15, 2002 up to and until the aforementioned
obligations shall have been fully paid;
 3. That, provided that [petitioners] shall truely [sic] comply with the foregoing specifically agreed manner of
payments, [respondents] shall forego and waive all the interests charges of 5% monthly from February 7, 1998
and the 25% attorney’s fees provided for in Annex "AA" of the Complaint;

4. In the event of failure on the part of the [petitioners] to comply with any of the specific provisions of this
Compromise Agreement, the [respondents] shall be entitled to the issuance of a "Writ of Execution" to enforce the
satisfaction of [petitioners’] obligations, as mentioned in paragraph 1, together with the 5% monthly interests
10
charges and attorney’s fees mentioned in paragraph 3 thereof.

Ruling of the Municipal Trial Court

Unfortunately, this was not the end of litigation. On May 2, 2002, petitioners filed a verified Motion to Set Aside
11
Decision alleging that the Agreement was written in a language not understood by them, and the terms and conditions
thereof were not fully explained to them. Petitioners further questioned the MTC’s jurisdiction, arguing that the total
amount allegedly covered by the Compromise Agreement amounted to ₱588,500.00, which exceeded the MTC’s
12
₱200,000.00 jurisdictional limit. In an Order dated June 28, 2002, the MTC denied the motion; it also granted
13
Cresencia’s prayer for the issuance of a writ of execution. The writ of execution was subsequently issued on July 3,
14
2002. Petitioners’ Motion for Reconsideration and to Quash Writ/Order of Execution dated August 1, 2002 was denied
15
by the MTC in an Order dated September 5, 2002.

Undeterred, on October 10, 2002, petitioners filed a Petition for Certiorari and Prohibition with Application for Temporary
16
Restraining Order/Preliminary Injunction before the Regional Trial Court (RTC) of Bocaue. The case was raffled to
17
Branch 82, and docketed as Civil Case No. 764-M-2002. In their petition, petitioners argued that the MTC gravely
abused its discretion in approving the Compromise Agreement because (1) the amount involved was beyond the
jurisdiction of the MTC; (2) the MTC failed to ascertain that the parties fully understood the contents of the Agreement; (3)
Crescencia had no authority to represent her co-heirs because Filomena’s estate had a personality of its own; and (4) the
Compromise Agreement was void for failure of the judge and Cresencia to explain the terms and conditions to the
petitioners.

18
In their Comment dated October 29, 2002, respondents argued that (1) the principal claim of ₱140,000.00 was within the
MTC’s jurisdiction; and (2) the records reveal that it was the petitioners themselves, assisted by their counsel, who
proposed the terms of the settlement, which offer of compromise was accepted in open court by the respondents. Thus,
the Compromise Agreement merely reduced the parties’ agreement into writing.

Ruling of the Regional Trial Court

19
The RTC initially granted petitioners’ prayer for the issuance of a Temporary Restraining Order (TRO) on November 18,
20
2002, and later issued a preliminary injunction in an Order dated December 10, 2002, primarily on the ground that the
SPA did not specifically authorize Cresencia to settle the case. However, Presiding Judge Herminia V. Pasamba later
21 22
inhibited herself, so the case was re-raffled to Branch 6, presided over by Judge Manuel D.J. Siayngo. The grant of the
23
preliminary injunction was thus reconsidered and set aside in an Order dated May 15, 2003. In the same Order, the RTC
dismissed the petition and held that (1) the MTC had jurisdiction over the subject matter; (2) Cresencia was authorized to
institute the action and enter into a Compromise Agreement on behalf of her co-heirs; and (3) the MTC’s approval of the
Compromise Agreement was not done in a capricious, whimsical, or arbitrary manner; thus, petitioners’ resort
24 25
to certiorari under Rule 65 was improper. Petitioners’ Motion for Reconsideration was denied, hence they sought
recourse before the CA.

Ruling of the Court of Appeals

26 27
In its Decision dated May 13, 2004 and Resolution dated October 5,

2004, the CA dismissed petitioners’ appeal, and held that:

1) the MTC had jurisdiction, since the principal amount of the loan only amounted to ₱140,000.00;

2) Cresencia was duly authorized by her co-heirs to enter into the Compromise Agreement;

3) Petitioners improperly sought recourse before the RTC through a Petition for Certiorari under Rule 65, when
the proper remedy was a Petition for Relief from Judgment under Rule 38.

Issues

Before us, petitioners claim that, first, they correctly resorted to the remedy of certiorari under Rule 65; second, the RTC
gravely erred in dismissing their Petition for Certiorari and Prohibition, when the matter under consideration was merely
the propriety of the grant of the preliminary injunction; and third, that the SPA did not validly authorize Cresencia to enter
into the Compromise Agreement on behalf of her co-heirs.

Our Ruling

We deny the petition.

The MTC had jurisdiction over the case.

