G.R. No. 165554               July 26, 2010 Unfortunately, this was not the end of litigation.
Unfortunately, this was not the end of litigation. On May 2, 2002, petitioners filed a verified Motion to Set Aside
LAZARO PASCO and LAURO PASCO, Petitioners,
vs.
HEIRS OF FILOMENA DE GUZMAN, represented by CRESENCIA DE GUZMAN-PRINCIPE, Respondents.
DECISION
DEL CASTILLO, J.:
No court should shield a party from compliance with valid obligations based on wholly unsubstantiated claims of mistake or
fraud. Having refused to abide by a compromise agreement, the aggrieved party may either enforce it or regard it as rescinded
and insist upon the original demand.
This Petition for Review on Certiorari1 assails the May 13, 2004 Decision2 of the Court of Appeals (CA) and its October 5,
2004 Resolution3 in CA-G.R. SP No. 81464 which dismissed petitioners’ appeal and affirmed the validity of the parties’
Compromise Agreement.
Factual Antecedents
The present petition began with a Complaint for Sum of Money and Damages4 filed on December 13, 2000 by respondents, the
heirs of Filomena de Guzman (Filomena), represented by Cresencia de Guzman-Principe (Cresencia), against petitioners Lauro
Pasco (Lauro) and Lazaro Pasco (Lazaro). The case was filed before the Municipal Trial Court (MTC) of Bocaue, Bulacan, and
docketed as Civil Case No. MM-3191.5
In their Complaint,6 herein respondents alleged that on February 7, 1997, petitioners obtained a loan in the amount of
₱140,000.00 from Filomena (now deceased). To secure the petitioners’ loan, Lauro executed a chattel mortgage on his Isuzu
Jeep in favor of Filomena. Upon her death, her heirs sought to collect from the petitioners, to no avail. Despite numerous
demands, petitioners refused to either pay the balance of the loan or surrender the Isuzu Jeep to the respondents. Thus,
respondents were constrained to file the collection case to compel the petitioners to pay the principal amount of ₱140,000.00
plus damages in the amount of 5% monthly interest from February 7, 1997, 25% attorney’s fees, exemplary damages, and
expenses of litigation.
Filomena’s heirs, consisting of Avelina de Guzman-Cumplido, Cecilia de Guzman, Rosita de Guzman, Natividad de Guzman,
and Cresencia de Guzman-Principe, authorized Cresencia to act as their attorney-in-fact through a Special Power of
Attorney7 (SPA) dated April 6, 1999. The SPA authorized Cresencia to do the following on behalf of the co-heirs:
1) To represent us on all matters concerning the intestate estate of our deceased sister, Filomena de Guzman;
2) To file cases for collection of all accounts due said Filomena de Guzman or her estate, including the power to file
petition for foreclosure of mortgaged properties;
3) To do and perform all other acts necessary to carry out the powers hereinabove conferred.
