G.R. No. 96296 June 18, 1992

RAFAEL S. DIZON, in his capacity as Administrator of the Estate of the Deceased JOSE P. FERNANDEZ, REDENTOR MELO, ELIODORO C. CRUZ, PIER 8 ARRASTRE & STEVEDORING SERVICES, INC., COMPAÑIA MARITIMA, PASIG STEVEDORING COMPANY, INC., and WESTERN PACIFIC CORPORATION, petitioners, vs.HON. COURT OF APPEALS, HON. PROTACIO C. STO. TOMAS, Judge, RTC, Branch 14, Ligao, Albay, and JOSE BALDE, respondents.

NARVASA, C.J.:

In the original action has given rise to the proceedings at bar 1 — instituted in 1975 by the plaintiff Jose Balde (private respondent herein) principally for the recovery of damages resulting from the allegedly illegal termination of his employment from the so-called "Fernandez Companies" 2 effected by herein petitioners — one of the defendants, Jose P. Fernandez, denominated the "principal" one, died before final judgment of the Trial Court. The legal consequences of that party's death are what are now chiefly in issue.

The complaint filed in the Court a quo 3 named as defendants the six (6) petitioner corporations herein, as well as (1) Jose P. Fernandez "in his own personal capacity and/or as Chairman of the Board, President, or Director" of said firms; (2) Redentor R. Melo, "in his own personal capacity and/or as Chief Legal Counsel of Pier 8 Arrastre & Stevedoring Services, Inc.;" and (3) Eliodoro C. Cruz, "in his own personal capacity and/or as a legal assistant" in the same company. It alleged that Balde was "summarily ousted and dismissed" from his job as "Chief Accountant and Credit & Collection Manager of Pier 8 Arrastre and Stevedoring Services . . . (since) 1973 and Chief Accountant of Western Pacific Corporation . . . (since) 1974."

The defendants filed a motion to dismiss on the ground that the Court had no jurisdiction over the nature of the action, which was essentially a "money claim" arising from an employer-employee relationship exclusively cognizable by the National Labor Relations Commission, and that no official decision had yet been reached regarding termination of Balde's employment. 4 The defendants also filed a supplemental motion urging dismissal of the action because venue had been improperly laid. 5 After oppositions were filed to both motions, the Court issued an Order holding "in abeyance the resolution . . . (thereof) until pre-trial is conducted and evidence is presented . . . without prejudice to dismissing the case when the ground for dismissal becomes apparent." 6

The defendants thereafter presented their "Answer with Compulsory Counterclaim," which contained specific denials and qualified admissions of the averments of the complaint; alleged as affirmative defenses the same grounds alleged in their motions to dismiss, and the fact that they had acted entirely in accordance with law and in all good faith in discharging Balde from employment, he having "done acts prejudicial and inimical to their interest and (which) have caused damage;" and seeking recovery of moral, actual and exemplary damages resulting from Balde's "completely unfounded and baseless action." 7 Pre-trial and trial ensued after Balde filed his answer to the counterclaim and a reply to the answer.

Balde's presentation of his evidence-in-chief was concluded upon the admission by the Court of his exhibits over the defendants' objections, by Order dated October 21, 1987.

Some two weeks afterwards, or more precisely on November 7, 1987, defendant Jose P. Fernandez died. Notice thereof was given to the Court by his counsel, through a manifestation dated November 16, 1987.

As intimated in the opening paragraph of this Decision, the death of Fernandez brought up the question of the legal consequences of that demise, and the action that Trial Court should properly take in view thereof. For the sake of clarify, and the better to gauge the propriety of the action actually taken by Trial Court, the narration of the material facts is interrupted at this point, so that a brief exposition of the applicable law may be made.

The effects of the death of a defendant in a civil suit are dependant upon of the nature action: whether (a) the action is a personal one for "recovery of money, debt or interest thereon," 8 or (b) is not for said purpose, 9

i.e., it is a real action, 10 or one for recovery of personal property "or to enforce a lien thereon, and actions to recover damages for an injury to person or property, real or personal." 11 The effects of the defendant's death are dependent, as well, on the time of his demise.

The law says that "(w)hen the action is for recovery of money, debt or interest thereon, and the defendant dies before final judgment in the Court of First Instance (now Regional Trial Court), it shall be dismissed to be prosecuted in the manner especially provided in these rule." 12

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

If the defendant dies after final judgment of the Regional Trial Court, the action (for money, debt or interest thereon) is not dismissed, and an appeal may be taken by or against the administrator; 15 but if that judgment against the deceased becomes final and executory, it shall be enforced, not by execution under Rule 39, but in accordance with Section 5 of Rule 86, 16 i.e., by presenting the same as a claim against the estate.

If, on the other hand, the claim against the defendant is other than for "money, debt or interest thereon" — i.e., it is a real action, 17 or one for recovery of personal property "or to enforce a lien thereon, and actions to recover damages for an injury to person or property, real or personal," supra 18 — and the defendant dies, the claim against him is not thereby extinguished, and the action will not be dismissed but continue against the decedent's legal representative. Section 17, Rule 3 specifies the procedure to be followed, viz.

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

The record discloses that the Court did not dismiss the action as against the deceased defendant, Fernandez, conformably with Section 21, Rule 3. What it did was: (a) to require the defendants' new counsel, former Supreme Court Justice Arsenio P. Dizon, by Order dated November 21, 1987, "to effect the substitution of said deceased defendant within thirty (30) days . . .," 19 (a requirement it reiterated in another Order dated October 4, 1988); and (b) on later learning that said Justice Dizon was the Administrator of the Fernandez Estate, to require the latter, by Order dated January 2, 1989, to appear before it on February 4, 1989 (later reset to March 6, 1989) "to be substituted as party defendant for and in behalf of the deceased Jose P. Fernandez" The Trial Judge was obviously proceeding in accordance with Section 17, Rule 3; and it was doing so quite erroneously, since the action against the deceased and his co-defendants was clearly one for the "recovery of money, debt or interest thereon" which, by direction of Section 21 of the same Rule, should "be dismissed to be prosecuted in the manner especially provided in these rules," at least in so far as concerned the deceased defendant.

Justice Dizon was unable to appear at the hearing of March 6, 1989, on account of the poor state of his health at the time. This he alleged in a telegram to the Court, and in a subsequent formal motion, seeking on that account a resetting of the hearing to "either April 17, 18 and 28/89 or May 1, 2 and

3/89." 20 Unfortunately, neither the telegram nor the motion was received by the Trial Court in time. Hence, by Order dated March 6, 1989, the Court directed plaintiff Jose Balde to formally move in writing to have the case submitted for decision by reason of the defendant's failure to appear despite notice.

When the defendants received notice of the Order of March 6, 1989, they promptly moved for reconsideration through Atty. Rafael Dizon, under date of March 18, 1989. 21 By order dated March 31, 1989, the Trial Court, without referring to its earlier Order of March 6, 1989, re-schedule the hearing on April 24 1989, but required that "if and when Atty. Arsenio Dizon shall still be indisposed during the next hearing, one of the associates of the law firm shall appear for the defendants in order to avoid further delay in the disposition of this case . . . (considering that) this case was fled since 1975 and this case could not be disposed of because of continuous postponement by the parties." 22

However, notice of the Order of March 31, 1989 — resetting the hearing on April 24, 1989 — sent from Ligao, Albay, was not received by the defendants in Metro Manila until the very day of the hearing, April 24, 1989. Atty. Rafael Dizon immediately dispatched a telegram to the Court that same day, reading as follows: "RECEIVED COPY MARCH 31, 1989 ORDER SETTING HEARING OF CIVIL CASE, 528 APRIL 24 ONLY TODAY APRIL 24, 1989, REQUEST RESET TO MAY 2, 14, 25, 31, JUNE 1, 2, 1989. FORMAL MOTION TO FOLLOW." The telegram evidently came too late. What the Court had before it when the case was called at the appointed hour on April 24, 1989 was Atty. Dizon's motion dated March 18, 1989 for reconsideration of the Order of March 6, 1989, which had already been granted (the Court having on March 31, 1989, reset the hearing on April 24, 1989). The Court then proceeded to declare said motion of April 18, 1989 "moot and academic" and, in view of the defendants' absence at the hearing of April 24, 1989, to consider the case submitted for decision. These disposition it made in the following Order, to wit:

When this case was called for hearing this morning, the court received the Motion seeking for reconsideration of the order dated March 6, 1989 considering this case submitted for decision, for failure of counsel for the defendants to appear on the said setting. The record shows that the order sought to be reconsidered by defendants has already been reconsidered by this court, when the court ordered on March 31, 1989 to set this case for today.

The Motion for Reconsideration filed by Atty. Rafael S. Dizon, now appearing as counsel for the defendants, is hereby considered moot and academic.

In view, however, of the fact that the defendants and counsel failed to appear today without justifiable cause, on motion of plaintiff, this case is hereby ordered submitted for decision based on the evidence so far presented.

According to the petitioners, notices of the Orders of April 24, 1989 and March 31, 1989 were never served on them or their counsel. 23 This is why, under date of October 19, 1989, they filed a "Motion to Resolve Motion for Reconsideration dated March 18, 1989 and to Set Case for Hearing." 24 This last motion was resolved by the Trial Court — now presided over by Hon. Protacio C. Sto. Tomas — in an Order dated October 17, 1989. In said Order the Court quoted verbatim the Order of April 24, 1989 of "Hon. Salvador D. Silerio, then Presiding Judge of this Court;" pointed out that said order of April 24, 1989 "has not been reconsidered and set aside;" and directed the immediate transmittal, "pursuant to an existing Administrative Order issued by the Supreme Court, . . . (of) the records . . . to Judge Salvador D. Selerio, Presiding Judge of RTC, Branch 8, Legazpi City for him to render the corresponding decision." 25

The petitioners received copy of the Order of October 17, 1989 on November 7, 1989. On the same day, they also received a copy of another Order of the same Court dated October 25, 1989, 26 dealing with their motion of October 19, 1989 and reading as follows:

The records disclosed that the Motion to Resolve Motion for Reconsideration dated March 18, 1989 and to Set Case for Hearing filed by Atty. Rafael S. Dizon dated October 19, 1989 has already been resolved and acted upon, in the sense, that this case was already submitted for decision as of April 24, 1989 signed by Hon. Salvador D. Silerio, presiding Judge, copy of which was furnished Atty. Rafael Dizon. Atty. Dizon appears not

to have a fixed address as the order of the court sent to him addressed at 5th Floor, Strata Building, Emerald Avenue, Ortigas Commercial Complex, Pasig, Metro Manila has not been claimed by said counsel.

Examining the instant motion, we find that it does not conform with the mandatory of Sections 4, 5 and 6 of Rule 15 of the Rules of Court.

Wherefore, the motion is denied.

On November 21, 1989, the petitioners once again filed a motion for reconsideration, this time directed against the Orders of April 24, October 17, and October 25, 1989. In that motion, denominated "Motion for Reconsideration with Motion to Dismiss," 27 the petitioners —

1) averred that they had failed to appear at the hearing on April 24, 1989 at 8:30 a.m., as directed in the Order of March 31, 1989, because they received notice thereof "ONLY ON THE VERY SAME DAY AND PAST THE TIME OF THE SCHEDULED HEARING," as stated in their telegram of April 24, 1989; and

2) argued that, "due to defendant Jose P. Fernandez death on November 7, 1987" and in light of "Rule 3, Sec. 21," the case "must necessarily be dismissed and prosecuted pursuant to Sec. 1, Rule 87 of the Rules of Court."

The petitioners set the motion for hearing on December 6, 1989 at 8:30 A.M., furnishing copy thereof on advance counsel by registered mail. In anticipation of his attendance at the hearing of his motion, Atty. Rafael Dizon booked passage on the PAL flight from Manila to Legazpi City on December 5, 1989 and from Legazpi to Manila on December 6, 1989. 28

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

The Court denied the telegraphic request for postponement, in an Order dated December 6, 1989, viz.:

When the Motion for Reconsideration with Motion to Dismiss dated November 21, 1989 was called for hearing, the movant Rafael S. Dizon failed to appear notwithstanding that this is the date set forth by him. However, a telegram has been received wherein said movant prays for a postponement of the hearing of said motion alleging that a formal motion will follow.

Examining the records, we find that the first motion for reconsideration dated March 18, 1989 was already resolved and denied by this Court in its order of October 25, 1989. This being the case, and considering that the rules does not allow a second motion for reconsideration without first securing leave of court, the instant motion for reconsideration dated November 21, 1989 is DENIED.

In view of the foregoing development, the petitioners felt constrained to institute, as they did institute in the Court of Appeals a special civil action of certiorari to annul and set aside the Trial Court's five (5) Orders just mentioned, of April 24, May 29, October 17, October 25, and December 6, 1989. 31 Their action failed. The Appellate Tribunal declared that upon the facts, it was "not prepared to rule that respondent Court's issuance of the assailed orders is tainted with grave abuse of discretion calling for the application of the extra-ordinary writ of certiorari," and accordingly dismissed their petition. More particularly, it ruled that —

1) "the alleged error committed by respondent Court in not dismissing the complaint against the deceased defendant Jose Fernandez, if at all, is merely an error of judgment and not of jurisdiction," and hence, not correctible by the special civil action of certiorari under Rule 65;

2) "even if the claim against the deceased . . . Fernandez may de dismissed, it does not necessarily follow that the complaint in Civil Case No. 528-LV should be dismissed in toto, considering that there are other defendants in the case, and considering further that some of the defendants in the case, and considering further that some of the defendants, the principals at that, are corporate entities with separate juridical personalities;" and

3) "if petitioners did not receive copies of the orders issued by respondent Court, it was for the reason that they have been continuously changing their address."

Their motion for reconsideration having been denied, by Resolution of the Court of Appeals dated November 21, 1990, the petitioners have appealed to this Court. Here they contend that:

1) "The Rules of Court mandate the dismissal of the case and not substitution of the deceased defendant;" and

2) They "had a valid/justifiable cause for failing to appear in the scheduled hearing."

The private respondent's two-page comment dated February 16, 1991 submitted in response to the Court's requirement therefor, does nothing except to assert, basically, that "there is no showing at all that the Hon. Court of Appeals acted with grave abuse of discretion," contrary to the petitioners' claim of "patent excess of jurisdiction and/or grave abuse of discretion" on the part of the Appellate Court." 32

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

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

It was error, too, for the Trial Court to deny Atty. Dizon's motion dated November 21, 1989 for reconsideration of the Orders of April 24, October 17, and October 25, 1989, on the ground that it was in effect a second motion for reconsideration "the rules does (sic) not allow a second motion for reconsideration without first securing leave of court . . ." There is no such rule as regards interlocutory orders like those sought to be reconsidered. The Trial Judge might possibly have had in mind Section 4, Rule 37, of the Rules of Court, governing a "second motion for new trial, based on a ground not existing nor available when the first motion was made," but the section clearly applies only to final judgments, not to interlocutory orders. The Trial Judge might have had in mind Section 1, Rule 52 pertinently providing that "(n)o more than one motion for re-hearing or reconsideration shall be filed without express leave of court," but again, it is clear that the proviso applies only to final judgments of the Court of Appeals, not to interlocutory orders or resolutions. The Trial Judge might have had in view Section 11 of Batas Pambansa Bilang 129 (Judiciary Reorganization Act of 1980) which inter alia decrees that "no second motion for reconsideration shall be entertained," or paragraph 4 of the Interim or Transitional Rules relative to the implementation of said B.P. Blg. 129, promulgated by this Court, declaring that "(n)o party shall be allowed a second motion for reconsideration of a final order or judgment;" but again these provisions obviously have reference not to interlocutory orders but to final judgments or orders. A second motion attacking an interlocutory order might possibly be denied on the ground that it is a "rehash" or mere reiteration of grounds and arguments already passed upon and resolved by the Court; it cannot be rejected on the ground that a second motion for reconsideration of an interlocutory order is forbidden by law.

The question that now arises is whether these errors amount to grave abuse of discretion on the part of the Trial Judge. The first does. In adamantly refusing to dismiss the action against the deceased Fernandez so that the claim against him might be filed in the special proceedings for the settlement of his estate, it is clear that His Honor was refusing to apply an explicit mandate of the Rules of Court although well aware of it, and of the fact that no reason existed in the record for excepting the case at bar from the operation of the rule. Such a refusal, in other words, may not be deemed to constitute "merely an error of judgment and not of jurisdiction," as the Court of Appeals characterizes it, but as an outright defiance of the plain provisions of the Rules of Court which had been insistently brought to his attention; an act therefore, executed without any jurisdiction in law, whimsically, capriciously, and oppressively; an act, in short, done with grave abuse of discretion. 37

What has just been stated makes inconsequential the failure of Atty. Dizon to appear before the Court on December 6, 1989, the date set by him for the hearing of his motion for reconsideration of November 21, 1989 — in which he asked that said hearing be reset because fortuitous events precluded his appearance, and reiterated the prayer that the action be dismissed as against defendant Fernandez because of the latter's demise. For even assuming that Atty. Dizon's failure to receive notices of, and consequent omission to appear at, the hearings of February 4, 1989, March 6, 1989 and April 24, 1989 were inexcusable, because the failure to receive said notices was due to his "continuously changing his address," as the Court of Appeals points out, that circumstance did not make unmeritorious the motion for dismissal of the suit as against deceased Fernandez. It must be mentioned, however, in fairness to Atty. Dizon, that he had as a matter of fact made preparation for presenting himself before the Trial Court at the hearing of December 6, 1989, booking passage on Philippine Airlines on December 5, 1989, and that the closure of airports and cancellation of domestic flights on account of the aborted coup d'etat of December 1, 1989 — of which the Court takes judicial notice — had indeed made impossible his intended appearance before the Trial Court on the appointed day, December 6, 1989.

Not to be overlooked in this case is the nature of the complaint instituted by Jose Balde in the Trial Court, 38 which upon sufficient reflection is disclosed as pertaining to the exclusive jurisdiction of the Labor Arbiters of the Department of Labor and Employment and not the regular courts of justice. That complaint alleged that Balde was "summarily ousted and dismissed" from his job as "Chief Accountant and Credit & Collection Manager of Pier 8 Arrastre and Stevedoring Services . . . (a job he had held since) 1973 and Chief Accountant of Western Pacific Corporation . . . (held since) 1974. " It averred that despite his having worked efficiently and caused an increase in the profitability of the companies, and allegedly on evidence known by defendant Cruz to be sham — that he (Balde) was implicated in some anomaly in the procurement of supplies and spare parts — said defendant Cruz unceremoniously relieved him of his duties and sealed and searched his personal belongings; that on his (Balde's) insistence, an investigation was eventually conducted by defendant Melo, the Chief Legal Counsel, ostensibly to ascertain the truth but which was actually nothing but an "inquisition" characterized by "malice, bias, prejudice and partiality, " at which he was not accorded full opportunity to defend himself; and that Fernandez, the highest corporate official in the corporations, turned a deaf ear to Balde's pleas for a "speedy and impartial investigation." Upon these factual assertions, the complaint prayed for the payment by the defendants to Balde of actual, moral, and exemplary damages in the aggregate amount of P1,100,000.00, attorney's fees in the sum of P100,000.00, and "such other reliefs equitable in the premises." It did not include reinstatement as a specific relief.

The complaint, in other words, set forth claims for money arising from employer-employee relations. Now, at the time that the complaint was filed, in 1975, exclusive jurisdiction over such "money claims arising form employer-employee relations" 39 as well " all other cases or matters arising from employer-employee relations," 40 was vested by the law in the Labor Arbiters of the National Labor Relations Commission. 41 That jurisdiction remained substantially unaffected by subsequent amendments of the Labor Code up to 1989, 42 when Republic Act No. 6715 became effective, except that for a time, about three (3) years, Labor Arbiters were divested of competence to "entertain claims for moral or other forms of damages." 43

Under Republic Act No. 6715, 44 embodying the latest amendments to the Labor Code of the Philippines, the following cases inter alia fall within the "original and exclusive jurisdiction" of Labor Arbiters, to wit:

xxx xxx xxx

(2) Termination disputes;

(3) If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment;

(4) Claims for actual, moral, exemplary and other forms of damages arising from employer-employee relations;

xxx xxx xxx

(6) Except claims for employees compensation, social security, medicare and maternity benefits, all other claims arising from employer-employee relations, including those persons in domestic or household services, involving an amount not exceeding five thousand pesos (P5,000.00) whether or not accompanied with a claim for reinstatement.

The claims in question do not involve "wages, rates of pay hours of work and other terms and conditions of employment." They do constitute, however, a "termination dispute," and are actually "claims for actual, moral, exemplary and other forms of damages arising from employer-employee relations," unaccompanied by a prayer for reinstatement. As such they are, as the law clearly says, within the "original and exclusive jurisdiction" of Labor Arbiters. In other words, whether under the law at present in force, or that at the time of the filing of the complaint, Jose Balde's cause falls within the exclusive original jurisdiction of the Labor Arbiters and not of the Regional Trial Court (formerly, Court of First Instance).

To be sure, this jurisdictional defect in the proceedings has not been explicity put at issue in the appeal at bar, although references appear in the pleadings to the various motions filed by Fernandez and his co-defendants with the Regional Trial Court to dismiss the action for want of jurisdiction over the nature of the suit instituted by Jose Balde. This omission is of no moment. Excepted from the general rule that in appellate proceedings in the Court of Appeals or this Court, " no error . . . will be considered unless stated in the assignment of errors and properly argued in the brief" (or otherwise raised as an issue), are (1) errors which "affect the jurisdiction over the subject matter," (2) "plain errors," and (3) "clerical errors". 45

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

SO ORDERED.

G.R. No. L-68935 January 22, 1990

JOSE PENEYRA and MILAGROS CALDERON, petitioners, vs.HON. INTERMEDIATE APPELLATE COURT and HONORABLE GODOFREDO RILLORAZA, respondents. 

FERNAN, C.J.:

We modify the decision 1 rendered on September 28, 1984 by the then Intermediate Appellate Court (IAC) now Court of Appeals, in AC-G.R. S.P. No. 03509 entitled, "Jose Peneyra, et al. vs. Hon Godofredo G. Rilloraza, et al."

The antecedent facts are undisputed:

On May 7, 1976, the Board of Trustees of the Corregidor College Inc. awarded the management and operation of its canteen at a monthly rental of P80.00 to petitioners herein who are stockholders of the said College. Subsequently, upon instructions of Eulogio Dizon, Chairman of the Board of Trustees of Corregidor College, Inc., the rental payments of petitioners were refused, and on August 6, 1980, partial demolition of the canteen was effected. Consequently, on September 9, 1980, petitioners filed in the then Court of First Instance of Nueva Ecija an action against Eulogio R. Dizon for damages with preliminary mandatory injunction. 2

After Dizon filed his answer and counterclaim, pre-trial took place. On February 20, 1981, petitioners presented their evidence and rested their case. The judge to whom the case was assigned having inhibited himself, the case was re-assigned to herein respondent judge, the Hon. Godofredo Rilloraza. 3

On September 2, 1983, petitioners filed a motion for leave to amend the complaint so as to include Corregidor College, Inc. as additional defendant. Dizon opposed the motion since petitioners had already presented their evidence. 4

In its order of September 15, 1983, the trial court denied petitioners' motion, ruling that the proposed amendment would substantially alter petitioners' cause of action; that defendant Dizon would be required to answer new issues wholly different from those which were stated in the original complaint; and that petitioners having rested their case, the amendment was too late. 5

Thereafter, petitioners asked for an extension of time to file a motion for reconsideration of the aforesaid order but the same was denied by the trial court in its order dated October 18, 1983. 6 Petitioners filed a motion for reconsideration which the trial court granted in its order dated November 9, 1983. It gave petitioners an extension of ten (10) days from notice within which to file the amended complaint. 7 However, realizing that its order dated November 9, 1983 was erroneous, the trial court reversed itself by setting aside said order. Instead, on December 6, 1983, the trial court required petitioners to file within ten (10) days from notice a motion for reconsideration of the Order of October 18, 1983. 8

On December 23, 1983, petitioners filed their motion for reconsideration of the order denying the admission of their amended complaint. Two days later or on December 25, 1983, Eulogio Dizon died. Thereafter, his counsel moved to dismiss the complaint by reason thereof. 9

In its order dated March 27, 1984, the trial court dismissed petitioners' complaint on the ground that the action for damages did not survive the death of Eulogio Dizon. 10 Petitioners moved to reconsider but were unsuccessful.

Arguing that the trial court gravely abused its discretion in denying admission of their amended complaint and in subsequently dismissing their case, petitioners filed a special civil action of certiorari and mandamus against respondent judge before the IAC.

On September 28, 1984, the Appellate Court dismissed the petition holding that the Securities and Exchange Commission (SEC) has jurisdiction over the case, the same being an intracorporate dispute, that the amendment to include Corregidor College, Inc. cannot be allowed and that the action for damages against Eulogio Dizon was extinguished by his death. 11

Hence, this recourse.

The three issues before us are: does jurisdiction over Civil Case No. 774-G pertain to the Securities and Exchange Commission? did the court a quo correctly deny petitioners' motion for leave to amend complaint to include Corregidor College, Inc. as additional defendant? and did the action for damages against Euologio Dizon survive his death?

One of the reasons given by the appellate court in affirming the dismissal of Civil Case No. 774-G is that the same is within the jurisdiction of the SEC. This is erroneous.

While it is true that petitioners herein are stockholders of Corregidor College, Inc., the. complaint in Civil Case No. 774-G did not stem directly from such relationship, but rather from the award to petitioners of the management and operation of its canteen at a monthly rental of P80.00. The management of a canteen, even if awarded to a stockholder, is outside or merely incidental to the central operations of an educational institution. Petitioners thus convincingly argue that "the controversy is not one where petitioners are bringing the action as stockholders but rather as operators of the canteen under an agreement with said Board. In short, the cause of action here is for damages arising from a violation of a contract of management operation of the College canteen by defendant Dizon. 12 Certainly, the present controversy cannot qualify as an intra-controversy, its root being a contractual breach separate and distinct from the corporate relationship between petitioners and Corregidor College, Inc., which, it must be noted, was not even named as a defendant in the original complaint. It was therefore patent error for the Court of Appeals to immediately rule that the present case belongs to the SEC just because petitioners alleged that they are stockholders of Corregidor College, Inc.

Under Section 3 of Presidential Decree 902-A, the jurisdiction of the SEC is limited to matters intrinsically connected with the regulation of corporations, partnerships and associations and those dealing with the internal affairs of such entities. P.D. 902-A does not confer in the SEC absolute jurisdiction and control over all matters affecting corporations. To uphold the appellate court's ruling would remove without legal imprimatur from the regular courts all controversies over matters involving or affecting corporations regardless of the nature of the transactions which give rise to such disputes. 13

On the second issue posed by herein petitioners, We rule that the amendment to include Corregidor College Inc. as additional defendant cannot be permitted inasmuch as the motion to amend was made only after petitioners had already rested their case on February 20, 1981. We note the fact that it was only after a lapse of two (2) years and seven (7) months or on September 2, 1983 that petitioners filed their motion to amend their complaint. To permit such amendment would obviously delay the proceedings of the trial court. Needless to say, at that point in the proceedings, substantial issues have already been joined.

The rule is that amendments should be liberally allowed 14 but this liberality at the outset of the action decreases as the case moves to its termination. 15 Besides, an application for leave to amend is ordinarily addressed to the sound discretion of the trial court and as a rule this discretion will not be disturbed on appeal except in case of an evident abuse thereof. 16

Moreover, the inclusion of Corregidor College as additional party is a substantial amendment which can be permitted only by leave of court. Section 3, of Rule 10 of the Rules of Court states that, "(A)fter the case is set for hearing, substantial amendments may be made only upon leave of court. But such leave may be refused if it appears to the court that the motion was made with intent to delay the action or that the cause of action or defense is substantially altered." The proposed inclusion of Corregidor College would necessarily alter petitioners' cause of action in that while petitioners alleged in their complaint:

9. That, the demolition being undertaken by the defendant is without any authority from the Board of Trustees nor from the proper government office concerned, in violation of the law, the only purpose of which is to harass the plaintiffs;

10. That, due to the unlawful acts of the defendants, not only in violation of the Board Resolution and of the law governing that matter, the herein plaintiffs were so humiliated before the eyes of the people and their rights and interest were prejudiced causing them irreparable damage for which they have to be compensated for loss of income and moral damages in an amount of not less than P 50,000.00; 17

thus ascribing to defendant Dizon personal responsibility for the alleged damages suffered by them, the inclusion of Corregidor College would have the effect of transforming said personal

responsibility into a corporate and collective liability. Correspondingly, the amendment would substantially affect the defense of defendant Dizon in his capacity as College president.

As argued convincingly by petitioners, an action for the recovery of damages for injury to personal property is not extinguished by the death of the defendant. This is because such action may still be brought against the executor or administrator of the estate of the defendant. Since the demolition of petitioners' canteen is a ground for the recovery of damages arising from injury to personal property, then, as provided in Section 1 of Rule 87 of the Rules of Court, the deceased defendant should now be substituted by the executor, administrator or legal representative of his estate as party-defendant.

WHEREFORE, the dismissal of Civil Case No. 774-G of the then Court of First Instance of Nueva Ecija, Branch XXXI, Guimba, is hereby set aside. The successor Regional Trial Court is ordered to reinstate Civil Case No. 774-G, to cause the deceased defendant Eulogio Dizon to be substituted by the executor, administrator or legal representative of his estate as party-defendant and thereafter to proceed with the trial of the case with dispatch. The denial of petitioners' motion to amend the complaint is affirmed. No costs.

SO ORDERED.

G.R. No. 121510 November 23, 1995

FABIANA C. VDA. DE SALAZAR, petitioner, vs.COURT OF APPEALS, PRIMITIVO NEPOMUCENO and EMERENCIANA NEPOMUCENO, respondents.

 

HERMOSISIMA, JR., J.:

Where the defendant in an ejectment case dies before the rendition by the trial court of its decision therein, does the trial court's failure to effectuate a substitution of heirs before its rendition of judgment render such judgment jurisdictionally infirm?

On July 23, 1970, both private respondents Primitive Nepomuceno and Emerenciana Nepomuceno filed separate complaints 1 with the then Court of Agrarian Relations of Malolos, Bulacan, for ejectment on the ground of personal cultivation and conversion of land for useful non-agricultural purposes against petitioner's deceased husband, Benjamin Salazar. After protracted proceedings in the agrarian court and then the Regional Trial Court 2 spanning from 1970 to 1993, the trial court rendered its joint decision 3 in favor of private respondents. An appeal 4 therefrom was interposed in the name of petitioner's deceased husband on the ground that private respondents herein failed to satisfy the requirements pertaining to personal cultivation and conversion of the landholdings into non-agricultural uses. The Court of Appeals rejected such contention upon finding that the record was replete with evidence justifying private respondents' assertion of their right of cultivation and conversion of their landholdings. 5

Almost a year after the termination of that appeal, the same trial court decision subject thereof was once again assailed before the Court of Appeals through a petition 6 for annulment of judgment. Herein petitioner assailed the same trial court decision as having been rendered by a court that did not have jurisdiction over her and the other heirs of her deceased husband because notwithstanding the fact that her husband had already died on October 3, 1991, the trial court still proceeded to render its decision on August 23, 1993 without effecting the substitution of heirs in accordance with Section 17, Rule 3, of the Rules of Court thereby depriving her of her day in court.

Petitioner, not having asserted the matter of fraud or collusion in her petition for annulment of judgment, the Court of Appeals decided the same on the basis of the sole issue of non-jurisdiction resulting from the alleged deprivation of petitioner's right to due process and ruled in favor of the validity of the challenged decision. 7 Petitioner filed a motion for reconsideration of the decision of the appellate court reiterating the trial court's lack of jurisdiction over the heirs of petitioner's deceased husband as a consequence of the failure of the trial court to effectuate a valid substitution of heirs. Said motion was denied in a resolution promulgated on August 14, 1995. Hence this petition.

The petition is bereft of merit.

The need for substitution of heirs is based on the right to due process accruing to every party in any proceeding. 8 The rationale underlying this requirement in case a party dies during the pendency of proceedings of a nature not extinguished by such death, is that

. . . the exercise of judicial power to hear and determine a cause implicitly presupposes in the trial court, amongst other essentials, jurisdiction over the persons of the parties. That jurisdiction was inevitably impaired upon the death of the protestee pending the proceedings below such that unless and until a legal representative is for him duly named and within the jurisdiction of the trial court, no adjudication in the cause could have been accorded any validity or binding effect upon any party, in representation of the deceased, without trenching upon the fundamental right to a day in court which is the very essence of the constitutionally enshrined guarantee of due process. 9

We are not unaware of several cases 10 where we have ruled that a party having died in an action that survives, the trial held by the court without appearance of the deceased's legal representative or substitution of heirs and the judgment rendered after such trial, are null and void because the court acquired no jurisdiction over the persons of the legal representatives or of the heirs upon whom the trial and the judgment would be binding. This general rule notwithstanding, in denying petitioner's motion for reconsideration, the Court of Appeals correctly ruled that formal substitution of heirs is not necessary when the heirs themselves voluntarily appeared, participated in the case and presented evidence in defense of deceased defendant. Attending the case at bench, after all, are these particular circumstances which negate petitioner's belated and seemingly ostensible claim of violation of her rights to due process. We should not lose sight of the principle underlying the general rule that formal substitution of heirs must be effectuated for them to be bound by a subsequent judgment. Such had been the general rule established not because the rule on substitution of heirs and that on appointment of a legal representative are jurisdictional requirements per se but because non-compliance therewith results in the undeniable violation of the right to due process of those who, though not duly notified of the proceedings, are substantially affected by the decision rendered therein. Viewing the rule on substitution of heirs in this light, the Court of Appeals, in the resolution denying petitioner's motion for reconsideration, thus expounded:

Although the jurisprudential rule is that failure to make the substitution is a jurisdictional defect, it should be noted that the purpose of this procedural rule is to comply with due process requirements. The original party having died, he could not continue to defend himself in court despite the fact that the action survived him. For the case to continue, the real party in interest must be substituted for the deceased. The real party in interest is the one who would be affected by the judgment. It could be the administrator or executor or the heirs. In the instant case, the heirs are the proper substitutes. Substitution gives them the opportunity to continue the defense for the deceased. Substitution is important because such opportunity to defend is a requirement to comply with due process. Such substitution consists of making the proper changes in the caption of the case which may be called the formal aspect of it. Such substitution also includes the process of letting the substitutes know that they shall be bound by any judgment in the case and that they should therefore actively participate in the defense of the deceased. This part may be called the substantive aspect. This is the heart of the procedural rule because this substantive aspect is the one that truly embodies and gives effect to the purpose of the rule. It is this court's view that compliance with the substantive aspect of the rule despite failure to comply with the formal aspect may be considered substantial compliance. Such is the situation in the case at bench because the only inference that could be deduced from the following facts was that there was active participation of the heirs in the defense of the deceased after his death:

1. The original lawyer did not stop representing the deceased. It would be absurd to think that the lawyer would continue to represent somebody if nobody is paying him his fees. The lawyer continued to represent him in the litigation before the trial court which lasted

for about two more years. A dead party cannot pay him any fee. With or without payment of fees, the fact remains that the said counsel was allowed by the petitioner who was well aware of the instant litigation to continue appearing as counsel until August 23, 1993 when the challenged decision was rendered;

2. After the death of the defendant, his wife, who is the petitioner in the instant case, even testified in the court and declared that her husband is already deceased. She knew therefore that there was a litigation against her husband and that somehow her interest and those of her children were involved;

3. This petition for annulment of judgment was filed only after the appeal was decided against the defendant on April 3, 1995, more than one and a half year (sic) after the decision was rendered (even if we were to give credence to petitioner's manifestation that she was not aware that an appeal had been made);

4. The Supreme Court has already established that there is such a thing as jurisdiction by estoppel. This principle was established even in cases where jurisdiction over the subject matter was being questioned. In the instant case, only jurisdiction over the person of the heirs is in issue. Jurisdiction over the person may be acquired by the court more easily than jurisdiction over the subject matter. Jurisdiction over the person may be acquired by the simple appearance of the person in court as did herein petitioner appear;

5. The case cited by the herein petitioner (Ferreria et al. vs. Manuela Ibarra vda. de Gonzales, et al.) cannot be availed of to support the said petitioner's contention relative to non-acquisition of jurisdiction by the court. In that case, Manolita Gonzales was not served notice and, more importantly, she never appeared in court, unlike herein petitioner who appeared and even testified regarding the death of her husband. 11

Consequently, we rule that, as in the case at bench, the defendant in an ejectment case having died before the rendition by the trial court of its decision therein, its failure to effectuate a formal substitution of heirs before its rendition of judgment, does not invalidate such judgment where the heirs themselves appeared before the trial court, participated in the proceedings therein, and presented evidence in defense of deceased defendant, it undeniably being evident that the heirs themselves sought their day in court and exercised their right to due process.

Respondent Court of Appeals also correctly ruled that ejectment, being an action involving recovery of real property, is a real action which as such, is not extinguished by the defendant's death.

. . . 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 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 incidental. 12

There is no dispute that an ejectment case survives the death of a party, which death did not extinguish the deceased's civil personality. 13 More significantly, a judgment in an ejectment case is conclusive between the parties and their successors in interest by title subsequent to the commencement of the action. 14 Thus, we have held that:

. . . In such a case and considering that the supervening death of appellant did not extinguish her civil personality, the appellate court was well within its jurisdiction to proceed as it did with the case. There is no showing that the appellate court's proceedings in the case were tainted with irregularities.

It appears that petitioners are heirs of Adela Salindon. In fact, it was because of this relationship that the petitioners were able to transfer the title of Adela Salindon over the subject lot to their names. . . . Considering all this, the appellate decision is binding and enforceable against the petitioners as successors-in-interest by title subsequent to the commencement of the action (Section 49 [b] Rule 39, Rules of Court). Furthermore, . . . judgment in an ejectment case may be enforced not only against defendants therein but also against the members of their family, their relatives, or privies who derive their right of possession from the defendants (Ariem v. De los Angeles, 49 SCRA 343). Under the circumstances of this case, the same rule should apply to the successors-in-interest . . . .

15

While it is true that a decision in an action for ejectment is enforceable not only against the defendant himself but also against members of his family, his relatives, and his privies who derived their right of possession from the defendant and his successors-in-interest, 16 it had been established that petitioner had, by her own acts, submitted to the jurisdiction of the trial court. She is now estopped to deny that she had been heard in defense of her deceased husband in the proceedings therein. As such, this petition evidently has no leg to stand on.

WHEREFORE, the instant petition is dismissed for lack of merit. Costs against petitioner.

SO ORDERED.

[G.R. No. 125848. September 6, 1999]

EDMUNDO BENAVIDEZ, petitioner, vs. COURT OF APPEALS and ARISTON MELENDRES represented by NARCISO M. MELENDRES, Jr., respondents.

D E C I S I O N

BELLOSILLO, J.:

The Decision of the Court of Appealsi[1] in CA-G.R. SP No. 35412 dated 30 April 1996 which reversed that of the Regional Trial Court, Br. 80, Tanay, Rizal, in its Civil Case No. 388-T, as well as the Resolution of the appellate court dated 6 August 1996 denying herein petitioner’s motion for reconsideration, is assailed in this petition for review.

On 18 July 1990 private respondent Ariston Melendres, through his nephew and administrator Narciso M. Melendres Jr., filed a complaint before the Municipal Trial Court of Tanay, Rizal, against petitioner Edmundo Benavidez for forcible entry and recovery of damages with prayer for preliminary mandatory injunction and restraining order.ii[2] On 19 July 1990 the Municipal Trial Court issued a restraining order.

Private respondent alleged in his complaint that for more than fifty (50) years he was the owner and actual possessor, by himself and through his predecessors in interest, of a parcel of land with an area of 1,622 square meters located in Brgy. Plaza Aldea, Tanay, Rizal. He claimed that the subject land was devoted to the planting of palay and worked on and cultivated by agricultural tenants the last of whom was Felino Mendez. Private respondent further alleged that on 29 November 1989 petitioner Benavidez, using force, intimidation, strategy and stealth, entered the property and destroyed the barbed-wire fence, filled the property with soil and other filling materials, and constructed permanent, concrete structures thereon thereby converting its use from

agricultural to commercial without the necessary clearance or permit from the Department of Agrarian Reform (DAR).

In his answer, petitioner alleged (a) that private respondent had no cause of action against him because he was the rightful owner of the land by virtue of a deed of sale dated 5 February 1990 executed by Alicia Catambay in his favor; (b) that Tax Declaration No. 597 covering the subject land had been cancelled and a new one already issued to him; and, (c) that the property claimed by private respondent was different from that occupied by him.

It was established in an ocular inspection on 11 October 1990 that the lot where the Petron gasoline station and some new structures were currently situated was the same lot being claimed by private respondent. Felino Mendez and the tenants/farmersiii[3] of adjoining and adjacent ricelands confirmed this. The inferior court thereafter issued a writ of preliminary injunction.

On 14 January 1994 the Municipal Trial Court declared private respondent Ariston Melendres as the rightful possessor of the land in controversy and ordering petitioner Edmundo Benavidez to remove the improvements introduced on the property and to vacate and restore private respondent to its physical possession. For the use of the land, petitioner was ordered to pay private respondent P3,000.00 per month plus lawful interests from 29 November 1989 until finally vacated. He was further ordered to pay P5,000.00 as attorney’s fees and the costs of the suit.iv[4]

The Municipal Trial Court considered the admission of petitioner that he proceeded in filling the subject lot with soil and other filling materials and constructed a gasoline station thereon without asking permission from tenant Felino Mendez. The court a quo disregarded the claim of petitioner that he was the owner of the land as ownership of the property was not material in actions for recovery of possession. Moreover, such claim of ownership, even if valid, was belied by the Deed of Salev[5] petitioner presented in court as it was only executed on 5 February 1990 or more than two (2) months after the date of his unlawful entry on 29 November 1989. Certainly, even if petitioner was the lawful owner of the property, he could not resort to force to gain possession thereof as “regardless of the actual condition of the title to the property, the party in peaceable quiet possession shall not be turned out by strong hand, violence or terror.”vi[6] The judgmentvii[7] of the Department of Agrarian Reform Adjudicatory Board (DARAB) declaring Felino Mendez as the agricultural tenant of the subject lot and ordering petitioner Benavidez to reinstate Mendez to the possession of the property or in lieu thereof to pay him P61,875.00 as disturbance compensation was considered by the Municipal Trial Court as persuasive proof of possession by private respondent through his agricultural tenant Felino Mendez.

On appeal, the Regional Trial Court reversed the decision of the Municipal Trial Court. It held that the issue involved in the case was not merely physical or de facto possession but one of title to or ownership of the subject property; consequently, the Municipal Trial Court did not acquire jurisdiction over it.

Private respondent appealed the case to the Court of Appeals where the main issue raised was whether the complaint for forcible entry could be decided without resolving the question of ownership of the property. Private respondent maintained that regardless of the property’s ownership, prior possession was already established in his favor. Petitioner, on the other hand, claimed the contrary. The appellate court sustained private respondent. It reversed the decision of the Regional Trial Court and reinstated that of the Municipal Trial Court.

On 25 May 1996 petitioner filed a motion for reconsideration which was denied by the Court of Appeals for lack of merit. Hence, this petition for review on certiorari. Petitioner argues that the allegation in the complaint that the land in question was tilled by an agricultural tenant clearly deprived the Municipal Trial Court of its jurisdiction because under Rule 70, Sec. 1 of the Rules of Court "x x x x the provisions of Rule 70 shall not apply to cases covered by the Agricultural Tenancy Act."

We do not agree. The allegation that an agricultural tenant tilled the land in question does not automatically make the case an agrarian dispute which calls for the application of the Agricultural Tenancy Act and the assumption of jurisdiction by the Department of Agrarian Reform Adjudication Board (DARAB). It is necessary to first establish the existence of a tenancy relationship between the party litigants. The following essential requisites must concur in order to establish a tenancy relationship: (a) the parties are the landowner and the tenant; (b) the subject matter is agricultural land; (c) there is consent; (d) the purpose is agricultural production; (e) there is personal cultivation by the tenant; and (f) there is a sharing of harvests between the parties.viii[8]

In the instant case, there is no showing that there exists any tenancy relationship between petitioner and private respondent. Thus, the case falls outside the coverage of the Agricultural Tenancy Act; consequently, it is the Municipal Trial Court and not the DARAB which has jurisdiction over the controversy between petitioner and private respondent.

