Bonilla v Barcena

Facts: 1. On March 31, 1975 Fortunata Barcena, mother of minors Rosalio Bonilla and Salvacion Bonilla and wife of Ponciano Bonilla, instituted a civil action in the Court of First Instance of Abra, to quiet title over certain parcels of land located in Abra. 2.On August 4, 1975, the defendants filed another motion to dismiss the complaint on the ground that Fortunata Barcena is dead and, therefore, has no legal capacity to sue.

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

3. On August 28, 1975, the court denied the motion for reconsideration filed by counsel for the plaintiff for lack of merit. 4. On September 1, 1975, counsel for deceased plaintiff filed a written manifestation praying that the minors

Rosalio Bonilla and Salvacion Bonilla be allowed to substitute their deceased mother, - but the court denied the counsel's prayer for lack of merit. From the order, counsel for the deceased plaintiff filed a second motion for reconsideration of the order dismissing the complaint claiming that the same is in violation of Sections 16 and 17 of Rule 3 of the Rules of Court but the same was denied. Issue/held: WON the court erred in denying minors Rosalio Bonilla and Salvacion Bonilla be to substitute their deceased mother? YES

Rationale: 1. While it is true that a person who is dead cannot sue in court, yet he can be substituted by his heirs in pursuing the case up to its completion. 2. The records of this case show that the death of Fortunata Barcena took place on July 9, 1975 while the complaint was filed on March 31, 1975. 3. This means that when the complaint was filed on March 31, 1975, Fortunata Barcena was still alive, and therefore, the court had acquired jurisdiction over her person.

- If thereafter she died, the Rules of Court prescribes the procedure whereby a party who

died during the pendency of the proceeding can be substituted. - Under Section 16, Rule 3 of the Rules of Court "whenever a party to a pending case dies ... it shall be the duty of his attorney to inform the court promptly of such death ... and to give the name and residence of his executor, administrator, guardian or other legal representatives." - This duty was complied with by the counsel for the deceased plaintiff when he manifested before the respondent Court that Fortunata Barcena died on July 9, 1975 and asked for the proper substitution of parties in the case. - The respondent Court, however, instead of allowing the substitution, dismissed the complaint on the ground that a dead person has no legal personality to sue. This is a grave error. - Article 777 of the Civil Code provides "that the rights to the succession are transmitted from the moment of the death of the decedent. - " From the moment of the death of the decedent, the heirs become the absolute owners of his property, subject to the rights and obligations of the decedent, and they cannot be deprived of their rights thereto except by the methods provided for by law

4. The moment of death is the determining factor when

the heirs acquire a definite right to the inheritance whether such right be pure or contingent.

- The right of the heirs to the property of the deceased vests in them even before judicial declaration of their being heirs in the testate or intestate proceedings. - When Fortunata Barcena, therefore, died her claim or right to the parcels of land in litigation in Civil Case No. 856, was not extinguished by her death but was transmitted to her heirs upon her death. - Her heirs have thus acquired interest in the properties in litigation and became parties in interest in the case. There is, therefore, no reason for the respondent Court not to allow their substitution as parties in interest for the deceased plaintiff.

5. Under Section 17, Rule 3 of the Rules of Court "after a party dies and the claim is not thereby extinguished, the court shall order, upon proper notice, the legal representative of the deceased to appear and be substituted for the deceased, within such time as may be granted ... ."

-The question as to whether an action survives or not depends on the nature of the 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.

6. It is, therefore, the duty of the respondent Court to order the legal representative of the deceased plaintiff to appear and to be substituted for her. 7. But what the respondent Court did, upon being informed by the counsel for the deceased plaintiff that the latter was dead, was to dismiss the complaint.

-This should not have been done for under the same Section 17, Rule 3 of the Rules of Court, it is even the duty of the court, if the legal representative fails to appear, to order the opposing party to procure the appointment of a legal representative of the deceased - In the instant case the respondent Court did not have to bother ordering the opposing party to procure the appointment of a legal representative of the deceased because her counsel has not only asked that the minor children be substituted for her - but also suggested that their uncle be appointed as guardian ad litem for them because their father

is busy in Manila earning a living for the family. -But the respondent Court refused the request for substitution on the ground that the children were still minors and cannot sue in court. -This is another grave error because the respondent Court ought to have known that under the same Section 17, Rule 3 of the Rules of Court, the court is directed to appoint a guardian ad litem for the minor heirs. -Precisely in the instant case, the counsel for the deceased plaintiff has suggested to the respondent Court that the uncle of the minors be appointed to act as guardian ad litem for them. - Unquestionably, the respondent Court has gravely abused its discretion in not complying with the clear provision of the Rules of Court in dismissing the complaint of the plaintiff in Civil Case No. 856 and refusing the substitution of parties in the case.