During the pre-trial of the case on February 15, 2002, the parties verbally agreed to settle the case. On February 21, 2002, the
parties jointly filed a Compromise Agreement8 that was signed by the parties and their respective counsel. Said Compromise
Agreement, approved by the MTC in an Order9 dated April 4, 2002, contained the following salient provisions:
1. That [petitioners] admit their principal loan and obligation to the [respondents] in the sum of One Hundred Forty
Thousand Pesos (₱140,000.00) Philippine currency; in addition to the incidental and other miscellaneous expenses
that they have incurred in the pursuit of this case, in the further sum of ₱18,700.00;
2. That, [petitioners] undertake to pay to the [respondents] their aforementioned obligations, together with attorney’s
fees equivalent to ten percentum (10%) of the total sum thereof, directly at the BULACAN OFFICE of the
[respondents’] counsel, located at No. 24 Hornbill Street, St. Francis Subdivision, Bo. Pandayan, Meycauayan,
Bulacan, WITHOUT NEED OF FURTHER DEMAND in the following specific manner, to wit:
₱60,000.00 – to be paid on or before May 15, 2002
₱10,000.00 – monthly payments thereafter, starting June 15, 2002 up to and until the aforementioned
obligations shall have been fully paid;
3. That, provided that [petitioners] shall truely [sic] comply with the foregoing specifically agreed manner of
payments, [respondents] shall forego and waive all the interests charges of 5% monthly from February 7, 1998 and
the 25% attorney’s fees provided for in Annex "AA" of the Complaint;
4. In the event of failure on the part of the [petitioners] to comply with any of the specific provisions of this
Compromise Agreement, the [respondents] shall be entitled to the issuance of a "Writ of Execution" to enforce the
satisfaction of [petitioners’] obligations, as mentioned in paragraph 1, together with the 5% monthly interests charges
and attorney’s fees mentioned in paragraph 3 thereof.10
Ruling of the Municipal Trial Court
Decision11 alleging that the Agreement was written in a language not understood by them, and the terms and conditions thereof
were not fully explained to them. Petitioners further questioned the MTC’s jurisdiction, arguing that the total amount allegedly
covered by the Compromise Agreement amounted to ₱588,500.00, which exceeded the MTC’s ₱200,000.00 jurisdictional
limit. In an Order12 dated June 28, 2002, the MTC denied the motion; it also granted Cresencia’s prayer for the issuance of a
writ of execution. The writ of execution13 was subsequently issued on July 3, 2002. Petitioners’ Motion for Reconsideration and
to Quash Writ/Order of Execution14 dated August 1, 2002 was denied by the MTC in an Order15 dated September 5, 2002.
Undeterred, on October 10, 2002, petitioners filed a Petition for Certiorari and Prohibition with Application for Temporary
Restraining Order/Preliminary Injunction16 before the Regional Trial Court (RTC) of Bocaue. The case was raffled to Branch
82,17 and docketed as Civil Case No. 764-M-2002. In their petition, petitioners argued that the MTC gravely abused its
discretion in approving the Compromise Agreement because (1) the amount involved was beyond the jurisdiction of the MTC;
(2) the MTC failed to ascertain that the parties fully understood the contents of the Agreement; (3) Crescencia had no authority
to represent her co-heirs because Filomena’s estate had a personality of its own; and (4) the Compromise Agreement was void
for failure of the judge and Cresencia to explain the terms and conditions to the petitioners.
In their Comment18 dated October 29, 2002, respondents argued that (1) the principal claim of ₱140,000.00 was within the
MTC’s jurisdiction; and (2) the records reveal that it was the petitioners themselves, assisted by their counsel, who proposed the
terms of the settlement, which offer of compromise was accepted in open court by the respondents. Thus, the Compromise
Agreement merely reduced the parties’ agreement into writing.
Ruling of the Regional Trial Court
The RTC initially granted petitioners’ prayer for the issuance of a Temporary Restraining Order (TRO) 19 on November 18,
2002, and later issued a preliminary injunction in an Order 20 dated December 10, 2002, primarily on the ground that the SPA did
not specifically authorize Cresencia to settle the case. However, Presiding Judge Herminia V. Pasamba later inhibited
herself,21 so the case was re-raffled to Branch 6, presided over by Judge Manuel D.J. Siayngo.22 The grant of the preliminary
injunction was thus reconsidered and set aside in an Order23 dated May 15, 2003. In the same Order, the RTC dismissed the
petition and held that (1) the MTC had jurisdiction over the subject matter; (2) Cresencia was authorized to institute the action
and enter into a Compromise Agreement on behalf of her co-heirs; and (3) the MTC’s approval of the Compromise Agreement
was not done in a capricious, whimsical, or arbitrary manner; thus, petitioners’ resort to certiorari under Rule 65 was improper.
Petitioners’ Motion for Reconsideration24 was denied,25 hence they sought recourse before the CA.