Petitioner also contends that since the issue of ownership is involved and only in resolving it can the issue of possession be finally settled, the Municipal Trial Court did not acquire jurisdiction over the case. He invokes the principle that “an inferior court loses its jurisdiction where the question of ownership is so necessarily involved that it would be impossible to decide the question of bare possession without first settling that of ownership.”ix[9] Petitioner’s reliance on this rulex[10] is erroneous as this was already modified by B.P. Blg. 129. The Municipal Trial Court now retains jurisdiction over ejectment cases even if the question of possession cannot be resolved without passing upon the issue of ownership provided that such issue of ownership shall be resolved only for the purpose of determining possession.xi[11] In other words, the fact that the issues of ownership and possession de facto are intricately interwoven will not cause the dismissal of the ejectment case on jurisdictional grounds.xii[12] Thus, the Municipal Trial Court of Tanay, Rizal, retained its jurisdiction over the case.

Petitioner further maintains that the forcible entry case is barred by the DARAB decision dated 4 March 1992. This contention has no merit. Felino Mendez, the plaintiff in the DARAB case, is not a party in the forcible entry case filed before the Municipal Trial Court. His status as private respondent's tenant and his alleged forcible ejectment from the subject property is not an issue raised in the forcible entry case. Instead, the question is the right of private respondent to be restored to the physical possession of the subject property. Thus, we see no reason why the DARAB decision should bar the instant case before us.

Finally, petitioner questions the legal personality of the counsel of private respondent for his failure to inform the court of the death of his client Ariston Melendres on 1 January 1991. He contends that such failure results in the nullity of the decision rendered by the Municipal Trial Court, invoking Rule 3, Sec. 16 of the Rules of Court which provides that:

Section 16. Duty of attorney upon 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 x x x x

He further argues that substitution of parties must be made according to Rule 3, Sec. 17 of the Rules of Court. Thus –

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 the deceased, within a period of thirty (30) days, or within such time as may be granted x x x x

Otherwise, the continuance by the court with the proceedings amounts to lack of jurisdiction.

The Rules invoked by petitioner have been amended by the present Rules.xiii[13] Nevertheless, even applying the old Rules, it is well settled that the failure of counsel to comply with his duty under Sec. 16 to inform the court of the death of his client and no substitution of such party is effected, will not invalidate the proceedings and the judgment thereon if the action survives the death of such party.xiv[14] Moreover, the decision rendered shall bind his successor in interest.xv

[15] The instant action for forcible entry, like any action for recovery of real property, is a real action and as such survives the death of Ariston Melendres. Thus, the decision rendered by the inferior court is conclusive between the parties and their successors in interest by title subsequent to the commencement of the action despite failure of private respondent’s counsel to inform the court of his client’s death and the consequent failure of the court to effectuate a substitution of heirs before its rendition of judgment. At any rate, a contrary rule would nonetheless make petitioner unsuccessful as the records show that the Municipal Trial Court was duly notified of Ariston Melendres’ death.

WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals dated 30 April 1996 and its Resolution dated 6 August 1996 in CA - G.R. SP No. 35412 are AFFIRMED. Costs against petitioner.

SO ORDERED

i

ii

iii

iv

vG.R. No. 86302 September 24, 1991

CASIMIRO MENDOZA, petitioner, vs.HON. COURT OF APPEALS and TEOPISTA TORING TUÑACAO, respondents.

Bienvenido R. Saniel, Jr. for petitioner.

Domingo Antigua & Associates for private respondent.

 

CRUZ, J.:p

The private respondent claimed she was the illegitimate daughter of Casimiro Mendoza, but the latter denied her claim. He denied it to his dying day. The trial court believed him and dismissed her complaint for compulsory recognition. The appellate court did not and reversed the judgment of the court below. Now the issue is before us on certiorari.

The complaint was filed on August 21, 1981, in the Regional Trial Court in Cebu City. Teopista Toring Tufiacao, the herein private respondent, alleged that she was born on August 20, 1930, to Brigida Toring, who was then single, and defendant Casimiro Mendoza, married at that time to Emiliana Barrientos. She averred that Mendoza recognized her as an illegitimate child by treating her as such and according her the rights and privileges of a recognized illegitimate child.

Casimiro Mendoza, then already 91 years old, specifically denied the plaintiffs allegations and set up a counterclaim for damages and attorney's fees.

Amplifying on her complaint, Teopista testified that it was her mother who told her that her father was Casimiro. She called him Papa Miroy. She lived with her mother because Casimiro was married but she used to visit him at his house. When she married Valentin Tufiacao, Casimiro bought a passenger truck and engaged him to drive it so he could have a livelihood. Casimiro later sold the truck but gave the proceeds of the sale to her and her husband. In 1977, Casimiro allowed her son, Lolito Tufiacao, to build a house on his lot and later he gave her money to buy her own lot from her brother, Vicente Toring. On February 14, 1977, Casimiro opened a joint savings account with her as a co-depositor at the Mandaue City branch of the Philippine Commercial and Industrial Bank. Two years later, Margarita Bate, Casimiro's adopted daughter, took the passbook from her, but Casimiro ordered it returned to her after admonishing Margarita. 1

Lolito Tufiacao corroborated his mother and said he considered Casimiro his grandfather because Teopista said so. He would kiss his hand whenever they saw each other and Casimiro would give him money. Casimiro used to invite him to his house and give him jackfruits. when his grandfather learned that he was living on a rented lot, the old man allowed him to build a house on the former's land. 2

Two other witnesses testified for Teopista, namely, Gaudencio Mendoza and Isaac Mendoza, both relatives of Casimiro.

Gaudencio said he was a cousin of Casimiro and knew Brigida Toring because she used to work with him in a saltbed in Opao. Casimiro himself told him she was his sweetheart. Later, Gaudencio acted as a go-between for their liaison, which eventually resulted in Brigida becoming pregnant in 1930 and giving birth to Teopista. Casimiro handed him P20.00 to be given to Brigida at Teopista's baptism. Casimiro also gave him P5.00 every so often to be delivered to Brigida. 3

Isaac testified that his uncle Casimiro was the father of Teopista because his father Hipolito, Casimiro's brother, and his grandmother, Brigida Mendoza, so informed him. He worked on Casimiro's boat and whenever Casimiro paid him his salary, he would also give him various amounts from P2.00 to P10.00 to be delivered to Teopista. Isaac also declared that Casimiro intended to give certain properties to Teopista. 4

Casimiro himself did not testify because of his advanced age, but Vicente Toring took the stand to resist Teopista's claim.

Vicente, who professed to be Casimiro's only illegitimate child by Brigida Toring, declared that Teopista's father was not Casimiro but a carpenter named Ondoy, who later abandoned her. Vicente said that it was he who sold a lot to Teopista, and for a low price because she was his half sister. It was also he who permitted Lolito to build a house on Casimiro's lot. This witness stressed that when Casimiro was hospitalized, Teopista never once visited her alleged father. 5

The last statement was shared by the other defense witness, Julieta Ouano, Casimiro's niece, who also affirmed that Vicente Toring used to work as a cook in Casimiro's boat. She flatly declared she had never met Teopista but she knew her husband, who was a mechanic. 6

The rules on compulsory recognition are embodied in Article 283 of the Civil Code, which has been held to be applicable not only to natural children but also to spurious children. 7 The said article provides:

Art. 283. In any of the following cases, the father is obliged to recognize the child as his natural child:

(1) In cases of rape, abduction or seduction, when the period of the offense coincides more or less with that of the conception;

(2) When the child is in continuous possession of status of a child of the alleged father by the direct acts of the latter or of his family;

(3) when the child was conceived during the time when the mother cohabited with the supposed father.

(4) When the child has in his favor any evidence or proof that the defendant is his father.

This article has been substantially reproduced in the Family Code as follows:

Art. 172. The filiation of legitimate children is established by any of the following:

(1) The record of birth appearing in the civil register or a final judgment; or

(2) An admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned.

In the absence of the foregoing evidence, the legitimate filiation shall be proved by:

(1) The open and continuous possession of the status of a legitimate child; or

(2) Any other means allowed by the Rules of Court and special laws.

Art. 175. Illegitimate children may establish their illegitimate filiation in the same way and on the same evidence as legitimate children.

In his remarkably well-written decision, Judge Leoncio P. Abarquez rejected the plaintiff' s claim that she was in continuous possession of the status of a child of the alleged father by the direct acts of the latter or of his family. His Honor declared:

In this particular case the established evidence is that plaintiff continuously lived with her mother, together with her sister Paulina. Neither the plaintiff nor her husband had come to live with the defendant. At most, only their son, Lolito Tufiacao was allowed to construct a small house in the land of the defendant, either by the defendant himself, as claimed by the plaintiff, or by Vicente Toring, as claimed by the witnesses of the defendant. The defendant never spent for the support and education of the plaintiff. He did not allow the plaintiff to carry his surname. The instances when the defendant gave money to the plaintiff were, more or less, off-and-on or rather isolatedly periodic. They were made at considerable intervals and were not given directly to the plaintiff but through a third person. Thus, while it may be conceded that: a) the defendant's parents, as well as the plaintiff himself told Gaudencio Mendoza and Isaac Mendoza that Teopista is the daughter of the defendant; b) that Teopista calls the defendant as "Papa Miroy"; c) that Teopista would kiss defendant's hand when she met him; d) that the defendant gave to her and her husband the income of the passenger truck as well as the proceeds of the sale thereof, all these acts, taken altogether, are not sufficient to show that the plaintiff had possessed continuously the status of a recognized illegitimate child.

On appeal, however, the respondent courts 8 disagreed and arrived at its own conclusion as follows:

Contrary to the conclusion of the court a quo, We find that appellant has sufficiently proven her continuous possession of such status. Although the court a quo did not pass on the credibility of the various witnesses presented, We consider the witnesses for the plaintiff as credible and unbiased. No proof was shown to render them otherwise. There is no showing that Isaac and Gaudencio testified falsely. They were disinterested parties with no axe to grind against the appellee or the people actively acting in his behalf. In fact even the court a quo conceded to the truthfulness of some of their testimonies.

By contrast, it continued, Vicente Toring was an interested party who was claiming to be the sole recognized natural child of Casimiro and stood to lose much inheritance if Teopista's claim were recognized. He had earlier filed theft charges against his own sister and libel charges against her husband. As for Julieta Ouano, the respondent court found it difficult to believe that she had never met Teopista although both of them have been living in the same barangay since birth.

The decision of the Court of Appeals was promulgated on August 11, 1988. A motion for reconsideration was filed, and it was only from the opposition thereto of the private respondent that Casimiro's counsel learned that his client had died on May 1986. He immediately informed the respondent court build the motion for reconsideration was denied without any substitution of parties having been effected. The said counsel, now acting for Vicente Toring, then asked this Court to substitute the latter for the deceased Casimiro Mendoza in the present petition.

The applicable provisions of the Rules of Court are Sections 16 and 17 of Rule 3, reading as follows:

Sec. 16. Duty of attorney upon 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, guardian or other legal representative.

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.

In the early case of Masecampo vs. Masecampo, 9 it was settled that:

The subsequent death of the father is not a bar to the action commenced during Ms lifetime by one who pretended to be his natural son. It may survive against the executor, administrator, or any other legal representative of the testate or intestate succession.

Pursuant to the above rules and jurisprudence, we hereby allow the substitution of Casimiro Mendoza pro haec vice and nunc pro tunc by Vicente Toring, who appears to be the former's illegitimate son. This disposes of the private respondent's contention that the lawyer-client relationship terminated with Casimiro's death and that Vicente has no personality now to substitute him.

Now to the merits.

We note that both the trial court and the respondent court, in arriving at their respective conclusions, focused on the question of whether or not Teopista was in continuous possession of her claimed status of an illegitimate child of Casimiro Mendoza. This was understandable because Teopista herself had apparently based her claim on this particular ground as proof of filiation allowed under Article 283 of the Civil Code.

To establish "the open and continuous possession of the status of an illegitimate child," it is necessary to comply with certain jurisprudential requirements. "Continuous" does not mean that the concession of status shall continue forever but only that it shall not be of an intermittent character while it continues. 10 The possession of such status means that the father has treated the child as his own, directly and not through others, spontaneously and without concealment though without publicity (since the relation is illegitimate). 11 There must be a showing of the permanent intention of the supposed father to consider the child as his own, by continuous and clear manifestation of paternal affection and care. 12

With these guidelines in mind, we agree with the trial court that Teopista has not been in continuous possession of the status of a recognized illegitimate child of Casimiro Mendoza, under both Article 283 of the Civil Code and Article 172 of the Family Code.

The plaintiff lived with her mother and not with the defendant although they were both residents of Omapad, Mandaue City. It is true, as the respondent court observed, that this could have been because defendant had a legitimate wife. However, it is not unusual for a father to take his illegitimate child into his house to live with him and his legitimate wife, especially if the couple is childless, as in this case. In fact, Vicente Toring, who also claimed to be an illegitimate child of Casimiro, lived with the latter and his wife, apparently without objection from the latter. We also note that Teopista did not use the surname of Casimiro although this is, of course, not decisive of one's status. No less significantly, the regularity of defendant's act of giving money to the plaintiff through Gaudencio Mendoza and Isaac Mendoza has not been sufficiently established. The trial court correctly concluded that such instances were "off-and-on," not continuous and intermittent. Indeed, the plaintiff s testimony on this point is tenuous as in one breath she said that her mother solely spent for her education and in another that Casimiro helped in supporting her. 13

But although Teopista has failed to show that she was in open and continuous possession of the status of an illegitimate child of Casimiro, we find that she has nevertheless established that status by another method.

What both the trial court and the respondent court did not take into account is that an illegitimate child is allowed to establish his claimed filiation by "any other means allowed by the Rules of Court and special laws," according to the Civil Code, or "by evidence or proof in his favor that the defendant is her father," according to the Family Code. Such evidence may consist of his baptismal certificate, a judicial admission, a family Bible in which his name has been entered, common reputation respecting his pedigree, admission by silence, the testimonies of witnesses, and other kinds of proof admissible under Rule 130 of the Rules of Court. 14

The trial court conceded that "the defendant's parents, as well as the plaintiff himself, told Gaudencio Mendoza and Isaac Mendoza, that Teopista was the daughter of the defendant." It should have probed this matter further in light of Rule 130, Section 39, of the Rules of Court, providing as follows:

Sec. 39. — Act or declarations about pedigree. — The act or declaration of a person deceased, or unable to testify, in respect to the pedigree of another person related to him by birth or marriage, may be received in evidence where it occurred before the controversy, and the relationship between the two persons is shown by evidence other than such act or declaration. The word "pedigree" includes relationship, family genealogy, birth, marriage, death, the dates when and the places where these facts occurred, and the names of the relatives. It embraces also facts of family history intimately connected with pedigree.

The statement of the trial court regarding Teopista's parentage is not entirely accurate. To set the record straight, we will stress that it was only Isaac Mendoza who testified on this question of pedigree, and he did not cite Casimiro's father. His testimony was that he was informed by his father Hipolito, who was Casimiro's brother, and Brigida Mendoza, Casimiro's own mother, that Teopista was Casimiro's illegitimate daughter. 15

Such acts or declarations may be received in evidence as an exception to the hearsay rule because "it is the best the nature of the case admits and because greater evils are apprehended from the rejection of such proof than from its admission. 16 Nevertheless, precisely because of its nature as hearsay evidence, there are certain safeguards against its abuse. Commenting on this provision, Francisco enumerates the following requisites that have to be complied with before the act or declaration regarding pedigree may be admitted in evidence:

1. The declarant is dead or unable to testify.

2. The pedigree must be in issue.

3. The declarant must be a relative of the person whose pedigree is in issue.

4. The declaration must be made before the controversy arose.

5. The relationship between the declarant and the person whose pedigree is in question must be shown by evidence other than such declaration. 17

All the above requisites are present in the case at bar. The persons who made the declarations about the pedigree of Teopista, namely, the mother of Casimiro, Brigida Mendoza, and his brother, Hipolito, were both dead at the time of Isaac's testimony. The declarations referred to the filiation of Teopista and the paternity of Casimiro, which were the very issues involved in the complaint for compulsory recognition. The declarations were made before the complaint was filed by Teopista or before the controversy arose between her and Casimiro. Finally, the relationship between the declarants and Casimiro has been established by evidence other than such declaration, consisting of the extrajudicial partition of the estate of Florencio Mendoza, in which Casimiro was mentioned as one of his heirs. 18

The said declarations have not been refuted. Casimiro could have done this by deposition if he was too old and weak to testify at the trial of the case.

If we consider the other circumstances narrated under oath by the private respondent and her witnesses, such as the financial doles made by Casimiro to Brigida Toring, the hiring of Teopista's husband to drive the passenger truck of Casimiro, who later sold the vehicle and gave the proceeds of the sale to Teopista and her husband, the permission he gave Lolito Tufiacao to build a house on his land after he found that the latter was living on a rented lot, and, no less remarkably, the joint savings account Casimiro opened with Teopista, we can reasonably conclude that Teopista was the illegitimate daughter of Casimiro Mendoza.

We hold that by virtue of the above-discussed declarations, and in view of the other circumstances of this case, 'reopista Toring Tufiacao has proved that she is the illegitimate daughter of Casimiro Mendoza and is entitled to be recognized as such. In so holding, we give effect to the policy of the Civil Code and the Family Code to liberalize the rule on the investigation of "the paternity of illegitimate children, without prejudice to the right of the alleged parent to resist the claimed status with his own defenses, including evidence now obtainable through the facilities of modern medicine and technology

WHEREFORE, the petition is DENIED. Judgment is hereby rendered DECLARING Teopista Toring Tuñacao to be the illegitimate child of the late Casimiro Mendoza and entitled to all the rights appurtenant to such status. Costs against the petitioner.

SO ORDERED.

PURITA ALIPIO, petitioner, vs. COURT OF APPEALS and ROMEO G. JARING, represented by his Attorney-In-Fact RAMON G. JARING, respondents.

D E C I S I O N

MENDOZA, J.:

The question for decision in this case is whether a creditor can sue the surviving spouse for the collection of a debt which is owed by the conjugal partnership of gains, or whether such claim must be filed in proceedings for the settlement of the estate of the decedent. The trial court and the Court of Appeals ruled in the affirmative. We reverse.

The facts are as follows:

Respondent Romeo Jaring[1] was the lessee of a 14.5 hectare fishpond in Barito, Mabuco, Hermosa, Bataan. The lease was for a period of five years ending on September 12, 1990. On June 19, 1987, he subleased the fishpond, for the remaining period of his lease, to the spouses Placido and Purita Alipio and the spouses Bienvenido and Remedios Manuel. The stipulated amount of rent was P485,600.00, payable in two installments of P300,000.00 and P185,600.00, with the second installment falling due on June 30, 1989. Each of the four sublessees signed the contract.

The first installment was duly paid, but of the second installment, the sublessees only satisfied a portion thereof, leaving an unpaid balance of P50,600.00. Despite due demand, the sublessees failed to comply with their obligation, so that, on October 13, 1989, private respondent sued the Alipio and Manuel spouses for the collection of the said amount before the Regional Trial Court, Branch 5, Dinalupihan, Bataan. In the alternative, he prayed for the rescission of the sublease contract should the defendants fail to pay the balance.

Petitioner Purita Alipio moved to dismiss the case on the ground that her husband, Placido Alipio, had passed away on December 1, 1988.[2] She based her action on Rule 3, §21 of the 1964 Rules of Court which then provided that "when the action is for recovery of money, debt or interest thereon, and the defendant dies before final judgment in the Court of First Instance, it shall be dismissed to be prosecuted in the manner especially provided in these rules." This provision has been amended so that now Rule 3, §20 of the 1997 Rules of Civil Procedure provides:

When the action is for the 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.

The trial court denied petitioner's motion on the ground that since petitioner was herself a party to the sublease contract, she could be independently impleaded in the suit together with the Manuel spouses and that the death of her husband merely resulted in his exclusion from the case.[3] The Manuel spouses failed to file their answer. For this reason, they were declared in default.

On February 26, 1991, the lower court rendered judgment after trial, ordering petitioner and the Manuel spouses to pay private respondent the unpaid balance of P50,600.00 plus attorney's fees in the amount of P10,000.00 and the costs of the suit.

Petitioner appealed to the Court of Appeals on the ground that the trial court erred in denying her motion to dismiss. In its decision[4] rendered on July 10, 1997, the appellate court dismissed her appeal. It held:

The rule that an action for recovery of money, debt or interest thereon must be dismissed when the defendant dies before final judgment in the regional trial court, does not apply where there are other defendants against whom the action should be maintained. This is the teaching of Climaco v. Siy Uy, wherein the Supreme Court held:

Upon the facts alleged in the complaint, it is clear that Climaco had a cause of action against the persons named as defendants therein. It was, however, a cause of action for the recovery of damages, that is, a sum of money, and the corresponding action is, unfortunately, one that does not survive upon the death of the defendant, in accordance with the provisions of Section 21, Rule 3 of the Rules of Court.

x x x x x x x x x

However, the deceased Siy Uy was not the only defendant, Manuel Co was also named defendant in the complaint. Obviously, therefore, the order appealed from is erroneous insofar as it dismissed the case against Co. (Underlining added)

Moreover, it is noted that all the defendants, including the deceased, were signatories to the contract of sub-lease. The remaining defendants cannot avoid the action by claiming that the death of one of the parties to the contract has totally extinguished their obligation as held in Imperial Insurance, Inc. v. David:

We find no merit in this appeal. Under the law and well settled jurisprudence, when the obligation is a solidary one, the creditor may bring his action in toto against any of the debtors obligated in solidum. Thus, if husband and wife bound themselves jointly and severally, in case of his death, her liability is independent of and separate from her husband's; she may be sued for the whole debt and it would be error to hold that the claim against her as well as the claim against her husband should be made in the decedent's estate. (Agcaoili vs. Vda. de Agcaoili, 90 Phil. 97).[5]

Petitioner filed a motion for reconsideration, but it was denied on June 4, 1998.[6] Hence this petition based on the following assignment of errors:

A. THE RESPONDENT COURT COMMITTED REVERSIBLE ERROR IN APPLYING CLIMACO v. SIY UY, 19 SCRA 858, IN SPITE OF THE FACT THAT THE PETITIONER WAS NOT SEEKING THE DISMISSAL OF THE CASE AGAINST REMAINING DEFENDANTS BUT ONLY WITH RESPECT TO THE CLAIM FOR PAYMENT AGAINST HER AND HER HUSBAND WHICH SHOULD BE PROSECUTED AS A MONEY CLAIM.

B. THE RESPONDENT COURT COMMITTED REVERSIBLE ERROR IN APPLYING IMPERIAL INSURANCE INC. v. DAVID, 133 SCRA 317, WHICH IS NOT APPLICABLE BECAUSE THE SPOUSES IN THIS CASE DID NOT BIND THEMSELVES JOINTLY AND SEVERALLY IN FAVOR OF RESPONDENT JARING.[7]

The petition is meritorious. We hold that a creditor cannot sue the surviving spouse of a decedent in an ordinary proceeding for the collection of a sum of money chargeable against the conjugal partnership and that the proper remedy is for him to file a claim in the settlement of estate of the decedent.

First. Petitioner's husband died on December 1, 1988, more than ten months before private respondent filed the collection suit in the trial court on October 13, 1989. This case thus falls outside of the ambit of Rule 3, §21 which deals with dismissals of collection suits because of the death of the defendant during the pendency of the case and the subsequent procedure to be undertaken by the plaintiff, i.e., the filing of claim in the proceeding for the settlement of the decedent's estate. As already noted, Rule 3, §20 of the 1997 Rules of Civil Procedure now provides that the case will be allowed to continue until entry of final judgment. A favorable judgment obtained by the plaintiff therein will then be enforced in the manner especially provided in the Rules for prosecuting claims against the estate of a deceased person. The issue to be resolved is whether private respondent can, in the first place, file this case against petitioner.

Petitioner and her late husband, together with the Manuel spouses, signed the sublease contract binding themselves to pay the amount of stipulated rent. Under the law, the Alipios' obligation (and also that of the Manuels) is one which is chargeable against their conjugal partnership. Under Art. 161(1) of the Civil Code, the conjugal partnership is liable for

All debts and obligations contracted by the husband for the benefit of the conjugal partnership, and those contracted by the wife, also for the same purpose, in the cases where she may legally bind the partnership.[8]

When petitioner's husband died, their conjugal partnership was automatically dissolved[9] and debts chargeable against it are to be paid in the settlement of estate proceedings in accordance with Rule 73, §2 which states:

Where estate settled upon dissolution of marriage. When the marriage is dissolved by the death of the husband or wife, the community property shall be inventoried, administered, and liquidated, and the debts thereof paid, in the testate or intestate proceedings of the deceased spouse. If both spouses have died, the conjugal partnership shall be liquidated in the testate or intestate proceedings of either.

As held in Calma v. Tañedo,[10] after the death of either of the spouses, no complaint for the collection of indebtedness chargeable against the conjugal partnership can be brought against the surviving spouse. Instead, the claim must be made in the proceedings for the liquidation and settlement of the conjugal property. The reason for this is that upon the death of one spouse, the powers of administration of the surviving spouse ceases and is passed to the administrator appointed by the court having jurisdiction over the settlement of estate proceedings.[11] Indeed, the surviving spouse is not even a de facto administrator such that conveyances made by him of any property belonging to the partnership prior to the liquidation of the mass of conjugal partnership property is void.[12]

The ruling in Calma v. Tañedo was reaffirmed in the recent case of Ventura v. Militante.[13] In that case, the surviving wife was sued in an amended complaint for a sum of money based on an obligation allegedly contracted by her and her late husband. The defendant, who had earlier moved to dismiss the case, opposed the admission of the amended complaint on the ground that the death of her husband terminated their conjugal partnership and that the plaintiff's claim, which was chargeable against the partnership, should be made in the proceedings for the settlement of his estate. The trial court nevertheless admitted the complaint and ruled, as the Court of Appeals did in this case, that since the defendant was also a party to the obligation, the death of her husband did not preclude the plaintiff from filing an ordinary collection suit against her. On appeal, the Court reversed, holding that

as correctly argued by petitioner, the conjugal partnership terminates upon the death of either spouse. . . . Where a complaint is brought against the surviving spouse for the recovery of an indebtedness chargeable against said conjugal [partnership], any judgment obtained thereby is void. The proper action should be in the form of a claim to be filed in the testate or intestate proceedings of the deceased spouse.

In many cases as in the instant one, even after the death of one of the spouses, there is no liquidation of the conjugal partnership. This does not mean, however, that the conjugal partnership continues. And private respondent cannot be said to have no remedy. Under Sec. 6, Rule 78 of the Revised Rules of Court, he may apply in court for letters of administration in his capacity as a principal creditor of the deceased . . . if after thirty (30) days from his death, petitioner failed to apply for administration or request that administration be granted to some other person.[14]

The cases relied upon by the Court of Appeals in support of its ruling, namely, Climaco v. Siy Uy[15] and Imperial Insurance, Inc. v. David,[16] are based on different sets of facts. In Climaco, the defendants, Carlos Siy Uy and Manuel Co, were sued for damages for malicious prosecution. Thus, apart from the fact the claim was not against any conjugal partnership, it was one which does not survive the death of defendant Uy, which merely resulted in the dismissal of the case as to him but not as to the remaining defendant Manuel Co.

With regard to the case of Imperial, the spouses therein jointly and severally executed an indemnity agreement which became the basis of a collection suit filed against the wife after her husband had died. For this reason, the Court ruled that since the spouses' liability was solidary, the surviving spouse could be independently sued in an ordinary action for the enforcement of the entire obligation.

It must be noted that for marriages governed by the rules of conjugal partnership of gains, an obligation entered into by the husband and wife is chargeable against their conjugal partnership and it is the partnership which is primarily bound for its repayment.[17] Thus, when the spouses are sued for the enforcement of an obligation entered into by them, they are being impleaded in their capacity as representatives of the conjugal partnership and not as independent debtors such that the concept of joint or solidary liability, as between them, does not apply. But even assuming the contrary to be true, the nature of the obligation involved in this case, as will be discussed later, is not solidary but rather merely joint, making Imperial still inapplicable to this case.

From the foregoing, it is clear that private respondent cannot maintain the present suit against petitioner. Rather, his remedy is to file a claim against the Alipios in the proceeding for the settlement of the estate of petitioner's husband or, if none has been commenced, he can file a petition either for the issuance of letters of administration[18] or for the allowance of will,[19] depending on whether petitioner's husband died intestate or testate. Private respondent cannot short-circuit this procedure by lumping his claim against the Alipios with those against the Manuels considering that, aside from petitioner's lack of authority to represent their conjugal estate, the inventory of the Alipios' conjugal property is necessary before any claim chargeable against it can be paid. Needless to say, such power exclusively pertains to the court having jurisdiction over the settlement of the decedent's estate and not to any other court.

Second. The trial court ordered petitioner and the Manuel spouses to pay private respondent the unpaid balance of the agreed rent in the amount of P50,600.00 without specifying whether the amount is to be paid by them jointly or solidarily.

In connection with this, Art. 1207 of the Civil Code provides:

The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestations. There is a solidary liability only when the obligation expressly so estates, or when the law or the nature of the obligation requires solidarity.

Indeed, if from the law or the nature or the wording of the obligation the contrary does not appear, an obligation is presumed to be only joint, i.e., the debt is divided into as many equal shares as there are debtors, each debt being considered distinct from one another.[20]

Private respondent does not cite any provision of law which provides that when there are two or more lessees, or in this case, sublessees, the latter's obligation to pay the rent is solidary. To be sure, should the lessees or sublessees refuse to vacate the leased property after the expiration of the lease period and despite due demands by the lessor, they can be held jointly and severally liable to pay for the use of the property. The basis of their solidary liability is not the contract of lease or sublease but the fact that they have become joint tortfeasors.[21] In the case at bar, there is no allegation that the sublessees refused to vacate the fishpond after the expiration of the term of the sublease. Indeed, the unpaid balance sought to be collected by private respondent in his collection suit became due on June 30, 1989, long before the sublease expired on September 12, 1990.

Neither does petitioner contend that it is the nature of lease that when there are more than two lessees or sublessees their liability is solidary. On the other hand, the pertinent portion of the contract involved in this case reads:[22]

2. That the total lease rental for the sub-leased fishpond for the entire period of three (3) years and two (2) months is FOUR HUNDRED EIGHT-FIVE THOUSAND SIX HUNDRED (P485,600.00) PESOS, including all the improvements, prawns, milkfishes, crabs and related species thereon as well all fishing equipment, paraphernalia and accessories. The said amount shall be paid to the Sub-Lessor by the Sub-Lessees in the following manner, to wit:

A. Three hundred thousand (P300,000.00) Pesos upon signing this contract; and

B. One Hundred Eight-Five Thousand Six-Hundred (P185,6000.00) Pesos to be paid on June 30, 1989.

Clearly, the liability of the sublessees is merely joint. Since the obligation of the Manuel and Alipio spouses is chargeable against their respective conjugal partnerships, the unpaid balance of P50,600.00 should be divided into two so that each couple is liable to pay the amount of P25,300.00.

WHEREFORE, the petition is GRANTED. Bienvenido Manuel and Remedios Manuel are ordered to pay the amount of P25,300.00, the attorney's fees in the amount of P10,000.00 and the costs of the suit. The complaint against petitioner is dismissed without prejudice to the filing of a claim by private respondent in the proceedings for the settlement of estate of Placido Alipio for the collection of the share of the Alipio spouses in the unpaid balance of the rent in the amount of P25,300.00.

SO ORDERED.

[G.R. No. L-48359. March 30, 1993.]

MANOLO P. CERNA, Petitioner, v. THE HONORABLE COURT OF APPEALS and CONRAD C. LEVISTE, Respondents.

Zosa & Quijano Law Offices for Petitioner.

Benjamin H. Aquino for Private Respondent.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS & CONTRACTS; SOLIDARY LIABILITY, NOT PRESUMED. — Only Delgado signed the promissory note and accordingly, he was the only one bound by the contract of loan. Nowhere did it appear in the promissory note that petitioner was a co-debtor. The law is clear that" (c)ontracts take effect only between the parties . . ." But by some stretch of the imagination, petitioner was held solidarily liable for the debt allegedly because he was a co-mortgagor of the principal debtor, Delgado. This ignores the basic precept that" (t)here is solidarily liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity." The contract of loan, as evidenced by the promissory note, was signed by Delgado only. Petitioner had no part in the said contract. Thus, nowhere could it be seen from the agreement that petitioner was solidarily bound with Delgado for the payment of the loan.

2. ID.; ID.; SIGNATORY TO THE PRINCIPAL CONTRACT OF LOAN, PRIMARILY LIABLE; THIRD-PARTY MORTGAGOR NOT SOLIDARILY BOUND WITH THE PRINCIPAL DEBTOR. — There is no legal provision nor jurisprudence in our jurisdiction which makes a third person who secures the fulfillment of another’s obligation by mortgaging his own property to be solidarily bound with the principal obligor. A chattel mortgage may be "an accessory contract" to a contract of loan, but that fact alone does not make a third-party mortgagor solidarily bound with the principal debtor in fulfilling the principal obligation that is, to pay the loan. The signatory to the principal contract — loan — remains to be primarily bound. It is only upon the default of the latter that the creditor may have been recourse on the mortgagors by foreclosing the mortgaged properties in lieu of an action for the recovery of the amount of the loan. And the liability of the third-party mortgagors extends only to the property mortgaged. Should there be any deficiency, the creditors has recourse on the principal debtor.

3. ID.; ID.; ID.; A SPECIAL POWER OF ATTORNEY AUTHORIZING THE MORTGAGE OF CERTAIN PROPERTIES DID NOT MAKE THE ATTORNEY-IN-FACT A MORTGAGOR. — The mortgage contract was also signed only by Delgado as mortgagor. The Special Power of Attorney did not make petitioner a mortgagor. All it did was to authorized Delgado to mortgage certain properties belonging to petitioner. And this is in compliance with the requirement in Article 2085 of the Civil Code which states that: "Art. 2085. The following requisites are essential to the contracts of pledge and mortgage: (3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose." In effect, petitioner lent his car to Delgado so that the latter may mortgage the same to secure his debt. Thus, from the contract itself, it was clear that only Delgado was the mortgagor regardless of the fact the he used properties belonging to a third person to secure his debt.

4. REMEDIAL LAW; CIVIL ACTIONS; FILING OF COLLECTION SUIT BARRED THE FORECLOSURE OF MORTGAGE. — We agree with petitioner that the filing of collection suit barred the foreclosure of the mortgage. Thus: "A mortgage who files a suit for collection abandons the remedy of foreclosure of the chattel mortgage constituted over the personal property as security for the debt or value of the promissory note which he seeks to recover in the said collection suit." The reason for this rule is that: ". . . when, however, the mortgage elects to file a suit for collection, not foreclosure, thereby abandoning the chattel as basis for relief, he clearly manifest his lack of desire and interest to go after the mortgaged property as security for the promissory note . . ."cralaw virtua1aw library

5. ID.; MORTGAGE DEBT DUE FROM ESTATE; OPTIONS GIVEN TO CREDITORS UNDER SEC. 7, RULE 86, NEW RULES OF COURT. — Leviste, having chosen to file the collection suit, could not now run after petitioner for the satisfaction of the debt. This is even more true in this case because of the death of the principal debtor, Delgado. Leviste was pursuing a money claim against a deceased person. Section 7, Rule 86 of the Rules of Court provides: "Sec. 7. Mortgage debt due from estate. — A creditor holding a claim against the deceased secured by mortgaged or other collateral security, may abandon the security and prosecute his claim in the manner provided in this rule, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by action in court, making the executor or administrator a party defendant, and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged, in the foreclosure or the other proceeding to realize upon security, he may claim his deficiency judgment in the manner provided in the preceding section; or he may upon his mortgage or other security alone, and foreclosure the same at any time within the period of the statue of limitations, and in that event he shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate; . . ."

D E C I S I O N

CAMPOS, JR., J.:

Before us is a Petition for Review on Certiorari of the decision ** of the Court of Appeals in CA G.R. No. SP-07237, dated March 31, 1978.

The facts of this case are as follows:chanrob1es virtual 1aw library

On or about October 16, 1972, Celerino Delgado (Delgado) and Conrad Leviste (Leviste) entered into a loan agreement which was evidenced by a promissory note worded as follows:jgc:chanrobles.com.ph

"FOR VALUE RECEIVED, I, CELERINO DELGADO, with postal address at 98 K-11 St., Kamias Rd., Quezon City, promise to pay to the order of CONRAD C. LEVISTE, NINETY (90) DAYS after date, at his office at 215 Buendia Ave., Makati Rizal, then total sum of SEVENTEEN THOUSAND FIVE HUNDRED (P17,500.00) PESOS, Philippine Currency without necessity of demand, with interest at the rate of TWELVE (12%) PERCENT per annum;" 1

On the same date, Delgado executed a chattel mortgage 2 over a Willy’s jeep owned by him. And acting as the attorney-in-fact of herein petitioner, Manolo P. Cerna (petitioner), he also mortgage a "Taunus’ car owned by the latter.

The period lapsed without Delgado paying the loan. This prompted Leviste to a file a collection suit docketed as Civil Case No. 17507 3 with the Court of First Instance of Rizal, Branch XXII against Delgado and petitioner as solidary debtors. Herein petitioner filed his first Motion to Dismiss 4 on April 4, 1973. The grounds cited in the Motion were lank of cause of action against petitioner and the death of Delgado. Anent the latter, petitioner claimed that the claim should be filed in the proceedings for the settlement of Delgado’s estate as the action did not survive Delgado’s death. Moreover, he also stated that since Leviste already opted to collect on the note, he could no longer foreclose the mortgage. This Motion to Dismiss was denied on August 15, 1973 by Judge Nicanor S. Sison. Thereafter, petitioner filed with the Court of Appeals a special

civil action for certiorari, mandamus, and prohibition with preliminary injunction docketed as CA G.R. No. 03088 on the ground that the respondent judge committed grave abuse of discretion in refusing to dismiss the complaint. On June 28, 1976, the Court of Appeals 5 denied the petition because herein petitioner failed to prove the death of Delgado and the consequent settlement proceedings regarding the latter’s estate. Neither did petitioner adequately prove his claim that the special power of attorney in favor of Delgado was forged.

On February 18, 1977, petitioner filed his second Motion to Dismiss on the ground that the trial court, now presided by Judge Nelly L. Romero Valdellon, acquired no jurisdiction over deceased defendant, that the claim did not survive, and that there was no cause of action against him. On May 13, 1977, the said judge dismissed the motion in an order hereunder quoted, to wit:jgc:chanrobles.com.ph

"Considering the second motion to dismiss filed by respondent Manolo Cerna on March 4, 1977, as well as plaintiff’s opposition thereto reiteration of the same grounds raised in the first motion to dismiss dated April 4, 1973, this Court hereby reiterates its resolution found in its order dated August 15, 1973." 6

Petitioner filed a motion to reconsider the said order but this was denied. Then, on October 17, 1977, he filed another petition for certiorari and prohibition docketed as CA G.R. No. SP-07237 with the Court of Appeals. This petition was dismissed by the said court in a decision which stated, thus:jgc:chanrobles.com.ph

"WHEREFORE, the herein petition insofar as it alleges lack of cause of action on the part of the herein petitioner is concerned, is hereby dismissed and/or denied and the writ of preliminary injunction previously issued by this Court is hereby lifted and/or set aside; insofar, however, as the case against the deceased Celerino Delgado is concerned, the petition is granted, that is, the complaint in the lower court against Celerino Delgado should be dismissed. No costs." 7

Thereafter, the instant petition for review was filed. Petitioner raised the following legal issue:jgc:chanrobles.com.ph

". . . NOW, INASMUCH AS THE COMPLAINT IS ONLY FOR COLLECTION OF A SUM OF MONEY BASED ON THE PROMISSORY NOTE, SHOULD NOT THE COMPLAINANT BE DISMISSED FOR LACK OF CAUSE OF ACTION AS AGAINST MANOLO P. CERNA WHO IS NOT A DEBTOR UNDER THE PROMISSORY NOTE — CONSIDERING THAT ACCORDING TO SETTLED JURISPRUDENCE THE FILING OF A COLLECTION SUIT IS DEEMED AN ABANDONMENT OF THE SECURITY OF THE CHATTEL MORTGAGE?" 8

In holding petitioner liable, the Court of Appeals held that petitioner and Delgado were solidary debtors. Thus, it held:jgc:chanrobles.com.ph

"But the herein petitioner pleads that the complaint states no cause of actions against the defendants Manolo P. Cerna on the following grounds: 1) that the petitioner did not sign as joint obligator in the promissory note signed by the deceased Celerino Delgado hence, even if the allegations of the complaint are hypothetically admitted there is no cause of action against the herein petitioner because having proceeded against the promissory note he is deemed to have abandoned the foreclosure of the chattel mortgage contract. This contention deserves scant consideration. The chattel mortgage contract, prima facie shows that it created the joint and solidary obligation of petitioner and Celerino Delgado against private Respondent." 9 (Emphasis ours)

We do not agree. Only Delgado signed the promissory note and accordingly, he was the only one bound by the contract of loan. Nowhere did it appear in the promissory note that petitioner was a co-debtor. The law is clear that" (c)ontracts take effect only between the parties . . ." 10

But by some stretch of the imagination, petitioner was held solidarily liable for the debt allegedly because he was a co-mortgagor of the principal debtor, Delgado. This ignores the basic precept that" (t)here is solidarily liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity." 11

We have already stated that the contract of loan, as evidenced by the promissory note, was signed by Delgado only. Petitioner had no part in the said contract. Thus, nowhere could it be seen from the agreement that petitioner was solidarily bound with Delgado for the payment of the loan.

There is also no legal provision nor jurisprudence in our jurisdiction which makes a third person who secures the fulfillment of another’s obligation by mortgaging his own property to be solidarily bound with the principal obligor. A chattel mortgage may be "an accessory contract" 12 to a contract of loan, but that fact alone does not make a third-party mortgagor solidarily bound with the principal debtor in fulfilling the principal obligation that is, to pay the loan. The signatory to the principal contract — loan — remains to be primarily bound. It is only upon the default of the latter that the creditor may have been recourse on the mortgagors by foreclosing the mortgaged properties in lieu of an action for the recovery of the amount of the loan. And the liability of the third-party mortgagors extends only to the property mortgaged. Should there be any deficiency, the creditors has recourse on the principal debtor.

In this case, however, the mortgage contract was also signed only by Delgado as mortgagor. It is true that the contract stated the following:jgc:chanrobles.com.ph

"That this CHATTEL MORTGAGE, made and entered into this 16th day of October, 1972 at Makati, Rizal, by and between:chanrob1es virtual 1aw library

CELERINO DELGADO, . . . as Attorney-in -Fact of Manolo P. Cerna . . . by virtue of a Special Power of Attorney executed by said Manolo P. Cerna in my favor under the date of October 10, 1972 and acknowledged before Orlando J. Coruna . . . herein referred to as the MORTGAGOR; - and -

CONRAD C. LEVISTE, . . . hereinafter referred to as the MORTGAGEE." 13

But this alone does not make petitioner a co-mortgagor especially so since only Delgado singed the chattel mortgage as mortgagor. The Special Power of Attorney did not make petitioner a mortgagor. All it did was to authorized Delgado to mortgage certain properties belonging to petitioner. And this is in compliance with the requirement in Article 2085 of the Civil Code which states that:chanrobles virtual lawlibrary

"Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:chanrob1es virtual 1aw library

x       x       x

(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose." (Emphasis ours.)

In effect, petitioner lent his car to Delgado so that the latter may mortgage the same to secure his debt. Thus, from the contract itself, it was clear that only Delgado was the mortgagor regardless of the fact the he used properties belonging to a third person to secure his debt.