Salvador v Sta. Maria

Doctrine: Right of heirs to specific, distributive shares of inheritance does not become finally determinable until all the debts of the estate are paid. Facts:

1.Seven parcels of titled land and two parcels of untitled land were owned by Celestino Salvador.

2.He executed a deed of sale over them in favor of the spouses Alfonso Salvador and Anatolia Halili.

3.Hel later filed Alleging that the sale was void for lack of consideration, he filed on May 12,1955, against said vendees, a suit for reconveyance of said parcels of land.

4.Celestino Salvador died, testate. As his alleged heirs, twenty-one persons substituted as plaintiffs in the action for reconveyance.

5.Meanwhile, special proceedings for the probate of his will and for letters testamentary was instituted.

6.About three years later, pursuant to an order of the CFI of Bulacan, Br. II, in the testacy proceedings, , one of the parcels of land involved, Lot 6, was sold so that with its proceeds debtors who filed claims may be paid.

7.The Philippine National Bank bought it at P41,184.00. Said amount was then deposited in the same bank by the administrator, subject to Court order.

8. The present special civil action for certiorari with preliminary injunction assails the order to pay the debts of the estate with the P41,184.00 proceeds of the sale of Lot 6

Issue:

Are the parcels of land and the proceeds of the sale of one of them, properties of the estate or not?

Held:

1.YES. Right of heirs to specific, distributive shares of inheritance does not become finally determinable until all the debts of the estate are paid. Until then, in the face of said claims, their rights cannot be enforced, are inchoate, and subject to the existence of a residue after payment of the debts.

2.Petitioners rely for their rights on their alleged character as heirs of Celestino; as such, they were substituted in the reconveyance case;

a. the reconveyance to them was reconveyance to them as heirs of Celestino Salvador. It follows that the properties they claim are, even by their own reasoning, part of Celestino's estate.

b. The right thereto as allegedly his heirs would arise only if said parcels of land are part of the estate of Celestino, not otherwise.

c. Their having received the same, therefore, in the reconveyance action, was perforce in trust for the estate, subject to its obligations. They cannot distribute said properties among themselves as substituted heirs without the debts of the estate being first satisfied.

Decision: Petition for certiorari is denied

Ramirez v BaltazarDOCTRINE: No.2 of the Ration

Facts:

1. It appears that on 6 January 1959, Victoriana Eguaras single, made and executed a real estate mortgage over a parcel of land, owned by her in fee simple, as security for a loan of P2,170.00 in favor of the spouses Artemio Baltazar and Susana Flores.

2. Upon the demise of the mortgagor, the mortgagees, as creditors of the deceased, on 16 September 1960 filed a petition for the intestate proceedings of her estate,

- as petitioners, they alleged that Filemon Ramirez and Monica Ramirez are the heirs of the deceased.

- Filemon Ramirez was appointed administrator of the estate;

- however, having failed to qualify, on 16 January 1961, the court appointed Artemio Diawan, then a deputy clerk of court, administrator of the estate who, in due time, qualified for the office.

3. On 19 April 1961, the mortgagees, Artemio Baltazar and Susana Flores, filed a complaint for foreclosure of the aforesaid mortgage, against Artemio Diawan, in his capacity as administrator of the estate

4. The defendant-administrator was duly served with summons but he failed to answer, whereupon, on petition of the plaintiffs said defendant was declared in default.

- The case was referred to a commissioner to receive the evidence for the plaintiffs, and defendant-administrator, as deputy clerk of court, acted as such hearing commissioner.

5. On 16 August 1961, decision was rendered decreeing the foreclosure of the mortgaged property and the sale thereof, if, within ninety days from finality of the decision, the obligation was not fully paid.

6. The judgment not having been satisfied, a writ of execution was issued for the sale of the mortgaged property, and after compliance with the requirements of the law regarding the sending, posting and publication of the notice of sale, the Sheriff sold the property at public auction to the highest bidder, who happened to be the plaintiffs themselves,

7. On 6 February 1962, Filemon Ramirez, Monica Ramirez and Jose Eguaras, the first two being the heirs named in the petition for intestate proceedings, filed a complaint designated "For the Annulment of all Proceedings in said Civil Case No. SC-292 for the Foreclosure of the Mortgage", against the spouses Artemio Baltazar and Susana Flores, and Artemio Diawan, in his capacity as administrator of the estate of Victoriana Eguaras, deceased,

- and Silverio Talabis, in his capacity as deputy provincial sheriff of Laguna,

8. the defendants spouses, Artemio Baltazar and Susana Flores, filed a motion to dismiss the complaint

- on the ground that the plaintiffs have no legal capacity to sue;

- defendant Diawan likewise moved to dismiss on

two grounds: that plaintiffs have no legal capacity to sue and that the complaint states no cause of action.

9. The lower court dismiss the complaint. The ff reasons:

- upon consideration of the evidence, said defendant could not have offered any evidence to avoid the foreclosure of the mortgage which the Court found to be in order.