Ruling of the Court of Appeals
In its Decision26 dated May 13, 2004 and Resolution27 dated October 5,
2004, the CA dismissed petitioners’ appeal, and held that:
1) the MTC had jurisdiction, since the principal amount of the loan only amounted to ₱140,000.00;
2) Cresencia was duly authorized by her co-heirs to enter into the Compromise Agreement;
3) Petitioners improperly sought recourse before the RTC through a Petition for Certiorari under Rule 65, when the
proper remedy was a Petition for Relief from Judgment under Rule 38.
Issues
Before us, petitioners claim that, first, they correctly resorted to the remedy of certiorari under Rule 65; second, the RTC
gravely erred in dismissing their Petition for Certiorari and Prohibition, when the matter under consideration was merely the
propriety of the grant of the preliminary injunction; and third, that the SPA did not validly authorize Cresencia to enter into the
Compromise Agreement on behalf of her co-heirs.
Our Ruling
We deny the petition.
The MTC had jurisdiction over the case.
It bears stressing that the question of the MTC’s jurisdiction has not been raised before this Court; hence, petitioners appear to
have admitted that the MTC had jurisdiction to approve the Compromise Agreement. In any event, it is beyond dispute that the
Judiciary Reorganization Act of 1980, or Batas Pambansa (BP) Blg. 129,28 as amended by Republic Act No. 7691,29 fixes the
MTC’s jurisdiction over cases where "the demand does not exceed Two hundred thousand pesos (₱200,000.00) exclusive of
interest, damages of whatever kind, attorney's fees, litigation expenses, and costs."30 Thus, respondents’ initiatory complaint,
covering the principal amount of ₱140,000.00, falls squarely within the MTC’s jurisdiction.
Petitioners properly resorted to the special civil action of certiorari.
On the first question, the CA held that the proper remedy from the MTC’s Order approving the Compromise Agreement was a
Petition for Relief from Judgment under Rule 38 and not a Petition for Certiorari under Rule 65. We recall that petitioners filed
1
a verified Motion to Set Aside Decision on May 2, 2002, 31 which was denied by the MTC on June 28, 2002. This Order of
denial was properly the subject of a petition for certiorari, pursuant to Rule 41, Section 1, of the Rules of Court:
Section 1. Subject of Appeal – An appeal may be taken from a judgment or final order that completely disposes of the case, or of
a particular matter therein when declared by these Rules to be appealable.
No appeal may be taken from:
xxxx
(e) an order denying a motion to set aside a judgment by consent, confession or compromise on the ground of fraud, mistake or
duress, or any other ground vitiating consent.
xxxx
In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate
special civil action under Rule 65.
From the express language of Rule 41, therefore, the MTC’s denial of petitioners’ Motion to Set Aside Decision could not have
been appealed. Indeed, a decision based on a compromise agreement is immediately final and executory and cannot be the
subject of appeal,32 for when parties enter into a compromise agreement and request a court to render a decision on the basis of
their agreement, it is presumed that such action constitutes a waiver of the right to appeal said decision.33 While there may have
been other remedies available to assail the decision,34 petitioners were well within their rights to institute a special civil action
under Rule 65.
The Regional Trial Court rightly dismissed the petition for certiorari.
On the second issue, petitioners argue that the RTC, in reconsidering the order granting the application for writ of preliminary
injunction, should not have gone so far as dismissing the main case filed by the petitioners. They claim that the issue in their
application for writ of preliminary injunction was different from the issues in the main case for certiorari, and that the
dissolution of the preliminary injunction should have been without prejudice to the conduct of further proceedings in the main
case. They also claim that the RTC did not have the power to dismiss the case without requiring the parties to file memoranda.
These assertions are belied, however, by petitioners’ own submissions.
Their arguments were exactly the same, whether relating to the preliminary or permanent injunction. Identical matters were at
issue – the MTC’s jurisdiction, petitioners’ alleged vitiated consent, and the propriety of enforcing the Compromise Agreement.
The reliefs sought, too, were the same, that is, the grant of an injunction against the enforcement of the compromise:35
WHEREFORE, it is most respectfully prayed that:
1) A Temporary Restraining Order and/or Preliminary Injunction issue ex parte directing the respondents to cease and
desist from enforcing, executing, or implementing in any manner the Decision dated April 4, 2002 and acting in Civil
Case No. MM-3191 until further orders from this Honorable Court.