It bears stressing that the question of the MTC’s jurisdiction has not been raised before this Court; hence, petitioners
appear to have admitted that the MTC had jurisdiction to approve the Compromise Agreement. In any event, it is beyond
28
dispute that the Judiciary Reorganization Act of 1980, or Batas Pambansa (BP) Blg. 129, as amended by Republic Act
29
No. 7691, fixes the MTC’s jurisdiction over cases where "the demand does not exceed Two hundred thousand pesos
30
(₱200,000.00) exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and costs." Thus,
respondents’ initiatory complaint, covering the principal amount of ₱140,000.00, falls squarely within the MTC’s
jurisdiction.

Petitioners properly resorted to the special civil action of certiorari.

On the first question, the CA held that the proper remedy from the MTC’s Order approving the Compromise Agreement
was a Petition for Relief from Judgment under Rule 38 and not a Petition for Certiorari under Rule 65. We recall that
31
petitioners filed a verified Motion to Set Aside Decision on May 2, 2002, which was denied by the MTC on June 28,
2002. This Order of denial was properly the subject of a petition for certiorari, pursuant to Rule 41, Section 1, of the Rules
of Court:

Section 1. Subject of Appeal – An appeal may be taken from a judgment or final order that completely disposes of the
case, or of a particular matter therein when declared by these Rules to be appealable.

No appeal may be taken from:

xxxx

(e) an order denying a motion to set aside a judgment by consent, confession or compromise on the ground of fraud,
mistake or duress, or any other ground vitiating consent.

xxxx

In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate
special civil action under Rule 65.

From the express language of Rule 41, therefore, the MTC’s denial of petitioners’ Motion to Set Aside Decision could not
have been appealed. Indeed, a decision based on a compromise agreement is immediately final and executory and
32
cannot be the subject of appeal, for when parties enter into a compromise agreement and request a court to render a
decision on the basis of their agreement, it is presumed that such action constitutes a waiver of the right to appeal said
33 34
decision. While there may have been other remedies available to assail the decision, petitioners were well within their
rights to institute a special civil action under Rule 65.

The Regional Trial Court rightly dismissed the petition for certiorari.

On the second issue, petitioners argue that the RTC, in reconsidering the order granting the application for writ of
preliminary injunction, should not have gone so far as dismissing the main case filed by the petitioners. They claim that
the issue in their application for writ of preliminary injunction was different from the issues in the main case for certiorari,
and that the dissolution of the preliminary injunction should have been without prejudice to the conduct of further
proceedings in the main case. They also claim that the RTC did not have the power to dismiss the case without requiring
the parties to file memoranda.

These assertions are belied, however, by petitioners’ own submissions.

Their arguments were exactly the same, whether relating to the preliminary or permanent injunction. Identical matters
were at issue – the MTC’s jurisdiction, petitioners’ alleged vitiated consent, and the propriety of enforcing the Compromise
Agreement. The reliefs sought, too, were the same, that is, the grant of an injunction against the enforcement of the
35
compromise:

WHEREFORE, it is most respectfully prayed that:

1) A Temporary Restraining Order and/or Preliminary Injunction issue ex parte directing the respondents to cease
and desist from enforcing, executing, or implementing in any manner the Decision dated April 4, 2002 and acting
in Civil Case No. MM-3191 until further orders from this Honorable Court.

2) After hearing, the temporary restraining order/ex parte injunction be replaced by a writ of preliminary injunction.

3) After hearing on the merits, judgment be rendered:

a. Making the injunction permanent.

Since the RTC found at the preliminary injunction phase that petitioners were not entitled to an injunction (whether
preliminary or permanent), that petitioners’ arguments were insufficient to support the relief sought, and that the MTC’s
approval of the Compromise Agreement was not done in a capricious, whimsical, or arbitary manner, the RTC was not
required to engage in unnecessary duplication of proceedings. As such, it rightly dismissed the petition.

In addition, nothing in the Rules of Court commands the RTC to require the parties to file Memoranda. Indeed, Rule 65,
Sec. 8 is explicit in that the court "may dismiss the petition if it finds the same to be patently without merit, prosecuted
36
manifestly for delay, or that the questions raised therein are too unsubstantial to require consideration."

Cresencia was authorized to enter into the Compromise Agreement.

As regards the third issue, petitioners maintain that the SPA was fatally defective because Cresencia was not specifically
authorized to enter into a compromise agreement. Here, we fully concur with the findings of the CA that:

x x x It is undisputed that Cresencia’s co-heirs executed a Special Power of Attorney, dated 6 April 1999, designating the
former as their attorney-in-fact and empowering her to file cases for collection of all the accounts due to Filomena or her
estate. Consequently, Cresencia entered into the subject Compromise Agreement in order to collect the overdue loan
obtained by Pasco from Filomena. In so doing, Cresencia was merely performing her duty as attorney-in-fact of her co-
37
heirs pursuant to the Special Power of Attorney given to her. 1avvphi1

38
Our ruling in Trinidad v. Court of Appeals is illuminating. In Trinidad, the heirs of Vicente Trinidad executed a SPA in
favor of Nenita Trinidad (Nenita) to be their representative in litigation involving the sale of real property covered by the
decedent’s estate. As here, there was no specific authority to enter into a Compromise Agreement. When a compromise
agreement was finally reached, the heirs later sought to invalidate it, claiming that Nenita was not specifically authorized
to enter into the compromise agreement. We held then, as we do now, that the SPA necessarily included the power of the
attorney-in-fact to compromise the case, and that Nenita’s co-heirs could not belatedly disavow their original
39
authorization. This ruling is even more significant here, where the co-heirs have not taken any action to invalidate the
Compromise Agreement or assail their SPA.