-Under the circumstances and with the apparent disinterestedness of Filemon and Rolando to qualify as administrator when appointed, there could not have been any connivance and/or collusion between plaintiffs in this case and Artemio Diawan as administrator";

- and that plaintiffs have no legal capacity to sue since their status as legal heirs of the deceased has yet to be determined precisely in Special Proceeding No. SC-99, and until such status is so fixed by the Court, they have no cause of action against defendants.

10. The lower court also denied plaintiffs’ petition for the issuance of a writ of preliminary injunction to enjoin

defendants from entering and taking physical possession of the land

- On the ground that possession was effected and delivered by provincial sheriff of Artemio Baltazar and Susana Flores on Feb. 1962

Issue/held:

WON the court erred in:

(1) in holding that plaintiffs-appellants have no legal capacity to sue until their

status as legal heirs of the deceased is determined in Special Proceeding No.

SC-99? YES

(2) in ruling that there was no collusion or connivance among the defendants-

appellees, despite the fact that the issue in the motion to dismiss is purely

legal, not factual? YES

(3) in denying the petition for a writ of preliminary injunction?YES

Rationale:

1st

issue:

1. let it be remembered that the defendants-appellees, in availing themselves of the defense that the plaintiffs-appellants had not been declared to be the heirs of the deceased Victoriana Eguaras, have overlooked the fact that the (defendants-appellees) themselves in their petition for intestate proceedings (Case SC-99) have alleged that Filemon Ramirez and Monica Ramirez,

- two of herein plaintiffs-appellants, are the heirs of the deceased. Insofar as defendants-appellees are concerned, it is our opinion that they are estopped from questioning the heirship of these two named persons to the estate of the deceased.

2. There is no question that the rights to succession are automatically transmitted to the heirs from the moment of the death of the decedent.

- GENERAL RULE: While, as a rule, the formal

declaration or recognition to such successional rights needs judicial confirmation, this Court has, under special circumstances, protected these rights from encroachments made or attempted before the judicial declaration.

- EXCEPTION:In Pascual vs. Pascual, it was ruled that although heirs have no legal standing in court upon the commencement of testate or intestate proceedings, this rule admits of an exception as "when the administrator fails or refuses to act in which event the heirs may act in his place."

3. A similar situation obtains in the case at bar. The administrator is being charged to have been in collusion and connivance with the mortgagees of a property of the deceased, allowing its foreclosure without notifying the heirs, to the prejudice of the latter.

- Since the ground for the present action to annul the aforesaid foreclosure proceedings is the fraud resulting from such insidious machinations and collusion in which the administrator has allegedly participated, it would be farfetched to expect the said administrator himself to file the action in behalf of the estate.

- And who else but the heirs, who have an interest

to assert and to protect, would bring the action?

- Inevitably, this case should fall under the exception, rather than the general rule that pending proceedings for the settlement of the estate,

- the heirs have no right to commence an action arising out of the rights belonging to the deceased.

2nd issue:

4. We fully agree with the plaintiffs-appellants that the lower court had gone too far in practically adjudicating the case on the merits when it made the observation

- that "there could not have been any connivance and/or collusion between plaintiffs in this case and Artemio Diawan as administrator."

- A thorough scrutiny of the allegations in the motions to dismiss filed by defendants-appellees does not indicate that that question was ever put at issue therein. On the other hand,

- the controversy — on the existence or inexistence of collusion between the parties as a result of which judgment was rendered against the

estate — is the very core of the complaint that was dismissed. Undoubtedly, the cause of action is based on Section 30, Rule 132 of the Rules of Court.

3rd Issue:

5. the denial of the motion for the issuance of preliminary injunction — for it puts at issue the factual finding made by the lower court that the defendants had already been placed in possession of the property.

6. At this stage of the proceeding, and considering the nature of the case before Us, such a question is, at this time, beyond the competence of the Court.

Puno v Puno Enterprises Inc

Doctrine: Upon the death of a stockholder, the heirs do not automatically become stockholders of the corporation; neither are they mandatorily entitled to the rights and privileges of a stockholder.

FACTS:

1) Carlos L. Puno, who died was an incorporator of respondent Puno Enterprises, Inc.

2) Petitioner Joselito Musni Puno, claiming to be an heir of Carlos L. Puno, initiated a complaint for specific performance against respondent. Petitioner averred that he is the son of the deceased with the latter’s common-law wife, Amelia Puno.

3) As surviving heir, he claimed entitlement to the rights and privileges of his late father as stockholder of respondent.

4) The complaint thus prayed that respondent allow petitioner to inspect its corporate book, render an accounting of all the transactions it entered into from 1962, and give petitioner all the profits, earnings, dividends, or income pertaining to the shares of Carlos L. Puno.