2) After hearing, the temporary restraining order/ex parte injunction be replaced by a writ of preliminary injunction.
3) After hearing on the merits, judgment be rendered:
a. Making the injunction permanent.
Since the RTC found at the preliminary injunction phase that petitioners were not entitled to an injunction (whether preliminary
or permanent), that petitioners’ arguments were insufficient to support the relief sought, and that the MTC’s approval of the
Compromise Agreement was not done in a capricious, whimsical, or arbitary manner, the RTC was not required to engage in
unnecessary duplication of proceedings. As such, it rightly dismissed the petition.
In addition, nothing in the Rules of Court commands the RTC to require the parties to file Memoranda. Indeed, Rule 65, Sec. 8
is explicit in that the court "may dismiss the petition if it finds the same to be patently without merit, prosecuted manifestly for
delay, or that the questions raised therein are too unsubstantial to require consideration."36
Cresencia was authorized to enter into the Compromise Agreement.
As regards the third issue, petitioners maintain that the SPA was fatally defective because Cresencia was not specifically
authorized to enter into a compromise agreement. Here, we fully concur with the findings of the CA that:
x x x It is undisputed that Cresencia’s co-heirs executed a Special Power of Attorney, dated 6 April 1999, designating the
former as their attorney-in-fact and empowering her to file cases for collection of all the accounts due to Filomena or her estate.
Consequently, Cresencia entered into the subject Compromise Agreement in order to collect the overdue loan obtained by Pasco
from Filomena. In so doing, Cresencia was merely performing her duty as attorney-in-fact of her co-heirs pursuant to the
Special Power of Attorney given to her.371avvphi1
Our ruling in Trinidad v. Court of Appeals38 is illuminating. In Trinidad, the heirs of Vicente Trinidad executed a SPA in favor
of Nenita Trinidad (Nenita) to be their representative in litigation involving the sale of real property covered by the decedent’s
estate. As here, there was no specific authority to enter into a Compromise Agreement. When a compromise agreement was
finally reached, the heirs later sought to invalidate it, claiming that Nenita was not specifically authorized to enter into the
compromise agreement. We held then, as we do now, that the SPA necessarily included the power of the attorney-in-fact to
compromise the case, and that Nenita’s co-heirs could not belatedly disavow their original authorization. 39 This ruling is even
more significant here, where the co-heirs have not taken any action to invalidate the Compromise Agreement or assail their
SPA.
Moreover, we note that petitioners never assailed the validity of the SPA
during the pre-trial stage prior to entering the Compromise Agreement. This matter was never even raised as a ground in
petitioners’ Motion to Set Aside the compromise, or in the initial Petition before the RTC. It was only months later, in
December 2002, that petitioners – rather self-servingly - claimed that the SPA was insufficient.
The stated interest rate should be reduced.
Although the petition is unmeritorious, we find the 5% monthly interest rate stipulated in Clause 4 of the Compromise
Agreement to be iniquitous and unconscionable. Accordingly, the legal interest of 12% per annum must be imposed in lieu of
the excessive interest stipulated in the agreement. As we held in Castro v. Tan:40
In several cases, we have ruled that stipulations authorizing iniquitous or unconscionable interests are contrary to morals, if not
against the law. In Medel v. Court of Appeals, we annulled a stipulated 5.5% per month or 66% per annum interest on a
₱500,000.00 loan and a 6% per month or 72% per annum interest on a ₱60,000.00 loan, respectively, for being excessive,
iniquitous, unconscionable and exorbitant. In Ruiz v. Court of Appeals, we declared a 3% monthly interest imposed on four
separate loans to be excessive. In both cases, the interest rates were reduced to 12% per annum.