Moreover, we note that petitioners never assailed the validity of the SPA

during the pre-trial stage prior to entering the Compromise Agreement. This matter was never even raised as a ground in
petitioners’ Motion to Set Aside the compromise, or in the initial Petition before the RTC. It was only months later, in
December 2002, that petitioners – rather self-servingly - claimed that the SPA was insufficient.

The stated interest rate should be reduced.

Although the petition is unmeritorious, we find the 5% monthly interest rate stipulated in Clause 4 of the Compromise
Agreement to be iniquitous and unconscionable. Accordingly, the legal interest of 12% per annum must be imposed in lieu
40
of the excessive interest stipulated in the agreement. As we held in Castro v. Tan:

In several cases, we have ruled that stipulations authorizing iniquitous or unconscionable interests are contrary to morals,
if not against the law. In Medel v. Court of Appeals, we annulled a stipulated 5.5% per month or 66% per annum interest
on a ₱500,000.00 loan and a 6% per month or 72% per annum interest on a ₱60,000.00 loan, respectively, for being
excessive, iniquitous, unconscionable and exorbitant. In Ruiz v. Court of Appeals, we declared a 3% monthly interest
imposed on four separate loans to be excessive. In both cases, the interest rates were reduced to 12% per annum.

In this case, the 5% monthly interest rate, or 60% per annum, compounded monthly, stipulated in the Kasulatan is even
higher than the 3% monthly interest rate imposed in the Ruiz case. Thus, we similarly hold the 5% monthly interest to be
excessive, iniquitous, unconscionable and exorbitant, contrary to morals, and the law. It is therefore void ab initio for being
violative of Article 1306 of the Civil Code. x x x (citations omitted)

The proceeds of the loan should be released to Filomena’s heirs only upon settlement of her estate.

Finally, it is true that Filomena’s estate has a different juridical personality than that of the heirs. Nonetheless, her heirs
41
certainly have an interest in the preservation of the estate and the recovery of its properties, for at the moment of
Filomena’s death, the heirs start to own the property, subject to the decedent's liabilities. In this connection, Article 777 of
42
the Civil Code states that "[t]he rights to the succession are transmitted from the moment of the death of the decedent."

Unfortunately, the records before us do not show the status of the proceedings for the settlement of the estate of
Filomena, if any. But to allow the release of the funds directly to the heirs would amount to a distribution of the estate;
which distribution and delivery should be made only after, not before, the payment of all debts, charges, expenses, and
43
taxes of the estate have been paid. We thus decree that respondent Cresencia should deposit the amounts received
from the petitioners with the MTC of Bocaue, Bulacan and in turn, the MTC of Bocaue, Bulacan should hold in abeyance
the release of the amounts to Filomena’s heirs until after a showing that the proper procedure for the settlement of
Filomena’s estate has been followed.

WHEREFORE, the petition is DENIED. The May 13, 2004 Decision of the Court of Appeals and its October 5, 2004
Resolution are AFFIRMED with MODIFICATIONS that the interest rate of 5% per month (60% per annum) is ordered
reduced to 12 % per annum. Respondent Cresencia De Guzman-Principe is DIRECTED to deposit with the Municipal
Trial Court of Bocaue, Bulacan the amounts received from the petitioners. The Municipal Trial Court of Bocaue, Bulacan is
likewise DIRECTED to hold in abeyance the release of any amounts recovered from the petitioners until after a showing
that the procedure for settlement of estates of Filomena de Guzman’s estate has been followed, and after all charges on
the estate have been fully satisfied.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice

PRESBITERO J. VELASCO, JR. TERESITA J. LEONARDO-DE CASTRO

Associate Justice Associate Justice

JOSE P. PEREZ
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

29
An Act Expanding The Jurisdiction Of The Metropolitan Trial Courts, Municipal Trial Courts, And Municipal
Circuit Trial Courts, Amending For The Purpose Batas Pambansa Blg. 129, Otherwise Known As The "Judiciary
Reorganization Act Of 1980" (1994).

30
Section 33 of BP No. 129, as amended, provides:

Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts in civil cases. — Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts shall exercise:

(1) Exclusive original jurisdiction over civil actions and probate proceedings, testate and intestate,
including the grant of provisional remedies in proper cases, where the value of the personal
property, estate, or amount of the demand does not exceed One hundred thousand pesos
(₱100,000.00) or, in Metro Manila where such personal property, estate, or amount of the
demand does not exceed Two hundred thousand pesos (₱200,000.00) exclusive of interest,
damages of whatever kind, attorney's fees, litigation expenses, and costs, the amount of which
must be specifically alleged: Provided, That where there are several claims or causes of action
between the same or different parties, embodied in the same complaint, the amount of the
demand shall be the totality of the claims in all the causes of action, irrespective of whether the
causes of action arose out of the same or different transactions;

36
Rule 65, Sec. 8 of the Rules of Court provides:

Sec. 8. Proceedings after comment is filed.