5) Court of Appeals ordered the dismissal of the complaint because petitioner was not able to establish the paternity of and his filiation to Carlos L. Puno.

ISSUE: WON petitioner as heir is entitled to the reliefs demanded (inspection of corporate book and giving him the profits earned from the shares of Carlos Puno).

RULING: The petition is without merit. Petitioner failed to establish the right to inspect respondent corporation’s books and receive dividends on the stocks owned by

Carlos L. Puno.

a) Petitioner anchors his claim on his being an heir of the deceased stockholder. However, we agree with the appellate court that petitioner was not able to prove satisfactorily his filiation to the deceased stockholder; thus, the former cannot claim to be an heir of the latter.

As correctly observed by the CA, only petitioner’s mother supplied the data in the birth certificate and signed the same. There was no evidence that Carlos L. Puno acknowledged petitioner as his son.

b) The stockholder’s right of inspection of the corporation’s books and records is based upon his ownership of shares in the corporation and the necessity for self-protection. After all, a shareholder has the right to be intelligently informed about corporate affairs. Such right rests upon the stockholder’s underlying ownership of the corporation’s assets and property.

Similarly, only stockholders of record are entitled to receive dividends declared by the corporation, a right inherent in the ownership of the shares.

c) Upon the death of a shareholder, the heirs do not

automatically become stockholders of the corporation and acquire the rights and privileges of the deceased as shareholder of the corporation.

The stocks must be distributed first to the heirs in estate proceedings, and the transfer of the stocks must be recorded in the books of the corporation.

Section 63 of the Corporation Code provides that no transfer shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation.

During such interim period, the heirs stand as the equitable owners of the stocks, the executor or administrator duly appointed by the court being vested with the legal title to the stock. Until a settlement and division of the estate is effected, the stocks of the decedent are held by the administrator or executor.

Consequently, during such time, it is the administrator or executor who is entitled to exercise the rights of the deceased as stockholder.

d) Thus, even if petitioner presents sufficient evidence in this case to establish that he is the son of Carlos L. Puno,

he would still not be allowed to inspect respondent’s books and be entitled to receive dividends from respondent, absent any showing in its transfer book that some of the shares owned by Carlos L. Puno were transferred to him.

This would only be possible if petitioner has been recognized as an heir and has participated in the settlement of the estate of the deceased.

Reyes V RTC of Makati

Facts:

1. Oscar and private respondent Rodrigo C. Reyes are two of the four children of the spouses Pedro and Anastacia Reyes.

A) Pedro, Anastacia, Oscar, and Rodrigo each owned shares of stock of Zenith Insurance Corporation (Zenith), a domestic corporation established by their family.

B) Pedro died in 1964, while Anastacia died in 1993.

C) Although Pedro's estate was judicially partitioned among his heirs sometime in the

1970s, no similar settlement and partition appear to have been made with Anastacia's estate, which included her shareholdings in Zenith.

D) Anastacia owned 136,598 shares of Zenith; Oscar and Rodrigo owned 8,715,637 and 4,250 shares, respectively.

2. Zenith and Rodrigo filed a complaint with the Securities and Exchange Commission (SEC) against Oscar

A) to obtain an accounting of the funds and assets of ZENITH INSURANCE CORPORATION which are now or formerly in the control, custody, and/or possession of respondent [herein petitioner Oscar]

B) to determine the shares of stock of deceased spouses Pedro and Anastacia Reyes that were arbitrarily and fraudulently appropriated [by Oscar] for himself

3. Oscar denied the charge that he illegally acquired the shares of Anastacia Reyes.

A) He asserted, as a defense, that he purchased the subject shares with his own funds from the unissued stocks of Zenith, and that the suit is not a bona fide derivative suit because the requisites

therefor have not been complied with.

4. Oscar filed a Motion to declare Complaint as nuisance or harassment suit.

A) He claimed that the complaint is a mere nuisance or harassment suit

5. RTC: denied the motion

6. CA: affirmed RTC decision.

Issue:

Whether the complaint is a bona fide derivative suit but or a petition for settlement of estate

Argument: If it is the latter, it is outside the jurisdiction of RTC acting as special commercial court

Held:

the RTC - sitting as special commercial court - has no jurisdiction to hear Rodrigo's complaint since what is involved is the determination and distribution of successional rights to the shareholdings of Anastacia Reyes.

Ratio:

1. To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by the branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur:

(a) the status or relationship of the parties (b) the nature of the question that is the subj

2. Article 777 of the Civil Code declares that the successional rights are transmitted from the moment of death of the decedent. Accordingly, upon Anastacia's death, her children acquired legal title to her estate (which title includes her shareholdings in Zenith), and they are, prior to the estate's partition, deemed co-owners thereof.

(a) This status as co-owners, however, does not immediately and necessarily make them stockholders of the corporation.