In this case, the 5% monthly interest rate, or 60% per annum, compounded monthly, stipulated in the Kasulatan is even higher
than the 3% monthly interest rate imposed in the Ruiz case. Thus, we similarly hold the 5% monthly interest to be excessive,
iniquitous, unconscionable and exorbitant, contrary to morals, and the law. It is therefore void ab initio for being violative of
Article 1306 of the Civil Code. x x x (citations omitted)
The proceeds of the loan should be released to Filomena’s heirs only upon settlement of her estate.
Finally, it is true that Filomena’s estate has a different juridical personality than that of the heirs. Nonetheless, her heirs certainly
have an interest in the preservation of the estate and the recovery of its properties, 41 for at the moment of Filomena’s death, the
heirs start to own the property, subject to the decedent's liabilities. In this connection, Article 777 of the Civil Code states that
"[t]he rights to the succession are transmitted from the moment of the death of the decedent."42
Unfortunately, the records before us do not show the status of the proceedings for the settlement of the estate of Filomena, if
any. But to allow the release of the funds directly to the heirs would amount to a distribution of the estate; which distribution
and delivery should be made only after, not before, the payment of all debts, charges, expenses, and taxes of the estate have
been paid.43 We thus decree that respondent Cresencia should deposit the amounts received from the petitioners with the MTC
of Bocaue, Bulacan and in turn, the MTC of Bocaue, Bulacan should hold in abeyance the release of the amounts to Filomena’s
heirs until after a showing that the proper procedure for the settlement of Filomena’s estate has been followed.
WHEREFORE, the petition is DENIED. The May 13, 2004 Decision of the Court of Appeals and its October 5, 2004
Resolution are AFFIRMED with MODIFICATIONS that the interest rate of 5% per month (60% per annum) is ordered
reduced to 12 % per annum. Respondent Cresencia De Guzman-Principe is DIRECTED to deposit with the Municipal Trial
Court of Bocaue, Bulacan the amounts received from the petitioners. The Municipal Trial Court of Bocaue, Bulacan is
likewise DIRECTED to hold in abeyance the release of any amounts recovered from the petitioners until after a showing that
the procedure for settlement of estates of Filomena de Guzman’s estate has been followed, and after all charges on the estate
have been fully satisfied.
G.R. No. 125835 July 30, 1998
NATALIA CARPENA OPULENCIA, petitioner,
vs.
COURT OF APPEALS, ALADIN SIMUNDAC and MIGUEL OLIVAN, respondents.
PANGANIBAN, J.:
Is a contract to sell a real property involved in restate proceedings valid and binding without the approval of the probate court?
Statement of the Case
This is the main question raised in this petition for review before us, assailing the Decision 1 of the Court of Appeals 2 in CA-
GR CV No. 41994 promulgated on February 6, 1996 and its Resolution 3 dated July 19, 1996. The challenged Decision disposed
as follows:
WHEREFORE, premises considered, the order of the lower court dismissing the complaint is SET ASIDE
and judgment is hereby rendered declaring the CONTRACT TO SELL executed by appellee in favor of
2
 appellants as valid and binding, subject to the result of the administration proceedings of the testate Estate
of Demetrio Carpena.
SO ORDERED. 4
Petitioner's Motion for Reconsideration was denied in the challenged Resolution. 5
The Facts
The antecedent facts, as succinctly narrated by Respondent Court of Appeals, are:
In a complaint for specific performance filed with the court a quo [herein private respondents] Aladin Simundac and Miguel
Oliven alleged that [herein petitioner] Natalia Carpena Opulencia executed in their favor a "CONTRACT TO SELL" Lot 2125
of the Sta. Rosa Estate, consisting of 23,766 square meters located in Sta. Rosa, Laguna at P150.00 per square meter; that
plaintiffs paid a downpayment of P300,000.00 but defendant, despite demands, failed to comply with her obligations under the
contract. [Private respondents] therefore prayed that [petitioner] be ordered to perform her contractual obligations and to further
pay damages, attorney's fee and litigation expenses.