After the comment or other pleadings required by the court are filed, or the time for the filing thereof has
expired, the court may hear the case or require the parties to submit memoranda. If after such hearing or
submission of memoranda or the expiration of the period for the filing thereof the court finds that the
allegations of the petition are true, it shall render judgment for the relief prayed for or to which the
petitioner is entitled.

The court, however, may dismiss the petition if it finds the same to be patently without merit, prosecuted
manifestly for delay, or that the questions raised therein are too unsubstantial to require consideration.

39
A reading of the special power of attorney, as well as the concurrent turn of events, would precisely point to the
fact that the special power of attorney was intended to have Nenita Trinidad help resolve the differences of the
parties in the contract to sell.

42
The possession of hereditary property is deemed transmitted to the heir without interruption and from the
moment of the death of the decedent, in case the inheritance is accepted (Civil Code of the Philippines, Art. 533).
Where there are two or more heirs, the whole estate of the decedent is, before its partition, owned in common by
such heirs. See Acebedo v. Abesamis, G.R. No. 102380, January 18, 1993, 217 SCRA 186, 194-195; Mendoza I
v. Court of Appeals, G.R. No. 44664, July 31, 1991, 199 SCRA 778, 787; Civil Code of the Philippines, Art. 1078.
 6.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 168970 January 15, 2010

CELESTINO BALUS, Petitioner,

vs.
SATURNINO BALUS and LEONARDA BALUS VDA. DE CALUNOD, Respondents.

DECISION

PERALTA, J.:

1
Assailed in the present petition for review on certiorari under Rule 45 of the Rules of Court is the Decision of the Court of
Appeals (CA) dated May 31, 2005 in CA-G.R. CV No. 58041 which set aside the February 7, 1997 Decision of the
Regional Trial Court (RTC) of Lanao del Norte, Branch 4 in Civil Case No. 3263.

The facts of the case are as follows:

Herein petitioner and respondents are the children of the spouses Rufo and Sebastiana Balus. Sebastiana died on
September 6, 1978, while Rufo died on July 6, 1984.

On January 3, 1979, Rufo mortgaged a parcel of land, which he owns, as security for a loan he obtained from the Rural
Bank of Maigo, Lanao del Norte (Bank). The said property was originally covered by Original Certificate of Title No. P-
439(788) and more particularly described as follows:

A parcel of land with all the improvements thereon, containing an area of 3.0740 hectares, more or less, situated in the
Barrio of Lagundang, Bunawan, Iligan City, and bounded as follows: Bounded on the NE., along line 1-2, by Lot 5122,
Csd-292; along line 2-12, by Dodiongan River; along line 12-13 by Lot 4649, Csd-292; and along line 12-1, by Lot 4661,
2
Csd-292. x x x

Rufo failed to pay his loan. As a result, the mortgaged property was foreclosed and was subsequently sold to the Bank as
3
the sole bidder at a public auction held for that purpose. On November 20, 1981, a Certificate of Sale was executed by
the sheriff in favor of the Bank. The property was not redeemed within the period allowed by law. More than two years
4
after the auction, or on January 25, 1984, the sheriff executed a Definite Deed of Sale in the Bank's favor. Thereafter, a
new title was issued in the name of the Bank.

5
On October 10, 1989, herein petitioner and respondents executed an Extrajudicial Settlement of Estate adjudicating to
each of them a specific one-third portion of the subject property consisting of 10,246 square meters. The Extrajudicial
Settlement also contained provisions wherein the parties admitted knowledge of the fact that their father mortgaged the
subject property to the Bank and that they intended to redeem the same at the soonest possible time.

Three years after the execution of the Extrajudicial Settlement, herein respondents bought the subject property from the
6
Bank. On October 12, 1992, a Deed of Sale of Registered Land was executed by the Bank in favor of respondents.
7
Subsequently, Transfer Certificate of Title (TCT) No. T-39,484(a.f.) was issued in the name of respondents. Meanwhile,
petitioner continued possession of the subject lot.

8
On June 27, 1995, respondents filed a Complaint for Recovery of Possession and Damages against petitioner,
contending that they had already informed petitioner of the fact that they were the new owners of the disputed property,
but the petitioner still refused to surrender possession of the same to them. Respondents claimed that they had exhausted
all remedies for the amicable settlement of the case, but to no avail.