(b) Unless and until there is compliance with Section 63 of the Corporation Code on the manner of transferring shares, the heirs do not become registered stockholders of the corporation.

(c) The transfer of title by means of succession, though effective and valid between the parties involved (i.e., between the decedent's estate and her heirs), does not bind the corporation and third parties. The transfer must be registered in the books of the corporation to make the transferee-heir a stockholder entitled to recognition as such both by the corporation and by third parties.

3. The complaint is about the protection and enforcement of successional rights.

(a) the controversy it presents is purely civil rather than corporate, although it is denominated as a "complaint for accounting of all corporate funds and assets

(b) Worth noting are this Court's statements in the case of Natcher v. CA

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

(c) xxxx

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.

4. Rodrigo's bare claim that the complaint is a derivative suit will not suffice to confer jurisdiction on the RTC (as a special commercial court) if he cannot comply with the requisites for the existence of a derivative suit. These requisites are:

a) the party bringing suit should be a shareholder during the time of the act or transaction complained of, the number of shares not being material;

b) the party has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of directors for the appropriate relief, but the latter has failed or refused to heed his plea; and

c) the cause of action actually devolves on the corporation; the wrongdoing or harm having been or being caused to the corporation and not to the

particular stockholder bringing the suit.[34]

d) Based on these standards, we hold that the allegations of the present complaint do not amount to a derivative suit.

First, as already discussed above, Rodrigo is not a shareholder with respect to the shareholdings originally belonging to Anastacia; he only stands as a transferee-heir whose rights to the share are inchoate and unrecorded. With respect to his own individually-held shareholdings, Rodrigo has not alleged any individual cause or basis as a shareholder on record to proceed against Oscar.

Second, in order that a stockholder may show a right to sue on behalf of the corporation, he must allege with some particularity in his complaint that he has exhausted his remedieswithin the corporation by making a sufficient demand upon the directors or other officers for appropriate relief with the expressed intent to sue if relief is denied.

Lastly, we find no injury, actual or threatened, alleged to have been done to the corporation due to Oscar's acts. If indeed he illegally and fraudulently transferred Anastacia's shares in his own name, then the damage is not to the corporation but to his co-heirs; the wrongful transfer did not affect the capital stock or the assets of Zenith. As already mentioned, neither has Rodrigo alleged any particular cause or wrongdoing against the corporation that he can

champion in his capacity as a shareholder on record.

De Borja v Vda. De Borja

Facts:

1. Francisco de Borja, upon the death of his wife Josefa Tangco on 6 October 1940, filed a petition for the probate of her will

a. The will was probated on 2 April 1941 b. Francisco de Borja was appointed executor

and administrator: c. Their son, Jose de Borja, was appointed co-

administrator. 2. When Francisco died, Jose became the sole

administrator of the testate estate of his mother, Josefa Tangco.

a. While a widower Francisco de Borja allegedly took unto himself a second wife, Tasiana Ongsingco.

b. Upon Francisco's death, Tasiana instituted testate proceedings in the Court of First Instance of Nueva Ecija, where, in 1955, she was appointed special administratrix.

3. The testate estate of Josefa Tangco alone has been

unsettled for more than a quarter of a century. In order to put an end to all these litigations, a compromise agreement was entered into.

4. Jose de Borja submitted for Court approval the agreement of 12 October 1963 to the Court of First Instance of Rizal, in Special Proceeding No. R-7866; and again, on 8 August 1966, to the Court of First Instance of Nueva Ecija, in Special Proceeding No. 832

a. The Rizal court approved the compromise agreement, but the Nueva Ecija court declared it void and unenforceable.

b. Special administratrix Tasiana Ongsingco Vda. de de Borja appealed the Rizal Court's order of approval (now Supreme Court G.R. case No. L-28040), while administrator Jose de Borja appealed the order of disapproval (G.R. case No. L-

c. 28568) by the Court of First Instance of Nueva Ecija.

Issue: WON the compromise agreement is valid, even if the will of Francisco has not yet been probated

Tasiana argues: that it was not valid because the heirs cannot enter into such kind of agreement without first probating the will of Francisco, and at the time the agreement was made, the will was still being probated with the CFI of Nueva Ecija.

Held: YES, the compromise agreement is valid.

Ratio:

1. Doctrine of Guevara vs. Guevara, ante, is not applicable to the case at bar.

a. Guevara vs. Guevara. 74 Phil. 479, (Court's majority held the view that the presentation of a will for probate is mandatory and that the settlement and distribution of an estate on the basis of intestacy when the decedent left a will, is against the law and public policy.)

b. There was here no attempt to settle or distribute the estate of Francisco de Borja among the heirs thereto before the probate of his will.

c. The clear object of the contract was merely the

conveyance by Tasiana Ongsingco of any and all her individual share and interest, actual or eventual in the estate of Francisco de Borja and Josefa Tangco.

d. There is no stipulation as to any other claimant, creditor or legatee.

e. And as a hereditary share in a decedent's estate is transmitted or vested immediately from the moment of the death of such causante or predecessor in interest (Civil Code of the Philippines, Art. 777) there is no legal bar to a successor (with requisite contracting capacity) disposing of her or his hereditary share immediately after such death, even if the actual extent of such share is not determined until the subsequent liquidation of the estate.