Granting, however, that petitioner was obligated under the mortgage contract to answer for Delgado’s indebtedness, under the circumstances, petitioner could not be held liable because the complaint was for recovery of a sum of money, and not for the foreclosure of the security. We agree with petitioner that the filing of collection suit barred the foreclosure of the mortgage. Thus:jgc:chanrobles.com.ph

"A mortgage who files a suit for collection abandons the remedy of foreclosure of the chattel mortgage constituted over the personal property as security for the debt or value of the promissory note which he seeks to recover in the said collection suit." 14

The reason for this rule is that:jgc:chanrobles.com.ph

". . . when, however, the mortgage elects to file a suit for collection, not foreclosure, thereby abandoning the chattel as basis for relief, he clearly manifest his lack of desire and interest to go after the mortgaged property as security for the promissory note . . ." 15

Hence, Leviste, having chosen to file the collection suit, could not now run after petitioner for the satisfaction of the debt. This is even more true in this case because of the death of the principal debtor, Delgado. Leviste was pursuing a money claim against a deceased person. Section 7, Rule 86 of the Rules of Court Provides:jgc:chanrobles.com.ph

"Sec. 7. Mortgage debt due from estate. — A creditor holding a claim against the deceased secured by mortgaged or other collateral security, may abandon the security and prosecute his claim in the manner provided in this rule, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by action in court, making the executor or administrator a party defendant, and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged, in the foreclosure or the other proceeding to realize upon security, he may claim his deficiency judgment in the manner provided in the preceding section; or he may upon his mortgage or other security alone, and foreclosure the same at any time within the period of the statue of limitations, and in that event he shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate; . . ."cralaw virtua1aw library

The above-quoted provision is substantially similar to Section 708 of the Code of Civil Procedure which states:jgc:chanrobles.com.ph

"Sec. 708. A creditor holding against the deceased, secured by mortgage or other collateral security, may abandon the security and prosecute his claim before the committee, and share in the mortgage or realize upon his security, by ordinary action in court, making the executor or administrator a party defendant; . . ."cralaw virtua1aw library

The Supreme Court, in the case of Osorio v. San Agustin, 16 has made the following interpretation of the said provision,, to wit:jgc:chanrobles.com.ph

"It is clear by the provisions quoted section that a person holding a mortgage against the estate of a deceased person may abandon such security and prosecute his claim before the committee, and share in the distribution of the general assets of the estate. It provides also that he may, at his own election, foreclose the mortgage and realize upon his security. But the law does not provide that he may have both remedies. If he elects one he must abandon the other. If he fails in one he fails utterly."cralaw virtua1aw library

But while there is a merit in the substantial allegations of this petition, We are constrained to deny the petition on procedural grounds. The facts of this case reveal that the decision under review in the decision in the second certiorari and prohibition case lodged petitioner against the judge trying the civil case. It appeared that after the denial of the first motion to dismiss, petitioner filed CA-G.R. No. 03088 wherein petitioner alleged grave abuse of discretion on the part of Judge Sison. The first petition was denied by the Court of Appeals. The decision became final. The second motion to dismiss, based on the same grounds, was thereafter filed. It was likewise denied and another petition for certiorari and prohibition was again instituted. The decision in the latter case is now under review.chanrobles.com : virtual law library

We agree with the contention of private respondent, that the action has been barred by the principle of res judicata.

It appears in this case that the second motion was filed to circumvent the effects of the finality of the decision of the Court of Appeals in Ca-G.R. No. 03088. Petitioner intended the second motion and the subsequent proceedings as remedies for his lapsed appeal. We cannot such behavior. It delayed the proceedings in this case and unduly burdened the courts. Petitioner should have allowed the trial of the case to go on where his defenses could still be presented and heard.

WHEREFORE, in view of the forgoing,, the Petition is hereby DISMISSED. With costs.

SO ORDERED.

vi

vii

viii

ixG.R. No. 88602 April 6, 1990

TOMASA VDA. DE JACOB, as Special Administratrix of the Estate of the Deceased ALFREDO E. JACOB, petitioner,

vs.HONORABLE COURT OF APPEALS, BICOL SAVINGS & LOAN ASSOCIATION, JORGE CENTENERA, AND LORENZO C. ROSALES, respondents.

G.R. No. 89544 April 6, 1990

THE ESTATE OF THE LATE ALFREDO JACOB, represented by its Administrator, TOMASA VDA. DE JACOB, petitioner vs.HONORABLE COURT OF APPEALS, AND UNITED BICOL SAVINGS BANK, respondents.

Benito P. Fable for petitioner.

Contreras & Associates for private respondents.

Rosales & Associates Law Office for private respondent Rosales.

Ramon Quisumbing, Jr. for private respondent Centenera.

 

GANCAYCO J.:

The question of whether or not an extrajudicial foreclosure of a mortgage may proceed even after the death of the mortgagor and whether or not a petition for the issuance of a writ of possession may be barred by estoppel, are the issues presented in this petition.

Dr. Alfredo E. Jacob was the registered owner of a parcel of land described under Transfer Certificate of Title No. 1433 of the Register of Deeds of Naga City. 1 Sometime in 1972 Jorge Centenera was appointed as administrator of Hacienda Jacob until January 1, 1978 when the Special Power of Attorney executed in his favor by Dr. Jacob was revoked by the latter. 2 The land in question is located at Liboton, Naga City and has an area of approximately 3,376 square meters. Because of the problem of paying realty taxes, internal revenue taxes and unpaid wages of farm laborers of the hacienda, Dr. Jacob asked Centenera to negotiate for a loan. For this purpose, a special power of attorney was executed and acknowledged by Dr. Jacob before notary public Lorenzo Rosales the material portions of which read as follows:

That I, ALFREDO E. JACOB, Filipino, of legal age, widower, address at Tigaon, Camarines Sur, have named, constituted and appointed and by these presents do name, constitute and appoint JORGE CENTENERA, Filipino, of legal age, married to Judith E. Centenera, resident of and with postal address at Naga City, to be my true and lawful attorney-in-fact, for me and in my name, place and stead. and to do and perform all the necessary acts and deeds, to wit:

1. To mortgage and/or, hypothecate with any banking institution in the City of Naga or elsewhere in the Philippines, the following described properties of which I am the absolute owner, as follows:

A parcel of land (Plan Ps-80014, Lot 818 of Naga Cad. 290 Case No. M 472 L.R.C. Rec. No. N-5986) located at Liboton, Naga City. Bounded on the NE, by Alfredo Cleto (Lot 383); Martin Perez (Lot 385) and Benedicto Naz (Lot 394), SE. by Benedicto Naz (Lot 394); S. by Pedro San Juan (Lot 317); SW by Margarita Narciso vs. Simeon Ty Ganco (Lot 319); and NW by the Calawag Street, containing an area of 3,376 square meters covered by TCT No. 1433.

A parcel of land (Lot 15, Block 4 of the subdivision plan Psd-46484, being a portion of Lot 1105-now of the Cad. survey of Naga, L.R.C. Cad. Rec. N. N-78), situated in Tinago, Naga City. Bounded on the SE., along line 1-2 by Lot 17, Block 4; along line 2-3 by road lot 4; along line 3-4 by Lot 13, Block 4; and along line 4-1 by Lot 14, Block 4 all of the subdivision plan. Containing an area of 236 square meters, covered by TCT No. 393.

A parcel of land (Lot 14, Block 4 of the subdivision plan Psd-46464, being a portion of Lot 1106-now Cad. survey of Naga, L.R.C. Cad. Rec. No. N-78), situated in Tinago, Naga City, Bounded on SW., along line 1-2 by Lot 15; Block 4; along line 23 by Lot 12, Block 4; along line 3-4 by road lot 3; and along line 41 by Lot 16, Block 4, all of the subdivision plan, containing an area of 239 square meters, covered by TCT No. 397.

2. To receive cash in any amount made in payment of the mortgage of the above described properties; to sign checks, drafts, money orders, treasury warrants, to indorse the same, to cash and make deposits with any bank here or elsewhere and to withdraw such deposit; to execute, sign and deliver any or all documents of mortgage, contracts, deeds or any instrument necessary and pertinent for purposes of mortgaging and/or encumbering said properties in favor of any banking institution in the City of Naga or elsewhere and lastly, to do and perform any and all acts and deeds which to him may seem most to my own benefit and advantage.

HEREBY GIVING AND GRANTING unto my said attorney-in-fact full power and authority to do and perform any and every act and thing whatever requisite or necessary or proper to be done in and about the premises, as fully to all intents and purposes as I might or could do if personally present and acting in person and I hereby ratify and confirm all that my said attorney shall do and had done lawfully or cause to be done under any by virtue of these presents. 3

Consequently, Centenera secured a loan in the amount of P18,000.00 from the Bicol Savings & Loan Association sometime in September 1972. Centenera signed and executed the real estate mortgage and promissory note as attorney-in-fact of Dr. Jacob. 4 When the loan fell due in 1975 Centenera failed to pay the same but was able to arrange a restructuring of the loan using the same special power of attorney and property as security. Another set of loan documents, namely: an amended real estate mortgage and promissory note dated November 27, 1975 was executed by Centenera as attorney-in-fact of Dr. Jacob. 5 Again, Centenera failed to pay the loan when it fell due and so he arranged for another restructuring of the loan with the bank on November 23, 1976. The corresponding promissory note was again executed by Centenera on behalf of Jacob under the special power of attorney.

The mortgage was annotated on the title 6 and when the loan was twice re-structured, the proceeds of the same were not actually given by the bank to Centenera since the transaction was actually nothing but a renewal of the first or original loan and the supposed proceeds were applied as payment for the loan. The accrued interest for sixty (60) days was, however, paid by Centenera.

Centenera again failed to pay the loan upon the maturity date forcing the bank to send a demand letter. 7 A copy of the demand letter was sent to Dr. Jacob but no reply or denial was received by the bank. Thus, the bank foreclosed the real estate mortgage and the corresponding provisional sale of the mortgaged property to the respondent bank was effected. On November 5, 1982 a definite deed of sale of the property was executed in favor of the respondent bank as the sole and highest bidder. 8

Tomasa Vda. de Jacob who was subsequently named administratrix of the estate of Dr. Jacob and who claimed to be an heir of the latter, conducted her own investigation and therefore she filed a complaint in the Regional Trial Court of Camarines Sur alleging that the special power of attorney and the documents therein indicated are forged and therefore the loan and/or real estate mortgages and promissory notes are null and void. After trial on the merit a decision was rendered on July 30, 1987, the dispositive part of which reads as follows:

WHEREFORE, plaintiff's complaint is ordered DISMISSED for lack of a cause of action and/or her failure to prove the cause(s) of action alleged in the complaint; and judgment is rendered against the Estate of the late Dr. Alfredo Jacob in favor of the defendants on their respective counterclaim, ordering payment from said estate of the following:

(a) actual damages in the sum of P30,000.00; exemplary damages in the sum of P20,000.00; and attorney's fees of P10,000.00; to defendant Bicol Savings and Loan Association;

(b) actual damages in the sum of P30,000.00; exemplary damages in the sum of P20,000.00; moral damages in the sum of P50,000.00; attorneys fees in the sum of P10,000.00 to defendant Jorge Centenera;

(c) actual damages in the sum of P30,000.00; exemplary damages in the sum of P20,000.00; attorney's fees in the sum of P10,000.00 to defendant Atty. Lorenzo Rosales.

with interest at the legal rate from the time of the filing of the complaint, until full payment.

Costs against the plaintiff.

SO ORDERED. 9

Not satisfied therewith the plaintiff appealed therefrom to the Court of Appeals wherein on May 30, 1989 a decision was rendered affirming in toto the decision of the lower court and dismissing the appeal for lack of merit. 10

Hence, the herein petition for review docketed as G.R. No. 88602 that was filed by plaintiff therein and which raises two issues, to wit:

A. The Honorable Court of Appeals failed and completely neglected to exercise appellate determination on material issues which, independently of what said Court determined, would cause nullification of the mortgage deed and amendment thereto, as well as extrajudicial foreclosure proceedings and sale thereof.

B. The Honorable Court of Appeals likewise ignored to resolve, nay, pass upon, the issue of excessive and unfounded award of damages, which certainly calls for appellate determination as it was squarely raised on appeal. 11

However, while the action for annulment of mortgage, etc. aforestated was pending in the trial court, on November 5, 1982, a definite deed of sale was issued by the sheriff in favor of respondent bank. Without redemption having been exercised within the prescribed period, the title in the name of Dr. Jacob was cancelled and in its place, Transfer Certificate of Title No. 14661 was issued on August 9, 1983 in favor of respondent bank. Respondent bank then filed a petition for the issuance of a writ of possession in the Regional Trial Court of Naga City which was opposed by petitioner. In due course a writ of possession was issued by the trial court in a decision dated July 21, 1987 in favor of the respondent bank, the dispositive part of which reads as follows:

WHEREFORE, the petitioner UNITED BICOL SAVINGS BANK being entitled to possession of the property covered by Transfer Certificate of Title No. 14661 (registry of Naga City) let a Writ of Possession issue addressed to the respondent ESTATE OF THE LATE ALFREDO JACOB, by its administratrix Tomasa Vda. de Jacob, directing the said respondent to deliver the possession of said property to the petitioner United Bicol Savings Bank within thirty (30) days from the date this judgment becomes final; and for the Provincial Sheriff to enforce said writ and to place said petitioner United Bicol Savings Bank in possession of said property, with costs against the said respondent.

SO ORDERED.

Not satisfied therewith petitioner appealed to the Court of Appeals wherein in due course a decision was rendered on June 27, 1989 affirming the decision appealed from without pronouncement as to costs. 12 A motion for reconsideration of said decision which was filed by the petitioner was denied tied in a resolution dated July 28, 1989.

Hence the petition for review docketed as G.R. No. 89544 wherein petitioner contends that the writ of possession may not validly issue where from the admitted facts the extrajudicial foreclosure and auction sale is patently void.

The petition in G.R. No. 89544 was consolidated with the petition in G.R. No. 88602 hereinabove discussed being closely related to each other.

The petition in G.R. No. 88602 is devoid of merit.

Petitioner contends that the extrajudicial foreclosure proceedings and the sale of the property mortgaged under the amended real estate mortgage after the mortgagor died are null and void. It is pointed out that Dr. Jacob died on March 9, 1979 and that the extrajudicial foreclosure proceedings were effected after his death, that is, the public auction sale was made on May 11, 1979. Petitioner argues that such extrajudicial foreclosure can only be prosecuted during the lifetime of Dr. Jacob for the reason that such kind of foreclosure under Act No. 3135, as amended, is authorized only because of the special power of attorney inserted in the mortgage deed; and that said special power of attorney cannot extend beyond the lifetime of the supposed mortgagor.

Section 7, Rule 86 of the Rules of Court provides as follows:

Sec. 7. Mortgage debt due from estate. — A creditor holding a claim against the deceased secured by mortgage or other collateral security, may abandon the security and prosecute claim in the manner provided in this rule, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by action in court, making the executor or administrator a party defendant, and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged, in the foreclosure or other proceeding to realize upon the security, he may claim his deficiency judgment in the manner provided in the preceding section; or he may rely upon his mortgage or other security alone, and foreclose the same at any time within the period of the statute of limitations, and in that event he shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate; but nothing herein contained shall prohibit the executor or administrator from redeeming the property mortgaged or pledged, by paying the debt for which it is held as security, under the direction of the court, if the court shall adjudge it to be for the best interest of the estate that such redemption shall be made

From the foregoing provision of the Rules it is clearly recognized that a mortgagee has three remedies that may be alternately availed of in case the mortgagor dies, to wit:

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

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

(3) to rely on the mortgage exclusively, or other security and foreclose the same at anytime, before it is barred by prescription, without the right to file a claim for any deficiency.

From the foregoing it is clear that the mortgagee does not lose its light to extrajudicially foreclose the mortgage even after the death of the mortgagor as a third alternative under Section 7, Rule 86 of the Rules of Court.

The power to foreclose a mortgage is not an ordinary agency that contemplated exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection. That power survives the death of the mortgagor. 13

The right of the mortgagee bank to extrajudicially foreclose the mortgage after the death of the mortgagor, acting through his attorney-in-fact, did not depend on the authority in the deed of mortgage executed by the latter. That right existed independently of said stipulation and is clearly recognized in Section 7, Rule 86 of the Rules of Court aforecited. 14

The other issues raised in the petition are questions of fact which cannot be considered in this proceeding. The findings of facts of the appellate court are conclusive and cannot be reviewed at this level.

Likewise, the petition in G.R. No. 89544 is devoid of merit.

It is premised on the assumption that the extrajudicial foreclosure and auction sale was patently void and was without basis. On the contrary the appellate court found and so does this Court, that the extrajudicial foreclosure and auction sale was regular and in accordance with law.

While it is true that the question of the validity of said mortgage and consequently the extrajudicial foreclosure thereof was raised in a separate proceeding before the trial court the pendency of such separate civil suit can be no obstacle to the issuance of the writ of possession which is a ministerial act of the trial court after a title on the property has been consolidated in the mortgagee. 15

WHEREFORE, petitions in G.R. Nos. 88602 and 89544 are hereby DISMISSED for lack of merit, with costs against petitioner.

SO ORDERED.

DAVID MAGLAQUE, JOSE MAGLAQUE MAURO MAGLAQUE and PACITA MAGLAQUE, petitioners, vs., PLANTERS DEVELOPMENT BANK, and SPOUSES ANGEL S. BELTRAN AND ERLINDA C. BELTRAN, respondents.

D E C I S I O N

PARDO, J.:

The case is an appeal via certiorari from a decision[1] of the Court of Appeals[2] affirming that of the Regional Trial Court, Branch 22, Malolos, Bulacan,[3] dismissing the petitioners' complaint[4] for revocation of sale and reconveyance of title, with damages, against respondent bank, which had extra-judicially foreclosed the mortgage on the land owned by petitioners' predecessors in interest, for non-payment of a loan secured by such mortgage.

The facts may be related as follows:

The spouses Egmidio Maglaque and Sabina Payawal were the owners of a parcel of land, situated in the municipality of San Miguel, province of Bulacan, with an area of Four Hundred Sixty Four (464) square meters, more or less, and a residential house of strong materials erected thereon, more particularly described as follows:

“A parcel of land (Lot No. 315-A of the subdivision plan Psd-20633 being a portion of Lot 315 of the Cad. Survey of San Miguel, G. L. R. O. Cadastral Record No. 696 situated in the Municipality of San Miguel, Province of Bulacan, Island of Luzon, xx xx xx containing an area of FOUR HUNDRED SIXTY FOUR (464) SQUARE METERS, more or less and covered by Transfer Certificate of Title No. 28303, assessed at P4,180.00 as per Tax Declaration No 250.”[5]

covered by Transfer Certificate of Title No. 28303 of the Registry of Deeds of Bulacan.

On March 19, 1974, the spouses Maglaque obtained a loan of two thousand (P2,000.00) pesos from the Bulacan Development Bank[6] evidenced by a promissory note, payable on or before March 19, 1975, in two installments, the first payment of P1,000.00, shall be due on September 19, 1974, and the second payment of P1,000.00, shall be due on March 19, 1975, with interest at 12% per annum. To secure the loan, the spouses executed a deed of real estate mortgage on the above-described parcel of land, including its improvements.

On September 15, 1976, Sabina Payawal died. On December 22, 1977, Egmidio Maglaque paid Planters Development Bank the amount of P2,000.00, which the bank accepted.

On April 9, 1979, Egmidio Maglaque died.

On September 15, 1978, for non-payment in full of the loan, the bank extra-judicially foreclosed on the real estate mortgage, through the Provincial Sheriff of Bulacan, who conducted a public auction sale of the mortgaged property pursuant to the authority provided for in the deed of real restate mortgage. The bank was the highest bidder.

On March 24, 1980, after the lapse of the redemption period, the bank consolidated its title to the property, and became its registered owner under Transfer Certificate of Title No. T-259923 of the Registry of Deeds of Bulacan.

On September 4, 1980, David Maglaque, as heir of the deceased spouses Egmidio Maglaque and Sabina Payawal, filed with the Court of First Instance of Bulacan, Branch 04, Baliuag, Bulacan, a complaint for annulment of the sale conducted by the Provincial Sheriff of Bulacan, reconveyance of title, with damages, and injunction.

On September 24, 1980, the bank sold the property to the spouses Angel S. Beltran and Erlinda C. Beltran, for thirty thousand (P30,000.00) pesos.

The plaintiff amended the complaint twice to implead the other heirs of the spouses Maglaque, and defendant Beltran spouses, the buyers of the property in question.

On August 16, 1985, the parties submitted a joint stipulation of facts, as follows:

“x x x

“1.- The late Egmidio Maglaque and Sabina Payawal were the owners of a parcel of land located in San Miguel, Province of Bulacan, the description of which appears in paragraph 2 of the amended complaint. The said parcel of land was covered by TCT No. 28303 issued by the Register of Deeds of Bulacan;

“2.- On March 19, 1974, said registered owners borrowed TWO THOUSAND PESOS (P2,000.00) from Bulacan Development Bank pursuant to a promissory note with Loan No. 3423. The promissory note stipulated that the loan shall be paid on or before March 19, 1975 and the interest shall be 12% per annum; that the first payment of P1,000.00 shall be due on March 19, 1975, and that the unpaid amortization shall bear interest at the rate of 12% per annum; that in case a litigation is resorted to the borrowers shall pay attorney’s fees in addition to the legal expenses;

“3.- Present plaintiffs are the children of the spouses Egmidio Maglaque and Sabina Payawal. David Maglaque has a Special Power of Attorney to prosecute the present complaint;

“4.- The borrowers failed to pay any of the payment agreed upon in the promissory note and the real estate mortgage due to the untimely death of Sabina Payawal;

“5.- On December 22, 1977, a payment of P2,000.00 was made and accepted, which were applied as shown by the Official Receipt No. 7662-8 dated December 22, 1977;

“6.- on September 15, 1978, the Provincial Sheriff of Bulacan conducted an extra-judicial foreclosure sale of the property in question in accordance with the specific authority provided for in the Deed of Real Estate Mortgage as authorized by law. The defendant-Bank contends that the formalities provided for by law were duly observed while the plaintiff claims that there was no such compliance. Hence, this will be the subject matter of evidence in Court;

“7.- The one year period allowed by law within which the delinquent borrowers should have exercised their right to redeem expired without any redemption by them. Consequently, on March 24, 1980 the bank consolidated its title on the property and became the registered owner of said property under TCT No. T-259923 issued by the Register of Deeds of Bulacan on March 24, 1980;

“8.- In September 24, 1980, defendant-Bank sold the property to the spouses Angel S. Beltran and Erlinda Beltran in a Deed of Conditional Sale, x x x;

“9.- The Register of Deeds wrote a letter dated September 8, 1980, informing the bank about a notice of lis pendens. However, the records of the bank show that the letter was received only on November 19, 1981. On March 16, 1984, Spouses Angel Beltran and Erlinda Beltran registered an adverse claim on the property;

“10.- The plaintiffs sought the help of prominent persons to arrange the case amicably, namely, Dr. Sabino Santos, Vice-President of Planters Development Bank; Mr. Miguel Sison, Jr. of the Malacañang Assistance Center; and, Minister Blas Ople of the Ministry of Labor and Employment. However, no concrete result came out of these efforts to settle.;

“11.- The property in question is located behind the parish Church of San Miguel, Bulacan and adjacent to a Municipal Street of said municipality;”[7]

Thereafter, the parties submitted the case for decision on the basis of their memoranda.

On February 28, 1989, the trial rendered decision dismissing the complaint for lack of merit or insufficiency of evidence.

On March 27, 1989, plaintiffs appealed the case to the Court of Appeals.[8]

After due proceedings, on March 26, 1993, the Court of Appeals rendered decision affirming the appealed decision in toto.

Hence, this petition for review.[9]

On May 10, 1993, the Court required respondents to comment on the petition, within ten (10) days from notice.[10]

On July 23, 1993, respondents filed their comment. On January 19, 1994, petitioners filed a reply to comment.[11]

On February 2, 1994, the Court resolved to give due course to the petition and required the parties to file their respective memoranda.

We now decide the case.

In this appeal, petitioners imputes the following errors to the Court of Appeals, namely:

1.The Honorable Court of Appeals erred in not finding that the Bank should have filed its claim in the settlement of estate of the deceased mortgagors.

2.The Honorable Court of Appeals erred in not finding that there was no compliance as to the mandatory requirements of extra-judicial foreclosure.

3.The Honorable Court of Appeals erred in not holding that the price of P4,202.70 realized from the auction sale was palpably iniquitous and unconscionable.

4.The Honorable Court of Appeals erred in not finding that the appellee Bank is guilty of estoppel.

5.The Honorable Court of Appeals erred in not holding that the Bank is guilty of usury.

6.The Honorable Court of Appeals erred in not holding that Sps. Angel Beltran and Erlinda Beltran are buyers in bad faith.

Except for the first assigned error, the rest of the issues raised are factual, hence, not subject to review by this Court.[12]

As to the first assigned error, the rule is that a secured creditor holding a real estate mortgage has three (3) options in case of death of the debtor.[13] These are:

"(l) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim;

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

"(3) to rely on the mortgage exclusively, foreclosing the same at anytime before it is barred by prescription, without right to file a claim for any deficiency."[14]

Obviously, respondent bank availed itself of the third option.

WHEREFORE, the Court hereby AFFIRMS in full the appealed decision of the Court of Appeals in CA-G. R. CV No. 22489.

No costs in all instances.

SO ORDERED

PHILIPPINE NATIONAL BANK, petitioner, vs. HON. COURT OF APPEALS, ALLAN M. CHUA as Special Administrator of the Intestate Estate of the late ANTONIO M. CHUA and Mrs. ASUNCION M. CHUA, respondents.

D E C I S I O N

QUISUMBING, J.:

This petition assails the decision[1] of the Court of Appeals dated July 25, 1995 in CA-G.R. CV No. 36546, affirming the decision dated September 4, 1991 of the Regional Trial Court of Balayan, Batangas, Branch 10 in Civil Case No. 1988.

The facts, as found by the trial court and by the Court of Appeals, are not disputed.

The spouses Antonio M. Chua and Asuncion M. Chua were the owners of a parcel of land covered by Transfer Certificate of Title No. P-142 and registered in their names. Upon Antonio’s death, the probate court appointed his son, private respondent Allan M. Chua, special administrator of Antonio’s intestate estate. The court also authorized Allan to obtain a loan accommodation of five hundred fifty thousand (P550,000.00) pesos from petitioner Philippine National Bank to be secured by a real estate mortgage over the above-mentioned parcel of land.

On June 29, 1989, Allan obtained a loan of P450,000.00 from petitioner PNB evidenced by a promissory note, payable on June 29, 1990, with interest at 18.8 percent per annum. To secure the loan, Allan executed a deed of real estate mortgage on the aforesaid parcel of land.

On December 27, 1990, for failure to pay the loan in full, the bank extrajudicially foreclosed the real estate mortgage, through the Ex-Officio Sheriff, who conducted a public auction of the mortgaged property pursuant to the authority provided for in the deed of real estate mortgage. During the auction, PNB was the highest bidder with a bid price

P306,360.00. Since PNB’s total claim as of the date of the auction sale was P679,185.63, the loan had a payable balance of P372,825.63. To claim this deficiency, PNB instituted an action with the RTC, Balayan, Batangas, Branch 10, docketed as Civil Case No. 1988, against both Mrs. Asuncion M. Chua and Allan Chua in his capacity as special administrator of his father’s intestate estate.

Despite summons duly served, private respondents did not answer the complaint. The trial court declared them in default and received evidence ex parte.

On September 4, 1991, the RTC rendered its decision, ordering the dismissal of PNB’s complaint.[2]

On appeal, the Court of Appeals affirmed the RTC decision by dismissing PNB’s appeal for lack of merit.[3]

Hence, the present petition for review on certiorari under Rule 45 of the Rules of Court. Petitioner cites two grounds:

I

THE CA ERRED IN HOLDING THAT PNB CAN NO LONGER PURSUE ITS DEFICIENCY CLAIM AGAINST THE ESTATE OF DECEASED ANTONIO M. CHUA, HAVING ELECTED ONE OF ITS ALTERNATIVE RIGHT PURSUANT TO SECTION 7 RULE 86 OF THE RULES OF COURT DESPITE A SPECIAL ENACTMENT (ACT. NO. 3135) COVERING EXTRAJUDICIAL FORECLOSURE SALE ALLOWING RECOURSE FOR A DEFICIENCY CLAIM AS SUPPORTED BY CONTEMPORARY JURISPRUDENCE.

II

THE CA ERRED IN HOLDING THAT ALLAN M. CHUA, AS SPECIAL ADMINISTRATOR OF THE INTESTATE ESTATE OF HIS DECEASED FATHER ANTONIO M. CHUA ON ONE HAND, AND HIM AND HIS MOTHER ASUNCION CHUA AS HEIRS ON THE OTHER HAND ARE NO LONGER LIABLE FOR THE DEBTS OF THE ESTATE.[4]

The primary issue posed before us is whether or not it was error for the Court of Appeals to rule that petitioner may no longer pursue by civil action the recovery of the balance of indebtedness after having foreclosed the property securing the same. A resolution of this issue will also resolve the secondary issue concerning any further liability of respondents and of the decedent’s estate.

Petitioner contends that under prevailing jurisprudence, when the proceeds of the sale are insufficient to pay the debt, the mortgagee has the right to recover the deficiency from the debtor.[5] It also contends that Act 3135, otherwise known as “An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages,” is the law applicable to this case of foreclosure sale and not Section 7 of Rule 86 of the Revised Rules of Court[6] as held by the Court of Appeals.[7]

Private respondents argue that having chosen the remedy of extrajudicial foreclosure of the mortgaged property of the deceased, petitioner is precluded from pursuing its deficiency claim against the estate of Antonio M. Chua. This they say is pursuant to Section 7, Rule 86 of the Rules of Court, which states that:

Sec. 7. Rule 86. Mortgage debt due from estate. — A creditor holding a claim against the deceased secured by mortgage or other collateral security, may abandon the security and prosecute his claim in the manner provided in this rule, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by action in court, making the executor or administrator a party defendant, and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged, in the foreclosure or other proceeding to realize upon the security, he may claim his deficiency judgment in the manner provided in the preceding section; or he may rely upon his mortgage or other security alone and foreclose the same at any time within the period of the statute of limitations, and in that event he shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate; but nothing herein contained shall prohibit the executor or administrator from redeeming the property mortgaged or pledged by paying the debt for which it is hold as security, under the direction of the court if the court shall adjudge it to be for the interest of the estate that such redemption shall be made.

Pertinent to the issue at bar, according to petitioner, are our decisions he cited.[8] Prudential Bank v. Martinez, 189 SCRA 612, 615 (1990), is particularly cited by petitioner as precedent for holding that in extrajudicial foreclosure of mortgage, when the proceeds of the sale are insufficient to pay the debt, the mortgagee has the right to recover the deficiency from the mortgagor.

However, it must be pointed out that petitioner’s cited cases involve ordinary debts secured by a mortgage. The case at bar, we must stress, involves a foreclosure of mortgage arising out of a settlement of estate, wherein the administrator mortgaged a property belonging to the estate of the decedent, pursuant to an authority given by the probate court. As the Court of Appeals correctly stated, the Rules of Court on Special Proceedings comes into play decisively.

To begin with, it is clear from the text of Section 7, Rule 89, that once the deed of real estate mortgage is recorded in the proper Registry of Deeds, together with the corresponding court order authorizing the administrator to mortgage the property, said deed shall be valid as if it has been executed by the deceased himself. Section 7 provides in part:

Sec. 7. Rule 89. Regulations for granting authority to sell, mortgage, or otherwise encumber estate – The court having jurisdiction of the estate of the deceased may authorize the executor or administrator to sell personal estate, or to sell, mortgage, or otherwise encumber real estate, in cases provided by these rules when it appears necessary or beneficial under the following regulations:

x x x

(f) There shall be recorded in the registry of deeds of the province in which the real estate thus sold, mortgaged, or otherwise encumbered is situated, a certified copy of the order of the court, together with the deed of the executor or administrator for such real estate, which shall be valid as if the deed had been executed by the deceased in his lifetime.

In the present case, it is undisputed that the conditions under the aforecited rule have been complied with. It follows that we must consider Sec. 7 of Rule 86, appropriately applicable to the controversy at hand.

Case law now holds that this rule grants to the mortgagee three distinct, independent and mutually exclusive remedies that can be alternatively pursued by the mortgage creditor for the satisfaction of his credit in case the mortgagor dies, among them:

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

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

(3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription without right to file a claim for any deficiency.[9]

In Perez v. Philippine National Bank,[10] reversing Pasno vs. Ravina,[11] we held:

The ruling in Pasno vs. Ravina not having been reiterated in any other case, we have carefully reexamined the same, and after mature deliberation have reached the conclusion that the dissenting opinion is more in conformity with reason and law. Of the three alternative courses that section 7, Rule 87 (now Rule 86), offers the mortgage creditor, to wit, (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2) foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription, without right to file a claim for any deficiency, the majority opinion in Pasno vs. Ravina, in requiring a judicial foreclosure, virtually wipes out the third alternative conceded by the Rules to the mortgage creditor, and which would precisely include extra-judicial foreclosures by contrast with the second alternative.

The plain result of adopting the last mode of foreclosure is that the creditor waives his right to recover any deficiency from the estate.[12] Following the Perez ruling that the third mode includes extrajudicial foreclosure sales, the result of extrajudicial foreclosure is that the creditor waives any further deficiency claim. The dissent in Pasno, as adopted in Perez, supports this conclusion, thus:

When account is further taken of the fact that a creditor who elects to foreclose by extrajudicial sale waives all right to recover against the estate of the deceased debtor for any deficiency remaining unpaid after the sale it will be readily seen that the decision in this case (referring to the majority opinion) will impose a burden upon the estates of deceased persons who have mortgaged real property for the security of debts, without any compensatory advantage.

Clearly, in our view, petitioner herein has chosen the mortgage-creditor’s option of extrajudicially foreclosing the mortgaged property of the Chuas. This choice now bars any subsequent deficiency claim against the estate of the deceased, Antonio M. Chua. Petitioner may no longer avail of the complaint for the recovery of the balance of indebtedness against said estate, after petitioner foreclosed the property securing the mortgage in its favor. It follows that in this case no further liability remains on the part of respondents and the late Antonio M. Chua’s estate.

WHEREFORE, finding no reversible error committed by respondent Court of Appeals, the instant petition is hereby DENIED. The assailed decision of the Court of Appeals in CA-G.R. CV No. 36546 is AFFIRMED. Costs against petitioner.

SO ORDERED.

IRGINIA O. GOCHAN, FELIX Y. GOCHAN III, MAE GOCHAN-EFANN, LOUISE Y. GOCHAN, ESTEBAN Y. GOCHAN JR., DOMINIC Y. GOCHAN, FELIX O. GOCHAN III, MERCEDES R. GOCHAN, ALFREDO R. GOCHAN, ANGELINA R. GOCHAN-HERNAEZ, MARIA

MERCED R. GOCHAN, CRISPO R. GOCHAN JR., MARION R. GOCHAN, MACTAN REALTY DEVELOPMENT CORPORATION and FELIX GOCHAN & SONS REALTY CORPORATION, petitioners, vs. RICHARD G. YOUNG, DAVID G. YOUNG, JANE G. YOUNG-LLABAN, JOHN D. YOUNG JR., MARY G. YOUNG-HSU and ALEXANDER THOMAS G. YOUNG as heirs of Alice Gochan; the INTESTATE ESTATE OF JOHN D. YOUNG SR.; and CECILIA GOCHAN-UY and MIGUEL C. UY, for themselves and on behalf and for the benefit of FELIX GOCHAN & SONS REALTY CORPORATION, respondents.

D E C I S I O N

PANGANIBAN, J.:

A court or tribunal’s jurisdiction over the subject matter is determined by the allegations in the complaint. The fact that certain persons are not registered as stockholders in the books of the corporation will not bar them from filing a derivative suit, if it is evident from the allegations in the complaint that they are bona fide stockholders. In view of RA 8799, intra-corporate controversies are now within the jurisdiction of courts of general jurisdiction, no longer of the Securities and Exchange Commission.

The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court. The Petition assails the February 28, 1996 Decision[1] of the Court of Appeals (CA), as well as its December 18, 1997 Resolution denying petitioner’s Motion for Reconsideration. The dispositive part of the CA Decision reads as follows:

“WHEREFORE, the petition as far as the heirs of Alice Gochan, is DISMISSED, without prejudice to filing the same in the regular courts.

SO ORDERED.”[2]

In dismissing the Complaint before the SEC regarding only Alice Gochan’s heirs but not the other complainants, the CA effectively modified the December 9, 1994 Order of the hearing officer[3] of the Securities and Exchange Commission (SEC). The Order, which was affirmed in full by the SEC en banc, dismissed the entire case.

The Facts

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

“Felix Gochan and Sons Realty Corporation (Gochan Realty, for brevity) was registered with the SEC on June, 1951, with Felix Gochan, Sr., Maria Pan Nuy Go Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and Crispo Gochan as its incorporators.

“Felix Gochan Sr.’s daughter, Alice, mother of [herein respondents], inherited 50 shares of stock in Gochan Realty from the former.

“Alice died in 1955, leaving the 50 shares to her husband, John Young, Sr.

“In 1962, the Regional Trial Court of Cebu adjudicated 6/14 of these shares to her children, herein [respondents] Richard Young, David Young, Jane Young Llaban, John Young Jr., Mary Young Hsu and Alexander Thomas Young.

“Having earned dividends, these stocks numbered 179 by 20 September 1979.

“Five days later (25 September), at which time all the children had reached the age of majority, their father John Sr., requested Gochan Realty to partition the shares of his late wife by cancelling the stock certificates in his name and issuing in lieu thereof, new stock certificates in the names of [herein respondents].

“On 17 October 1979, respondent Gochan Realty refused, citing as reason, the right of first refusal granted to the remaining stockholders by the Articles of Incorporation.

“On 21, 1990, [sic] John, Sr. died, leaving the shares to the [respondents].

“On 8 February 1994, [respondents] Cecilia Gochan Uy and Miguel Uy filed a complaint with the SEC for issuance of shares of stock to the rightful owners, nullification of shares of stock, reconveyance of property impressed with trust, accounting, removal of officers and directors and damages against respondents. A Notice of Lis Pendens was annotated as [sic] real

properties of the corporation.

“On 16 March 1994, [herein petitioners] moved to dismiss the complaint alleging that: (1) the SEC ha[d] no jurisdiction over the nature of the action; (2) the [respondents] [were] not the real parties-in-interest and ha[d] no capacity to sue; and (3) [respondents’] causes of action [were] barred by the Statute of Limitations.

“The motion was opposed by herein [respondents].

“On 29 March 1994, [petitioners] filed a Motion for cancellation of Notice of Lis Pendens. [Respondents] opposed the said motion.

“On 9 December 1994, the SEC, through its Hearing Officer, granted the motion to dismiss and ordered the cancellation of the notice of lis pendens annotated upon the titles of the corporate lands. In its order, the SEC opined:

‘In the instant case, the complaint admits that complainants Richard G. Young, David G. Young, Jane G. Young Llaban, John D. Young, Jr., Mary G. Young Hsu and Alexander Thomas G. Young, who are the children of the late Alice T. Gochan and the late John D. Young, Sr. are suing in their own right and as heirs of and/or as the beneficial owners of the shares in the capital stock of FGSRC held in trust for them during his lifetime by the late John D. Young. Moreover, it has been shown that said complainants ha[d] never been x x x stockholder[s] of record of FGSRC to confer them with the legal capacity to bring and maintain their action. Conformably, the case cannot be considered as an intra-corporate controversy within the jurisdiction of this Commission.

‘The complainant heirs base what they perceived to be their stockholders’ rights upon the fact of their succession to all the rights, property and interest of their father, John D. Young, Sr. While their heirship is not disputed, their right to compel the corporation to register John D. Young’s Sr. shares of stock in their names cannot go unchallenged because the devolution of property to the heirs by operation of law in succession is subject to just obligations of the deceased before such property passes to the heirs. Conformably, until therefore the estate is settled and the payment of the debts of the deceased is accomplished, the heirs cannot as a matter of right compel the delivery of the shares of stock to them and register such transfer in the books of the corporation to recognize them as stockholders. The complainant heirs succeed to the estate of [the] deceased John D. Young, Sr. but they do not thereby become stockholders of the corporation.

‘Moreover, John D. [Young Sr.’s] shares of stocks form part of his estate which is the subject of Special Proceedings No. 3694-CEB in the Regional Trial Court of Cebu, Branch VIII, [par. 4 of the complaint]. As complainants clearly claim[,] the Intestate Estate of John D. Young, Sr. has an interest in the subject matter of the instant case. However, actions for the recovery or protection of the property [such as the shares of stock in question] may be brought or defended not by the heirs but by the executor or administrator thereof.

‘Complainants further contend that the alleged wrongful acts of the corporation and its directors constitute fraudulent devices or schemes which may be detrimental to the stockholders. Again, the injury [is] perceived[,] as is alleged[,] to have been suffered by complainants as stockholders, which they are not. Admittedly, the SEC has no jurisdiction over a controversy wherein one of the parties involved is not or not yet a stockholder of the corporation. [SEC vs. CA, 201 SCRA 134].

‘Further, by the express allegation of the complaint, herein complainants bring this action as [a] derivative suit on their own behalf and on behalf of respondent FGSRC.

‘Section 5, Rule III of the Revised Rules of Procedure in the Securities and Exchange Commission provides:

‘Section 5. Derivative Suit. No action shall be brought by stockholder in the right of a corporation unless the complainant was a stockholder at the time the questioned transaction occurred as well as at the time the action was filed and remains a stockholder during the pendency of the action. x x x.’

‘The rule is in accord with well settled jurisprudence holding that a stockholder bringing a derivative action must have been [so] at the time the transaction or act complained of [took] place. (Pascual vs. Orozco, 19 Phil. 82; Republic vs. Cuaderno, 19 SCRA 671; San Miguel Corporation vs. Khan, 176 SCRA 462-463) The language of the rule is mandatory, strict compliance with the terms thereof thus being a condition precedent, a jurisdictional requirement to the filing of the instant action.

‘Otherwise stated, proof of compliance with the requirement must be sufficiently established for the action to be given due course by this Commission. The failure to comply with this jurisdictional requirement on derivative action must necessarily result in the dismissal of the instant complaint.’ (pp. 77-79, Rollo)

“[Respondents] moved for a reconsideration but the same was denied for being pro-forma.

“[Respondents] appealed to the SEC en banc, contending, among others, that the SEC ha[d] jurisdiction over the case.

“[Petitioners], on the other hand, contend that the appeal was 97 days late, beyond the 30-day period for appeals.

“On 3 March 1995, the SEC en banc ruled for the [petitioners,] holding that the [respondents’] motion for reconsideration did not interrupt the 30-day period for appeal because said motion was pro-forma.”[4]

Aggrieved, herein respondents then filed a Petition for Review with the Court of Appeals.

Ruling of the Court of Appeals

The Court of Appeals ruled that the SEC had no jurisdiction over the case as far as the heirs of Alice Gochan were concerned, because they were not yet stockholders of the corporation. On the other hand, it upheld the capacity of Respondents Cecilia Gochan Uy and her spouse Miguel Uy. It also held that the intestate Estate of John Young Sr. was an indispensable party.

The appellate court further ruled that the cancellation of the notice of lis pendens on the titles of the corporate real estate was not justified. Moreover, it declared that respondents’ Motion for Reconsideration before the SEC was not pro forma; thus, its filing tolled the appeal period.

Hence, this Petition.[5]

The Issues

These are the issues presented before us:

“A. Whether or not the Spouses Uy have the personality to file an action before the SEC against Gochan Realty Corporation.

“B. Whether or not the Spouses Uy could properly bring a derivative suit in the name of Gochan Realty to redress wrongs allegedly committed against it for which the directors refused to sue.

“C. Whether or not the intestate estate of John D. Young Sr. is an indispensable party in the SEC case considering that the individual heirs’ shares are still in the decedent stockholder’s name.

“D. Whether or not the cancellation of [the] notice of lis pendens was justified considering that the suit did not involve real properties owned by Gochan Realty.”[6]

In addition, the Court will determine the effect of Republic Act No. 8799[7] on this case.

The Court’s Ruling

The Petition has no merit. In view of the effectivity of RA 8799, however, the case should be remanded to the proper regional trial court, not to the Securities and Exchange Commission.

First Issue: Personality of the Spouses Uy to File a Suit Before the SEC

Petitioners argue that Spouses Cecilia and Miguel Uy had no capacity or legal standing to bring the suit before the SEC on February 8, 1994, because the latter were no longer stockholders at the time. Allegedly, the stocks had already been purchased by the corporation. Petitioners further assert that, being allegedly a simple contract of sale cognizable by the regular courts, the purchase by Gochan Realty of Cecilia Gochan Uy’s 210 shares does not come within the purview of an intra-corporate controversy.

As a general rule, the jurisdiction of a court or tribunal over the subject matter is determined by the allegations in the complaint.[8] For purposes of resolving a motion to dismiss, Cecilia Uy’s averment in the Complaint -- that the purchase of her stocks by the corporation was null and void ab initio – is deemed admitted. It is elementary that a void contract produces no effect either against or in favor of anyone; it cannot create, modify or extinguish the juridical relation to which it refers.[9] Thus, Cecilia remains a stockholder of the corporation in view of the nullity of the Contract of Sale. Although she was no longer registered as a stockholder in the corporate records as of the filing of the case before the SEC, the admitted allegations in the Complaint made her still a bona fide stockholder of Felix Gochan & Sons Realty Corporation

(FGSRC), as between said parties.

In any event, the present controversy, whether intra-corporate or not, is no longer cognizable by the SEC, in view of RA 8799, which transferred to regional trial courts the former’s jurisdiction over cases involving intra-corporate disputes.