9
On February 7, 1997, the RTC rendered a Decision disposing as follows:

WHEREFORE, judgment is hereby rendered, ordering the plaintiffs to execute a Deed of Sale in favor of the defendant,
the one-third share of the property in question, presently possessed by him, and described in the deed of partition, as
follows:

A one-third portion of Transfer Certificate of Title No. T-39,484 (a.f.), formerly Original Certificate of Title No. P-788, now
in the name of Saturnino Balus and Leonarda B. Vda. de Calunod, situated at Lagundang, Bunawan, Iligan City, bounded
on the North by Lot 5122; East by shares of Saturnino Balus and Leonarda Balus-Calunod; South by Lot 4649, Dodiongan
River; West by Lot 4661, consisting of 10,246 square meters, including improvements thereon.

and dismissing all other claims of the parties.

The amount of ₱6,733.33 consigned by the defendant with the Clerk of Court is hereby ordered delivered to the plaintiffs,
as purchase price of the one-third portion of the land in question.

Plaintiffs are ordered to pay the costs.

10
SO ORDERED.

The RTC held that the right of petitioner to purchase from the respondents his share in the disputed property was
recognized by the provisions of the Extrajudicial Settlement of Estate, which the parties had executed before the
respondents bought the subject lot from the Bank.

Aggrieved by the Decision of the RTC, herein respondents filed an appeal with the CA.

On May 31, 2005, the CA promulgated the presently assailed Decision, reversing and setting aside the Decision of the
RTC and ordering petitioner to immediately surrender possession of the subject property to the respondents. The CA
ruled that when petitioner and respondents did not redeem the subject property within the redemption period and allowed
the consolidation of ownership and the issuance of a new title in the name of the Bank, their co-ownership was
extinguished.

Hence, the instant petition raising a sole issue, to wit:

WHETHER OR NOT CO-OWNERSHIP AMONG THE PETITIONER AND THE RESPONDENTS OVER THE PROPERTY
PERSISTED/CONTINUED TO EXIST (EVEN AFTER THE TRANSFER OF TITLE TO THE BANK) BY VIRTUE OF THE
PARTIES' AGREEMENT PRIOR TO THE REPURCHASE THEREOF BY THE RESPONDENTS; THUS, WARRANTING
THE PETITIONER'S ACT OF ENFORCING THE AGREEMENT BY REIMBURSING THE RESPONDENTS OF HIS
11
(PETITIONER'S) JUST SHARE OF THE REPURCHASE PRICE.

The main issue raised by petitioner is whether co-ownership by him and respondents over the subject property persisted
even after the lot was purchased by the Bank and title thereto transferred to its name, and even after it was eventually
bought back by the respondents from the Bank.

Petitioner insists that despite respondents' full knowledge of the fact that the title over the disputed property was already in
the name of the Bank, they still proceeded to execute the subject Extrajudicial Settlement, having in mind the intention of
purchasing back the property together with petitioner and of continuing their co-ownership thereof.

Petitioner posits that the subject Extrajudicial Settlement is, in and by itself, a contract between him and respondents,
because it contains a provision whereby the parties agreed to continue their co-ownership of the subject property by
"redeeming" or "repurchasing" the same from the Bank. This agreement, petitioner contends, is the law between the
parties and, as such, binds the respondents. As a result, petitioner asserts that respondents' act of buying the disputed
property from the Bank without notifying him inures to his benefit as to give him the right to claim his rightful portion of the
property, comprising 1/3 thereof, by reimbursing respondents the equivalent 1/3 of the sum they paid to the Bank.

The Court is not persuaded.

Petitioner and respondents are arguing on the wrong premise that, at the time of the execution of the Extrajudicial
Settlement, the subject property formed part of the estate of their deceased father to which they may lay claim as his
heirs.

At the outset, it bears to emphasize that there is no dispute with respect to the fact that the subject property was
exclusively owned by petitioner and respondents' father, Rufo, at the time that it was mortgaged in 1979. This was
12
stipulated by the parties during the hearing conducted by the trial court on October 28, 1996. Evidence shows that a
13
Definite Deed of Sale was issued in favor of the Bank on January 25, 1984, after the period of redemption expired.
There is neither any dispute that a new title was issued in the Bank's name before Rufo died on July 6, 1984. Hence,
there is no question that the Bank acquired exclusive ownership of the contested lot during the lifetime of Rufo.

14
The rights to a person's succession are transmitted from the moment of his death. In addition, the inheritance of a
person consists of the property and transmissible rights and obligations existing at the time of his death, as well as those
15
which have accrued thereto since the opening of the succession. In the present case, since Rufo lost ownership of the
subject property during his lifetime, it only follows that at the time of his death, the disputed parcel of land no longer
formed part of his estate to which his heirs may lay claim. Stated differently, petitioner and respondents never inherited
the subject lot from their father.

Petitioner and respondents, therefore, were wrong in assuming that they became co-owners of the subject lot. Thus, any
issue arising from the supposed right of petitioner as co-owner of the contested parcel of land is negated by the fact that,
in the eyes of the law, the disputed lot did not pass into the hands of petitioner and respondents as compulsory heirs of
Rufo at any given point in time.