2. Tasiana Ongsingco was his compulsory heir under article 995 et seq. of the present Civil Code.

a. Wherefore, barring unworthiness or valid disinheritance, her successional interest existed independent of Francisco de Borja's last will and testament and would exist even if such will were not probated at all.

b. Thus, the prerequisite of a previous probate of the will, as established in the Guevara and analogous cases, can not apply to the case of Tasiana Ongsingco Vda. de de Borja.

3. Since the compromise contract Annex A was entered into by and between "Jose de Borja personally and as administrator of the Testate Estate of Josefa Tangco" on the one hand, and on the other, "the heir and surviving spouse of Francisco de Borja by his second marriage, Tasiana Ongsingco Vda. de de Borja", it is clear that the transaction was binding on both in their individual capacities, upon the perfection of the contract, even without previous authority of the Court to enter into the same.

a. The only difference between an extrajudicial compromise and one that is submitted and approved by the Court, is that the latter can be enforced by execution proceedings.

Lee v RTC of QC

FACTS:

1. Dr. Juvencio P. Ortañez incorporated the Philippine

International Life Insurance Company, Inc.

a. At the time of the company’s incorporation, Dr. Ortañez owned ninety percent (90%) of the subscribed capital stock.

2. On July 21, 1980, Dr. Ortañez died

a. 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).

3. Judge Ernani Cruz Paño appointed Rafael and Jose Ortañez joint special administrators of their father’s estate

a. special administrators Rafael and Jose Ortañez submitted an inventory of the estate of their

father which included 2,0293

shares of stock in Philinterlife, representing 50.725% of the company’s outstanding capital stock.

4. The decedent’s wife, Juliana S. Ortañez, claiming that she owned 1,014 Philinterlife shares of stock as her conjugal share in the estate, sold said shares with right to

repurchase in favor of petitioner Filipino Loan Assistance Group (FLAG), represented by its president Jose C. Lee.

5. Special Administrator Jose Ortañez, claiming he owned the remaining 1,011 Philinterlife shares of stocks as his inheritance share in the estate, sold said shares with right to repurchase also in favor of FLAG

6. several years before Juliana Ortañez and her two children, Special Administrators Rafael and Jose Ortañez, entered into a memorandum of agreement for the extrajudicial settlement of the estate of Dr. Juvencio Ortañez, partitioning the estate (including the Philinterlife shares of stock) among themselves

a. This was the basis of the number of shares separately sold by Juliana Ortañez and by Jose Ortañez

7. Ma. Divina Ortañez–Enderes and her siblings filed a motion for appointment of special administrator of Philinterlife shares of stock.

a. the intestate court granted the motion and appointed private respondent Enderes special administratrix of the Philinterlife shares of stock.

8.Special Administratrix Enderes filed an urgent motion

to declare void ab initio the memorandum of agreement

a. she filed a motion to declare the partial nullity of the extrajudicial settlement of the decedent’s estate.

b. Special Administratrix Enderes filed an urgent motion to declare void ab initio the deeds of sale of Philinterlife shares of stock

9.ALL THE ABOVE-MENTIONED MOTIONS WERE GRANTED

a.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.

b.the Memorandum of Agreement is partially void ab initio insofar as the transfer/waiver/renunciation of the Philinterlife shares of stocks are concerned

10. Special Administratrix Enderes and her siblings filed a motion for execution of the Orders of the intestate court

a. the intestate court granted the motion for execution

ISSUES: 1. Whether the lower court was correct in not approving the Memorandum Agreement and in declaring void the deeds of sale? YES

2. Whether it correctly issued the order for execution? YES

HELD:

1. Memorandum of Agreement was correctly not approved. Deeds of sale are void.

a. 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

o 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

b. no legal justification for this action by the

heirs

o 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.

parties to the Memorandum of Agreement are not the only heirs claiming an interest in the estate left by Dr. Juvencio P. Ortañez.

o 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

o claim is admittedly known to the parties to the Memorandum of Agreement before they executed the same.

Since the appropriation of the estate properties by Juliana Ortañez and her children 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.

o 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

o an heir may only sell his ideal or undivided share in the estate, not any specific property therein

Juliana Ortañez and Jose Ortañez sold specific properties of the estate in favor of petitioner FLAG.

o 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.

any disposition of estate property by an administrator or prospective heir pending final adjudication requires court approval

o 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.

2. The intestate or probate court can execute its order nullifying the invalid sale.

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

o 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

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.

o 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.