Action Has Not Prescribed

Petitioners contend that the statute of limitations already bars the Uy spouses’ action, be it one for annulment of a voidable contract or one based upon a written contract. The Complaint, however, contains respondents’ allegation that the sale of the shares of stock was not merely voidable, but was void ab initio. Below we quote its relevant portion:

“38. That on November 21, 1979, respondent Felix Gochan & Sons Realty Corporation did not have unrestricted retained earnings in its books to cover the purchase price of the 208 shares of stock it was then buying from complainant Cecilia Gochan Uy, thereby rendering said purchase null and void ab initio for being violative of the trust fund doctrine and contrary to law, morals good customs, public order and public policy;”

Necessarily, petitioners’ contention that the action has prescribed cannot be sustained. Prescription cannot be invoked as a ground if the contract is alleged to be void ab initio.[10] It is axiomatic that the action or defense for the declaration of nullity of a contract does not prescribe.[11]

Second Issue: Derivative Suit and the Spouses Uy

Petitioners also contend that the action filed by the Spouses Uy was not a derivative suit, because the spouses and not the corporation were the injured parties. The Court is not convinced. The following quoted portions of the Complaint readily shows allegations of injury to the corporation itself:

“16. That on information and belief, in further pursuance of the said conspiracy and for the fraudulent purpose of depressing the value of the stock of the Corporation and to induce the minority stockholders to sell their shares of stock for an inadequate consideration as aforesaid, respondent Esteban T. Gochan . . ., in violation of their duties as directors and officers of the Corporation . . ., unlawfully and fraudulently appropriated [for] themselves the funds of the Corporation by drawing excessive amounts in the form of salaries and cash advances. . . and by otherwise charging their purely personal expenses to the Corporation.”

x x x x x x x x x

“41. That the payment of P1,200,000.00 by the Corporation to complainant Cecilia Gochan Uy for her shares of stock constituted an unlawful, premature and partial liquidation and distribution of assets to a stockholder, resulting in the impairment of the capital of the Corporation and prevented it from otherwise utilizing said amount for its regular and lawful business, to the damage and prejudice of the Corporation, its creditors, and of complainants as minority stockholders;”[12]

As early as 1911, this Court has recognized the right of a single stockholder to file derivative suits. In its words:

“[W]here corporate directors have committed a breach of trust either by their frauds, ultra vires acts, or negligence, and the corporation is unable or unwilling to institute suit to remedy the wrong, a single stockholder may institute that suit, suing on behalf of himself and other stockholders and for the benefit of the corporation, to bring about a redress of the wrong done directly to the corporation and indirectly to the stockholders.”[13]

In the present case, the Complaint alleges all the components of a derivative suit. The allegations of injury to the Spouses Uy can coexist with those pertaining to the corporation. The personal injury suffered by the spouses cannot disqualify them from filing a derivative suit on behalf of the corporation. It merely gives rise to an additional cause of action for damages against the erring directors. This cause of action is also included in the Complaint filed before the SEC.

The Spouses Uy have the capacity to file a derivative suit in behalf of and for the benefit of the corporation. The reason is that, as earlier discussed, the allegations of the Complaint make them out as stockholders at the time the questioned transaction occurred, as well as at the time the action was filed and during the pendency of the action.

Third Issue: Capacity of the Intestate Estate of John D. Young Sr.

Petitioners contend that the Intestate Estate of John D. Young Sr. is not an indispensable party, as there is no showing that it stands to be benefited or injured by any court judgment.

It would be useful to point out at this juncture that one of the causes of action stated in the Complaint filed with the SEC refers to the registration, in the name of the other heirs of Alice Gochan Young, of 6/14th of the shares still registered under the name of John D. Young Sr. Since all the shares that belonged to Alice are still in his name, no final determination can be had without his estate being impleaded in the suit. His estate is thus an indispensable party with respect to the cause of action dealing with the registration of the shares in the names of the heirs of Alice.

Petitioners further claim that the Estate of John Young Sr. was not properly represented. They claim that “when the estate is under administration, suits for the recovery or protection of the property or rights of the deceased may be brought only by the administrator or executor as approved by the court.”[14] The rules relative to this matter do not, however, make any such categorical and confining statement.

Section 3 of Rule 3 of the Rules of Court, which is cited by petitioner in support of their position, reads:

“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.”

Section 2 of Rule 87 of the same Rules, which also deals with administrators, states:

“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.”

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.

The Rules are to be interpreted liberally in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding.[15] They cannot be interpreted in such a way as to unnecessarily put undue hardships on litigants. For the protection of the interests of the decedent, this Court has in previous instances[16] recognized the heirs as proper representatives of the decedent, even when there is already an administrator appointed by the court. When no administrator has been appointed, as in this case, there is all the more reason to recognize the heirs as the proper representatives of the deceased. Since the Rules do not specifically prohibit them from representing the deceased, and since no administrator had as yet been appointed at the time of the institution of the Complaint with the SEC, we see nothing wrong with the fact that it was the heirs of John D. Young Sr. who represented his estate in the case filed before the SEC.

Fourth IssueNotice of Lis Pendens

On the issue of the annotation of the Notice of Lis Pendens on the titles of the properties of the corporation and the other respondents, we still find no reason to disturb the ruling of the Court of Appeals.

Under the third, fourth and fifth causes of action of the Complaint, there are allegations of breach of trust and confidence and usurpation of business opportunities in conflict with petitioners’ fiduciary duties to the corporation, resulting in damage to the Corporation. Under these causes of action, respondents are asking for the delivery to the Corporation of possession of the parcels of land and their corresponding certificates of title. Hence, the suit necessarily affects the title to or right of possession of the real property sought to be reconveyed. The Rules of Court[17] allows the annotation of a notice of lis pendens in actions affecting the title or right of possession of real property.[18] Thus, the Court of Appeals was correct in reversing the SEC Order for the cancellation of the notice of lis pendens.

The fact that respondents are not stockholders of the Mactan Realty Development Corporation and the Lapu-Lapu Real Estate Corporation does not make them non-parties to this case. To repeat, the jurisdiction of a court or tribunal over the subject matter is determined by the allegations in the Complaint. In this case, it is alleged that the aforementioned corporations are mere alter egos of the directors-petitioners, and that the former acquired the properties sought to be reconveyed to FGSRC in violation of the directors-petitioners’ fiduciary duty to FGSRC. The notion of corporate entity will be pierced or disregarded and the individuals composing it will be treated as identical[19] if, as alleged in the present case, the corporate entity is being used as a cloak or cover for fraud or illegality; as a justification for a wrong; or as an alter ego,

an adjunct, or a business conduit for the sole benefit of the stockholders.

Effect of RA 8799

While we sustain the appellate court, the case can no longer be remanded to the SEC. As earlier stated, RA 8799, which became effective on August 8, 2000, transferred SEC’s jurisdiction over cases involving intra-corporate disputes to courts of general jurisdiction or to the regional trial courts.[20] Section 5.2 thereof reads as follows:

“5.2. The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.”

In the light of the Resolution issued by this Court in AM No. 00-8-10-SC,[21] the Court Administrator and the Securities and Exchange Commission should be directed to cause the transfer of the records of SEC Case No. 02-94-4674 to the appropriate court of general jurisdiction.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED, subject to the modification that the case be remanded to the proper regional trial court. The December 9, 1994 Order of Securities and Exchange Commission hearing officer dismissing the Complaint and directing the cancellation of the notice of lis pendens, as well as the March 3, 1995 Order denying complainants’ motion for reconsideration are REVERSED and SET ASIDE. Pursuant to AM No. 00-8-10-SC, the Office of the Court Administrator and the SEC are DIRECTED to cause the actual transfer of the records of SEC Case No. 02-94-4674 to the appropriate regional trial court.

SO ORDERED.

[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.

D E C I S I O N

TINGA, J.:

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

This Petition for Review on Certiorari, under Rule 45 of the Rules of Court, seeks to set aside the Decision[1] of the Court of Appeals in CA-G.R. SP No. 42053 dated January 31, 1997, as well as its Resolution[2] dated March 26, 1997, denying petitioners’ motion for reconsideration.

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

Apart from the respondents, the demise of the decedent left in mourning his paramour and their children. They are petitioner Teodora Riofero, who became a part of his life when he entered into an extra-marital relationship with her during the subsistence of his marriage to Esperanza sometime in 1965, and co-petitioners Veronica[5], Alberto and Rowena.[6]

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

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

On December 4, 1995, respondents filed a Complaint for the Annulment/Rescission of Extra Judicial Settlement of Estate of a Deceased Person with Quitclaim, Real Estate Mortgage and Cancellation of Transfer Certificate of Titles with Nos. 63983, 63985 and 63984 and Other Related Documents with Damages against petitioners, the Rural Bank of Mangaldan, Inc. and the Register of Deeds of Dagupan City before the Regional Trial Court, Branch 42, Dagupan City.[9]

On February 5, 1996, petitioners filed their Answer to the aforesaid complaint interposing the defense that the property subject of the contested deed of extra-judicial settlement pertained to the properties originally belonging to the parents of Teodora Riofero[10] and that the titles thereof were delivered to her as an advance inheritance but the decedent had managed to register them in his name.[11] Petitioners also raised the affirmative defense that respondents are not the real parties-in-interest but rather the Estate of Alfonso O. Orfinada, Jr. in view of the pendency of the administration proceedings.[12] On April 29, 1996, petitioners filed a Motion to Set Affirmative Defenses for Hearing[13] on the aforesaid ground.

The lower court denied the motion in its Order[14] dated June 27, 1996, on the ground that respondents, as heirs, are the real parties-in-interest especially in the absence of an administrator who is yet to be appointed in S.P. Case No. 5118. Petitioners moved for its reconsideration[15] but the motion was likewise denied.[16]

This prompted petitioners to file before the Court of Appeals their Petition for Certiorari under Rule 65 of the Rules of Court docketed as CA G.R. S.P. No. 42053.[17] Petitioners averred that the RTC committed grave abuse of discretion in issuing the assailed order which denied the dismissal of the case on the ground that the proper party to file the complaint for the annulment of the extrajudicial settlement of the estate of the deceased is the estate of the decedent and not the respondents.[18]

The Court of Appeals rendered the assailed Decision[19] dated January 31, 1997, stating that it discerned no grave abuse of discretion amounting to lack or excess of jurisdiction by the public respondent judge when he denied petitioners’ motion to set affirmative defenses for hearing in view of its discretionary nature.

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

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

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

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

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

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

Pending the filing of administration proceedings, the heirs without doubt have legal personality to bring suit in behalf of the estate of the decedent in accordance with the provision of Article 777 of the New Civil Code “that (t)he rights to succession are transmitted from the moment of the death of the decedent.” The provision in turn is the foundation of the principle that the property, rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law.[25]

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

decedent under administration pending the appointment of an administrator. Thus:

The above-quoted rules,[29] while permitting an executor or administrator to represent or to bring suits on behalf of the deceased, do not prohibit the heirs from representing the deceased. These rules are easily applicable to cases in which an administrator has already been appointed. But no rule categorically addresses the situation in which special proceedings for the settlement of an estate have already been instituted, yet no administrator has been appointed. In such instances, the heirs cannot be expected to wait for the appointment of an administrator; then wait further to see if the administrator appointed would care enough to file a suit to protect the rights and the interests of the deceased; and in the meantime do nothing while the rights and the properties of the decedent are violated or dissipated.

Even if there is an appointed administrator, jurisprudence recognizes two exceptions, viz: (1) if the executor or administrator is unwilling or refuses to bring suit;[30] and (2) when the administrator is alleged to have participated in the act complained of[31] and he is made a party defendant.[32] Evidently, the necessity for the heirs to seek judicial relief to recover property of the estate is as compelling when there is no appointed administrator, if not more, as where there is an appointed administrator but he is either disinclined to bring suit or is one of the guilty parties himself.

All told, therefore, the rule that the heirs have no legal standing to sue for the recovery of property of the estate during the pendency of administration proceedings has three exceptions, the third being when there is no appointed administrator such as in this case.

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

WHEREFORE, the petition for review is DENIED. The assailed decision and resolution of the Court of Appeals are hereby AFFIRMED. No costs.

SO ORDERED.

[G.R. No. 144881. October 16, 2003]

BETTY T. CHUA, JENNIFER T. CHUA-LOCSIN, BENISON T. CHUA, and BALDWIN T. CHUA, petitioners, vs. ABSOLUTE MANAGEMENT CORPORATION and COURT OF APPEALS, respondents.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for review on certiorari[1] to annul the Decision[2] dated 9 May 2000 of the Court of Appeals in CA-G.R. SP No. 57421, as well as the Resolution dated 5 September 2000 denying the motion for reconsideration. The Court of Appeals set aside the Order[3] dated 7 February 2000 issued by Branch 112 of the Regional Trial Court of Pasay City which denied the petitioners’ “Motion for the Examination of the Administratrix and Others” (“Motion”).

Antecedent Facts

The facts are not in dispute. As found by the Court of Appeals, the essential antecedents are as follows:

Sometime in 1999, upon a petition for letters of administration filed by [herein petitioners] Jennifer T. Chua-Locsin, Benison T. Chua, and Baldwin T. Chua with the Regional Trial Court, Branch 112, Pasay City, presided by [Judge Manuel P. Dumatol], xxx Betty T. Chua was appointed as administratrix of the intestate estate of the deceased Jose L. Chua. Thereafter, she submitted to the trial court an inventory of all the real and personal properties of the deceased.

One of the creditors of the deceased, [herein respondent] Absolute Management Corporation, filed a claim on [sic] the estate in the amount of P63,699,437.74. As administratrix, Betty T. Chua tentatively accepted said amount as correct, with a statement that it shall be reduced or adjusted as additional evidences [sic] may warrant.

In the interim, Absolute Management Corporation noticed that the deceased’s shares of stocks with Ayala Sales Corporation and Ayala Construction Supply, Inc. were not included in the inventory of assets. As a consequence, it filed a motion to require Betty T. Chua to explain why she did not report these shares of stocks in the inventory. Through a reply, Betty T. Chua alleged that these shares had already been assigned and transferred to other parties prior to the death of

her husband, Jose L. Chua. She attached to her reply the deeds of assignment which allegedly constituted proofs of transfer. Judge Dumatol accepted the explanation as meritorious.

Absolute Management Corporation, suspecting that the documents attached to Betty T. Chua’s reply were spurious and simulated, filed a motion for the examination of the supposed transferees. xxx It premised its motion on Section 6, Rule 87, Revised Rules of Court, infra, which states that when a person is suspected of having concealed, embezzled, or conveyed away any of the properties of the deceased, a creditor may file a complaint with the trial court and the trial court may cite the suspected person to appear before it and be examined under oath on the matter of such complaint. Private respondents opposed the motion on the ground that this provision bears no application to the case. On February 7, 2000, Judge Dumatol issued the assailed order.[4]

The Ruling of the Trial Court

The trial court’s order denying Absolute Management Corporation’s (“Absolute”) Motion reads:

This resolves the undated Motion for the Examination of the Administratrix and Others, filed on January 11, 2000 by claimant Absolute Management Corporation, to which petitioners, through counsel filed their opposition, and claimant Absolute Management Corporation in turn filed its reply.

Finding no merit in the motion filed by claimant Absolute Management Corporation, as it in effect seeks to engage in a fishing expedition for evidence to be used against the administratrix and others whom it seeks to examine, it being the consensus of the Court that the Rules of Procedure does [sic] not allow the fishing of evidence to use [sic] against the adverse party, claimant Absolute Management Corporation’s motion is hereby DENIED.

SO ORDERED.[5]

Aggrieved, Absolute filed a petition for certiorari and mandamus with the Court of Appeals.

The Ruling of the Court of Appeals

In its petition for certiorari and mandamus before the Court of Appeals, Absolute claimed that the trial court committed grave abuse of discretion in denying its Motion and in failing to act on its claim. Absolute alleged that the trial court deprived it of the right to show that the documents presented by petitioners were fictitious to the prejudice of Absolute.

During the hearing[6] conducted on 9 August 2000 before the members of the Special Sixth Division of the Court of Appeals, counsel for Absolute presented the following evidence to support its assertion that the transfers of the shares were spurious:

1. Exhibit “A”[7] - Certification from the Office of the Clerk of Court of the Regional Trial Court of Pasay City that Atty. Hilarion A.D. Maagad (the notary public who notarized the questioned Secretary’s Certificate[8] and Deeds of Assignment of Shares of Stock[9]) is not listed in the Roll of Notaries Public for the City of Pasay particularly for the period of 1993-1994, 1994-1995, 1998-1999 and 1999-2000.

2. Exhibit “B”[10] – Certification from the Clerk of Court of the Regional Trial Court of Makati City that the questioned Secretary’s Certificate[11] was not included in the Notarial Report of Atty. Lope M. Velasco for the years 1998-1999.

3. Exhibits “B-1,” “B-2,” and “B-3”[12] – Certification from the Clerk of Court of the Regional Trial Court of Makati City that the questioned Deeds of Assignment of Shares of Stock[13] were not included in the Notarial Report of Atty. Lope M. Velasco for the years 1998-1999.

In setting aside the trial court’s order, the Court of Appeals pointed out that the presentation of the deeds of assignment executed by the decedent in petitioners’ favor does not automatically negate the existence of concealment. The appellate court stated that it is a common occurrence in estate proceedings for heirs to execute simulated deeds of transfer which conceal and place properties of the decedent beyond the reach of creditors.

The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, the petition is GRANTED. The order dated February 7, 2000 of respondent Judge Manuel P. Dumatol is hereby SET ASIDE. He is hereby ORDERED to give due course to petitioner’s “Motion for the Examination of the Administratrix and Others” and thereafter, to dispose of the claim accordingly.

SO ORDERED.[14]

Hence, this petition.

Issue

Petitioners would like this Court to rule whether Section 6, Rule 87 of the Rules of Court, which is the principal basis of Absolute’s Motion, is mandatory or merely directory on the trial court. This perspective misses the point. The issue in this case is whether the Court of Appeals correctly ordered the trial court to give due course to the Motion for Examination.

Petitioners also point out that the Court of Appeals should have dismissed Absolute’s petition because of these procedural infirmities:

1. Counsel for Absolute, not the proper officers of Absolute, filed the Certification against Forum Shopping;

2. Absolute attached only a duplicate original copy of the challenged order of the trial court to the petition submitted to the Court of Appeals; and

3. No proper proof of service accompanied the petition submitted to the Court of Appeals.[15]

The Ruling of the Court

The petition has no merit.

Whether the Court of Appeals correctly ordered the Trial Courtto give due course to Absolute’s Motion for Examination

Section 6, Rule 87 of the Rules of Court provides:

SEC. 6. Proceedings when property concealed, embezzled, or fraudulently conveyed. — If an executor or administrator, heir, legatee, creditor, or other individual interested in the estate of the deceased, complains to the court having jurisdiction of the estate that a person is suspected of having concealed, embezzled, or conveyed away any of the money, goods, or chattels of the deceased, or that such person has in his possession or has knowledge of any deed, conveyance, bond, contract, or other writing which contains evidence of or tends to disclose the right, title, interest, or claim of the deceased, the court may cite such suspected person to appear before it and may examine him on oath on the matter of such complaint; and if the person so cited refuses to appear, or to answer on such examination or such interrogatories as are put to him, the court may punish him for contempt, and may commit him to prison until he submits to the order of the court. The interrogatories put to any such person, and his answers thereto, shall be in writing and shall be filed in the clerk’s office.

Section 6 of Rule 87 seeks to secure evidence from persons suspected of having possession or knowledge of the properties left by a deceased person, or of having concealed, embezzled or conveyed any of the properties of the deceased.[16]

The court which acquires jurisdiction over the properties of a deceased person through the filing of the corresponding proceedings has supervision and control over these properties. The trial court has the inherent duty to see to it that the inventory of the administrator lists all the properties, rights and credits which the law requires the administrator to include in his inventory. In compliance with this duty, the court also has the inherent power to determine what properties, rights and credits of the deceased the administrator should include or exclude in the inventory. An heir or person interested in the properties of a deceased may call the court’s attention that certain properties, rights or credits are left out from the inventory. In such a case, it is likewise the court’s duty to hear the observations of such party. The court has the power to determine if such observations deserve attention and if such properties belong prima facie to the estate.[17]

However, in such proceedings the trial court has no authority to decide whether the properties, real or personal, belong to the estate or to the persons examined. If after such examination there is good reason to believe that the person examined is keeping properties belonging to the estate, then the administrator should file an ordinary action in court to recover the same.[18] Inclusion of certain shares of stock by the administrator in the inventory does not automatically deprive the assignees of their shares. They have a right to be heard on the question of ownership, when that property is properly presented to the court.[19]

In the present case, some of the transferees of the shares of stock do not appear to be heirs of the decedent. Neither do they appear to be parties to the intestate proceedings.[20] Third persons to whom the decedent’s assets had been conveyed may be cited to appear in court and examined under oath as to how they came into possession of the decedent’s assets. In case of fraudulent conveyances, a separate action is necessary to recover these assets.[21]

Taken in this light, there is no reason why the trial court should disallow the examination of the alleged transferees of the shares of stocks. This is only for purposes of eliciting information or securing evidence from persons suspected of concealing or conveying some of the decedent’s properties to the prejudice of creditors. Petitioners’ admission that these persons are the decedent’s assignees does not automatically negate concealment of the decedent’s assets on their part. The assignment might be simulated so as to place the shares beyond the reach of creditors. In case the shares are eventually included in the estate, this inventory is merely provisional and is not determinative of the issue of ownership. A separate action is necessary for determination of ownership and recovery of possession. [22]

Whether the Petition submitted to the Court of Appeals sufferedfrom procedural infirmities which merit its dismissal

The petition filed before the Court of Appeals contained a certificate of non-forum shopping executed by counsel and not by the authorized officer of Absolute. However, the subsequent filing of an affidavit of non-forum shopping signed by the corporate director cured this defect. In Maricalum Mining Corp. v. National Labor Relations Commission,[23] the Court held that a slight delay in the filing of an affidavit of non-forum shopping should not defeat the action. A liberal interpretation of the rules is more in keeping with the objective to “secure a just, speedy and inexpensive disposition of every action and proceeding.” As held in Loyola v. Court of Appeals,[24] substantial compliance is sufficient. While submission of the certificate of non-forum shopping is mandatory, nonetheless we must not interpret the requirement too literally to defeat the objective of preventing the undesirable practice of forum shopping.[25] Technical rules of procedure should be used to promote, not frustrate, justice. While the swift unclogging of court dockets is a laudable objective, the granting of substantial justice is an even more urgent ideal.[26]

Petitioners claim that the attachment of a mere duplicate original copy of the assailed order violates the express mandate of Section 1, Rule 65, of the 1997 Rules of Civil Procedure. This rule states that “the petition shall be accompanied by a certified true copy of the judgment, order, or resolution subject thereof.” However, under Section 3, Rule 46 of the 1997 Rules of Civil Procedure, as amended by Circular No. 39-98, either a certified true copy or a duplicate original copy may be attached to the petition.

The affidavit of service executed by petitioners’ counsel stating that he served a copy of the petition by registered mail to respondents with the corresponding registry receipts constitutes sufficient proof of service.[27] This complies with Section 13, Rule 13 of the 1997 Rules of Civil Procedure.

Lastly, petitioners quote Arcega and Miranda v. Pecson and Arcega[28] to question the propriety of filing a petition for certiorari before the Court of Appeals:

Without deciding whether the proceeding thus conducted complies with the provision of Section 6 of Rule 88 [Section 6, Rule 87 under the 1997 Rules of Civil Procedure], which says that “the court may cite such suspected person to appear before it and may examine him on oath on the matter of such complaint,” and without deciding whether the duty of the judge to make the examination is or not mandatory, we are satisfied that certiorari is not an appropriate remedy under the aforecited rule. (Emphasis supplied)

The facts in Arcega are not on all fours with the facts in the instant case. In Arcega, the judge granted the examination but only with respect to three of the several lots involved. In the present case, there was an absolute refusal by the trial court to conduct an examination on the ground that it would constitute a “fishing expedition” of evidence that could be used against the administratrix. In Arcega, the trial court issued an order in favor of the person suspected of having concealed properties of the estate and against the special administratrix and the judicial receiver. The special administratrix had the remedy of filing another case to recover such properties in the name of thee state.[29]

In the present case, Absolute as a creditor of the decedent filed the petition after the trial court denied its Motion for examination. Absolute questioned the ruling in favor of the administratrix and heirs of the decedent. Although as a creditor, Absolute does have the remedy of filing another case to recover such properties,[30] its Motion for examination was intended merely to investigate and take testimony in preparation for an independent action.[31] Aside from the administratrix and the heirs of the decedent, Absolute also sought to examine the supposed assignees of the decedent’s shares, who are third persons with respect to the probate proceedings. The Motion was a preparatory move sanctioned by the Rules of Court. The denial of Absolute’s Motion was an interlocutory order not subject to appeal. The order of denial may, however, be challenged before a superior court through a petition for certiorari under Rule 65.

WHEREFORE, we DENY the petition for lack of merit. The Decision of the Court of Appeals in CA-G.R. SP No. 57421 dated 9 May 2000 as well as the Resolution dated 5 September 2000 denying the motion for reconsideration is AFFIRMED.

SO ORDERED.

G.R. No. L-27876 April 22, 1992

ADELAIDA S. MANECLANG, in her capacity as Administrator of the Intestate Estate of the late Margarita Suri Santos, plaintiff-appellee, vs.JUAN T. BAUN and AMPARO S. BAUN, ET AL., defendants. CITY OF DAGUPAN, defendant-appellant.

 

DAVIDE, JR., J.:

The issue presented in this case is the validity of a sale of a parcel of land by the administrator of an intestate estate made pursuant to a petition for authority to sell and an order granting it which were filed and entered, respectively, without notice to the heirs of the decedents.

The records disclose that on 12 June 1947, Margarita Suri Santos died intestate. She was survived by her husband Severo Maneclang and nine (9) children. On 30 July 1947, a petition for the settlement of her estate was filed by Hector S. Maneclang, one of her legitimate children, with the Court of First Instance at Dagupan City, Pangasinan; the case was docketed as Special Proc. No. 3028. At the time of the filing of the petition, the ages of her children were as follows:

Hector Maneclang –– 21 years oldCesar Maneclang –– 19Oscar Maneclang –– 17Amanda Maneclang –– 16Adelaida Meneclang –– 13Linda Maneclang –– 7Priscila Maneclang –– 6Natividad Maneclang –– 3Teresita Maneclang –– 2

No guardian ad litem was appointed by the court for the minor children.

Margarita left several parcels of land, among which is Lot No. 203 of the Cadastral Survey of Dagupan City containing an area of 7, 401 square meters, more or less , and covered by Transfer Certificate of Title No. 1393.

On 2 September 1949, Pedro M. Feliciano, the administrator of the intestate estate of Margarita, filed a petition in SP Proc. No. 3028 asking the court to give him "the authority to dispose of so much of the estate that is necessary to meet the debts enumerated" in the petition. While notice thereof was given to the surviving spouse, Severo Maneclang, through his counsel, Atty. Teofilo Guadiz, no such notice was sent to the heirs of Margarita.

On 9 September 1949, despite the absence of notice to the heirs, the intestate court issued an Order "authorizing the administrator to mortgage or sell so much of the properties of the estate for the purposes (sic) of paying off the obligations" referred to in the petition.

Pursuant to this Order, Oscar Maneclang, the new administrator of the intestate estate, executed on 4 October 1952 a deed of sale 1 in favor of the City of Dagupan, represented by its mayor, Angel B. Fernandez, of a portion consisting of 4,415 square meters of the aforementioned Lot No. 203 for and in consideration of P11,687.50. This sale was approved by the intestate court on 15 March 1954.

The City of Dagupan immediately took possession of the land and constructed thereon a public market, known as the Perez Boulevard Public Market, at a cost of P100,00.00, more or less. It has been in continuous and uninterrupted possession of the property since the construction of the market. 2

Some other parcels of land belonging to the intestate estate were sold by the administrator pursuant of the same authority granted by the 9 September 1949 Order. 3

On 28 September 1965, the new judicial administratrix of the intestate estate, Adelaida S. Maneclang, daughter of the late Margarita Suri Santos, filed with the Court of First Instance of Pangasinan an action for the annulment of the sales made by the previous administrator pursuant to the order of 9 September 1949, cancellation of titles, recovery of possession and damages against the vendees Juan T. Baun and Amparo Baun, Marcelo Operaña and Aurora Pagurayan, Crispino Tandoc and Brigida Tandoc, Jose Infante and Mercedes Uy Santos, Roberto Cabugao, Basilisa Callanta and Fe Callanta, Ricardo Bravo and Francisca Estrada, the City of Dagupan, and Constantino Daroya and Marciana Caramat. 4 The complaint was docketed as Civil Case No. D-1785. The cause of action against the City of Dagupan centers around the deed of sale executed in its favor on 4 October 1952 by former judicial administrator Oscar S. Maneclang. In its Answer filed on 5 November 1965, 5 the City of Dagupan interposed the following affirmative defenses: (a) the sale in its favor is valid, legal and above board; (b) plaintiff has no cause of action against it, or that the same, if any, had prescribed since the complaint

was filed thirteen (13) years after the execution of the sale; (c) plaintiff is barred by estoppel and laches; (d) it is a buyer in good faith; and (e) it has introduced necessary and useful improvements and contructed a supermarket worth P200,000.00; hence, assuming arguendo that the sale was illegal, it has the right to retain the land and the improvements until it is reimbursed for the said improvements.

On 30 March 1966, plaintiff and the City of Dagupan entered into a Stipulation of Facts wherein they agreed on the facts earlier adverted to. They, however, agreed: (a) to adduce evidence concerning the reasonable rental of the property in question and other facts not embodied therein but which are material and vital to the final determination of the case, and (b) to request the court to take judicial notice of SP Proc. No. 3028.

The evidence adduced by plaintiff discloses that Oscar Maneclang was induced by its then incumbent Mayor, Atty. Angel B. Fernandez, to sell the property to the City of Dagupan and that the said City has been leasing the premises out to numerous tenants at the rate of P0.83 per square meter per month, or a total monthly rental of P3,747.45, since 4 October 1952. 6

On 9 November 1966, the trial court rendered a partial decision in Civil Case No. D-1785 against the City of Dagupan, the dispositive portion of which reads as follows:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment:

(a) Annulling (sic) the Deed of Sale executed by the Administrator on October 4, 1952 (Exh. F) being null and void ab initio;

(b) Ordering the cancellation of the Certificate of Title issued in favor of the defendant City of Dagupan by virtue of said Deed of Sale, and directing the Register of Deeds of said City to issue a new Certificate of Title in favor of the plaintiff as Administratrix covering the property in question;

(c) Ordering the defendant City of Dagupan to restore the possession to the plaintiff in her capacity as Judicial Administratrix of the Intestate Estate of Margarita Suri Santos of the parcel of land in question, together with all the improvements thereon existing;

(d) Ordering the defendant City of Dagupan City to pay the plaintiff the sum of P584,602.20 as accumulated rentals or reasonable value of the use of the property in question from October 4, 1952 up to the filing of the complaint in 1985, plus interest thereon at the rate of 6% per annum from the later date;

(e) Ordering the defendant City of Dagupan to pay a monthly rental or reasonable value of its occupation of the premises in the amount of P3,747.45 from October 9, 1985 up to the date the possession of the premises is delivered (sic) the plaintiff by said defendant, and

(f) Ordering the plaintiff to reimburse the defendant City of Dagupan the sums of P100,000.00 and P11,687.50 both amounts to be deducted from the amount due the plaintiff from said defendant.

Defendant shall also pay the costs.

SO ORDERED. 7

In arriving at the said disposition, the trial court held that:

(a) Under Rule 90 of the Rules of Court, 8 which is similar to the provisions of Section 722 of the Code of Civil Procedure, it is essential and mandatory that the interested parties be given notices of the application for authority to sell the estate or any portion thereof which is pending settlement in a probate court. As held in the early case of Estate of Gamboa vs. Floranza, 9 an order issued by a probate court for the sale of real property belonging to the estate of a deceased person would be void if no notice for the hearing of the petition for such sale is given as required by said Section 722. Under this section, when such a petition is made, the court shall designate a time and place for the hearing and shall require notice of such hearing to be given in a newspaper of general circulation; moreover, the court may require the giving of such further notice as it deems proper.

In the instant case, no notice of the application was given to the heirs; hence, both the order granting authority to sell and the deed of sale executed in favor of the City of Dagupan pursuant thereto, are null and void.

(b) Estoppel does not lie against plaintiff as no estoppel can be predicated on an illegal act and estoppel is founded on ignorance. In the instant case, the nullity is by reason of the non-observance of the requirements of law regarding notice; this legal defect or deficiency deprived the probate court of its jurisdiction to dispose of the property of the estate. Besides, the City of Dagupan was represented in the transaction by lawyers who are presumed to know the law. This being the case, they should not be allowed to plead estoppel; finally, estoppel cannot give validity to an act which is prohibited by law or is against public policy. 10

(c) Laches and prescription do not apply. The deed of sale being void ab initio, it is in contemplation of law inexistent and therefore the right of the plaintiff to bring the action for the declaration of inexistence of such contract does not prescribe. 11

(d) The City of Dagupan is not a purchaser in good faith and for value as the former judicial administrator, Oscar Maneclang, testified that he was induced by then incumbent Mayor of the City Councilor Atty. Teofilo Guadiz, Sr. to sell the property; moreover, the City Fiscal signed as witness to the deed of sale. These lawyers are presumed to know the law.

Not satisfied with the decision, the City of Dagupan appealed to this Court 12 alleging that said decision is contrary to law, the facts and the evidence on record, and that the amount involved exceeds P500,000.00.

In its Brief, the City of Dagupan submits the following assigned errors:

FIRST ERROR

THE LOWER COURT ERRED IN HOLDING THAT THE SALE EXECUTED BY THE JUDICIAL ADMINISTRATOR TO THE CITY OF DAGUPAN IS NULL AND VOID AB INITIO.

SECOND ERROR

THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF IS NOT IN ESTOPPEL FROM ASSAILING THE LEGALITY OF THE SALE.

THIRD ERROR

THE LOWER COURT ERRED IN HOLDING THAT THE INSTANT ACTION IS NOT BARRED BY LACHES AND PRESCRIPTION.

FOURTH ERROR

THE LOWER COURT ERRED IN DECLARING THAT DEFENDANT CITY OF DAGUPAN IS NOT A PURCHASER IN GOOD FAITH AND FOR VALUE.

FIFTH ERROR

THE LOWER COURT ERRED IN ORDERING DEFENDANT CITY OF DAGUPAN TO PAY THE PLAINTIFF THE SUM OF P584,602.20 AS ACCUMULATED RENTALS OR REASONABLE VALUE OF (sic) THE USE OF THE PROPERTY IN QUESTION FROM OCTOBER 4, 1952 UP TO THE FILING OF THE COMPLAINT IN 1965, PLUS INTEREST THEREON AT THE RATE OF 6% PER ANNUM FROM THE LATER DATE.

SIXTH ERROR

THE LOWER COURT ERRED IN ORDERING THE DEFENDANT CITY OF DAGUPAN TO PAY A MONTHLY RENTAL OR REASONABLE VALUE OF (sic) ITS OCCUPATION OF THE PREMISES IN THE AMOUNT OF P3,747,45 FROM OCTOBER 9, 1965 UP TO THE DATE THE POSSESSION OF THE PREMISES IS DELIVERED TO THE PLAINTIFF BY SAID DEFENDANT.

We shall consider these assigned errors sequentially.

1. In support of the first, appellant maintains that notice of the application for authority to sell was given to Severo Maneclang, surviving spouse of Margarita. As the designated legal representative of the minor children in accordance with Article 320 of the Civil Code, notice to him is deemed sufficient notice to the latter; moreover, after Oscar Maneclang signed the deed of sale 13 in his capacity as judicial administrator, he "sent copies of his annual report and the deed of sale

to Severo Maneclang, and his brothers Hector Maneclang and Oscar Maneclang and sister Amanda Maneclang, all of legal ages (sic), while the other minor heirs received theirs through his lawyer." 14 Besides, per Flores vs. Ang Bansing, 15 the sale of property by the judicial administrator cannot be set aside on the sole ground of lack of notice.

These contentions are without merit.

Article 320 of the Civil Code does not apply. While the petition for authority to sell was filed on 2 September 1949, the Civil Code took effect only on 30 August 1950. 16 Thus, the governing law at the time of the filing of the petition was Article 159 of the Civil Code of Spain which provides as follows:

The father, or in his default, the mother, shall be the legal administrator of the property of the children who are subject to parental authority.

However, the provisions of the Code of Civil Procedure on guardianship impliedly repealed those of the Civil Code relating to that portion of the patria potestad (parental authority) which gave to the parents the administration and usufruct of their minor children's property; said parents were however entitled, under normal conditions, to the custody and care of the persons of their minor children. 17

Article 320 of the present Civil Code, taken from the aforesaid Article 159, incorporates the amendment that if the property under administration is worth more than two thousand pesos (P2,000.00), the father or the mother shall give a bond subject to the approval of the Court of First Instance. This provision then restores the old rule 18 which made the father or mother, as such, the administrator of the child's property. Be that as it may, it does not follow that for purposes of complying with the requirement of notice under Rule 89 of the Rules of the Court, notice to the father is notice to the children. Sections 2, 4 and 7 of said Rule state explicitly that the notice, which must be in be writing, must be given to the heirs, devisees, and legatees and that the court shall fix a time and place for hearing such petition and cause notice to be given to the interested parties.

There can be no dispute that if the heirs were duly represented by counsel or by a guardian ad litem in the case of the minors, the notice may be given to such counsel or guardian ad litem. In this case, however, only the surviving spouse, Severo Maneclang, was notified through his counsel. Two of the heirs, Hector Maneclang and Oscar Maneclang, who were then of legal age, were not represented by counsel. The remaining seven (7) children were still minors with no guardian ad litem having been appointed to represent them. Obviously then, the requirement of notice was not satisfied. The requisite set forth in the aforesaid sections of Rule 89 are mandatory and essential. Without them, the authority to sell, the sale itself and the order approving it would be null and void ab initio. 19 The reason behind this requirement is that the heirs, as the presumptive owners 20 since they succeed to all the rights and obligations of the deceased from the moment of the latter's death, 21 are the persons directly affected by the sale or mortage and therefore cannot be deprived of the property except in the manner provided by law.

Consequently, for want of notice to the children, the Order of 9 September 1949 granting the application, the sale in question of 4 October 1952 and the Order of 15 March 1954 approving the sale are all void ab initio as against said children. Severo Maneclang, however, stands on different ground altogether. Having been duly notified of the application, he was bound by the said order, sale and approval of the latter. However, the only interest which Severino Maneclang would have over the property is his right of usufruct which is equal to that corresponding by way of legitime pertaining to each of the surviving children pursuant to Article 834 of the Civil Code of Spain, the governing law at that time since Margarita Suri Santos died before the effectivity of the Civil Code of the Philippines.

2 Estoppel is unavailable as an argument against the administratrix of the estate and against the children.

As to the former, this Court, in Boñaga vs. Soler, supra, reiterated the rule "that a decedent's representative is not estopped to question the validity of his own void deed purporting to convey land; 22 and if this be true of the administrator as to his own acts, a fortiori, his successor can not be estopped to question the acts of his predecessor are not conformable to law." 23 Not being the party who petitioned the court for authority to sell and who executed the sale, she cannot be held liable for any act or omission which could give rise to estoppel. Under Article 1431 of the Civil Code, 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. In estoppel by pais, as related to the party sought to be estopped, it is necessary that there be a concurrence of the following requisites: (a) conduct amounting to false representation or concealment of material facts or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (b) intent, or at least expectation that this conduct shall be acted upon, or at least influenced by the other party; and (c) knowledge, actual or constructive of the actual facts. 24 In estoppel by conduct, on the other hand, (a) there must have been a representation or concealment of material facts; (c) the party to whom it was made must have been ignorant of the truth of the matter; and (d) it must have been made with the intention that the other party would act upon it. 25

As to the latter, considering that, except as to Oscar Maneclang who executed the deed of sale in his capacity as judicial administrator, the rest of the heirs did not participate in such sale, and considering further that the action was filed solely by the administratrix without the children being impleaded as parties plaintiffs or intervenors, there is neither rhyme nor

reason to hold these heirs in estoppel. For having executed the deed of sale, Oscar Maneclang is deemed to have assented to both the motion for and the actual order granting the authority to sell. Estoppel operates solely against him.

3 As to prescription, this Court ruled in the Boñaga case that "[a]ctions to declare the inexsistence of contracts do not prescribe (Art. 1410, N.C.C.), a principle applied even before the effectivity of the new Civil Code (Eugenio, et al. vs. Perdido, et al., supra, citing Tipton vs. Velasco, 6 Phil. 67, and Sabas vs. Germa , 66 Phil. 471 )."

4. Laches is different from prescription. As the court held in Nielsen & Co. Inc . vs. Lepanto Consolidated Mining Co., 26 the defense of laches applies independently of prescription. While prescription is concerned with the fact of delay, laches is concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being founded on some change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches applies in equity, whereas prescription applies at law. Prescription is based on fixed time, laches is not.

The essential elements of laches are the following: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made and for which the complaint seeks a remedy; (2) delay in asserting the complainant's rights, the complainant having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred. 27

In the instant case, from time the deed of sale in favor of the City of Dagupan was executed on 4 October 1952, up to the time of the filing of the complaint for annulment on 28 September 1965, twelve (12) years, ten (10) months and twenty-four (24) days had elapsed.

The respective ages of the children of Margarita Suri Santos on these two dates were, more or less, as follows:

Upon execution At the filingof the deed of sale of the complaint

Hector Maneclang 26 39Cesar Maneclang 24 37Oscar Maneclang 22 35Amanda Maneclang 21 34Adelaida Maneclang 18 31Linda Maneclang 12 25Priscila Maneclang 11 24Natividad Maneclang 8 20Teresita Maneclang 7 20

It is an undisputed fact that the City of Dagupan immediately took possession of the property and constructed thereon a public market; such possession was open, uninterrupted and continuous. Obviously, Hector, Cesar, Oscar and Amanda were already of legal age when the deed of sale was executed. As it was Oscar who executed the deed of sale, he cannot be expected to renounce his own act. With respect to Hector, Cesar and Amanda, they should have taken immediate steps to protect their rights. Their failure to do so for thirteen (13) years amounted to such inaction and delay as to constitute laches. This conclusion, however, cannot apply to the rest of the children — who were then minors and not represented by any legal representative. They could not have filed an action to protect their interests; hence, neither delay nor negligence could be attributed to them as a basis for laches. Accordingly, the estate is entitled to recover 5/9 of the questioned property.

5. In ruling out good faith, the trial court took into account the testimony of Oscar Maneclang to the effect that it was Mayor Fernandez of Dagupan City and Councilor Teofilo Guadiz, Sr., both lawyers, who induced him to sell the property and that the execution of the sale was witnessed by the City Fiscal.

We are unable to agree.

While the order granting the motion for authority to sell was actually issued on 9 September 1949, the same was secured during the incumbency of the then judicial administrator Pedro Feliciano. Even if it is to be assumed that Mayor Fernandez and Councilor Guadiz induced Oscar Maneclang to sell the property, the fact remains that there was already the order authorizing the sale. Having been issued by a Judge who was lawfully appointed to his position, he was disputably presumed to have acted in the lawful exercise of jurisdiction and that his official duty was regularly performed. 28 It was not incumbent upon them to go beyond the order to find out if indeed there was a valid motion for authority to sell. Otherwise, no order of any court can be relied upon by the parties. Under Article 526 of the Civil Code, a possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it; furthermore, mistake upon a doubtful or difficult question of law may be the basis of good faith. It implies freedom from knowledge and

circumstances which ought to put a person on inquiry. 29 We find no circumstance in this case to have alerted the vendee, the City of Dagupan, to a possible flaw or defect in the authority of the judicial administrator to sell the property. Since good faith is always presumed, and upon him who alleges bad faith on the part of the possessor rests the burden of proof, 30 it was incumbent upon the administrator to established such proof, which We find to be wanting. However, Article 528 of the Civil Code provides that: "Possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully." The filing of a case alleging bad faith on the part of a vendee gives cause for cessation of good faith.

In Tacas vs. Tobon, 31 this Court held that if there are no other facts from which the interruption of good faith may be determined, and an action is filed to recover possession, good faith ceases from the date of receipt of the summons to appear at the trial and if such date does not appear in the record, that of the filing of the answer would control. 32

The date of service of summons to the City of Dagupan in Civil Case No. D-1785 is not clear from the record. Its Answer, however, was filed on 5 November 1965. Accordingly, its possession in good faith must be considered to have lasted up to that date. As a possessor in good faith, it was entitled to all the fruits of the property and was under no obligation to pay rental to the intestate of Margarita for the use thereof. Under Article 544 of the Civil Code, a possessor in good faith is entitled to the fruits received before the possession is legally interrupted. Thus, the trial court committed an error when it ordered the City of Dagupan to pay accumulated rentals in the amount of P584,602.20 from 4 October 1952 up to the filing of the complaint.