The foregoing notwithstanding, the Court finds a necessity for a complete determination of the issues raised in the instant
case to look into petitioner's argument that the Extrajudicial Settlement is an independent contract which gives him the
right to enforce his right to claim a portion of the disputed lot bought by respondents.1avvphi1
It is true that under Article 1315 of the Civil Code of the Philippines, contracts are perfected by mere consent; and from
that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and law.

Article 1306 of the same Code also provides that the contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided these are not contrary to law, morals, good customs, public order
or public policy.

In the present case, however, there is nothing in the subject Extrajudicial Settlement to indicate any express stipulation for
petitioner and respondents to continue with their supposed co-ownership of the contested lot.

On the contrary, a plain reading of the provisions of the Extrajudicial Settlement would not, in any way, support petitioner's
contention that it was his and his sibling's intention to buy the subject property from the Bank and continue what they
believed to be co-ownership thereof. It is a cardinal rule in the interpretation of contracts that the intention of the parties
16
shall be accorded primordial consideration. It is the duty of the courts to place a practical and realistic construction upon
17
it, giving due consideration to the context in which it is negotiated and the purpose which it is intended to serve. Such
intention is determined from the express terms of their agreement, as well as their contemporaneous and subsequent
18 19
acts. Absurd and illogical interpretations should also be avoided.

For petitioner to claim that the Extrajudicial Settlement is an agreement between him and his siblings to continue what
they thought was their ownership of the subject property, even after the same had been bought by the Bank, is stretching
the interpretation of the said Extrajudicial Settlement too far.

In the first place, as earlier discussed, there is no co-ownership to talk about and no property to partition, as the disputed
lot never formed part of the estate of their deceased father.

Moreover, petitioner's asseveration of his and respondents' intention of continuing with their supposed co-ownership is
negated by no less than his assertions in the present petition that on several occasions he had the chance to purchase
the subject property back, but he refused to do so. In fact, he claims that after the Bank acquired the disputed lot, it
offered to re-sell the same to him but he ignored such offer. How then can petitioner now claim that it was also his
intention to purchase the subject property from the Bank, when he admitted that he refused the Bank's offer to re-sell the
subject property to him?

In addition, it appears from the recitals in the Extrajudicial Settlement that, at the time of the execution thereof, the parties
were not yet aware that the subject property was already exclusively owned by the Bank. Nonetheless, the lack of
knowledge on the part of petitioner and respondents that the mortgage was already foreclosed and title to the property
was already transferred to the Bank does not give them the right or the authority to unilaterally declare themselves as co-
owners of the disputed property; otherwise, the disposition of the case would be made to depend on the belief and
conviction of the party-litigants and not on the evidence adduced and the law and jurisprudence applicable thereto.

Furthermore, petitioner's contention that he and his siblings intended to continue their supposed co-ownership of the
subject property contradicts the provisions of the subject Extrajudicial Settlement where they clearly manifested their
intention of having the subject property divided or partitioned by assigning to each of the petitioner and respondents a
specific 1/3 portion of the same. Partition calls for the segregation and conveyance of a determinate portion of the
property owned in common. It seeks a severance of the individual interests of each co-owner, vesting in each of them a
sole estate in a specific property and giving each one a right to enjoy his estate without supervision or interference from
20 21
the other. In other words, the purpose of partition is to put an end to co-ownership, an objective which negates
petitioner's claims in the present case.

WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals, dated May 31, 2005 in CA-
G.R. CV No. 58041, is AFFIRMED.

SO ORDERED

DIOSDADO M. PERALTA
Associate Justice
 7.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 103577 October 7, 1996

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself
and on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and
CATALINA BALAIS MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by GLORIA
F. NOEL as attorney-in-fact, respondents.

MELO, J.:p

The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last
named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along
Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00.

The undisputed facts of the case were summarized by respondent court in this wise:

On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as Coronels)
executed a document entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiff Ramona Patricia
Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder:

RECEIPT OF DOWN PAYMENT

P1,240,000.00 — Total amount

50,000 — Down payment

———————————
P1,190,000.00 — Balance

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of
Deeds of Quezon City, in the total amount of P1,240,000.00.

We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel,
the transfer certificate of title immediately upon receipt of the down payment above-stated.

On our presentation of the TCT already in or name, We will immediately execute the deed of absolute
sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the
P1,190,000.00.

Clearly, the conditions appurtenant to the sale are the following:

1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution of the
document aforestated;

2. The Coronels will cause the transfer in their names of the title of the property registered in the name of
their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment;

3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute
sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred
Ninety Thousand (P1,190,000.00) Pesos.

On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as
Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh.
"B", Exh. "2").

On February 6, 1985, the property originally registered in the name of the Coronels' father was
transferred in their names under TCT
No. 327043 (Exh. "D"; Exh. "4")

On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-
appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty
 Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00)
Pesos (Exhs. "F-3"; Exh. "6-C")

For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by depositing the
down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz.

On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the Coronels
and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5").

On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property
with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6").

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of
Catalina (Exh. "G"; Exh. "7").

On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No.
351582 (Exh. "H"; Exh. "8").