DECISION: Petition is hereby DENIED

Heirs of Sandejas v Lina

Facts:

1.Eliosoro Sandejas was appointed administrator for the settlement of the estate of his wife, Remedios.

2. He eventually sold parcels of land (in Makati) to Alex Lina, who agreed to buy it for P1M.

3. Eliosoro eventually died and Alex Lina was appointed new administrator of the estate of Remedios.

4.The heirs of Sandejas now filed a MR for the appointment of a new administrator.

5. Lina filed a Motion to approve the deed of conditional sale.

ISSUES:

1. Is Elisoro legally obliged to convey title to the property, found by the lower court to be a contract to sell?

2. Did the Probate Court have jurisdiction over the approval of the sale? 3. Can Lina apply to the Court for the approval of the sale?4. Is Elisoro in Bad faith?5. How much is Elisoro’s share in the property?

HELD:

First

NO, since the condition is the procurement of court approval and not the payment of the purchase price

Second

YES, the Probate Court has jurisdiction over it since it

covers all matters relating to the settlement of estates and the probate of wills of deceased persons, including the appointment and removal of administrators and executors. It also extends to incidental and collateral matters such as selling, mortgaging or otherwise encumbering real property belonging to the estate.

Third

The stipulation requiring court approval does not affect the validity and the effectivity of the sale as regards the selling heirs. It merely implies that that the property may be taken out of custodia legis, only with court’s permission.

Because the other heirs did not consent to the sale of their ideal shares in the disputed lots, it is only limited to the pro-indiviso share of Eliosoro.

Fourth

NO. SC held that he is not in bad faith because: (1) he informed Lina of the need to secure court approval prior to the sale of the lots, and (2) he did not promise he could obtain the approval.

Fifth

His share is 11/20 of the entire property because he owned 1⁄2 of these lots plus a further 1/10 of the remaining half, in his capacity as one of the legal heirs.

Santos v Lumbao

NATURE: Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure

FACTS:

1. Petitioners Virgilio, Victorino, Ernesto and Tadeo, all surnamed Santos, are the legitimate and surviving heirs of the late Rita Catoc Santos (Rita), who died on 20 October 1985.

a. petitioners Esperanza Lati and Lagrimas Santos are the daughters-in-law of Rita.

2. Respondents Spouses Jose Lumbao and Proserfina Lumbao are the alleged owners of the 107-square meter lot (subject property), which they purportedly bought from Rita during her lifetime.

3.On two separate occasions during her lifetime, Rita sold

to respondents Spouses Lumbao the subject property which is a part of her share in the estate of her deceased mother, Maria Catoc (Maria), who died intestate on 19 September 1978.

a. first occasion: Rita sold 100 square meters of her inchoate share in her mother’s estate through a document denominated as "Bilihan ng Lupa," dated 17 August 1979

i. Respondents Spouses Lumbao claimed the execution of the aforesaid document was witnessed by petitioners Virgilio and Tadeo, as shown by their signatures affixed therein.

b. second occasion: an additional seven square meters was added to the land as evidenced by a document also denominated as "Bilihan ng Lupa," dated 9 January 1981

4. Spouses Lumbao took actual possession thereof and erected thereon a house which they have been occupying as exclusive owners up to the present

5. Respondents Spouses Lumbao alleged that prior to her death, Rita informed respondent Proserfina Lumbao she could not deliver the title to the subject property because

the entire property inherited by her and her co-heirs from Maria had not yet been partitioned.

6. the Spouses Lumbao claimed that petitioners executed a Deed of Extrajudicial Settlement, adjudicating and partitioning among themselves and the other heirs, the estate left by Maria, which included the subject property already sold to respondents Spouses Lumbao

7. respondents Spouses Lumbao sent a formal demand letter to petitioners but despite receipt of such demand letter, petitioners still failed and refused to reconvey the subject property to the respondents Spouses Lumbao.

8. Consequently, the latter filed a Complaint for Reconveyance with Damages

9. The trial court denied the petition

10.Aggrieved, respondents Spouses Lumbao appealed to the Court of Appeals; it was granted.

ISSUES:

1. Whether the Complaint for Reconveyance with Damages filed by respondents spouses Lumbao is dismissible for their failure to comply with the mandate of the Revised Katarungang Pambarangay Law under R.A.