6. However, upon the filing of the Answer, the City of Dagupan already became a possessor in bad faith. This brings Us to the issue of reasonable rentals, which the trial court fixed at P3,747.45 a month. The basis thereof is the monthly earnings of the city from the lessees of the market stalls inside the Perez Boulevard Supermarket. The lesses were paying rental at the rate of P0.83 per square meter. Appellant maintains that this is both unfair and unjust. The property in question is located near the Chinese cemetery and at the time of the questioned sale, it had no access to the national road, was located "in the hinterland" and, as admitted by the former judicial administrator, Oscar Maneclang, the persons who built houses thereon prior to the sale paid only P6.00 to P8.00 as monthly rentals and the total income from them amounted only to P40.00 a month. Appellant contends that it is this income which should be made the basis for determining the reasonable rental for the use of the property.

There is merit in this contention since indeed, if the rental value of the property had increased, it would be because of the construction by the City of Dagupan of the public market and not as a consequence of any act imputable to the intestate estate. It cannot, however, be denied that considering that the property is located within the city, its value would never decrease; neither can it be asserted that its price remained constant. On the contrary, the land appreciated in value at least annually, if not monthly. It is the opinion of this Court that the reasonable compensation for the use of the property should be fixed at P1,000.00 a month. Taking into account the fact that Severo Maneclang, insofar as his usufructuary right is concerned, but only until his death, is precluded from assailing the sale, having been properly notified of the motion for authority to sell and considering further that the heirs, Hector, Cesar, Oscar and Amanda, all surnamed Maneclang, are, as discussed above, barred by laches, only those portions of the monthly rentals which correspond to the presumptive shares of Adelaida, Linda, Priscila, Natividad and Teresita, all surnamed Maneclang, to the extent untouched by the usufructuary right of Severo Maneclang, should be paid by the City of Dagupan. There is no showing as to when Severo Maneclang died; this date of death is necessary to be able to determine the cessation of his usufructuary right and the commencement of the full enjoyment of the fruits of the property by the unaffected heirs. Under the circumstances, and for facility of computation, We hereby fix the presumptive shares in the rentals of the aforenamed unaffected heirs at P500.00 a month, or at P100.00 each, effective 5 November 1965 until the City of Dagupan shall have effectively delivered to the intestate estate 5/9 of the property in question. The latter, however, shall reimburse the City of Dagupan of that portion of the real estate taxes it had paid on the land corresponding to 5/9 of the lot commencing from taxable year 1965 until said 5/9 part is effectively delivered to the intestate estate.

Pursuant to Article 546 of the Civil Code, the City of Dagupan may retain possession of the property until it shall have been fully reimbursed the value of the building in the amount of P100,000.00 and 5/9 of the purchase price amounting to P6,493.05

WHEREFORE, judgment is hereby rendered AFFIRMING the decision in all respects, except to the extent as above modified. As modified, (a) the sale in favor of the City of Dagupan, executed on 4 October 1952 (Exhibit "F"), is hereby declared null and void; however, by reason of estoppel and laches as abovestated, only 5/9 of the subject property representing the presumptive shares of Adelaida, Linda, Priscila, Natividad and Teresita, all surnamed Maneclang, may be recovered; (b) subject, however, to its right to retain the property until it shall have been refunded the amounts of P100,000.00 and P6,493.05, the City of Dagupan is hereby ordered to reconvey to the intestate estate of Margarita Suri Santos 5/9 of the property in question, for which purpose said parties shall cause the appropriate partition thereof, expenses for which shall be borne by them proportionately; and (c) the City of Dagupan is further ordered to pay reasonable compensation for the use of 5/9 of the property in question at the rate of P500.00 a month from 5 November 1965 until it shall have effectively delivered the possession of the property to the intestate estate of Margarita Suri Santos. Upon the other hand, said intestate estate is hereby ordered to refund to the City of Dagupan that portion of the real estate taxes the latter had paid for the lot corresponding to 5/9 thereof effective taxable year 1965 and until the latter shall have delivered to said intestate estate.

SO ORDERED.

[G.R. No. 146006. February 23, 2004]

JOSE C. LEE AND ALMA AGGABAO, in their capacities as President and Corporate Secretary, respectively, of Philippines Internationl 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.

D E C I S I O N

CORONA, J.:

This is a petition for review under Rule 45 of the Rules of Court seeking to reverse and set aside the decision[1] 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-Enderes and her siblings Jose, Romeo, Enrico Manuel and Cesar, all surnamed Ortañez).[2]

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 their father which included, among other properties, 2,029[3] shares of stock in Philippine International Life Insurance Company (hereafter Philinterlife), representing 50.725% of the company’s outstanding capital stock.

On April 15, 1989, the decedent’s wife, Juliana S. Ortañez, claiming that she owned 1,014[4] 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 remaining 1,011[5] 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. Divina Ortañez-Enderes as Special Administratrix is hereby denied.[6]

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 Philinterlife shares of stocks are concerned.[7]

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 invalidly appropriated for themselves, without approval of the intestate court, was void.[8]

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 decedent, Dr. Juvencio Ortañez, in the insurance company.[9] 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 Administratrix Enderes in the SEC and civil courts.[10] 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, of Philinterlife,[11] 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.

SO ORDERED.[12]

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 cite herein petitioners Jose Lee and Alma Aggabao (president and secretary, respectively, of Philinterlife) in contempt.[13]

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.

SO ORDERED.[14]

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.

SO ORDERED.[15]

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 jurisdiction.[16]

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 FLAG.[17]

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, 1999 on the ground that there was no compelling reason to reconsider said denial.[18] 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 respondent judge.[19]

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 moment of death of the decedent.[20] 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 been paid or the devisees or legatees shall have been given their shares.[21] 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. Orellano,[22] we laid down the rule that the sale of the property of the estate by an administrator without the order of the probate court is void and passes no title to the purchaser. And in the case of Dillena vs. Court of Appeals,[23] 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.

x x x x x x x x x

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 execution.[24] (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 appointed special administrators by the intestate court.[25]

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 and in several subsequent cases.[26] 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 damages with prayer for a writ of preliminary injunction and/or temporary restraining order.[27] 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.

x x x x x x x x x

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 pending.[28]

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?

Futhermore, 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 and the acquisition of shares of stock of private respondent is barred by prescription.[29]

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 Aggaboa 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 the Knights of Columbus Fraternal Association, Inc. (which motion was, however, later abandoned).[30] 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 was a director of Philinterlife,[31] 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 denial of due process.[32] 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.

G.R. No. 102380 January 18, 1993

HERODOTUS P. ACEBEDO and DEMOSTHENES P. ACEBEDO, petitioners, vs.HON. BERNARDO P. ABESAMIS, MIGUEL ACEBEDO, ALEXANDER ACEBEDO, NAPOLEON ACEBEDO, RIZALINO ACEBEDO, REPUBLICA ACEBEDO, FILIPINAS ACEBEDO and YU HWA PING, respondents.

Heminio L. Ruiz for petitioners.

Vicente D. Millora for private respondents.

Romero A. Yu for respondent Yu Hua Ping.

 

CAMPOS, JR., J.:

The lower court's jurisdiction in approving a Deed of Conditional Sale executed by respondents-heirs and ordering herein administrator-petitioner Herodotus Acebedo to sell the remaining portions of said properties, despite the absence of its prior approval as a probate court, is being challenged in the case at bar.

The late Felix Acebedo left an estate consisting of several real estate properties located in Quezon City and Caloocan City, with a conservative estimated value of about P30 million. Said estate allegedly has only the following unsettled claims:

a. P87,937.00 representing unpaid real estate taxes due Quezon City;

b. P20,244.00 as unpaid real estate taxes due Caloocan City;

c. The unpaid salaries/allowances of former Administrator Miguel Acebedo, and the incumbent Administrator Herodotus Acebedo; and

d. Inheritance taxes that may be due on the net estate.

The decedent was succeeded by eight heirs, two of whom are the petitioners herein, and the others are the private respondents.

Due to the prolonged pendency of the case before the respondent Court for sixteen years, respondents-heirs filed a "Motion for Approval of Sale", on October 4, 1989. The said sale involved the properties covered by Transfer Certificate of Title Nos. 155569, 120145, 9145, and 18709, all of which are registered in Quezon City, and form part of the estate. The consideration for said lots was twelve (12) million pesos and by that time, they already had a buyer. It was further stated in said Motion that respondents-heirs have already received their proportionate share of the six (6) million pesos paid by the buyer, Yu Hwa Ping, as earnest money; that the balance of P6,000,000.00 is more than enough to pay the unsettled claims against the estate. Thus, they prayed for the Court to direct the administrator, Herodotus Acebedo (referred to as petitioner-administrator hereafter):

1. to sell the properties mentioned in the motion;

2. with the balance of P6 million, to pay all the claims against the Estate; and

3. to distribute the residue among the Heirs in final settlement of the Estate.

To the aforesaid Motion, herein petitioner-administrator interposed an "Opposition to Approval of Sale", to wit:

1. That he has learned that some of the heirs herein have sold some real estate property of the Estate located at Balintawak, Quezon City, without the knowledge of the herein administrator, without the approval of this Honorable Court and of some heirs, and at a shockingly low price;

2. That he is accordingly hereby registering his vehement objection to the approval of the sale, perpetrated in a manner which can even render the proponents of the sale liable for punishment for contempt of this Honorable Court;

3. The herein Administrator instead herein prays this Honorable Court to authorize the sale of the above mentioned property of the Estate to generate funds to pay certain liabilities of the Estate and with the approval of this Honorable Court if warranted, to give the heirs some advances chargeable against theirs (sic) respective shares, and, for the purpose to authorize the herein Administrator, and the other heirs to help the Administrator personally or through a broker, to look for a buyer for the highest obtainable price, subject always to the approval of this Honorable Court. 1

On October 30, 1989, herein petitioners moved to be given a period of forty-five (45) days within which to look for a buyer who will be willing to buy the properties at a price higher than P12,000,000.00.

The case was set for hearing on December 15, 1989. However, by said date, petitioners have not found any buyer offering better terms. Thus, they asked the Court, on February 8, 1990, for an in extendible period of thirty days to look for a buyer.

Petitioner-administrator then filed a criminal complaint for falsification of a public document against Yu Hwa Ping and notary public Eugenio Obon on February 26, 1990. He initiated this complaint upon learning that it was Yu Hwa Ping who caused the notarization of the Deed of Conditional Sale wherein allegedly petitioner-administrator's signature was made to appear. He also learned that after he confronted the notary public of the questioned document, the latter revoked his notarial act on the same.

On April 2, 1990, petitioner-administrator filed the civil action to secure the declaration by the Court of the nullity of the Deed of Conditional Sale and the Deed of Absolute Sale.

The period granted herein petitioners having lapsed without having found a buyer, petitioner Demosthenes Acebedo sought to nullify the Orders granting them several periods within which to look for a better buyer. Respondents filed a comment thereon.

Having miserably failed to find a better buyer, after seven long months, petitioner-administrator filed another "Opposition to Approval of Sale", dated May 10, 1990, maintaining that the sale should wait for the country to recover from the effects of the coup d'etat attempts, otherwise, the properties should be divided among the heirs.

On June 21, 1990, petitioners filed a "Motion for Leave of Court to Mortgage and Lease some of the Properties of the Estate". To this Motion, respondents filed an Opposition on the following grounds : that the motion is not proper because of the pending motion to approve the sale of the same properties; that said conditional sale was initiated by petitioner-administrator who had earlier signed a receipt for P500,000.00 as earnest money; that the approval of the sale would mean Yu Hwa Ping's assumption of payment of the realty taxes; that the estate has no further debts and thus, the intestate administrator may be terminated.

On August 17, 1990, respondent Court issued an Order, the dispositive portion of which, stated, among others, to wit: 2

b. the motion filed by the heirs-movants, dated October 4, 1989, praying that the new administrator be directed to sell the properties covered by TCT Nos. 155569, 120145, 9145 and 18709, in favor of Yu Hwa Ping is hereby denied; and

c. the new administrator is hereby granted leave to mortgage some properties of the estate at a just and reasonable amount, subject to the approval of the Court.

On December 4, 1990, the respondent Judge issued an order resolving to call the parties to a conference on December 17, 1990. The conference was held, but still the parties were unable to arrive at an agreement. So, on January 4, 1991, it was continued, wherein the parties actually agreed that the heirs be allowed to sell their shares of the properties to Yu Hwa Ping for the price already agreed upon, while herein petitioners negotiate for a higher price with Yu Hwa Ping.

Petitioners, then, instead filed a "Supplemental Opposition" to the approval of the Deed of Conditional Sale.

On March 29, 1991, the respondent Court issued the challenged Order, the dispositive portion of which states, to wit:

WHEREFORE, the Order dated August 7, 1990, is hereby lifted, reconsidered and set aside, and another one is hereby issued as follows:

1. Approving the conditional sale, dated September 10, 1989, executed by the heirs-movants, in favor of Yu Hwa Ping, pertaining to their respective shares in the properties covered by TCT Nos. 155569, 120145, 1945 and 18709 of the Register of Deeds of Quezon City;

2. Ordering the administrator Herodotus Acebedo to sell the remaining portions of the said properties also in favor of Yu Hwa Ping at the same price as the sale executed by the herein heirs-movants;

3. Ordering Yu Hwa Ping to deposit with the Court the total remaining balance of the purchase price for the said lots within TWENTY (20) DAYS from notice hereof;

4. The motion to cite former administrator Miguel Acebedo in contempt of court, resulting from his failure to submit the owner's copy of TCT Nos. 155569, and 120145 is hereby denied. 3

Yu Hwa Ping, on April 4, 1991, deposited the remaining balance of the purchase price for the properties subject of the Deed of Conditional Sale in the amount of P6,500,000.00.

Petitioners herein received the questioned Order on April 11, 1991. Twenty one (21) days thereafter, they filed a Motion for Reconsideration, praying that the Court reinstate its Order of August 17, 1990. To this, private respondents filed their Opposition. 4

Instead of making a reply, petitioners herein filed a Supplemental Motion for Reconsideration. The motions for reconsideration of herein petitioners were denied by the respondent Court on August 23, 1991.

On September 23, 1991, herein petitioners filed a Motion for Partial Reconsideration, hoping for the last time that they would be able to convince the Court that its Order dated March 29, 1991 in effect approving the conditional sale is erroneous and beyond its jurisdiction.

On October 17, 1991, the respondent Court denied the Motion for Partial Reconsideration for "lack of merit".

On November 7, 1991, private respondents filed a Motion for Execution of the Order dated March 29, 1991. This was pending resolution when the petitioners filed this Petition for Certiorari.

The controversy in the case at bar revolves around one question: Is it within the jurisdiction of the lower court, acting as a probate court, to issue an Order approving the Deed of Conditional Sale executed by respondents-heirs without prior court approval and to order herein Administrator to sell the remaining portion of said properties?

We answer in the positive?

In the case of Dillena vs. Court of Appeals, 5 this Court made a pronouncement that it is within the jurisdiction of the probate court to approve the sale of properties of a deceased person by his prospective heirs before final adjudication. Hence, it is error to say that this matter should be threshed out in a separate action.

The Court further elaborated that although the Rules of Court do not specifically state that the sale of an immovable property belonging to an estate of a decedent, in a special proceeding, should be made with the approval of the court, this authority is necessarily included in its capacity as a probate court. Therefore, it is clear that the probate court in the case at bar, acted within its jurisdiction in issuing the Order approving the Deed of Conditional Sale.

We cannot countenance the position maintained by herein petitioners that said conditional sale is null and void for lack of prior court approval. The sale precisely was made conditional, the condition being that the same should first be approved by the probate court.

Petitioners herein anchor their claim on Section 7, Rule 89 of the Rules of Court. 6 It is settled that court approval is necessary for the validity of any disposition of the decedent's estate. However, reference to judicial approval cannot adversely affect the substantive rights of the heirs to dispose of their ideal share in the co-heirship and/or co-ownership among the heirs. 7

This Court had the occasion to rule that there is no doubt that an heir can sell whatever right, interest, or participation he may have in the property under administration. This is a matter which comes under the jurisdiction of the probate court. 8

The right of an heir to dispose of the decedent's property, even if the same is under administration, is based on the Civil Code provision 9 stating that 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. Where there are however, two or more heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs. 10

The Civil Code, under the provisions on co-ownership, further qualifies this right. 11 Although it is mandated that each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and thus may alienate, assign or mortgage it, and even substitute another person in its enjoyment, the effect of the alienation or the mortgage, with respect to theco-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership. 12 In other words, the law does not prohibit a co-owner from selling, alienating or mortgaging his ideal share in the property held in common. 13

As early as 1942, this Court has recognized said right of an heir to dispose of property under administration. In the case of Teves de Jakosalem vs. Rafols, et al., 14 it was said that the sale made by an heir of his share in an inheritance, subject to the result of the pending administration, in no wise, stands in the way of such administration. The Court then relied on the provision of the Old Civil Code, Article 440 and Article 339 which are still in force as Article 533 and Article 493, respectively, in the new Civil Code. The Court also cited the words of a noted civilist, Manresa: "Upon the death of a person, each of his heirs 'becomes the undivided owner of the whole estate left with respect to the part or portion which might be adjudicated to him, a community of ownership being thus formed among the co-owners of the estate which remains undivided'."

Private respondents having secured the approval of the probate court, a matter which is unquestionably within its jurisdiction, and having established private respondents' right to alienate the decedent's property subject of administration, this Petition should be dismissed for lack of merit.

PREMISES considered, Petition is hereby DISMISSED. With Costs.

SO ORDERED.

[G.R. No. 141634. February 5, 2001]

Heirs of Spouses REMEDIOS R. SANDEJAS and ELIODORO P. SANDEJAS SR. -- ROBERTO R. SANDEJAS, ANTONIO R. SANDEJAS, CRISTINA SANDEJAS MORELAND, BENJAMIN R. SANDEJAS, REMEDIOS R. SANDEJAS; and heirs of SIXTO S. SANDEJAS II, RAMON R. SANDEJAS, TERESITA R. SANDEJAS, and ELIODORO R. SANDEJAS JR., all represented by ROBERTO R. SANDEJAS, petitioners, vs. ALEX A. LINA, respondent.

D E C I S I O N

PANGANIBAN, J.:

A contract of sale is not invalidated by the fact that it is subject to probate court approval. The transaction remains binding on the seller-heir, but not on the other heirs who have not given their consent to it. In settling the estate of the deceased, a probate court has jurisdiction over matters incidental and collateral to the exercise of its recognized powers. Such matters include selling, mortgaging or otherwise encumbering realty belonging to the estate. Rule 89, Section 8 of the Rules of Court, deals with the conveyance of real property contracted by the decedent while still alive. In contrast with Sections 2 and 4 of the same Rule, the said provision does not limit to the executor or administrator the right to file the application for authority to sell, mortgage or otherwise encumber realty under administration. The standing to pursue such course of action before the probate court inures to any person who stands to be benefited or injured by the judgment or to be entitled to the avails of the suit.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to reverse and set aside the Decision[1] dated April 16, 1999 and the Resolution[2] dated January 12, 2000, both promulgated by the Court of Appeals in CA-GR CV No. 49491. The dispositive portion of the assailed Decision reads as follows:[3]

“WHEREFORE, for all the foregoing, [w]e hereby MODIFY the [O]rder of the lower court dated January 13, 1995, approving the Receipt of Earnest Money With Promise to Buy and Sell dated June 7, 1982, only to the three-fifth (3/5) portion of the disputed lots covering the share of [A]dministrator Eliodoro Sandejas, Sr. [in] the property. The intervenor is hereby directed to pay appellant the balance of the purchase price of the three-fifth (3/5) portion of the property within thirty (30) days from receipt of this [O]rder and x x x the administrator [is directed] to execute the necessary and proper deeds of conveyance in favor of appellee within thirty (30) days thereafter.”

The assailed Resolution denied reconsideration of the foregoing disposition.

The Facts

The facts of the case, as narrated by the Court of Appeals (CA), are as follows:[4]

“On February 17, 1981, Eliodoro Sandejas, Sr. filed a petition (Record, SP. Proc. No. R-83-15601, pp. 8-10) in the lower court praying that letters of administration be issued in his favor for the settlement of the estate of his wife, REMEDIOS R. SANDEJAS, who died on April 17, 1955. On July 1, 1981, Letters of Administration [were issued by the lower court appointing Eliodoro Sandejas, Sr. as administrator of the estate of the late Remedios Sandejas (Record, SP. Proc. No. R-83-15601, p. 16). Likewise on the same date, Eliodoro Sandejas, Sr. took his oath as administrator (Record, SP. Proc. No. R-83-15601, p. 17). x x x.

“On November 19, 1981, the 4th floor of Manila City Hall was burned and among the records burned were the records of Branch XI of the Court of First Instance of Manila. As a result, [A]dministrator Eliodoro Sandejas, Sr. filed a [M]otion for [R]econstitution of the records of the case on February 9, 1983 (Record, SP. Proc. No. R-83-15601, pp. 1-5). On February 16, 1983, the lower court in its [O]rder granted the said motion (Record, SP. Proc. No. R-83-15601, pp. 28-29).

“On April 19, 1983, an Omnibus Pleading for motion to intervene and petition-in-intervention was filed by [M]ovant Alex A. Lina alleging among others that on June 7, 1982, movant and [A]dministrator Eliodoro P. Sandejas, in his capacity as seller, bound and obligated himself, his heirs, administrators, and assigns, to sell forever and absolutely and in their entirety the following parcels of land which formed part of the estate of the late Remedios R. Sandejas, to wit:

1. ‘A parcel of land (Lot No. 22 Block No. 45 of the subdivision plan Psd-21121, being a portion of Block 45 described on plan Psd-19508, G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati, province of Rizal, containing an area of TWO HUNDRED SEVENTY (270) SQUARE METERS, more or less, with TCT No. 13465;

2. ‘A parcel of land (Lot No. 21 Block No. 45 of the subdivision plan Psd-21141, being a portion of Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, containing an area of TWO HUNDRED SEVENTY (270) SQUARE METERS, more or less, with TCT No. 13464;’

3. ‘A parcel of land (Lot No. 5 Block No. 45 of the subdivision plan Psd-21141, being a portion of Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, containing an area of TWO HUNDRED EIGHT (208) SQUARE METERS, more or less, with TCT No. 13468;’

4. ‘A parcel of land (Lot No. 6, Block No. 45 of the subdivision plan Psd-21141, being a portion of Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, containing an area of TWO HUNDRED EIGHT (208) SQUARE METERS, more or less, with TCT No. 13468;’

“The [R]eceipt of the [E]arnest [M]oney with [P]romise to [S]ell and to [B]uy is hereunder quoted, to wit:

‘Received today from MR. ALEX A. LINA the sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS, Philippine Currency, per Metropolitan Bank & Trust Company Chec[k] No. 319913 dated today for P100,000.00, x x x as additional earnest money for the following:

x x x x x x x x x

all registered with the Registry of Deeds of the [P]rovince of Rizal (Makati Branch Office) in the name of SELLER ‘ELIODORO SANDEJAS, Filipino Citizen, of legal age, married to Remedios Reyes de Sandejas;’ and which undersigned, as SELLER, binds and obligates himself, his heirs, administrators and assigns, to sell forever and absolutely in their entirety (all of the four (4) parcels of land above described, which are contiguous to each other as to form one big lot) to said Mr. Alex A. Lina, who has agreed to buy all of them, also binding on his heirs, administrators and assigns, for the consideration of ONE MILLION (P1,000,000.00) PESOS, Philippine Currency, upon such reasonable terms of payment as may be agreed upon by them. The parties have, however, agreed on the following terms and conditions:

‘1. The P100,000.00 herein received is in addition to the P70,000.00 earnest money already received by SELLER from BUYER, all of which shall form part of, and shall be deducted from, the purchase price of P1,000,000.00, once the deed of absolute [sale] shall be executed;

‘2. As a consideration separate and distinct from the price, undersigned SELLER also acknowledges receipt from Mr. Alex A. Lina of the sum of ONE THOUSAND (P1,000.00) PESOS, Philippine Currency, per Metropolitan Bank & Trust Company Check No. 319912 dated today and payable to SELLER for P1,000.00;

‘3. Considering that Mrs. Remedios Reyes de Sandejas is already deceased and as there is a pending intestate proceedings for the settlement of her estate (Spec. Proc. No. 138393, Manila CFI, Branch XI), wherein SELLER was appointed as administrator of said Estate, and as SELLER, in his capacity as administrator of said Estate, has informed BUYER that he (SELLER) already filed a [M]otion with the Court for authority to sell the above parcels of land to herein BUYER, but which has been delayed due to the burning of the records of said Spec. Pro. No. 138398, which records are presently under reconstitution, the parties shall have at least ninety (90) days from receipt of the Order authorizing SELLER, in his capacity as administrator, to sell all THE ABOVE DESCRIBED PARCELS OF LAND TO HEREIN BUYER (but extendible for another period of ninety (90) days upon the request of either of the parties upon the other), within which to execute the deed of absolute sale covering all above parcels of land;

‘4. In the event the deed of absolute sale shall not proceed or not be executed for causes either due to SELLER’S fault, or for causes of which the BUYER is innocent, SELLER binds himself to personally return to Mr. Alex A. Lina the entire ONE HUNDRED SEVENTY THOUSAND ([P]170,000.00) PESOS in earnest money received from said Mr. Lina by SELLER, plus fourteen (14%) percentum interest per annum, all of which shall be considered as liens of said parcels of land, or at least on the share therein of herein SELLER;

‘5. Whether indicated or not, all of above terms and conditions shall be binding on the heirs, administrators, and assigns of both the SELLER (undersigned MR. ELIODORO P. SANDEJAS, SR.) and BUYER (MR. ALEX A. LINA).’ (Record, SP. Proc. No. R-83-15601, pp. 52-54)

“On July 17, 1984, the lower court issued an [O]rder granting the intervention of Alex A. Lina (Record, SP. Proc. No. R-83-15601, p. 167).

“On January 7, 1985, the counsel for [A]dministrator Eliodoro P. Sandejas filed a [M]anifestation alleging among others that the administrator, Mr. Eliodoro P. Sandejas, died sometime in November 1984 in Canada and said counsel is still waiting for official word on the fact of the death of the administrator. He also alleged, among others that the matter of the claim of Intervenor Alex A. Lina becomes a money claim to be filed in the estate of the late Mr. Eliodoro P. Sandejas (Record, SP. Proc. No. R-83-15601, p. 220). On February 15, 1985, the lower court issued an [O]rder directing, among others, that the counsel for the four (4) heirs and other heirs of Teresita R. Sandejas to move for the appointment of [a] new administrator within fifteen (15) days from receipt of this [O]rder (Record, SP. Proc. No. R-83-15601, p. 227). In the same manner, on November 4, 1985, the lower court again issued an order, the content of which reads:

‘On October 2, 1985, all the heirs, Sixto, Roberto, Antonio, Benjamin all surnamed Sandejas were ordered to move for the appointment of [a] new administrator. On October 16, 1985, the same heirs were given a period of fifteen (15) days from said date within which to move for the appointment of the new administrator. Compliance was set for October 30, 1985, no appearance for the aforenamed heirs. The aforenamed heirs are hereby ordered to show cause within fifteen (15) days from receipt of this Order why this Petition for Settlement of Estate should not be dismissed for lack of interest and failure to comply with a lawful order of this Court.

‘SO ORDERED.’ (Record, SP. Proc. No. R-83-15601, p. 273)

“On November 22, 1985, Alex A. Lina as petitioner filed with the Regional Trial Court of Manila an Omnibus Pleading for (1) petition for letters of administration [and] (2) to consolidate instant case with SP. Proc. No. R-83-15601 RTC-Branch XI-Manila, docketed therein as SP. Proc. No. 85-33707 entitled ‘IN RE: INTESTATE ESTATE OF ELIODORO P. SANDEJAS, SR., ALEX A. LINA PETITIONER”, [for letters of administration] (Record, SP. Proc. No. 85-33707, pp. 1-7). On November 29, 1985, Branch XXXVI of the Regional Trial Court of Manila issued an [O]rder consolidating SP. Proc. No. 85-33707, with SP. Proc. No. R-83-15601 (Record, SP. Proc. No.85-33707, p. 13). Likewise, on December 13, 1985, the Regional Trial Court of Manila, Branch XI, issued an [O]rder stating that ‘this Court has no objection to the consolidation of Special Proceedings No. 85-331707, now pending before Branch XXXVI of this Court, with the present proceedings now pending before this Branch’ (Record, SP. Proc. No. R-83-15601, p. 279).

“On January 15, 1986, Intervenor Alex A. Lina filed [a] Motion for his appointment as a new administrator of the Intestate Estate of Remedios R. Sandejas on the following reasons:

‘5.01. FIRST, as of this date, [i]ntervenor has not received any motion on the part of the heirs Sixto, Antonio, Roberto and Benjamin, all surnamed Sandejas, for the appointment of a new [a]dministrator in place of their father, Mr. Eliodoro P. Sandejas, Sr.;

‘5.02. SECOND, since Sp. Proc. 85-33707, wherein the [p]etitioner is herein Intervenor Alex A. Lina and the instant Sp. PROC. R-83-15601, in effect are already consolidated, then the appointment of Mr. Alex Lina as [a]dministrator of the Intestate Estate of Remedios R. Sandejas in instant Sp. Proc. R-83-15601, would be beneficial to the heirs and also to the Intervenor;

‘5.03. THIRD, of course, Mr. Alex A. Lina would be willing to give way at anytime to any [a]dministrator who may be proposed by the heirs of the deceased Remedios R. Sandejas, so long as such [a]dministrator is qualified.’ (Record, SP. Proc. No. R-83-15601, pp. 281-283)

“On May 15, 1986, the lower court issued an order granting the [M]otion of Alex A. Lina as the new [a]dministrator of the Intestate Estate of Remedios R. Sandejas in this proceedings. (Record, SP. Proc. No. R-83-15601, pp. 288-290)

“On August 28, 1986, heirs Sixto, Roberto, Antonio and Benjamin, all surnamed Sandejas, and heirs [sic] filed a [M]otion for [R]econsideration and the appointment of another administrator Mr. Sixto Sandejas, in lieu of [I]ntervenor Alex A. Lina stating among others that it [was] only lately that Mr. Sixto Sandejas, a son and heir, expressed his willingness to act as a new administrator of the intestate estate of his mother, Remedios R. Sandejas (Record, SP. Proc. No. 85-33707, pp. 29-31). On October 2, 1986, Intervenor Alex A. Lina filed his [M]anifestation and [C]ounter [M]otion alleging that he ha[d] no objection to the appointment of Sixto Sandejas as [a]dministrator of the [i]ntestate [e]state of his mother Remedios R. Sandejas (Sp. Proc. No. 85-15601), provided that Sixto Sandejas be also appointed as administrator of the [i]ntestate [e]state of his father, Eliodoro P. Sandejas, Sr. (Spec. Proc. No. 85-33707), which two (2) cases have been consolidated (Record, SP. Proc. No. 85-33707, pp. 34-36). On March 30, 1987, the lower court granted the said [M]otion and substituted Alex Lina with Sixto Sandejas as petitioner in the said [P]etitions (Record, SP. Proc. No. 85-33707, p.52). After the payment of the administrator’s bond (Record, SP. Proc. No. 83-15601, pp. 348-349) and approval thereof by the court (Record, SP. Proc. No. 83-15601, p. 361), Administrator Sixto Sandejas on January 16, 1989 took his oath as administrator of the estate of the deceased Remedios R. Sandejas and Eliodoro P. Sandejas (Record, SP. Proc. No. 83-15601, p. 367) and was likewise issued Letters of Administration on the same day (Record, SP. Proc. No. 83-15601, p. 366).

“On November 29, 1993, Intervenor filed [an] Omnibus Motion (a) to approve the deed of conditional sale executed between Plaintiff-in-Intervention Alex A. Lina and Elidioro [sic] Sandejas, Sr. on June 7, 1982; (b) to compel the heirs of Remedios Sandejas and Eliodoro Sandejas, Sr. thru their administrator, to execute a deed of absolute sale in favor of [I]ntervenor Alex A. Lina pursuant to said conditional deed of sale (Record, SP. Proc. No. 83-15601, pp. 554-561) to which the administrator filed a [M]otion to [D]ismiss and/or [O]pposition to said omnibus motion on December 13, 1993 (Record, SP. Proc. No. 83-15601, pp. 591-603).

“On January 13, 1995, the lower court rendered the questioned order granting intervenor’s [M]otion for the [A]pproval of the Receipt of Earnest Money with promise to buy between Plaintiff-in-Intervention Alex A. Lina and Eliodoro Sandejas, Sr. dated June 7, 1982 (Record, SP. Proc. No. 83-15601, pp. 652-654). x x x.”

The Order of the intestate court[5] disposed as follows:

“WHEREFORE, [i]ntervenor’s motion for the approval of the Receipt Of Earnest Money With Promise To Sell And To Buy dated June 7, 1982, is granted. The [i]ntervenor is directed to pay the balance of the purchase price amounting to P729,000.00 within thirty (30) days from receipt of this Order and the Administrator is directed to execute within thirty (30) days thereafter the necessary and proper deeds of conveyancing.”[6]

Ruling of the Court of Appeals

Overturning the RTC ruling, the CA held that the contract between Eliodoro Sandejas Sr. and respondent was merely a contract to sell, not a perfected contract of sale. It ruled that the ownership of the four lots was to remain in the intestate estate of Remedios Sandejas until the approval of the sale was obtained from the settlement court. That approval was a positive suspensive condition, the nonfulfillment of which was not tantamount to a breach. It was simply an event that prevented the obligation from maturing or becoming effective. If the condition did not happen, the obligation would not arise or come into existence.

The CA held that Section 1, Rule 89[7] of the Rules of Court was inapplicable, because the lack of written notice to the other heirs showed the lack of consent of those heirs other than Eliodoro Sandejas Sr. For this reason, bad faith was imputed to him, for no one is allowed to enjoy a claim arising from one’s own wrongdoing. Thus, Eliodoro Sr. was bound, as a matter of justice and good faith, to comply with his contractual commitments as an owner and heir. When he entered into the agreement with respondent, he bound his conjugal and successional shares in the property.

Hence, this Petition.[8]

Issues

In their Memorandum, petitioners submit the following issues for our resolution:

“a) Whether or not Eliodoro P. Sandejas Sr. is legally obligated to convey title to the property referred to in the subject document which was found to be in the nature of a contract to sell – where the suspensive condition set forth therein [i.e.] court approval, was not complied with;

“b) Whether or not Eliodoro P. Sandejas Sr. was guilty of bad faith despite the conclusion of the Court of Appeals that the respondent [bore] the burden of proving that a motion for authority to sell ha[d] been filed in court;

“c) Whether or not the undivided shares of Eliodoro P. Sandejas Sr. in the subject property is three-fifth (3/5) and the administrator of the latter should execute deeds of conveyance therefor within thirty days from receipt of the balance of the purchase price from the respondent; and

“d) Whether or not the respondent’s petition-in-intervention was converted to a money claim and whether the [trial court] acting as a probate court could approve the sale and compel the petitioners to execute [a] deed of conveyance even for the share alone of Eliodoro P. Sandejas Sr.”[9]

In brief, the Petition poses the main issue of whether the CA erred in modifying the trial court’s Decision and in obligating petitioners to sell 3/5 of the disputed properties to respondent, even if the suspensive condition had not been fulfilled. It also raises the following collateral issues: (1) the settlement court’s jurisdiction; (2) respondent-intervenor’s standing to file an application for the approval of the sale of realty in the settlement case, (3) the decedent’s bad faith, and (4) the computation of the decedent’s share in the realty under administration.

This Court’s Ruling

The Petition is partially meritorious.

Main Issue:Obligation With a Suspensive Condition

Petitioners argue that the CA erred in ordering the conveyance of the disputed 3/5 of the parcels of land, despite the nonfulfillment of the suspensive condition -- court approval of the sale -- as contained in the “Receipt of Earnest Money with Promise to Sell and to Buy” (also referred to as the “Receipt”). Instead, they assert that because this condition had not been satisfied, their obligation to deliver the disputed parcels of land was converted into a money claim.

We disagree. Petitioners admit that the agreement between the deceased Eliodoro Sandejas Sr. and respondent was a contract to sell. Not exactly. In a contract to sell, the payment of the purchase price is a positive suspensive condition. The vendor’s obligation to convey the title does not become effective in case of failure to pay.[10]

On the other hand, the agreement between Eliodoro Sr. and respondent is subject to a suspensive condition -- the procurement of a court approval, not full payment. There was no reservation of ownership in the agreement. In accordance with paragraph 1 of the Receipt, petitioners were supposed to deed the disputed lots over to respondent. This they could do upon the court’s approval, even before full payment. Hence, their contract was a conditional sale, rather than a contract to sell as determined by the CA.

When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the condition happens or is fulfilled.[11] Thus, the intestate court’s grant of the Motion for Approval of the sale filed by respondent resulted in petitioners’ obligation to execute the Deed of Sale of the disputed lots in his favor. The condition having been satisfied, the contract was perfected. Henceforth, the parties were bound to fulfill what they had expressly agreed upon.

Court approval is required in any disposition of the decedent’s estate per Rule 89 of the Rules of Court. Reference to judicial approval, however, cannot adversely affect the substantive rights of heirs to dispose of their own pro indiviso shares in the co-heirship or co-ownership.[12] In other words, they can sell their rights, interests or participation in the property under administration. A stipulation requiring court approval does not affect the validity and the effectivity of the sale as regards the selling heirs. It merely implies that the property may be taken out of custodia legis, but only with the court’s permission.[13] It would seem that the suspensive condition in the present conditional sale was imposed only for this reason.

Thus, we are not persuaded by petitioners’ argument that the obligation was converted into a mere monetary claim. Paragraph 4 of the Receipt, which petitioners rely on, refers to a situation wherein the sale has not materialized. In such a case, the seller is bound to return to the buyer the earnest money paid plus interest at fourteen percent per annum. But the sale was approved by the intestate court; hence, the proviso does not apply.

Because petitioners did not consent to the sale of their ideal shares in the disputed lots, the CA correctly limited the scope of the Receipt to the pro-indiviso share of Eliodoro Sr. Thus, it correctly modified the intestate court’s ruling by excluding their shares from the ambit of the transaction.

First Collateral Issue:Jurisdiction of Settlement Court

Petitioners also fault the CA Decision by arguing, inter alia, (a) jurisdiction over ordinary civil action seeking not merely to enforce a sale but to compel performance of a contract falls upon a civil court, not upon an intestate court; and (b) that Section 8 of Rule 89 allows the executor or administrator, and no one else, to file an application for approval of a sale of the property under administration.

Citing Gil v. Cancio[14] and Acebedo v. Abesamis,[15] petitioners contend that the CA erred in clothing the settlement court with the jurisdiction to approve the sale and to compel petitioners to execute the Deed of Sale. They allege factual differences between these cases and the instant case, as follows: in Gil, the sale of the realty in administration was a clear and an unequivocal agreement for the support of the widow and the adopted child of the decedent; and in Acebedo, a clear sale had been made, and all the heirs consented to the disposition of their shares in the realty in administration.

We are not persuaded. We hold that Section 8 of Rule 89 allows this action to proceed. The factual differences alleged by petitioners have no bearing on the intestate court’s jurisdiction over the approval of the subject conditional sale. Probate jurisdiction covers all matters relating to the settlement of estates (Rules 74 & 86-91) and the probate of wills (Rules 75-77) of deceased persons, including the appointment and the removal of administrators and executors (Rules 78-85). It also extends to matters incidental and collateral to the exercise of a probate court’s recognized powers such as selling, mortgaging or otherwise encumbering realty belonging to the estate. Indeed, the rules on this point are intended to settle the estate in a speedy manner, so that the benefits that may flow from such settlement may be immediately enjoyed by the heirs and the beneficiaries.[16]

In the present case, the Motion for Approval was meant to settle the decedent’s obligation to respondent; hence, that obligation clearly falls under the jurisdiction of the settlement court. To require respondent to file a separate action -- on whether petitioners should convey the title to Eliodoro Sr.’s share of the disputed realty -- will unnecessarily prolong the settlement of the intestate estates of the deceased spouses.

The suspensive condition did not reduce the conditional sale between Eliodoro Sr. and respondent to one that was “not a definite, clear and absolute document of sale,” as contended by petitioners. Upon the occurrence of the condition, the conditional sale became a reciprocally demandable obligation that is binding upon the parties.[17] That Acebedo also involved a conditional sale of real property[18] proves that the existence of the suspensive condition did not remove that property from the jurisdiction of the intestate court.

Second Collateral Issue: Intervenor’s Standing

Petitioners contend that under said Rule 89, only the executor or administrator is authorized to apply for the approval of a sale of realty under administration. Hence, the settlement court allegedly erred in entertaining and granting respondent’s Motion for Approval.

We read no such limitation. Section 8, Rule 89 of the Rules of Court, provides:

“SEC. 8. When court may authorize conveyance of realty which deceased contracted to convey. Notice. Effect of deed.—Where the deceased was in his lifetime under contract, binding in law, to deed real property, or an interest therein, the court having jurisdiction of the estate may, on application for that purpose, authorize the executor or administrator to convey such property according to such contract, or with such modifications as are agreed upon by the parties and approved by the court; and if the contract is to convey real property to the executor or administrator, the clerk of the court shall execute the deed. x x x.”

This provision should be differentiated from Sections 2 and 4 of the same Rule, specifically requiring only the executor or administrator to file the application for authority to sell, mortgage or otherwise encumber real estate for the purpose of paying debts, expenses and legacies (Section 2);[19] or for authority to sell real or personal estate beneficial to the heirs, devisees or legatees and other interested persons, although such authority is not necessary to pay debts, legacies or expenses of administration (Section 4).[20] Section 8 mentions only an application to authorize the conveyance of realty under a contract that the deceased entered into while still alive. While this Rule does not specify who should file the application, it stands to reason that the proper party must be one who is to be benefited or injured by the judgment, or one who is to be entitled to the avails of the suit.[21]

Third Collateral Issue: Bad Faith

Petitioners assert that Eliodoro Sr. was not in bad faith, because (a) he informed respondent of the need to secure court approval prior to the sale of the lots, and (2) he did not promise that he could obtain the approval.

We agree. Eliodoro Sr. did not misrepresent these lots to respondent as his own properties to which he alone had a title in fee simple. The fact that he failed to obtain the approval of the conditional sale did not automatically imply bad faith on his part. The CA held him in bad faith only for the purpose of binding him to the conditional sale. This was unnecessary because his being bound to it is, as already shown, beyond cavil.

Fourth Collateral Issue: Computation of Eliodoro’s Share

Petitioners aver that the CA’s computation of Eliodoro Sr.’s share in the disputed parcels of land was erroneous because, as the conjugal partner of Remedios, he owned one half of these lots plus a further one tenth of the remaining half, in his capacity as a one of her legal heirs. Hence, Eliodoro’s share should be 11/20 of the entire property. Respondent poses no objection to this computation.[22]

On the other hand, the CA held that, at the very least, the conditional sale should cover the one half (1/2) pro indiviso conjugal share of Eliodoro plus his one tenth (1/10) hereditary share as one of the ten legal heirs of the decedent, or a total of three fifths (3/5) of the lots in administration.[23]

Petitioners’ computation is correct. The CA computed Eliodoro’s share as an heir based on one tenth of the entire disputed property. It should be based only on the remaining half, after deducting the conjugal share.[24]

The proper determination of the seller-heir’s shares requires further explanation. Succession laws and jurisprudence require that when a marriage is dissolved by the death of the husband or the wife, the decedent’s entire estate – under the concept of conjugal properties of gains -- must be divided equally, with one half going to the surviving spouse and the other half to the heirs of the deceased.[25] After the settlement of the debts and obligations, the remaining half of the estate is then distributed to the legal heirs, legatees and devices. We assume, however, that this preliminary determination of the decedent’s estate has already been taken into account by the parties, since the only issue raised in this case is whether Eliodoro’s share is 11/20 or 3/5 of the disputed lots.

WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The appealed Decision and Resolution are AFFIRMED with the MODIFICATION that respondent is entitled to only a pro-indiviso share equivalent to 11/20 of the disputed lots.

SO ORDERED.

G.R. No. 133000           October 2, 2001

PATRICIA NATCHER, petitioner, vs.HON. COURT OFAPPEALS AND THE HEIR OF GRACIANO DEL ROSARIO – LETICIA DEL ROSARIO, EMILIA DEL RESORIO – MANANGAN, ROSALINDA FUENTES LLANA, RODOLFO FUENTES, ALBERTO FUENTES, EVELYN DEL ROSARIO, and EDUARDO DEL ROSARIO, respondent..

BUENA, J.:

May a Regional Trial Court, acting as a court of general jurisdiction in an action for reconveyance annulment of title with damages, adjudicate matters relating to the settlement of the estate of a deceased person particularly on questions as to advancement of property made by the decedent to any of the heirs?

Sought to be reversed in this petition for review on certiorari under Rule 45 is the decision1 of public respondent Court of Appeals, the decretal portion of which declares:

"Wherefore in view of the foregoing considerations, judgment appealed from is reversed and set aside and another one entered annulling the Deed of Sale executed by Graciano Del Rosario in favor of defendant-appellee Patricia Natcher, and ordering the Register of Deeds to Cancel TCT No. 186059 and reinstate TCT No. 107443 without prejudice to the filing of a special proceeding for the settlement of the estate of Graciano Del Rosario in a proper court. No costs.