(Rollo, pp. 134-136)

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the
case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered
their documentary evidence accordingly marked as Exhibits "A" through "J", inclusive of their corresponding submarkings.
Adopting these same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as
Exhibits "1" through "10", likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court
gave them thirty (30) days within which to simultaneously submit their respective memoranda, and an additional 15 days
within which to submit their corresponding comment or reply thereof, after which, the case would be deemed submitted for
resolution.

On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily
detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge
Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:

WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in
favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by
Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City,
together with all the improvements existing thereon free from all liens and encumbrances, and once
accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the
said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants
the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title
No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and
declared to be without force and effect. Defendants and intervenor and all other persons claiming under
them are hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs.
Plaintiffs' claim for damages and attorney's fees, as well as the counterclaims of defendants and
intervenors are hereby dismissed.

No pronouncement as to costs.

So Ordered.

Macabebe, Pampanga for Quezon City, March 1, 1989.

(Rollo, p. 106)

A motion for reconsideration was filed by petitioner before the new presiding judge of the Quezon City RTC but the same
was denied by Judge Estrella T. Estrada, thusly:

The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the
undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became
submitted for decision as of April 14, 1988 when the parties terminated the presentation of their
respective documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura.
The fact that they were allowed to file memoranda at some future date did not change the fact that the
hearing of the case was terminated before Judge Roura and therefore the same should be submitted to
him for decision; (2) When the defendants and intervenor did not object to the authority of Judge
Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for the first time
before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145
on November 11, 1988, they were deemed to have acquiesced thereto and they are now estopped from
questioning said authority of Judge Roura after they received the decision in question which happens to
be adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this
Branch of the Court, he was in all respects the Presiding Judge with full authority to act on any pending
incident submitted before this Court during his incumbency. When he returned to his Official Station at
 Macabebe, Pampanga, he did not lose his authority to decide or resolve such cases submitted to him for
decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank
with the undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge
to whom a case is submitted for decision has the authority to decide the case notwithstanding his transfer
to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court).

Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the
instant case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous
examination of the documentary evidence presented by the parties, she is convinced that the Decision of
March 1, 1989 is supported by evidence and, therefore, should not be disturbed.

IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision and Render
Anew Decision by the Incumbent Presiding Judge" dated March 20, 1989 is hereby DENIED.

SO ORDERED.

Quezon City, Philippines, July 12, 1989.

(Rollo, pp. 108-109)

Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes,
Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial court.

Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents' Reply Memorandum,
was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on August 28, 1996,
due to the voluntary inhibition of the Justice to whom the case was last assigned.

While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of
the trial court's decision, we definitely find the instant petition bereft of merit.

The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise
determination of the legal significance of the document entitled "Receipt of Down Payment" which was offered in evidence
by both parties. There is no dispute as to the fact that said document embodied the binding contract between Ramona
Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house
and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect
to the other, to give something or to render some service.

While, it is the position of private respondents that the "Receipt of Down Payment" embodied a perfected contract of sale,
which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that
what the document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because
of the absence of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into
a contract absolute sale.

Plainly, such variance in the contending parties' contentions is brought about by the way each interprets the terms and/or
conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be
available on record, this, Court, as were the courts below, is now called upon to adjudge what the real intent of the parties
was at the time the said document was executed.

The Civil Code defines a contract of sale, thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a
contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicity reserves the transfer of title to the prospective buyer, meaning,
the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What
the seller agrees or obliges himself to do is to fulfill is promise to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive
condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the
prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this
Court had occasion to rule:

Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where
the ownership or title is retained by the seller and is not to pass until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but
simply an event that prevented the obligation of the vendor to convey title from acquiring binding force.

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the
prospective seller's obligation to sell the subject property by entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil Code which states:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration distinct from the price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase
price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller
may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of
sale is completely abated (cf. Homesite and housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous
delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by
operation of law without any further act having to be performed by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although the property may have been previously delivered to him.
The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at
bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the
fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a
buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double
sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-
seller's title per se, but the latter, of course, may be used for damages by the intending buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and
this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the subject property, the
seller's ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have
any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who
may have had actual or constructive knowledge of such defect in the seller's title, or at least was charged with the
obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's
title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the
sale.

With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered
into by petitioners and private respondents.

It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary
meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when
petitioners declared in the said "Receipt of Down Payment" that they —

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of
Deeds of Quezon City, in the total amount of P1,240,000.00.

without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea
conveyed is that they sold their property.

When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear intent
on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of
petitioner's father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay
the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent
Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which,
they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon,
the latter shall, in turn, pay the entire balance of the purchase price.

The agreement could not have been a contract to sell because the sellers herein made no express reservation of
ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering
into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not
the full payment of the purchase price. Under the established facts and circumstances of the case, the Court may safely
presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no
reason why an absolute contract of sale could not have been executed and consummated right there and then.

Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the properly to private
respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject
property, they undertook to have the certificate of title changed to their names and immediately thereafter, to execute the
written deed of absolute sale.

Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain
terms and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings
of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father,
completely willing to transfer full ownership of the subject house and lot to the buyer if the documents were then in order.
It just happened, however, that the transfer certificate of title was then still in the name of their father. It was more
expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause
the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of
P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately
execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price
arise.

There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a
buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full
payment therefor, in the contract entered into in the case at bar, the sellers were the one who were unable to enter into a
contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father.
It was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of an
contract of absolute sale.

What is clearly established by the plain language of the subject document is that when the said "Receipt of Down
Payment" was prepared and signed by petitioners Romeo A. Coronel, et al., the parties had agreed to a conditional
contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of
petitioners' father, Constancio P. Coronel, to their names.

The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4").
Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz
became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the
execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do
as evidenced by the "Receipt of Down Payment."

Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.

From the moment, the parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts.

Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the happening of the event which constitutes the condition.

Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners' names was
fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually
demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to
private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer
on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00.

It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that:

3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from our
deceased father Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the
downpayment above-stated". The sale was still subject to this suspensive condition. (Emphasis supplied.)

(Rollo, p. 16)

Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they
contend, continuing in the same paragraph, that:
 . . . Had petitioners-sellers not complied with this condition of first transferring the title to the property
under their names, there could be no perfected contract of sale. (Emphasis supplied.)

(Ibid.)

not aware that they set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that:

Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is
the fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985, when a new title
was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").

The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as "Receipt of Down
Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject only to the suspensive condition that the
sellers shall effect the issuance of new certificate title from that of their father's name to their names and that, on February
6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").

We, therefore, hold that, in accordance with Article 1187 which pertinently provides —

Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact
to the day of the constitution of the obligation . . .

In obligation to do or not to do, the courts shall determine, in each case, the retroactive effect of the
condition that has been complied with.

the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that
point in time, reciprocal obligations of both seller and buyer arose.

Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet the
absolute owners of the inherited property.

We cannot sustain this argument.

Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to be
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.

Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are
compulsory heirs who were called to succession by operation of law. Thus, at the point their father drew his last
breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or
obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to
the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs.
Villanueva, 90 Phil. 850 [1952]).

Be it also noted that petitioners' claim that succession may not be declared unless the creditors have been paid is
rendered moot by the fact that they were able to effect the transfer of the title to the property from the decedent's name to
their names on February 6, 1985.

Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that
time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the
agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that:

Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon.

Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot
claim now that they were not yet the absolute owners thereof at that time.

Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P.
Alcaraz, the latter breached her reciprocal obligation when she rendered impossible the consummation thereof by going to
the United States of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs
14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so
petitioners conclude, they were correct in unilaterally rescinding rescinding the contract of sale.

We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that
these supposed grounds for petitioners' rescission, are mere allegations found only in their responsive pleadings, which
by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6,
Revised Rules of Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners'
allegations. We have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng
Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation is not an evidence (Lagasca vs. De
Vera, 79 Phil. 376 [1947]).

Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot
justify petitioner-sellers' act of unilaterally and extradicially rescinding the contract of sale, there being no express
stipulation authorizing the sellers to extarjudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988];
Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])

Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the
evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing
with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also in her own
behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2")
for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's
authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as
regards payment being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence
of Ramona P. Alcaraz is not a ground to rescind the contract of sale.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase
price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P.
Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate
of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with
their agreement. Ramona's corresponding obligation to pay the balance of the purchase price in the amount of
P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be deemed to have been in
default.

Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in
default, to wit:

Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation.

xxx xxx xxx

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfill
his obligation, delay by the other begins. (Emphasis supplied.)

There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents.

With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale
where Article 1544 of the Civil Code will apply, to wit:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.

Should if be immovable property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof to the person who presents the oldest title, provided there is
good faith.

The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale
was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the
name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.

The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a)
when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by
either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first
buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of
the first buyer.

In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court,
Justice Jose C. Vitug, explains:

The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first
buyer of the second sale cannot defeat the first buyer's rights except when the second buyer first
 registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge
gained by the second buyer of the first sale defeats his rights even if he is first to register, since
knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530,
26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it has held that
it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must
act in good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99,
Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).

Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the subject property only on
February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly
perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second
buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason
she is buyer in good faith.

We are not persuaded by such argument.

In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in good
faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any
defect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale
entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on
the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime
in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title
to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time
of the registration of the property.

This Court had occasions to rule that:

If a vendee in a double sale registers that sale after he has acquired knowledge that there was a previous
sale of the same property to a third party or that another person claims said property in a pervious sale,
the registration will constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs.
Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43
Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)

Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985,
prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts
below.

Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion,
her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion was
also acting in her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such assumption disputed
between mother and daughter. Thus, We will not touch this issue and no longer disturb the lower courts' ruling on this
point.

WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED.

SO ORDERED.

I. GENERAL PROVISIONS (F. KINDS- TESTAMENTARY, INTESTAE OR MIXED)(ART 778-780)

I. GENERAL PROVISIONS (G. HEIRS – FRACTIONAL HEIRS, DEVISEES, LEGATESS)(ART 782)