No. 7160? NO

2. Whether the documents known as "Bilihan ng Lupa" are valid and enforceable, thus, they can be the bases of the respondents spouses Lumbao’s action for reconveyance with damages? YES

3. Whether herein petitioners are legally bound to comply with the "Bilihan ng Lupa" dated 17 August 1979 and 9 January 1981 and consequently, reconvey the subject property to herein respondents spouses Lumbao? YES

HELD:

1. No, it is not dismissable.

petitioners can no longer raise the defense of non-compliance with the barangay conciliation proceedings to seek the dismissal of the complaint filed by the respondents Spouses Lumbao, because they already waived the said defense when they failed to file a Motion to Dismiss.

non-referral of a case for barangay conciliation when so required under the law is not jurisdictional in nature and may therefore be deemed waived if not raised seasonably in a

motion to dismiss

2. Document Bilihan ng Lupa is valid and enforceable.

in petitioners’ Answer and Amended Answer to the Complaint for Reconveyance with Damages, both petitioners Virgilio and Tadeo made an admission that indeed they acted as witnesses in the execution of the "Bilihan ng Lupa," dated 17 August 1979

o however, petitioner Virgilio denied having knowledge of the sale transaction and claimed that he could not remember the same as well as his appearance before the notary public due to the length of time that had passed.

petitioner Virgilio did not categorically deny having signed the "Bilihan ng Lupa”

o petitioners had not adduced any other evidence to override the admission made in their [A]nswer

o the general rule that the admissions made by a party in a pleading are binding and conclusive upon him applies in this case.

both "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981 were duly notarized before a notary public

o a document acknowledged before a notary public is a public document that enjoys the presumption of regularity

at the time of the execution of the documents denominated as "Bilihan ng Lupa," the entire property owned by Maria, the mother of Rita, was not yet divided among her and her co-heirs

o exact metes and bounds of the subject property sold to respondents Spouses Lumbao could not be possibly determined at that time.

o does not make the contract of sale between Rita and respondents Spouses Lumbao invalid while an estate remains undivided, co-owners have each full ownership of their respective aliquots or undivided shares and may therefore alienate, assign or mortgage them

o The sale is valid, but only with respect to the aliquot share of the selling co-owner.

o Furthermore, the sale is subject to the results of the partition upon the termination of the co-ownership

when the estate left by Maria had been partitioned, the 107- square meter lot sold by the mother of the petitioners to respondents Spouses Lumbao should be deducted from the total lot, inherited by them in representation of their deceased mother, which in this case measures 467 square meters.

o The 107-square meter lot already sold to respondents Spouses Lumbao can no longer be inherited by the petitioners because the same was no longer part of their inheritance as it was already sold during the lifetime of their mother.

defense of prescription of action and laches is likewise unjustifiable

when the plaintiff is in possession of the land to be reconveyed, prescription cannot set ino exception is based on the theory that registration proceedings could not be used as a shield for fraud or for enriching a person at the expense of another

o right of the respondents Spouses Lumbao to

seek reconveyance does not prescribe because the latter have been and are still in actual possession and occupation as owners of the property sought to be reconveyed

respondents Spouses Lumbao cannot be held guilty of laches because from the very start that they bought the 107-square meter lot from the mother of the petitioners, they have constantly asked for the transfer of the certificate of title into their names but Rita, during her lifetime, and the petitioners, after the death of Rita, failed to do so on the flimsy excuse that the lot had not been partitioned yet

o after the partition of the entire estate of Maria, petitioners still included the 107-square meter lot in their inheritance which they divided among themselves despite their knowledge of the contracts of sale between their mother and the respondents Spouses Lumbao

3. Petitioners are legally bound to comply with the Bilihan ng Lupa documents.

“Bilihan ng Lupa" documents are valid and enforceable and can be made the basis of the respondents Spouses Lumbao’s action for

reconveyance

failure of respondents Spouses Lumbao to have the said documents registered does not affect its validity and enforceability

o registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons.

o Where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him

Hence, the "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981, being valid and enforceable, herein petitioners are bound to comply with their provisions.

o In short, such documents are absolutely valid between and among the parties thereto.

general rule that heirs are bound by contracts

entered into by their predecessors-in-interest applies in the present case.

o Article 1311 of the NCC is the basis of this rule: whatever rights and obligations the decedent have over the property were transmitted to the heirs by way of succession, a mode of acquiring the property, rights and obligations of the decedent to the extent of the value of the inheritance of the heirs.

the heirs cannot escape the legal consequence of a transaction entered into by their predecessor-in-interest because they have inherited the property subject to the liability affecting their common ancestor.

o Being heirs, there is privity of interest between them and their deceased mother.

o They only succeed to what rights their mother had and what is valid and binding against her is also valid and binding as against them.

o The death of a party does not excuse nonperformance of a contract which

involves a property right and the rights and obligations thereunder pass to the personal representatives of the deceased. Similarly, nonperformance is not excused by the death of the party when the other party has a property interest in the subject matter of the contract.

despite the death of the petitioners’ mother, they are still bound to comply with the provisions of the "Bilihan ng Lupa"

they must reconvey to herein respondents Spouses Lumbao the 107- square meter lot which they bought from Rita, petitioners’ mother.

petitioners must pay respondents Spouses Lumbao attorney’s fees and litigation expenses for having been compelled to litigate and incur expenses to protect their interest.

DECISION: DENIED