"So ordered."

Spouses Graciano del Rosario and Graciana Esguerra were registered owners of a parcel of land with an area of 9,322 square meters located in Manila and covered by Transfer Certificate of Title No. 11889. Upon the death of Graciana in 1951, Graciano, together with his six children, namely: Bayani, Ricardo, Rafael, Leticia, Emiliana and Nieves, entered into

an extrajudicial settlement of Graciana's estate on 09 February 1954 adjudicating and dividing among themselves the real property subject of TCT No. 11889. Under the agreement, Graciano received 8/14 share while each of the six children received 1/14 share of the said property. Accordingly, TCT No. 11889 was cancelled, and in lieu thereof, TCT No. 35980 was issued in the name of Graciano and the Six children.1âwphi1.nêt

Further, on 09 February 1954, said heirs executed and forged an "Agreement of Consolidation-Subdivision of Real Property with Waiver of Rights" where they subdivided among themselves the parcel of land covered by TCT No. 35980 into several lots. Graciano then donated to his children, share and share alike, a portion of his interest in the land amounting to 4,849.38 square meters leaving only 447.60 square meters registered under Graciano's name, as covered by TCT No. 35988. Subsequently, the land subject of TCT No. 35988 was further subdivided into two separate lots where the first lot with a land area of 80.90 square meter was registered under TCT No. 107442 and the second lot with a land area of 396.70 square meters was registered under TCT No. 107443. Eventually, Graciano sold the first lot2 to a third person but retained ownership over the second lot.3

On 20 March 1980, Graciano married herein petitioner Patricia Natcher. During their marriage, Graciano sold the land covered by TCT No. 107443 to his wife Patricia as a result of which TCT No. 1860594 was issued in the latter's name. On 07 October 1985,Graciano died leaving his second wife Patricia and his six children by his first marriage, as heirs.

In a complaint5 filed in Civil Case No. 71075 before the Regional Trial Court of Manila, Branch 55, herein private respondents alleged that upon Graciano's death, petitioner Natcher, through the employment of fraud, misrepresentation and forgery, acquired TCT No. 107443, by making it appear that Graciano executed a Deed of Sale dated 25 June 19876 in favor herein petitioner resulting in the cancellation of TCT No. 107443 and the issuance of TCT no. 186059 in the name of Patricia Natcher. Similarly, herein private respondents alleged in said complaint that as a consequence of such fraudulent sale, their legitimes have been impaired.

In her answer7 dated 19 August 1994, herein petitioner Natcher averred that she was legally married to Graciano in 20 March 1980 and thus, under the law, she was likewise considered a compulsory heir of the latter. Petitioner further alleged that during Graciano's lifetime, Graciano already distributed, in advance, properties to his children, hence, herein private respondents may not anymore claim against Graciano's estate or against herein petitioner's property.

After trial, the Regional Trial Court of Manila, Branch 55, rendered a decision dated 26 January 1996 holding:8

"1) The deed of sale executed by the late Graciano del Rosario in favor of Patricia Natcher is prohibited by law and thus a complete nullity. There being no evidence that a separation of property was agreed upon in the marriage settlements or that there has been decreed a judicial separation of property between them, the spouses are prohibited from entering (into) a contract of sale;

"2) The deed as sale cannot be likewise regarded as a valid donation as it was equally prohibited by law under Article 133 of the New Civil Code;

"3) Although the deed of sale cannot be regarded as such or as a donation, it may however be regarded as an extension of advance inheritance of Patricia Natcher being a compulsory heir of the deceased."

On appeal, the Court of Appeals reversed and set aside the lower court's decision ratiocinating, inter alia:

"It is the probate court that has exclusive jurisdiction to make a just and legal distribution of the estate. The court a quo, trying an ordinary action for reconveyance / annulment of title, went beyond its jurisdiction when it performed the acts proper only in a special proceeding for the settlement of estate of a deceased person. XXX

"X X X Thus the court a quo erred in regarding the subject property as advance inheritance. What the court should have done was merely to rule on the validity of (the) sale and leave the issue on advancement to be resolved in a separate proceeding instituted for that purpose. XXX"

Aggrieved, herein petitioner seeks refuge under our protective mantle through the expediency of Rule 45 of the Rules of Court and assails the appellate court's decision "for being contrary to law and the facts of the case."

We concur with the Court of Appeals and find no merit in the instant petition.

Section 3, Rule 1 of the 1997 Rules of Civil Procedure defines civil action and special proceedings, in this wise:

"XXX a) A civil action is one by which a party sues another for the enforcement or protection of a right, or the prevention or redress of a wrong.

"A civil action may either be ordinary or special. Both are government by the rules for ordinary civil actions, subject to specific rules prescribed for a special civil action.

"XXX

"c) A special proceeding is a remedy by which a party seeks to establish a status, a right or a particular fact."

As could be gleaned from the foregoing, there lies a marked distinction between an action and a special proceeding. An action is a formal demand of one's right in a court of justice in the manner prescribed by the court or by the law. It is the method of applying legal remedies according to definite established rules. The term "special proceeding" may be defined as an application or proceeding to establish the status or right of a party, or a particular fact. Usually, in special proceedings, no formal pleadings are required unless the statute expressly so provides. In special proceedings, the remedy is granted generally upon an application or motion."9

Citing American Jurisprudence, a noted authority in Remedial Law expounds further:

"It may accordingly be stated generally that actions include those proceedings which are instituted and prosecuted according to the ordinary rules and provisions relating to actions at law or suits in equity, and that special proceedings include those proceedings which are not ordinary in this sense, but is instituted and prosecuted according to some special mode as in the case of proceedings commenced without summons and prosecuted without regular pleadings, which are characteristics of ordinary actions. XXX A special proceeding must therefore be in the nature of a distinct and independent proceeding for particular relief, such as may be instituted independently of a pending action, by petition or motion upon notice."10

Applying these principles, an action for reconveyance and annulment of title with damages is a civil action, whereas matters relating to settlement of the estate of a deceased person such as advancement of property made by the decedent, partake of the nature of a special proceeding, which concomitantly requires the application of specific rules as provided for in the Rules of Court.

Clearly, matters which involve settlement and distribution of the estate of the decedent fall within the exclusive province of the probate court in the exercise of its limited jurisdiction.

Thus, under Section 2, Rule 90 of the Rules of Court, questions as to advancement made or alleged to have been made by the deceased to any heir may be heard and determined by the court having jurisdiction of the estate proceedings; and the final order of the court thereon shall be binding on the person raising the questions and on the heir.

While it may be true that the Rules used the word "may", it is nevertheless clear that the same provision11 contemplates a probate court when it speaks of the "court having jurisdiction of the estate proceedings".

Corollarily, the Regional Trial Court in the instant case, acting in its general jurisdiction, is devoid of authority to render an adjudication and resolve the issue of advancement of the real property in favor of herein petitioner Natcher, inasmuch as Civil Case No. 471075 for reconveyance and annulment of title with damages is not, to our mind, the proper vehicle to thresh out said question. Moreover, under the present circumstances, the RTC of Manila, Branch 55 was not properly constituted as a probate court so as to validly pass upon the question of advancement made by the decedent Graciano Del Rosario to his wife, herein petitioner Natcher.

At this point, the appellate court's disquisition is elucidating:

"Before a court can make a partition and distribution of the estate of a deceased, it must first settle the estate in a special proceeding instituted for the purpose. In the case at hand, the court a quo determined the respective legitimes of the plaintiffs-appellants and assigned the subject property owned by the estate of the deceased to defendant-appellee without observing the proper proceedings provided (for) by the Rules of Court. From the aforecited discussions, it is clear that trial courts trying an ordinary action cannot resolve to perform acts pertaining to a special proceeding because it is subject to specific prescribed rules. Thus, the court a quo erred in regarding the subject property as an advance inheritance."12

In resolving the case at bench, this Court is not unaware of our pronouncement in Coca vs. Borromeo13 and Mendoza vs. Teh14 that whether a particular matter should be resolved by the Regional Trial Court (then Court of First Instance) in the exercise of its general jurisdiction or its limited probate jurisdiction is not a jurisdictional issue but a mere question of procedure. In essence, it is procedural question involving a mode of practice "which may be waived".15

Notwithstanding, we do not see any waiver on the part of herein private respondents inasmuch as the six children of the decedent even assailed the authority of the trail court, acting in its general jurisdiction, to rule on this specific issue of advancement made by the decedent to petitioner.

Analogously, in a train of decisions, this Court has consistently enunciated the long standing principle that although generally, a probate court may not decide a question of title or ownership, yet if the interested parties are all heirs, or the question is one of collation or advancement, or the parties consent to the assumption of jurisdiction by the probate court and the rights of third parties are not impaired, then the probate court is competent to decide the question of ownership.16

Similarly in Mendoza vs. Teh, we had occasion to hold:

"In the present suit, no settlement of estate is involved, but merely an allegation seeking appointment as estate administratrix which does not necessarily involve settlement of estate that would have invited the exercise of the limited jurisdiction of a probate court.17 (emphasis supplied)

Of equal importance is that before any conclusion about the legal share due to a compulsory heir may be reached, it is necessary that certain steps be taken first.18 The net estate of the decedent must be ascertained, by deducting all payable obligations and charges from the value of the property owned by the deceased at the time of his death; then, all donations subject to collation would be added to it. With the partible estate thus determined, the legitime of the compulsory heir or heirs can be established; and only thereafter can it be ascertained whether or not a donation had prejudiced the legitimes.19

A perusal of the records, specifically the antecedents and proceedings in the present case, reveals that the trial court failed to observe established rules of procedure governing the settlement of the estate of Graciano Del Rosario. This Court sees no cogent reason to sanction the non-observance of these well-entrenched rules and hereby holds that under the prevailing circumstances, a probate court, in the exercise of its limited jurisdiction, is indeed the best forum to ventilate and adjudge the issue of advancement as well as other related matters involving the settlement of Graciano Del Rosario's estate.1âwphi1.nêt

WHEREFORE, premises considered, the assailed decision of the Court of Appeals is hereby AFFIRMED and the instant petition is DISMISSED for lack of merit.

SO ORDERED.

G.R. No. 118671. January 29, 1996]

THE ESTATE OF HILARIO M. RUIZ, EDMOND RUIZ, Executor, petitioner, vs. THE COURT OF APPEALS (Former Special Sixth Division), MARIA PILAR RUIZ-MONTES, MARIA CATHRYN RUIZ, CANDICE ALBERTINE RUIZ, MARIA ANGELINE RUIZ and THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF PASIG, BRANCH 156, respondents.

D E C I S I O N

PUNO, J.:

This petition for review on certiorari seeks to annul and set aside the decision dated November 10, 1994 and the resolution dated January 5, 1995 of the Court of Appeals in CA-G.R. SP No. 33045.

The facts show that on June 27, 1987, Hilario M. Ruiz1 executed a holographic will naming as his heirs his only son, Edmond Ruiz, his adopted daughter, private respondent Maria Pilar Ruiz Montes, and his three granddaughters, private respondents Maria Cathryn, Candice Albertine and Maria Angeline, all children of Edmond Ruiz. The testator bequeathed to his heirs substantial cash, personal and real properties and named Edmond Ruiz executor of his estate.2

On April 12, 1988, Hilario Ruiz died. Immediately thereafter, the cash component of his estate was distributed among Edmond Ruiz and private respondents in accordance with the decedent’s will. For unbeknown reasons, Edmond, the named executor, did not take any action for the probate of his father’s holographic will.

On June 29, 1992, four years after the testator’s death, it was private respondent Maria Pilar Ruiz Montes who filed before the Regional Trial Court, Branch 156, Pasig, a petition for the probate and approval of Hilario Ruiz’s will and for the issuance of letters testamentary to Edmond Ruiz.3 Surprisingly, Edmond opposed the petition on the ground that the will was executed under undue influence.

On November 2, 1992, one of the properties of the estate - the house and lot at No. 2 Oliva Street, Valle Verde IV, Pasig which the testator bequeathed to Maria Cathryn, Candice Albertine and Maria Angeline4 - was leased out by Edmond Ruiz to third persons.

On January 19, 1993, the probate court ordered Edmond to deposit with the Branch Clerk of Court the rental deposit and payments totalling P540,000.00 representing the one-year lease of the Valle Verde property. In compliance, on January 25, 1993, Edmond turned over the amount of P348,583.56, representing the balance of the rent after deducting P191,416.14 for repair and maintenance expenses on the estate.5

In March 1993, Edmond moved for the release of P50,000.00 to pay the real estate taxes on the real properties of the estate. The probate court approved the release of P7,722.006

On May 14, 1993, Edmond withdrew his opposition to the probate of the will. Consequently, the probate court, on May 18, 1993, admitted the will to probate and ordered the issuance of letters testamentary to Edmond conditioned upon the filing of a bond in the amount of P50,000.00. The letters testamentary were issued on June 23, 1993.

On July 28, 1993, petitioner Testate Estate of Hilario Ruiz as executor, filed an “Ex-Parte Motion for Release of Funds.” It prayed for the release of the rent payments deposited with the Branch Clerk of Court. Respondent Montes opposed the motion and concurrently filed a “Motion for Release of Funds to Certain Heirs” and Motion for Issuance of Certificate of Allowance of Probate Will.” Montes prayed for the release of the said rent payments to Maria Cathryn, Candice Albertine and Maria Angeline and for the distribution of the testator’s properties, specifically the Valle Verde property and the Blue Ridge apartments, in accordance with the provisions of the holographic will.

On August 26, 1993, the probate court denied petitioner’s motion for release of funds but granted respondent Montes’ motion in view of petitioner’s lack of opposition. It thus ordered the release of the rent payments to the decedent’s three granddaughters. It further ordered the delivery of the titleds to and possession of the properties bequeathed to the three granddaughters and respondent Montes upon the filing of a bond of P50,000.00.

Petitioner moved for reconsideration alleging that he actually filed his opposition to respondent Montes’ motion for release of rent payments which opposition the court failed to consider. Petitioner likewise reiterated his previous motion for release of funds.

On November 23, 1993, petitioner, through counsel, manifested that he was withdrawing his motion for release of funds in view of the fact that the lease contract over Valle Verde property had been renewed for another year.7

Despite petitioner’s manifestation, the probate court, on December 22, 1993, ordered the release of the funds to Edmond but only “such amount as may be necessary to cover the espenses of administration and allowanceas for support” of the testator’s three granddaughters subject to collation and deductible from their share in the inheritance. The court, however, held in abeyance the release of the titles to respondent Montes and the three granddaughters until the lapse of six months from the date of firast publication of the notice to creditors.8 The Court stated thus:

“xxx xxx xxx

After consideration of the arguments set forth thereon by the parties, the court resolves to allow Administrator Edmond M. Ruiz to take possession of the rental payments deposited with the Clerk of Court, Pasig Regional Trial Court, but only such amount as may be necessary to cover the expenses of administration and allowances for support of Maria Cathryn Veronique, Candice Albertine and Maria Angeli, which are subject to collation and deductible from the share in the inheritance of said heirs and insofar as they exceed the fruits or rents pertaining to them.

As to the release of the titles bequeathed to petitioner Maria Pilar Ruiz-Montes and the above-named heirs, the same is hereby reconsidered and held in abeyance until the lapse of six (6) months from the date of first publication of Notice to Creditors.

WHEREFORE, Administrator Edmond M. Ruiz is hereby ordered to submit an accounting of the expenses necessary for administration including provisions for the support Of Maria Cathryn Veronique Ruiz, Candice Albertine Ruiz and Maria Angeli Ruiz before the amount required can be withdrawn and cause the publication of the notice to creditors with reasonable dispatch.9

Petitioner assailed this order before the Court of Appeals. Finding no grave abuse of discretion on the part of respondent judge, the appellate court dismissed the petition and sustained the probate court’s order in a decision dated November 10, 199410 and a resolution dated January 5, 1995.11

Hence, this petition.

Petitioner claims that:

“THE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AFFIRMING AND CONFIRMING THE ORDER OF RESPONDENT REGIONAL TRIAL COURT OF PASIG, BRANCH 156, DATED DECEMBER 22, 1993, WHICH WHEN GIVEN DUE COURSE AND IS EFFECTED WOULD: (1) DISALLOW THE EXECUTOR/ADMINISTRATOR OF THE ESTATE OF THE LATE HILARIO M. RUIZ TO TAKE POSSESSION OF ALL THE REAL AND PERSONAL PROPERTIES OF THE ESTATE; (2) GRANT SUPPORT, DURING THE PENDENCY OF THE SETTLEMENT OF AN ESTATE, TO CERTAIN PERSONS NOT ENTITLED THERETO; AND (3) PREMATURELY PARTITION AND DISTRIBUTE THE ESTATE PURSUANT TO THE PROVISIONS OF THE HOLOGRAPHIC WILL EVEN BEFORE ITS INTRINSIC VALIDITY HAS BEEN DETERMINED, AND DESPITE THE EXISTENCE OF UNPAID DEBTS AND OBLIGATIONS OF THE ESTATE.”12

The issue for resolution is whether the probate court, after admitting the will to probate but before payment of the estate’s debts and obligations, has the authority: (1) to grant an allowance from the funds of the estate for the support of the testator’s grandchildren; (2) to order the release of the titles to certain heirs; and (3) to grant possession of all properties of the estate to the executor of the will.

On the matter of allowance, Section 3 of Rule 83 of the Revised Rules of Court provides:

“Sec. 3. Allowance to widow and family. - The widow and minor or incapacitated children of a deceased person, during the settlement of the estate, shall receive therefrom under the direction of the court, such allowance as are provided by law.”

Petitioner alleges that this provision only gives the widow and the minor or incapacitated children of the deceased the right to receive allowances for support during the settlement of estate proceedings. He contends that the testator’s three granddaughters do not qualify for an allowance because they are not incapacitated and are no longer minors but of legal age, married and gainfully employed. In addition, the provision expressly states “children” of the deceased which excludes the latter’s grandchildren.

It is settled that allowances for support under Section 3 of Rule 83 should not be limited to the “minor or incapacitated” children of the deceased. Article 18813 of the Civil Code of the Philippines, the substantive law in force at the time of the testator’s death, provides that during the liquidation of the conjugal partnership, the deceased’s legitimate spouse and children, regardless of their age, civil status or gainful employment, are entitled to provisional support from the funds of the estate.14 The law is rooted on the fact that the right and duty to support, especially the right to education, subsist even beyond the age of majority.15

Be that as it may, grandchildren are not entitled to provisional support from the funds of the decedent’s estate. The law clearly limits the allowance to “widow and children” and does not extend it to the deceased’s grandchildren, regardless of their minority or incapacity.16 It was error, therefore, for the appellate court to sustain the probate court’s order granting an allowance to the grandchildren of the testator pending settlement of his estate.

Respondent courts also erred when they ordered the release of the titles of the bequeathed properties to private respondents six months after the date of first publication of notice to creditors. An order releasing titles to properties of the estate amounts to an advance distribution of the estate which is allowed only under the following conditions:

“Sec. 2. Advance distribution in special proceedings. - Nothwithstanding a pending controversy or appeal in proceedings to settle the estate of a decedent, the court may, in its discretion and upon such terms as it may deem proper and just, permit that such part of the estate as may not be affected by the controversy or appeal be distributed among the heirs or legatees, upon compliance with the conditions set forth in Rule 90 of these Rules.”17

And Rule 90 provides that:

“Sec. 1. When order for distribution of residue made. - When the debts, funeral charges, and expenses of administration, the allowance to the widow, and inheritance tax, if any, chargeable to the estate in accordance with law, have been paid, the court, on the application of the executor or administrator, or of a person interested in the estate, and after hearing upon notice, shall assign the residue of the estate to the persons entitled to the same, naming them and the proportions, or parts, to which each is entitled, and such persons may demand and recover their respective shares from the executor or administrator, or any other person having the same in his possession. If there is a controversy before the court as to who are the lawful heirs of the deceased person or as to the distributive shares to which each person is entitled under the law, the controversy shall be heard and decided as in ordinary cases.

No distribution shall be allowed until the payment of the obligations above-mentioned has been made or provided for, unless the distributees, or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs.18

In settlement of estate proceedings, the distribution of the estate properties can only be made: (1) after all the debts, funeral charges, expenses of administration, allowance to the widow, and estate tax have been paid; or (2) before payment of said obligations only if the distributees or any of them gives a bond in a sum fixed by the court conditioned upon the payment of said obligations within such time as the court directs, or when provision is made to meet those obligations.19

In the case at bar, the probate court ordered the release of the titles to the Valle Verde property and the Blue Ridge apartments to the private respondents after the lapse of six months from the date of first publication of the notice to creditors. The questioned order speaks of “notice” to creditors, not payment of debts and obligations. Hilario Ruiz allegedly left no debts when he died but the taxes on his estate had not hitherto been paid, much less ascertained. The estate tax is one of those obligations that must be paid before distribution of the estate. If not yet paid, the rule requires that the distributees post a bond or make such provisions as to meet the said tax obligation in proportion to their respective shares in the inheritance.20 Notably, at the time the order was issued the properties of the estate had not yet been inventoried and appraised.

It was also too early in the day for the probate court to order the release of the titles six months after admitting the will to probate. The probate of a will is conclusive as to its due execution and extrinsic validity21 and settles only the question of whether the testator, being of sound mind, freely executed it in accordance with the formalities prescribed by law.22 Questions as to the intrinsic validity and efficacy of the provisions of the will, the legality of any devise or legacy may be raised even after the will has been authenticated.23

The intrinsic validity of Hilario’s holographic will was controverted by petitioner before the probate court in his Reply to Montes’ Opposition to his motion for release of funds24 and his motion for reconsideration of the August 26, 1993 order of the said court.25 Therein, petitioner assailed the distributive shares of the devisees and legatees inasmuch as his father’s will included the estate of his mother and allegedly impaired his legitime as an intestate heir of his mother. The Rules provide that if there is a controversy as to who are the lawful heirs of the decedent and their distributive shares in his estate, the probate court shall proceed to hear and decide the same as in ordinary cases.26

Still and all, petitioner cannot correctly claim that the assailed order deprived him of his right to take possession of all the real and personal properties of the estate. The right of an executor or administrator to the possession and management of the real and personal properties of the deceased is not absolute and can only be exercised “so long as it is necessary for the payment of the debts and expenses of administration,”27 Section 3 of Rule 84 of the Revised Rules of Court explicitly provides:

“Sec. 3. Executor or administrator to retain whole estate to pay debts, and to administer estate not willed. - An executor or administrator shall have the right to the possession and management of the real as well as the personal estate of the deceased so long as it is necessary for the payment of the debts and expenses for administration.”28

When petitioner moved for further release of the funds deposited with the clerk of court, he had been previously granted by the probate court certain amounts for repair and maintenance expenses on the properties of the estate, and payment of the real estate taxes thereon. But petitioner moved again for the release of additional funds for the same reasons he previously cited. It was correct for the probate court to require him to submit an accounting of the necessary expenses for administration before releasing any further money in his favor.

It was relevantly noted by the probate court that petitioner had deposited with it only a portion of the one-year rental income from the Valle Verde property. Petitioner did not deposit its succeeding rents after renewal of the lease.29 Neither did he render an accounting of such funds.

Petitioner must be reminded that his right of ownership over the properties of his father is merely inchoate as long as the estate has not been fully settled and partitioned.30 As executor, he is a mere trustee of his father’s estate. The funds of the estate in his hands are trust funds and he is held to the duties and responsibilities of a trustee of the highest order.31 He cannot unilaterally assign to himself and possess all his parents’ properties and the fruits thereof without first submitting an inventory and appraisal of all real and personal properties of the deceased, rendering a true account of his administration, the expenses of administration, the amount of the obligations and estate tax, all of which are subject to a determination by the court as to their veracity, propriety and justness.32

IN VIEW WHEREOF, the decision and resolution of the Court of Appeals in CA-G.R. SP No. 33045 affirming the order dated December 22, 1993 of the Regional Trial Court, Branch 156, Pasig in SP Proc. No. 10259 are affirmed with the modification that those portions of the order granting an allowance to the testator’s grandchildren and ordering the release of the titles to the private respondents upon notice to creditors are annulled and set aside.

Respondent judge is ordered to proceed with dispatch in the proceedings below.

SO ORDERED.

G.R. No. 83484 February 12, 1990

CELEDONIA SOLIVIO, petitioner, vs.THE HONORABLE COURT OF APPEALS and CONCORDIA JAVELLANA VILLANUEVA, respondents.

Rex Suiza Castillon for petitioner.

Salas & Villareal for private respondent.

MEDIALDEA, J.:

This is a petition for review of the decision dated January 26, 1988 of the Court of Appeals in CA GR CV No. 09010 (Concordia Villanueva v. Celedonia Solivio) affirming the decision of the trial court in Civil Case No. 13207 for partition, reconveyance of ownership and possession and damages, the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered for the plaintiff and against defendant:

a) Ordering that the estate of the late Esteban Javellana, Jr. be divided into two (2) shares: one-half for the plaintiff and one-half for defendant. From both shares shall be equally deducted the expenses for the burial, mausoleum and related expenditures. Against the share of defendants shall be charged the expenses for scholarship, awards, donations and the 'Salustia Solivio Vda. de Javellana Memorial Foundation;'

b) Directing the defendant to submit an inventory of the entire estate property, including but not limited to, specific items already mentioned in this decision and to render an accounting of the property of the estate, within thirty (30) days from receipt of this judgment; one-half (1/2) of this produce shall belong to plaintiff;

c) Ordering defendant to pay plaintiff P5,000.00 as expenses of litigation; P10,000.00 for and as attorney's fees plus costs.

SO ORDERED. (pp. 42-43, Rollo)

This case involves the estate of the late novelist, Esteban Javellana, Jr., author of the first post-war Filipino novel "Without Seeing the Dawn," who died a bachelor, without descendants, ascendants, brothers, sisters, nephews or nieces. His only surviving relatives are: (1) his maternal aunt, petitioner Celedonia Solivio, the spinster half-sister of his mother, Salustia Solivio; and (2) the private respondent, Concordia Javellana-Villanueva, sister of his deceased father, Esteban Javellana, Sr.

He was a posthumous child. His father died barely ten (10) months after his marriage in December, 1916 to Salustia Solivio and four months before Esteban, Jr. was born.

Salustia and her sister, Celedonia (daughter of Engracio Solivio and his second wife Josefa Fernandez), a teacher in the Iloilo Provincial High School, brought up Esteban, Jr.

Salustia brought to her marriage paraphernal properties (various parcels of land in Calinog, Iloilo covered by 24 titles) which she had inherited from her mother, Gregoria Celo, Engracio Solivio's first wife (p. 325, Record), but no conjugal property was acquired during her short-lived marriage to Esteban, Sr.

On October 11, 1959, Salustia died, leaving all her properties to her only child, Esteban, Jr., including a house and lot in La Paz, Iloilo City, where she, her son, and her sister lived. In due time, the titles of all these properties were transferred in the name of Esteban, Jr.

During his lifetime, Esteban, Jr. had, more than once, expressed to his aunt Celedonia and some close friends his plan to place his estate in a foundation to honor his mother and to help poor but deserving students obtain a college education. Unfortunately, he died of a heart attack on February 26,1977 without having set up the foundation.

Two weeks after his funeral, Concordia and Celedonia talked about what to do with Esteban's properties. Celedonia told Concordia about Esteban's desire to place his estate in a foundation to be named after his mother, from whom his properties came, for the purpose of helping indigent students in their schooling. Concordia agreed to carry out the plan of the deceased. This fact was admitted by her in her "Motion to Reopen and/or Reconsider the Order dated April 3, 1978" which she filed on July 27, 1978 in Special Proceeding No. 2540, where she stated:

4. That petitioner knew all along the narrated facts in the immediately preceding paragraph [that herein movant is also the relative of the deceased within the third degree, she being the younger sister of the late Esteban Javellana, father of the decedent herein], because prior to the filing of the petition they (petitioner Celedonia Solivio and movant Concordia Javellana) have agreed to make the estate of the decedent a foundation, besides they have closely known each other due to their filiation to the decedent and they have been visiting each other's house which are not far away for (sic) each other. (p. 234,

Record; Emphasis supplied.)

Pursuant to their agreement that Celedonia would take care of the proceedings leading to the formation of the foundation, Celedonia in good faith and upon the advice of her counsel, filed on March 8, 1977 Spl. Proceeding No. 2540 for her appointment as special administratrix of the estate of Esteban Javellana, Jr. (Exh. 2). Later, she filed an amended petition (Exh. 5) praying that letters of administration be issued to her; that she be declared sole heir of the deceased; and that after payment of all claims and rendition of inventory and accounting, the estate be adjudicated to her (p. 115, Rollo).

After due publication and hearing of her petition, as well as her amended petition, she was declared sole heir of the estate of Esteban Javellana, Jr. She explained that this was done for three reasons: (1) because the properties of the estate had come from her sister, Salustia Solivio; (2) that she is the decedent's nearest relative on his mother's side; and (3) with her as sole heir, the disposition of the properties of the estate to fund the foundation would be facilitated.

On April 3, 1978, the court (Branch II, CFI, now Branch 23, RTC) declared her the sole heir of Esteban, Jr. Thereafter, she sold properties of the estate to pay the taxes and other obligations of the deceased and proceeded to set up the "SALUSTIA SOLIVIO VDA. DE JAVELLANA FOUNDATION" which she caused to be registered in the Securities and Exchange Commission on July 17,1981 under Reg. No. 0100027 (p. 98, Rollo).

Four months later, or on August 7, 1978, Concordia Javellana Villanueva filed a motion for reconsideration of the court's order declaring Celedonia as "sole heir" of Esteban, Jr., because she too was an heir of the deceased. On October 27, 1978, her motion was denied by the court for tardiness (pp. 80-81, Record). Instead of appealing the denial, Concordia filed on January 7, 1980 (or one year and two months later), Civil Case No. 13207 in the Regional Trial Court of Iloilo, Branch 26, entitled "Concordia Javellana- Villanueva v. Celedonia Solivio" for partition, recovery of possession, ownership and damages.

On September 3, 1984, the said trial court rendered judgment in Civil Case No. 13207, in favor of Concordia Javellana-Villanueva.

On Concordia's motion, the trial court ordered the execution of its judgment pending appeal and required Celedonia to submit an inventory and accounting of the estate. In her motions for reconsideration of those orders, Celedonia averred that the properties of the deceased had already been transferred to, and were in the possession of, the 'Salustia Solivio Vda. de Javellana Foundation." The trial court denied her motions for reconsideration.

In the meantime, Celedonia perfected an appeal to the Court of Appeals (CA GR CV No. 09010). On January 26, 1988, the Court of Appeals, Eleventh Division, rendered judgment affirming the decision of the trial court in toto. Hence, this petition for review wherein she raised the following legal issues:

1. whether Branch 26 of the RTC of Iloilo had jurisdiction to entertain Civil Case No. 13207 for partition and recovery of Concordia Villanueva's share of the estate of Esteban Javellana, Jr. even while the probate proceedings (Spl. Proc. No. 2540) were still pending in Branch 23 of the same court;

2. whether Concordia Villanueva was prevented from intervening in Spl. Proc. No. 2540 through extrinsic fraud;

3. whether the decedent's properties were subject to reserva troncal in favor of Celedonia, his relative within the third degree on his mother's side from whom he had inherited them; and

4. whether Concordia may recover her share of the estate after she had agreed to place the same in the Salustia Solivio Vda. de Javellana Foundation, and notwithstanding the fact that conformably with said agreement, the Foundation has been formed and properties of the estate have already been transferred to it.

I. The question of jurisdiction—

After a careful review of the records, we find merit in the petitioner's contention that the Regional Trial Court, Branch 26, lacked jurisdiction to entertain Concordia Villanueva's action for partition and recovery of her share of the estate of Esteban Javellana, Jr. while the probate proceedings (Spl, Proc. No. 2540) for the settlement of said estate are still pending in Branch 23 of the same court, there being as yet no orders for the submission and approval of the administratix's inventory and accounting, distributing the residue of the estate to the heir, and terminating the proceedings (p. 31, Record).

It is the order of distribution directing the delivery of the residue of the estate to the persons entitled thereto that brings to a close the intestate proceedings, puts an end to the administration and thus far relieves the administrator from his duties (Santiesteban v. Santiesteban, 68 Phil. 367, Philippine Commercial and Industrial Bank v. Escolin, et al., L-27860, March 29, 1974, 56 SCRA 266).

The assailed order of Judge Adil in Spl. Proc. No. 2540 declaring Celedonia as the sole heir of the estate of Esteban Javellana, Jr. did not toll the end of the proceedings. As a matter of fact, the last paragraph of the order directed the administratrix to "hurry up the settlement of the estate." The pertinent portions of the order are quoted below:

2. As regards the second incident [Motion for Declaration of Miss Celedonia Solivio as Sole Heir, dated March 7, 1978], it appears from the record that despite the notices posted and the publication of these proceedings as required by law, no other heirs came out to interpose any opposition to the instant proceeding. It further appears that herein Administratrix is the only claimant-heir to the estate of the late Esteban Javellana who died on February 26, 1977.

During the hearing of the motion for declaration as heir on March 17, 1978, it was established that the late Esteban Javellana died single, without any known issue, and without any surviving parents. His nearest relative is the herein Administratrix, an elder [sic] sister of his late mother who reared him and with whom he had always been living with [sic] during his lifetime.

x x x x x x x x x

2. Miss Celedonia Solivio, Administratrix of this estate, is hereby declared as the sole and legal heir of the late Esteban S. Javellana, who died intestate on February 26, 1977 at La Paz, Iloilo City.

The Administratrix is hereby instructed to hurry up with the settlement of this estate so that it can be terminated. (pp, 14-16, Record)

In view of the pendency of the probate proceedings in Branch 11 of the Court of First Instance (now RTC, Branch 23), Concordia's motion to set aside the order declaring Celedonia as sole heir of Esteban, and to have herself (Concordia) declared as co-heir and recover her share of the properties of the deceased, was properly filed by her in Spl. Proc. No. 2540. Her remedy when the court denied her motion, was to elevate the denial to the Court of Appeals for review on certiorari. However, instead of availing of that remedy, she filed more than one year later, a separate action for the same purpose in Branch 26 of the court. We hold that the separate action was improperly filed for it is the probate court that has exclusive jurisdiction to make a just and legal distribution of the estate.

In the interest of orderly procedure and to avoid confusing and conflicting dispositions of a decedent's estate, a court should not interfere with probate proceedings pending in a co-equal court. Thus, did we rule in Guilas v. Judge of the Court of First Instance of Pampanga, L-26695, January 31, 1972, 43 SCRA 111, 117, where a daughter filed a separate action to annul a project of partition executed between her and her father in the proceedings for the settlement of the estate of her mother:

The probate court loses jurisdiction of an estate under administration only after the payment of all the debts and the remaining estate delivered to the heirs entitled to receive the same. The finality of the approval of the project of The probate court, in the exercise of its jurisdiction to make distribution, has power to determine the proportion or parts to which each distributed is entitled. ... The power to determine the legality or illegality of the testamentary provision is inherent in the jurisdiction of the court making a just and legal distribution of the inheritance. ... To hold that a separate and independent action is necessary to that effect, would be contrary to the general tendency of the jurisprudence of avoiding multiplicity of suits; and is further, expensive, dilatory, and impractical. (Marcelino v. Antonio, 70 Phil. 388)

A judicial declaration that a certain person is the only heir of the decedent is exclusively within the range of the administratrix proceedings and can not properly be made an independent action. (Litam v. Espiritu, 100 Phil. 364)

A separate action for the declaration of heirs is not proper. (Pimentel v. Palanca, 5 Phil. 436)

partition by itself alone does not terminate the probate proceeding (Timbol v. Cano, 1 SCRA 1271, 1276, L-15445, April 29, 1961; Siguiong v. Tecson, 89 Phil. pp. 28, 30). As long as the order of the distribution of the estate has not been complied with, the probate proceedings cannot be deemed closed and terminated Siguiong v. Tecson, supra); because a judicial partition is not final and conclusive and does not prevent the heirs from bringing an action to obtain his share, provided the prescriptive period therefore has not elapsed (Mari v. Bonilia, 83 Phil. 137). The better practice, however, for the heir who has not received his share, is to demand his share through a proper motion in the same probate or administration proceedings, or for reopening of the probate or administrative proceedings if it had already been closed, and not through an independent action, which would be tried by another court or Judge which may thus reverse a decision or order of the probate or intestate court already final and executed and re-shuffle properties long ago distributed and disposed of. (Ramos v. Ortuzar, 89 Phil. 730, 741-742; Timbol v. Cano, supra; Jingco v. Daluz, L-5107, April 24, 1953, 92 Phil. 1082; Roman Catholic v.

Agustines, L-14710, March 29, 1960, 107 Phil. 455, 460-461; Emphasis supplied)

In Litam et al., v. Rivera, 100 Phil. 364, where despite the pendency of the special proceedings for the settlement of the intestate estate of the deceased Rafael Litam the plaintiffs-appellants filed a civil action in which they claimed that they were the children by a previous marriage of the deceased to a Chinese woman, hence, entitled to inherit his one-half share of the conjugal properties acquired during his marriage to Marcosa Rivera, the trial court in the civil case declared that the plaintiffs-appellants were not children of the deceased, that the properties in question were paraphernal properties of his wife, Marcosa Rivera, and that the latter was his only heir. On appeal to this Court, we ruled that "such declarations (that Marcosa Rivera was the only heir of the decedent) is improper, in Civil Case No. 2071, it being within the exclusive competence of the court in Special Proceedings No. 1537, in which it is not as yet, in issue, and, will not be, ordinarily, in issue until the presentation of the project of partition. (p. 378).

However, in the Guilas case, supra, since the estate proceedings had been closed and terminated for over three years, the action for annulment of the project of partition was allowed to continue. Considering that in the instant case, the estate proceedings are still pending, but nonetheless, Concordia had lost her right to have herself declared as co-heir in said proceedings, We have opted likewise to proceed to discuss the merits of her claim in the interest of justice.

The orders of the Regional Trial Court, Branch 26, in Civil Case No. 13207 setting aside the probate proceedings in Branch 23 (formerly Branch 11) on the ground of extrinsic fraud, and declaring Concordia Villanueva to be a co-heir of Celedonia to the estate of Esteban, Jr., ordering the partition of the estate, and requiring the administratrix, Celedonia, to submit an inventory and accounting of the estate, were improper and officious, to say the least, for these matters he within the exclusive competence of the probate court.

II. The question of extrinsic fraud—

Was Concordia prevented from intervening in the intestate proceedings by extrinsic fraud employed by Celedonia? It is noteworthy that extrinsic fraud was not alleged in Concordia's original complaint in Civil Case No. 13207. It was only in her amended complaint of March 6, 1980, that extrinsic fraud was alleged for the first time.

Extrinsic fraud, as a ground for annulment of judgment, is any act or conduct of the prevailing party which prevented a fair submission of the controversy (Francisco v. David, 38 O.G. 714). A fraud 'which prevents a party from having a trial or presenting all of his case to the court, or one which operates upon matters pertaining, not to the judgment itself, but to the manner by which such judgment was procured so much so that there was no fair submission of the controversy. For instance, if through fraudulent machination by one [his adversary], a litigant was induced to withdraw his defense or was prevented from presenting an available defense or cause of action in the case wherein the judgment was obtained, such that the aggrieved party was deprived of his day in court through no fault of his own, the equitable relief against such judgment may be availed of. (Yatco v. Sumagui, 44623-R, July 31, 1971). (cited in Philippine Law Dictionary, 1972 Ed. by Moreno; Varela v. Villanueva, et al., 96 Phil. 248)

A judgment may be annulled on the ground of extrinsic or collateral fraud, as distinguished from intrinsic fraud, which connotes any fraudulent scheme executed by a prevailing litigant 'outside the trial of a case against the defeated party, or his agents, attorneys or witnesses, whereby said defeated party is prevented from presenting fully and fairly his side of the case. ... The overriding consideration is that the fraudulent scheme of the prevailing litigant prevented a party from having his day in court or from presenting his case. The fraud, therefore, is one that affects and goes into the jurisdiction of the court. (Libudan v. Gil, L-21163, May 17, 1972, 45 SCRA 17, 27-29; Sterling Investment Corp. v. Ruiz, L-30694, October 31, 1969, 30 SCRA 318, 323)

The charge of extrinsic fraud is, however, unwarranted for the following reasons:

1. Concordia was not unaware of the special proceeding intended to be filed by Celedonia. She admitted in her complaint that she and Celedonia had agreed that the latter would "initiate the necessary proceeding" and pay the taxes and obligations of the estate. Thus paragraph 6 of her complaint alleged:

6. ... for the purpose of facilitating the settlement of the estate of the late Esteban Javellana, Jr. at the lowest possible cost and the least effort, the plaintiff and the defendant agreed that the defendant shall initiate the necessary proceeding, cause the payment of taxes and other obligations, and to do everything else required by law, and thereafter, secure the partition of the estate between her and the plaintiff, [although Celedonia denied that they agreed to partition the estate, for their agreement was to place the estate in a foundation.] (p. 2, Record; emphasis supplied)

Evidently, Concordia was not prevented from intervening in the proceedings. She stayed away by choice. Besides, she knew that the estate came exclusively from Esteban's mother, Salustia Solivio, and she had agreed with Celedonia to place it in a foundation as the deceased had planned to do.

2. The probate proceedings are proceedings in rem. Notice of the time and place of hearing of the petition is required to be published (Sec. 3, Rule 76 in relation to Sec. 3, Rule 79, Rules of Court). Notice of the hearing of Celedonia's original petition was published in the "Visayan Tribune" on April 25, May 2 and 9, 1977 (Exh 4, p. 197, Record). Similarly, notice of the hearing of her amended petition of May 26, 1977 for the settlement of the estate was, by order of the court, published in "Bagong Kasanag" (New Light) issues of May 27, June 3 and 10, 1977 (pp. 182-305, Record). The publication of the notice of the proceedings was constructive notice to the whole world. Concordia was not deprived of her right to intervene in the proceedings for she had actual, as well as constructive notice of the same. As pointed out by the probate court in its order of October 27, 1978:

... . The move of Concordia Javellana, however, was filed about five months after Celedonia Solivio was declared as the sole heir. ... .

Considering that this proceeding is one in rem and had been duly published as required by law, despite which the present movant only came to court now, then she is guilty of laches for sleeping on her alleged right. (p. 22, Record)

The court noted that Concordia's motion did not comply with the requisites of a petition for relief from judgment nor a motion for new trial.

The rule is stated in 49 Corpus Juris Secundum 8030 as follows:

Where petition was sufficient to invoke statutory jurisdiction of probate court and proceeding was in rem no subsequent errors or irregularities are available on collateral attack. (Bedwell v. Dean 132 So. 20)

Celedonia's allegation in her petition that she was the sole heir of Esteban within the third degree on his mother's side was not false. Moreover, it was made in good faith and in the honest belief that because the properties of Esteban had come from his mother, not his father, she, as Esteban's nearest surviving relative on his mother's side, is the rightful heir to them. It would have been self-defeating and inconsistent with her claim of sole heirship if she stated in her petition that Concordia was her co-heir. Her omission to so state did not constitute extrinsic fraud.

Failure to disclose to the adversary, or to the court, matters which would defeat one's own claim or defense is not such extrinsic fraud as will justify or require vacation of the judgment. (49 C.J.S. 489, citing Young v. Young, 2 SE 2d 622; First National Bank & Trust Co. of King City v. Bowman, 15 SW 2d 842; Price v. Smith, 109 SW 2d 1144, 1149)

It should be remembered that a petition for administration of a decedent's estate may be filed by any "interested person" (Sec. 2, Rule 79, Rules of Court). The filing of Celedonia's petition did not preclude Concordia from filing her own.

III. On the question of reserva troncal—

We find no merit in the petitioner's argument that the estate of the deceased was subject to reserva troncal and that it pertains to her as his only relative within the third degree on his mother's side. The reserva troncal provision of the Civil Code is found in Article 891 which reads as follows:

ART. 891. The ascendant who inherits from his descendant any property which the latter may have acquired by gratuitous title from another ascendant, or a brother or sister, is obliged to reserve such property as he may have acquired by operation of law for the benefit of relatives who are within the third degree and who belong to the line from which said property came.

The persons involved in reserva troncal are:

1. The person obliged to reserve is the reservor (reservista)—the ascendant who inherits by operation of law property from his descendants.

2. The persons for whom the property is reserved are the reservees (reservatarios)—relatives within the third degree counted from the descendant (propositus), and belonging to the line from which the property came.

3. The propositus—the descendant who received by gratuitous title and died without issue, making his other ascendant inherit by operation of law. (p. 692, Civil Law by Padilla, Vol. II, 1956 Ed.)

Clearly, the property of the deceased, Esteban Javellana, Jr., is not reservable property, for Esteban, Jr. was not an ascendant, but the descendant of his mother, Salustia Solivio, from whom he inherited the properties in question. Therefore, he did not hold his inheritance subject to a reservation in favor of his aunt, Celedonia Solivio, who is his relative within the third degree on his mother's side. The reserva troncal applies to properties inherited by an ascendant from a descendant who inherited it from another ascendant or 9 brother or sister. It does not apply to property inherited by a descendant from his ascendant, the reverse of the situation covered by Article 891.

Since the deceased, Esteban Javellana, Jr., died without descendants, ascendants, illegitimate children, surviving spouse, brothers, sisters, nephews or nieces, what should apply in the distribution of his estate are Articles 1003 and 1009 of the Civil Code which provide:

ART. 1003. If there are no descendants, ascendants, illegitimate children, or a surviving spouse, the collateral relatives shall succeed to the entire estate of the deceased in accordance with the following articles.

ART. 1009. Should there be neither brothers nor sisters, nor children of brothers or sisters, the other collateral relatives shall succeed to the estate.

The latter shall succeed without distinction of lines or preference among them by reason of relationship by the whole blood.

Therefore, the Court of Appeals correctly held that:

Both plaintiff-appellee and defendant-appellant being relatives of the decedent within the third degree in the collateral line, each, therefore, shall succeed to the subject estate 'without distinction of line or preference among them by reason of relationship by the whole blood,' and is entitled one-half (1/2) share and share alike of the estate. (p. 57, Rollo)

IV. The question of Concordia's one-half share—

However, inasmuch as Concordia had agreed to deliver the estate of the deceased to the foundation in honor of his mother, Salustia Solivio Vda. de Javellana (from whom the estate came), an agreement which she ratified and confirmed in her "Motion to Reopen and/or Reconsider Order dated April 3, 1978" which she filed in Spl. Proceeding No. 2540:

4. That ... prior to the filing of the petition they (petitioner Celedonia Solivio and movant Concordia Javellana) have agreed to make the estate of the decedent a foundation, besides they have closely known each other due to their filiation to the decedent and they have been visiting each other's house which are not far away for (sic) each other. (p. 234, Record; Emphasis supplied)

she is bound by that agreement. It is true that by that agreement, she did not waive her inheritance in favor of Celedonia, but she did agree to place all of Esteban's estate in the "Salustia Solivio Vda. de Javellana Foundation" which Esteban, Jr., during his lifetime, planned to set up to honor his mother and to finance the education of indigent but deserving students as well.

Her admission may not be taken lightly as the lower court did. Being a judicial admission, it is conclusive and no evidence need be presented to prove the agreement (Cunanan v. Amparo, 80 Phil. 227; Granada v. Philippine National Bank, L-20745, Sept. 2, 1966, 18 SCRA 1; Sta. Ana v. Maliwat, L-23023, Aug. 31, 1968, 24 SCRA 1018; People v. Encipido, G.R.70091, Dec. 29, 1986, 146 SCRA 478; and Rodillas v. Sandiganbayan, G.R. 58652, May 20, 1988, 161 SCRA 347).

The admission was never withdrawn or impugned by Concordia who, significantly, did not even testify in the case, although she could have done so by deposition if she were supposedly indisposed to attend the trial. Only her husband, Narciso, and son-in-law, Juanito Domin, actively participated in the trial. Her husband confirmed the agreement between his wife and Celedonia, but he endeavored to dilute it by alleging that his wife did not intend to give all, but only one-half, of her share to the foundation (p. 323, Record).

The records show that the "Salustia Solivio Vda. de Javellana Foundation" was established and duly registered in the Securities and Exchange Commission under Reg. No. 0100027 for the following principal purposes:

1. To provide for the establishment and/or setting up of scholarships for such deserving students as the Board of Trustees of the Foundation may decide of at least one scholar each to study at West Visayas State College, and the University of the Philippines in the Visayas both located in Iloilo City.

2. To provide a scholarship for at least one scholar for St. Clements Redemptorist Community for a deserving student who has the religious vocation to become a priest.

3. To foster, develop, and encourage activities that will promote the advancement and enrichment of the various fields of educational endeavors, especially in literary arts. Scholarships provided for by this foundation may be named after its benevolent benefactors as a token of gratitude for their contributions.

4. To direct or undertake surveys and studies in the community to determine community needs and be able to alleviate partially or totally said needs.

5. To maintain and provide the necessary activities for the proper care of the Solivio-Javellana mausoleum at Christ the King Memorial Park, Jaro, Iloilo City, and the Javellana Memorial at the West Visayas State College, as a token of appreciation for the contribution of the estate of the late Esteban S. Javellana which has made this foundation possible. Also, in perpetuation of his Roman Catholic beliefs and those of his mother, Gregorian masses or their equivalents will be offered every February and October, and Requiem masses every February 25th and October llth, their death anniversaries, as part of this provision.

6. To receive gifts, legacies, donations, contributions, endowments and financial aids or loans from whatever source, to invest and reinvest the funds, collect the income thereof and pay or apply only the income or such part thereof as shall be determined by the Trustees for such endeavors as may be necessary to carry out the objectives of the Foundation.

7. To acquire, purchase, own, hold, operate, develop, lease, mortgage, pledge, exchange, sell, transfer, or otherwise, invest, trade, or deal, in any manner permitted by law, in real and personal property of every kind and description or any interest herein.

8. To do and perform all acts and things necessary, suitable or proper for the accomplishments of any of the purposes herein enumerated or which shall at any time appear conducive to the protection or benefit of the corporation, including the exercise of the powers, authorities and attributes concerned upon the corporation organized under the laws of the Philippines in general, and upon domestic corporation of like nature in particular. (pp. 9-10, Rollo)

As alleged without contradiction in the petition' for review:

The Foundation began to function in June, 1982, and three (3) of its eight Esteban Javellana scholars graduated in 1986, one (1) from UPV graduated Cum Laude and two (2) from WVSU graduated with honors; one was a Cum Laude and the other was a recipient of Lagos Lopez award for teaching for being the most outstanding student teacher.

The Foundation has four (4) high school scholars in Guiso Barangay High School, the site of which was donated by the Foundation. The School has been selected as the Pilot Barangay High School for Region VI.

The Foundation has a special scholar, Fr. Elbert Vasquez, who would be ordained this year. He studied at St. Francis Xavier Major Regional Seminary at Davao City. The Foundation likewise is a member of the Redemptorist Association that gives yearly donations to help poor students who want to become Redemptorist priests or brothers. It gives yearly awards for Creative writing known as the Esteban Javellana Award.

Further, the Foundation had constructed the Esteban S. Javellana Multi-purpose Center at the West Visayas State University for teachers' and students' use, and has likewise contributed to religious civic and cultural fund-raising drives, amongst other's. (p. 10, Rollo)

Having agreed to contribute her share of the decedent's estate to the Foundation, Concordia is obligated to honor her commitment as Celedonia has honored hers.

WHEREFORE, the petition for review is granted. The decision of the trial court and the Court of Appeals are hereby SET ASIDE. Concordia J. Villanueva is declared an heir of the late Esteban Javellana, Jr. entitled to one-half of his estate. However, comformably with the agreement between her and her co-heir, Celedonia Solivio, the entire estate of the deceased should be conveyed to the "Salustia Solivio Vda. de Javallana Foundation," of which both the petitioner and the private respondent shall be trustees, and each shall be entitled to nominate an equal number of trustees to constitute the Board of Trustees of the Foundation which shall administer the same for the purposes set forth in its charter. The petitioner, as administratrix of the estate, shall submit to the probate court an inventory and accounting of the estate of

the deceased preparatory to terminating the proceedings therein.

SO ORDERED.

G.R. No. 45425 March 27, 1992

CELSA L. VDA. DE KILAYKO, ENCARNACION L. VDA. DE PANLILIO and REMEDIOS L. VDA. DE GUINTO, petitioners,

vs.HON. JUDGE ERNESTO TENGCO of the Court of First Instance of Negros Occidental, Bacolod City, Branch IV and RODOLFO LIZARES and AMELO LIZARES, as Judicial Administrators of the Estate of the late EUSTAQUIA LIZARES, respondents.

G.R. No. 45965 March 27, 1992

ROLDOFO LIZARES and AMELO LIZARES, as Judicial Administrators of the ESTATE OF EUSTAQUIA LIZARES, petitioners, vs.HON. JUDGE ERNESTO TENGCO, CELSA L. VDA. DE KILAYKO, ENCARNACION L. VDA. DE PANLILIO and REMEDIOS VDA. DE GUINTO, respondents.

 

ROMERO, J.:

These consolidated cases seek to annul the orders 1 dated September 20, 1976, January 7, 1977 and January 31, 1977 of the then Court of First Instance of Negros Occidental, Branch, IV respectively, cancelling the notice of lis pendens filed by Celsa L. Vda. de Kilayko, et al. with the Register of Deeds of Negros Occidental, denying the motion for reconsideration of the order dated September 20, 1976 filed by Celsa L. Vda. de Kilayko, et al., and holding in abeyance the resolution of defendants' motion to dismiss.

The undisputed facts of the case are as follows:

On November 20, 1962, the late Maria Lizares y Alunan executed a "Testamento" 2 which contains among its provisions, the following:

DECIMA — Asimismo, ordeno y dispongo que mi participacion consistente en una tercera parte (1/3) de una catorce (1/14) avas partes proindivisas de la Hda. Minuluan, que he adquirido mediante permuta de mi hermano Dr. Antonio A. Lizares, se adjudique, como por el presente se adjudica, a mi sobrina Eustaquia Lizares; ENTENDIENDOSE, sin embargo, que en el caso de que mi citada sobrina Eustaquia Lizares muera soltera o sin descendientes legitimos, mi referida participacion en la Hda. Minuluan se adjudicara a mi hermano Antonio A. Lizares que me sobrevivan.

UNDECIMA — Tambien ordeno y dispongo que el resto de todas mis propiendades, incluyendo mis participaciones, derechos e intereses (no dispuestos mas arriba) an las Haciendas "Minuluan" (Lotes Nos. 439, 403, 1273, 1274, 1278, 1279 y 1280 del Catastro de Talisay, Negros Occidental), y "Matab-ang" (Lotes Nos. 514, 550, 552, 553 y 1287-C del Catastrado de Talisay, Negros Occidental), situadas en el Municipio de Talisay, Provincia de Negros Occidental, I.F., el resto de mis acciones en la Central Talisay-Silay Milling Co., Inc. (unas 2,860 acciones) y de la Financing Corporation of the Philippines (unas 53,636 acciones), registradas a mi nombre y no heredadas de mi difunta madre Dña. Enrica A. Vda. de Lizares, mis acciones en la Central Bacolod-Murcia Milling Co., Inc., Negros Navigation Co. y otras Compañas Mineras, y todos los demas bienes no mencionados en este testamento y que me pertenezcan en la fecha de mi muerte, se adjudiquen, como por el presente adjudico, a mi sobrina Srta. Eusaquia Lizares, hija de mi difunto hermano Don Simplicio Lizares cuidados que mi citada sobrina me ha prestado y signe prestandome hasta ahora. Ordeno, sin embargo, a mi referida sobrina, Srta. Eustaquia Lizares, que ella se haga cargo de pagar todas las obligaciones que tengo y que gravan sobre las propriedades adjudicadas a la misma. Asimismo ordeno a mi citada sobrina que ella mande celebrar una Misa Gregoriana cada año en sufragio de mi alma, y misas ordinarias en sufragio de las almas de mi difunto Padre y de mi difunta Madre, el 6 de Marzo y 17 de Deciembre de cada año, respectivamente, y mande celebrar todos los años la fiesta de San Jose en Talisay como lo hago hasta ahora. En el caso de que mi citada sobrina, Srta. Eustaquia Lizares, falleciere sin dejar descendientes legitimos, ordeno y dispongo que mi participacion consistente en una sexta parte (1/6) de la Hda. Matab-ang, con su correspondiente cuota de azucar y otros mejoras, se adjudique a mis hermanas y hermano antes mencionados y que me sobrevivan (Emphasis supplied)

On January 28, 1968, Maria Lizares y Alunan died without any issue leaving said "testamento" in the possession and custody of her niece, Eustquia Lizares. 3 On February 6, 1968, Eustaquia filed a petition for the settlement of the testate estate of Maria Lizares y Alunan, before the Court of First Instance of Negros Occidental, Branch IV, docketed as Special Proceedings No. 8452. 4

The required publication of the notice of hearing of the petition having been made, in due course, the probate court issued an order declaring the will probated and appointing Eustaquia as the executrix of the estate of Maria Lizares. 5

On July 10, 1968, Eustaquia filed a project of partition 6 which was granted by the probate court in an order dated January 8, 1971. Simultaneously, said court declared the heirs, devisees, legatees and usufructuaries mentioned in the project of partition as the only heirs, devisees, legatees and usufructuaries of the estate; adjudicated to them the properties repectively assigned to each and every one of them, and ordered the Register of Deeds of Negros Occidental and Bacolod City to effect the corresponding transfer of the real properties to said heirs as well as the transfer of shares, stocks, and dividends in different corporations, companies and partnerships in the name of Maria Lizares to the heirs and legatees, and the closure of the testate proceedings of Maria Lizares. 7

Thereafter, Eustaquia filed an urgent motion to reopen the testate proceedings in order that some properties of Maria Lizares which had been omitted in the partition be adjudicated to her. 8 The Court granted the motion and correspondingly reopened the testate proceedings. It adjudicated to Eustaquia certain shares of stocks, a revolving fund certificate, plantation credits and sugar quota allocations, and real or personal properties of Maria Lizares which were not given by her to any other person in her last will and testament. 9

On November 28, 1972, the heirs of Maria Lizares, namely: Encarnacion L. Vda. de Panlilio, Remedios L. Vda. de Guinto, Felicidad Paredes Llopez, Rosario Paredes Mendoza and Eustaquia Lizares executed an agreement of partition and subdivision, thereby terminating their co-ownership over Lots Nos. 550, 514, 553, 1287-C of plan SWO-7446, and 552, all of the Cadastral Survey of Talisay covered by Transfer Certificates of Title Nos. T-65004, T-65005; T-65006, T-65007, and T-65008. 10

A year later or on November 23, 1973, Eustquia Lizares died single without any descendant. 11 In due time, Rodolfo Lizares and Amelo Lizares were appointed joint administrators of Eustquia's intestate estate.

On the strength of the testamentary provisions contained in paragraphs 10 and 11 of the will of Maria Lizares, which were allegedly in the nature of a simple substitution, Celsa Vda. de Kilayko, Encarnacion Vda. de Panlilio, and Remedios Vda. de Guinto (hereinafter collectively referred to as Celsa L. Vda. de Kilayko, et al.) filed a motion in Special Proceedings No. 8452 to reopen once again the testate estate proceedings of Maria Lizares. They prayed among others that a substitute administrator be appointed; that the order dated January 8, 1971 be reconsidered and amended by declaring them as heirs to 1/3 of 1/14 of Hda. Minuluan and to 1/6 of Hda. Matab-ang, both of which form an aggregate area of 33 hectares; that the Register of Deeds of Negros Occidental, after such amendment, be ordered to register at the back of their respective certificates of title, the order of probate and a "declaration" that movants are the heirs of said properties, and correspondingly issue new certificates of title in their names. 12

Two (2) sets of intestate heirs of the deceased Eustaquia Lizares namely: Socorro L. Vda. de Escario, Rodolfo Lizares, Mario Lizares, Lucrecia Gustilo, and Aurora Lizares Wagner opposed the aforesaid motion. They alleged that the court had no more jurisdiction to reopen the testate estate proceedings of Maria Lizares as the order of closure had long become final and that the testamentary provisions sought to be enforced are null and void. 13

On April 6, 1974, the Court issued an order denying the motion to reopen the testate proceedings and holding that inasmuch as the settlement of an estate is a proceeding in rem, the judgment therein is binding against the whole world. It observed that inspite of the fact that the movants knew that the court had jurisdiction over them, they did not take part in the proceedings nor did they appeal the order of January 8, 1971. Thus, the court concluded, even if the said order was erroneous, and since the error was not jurisdictional, the same could have been corrected only by a regular appeal. The period for filing a motion for reconsideration having expired, the court opined that the movants could have sought relief from judgment under Rule 38 of the Rules of Court, but unfortunately for the movants, the period for filing such remedy had also elapsed. 14

Celsa L. Vda. de Kilayko, et al. then filed a motion for reconsideration of said order. It was denied on June 17, 1974. 15 Hence, on October 14, 1974, the said movants filed a complaint for recovery of ownership and possession of real property against the joining administrators of the estate of Eustaquia Lizares, Rodolfo and Amelo Lizares. It was docketed as Civil Case No. 11639 with the then Court of First Instance of Negros Occidental, Branch IV. 16 On the same date, they availed of their rights under Rule 14, Section 24 of Rules of Court by filing a notice of lis pendens with the Register of Deeds of Negros Occidental. 17

As duly appointed judicial joint administrators of the estate of the late Eustaquia Lizares, Rodolfo Lizares and Amelo Lizares (the joint administrators for brevity), filed a motion to dismiss alleging that the court had no jurisdiction over the subject matter or nature of the case; the cause of action was barred by prior judgment, and the complaint stated no cause of action. 18 This motion was opposed by the plaintiffs.

On January 23, 1975, the joint administrators filed a motion for the cancellation of the notice of lis pendens on the contentions that there existed exceptional circumstances which justified the cancellation of the notice of lis pendens and that no prejudice would be caused to the plaintiffs. 19 The latter opposed said motion. The defendants having filed a reply thereto, the plaintiffs filed a rejoinder reiterating their arguments in their opposition to the motion for cancellation of notice of lis pendens. 20

On September 20, 1976, respondent judge issued an order granting the motion for cancellation of notice of lis pendens. 21 The court simultaneously held in abeyance the resolution of the motion to dismiss the complaint.

The joint administrators filed the answer to the complaint in Civil Case No. 11639. 22 Thereafter, they filed a motion for preliminary hearing on affirmative defenses. 23 Celsa L. Vda. de Kilayko, et al. vigorously opposed said motion. 24

On November 3, 1976, Celsa L. Vda. de Kilayko, et al. filed a motion praying for the reconsideration of the order dated September 20, 1976. 25 The joint administrators having filed an opposition thereto, 26 on January 7, 1977 the lower court denied the aforesaid motion for reconsideration. 27 It held that while a notice of lis pendens would serve as notice to strangers that a particular property was under litigation, its annotation upon the certificates of title to the properties involved was not necessary because such properties, being in custodia legis, could not just be alienated without the approval of the court. Moreover, the court added, a notice of lis pendens would prejudice any effort of the estate to secure crop loans which were necessary for the viable cultivation and production of sugar to which the properties were planted.

Upon receipt of a copy of said order, Celsa L. Vda. de Kilayko, et al. filed in this Court a motion for extension of time to file a petition for review on certiorari. Docketed as G.R No. L-45425, the petition contends that the grounds of lis pendens, namely, that the properties are in custodia legis and the lending institutions would not grant crop loans to the estate, are not the legal grounds provided for under Sec. 24, Rule 14 of the Rules of Court for the cancellation of a notice of lis pendens.

Meanwhile, on January 31, 1977, the lower court issued an order stating that since on September 21, 1976 it had held in abeyance the resolution of the motion to dismiss, it was also proper to suspend the resolution of the affirmative defenses interposed by the defendants until after trial on the merits of the case. Accordingly, the court set the date of pre-trial for March 24, 1977. 28

On April 13, 1977, the joint administrators filed before this Court a petition for certiorari, prohibition and/or mandamus with prayer for a writ of preliminary injunction. It was docketed as G.R. No. L-45965. Petitioners contend that the lower court had no jurisdiction over Civil Case No. 11639 as it involves the interpretation of the will of Maria Lizares, its implementation and/or the adjudication of her properties. They assert that the matter had been settled in Special Proceedings No. become final and unappealable long before the complaint in Civil Case No. 8452 which had become final and unappealable long before the complaint in Civil Case No. 11639 was filed, and therefore, the cause of action in the latter case was barred by the principle of res judicata. They aver that the claim of Celsa, Encarnacion and Remedios, sisters of Maria Lizares, over the properties left by their niece Eustaquia and which the latter had inherited by will from Maria Lizares, was groundless because paragraphs 10 and 11 of Maria's will on which Celsa L. Vda. de Kilayko, et al. base their claim, conceived of a fideicommissary substitution of heirs. Petitioners contend that said provisions of the will are not valid because under Article 863 of the Civil code, they constitute an invalid fideicommissary substitution of heirs.

On April 26, 1977, this Court issued a temporary restraining order enjoining the lower court from further proceeding with the trial of Civil Case No. 11639. 29 After both G.R. Nos. L-45425 and L-45965 had been given due course and submitted for decision, on January 20, 1986, the two cases were consolidated.

The petition in G.R. No. L-45965 is impressed with merit.

In testate succession, there can be no valid partition among the heirs until after the will has been probated. 30 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. 31 The authentication of a will decides no other question than such as touch upon the capacity of the testator and the compliance with those requirements or solemnities which the law prescribes for the validity of a will. 32

Pertinent to the issue interposed by the petitioners in G.R. No. L-45965 is Section 1, Rule 90 of the Rules of Court which reads:

Sec. 1. When order for distribution of residue made. — When the debts, funeral charges, and expenses of administration, the allowance to the widow, and inheritance tax, if any, chargeable to the estate in accordance with law, have been paid, the court, on application of the executor or administrator, or of a person interested in the estate, and after hearing upon notice, shall assign the residue of the estate to the persons entitled to the same, naming them and the proportions or parts, to which each is entitled, and such persons may demand and recover their respective shares from the executor or administrator, or any other person having the same in his possession. If there is a controversy before the court as to who

are the lawful heirs of the deceased person or as to the distributive shares to which each person is entitled under the law, the controversy shall be heard and decided as in ordinary cases.

No distribution shall be allowed until the payment of the obligations above-mentioned has been made or provided for, unless the distributees, or any of them give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs.

Applying this rule, in the cases of De Jesus v. Daza, 33 and Torres v. Encarnacion, 34 the Court said:

. . . (T)he probate court, having the custody and control of the entire estate, is the most logical authority to effectuate this provision, within the estate proceeding, said proceeding being the most convenient one in which this power and function of the court can be exercised and performed without the necessity of requiring the parties to undergo the incovenience and litigate an entirely different action.

Some decisions of the Court pertinent to the issue that the probate court has the jurisdiction to settle the claims of an heir and the consequent adjudication of the properties, are worth mentioning. In the cases of Arroyo v. Gerona, 35 and Benedicto v. Javellana, 36 this Court said:

. . . any challenge to the validity of a will, any objection to the authentication thereof, and every demand or claim which any heir, legatee or party interested in a testate or intestate succession may make, must be acted upon and decided within the same special proceedings, not in a separate action, and the same judge having jurisdiction in the administration of the estate shall take cognizance of the question raised, inasmuch as when the day comes he will be called upon to make distribution and adjudication of the property to the interested parties. . . . (Emphasis supplied)

The probate court, in the exercise of its jurisdiction to distribute the estate, has the power to determine the proportion or parts to which each distributee is entitled . . .. 37 A project of partition is merely a proposal for the distribution of the heredity estate which the court may accept or reject. It is the court that makes that distribution of the estate and determines the persons entitled thereto. 38

In the instant case, the records will show that in the settlement of the testate estate of Maria Lizares, the executrix, Eustaquia Lizares submitted on January 8, 1971, a project of partition in which the parcels of land, subject matters of the complaint for reconveyance, were included as property of the estate and assigned exclusively to Eustaquia as a devisee of Maria Lizares. In accordance with said project of partition which was approved by the probate court, Encarnacion Lizares Vda. de Panlilio, Remedios Lizares Vda. de Guinto, Felicidad Paredes Llopez, Rosario Paredes Mendoza and Eustaquia Lizares executed an Agreement of Partition and Subdivision on November 28, 1972, whereby they agreed to terminate their co-ownership over Lots Nos. 550, 514, 553, 1287-C of SWO-7446 and 552 covered by Transfer Certificates of Title Nos. T-65004, T-65005, T-65006, T-65007 and T-65008. These facts taken altogether show that the Lizares sisters recognized the decree of partition sanctioned by the probate court and in fact reaped the fruits thereof.

Hence, they are now precluded from attacking the validity of the partition or any part of it in the guise of a complaint for reconveyance. A party cannot, in law and in good conscience be allowed to reap the fruits of a partition, agreement or judgment and repudiate what does not suit him. 39 Thus, where a piece of land has been included in a partition and there is no allegation that the inclusion was affected through improper means or without petitioner's knowledge, the partition barred any further litigation on said title and operated to bring the property under the control and jurisdiction of the court for its proper disposition according to the tenor of the partition. 40 The question of private respondents title over the lots in question has been concluded by the partition and became a closed matter.

The admission made by Celsa L. Vda. de Kilayko, et al. in their complaint, Civil Case No. 11639, that Eustaquia had been in possession of the questioned lots since March 2, 1971 up to the time of her death indicates that the distribution pursuant to the decree of partition has already been carried out. Moreover, it cannot be denied that when Celsa L. Vda. de Kilayko, et al. moved for the reopening of the testate estate proceedings of Maria Lizares, the judicial decree of partition and order of closure of such proceedings was already final and executory, then reglementary period of thirty (30) days having elapsed from the time of its issuance, with no timely appeal having been filed by them. Therefore, they cannot now be permitted to question the adjudication of the properties left by will of Maria Lizares, by filing an independent action for the reconveyance of the very same properties subject of such partition.

A final decree of distribution of the estate of a deceased person vests the title to the land of the estate in the distributees. If the decree is erroneous, it should be corrected by opportune appeal, for once it becomes final, its binding effect is like any other judgment in rem, unless properly set aside for lack of jurisdiction or fraud. Where the court has validly issued a decree of distribution and the same has become final, the validity or invalidity of the project of partition becomes irrelevant. 41

It is a fundamental concept in the origin of every jural system, a principle of public policy, that at the risk of occasional errors, judgments of courts should become final at some definite time fixed by law, interest rei publicae ut finis sit litum.

"The very object of which the courts were constituted was to put an end to controversies." 42 The only instance where a party interested in a probate proceeding may have a final liquidation set aside is when he is left out by reason of circumstances beyond his control or through mistake or inadvertence not imputable to negligence. Even then, the better practice to secure relief is the opening of the same by proper motion within the reglementary period, instead of an independent action, the effect of which if successful, would be for another court or judge to throw out a decision or order already final and executed and reshuffle properties long ago distributed and disposed of. 43

The fundamental principle upon which the doctrine of res judicata rests is that parties ought not to be permitted to litigate the same issue more than once, that, when a right or fact has been judicially tried and determined by a court of competent jurisdiction, or an opportunity for such trial has been given, the judgment of the court, so long as it remains unreversed, should be conclusive upon the parties and those in privity with them in law or estate. 44

All the requisites for the existence of res judicata are present. Thus, the order approving the distribution of the estate of Maria Lizares to the heirs instituted in said will has become final and unappealable; the probate court that rendered judgment had jurisdiction over the subject matter and over the parties; the judgment or orders had been rendered on the merits; the special proceedings for the settlement of the estate of Maria Lizares was a proceeding in rem that was directed against the whole world including Celsa L. Vda. de Kilayko, et al., so that it can be said that there is a similarity of parties in Special Proceedings No. 8452 and Civil Case No. 11639, the judicial administrators of Eustaquia being privy to Celsa L. Vda. de Kilayko, et al.; there is identity of subject matter involved in both actions, namely, the properties left by Maria Lizares; there is identity of causes of action because in the first action there was a declaration of the probate court in its order dated April 6, 1974 that although the testatrix intended a fideicommissary substitution in paragraphs 10 and 11 of her will, the substitution can have no effect because the requisites for it to be valid, had not been satisfied. 45

Granting that res judicata has not barred the institution of Civil Case No. 11639, the contention of Celsa L. Vda. de Kilayko, et al. that they are conditional substitute heirs of Eustaquia in the testate estate of Maria Lizares 46 is not meritorious. While the allegation of the joint administrators that paragraphs 10 and 11 of Maria Lizares' last will and testament conceives of a fideicommissary substitution under Article 863 of the Civil Code is also baseless as said paragraphs do not impose upon Eustaquia a clear obligation to preserve the estate in favor of Celsa L. Vda. de Kilayko, et al., neither may said paragraphs be considered as providing for a vulgar or simple substitution.

It should be remembered that when a testator merely names an heir and provides that if such heir should die a second heir also designated shall succeed, there is no fideicommissary substitution. The substitution should then be construed as a vulgar or simple substitution under Art. 859 of the Civil Code but it shall be effective only if the first heir dies before the testator. 47 In this case, the instituted heir, Eustaquia, survived the testatrix, Maria Lizares. Hence, there can be no substitution of heirs for, upon Maria Lizares' death, the properties involved unconditionally devolved upon Eustaquia. Under the circumstances, the sisters of Maria Lizares could only inherit the estate of Eustaquia by operation of the law of intestacy.

With respect to the cancellation of the notice of lis pendens on the properties involved, there is no merit in the contention of Celsa L. Vda. de Kilayko, et al., that the lower court acted contrary to law and/or gravely abused its discretion in cancelling the notice of lis pendens. The cancellation of such a precautionary notice, being a mere incident in an action, may be ordered by the court having jurisdiction over it at any given time. 48 Under Sec. 24, Rule 14 of the Rules of Court, a notice of lis pendens may be cancelled "after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be recorded." 49 In this case, the lower court ordered the cancellation of said notice on the principal reason that the administrators of the properties involved are subject to the supervision of the court and the said properties are under custodia legis. Therefore, such notice was not necessary to protect the rights of Celsa L. Vda. de Kilayko, et al. More so in this case where it turned out that their claim to the properties left by Eustaquia is without any legal basis.

WHEREFORE, the petition for review on certiorari in L-45425 is hereby DENIED but the petition for certiorari and prohibition and/or mandamus in L-45965 is GRANTED. The temporary restraining order of April 26, 1977 which was issued by the Court in L-45965 is made PERMANENT. Costs against the petitioners in L-45425.

SO ORDERED.

G.R. No. 70722 July 3, 1991

CANUTA PAGKATIPUNAN, FLORA VELASQUEZ, BENJAMIN VELASQUEZ, RODOLFO VELASQUEZ, ALFREDO VELASQUEZ, NAPOLEON VELASQUEZ, MANUEL VELASQUEZ, JULIO VELASQUEZ, VICTORIA VELASQUEZ, CARLOS VELASQUEZ, LEONOR VELASQUEZ, ELENA VELASQUEZ, PATROCINIO VELASQUEZ, PATRICIA VELASQUEZ, SANTIAGO ZAPANTA, HERMINIGILDO SISON, ALFREDO AGAPITO, MOISES SANTOS, MAGDALENA PAGKATIPUNAN, AGAPITO MANALO, MIGUEL ANGELES, MATIAS ALVAREZ, PATRICIO LAYSA, TEOFILO DE LUNA, ISIDRO ANINAO, APOLINAR CASAL, MOISES GALLARDO, BONIFACIO PEREZ, DELFIN LAYBA, AND HERMOGENES FLORES, petitioners, vs.HON. INTERMEDIATE APPELLATE COURT, JOSE R. VELASQUEZ, JR., LOURDES VELASQUEZ, EDGARDO

VELASQUEZ, LOLITA VELASQUEZ, MINERVA VELASQUEZ, CYNTHIA VELASQUEZ, CESAR GONZALES, ADOLFO GONZALES, EVELYN GONZALES, AMELITA GONZALES, RUBEN GONZALES, AND CARMENCITA GONZALES, respondents.

Bengzon, Zarraga, Narciso, Cudala, Pecson, Ascuna & Bengson for petitioners.

Tomas P. Añonuevo for private respondents.

 

MEDIALDEA, J.:p

This petition for certiorari seeks to nullify the decision of the Intermediate Appellate Court (now Court of Appeals) in AC-G.R. CV No. 68431 dated February 7, 1986, affirming the decision of the Court of First Instance (now Regional Trial Court) of Laguna, Branch II, Santa Cruz, Laguna, in Civil Case No. SC-894, the dispositive portion of which reads:

WHEREFORE, the appealed decision of the lower court is affirmed, with the following modification:

The entire house and lot on West Avenue, Quezon City, shall be divided as follows:

One-half value of said house and lot to defendant-appellant Canuta Pagkatipunan and her 13 co-defendants-appellants children (now petitioners) to the extent of their respective proportional contributions as stated above; and

The other one-half value of the said house and lot goes to the second conjugal partnership of the deceased husband and his second spouse Canuta Pagkatipunan to be partitioned one-fourth to Canuta Pagkatipunan and the other one-fourth appertaining to the deceased Jose Velasquez, Sr. to be divided equally among his 18 heirs as follows:

1/18 undivided portion to Canuta Pagkatipunan;

1/18 undivided portion to the plaintiff-appellee Lourdes Velasquez;

1/18 undivided portion to the plaintiffs-appellees Edgardo, Lolita, Minerva, Cynthia, and Jennifer, all surnamed Velasquez;

1/18 undivided portion to the plaintiffs-appellee Teresa Magtibay and her children, Ricardo, Lourdes, Celia and Aida, all surnamed Velasquez;

1/1 8 undivided portion to the plaintiffs-appellees Cesar, Adolfo, Evelyn, Angelita, Ruben, and Carmencita, all surnamed Gonzales;

1/18 undivided portion to each of the 13 defendants-appellants Flora, Leonor, Patrocinio, Benjamin, Rodolfo, Alfredo, Napoleon, Manuel, Julio, Elena, Patricia, Victoria, and Carlos, all surnamed Velasquez.

SO ORDERED. (p. 55, Rollo)

The facts from the records are as follows:

The principal litigants in this case are the successors- in-interest of Jose Velasquez, Sr. who died intestate on February 24, 1961. Petitioner Canuta Pagkatipunan is the surviving spouse of Jose Velasquez, Sr. and the other 13 petitioners are their children namely: Flora, Leonor, Patrocinio, Julio, Benjamin, Rodolfo, Alfredo, Napoleon, Manuel, Elena, Patricia, Victoria and Carlos. On the other hand, the private respondents are the descendants of Jose Velasquez, Sr. with his first wife Victorina Real who died in 1920 at Santa Cruz, Laguna. Private respondents Jose Velasquez, Jr. (substituted after his death during the pendency of this suit by his surviving spouse Teresa Magtibay and their children Ricardo, Lourdes, Celia and Aida), and Lourdes Velasquez are two of the five children of Jose Velasquez, Sr. and Victorina Real. The other three, Amelia, Guillermo and Lutgarda, all surnamed Velasquez, all died before the commencement of this case. Amelia Velasquez died without any issue. Guillermo Velasquez was survived by private respondents Edgardo, Lolita, Minerva, Cynthia and Jennifer, all surnamed Velasquez, his children, forced heirs and lawful successors-in-interest. Lutgarda Velasquez was survived by private respondents Cesar, Adolfo, Evelyn, Amelita, Ruben and Carmencita, all surnamed Gonzales, likewise her children, forced heirs and successors-in-interest.

This case was judicially instituted by the private respondents against the petitioners in 1969 in a complaint entitled "accion reivindicatoria, annulment of deeds of sale, partition and damages." However, both the trial and the appellate courts considered that the real controversy in this case is the liquidation of the conjugal partnership properties acquired by the deceased Jose Velasquez, Sr. in his two marriages, one with Victorina Real, who predeceased him, and the other with Canuta Pagkatipunan, as well as the partition of the estate of said Jose Velasquez, Sr. among his heirs.

It appears that after the death of Victorina Real in 1920, no dissolution of the first conjugal property has been made. Consequently, Jose Velasquez, Sr. enjoyed full possession, use, usufruct and administration of the whole conjugal property of the first marriage.

In 1930, Jose Velasquez, Sr. took Canuta Pagkatipunan as his second wife although they cohabited as early as 1921, when she was 16, soon after his first wife's death. From this marriage, the other 13 co-petitioners were born. Neither had there been any liquidation of the second conjugal partnership after the death of Jose Velasquez, Sr. in 1961. This situation gave rise to the controversies in the instant case spawned by the parties' conflicting claims from both sides of the two marriages.

The trial court appointed two sets of commissions — one on January 31, 1975, for the purpose of making an inventory of the estate of Jose Velasquez, Sr., and the other on November 15, 1976, to determine which of the parcels of land listed in such inventory submitted by the first set of commissioners belong to the conjugal partnership of the first marriage or to the conjugal partnership of the second marriage.

Based on the Report and Inventory submitted on May 29, 1975, the commissioners listed the following properties as acquired by the late Jose Velasquez, Sr. during his marriage with Victorina Real:

1. Tax Declaration No. 2718. A riceland, located in Luya and with an area of 93,662 square meters;

2. Tax Declaration No. 3125. A Secano land located in Luya and with an area of 12,540 square meters;

3. Tax Declaration No. 2623. A Cocal and Forestal, situated in Salang-Bato (Macasipac) and with an area of 500,000 square meters;

4. Tax Declaration No. 2096. A riceland, situated in Islang Munti and with an area of 40,328 square meters;

5. A Cocal and Forestal land situated in Bankang Bato containing an area of 240,000 square meters;

6. Tax Declaration No. 4251. A Cocal, Secano and Cogonal land situated in Cambuja and containing an area of 163,121 square meters;

7. Tax Declaration No. 1342. A parcel of land situated in Bagumbayan and containing an area of 80,258 square meters;

8. Tax Declaration No. 3541. A Cocal and Secano land, situated in Bagumbayan and containing an area of 20 hectares;

(Total area as surveyed is 392,503 square meters. This includes the area of the land stated in Item 7 of the Inventory).

9. Tax Declaration No. 82. A Cogonal land situated in Tungkod (Ikalong Tumid), containing an area of 385,324 square meters;

10. Tax Declaration No. 1500. A riceland, situated in Pague, containing an area of 9,228 square meters;

11. Tax Declaration No. 5688

a) A parcel of land situated in NAPSE (Masinao), containing an area of 24,725 square meters;

b) A parcel of land situated in NAPSE (Masinao), containing an area of 25,000 square meters;

12. Tax Declaration No. 543. A parcel of land situated in Gomez Street, containing an area of 755 square meters;

13. Tax Declaration No. 4139. A parcel of land situated in Caboan, containing an area of 367.2 square meters;

14. Tax Declaration No. 4139. A parcel of land situated in Caboan, containing an area of 367.2 square meters.

15. Tax Declaration No. 4139. A parcel of land situated in Caboan, containing an area of 367.2 square meters.

16. Tax Declaration No. 4139. A parcel of land situated in Caboan, containing an area of 367.2 square meters.

17. Tax Declaration No. 4139. A parcel of land situated in Caboan, containing an area of 1,275 square meters.

18. Tax Declaration No. 804-A. Three parcels of land situated in Salang Bato, containing an area of 450,000 square meters;

19. Tax Declaration No. 2560. A parcel of land situated in Salang Bato which area is included in item no. 18.

20. A parcel of land situated in Burgos St. (Papers cannot be located but subject lot is known to both parties).

21. A parcel of land situated in Burgos St., containing an area of 5,000 square meters. (Papers cannot be located but subject lot is known to both parties).

22. A parcel of land situated in Gomez St., containing an area of 300 square meters. (Papers cannot be located but subject lot is known to both parties).

23. A parcel of land situated in Gomez St., containing an area of 1,050 square meters. (Papers cannot be located but subject lot is known to both parties).

24. A parcel of land situated in Gomez St. (Papers cannot be located but subject lot is known to both parties).

25. A parcel of land situated in Zamora St., containing an area of 3,605. (Papers cannot be located but subject lot is known to both parties).

26. Tax Declaration No. 2412: A parcel of land situated in Caboan, containing an area of 12,867 square meters;

27. A parcel of land situated in Dra. Amelia St.

On the other hand, the commissioners listed the following properties as acquired by Jose Velasquez, Sr. on February 11, 1921 or after the death of Victorina Real:

28. Tax Declaration No. 2547. A parcel of land situated in Barandilla, containing an area of 21,566 square meters;

29. A parcel of land situated in Barandilla, containing an area of 93.191 square meters. (Commissioner's Inventory, Rollo, pp. 355-360)

Worth noting are the following findings of the commissioners:

3) That among the properties acquired by the late Jose Velasquez, Sr. during his lifetime, only the one mentioned in Item 7 of the Inventory (Annex "A") is still intact. It is situated in Bagumbayan, Sta. Maria, Laguna, and is containing an area of 80,258 square meters, more or less;

4) That Item 8 of the Inventory is only 200,000 square meters, more or less in Tax Declaration No. 3541, but as per Survey caused by the defendants (which is not yet approved) it contains an area of 330,345 square meters. That the Tax Declaration of said parcel of land is under the name of Canuta Pagkatipunan, but plaintiff Jose Velasquez, Jr. is the one in possession of said property. That the area as contained in the Survey includes the area of the land mentioned in Item 7 of the Inventory (80,258 sq. m.);

5) That the other properties of the late Jose Velasquez Sr. were disposed of by the said decedent during his lifetime and some were sold and/or disposed of by the parties and heirs of the late Jose Velasquez, Sr.;

6) That the Barandilla properties, as evidenced by the Venta Absoluta dated February 11, 1921 executed by Pedro Villanueva in favor of Jose Velasquez Sr., were disposed of portion by portion. It was sold by the late Jose Velasquez who disposed of some portions and the rest by either the plaintiffs or defendants. An area of 11,200 square meters more or less was DONATED (donacion propter Nupcias) in favor of Canuta Pagkatipunan by the decedent Jose Velasquez, Sr. as evidenced by Kasulatan ng Panibagong Documento Donacion Propter Nupcias notarized under Inst. 135; Page 47; Book 1; Series of 1947 of Notary Public Bonifacio de Ramos;

7) That the parcels of land appearing in Items 5 and 6 of the Inventory (Annex "A") were DONATED by the late Jose Velasquez Sr. to Guillermo Velasquez;

8) That parcels of land mentioned in Items 18 and 19 of the Inventory (Annex "A") were DONATED by the late Jose Velasquez, Sr. to Jose Velasquez, Jr. Said properties were sold by the Donee to Sps. Santiago Recio and Filomena Dimaculangan;

9) The property mentioned in Item 27, page 3 of the Inventory was given by the late Jose Velasquez, Sr. to one of his daughters, Dra. Amelia Velasquez while she was still living and now owned by her heirs;

10) A residential lot at 7 West Avenue, Quezon City, titled in the name of Canuta Pagkatipunan, was acquired from the PHHC (People's Homesite and Housing Corporation, now National Housing Authority) and presently occupied by the defendants. (Rollo, pp. 351-353)

There is divergence of findings and opinion among the three members of the second set of commissioners with respect to the properties covered by Items 7 and 8 and the property in the unnumbered item relating to Lot 2-A West Avenue, Quezon City and the house thereon of the Inventory submitted by the first set of commissioners. They refuse to make findings as to the nature of the properties because the petitioners had caused the issuance of titles covering said properties. However, all the commissioners were in agreement that all the other properties listed in the Inventory belonged to the conjugal partnership of the first marriage.

The records before Us will show that the properties covered by items 7 and 8 were originally declared for taxation purposes in the names of the spouses Real and Velasquez. This has been admitted by Canuta Pagkatipunan during the hearing before the Commissioner and is duly supported by documentary evidence.

After the death of Jose Velasquez, Sr. the full possession of said property was acquired by Canuta Pagkatipunan. On March 4, 1967, she sold the same property to the spouses Moises Santos and Magdalena Pagkatipunan, her brother-in-law and sister, respectively (they were previously impleaded in the trial court as party-defendants). Subsequently, Tax Declaration No. 4843 was issued in the names of the said spouses who later resold the same property to Canuta Pagkatipunan. Thereafter, tax declaration covering said property was issued in her name, During the pendency of this suit, this property was subdivided and assigned by Canuta Pagkatipunan in favor of her thirteen children. The latter caused the issuance of separate free patent titles in their favor covering the subdivided lots conveyed to them by their mother. Original Certificates of Title Nos. P-2000 to P-2012 were accordingly issued in their names.

With regard to the West Avenue property it is not disputed that said residential lot was purchased on installments from People's Homesite and Housing Corporation (now National Housing Authority) by the spouses Jose Velasquez Sr. and Canuta Pagkatipunan. The installments were paid by the said spouses until Jose Velasquez, Sr. died on February 24, 1961. Canuta Pagkatipunan, with the help of some of her children, shouldered the payment of the remaining installments until said property was fully paid in 1965. On February 23, 1968, the PHHC executed a deed of absolute sale conveying the said house and lot to Canuta Pagkatipunan.

On August 11, 1980, a judgment was rendered by the trial court:

1) Declaring the properties listed in the Inventory submitted by the Commissioners on May 9, 1975, as belonging to the estate of the conjugal partnership of the deceased spouses Jose Velasquez, Sr. and Victorina Real;

2) Confirming all the conveyances, either by way of sale or donation, executed by Jose Velasquez, Sr. during his lifetime;

3) Declaring null and void, sham and fictitious, the following sales, transfers, assignments or conveyances: (a) the sale executed by Canuta Pagkatipunan in favor of her sister Magdalena Pagkatipunan in favor of Canuta Pagkatipunan (sic); (b) the deeds of assignments executed by Canuta Pagkatipunan in favor of her children, covering the properties listed in Items 7 and 8 of the Inventory; and ordering defendants (petitioners) to reconvey in favor of the plaintiffs (private respondents) the parcels of land covered by Patent Titles Nos. P-2000 to P-2012;

4) Declaring as null, fictitious and fraudulent the sales by Canuta Pagkatipunan in favor of her children and her sister Magdalena Pagkatipunan and brother-in-law Moises Santos, listed in paragraph 13 of the Amended Complaint; declaring the plaintiffs owners of the said properties; and ordering the defendant Canuta Pagkatipunan and her children-defendants to deliver possession of said properties to the plaintiffs;

5) Ordering the partition of the house and lot in West Avenue, Quezon City in the following manner:

(a) One-half undivided portion to defendant Canuta Pagkatipunan; and the other half appertaining to Jose Velasquez, Sr. to be divided among his heirs, to wit:

1/18 undivided portion to Canuta Pagkatipunan;

1/18 undivided portion to Lourdes Velasquez;

1/18 undivided portion to the plaintiffs Edgardo, Lolita, Minerva, Cynthia and Jennifer, all surnamed Velasquez;

1/18 undivided portion to the plaintiffs Teresa Magtibay and her children Ricardo, Lourdes, Celia and Aida, all surnamed Velasquez;

1/18 undivided portion to the plaintiffs Cesar, Adolfo, Evelyn, Angelita, Ruben and Carmencita, all surnamed Gonzales;

1/18 undivided portion to each of the defendants Flora, Leonor, Patrocinio, Benjamin, Rodolfo, Alfredo, Napoleon, Manuel, Julio, Elena, Patricia, Victoria and Carlos, all surnamed Velasquez;

Petitioners appealed to the respondent Intermediate Appellate Court.

On February 7, 1985, the Intermediate Appellate Court, Third Civil Cases Division promulgated a decision, affirming the decision of the trial court, with the modification that the entire house and lot in West Avenue, Quezon City be divided into two; one-half value to the petitioners Canuta Pagkatipunan and her 13 children to the extent of their respective proportional contributions and the other half value, to the second conjugal partnership of Jose Velasquez, Sr. and Canuta Pagkatipunan to be partitioned one-fourth to the wife and the other one-fourth appertaining to the deceased Jose Velasquez, Sr. to be divided equally among his heirs.

Hence, this instant petition for review pointing out the following four (4) assignments of error, to wit:

I

THE TRIAL COURT ERRED IN HOLDING THAT THE ENTIRE ESTATE LISTED IN THE INVENTORY SUBMITTED BY THE COMMISSIONERS ON MAY 9, 1975 AS BELONGING TO THE DECEASED SPOUSES JOSE VELASQUEZ, SR. AND VICTORINA REAL.

II

THAT THE LOWER COURT ERRED IN CONFIRMING ALL THE CONVENYANCES EITHER BY WAY OF SALE OR DONATION EXECUTED BY JOSE VELASQUEZ, SR. DURING HIS LIFETIME.

III

THAT THE LOWER COURT ERRED IN DECLARING NULL AND VOID, SHAM AND FICTITIOUS THE FOLLOWING SALES: a) THE SALE EXECUTED BY CANUTA PAGKATIPUNAN IN FAVOR OF HER SISTER MAGDALENA PAGKATIPUNAN AND BROTHER-IN-LAW MOISES SANTOS; b) THE RESALE EXECUTED BY MOISES SANTOS AND MAGDALENA PAGKATIPUNAN IN FAVOR OF CANUTA PAGKATIPUNAN; c) THE DEEDS OF ASSIGNMENT EXECUTED BY CANUTA PAGKATIPUNAN IN FAVOR OF HER CHILDREN: COVERING THE PROPERTIES LISTED IN ITEMS 7 AND 8 OF THE INVENTORY; AND ORDERING DEFENDANT-APPELLANT CANUTA PAGKATIPUNAN AND HER CHILDREN DEFENDANTS-APPELLANTS TO RECONVEY IN FAVOR OF THE PLAINTIFFS-APPELLEES THE PARCELS OF LAND COVERED BY PATENT TITLES NOS. P2-000 TO P-2012.

IV

THAT THE TRIAL COURT ERRED IN ORDERING THE PARTITION OF THE HOUSE AND LOT IN WEST AVENUE, QUEZON CITY, ONE-HALF UNDIVIDED PORTION TO DEFENDANT-APPELLANT CANUTA PAGKATIPUNAN AND THE OTHER HALF TO JOSE VELASQUEZ, SR. (pp. 21-22, Rollo)

After a careful review of the records and the arguments presented by both parties, the Court finds that both the trial court and the respondent Intermediate Appellate Court failed to consider some basic principles observed in the law on succession Such an oversight renders the appealed decision defective and hard to sustain.

It is a basic rule that before any conclusion about the legal share due to the heirs may be reached, it is necessary that certain steps be taken first. In the assailed decision, the respondent court affirmed the trial court's ruling, that Jose Velasquez, Sr. had already disposed of and exhausted his corresponding share in the conjugal partnership owned by him and Victorina Real, so that his heirs have nothing more to inherit from him, and that accordingly, whatever remaining portion of the conjugal property must necessarily appertain only to the private respondents as heirs of the deceased Victorina Real. Clearly, the trial court failed to consider among others, the following provisions of the Civil Code:

Art. 908. To determine the legitime, the value of the property left at the death of the testator shall be considered, deducting all debts and charges, which shall not include those imposed in the will.

To the net value of the hereditary estate, shall be added the value of all donations by the testator that are subject to collation, at the time he made them.

Art. 1061. Every compulsory heir, who succeeds with other compulsory heirs, must bring into the mass of the estate any property or right which he may have received from the decedent, during the lifetime of the latter, by way of donation, or any other gratuitous title, in order that it may be computed in the determination of the legitime of each heir, and in the account of the partition.

It is undeniable that numerous donations inter vivos were made by Jose Velasquez, Sr. in favor of some of his compulsory heirs. They include among others, the donation made in favor of Guillermo Velasquez on February 26,1953, consisting of 403,000 square meters (Items 5 and 6); the donation made in 1926 in favor of Jose Velasquez, Jr., consisting of 450,000 square meters (Item No. 18); the donation in favor of Amelia Velasquez (Item No. 27); and the donation in favor of Canuta Pagkatipunan, consisting of 11,000 square meters (part of Item No. 29) (Commissioner's Report, Rollo, pp. 355-360).

It appears that there was no determination whatsoever of the gross value of the conjugal properties of Jose Velasquez, Sr. and Victorina Real. Obviously it is impossible to determine the conjugal share of Jose Velasquez, Sr. from the said property relationship. Likewise, no collation of the donations he executed during his lifetime was undertaken by the trial court. Thus, it would be extremely difficult to ascertain whether or not such donations trenched on the heirs' legitime so that the same may be considered subject to reduction for being inofficious.

Article 909 of the Civil Code provides:

Art. 909. Donations given to children shall be charged to their legitime.

Donations made to strangers shall be charged to that part of the estate of which the testator could have disposed by his last will.

Insofar as they may be inofficious or may exceed the disposable portion, they shall be reduced according to the rules established by this Code.

With the avowed specific provisions of the aforesaid laws respecting collation, which are ruled controlling even in intestate succession, this Court finds that the lower court's ruling adjudicating the remaining portion of the conjugal estate to the private respondents is purely speculative and conjectural.

Relative to the sale executed by Canuta Pagkatipunan to the spouses Magdalena Pagkatipunan and Moises Santos; the resale of the same property to her; and the subsequent deeds of assignment she executed in favor of her children, the trial court had clearly established that Canuta Pagkatipunan employed fraudulent acts to acquire title over the said properties. Hence, the trial court, as well as the respondent court are correct in ruling that the said sales and assignments are null and void, sham and fictitious.

The pertinent portion of the trial court's decision reads as follows:

From the evidence adduced by the parties during the hearing before this Court and before the Commissioners, these properties were acquired on November 19, 1918 by the spouses Jose Velasquez, Sr. and Victorina Real from Estanislao Balasoto (Exh. H-5 Commissioner). Said property was originally declared for taxation purposes in the names of said spouses. (Exh. H Commissioner) On March 4, 1967, defendant Canuta Pagkatipunan sold the same property to the spouses Moises Santos and Magdalena Pagkatipunan (Exh. H-1-Commissioner). The vendee Magdalena Pagkatipunan is the sister of the defendant Canuta Pagkatipunan. Subsequently, Tax Declaration No. 4843 (Exh. H-2 Commissioner) was issued in the names of the spouses Moises Santos and Magdalena Pagkatipunan resold (sic) the same property to Canuta Pagkatipunan (Exh. H-3 Commissioner). Thereafter, tax declaration covering said property was issued in the name of Canuta Pagkatipunan (Exhibit H-4 Commissioner). During the pendency of this suit, this property was subdivided and assigned by Canuta Pagkatipunan in favor of her children, the defendants Flora, Leonor, Patrocinio, Benjamin, Rodolfo, Alfredo, Napoleon, Manuel, Elena, Patricia, Julio, Victoria and Carlos, all surnamed Velasquez. Said defendants-children of Canuta Pagkatipunan caused the issuance of free patent titles in their favor covering the subdivided lots conveyed to them respectively by their mother (Exh. 2, 2-A to 2-L)

It is evident that the parcels of land under Items 7 and 8 of the Inventory belonged to the conjugal partnership of the spouses Jose Velasquez, Sr. and Victorina Real. Canuta Pagkatipunan had no right to alienate the same. Her conveyance of the same property to her brother-in-law and sister is fictitious or simulated. Ten (10) days after she executed her sale, the same property was resold to her by the vendees. She utilized said conveyance and reconveyance only for the purpose of securing a tax declaration in her name over said property. Her subsequent subdivision of said lot and transfer of the subdivided lots to each of their children further show her fraudulent intent to deprive the plaintiffs of their rightful shares in the disputed property. (Rollo, pp. 606-607)

Despite the several pleadings filed by the petitioners in this Court, they did not rebut the foregoing findings of the trial court but merely held on to their argument that since Free Patent Titles Nos. P-2000 to P-2012 were already issued in their names, their title thereto is indefeasible and incontrovertible. This is a misplaced argument.

The fact that they had succeeded in securing title over the said parcels of land does not warrant the reversal of the trial court's ruling that the above mentioned sales and assignments were sham and fictitious. A Torrens title does not furnish a shield for fraud notwithstanding the long-standing rule that registration is a constructive notice of title binding upon the whole world. The legal principle is that if the registration of the land is fraudulent and the person in whose name the land is registered thus holds it as a mere trustee, the real owner is entitled to file an action for reconveyance of the property within a period of ten years (Pajarillo v. Intermediate Appellate Court, G.R. No. 72908, August 11, 1969, 176 SCRA 340).

Since petitioners asserted claims of exclusive ownership over the said parcels of land but acted in fraud of the private respondents, the former may be held to act as trustees for the benefit of the latter, pursuant to the provision of Article 1456 of the Civil Code:

Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.

But while the trial court has the authority to order the reconveyance of the questioned titles, We cannot agree that the reconveyance should be made in favor of the private respondents. The reason is that it is still unproven whether or not the private respondents are the only ones entitled to the conjugal properties of Jose Velasquez, Sr. and Victoria Real. It is to be noted that as the lawful heirs of Jose Velasquez Sr. the herein petitioners are also entitled to participate in his conjugal share. To reconvey said property in favor of the private respondents alone would not only be improper but will also make the situation more complicated. There are still things to be done before the legal share of all the heirs can be properly adjudicated.

Relative to the last assignment of error, We find the ruling made by the respondent appellate court proper and in accord with law insofar as it adjudicated the one-half (1/2) portion of the house and lot situated at West Avenue, Quezon City, as belonging to the petitioners to the extent of their respective proportional contributions, and the other half to the conjugal partnership of Jose Velasquez, Sr. and Canuta Pagkatipunan. We must modify it, however, as it readily partitioned the conjugal share of Jose Velasquez, Sr. (1/2 of the conjugal property or 1/4 of the entire house and lot) to his 18 heirs.

As already said, no conclusion as to the legal share due to the compulsory heirs can be reached in this case without (1) determining first the net value of the estate of Jose Velasquez, Sr.; (2) collating all the donations inter vivos in favor of some of the heirs; and (3) ascertaining the legitime of the compulsory heirs.

ACCORDINGLY, the decision of the trial court as modified by the respondent appellate court is hereby SET ASIDE except insofar as it:

(a) declared the properties listed in the Inventory submitted by the commissioners on May 9, 1975 as belonging to the estate of the conjugal partnership of the spouses Jose Velasquez, Sr. and Victorina Real;

(b) declared null and void, sham and fictitious, the following sales, transfers, assignments or conveyances:

1) the sale executed by Canuta Pagkatipunan in favor of her sister Magdalena Pagkatipunan; 2) the resale of the same property executed in favor of Canuta Pagkatipunan; and 3) the deeds of assignments executed by Canuta Pagkatipunan in favor of her 13 children; covering the properties listed in Items 7 and 8;

(c) declared as null and void all the other conveyances made by Canuta Pagkatipunan with respect to Item No. 13 of the inventory; and

d) dismissed the case against the other defendants except Canuta Pagkatipunan and her children and the spouses Moises Santos and Magdalena Pagkatipunan.

Civil Case No. SC-894 is hereby remanded to the Regional Trial Court of Laguna, for further proceedings and the same Court is directed to:

a) follow the procedure for partition herein prescribed;

b) expand the scope of the trial to cover other possible illegal dispositions of the first conjugal partnership properties not only by Canuta Pagkatipunan but also by the other heirs as can be shown in the records;

c) include the one-fourth (1/4) share of Jose Velasquez, Sr. in the residential house in Quezon City with his conjugal share under his first marriage, if any, to determine his net estate at the time of his death.

The trial court's pronouncement as to cost and damages is hereby deleted.

SO ORDERED.

G.R. No. L-53546 June 25, 1992

THE HEIRS OF THE LATE JESUS FRAN and CARMEN MEJIA RODRIGUEZ, petitioners, vs.HON. BERNARDO LL. SALAS, CONCEPCION MEJIA ESPINA and MARIA MEJIA GANDIONGCO, respondents.

 

DAVIDE, JR., J.:

This is a petition for certiorari and prohibition under Rule 65 of the Revised Rules of Court, with prayer for a writ of preliminary injunction, to annul and set aside, for having been issued without jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction, the following Orders of the respondent Judge in Special Proceedings No. 3309-R of Branch VIII of the then Court of First Instance (now Regional Trial Court) of Cebu entitled "In The Matter of the Petition for Probate of the Last Will and Testament of Remedios Mejia Vda. de Tiosejo:"

1. The Order of 26 February 1980 setting for hearing private respondents' Omnibus Motion for Reconsideration 1 which was filed six (6) years, ten (10) months and eighteen (18) days after the probate judgment was rendered and six (6) years and twenty-one (21) days after the testate proceedings was declared closed and terminated; and

2. The Order of 2 June 1980 finding the signature of the testatrix in the last will and testament to be a forgery and (a) declaring the testatrix as having died intestate; (b) declaring the testamentary dispositions in said last will and testament as null and void; (c) setting aside the order dated 10 September 1973 declaring the testate proceedings closed and terminated; (d) revoking the appointment of Jesus Fran as executor while appointing respondent Concepcion M. Espina as administratrix; and (e) ordering the conversion of the proceedings to one of intestacy. 2 This Order effectively annulled and set aside the probate judgment of 13 November 1972.

Petitioners would also have this Court nullify all other actions of respondent Judge in said Sp. Proc. No. 3309-R; restore the status quo therein prior to the issuance of the foregoing orders; and permanently enjoin respondent Judge from reopening said proceedings.

The following facts are not controverted:

Remedios M. Vda. de Tiosejo, a widow, died on 10 July 1972 in Cebu City with neither descendants nor ascendants; she left real and personal properties located in Cebu City, Ormoc City and Puerto Bello, Merida, Leyte. Earlier, on 23 April 1972, she executed a last will and testament 3 wherein she bequeathed to her collateral relatives (brothers, sisters, nephews and nieces) all her properties, and designated Rosario Tan or, upon the latter's death, Jesus Fran, as executor to serve without bond. Instrumental witnesses to the will were Nazario Pacquiao, Alcio Demerre and Primo Miro.

On 15 July 1972, Jesus Fran filed a petition with the Court of First instance of Cebu for the probate of Remedios' last will and testament. 4 The case was raffled to the original Branch VIII thereof which was then presided over by Judge Antonio D. Cinco. The petition alleged that Rosario Tan is not physically well and, therefore, will not be assuming the position of administratrix. Tan signed a waiver in favor of Jesus Fran on the third page of the said petition. The probate court issued an order setting the petition for hearing on 18 September 1972. Meanwhile, on 31 July 1972, the court appointed petitioner Jesus Fran as special administrator.

On 10 August 1972, the private respondents, who are sisters of the deceased, filed a manifestation 5 alleging that they needed time to study the petition because some heirs who are entitled to receive their respective shares have been intentionally omitted therein, and praying that they be given ample time to file their opposition, after which the hearing be reset to another date.

Private respondents did not file any opposition. Instead, they filed on 18 September 1972 a "Withdrawal of Opposition to the Allowance of Probate (sic) of the Will" wherein they expressly manifested, with their "full knowledge and consent that . . . they have no objection of (sic) the allowance of the . . . will of the late Remedios Mejia Vda. de Tiosejo," and that they have "no objection to the issuance of letters testamentary in favor of petitioner, Dr. Jesus Fran." 6

No other party filed an opposition. The petition thus became uncontested.

During the initial hearing, petitioner Fran introduced the requisite evidence to establish the jurisdictional facts.

Upon a determination that the court had duly acquired jurisdiction over the uncontested petition for probate, Judge Cinco issued in open court an order directing counsel for petitioner to present evidence proving the authenticity and due execution of the will before the Clerk of Court who was, accordingly, so authorized to receive the same.

The reception of evidence by the Clerk of Court immediately followed. Petitioner Fran's first witness was Atty. Nazario R. Pacquiao, one at the subscribing witnesses to the will. The original of the will, marked as Exhibit "F", and its English translation, marked as Exhibit "F-Translation", were submitted to the Clerk of Court. 7 Petitioner Fran was the second and also the last witness. He enumerated the names of the surviving heirs of the deceased.

On 13 November 1972, the probate court rendered a decision admitting to probate the will of the testatrix, Remedios Mejia Vda. de Tiosejo, and appointing petitioner Fran as executor thereof. 8 The dispositive portion of the decision reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered declaring the last will and testament of the deceased Remedios Mejia Vda. de Tiosejo marked as Exhibit F as admitted to probate. Dr. Jesus Fran is hereby appointed as executor of the will. Let letters testamentary be issued in favor of Dr. Jesus Fran. The special administrator's bond put up by Dr. Jesus Fran as special administrator duly approved by this Court shall serve and be considered as the executor's bond considering that the special administrator and executor are one and the same person.

The requisite notice to creditors was issued, but despite the expiration of the period therein fixed, no claim was presented against the estate.

On 4 January 1973, petitioner Fran filed an Inventory of the Estate; 9 copies thereof were furnished each of the private respondents.

Subsequently, a Project of Partition based on the dispositions made in the will and signed by all the devisees and legatees, with the exception of Luis Fran, Remedios C. Mejia and respondent Concepcion M. Espina, was submitted by the executor for the court's approval. 10 Said legatees and devisees submitted certifications wherein they admit receipt of a copy of the Project of Partition together with the notice of hearing, and state that they had no objection to its approval. 11

The notice of hearing referred to in these certifications is the 6 August 1973 notice issued by the Clerk of Court setting the hearing on the Project of Partition for 29 August 1973. 12

After the hearing on the Project of Partition, the court issued its Order of 10 September 1973 13 approving the same, declaring the parties therein as the only heirs entitled to the estate of Remedios Mejia Vda. de Tiosejo, directing the administrator to deliver to the said parties their respective shares and decreeing the proceedings closed. The dispositive portion thereof reads:

WHEREFORE, the signers (sic) to the project of partition are declared the only, heirs entitled to the estate; the project of partition submitted is ordered approved and the administrator is ordered to deliver to each one of them their respective aliquot parts as distributed in the said project of partition. It is understood that if there are expenses incurred or to be incurred as expenses of partition, Section 3 of Rule 90 shall be followed.

Let this proceedings be now declared closed.

SO ORDERED.

Thereafter, the aforesaid Branch VIII of the Court of First Instance of Cebu was converted to a Juvenile and Domestic Relations Court. On November 1978, by virtue of Presidential Decree No. 1439, Branch XVII (Davao City) of the Court of First Instance of Cebu, presided over by herein respondent Judge, was officially transferred to Cebu City and renumbered as Branch VIII.

On 1 October 1979, private respondents filed with the new Branch VIII an Omnibus Motion for Reconsideration of the probate judgment of 13 November 1972 and the Order of partition of 10 September 1973, in said motion, they ask the court to declare the proceedings still open and admit their opposition to the allowance of the will, 14 which they filed on 1 October 1979. They allege that: (a) they were not furnished with a copy of the will; (b) the will is a forgery; (c) they were not notified of any resolution or order on their manifestation requesting time within which to file their opposition, or of the order authorizing the clerk of court to receive the evidence for the petitioner, or of the order closing the proceedings; (d) the reception of evidence by the clerk of court was void per the ruling in Lim Tanhu vs. Ramolete; 15 (e) the project of partition contains no notice of hearing and they were not notified thereof; (f) the petitioner signed the project of partition as administrator and not as executor, thereby proving that the decedent died intestate; (g) the petitioner did not submit any accounting as required by law; and (h) the petitioner never distributed the estate to the devisees and legatees.

In a detailed opposition 16 to the above Omnibus Motion for Reconsideration, petitioner Fran refuted all the protestations of private respondents. Among other reasons, he stresses therein that: (a) private respondents are in estoppel to question the will because they filed their Withdrawal Of Opposition To The Allowance of Will which states that after thoroughly studying the petition, to which was attached a copy of the English translation of the will, they have no objection to its allowance; the order directing the clerk of court to receive the evidence was dictated in open court in the presence of private respondents; private respondent Maria M. Gandiongco signed the Project of Partition and private respondent Concepcion M. Espina submitted a certification stating therein that she received the notice of hearing therefor and has no objection to its approval; (b) except for some properties, either covered by a usufruct under the will or agreed upon by the parties to be held in common by reason of its special circumstance, there was an actual distribution of the estate in accordance with the Project of Partition; insofar as private respondents are concerned, they not only received their respective shares, they even purchased the shares of the other devisees. To top it all, private respondents' children, namely Rodrigo M. Gandiongco, Jr. and Victor Espina, mortgaged their respective shares in favor of a bank

Notwithstanding petitioners' objections, respondent Judge issued on 26 February 1980 an Order setting for hearing the said Omnibus Motion for Reconsideration on 8 April 1980 so that "the witnesses and the exhibits (may be) properly ventilated." 17

On 25 March 1980, petitioners filed a Motion to Dismiss the Omnibus and to Reconsider the 26 February 1980 Order setting it for hearing on 17 April 1980, 18 but the respondent Judge prematurely denied it for lack of merit in his Order of 31 March 1980. 19

Consequently, on 8 April 1980, the instant petition was filed challenging the jurisdiction of the lower court in taking cognizance of the Omnibus Motion for Reconsideration considering that the probate judgment and the order approving the

Project of Partition and terminating the proceedings had long become final and had in fact been executed. Private respondents had long lost their right to appeal therefrom. The Omnibus Motion for Reconsideration cannot likewise be treated as a petition for relief from judgment for under Rule 38 of the Revised Rules of Court, the same must be filed within sixty (60) days from receipt of notice of the judgment/order and within six (6) months from the date of said judgment. Therefore, this remedy can no longer be availed of.

On 8 April 1980, the date the instant petition was filed, respondent Judge proceeded with the hearing of the Omnibus Motion for Reconsideration. He received the testimonies of private respondents and one Romeo O. Varena, an alleged handwriting expert from the Philippine Constabulary, who averred that the signature of the testatrix on the will is a forgery. The respondent Judge likewise issued an Order on the same date stating that unless he received a restraining order from this Court within twenty (20) days therefrom, he will reopen Sp. Proc. No. 3309-R.

On 14 April 1980, petitioners filed a Supplemental Petition asking this Court to restrain respondent Judge from reopening the case. 20

In their voluminous Comments and Opposition to the petition and Supplemental Petition, 21 private respondents not only amplify in great detail the grounds raised in their Omnibus Motion for Reconsideration, they also squarely raise for the first time the following issues.

(a) The probate court never acquired jurisdiction over the case since petitioner Jesus Fran failed to submit to the court the original of the will.

(b) They were deprived of the opportunity to examine the will as petitioner Jesus Fran did not attach it to the petition; what was attached was only the English translation of the will.

(c) Even assuming that the probate judge could validly delegate the reception of evidence to the Clerk of Court, the proceeding before the latter would still be void as he failed to take an oath of office before entering upon his duties as commissioner and failed to render a report on the matters submitted to him.

(d) Respondent Maria M. Vda. de Gandiongco was defrauded into (sic) signing the Project of Partition and respondent Concepcion M. Espina, her certification, when they were misled by petitioner Fran into believing that the Agreement of Petition to be submitted to the court is the Extra Judicial Partition they signed on 7 May 1973.

(e) Petitioner Fran is guilty of fraud in urdervaluing the estate of the late Remedios M. Vda. de Tiosejo by reporting properties worth only P400,000.00 when in truth and in fact the estate has an aggregate value of P2,094,333.00.

In the Resolution dated 2 June 1980, We issued a restraining order enjoining respondent Judge from reopening Sp. Proc. No. 3309-R. 22

However, on the same date, before the restraining order was served on him; respondent Judge issued the impugned order declaring the testamentary dispositions of the will void, finding the signature of the late Remedios M. Vda. de Tiosejo to be a forgery, decreeing the reopening of Sp. Proc. No. 3309-R and converting the same into an intestate proceeding. 23

Hence, on 6 June 1980, petitioners filed their Second Supplemental Petition 24 asking this Court to declare as null and void the Order of 2 June 1980 and, pending such declaration, to restrain respondent Judge from enforcing the same. Private respondents filed their Comment and Opposition to the Second Supplemental Petition on 9 July 1980.

Thereafter, as mandated in the resolution of 30 June 1980, 25 this Court gave due course to this case and required the parties to file their respective Memoranda, which private respondents complied with on 16 August 1980; 26 petitioners filed theirs on 27 August 1980. 27 Consequently, the parties continued to file several pleadings reiterating substantially the same allegations and arguments earlier submitted to this Court.

On 22 March 1984, counsel for petitioners filed a manifestation informing this Court of the death of petitioner Fran on 29 February 1984 and enumerating therein his surviving heirs. On 2 April 1984, this Court resolved to have said heirs substitute him in this case.

Over a year later, respondent Maria M. Vda. de Gandiongco filed an affidavit, 28 sworn to before the acting Clerk of Court of the Regional Trial Court in Cebu City, disclosing the following material facts: (a) she signed the Omnibus Motion for Reconsideration dated 1 October 1979 without knowing or reading the contents thereof; (b) she saw the will of the late Remedios M. Vda. de Tiosejo written in the Cebuano dialect after the same was executed by the latter; the said will bearing the authentic signature of Remedios was the very one presented to the probate court by petitioner's counsel; (c) she received the notice of hearing of the petition for probate and because she was convinced that the signature of the testatrix

was genuine, she, together with Concepcion M. Espina, withdrew her opposition; (d) she received her share of the estate of the late Remedios M. Vda. de Tiosejo which was distributed in accordance with the provisions of the latter's will; and (e) she did not authorize Atty. Numeriano Estenzo or other lawyers to present a motion to this Court after 25 February 1981 when Estenzo withdrew as counsel for private respondents. She then asks this Court to consider as withdrawn her Opposition to the Allowance of the Will, her participation in the Omnibus Motion for Reconsideration and her Opposition to this petition.

Due to this development, We required private respondent Concepcion M. Espina to comment on the affidavit of private respondent Maria M. Vda. de Gandiongco.

On 17 August 1985, private respondents filed a joint manifestation 29 wherein they claim that Maria M. Vda. de Gandiongco does not remember, executing the affidavit. A few weeks before the affidavit was filed, particularly on 17 June 1985, Maria M. Vda. de Gandiongco was confined in the hospital; she could not recall having signed, during this period, any affidavit or recognized her sisters and other relatives.

On 19 September 1985, respondent Maria M. Vda. de Gandiongco, through special counsel, filed a Manifestation/Motion with a second Affidavit attached thereto 30 confessing that she signed the Joint Manifestation dated 16 August 1985 "without knowing or being informed of its contents, and only upon Mrs. Concepcion Espina's request." She reiterated her desire to withdraw from the Omnibus Motion for Reconsideration filed in Sp. Proc. No, 3309-R as well as from the instant petition.

Despite the valiant attempt of private respondent Concepcion M. Espina to influence and control the action of Maria Gandiongco, there is nothing in the records that would cast any doubt on the irrevocability of the latter's decision to withdraw her participation in the Omnibus Motion for Reconsideration and Opposition to this case. That decision, however, is not a ground for dropping her as a private respondent as the respondent Judge had already issued the abovementioned Order of 2 June 1980.

The petition and the supplemental petitions are impressed with merit.

We do not hesitate to rule that the respondent Judge committed grave abuse of discretion amounting to lack of jurisdiction when he granted the Omnibus Motion for Reconsideration and thereafter set aside the probate judgment of 13 November 1972 in Sp. Proc. No. 3309-R, declared the subject will of the testatrix a forgery, nullified the testamentary dispositions therein and ordered the conversion of the testate proceedings into one of intestacy.

It is not disputed that private respondents filed on the day of the initial hearing of the petition their "Withdrawal of Opposition To Allowance of Probate (sic) Will" wherein they unequivocally state that they have no objection to the allowance of the will. For all legal intents and purposes, they became proponents of the same.

After the probate court rendered its decision on 13 November 1972, and there having been no claim presented despite publication of notice to creditors, petitioner Fran submitted a Project of Partition which private respondent Maria M. Vda. de Gandiongco voluntarily signed and to which private respondent Espina expressed her conformity through a certification filed with the probate court. Assuming for the sake of argument that private respondents did not receive a formal notice of the decision as they claim in their Omnibus Motion for Reconsideration, these acts nevertheless constitute indubitable proof of their prior actual knowledge of the same. A formal notice would have been an idle ceremony. In testate proceedings, a decision logically precedes the project of partition, which is normally an implementation of the will and is among the last operative acts to terminate the proceedings. If private respondents did not have actual knowledge of the decision, they should have desisted from performing the above acts and instead demanded from petitioner Fran the fulfillment of his alleged promise to show them the will. The same conclusion refutes and defeats the plea that they were not notified of the order authorizing the Clerk of Court to receive the evidence and that the Clerk of Court did not notify them of the date of the reception of evidence. Besides, such plea must fail because private respondents were present when the court dictated the said order.

Neither do We give any weight to the contention that the reception of evidence by the Clerk of Court is null and void per the doctrine laid, down in Lim Tanhu vs. Ramolete. 31 In the first place, Lim Tanhu was decided on 29 August 1975, nearly four (4) years after the probate court authorized the Clerk of Court to receive the evidence for the petitioner in this case. A month prior to Lim Tanhu, or on 30 July 1975, this Court, in Laluan vs. Malpaya, 32 recognized and upheld the practice of delegating the reception of evidence to Clerks of Court. Thus:

No provision of law or principle of public policy prohibits a court from authorizing its clerk of court to receive the evidence of a party litigant. After all, the reception of evidence by the clerk of court constitutes but a ministerial task — the taking down of the testimony of the witnesses and the marking of the pieces of documentary evidence, if any, adduced by the party present. This task of receiving evidence precludes, on the part of the clerk of court the exercise of judicial discretion usually called for when the other party who is present objects to questions propounded and to the admission of the documentary evidence proffered. 33 More importantly, the duty to render judgment on the merits of the case still rests with the judge who is obliged to personally and directly prepare the decision based upon

the evidence reported. 34

But where the proceedings before the clerk of court and the concomitant result thereof, i.e., the judgment rendered by the court based on the evidence presented in such limited proceedings, prejudice the substantial rights of the aggrieved party, then there exists, sufficient justification to grant the latter complete opportunity to thresh out his case in court. 35

Monserrate vs. Court of Appeals, 36 decided on 29 September 1989, reiterated this rule. Lim Tanhu then cannot be used as authority to nullify the order of the probate court authorizing the Clerk of Court to receive the evidence for the rule is settled that "when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively, and should not apply to parties who had relied on the old doctrine and acted on the faith thereof." 37 It may also be emphasized in this connection that Lim Tanhu did not live long; it was subsequently overruled in Gochangco vs. Court of First Instance of Negros Occidental, 38 wherein this Court, en banc, through Justice, now Chief Justice, Andres R. Narvasa, in reference to what the trial court termed as "the doctrinal rule laid down in the recent case of Lim Tan Hu (sic) vs. Ramolete," ruled:

Now, that declaration does not reflect long observed and established judicial practice with respect to default cases. It is not quite consistent, too, with the several explicitly authorized instances under the Rules where the function of receiving evidence and even of making recommendatory findings of facts on the basis thereof may be delegated to commissioners, inclusive of the Clerk of Court. These instances are set out in Rule 33, . . . ; Rule 67 and 69, . . . ; Rule 86, . . . ; Rule 136, . . . . In all these instances, the competence of the clerk of court is assumed. Indeed, there would seem, to be sure, nothing intrinsically wrong in allowing presentation of evidence ex parte before a Clerk of Court. Such a procedure certainly does not foreclose relief to the party adversely affected who, for valid cause and upon appropriate and seasonable application, may bring about the undoing thereof or the elimination of prejudice thereby caused to him; and it is, after all, the Court itself which is duty bound and has the ultimate responsibility to pass upon the evidence received in this manner, discarding in the process such proofs as are incompetent and then declare what facts have thereby been established. In considering and analyzing the evidence preparatory to rendition of judgment on the merits, it may not unreasonably be assumed that any serious error in the ex-parte presentation of evidence, prejudicial to any absent party, will be detected and duly remedied by the Court, and/or may always, in any event, be drawn to its attention by any interested party.

xxx xxx xxx

It was therefore error for the Court a quo to have declared the judgment by default to be fatally flawed by the fact that the plaintiff's evidence had been received not by the Judge himself but by the clerk of court.

The alternative claim that the proceedings before the Clerk of Court were likewise void because said official did not take an oath is likewise untenable. The Clerk of Court acted as such when he performed the delegated task of receiving evidence. It was not necessary for him to take an oath for that purpose; he was bound by his oath of office as a Clerk of Court. Private respondents are obviously of the impression that by the delegation of the reception of evidence to the Clerk of Court, the latter became a commissioner as defined under Rule 33 of the Rules of Court entitled Trial by Commissioner. This is not correct; as this Court said in Laluan:

The provisions of Rule 33 of the Rules of Court invoked by both parties properly relate to the reference by a court of any or all of the issues in a case to a person so commissioned to act or report thereon. These provisions explicitly spell out the rules governing the conduct of the court, the commissioner, and the parties before, during, and after the reference proceedings. Compliance with these rules of conduct becomes imperative only when the court formally orders a reference of the case to a commissioner. Strictly speaking then, the provisions of Rule 33 find no application to the case at bar where the court a quo merely directed the clerk of court to take down the testimony of the witnesses presented and to mark the documentary evidence proferred on a date previously set for hearing.

Belatedly realizing the absence of substance of the above grounds, private respondents now claim in their Comments to the Petition and the Supplemental Petition that the trial court never acquired jurisdiction over the petition because only the English translation of the will — and not a copy of the same — was attached to the petition; the will was not even submitted to the court for their examination within twenty (20) days after the death of the testatrix; and that there was fraud in the procurement of the probate judgment principally because they were not given any chance to examine the signature of the testatrix and were misled into signing the withdrawal of their opposition on the assurance of petitioner Fran and their sister, Rosario M. Tan, that the will would be shown to them during the trial. These two grounds easily serve as the bases for the postulation that the decision is null and void and so, therefore, their omnibus motion became all the more timely and proper.

The contentions do not impress this Court.

In Santos vs. Castillo 39 and Salazar vs. Court of First Instance of Laguna, 40 decided six (6) months apart in 1937, this Court already ruled that it is not necessary that the original of the will be attached to the petition. In the first, it ruled: "The original of said document [the will] must be presented or sufficient reasons given to justify the nonpresentation of said original and the acceptance of the copy or duplicate thereof." 41 In the second case, this Court was more emphatic in holding that:

The law is silent as to the specific manner of bringing the jurisdictional allegations before the court, but practice and jurisprudence have established that they should be made in the form of an application and filed with the original of the will attached thereto. It has been the practice in some courts to permit attachment of a mere copy of the will to the application, without prejudice to producing the original thereof at the hearing or when the court so requires. This precaution has been adopted by some attorneys to forestall its disappearance, which has taken place in certain cases. 42

That the annexing of the original will to the petition is not a jurisdictional requirement is clearly evident in Section 1, Rule 76 of the Rules of Court which allows the filing of a petition for probate by the person named therein regardless of whether or not he is in possession of the will, or the same is lost or destroyed. The section reads in full as follows:

Sec. 1. Who may petition for the allowance of will. — Any executor, devisee, or legatee named in a will, or any other person interested in the estate, may, at any time after the death of the testator, petition the court having jurisdiction to have the will allowed, whether the same be in his possession or not, or is lost or destroyed.

In the instant case, a copy of the original will and its English translation were attached to the petition as Annex "A" and Annex "A-1", respectively, and made integral parts of the same. It is to be presumed that upon the filing of the petition the Clerk of Court, or his duly authorized subordinate, examined the petition and found that the annexes mentioned were in fact attached thereto. If they were not, the petition cannot be said to have been properly presented and the Clerk of Court would not have accepted it for docketing. Under Section 6, Rule 136 of the Rules of Court, the Clerk of Court shall receive and file all pleadings and other papers properly presented, endorsing on each such paper the time when it was filed. The presumption of regularity in the performance of official duty militates against private respondents' claim that Annex "A" of the petition was not in fact attached thereto.

The certification of the Assistant Clerk of Court issued on 8 April1980, 43 or SIX (6) months after the filing of the motion for reconsideration, to the effect that as per examination of the records of Sp. Proc. No. 3309-R, "the copy of the Will mentioned in the petition as Annex "A" is not found to be attached as of this date in the said petition; only the English Translation of said Will is attached thereof (sic) as Annex "A-1" does not even save the day for private respondents. It is not conclusive because it fails to state the fact that as hereafter shown, the pages of the records which correspond to the four (4) pages of Annex "A" were missing or were detached therefrom. As emphatically asserted by the petitioners in their Reply to the Comments of private respondents, 44 duly supported by a certification of the former Clerk of Court of the original Branch VIII of the court below, 45 and which private respondents merely generally denied in their motion for reconsideration with comments and opposition to consolidated reply, 46 the four-page xerox copy of will, marked as Annex "A" of the petition, became, as properly marked by the personnel of the original Branch VIII of the court below upon the filing of the petition, pages 5, 6, 7 and 8 while the translation thereof, marked as Annex "A-1", became pages 9, 10, 11 and 12 of the records. The markings were done in long hand. The records of the case were thereafter sent to the Clerk of Court, 14th Judicial District, Cebu City on 9 February 1978. These records, now in the possession of the respondent Judge, show that said pages 5, 6, 7 and 8 in long are missing. As a consequence thereof, petitioners filed with the Executive Judge of the court below an administrative complaint.

It is not likewise disputed that the original of the will was submitted in evidence and marked as Exhibit "F". It forms part of the records of the special proceedings — a fact which private respondents admit in their Omnibus Motion for Reconsideration, thus:

9. That an examination of the alleged will of our deceased sister has revealed that the signatures at the left hand margin of Exhibit "F", are written by (sic) different person than the signature appearing at the bottom of said alleged will . . . 47

The availability of the will since 18 September 1972 for their examination renders completely baseless the private respondents' claim of fraud on petitioner Fran's part in securing the withdrawal of their opposition to the probate of the will. If indeed such withdrawal was conditioned upon Fran's promise that the private respondents would be shown the will during the trial, why weren't the appropriate steps taken by the latter to confront Fran about this promise before certifications of conformity to the project of partition were filed?

Granting for the sake of argument that the non-fulfillment of said promise constitutes fraud, such fraud is not of the kind which provides sufficient justification for a motion for reconsideration or a petition for relief from judgment under Rule 37 and Rule 38, respectively, of the Rules of Court, or even a separate action for annulment of judgment. It is settled that for fraud to be invested with, sufficiency, it must be extrinsic or collateral to the matters involved in the issues raised during the trial which resulted in such judgment. 48

In Our jurisdiction, the following courses of action are open to an aggrieved party to set aside or attack the validity of a final judgment:

(1) Petition for relief under Rule 38 of the Rules of Court which must be filed within sixty (60) days after learning of the decision, but not more than six (6) months after such decision is entered;

(2) By direct action, via a special civil action for certiorari, or by collateral attack, assuming that the decision is void for want of jurisdiction;

(3) By an independent civil action under Article 1114 of the Civil Code, assuming that the decision was obtained through fraud and Rule 38 can not be applied. 49

It is not difficult to see that private respondents had lost their right to file a petition for relief from judgment, it appearing that their omnibus motion for reconsideration was filed exactly six (6) years, ten (10) months and twenty-two (22) days after the rendition of the decision, and six (6) years, one (1) month and thirteen (13) days after the court issued the order approving the Project of Partition, to which they voluntarily expressed their conformity through their respective certifications, and closing the testate proceedings.

Private respondents did not avail of the other two (2) modes of attack.

The probate judgment of 13 November 1972, long final and undisturbed by any attempt to unsettle it, had inevitably passed beyond the reach of the court below to annul or set the same aside, by mere motion, on the ground that the will is a forgery. Settled is the rule that the decree of probate is conclusive with respect to the due execution of the will and it cannot be impugned on any of the grounds authorized by law, except that of fraud, in any separate or independent action or proceeding. 50 We wish also to advert to the related doctrine which holds that final judgments are entitled to respect and should not be disturbed; otherwise, there would be a wavering of trust in the courts. 51 In Lee Bun Ting vs. Aligaen, 52 this Court had the occasion to state the rationale of this doctrine, thus:

Reasons of public policy, judicial orderliness, economy and judicial time and the interests of litigants, as well as the peace and order of society, all require that stability be accorded the solemn and final judgments of the courts or tribunals of competent jurisdiction.

This is so even if the decision is incorrect 53 or, in criminal cases, the penalty imposed is erroneous. 54

Equally baseless and unmeritorious is private respondents' contention that the order approving the Project of Partition and closing the proceedings is null and void because the Project of Partition did not contain a notice of hearing and that they were not notified of the hearing thereon. In truth, in her own certification 55 dated 5 September 1973, private respondent Concepcion M. Espina admitted that she "received a copy of the Project of Partition and the Notice of Hearing in the above-entitled proceeding, and that she has no objection to the approval of the said Project of Partition." The notice of hearing she referred to is the Notice of Hearing For Approval of Project of Partition issued on 6 August 1973 by the Clerk of Court. 56

Private respondent Espina was lying through her teeth when she claimed otherwise.

The non-distribution of the estate, which is vigorously denied by the petitioners, is not a ground for the re-opening of the testate proceedings. A seasonable motion for execution should have been filed. In De Jesus vs.Daza, 57 this Court ruled that if the executor or administrator has possession of the share to be delivered, the probate court would have jurisdiction within the same estate proceeding to order him to transfer that possession to the person entitled thereto. This is authorized under Section 1, Rule 90 of the Rules of Court. However, if no motion for execution is filed within the reglementary period, a separate action for the recovery of the shares would be in order. As We see it, the attack of 10 September 1973 on the Order was just a clever ploy to give asemblance of strength and substance to the Omnibus Motion for Reconsideration by depicting therein a probate court committing a series of fatal, substantive and procedural blunders, which We find to be imaginary, if not deliberately fabricated.

WHEREFORE, the instant petition and supplemental petitions are GRANTED. The Order of respondent Judge of 2 June 1980 and all other orders issued by him in Sp. Proc. No. 3309-R, as well as all other proceedings had therein in connection with or in relation to the Omnibus Motion for Reconsideration, are hereby ANNULLED and SET ASIDE.

The restraining order issued on 2 June 1980 is hereby made PERMANENT.

Costs against private respondent Concepcion M. Espina.

SO ORDERED.

Gutierrez, Jr., Bidin and Romero, JJ., concur.

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