In her traverse, [petitioner] admitted the execution of the contract in favor of plaintiffs and receipt of P300,000.00 as
downpayment. However, she put forward the following affirmative defenses: that the property subject of the contract formed
part of the Estate of Demetrio Carpena (petitioner's father), in respect of which a petition for probate was filed with the Regional
Trial Court, Branch 24, Biñan, Laguna; that at the time the contract was executed, the parties were aware of the pendency of the
probate proceeding; that the contract to sell was not approved by the probate court; that realizing the nullity of the contract
[petitioner] had offered to return the downpayment received from [private respondents], but the latter refused to accept it; that
[private respondents] further failed to provide funds for the tenant who demanded P150,00.00 in payment of his tenancy rights
on the land; that [petitioner] had chosen to rescind the contract.
At the pre-trial conference the parties stipulated on [sic] the following facts:
1. That on February 3, 1989, [private respondents] and [petitioner] entered into a contract to sell involving
a parcel of land situated in Sta. Rosa, Laguna, otherwise known as Lot No. 2125 of the Sta. Rosa Estate.
2. That the price or consideration of the said sell [sic] is P150.00 per square meters;
3. That the amount of P300,000.00 had already been received by [petitioner];
4. That the parties have knowledge that the property subject of the contract to sell is subject of the probate
proceedings;
5. That [as] of this time, the probate Court has not yet issued an order either approving or denying the said
sale. (p. 3, appealed Order of September 15, 1992, pp. 109-112, record).
[Private respondents] submitted their evidence in support of the material allegations of the complaint. In addition to testimonies
of witnesses, [private respondents] presented the following documentary evidences: (1) Contract to Sell (Exh A); (2) machine
copy of the last will and testament of Demetrio Carpena (defendant's father) to show that the property sold by defendant was
one of those devised to her in said will (Exh B); (3) receipts signed by defendant for the downpayment in the total amount of
P300,000.00 (Exhs C, D & E); and (4) demand letters sent to defendant (Exhs F & G).
It appears that [petitioner], instead of submitting her evidence, filed a Demurrer to Evidence. In essence, defendant maintained
that the contract to sell was null and void for want of approval by the probate court. She further argued that the contract was
subject to a suspensive condition, which was the probate of the will of defendant's father Demetrio Carpena. An Opposition was
filed by [private respondents]. It appears further that in an Order dated December 15, 1992 the court a quo granted the demurrer
to evidence and dismissed the complaint. It justified its action in dismissing the complaint in the following manner:
It is noteworthy that when the contract to sell was consummated, no petition was filed in the Court with notice to the heirs of the
time and place of hearing, to show that the sale is necessary and beneficial. A sale of properties of an estate as beneficial to the
interested parties must comply with the requisites provided by law, (Sec. 7, Rule 89, Rules of Court) which are mandatory, and
without them, the authority to sell, the sale itself, and the order approving it, would be null and void ab initio. (Arcilla vs.
David, 77 Phil. 718, Gabriel, et al., vs. Encarnacion, et al., L-6736, May 4, 1954; Bonaga vs. Soler, 2 Phil. 755) Besides, it is
axiomatic that where the estate of a 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. (Estate of Obave, vs. Reyes, 123
SCRA 767).
As held by the Supreme Court, a decedent's representative (administrator) is not estopped from questioning the validity of his
own void deed purporting to convey land. (Bona vs. Soler, 2 Phil, 755). In the case at bar, the [petitioner,] realizing the illegality
of the transaction[,] has interposed the nullity of the contract as her defense, there being no approval from the probate Court,
and, in good faith offers to return the money she received from the [private respondents]. Certainly, the administratrix is not
estop[ped] from doing so and the action to declare the inexistence of contracts do not prescribe. This is what precipitated the
filing of [petitioner's] demurrer to evidence. 6
The trial court's order of dismissal was elevated to the Court of Appeals by private respondents who alleged:
1. The lower court erred in concluding that the contract to sell is null and void, there being no approval of the probate court.
2. The lower court erred in concluding that [petitioner] in good faith offers to return the money to [private respondents].
3. The lower court erred in concluding that [petitioner] is not under estoppel to question the validity of the contract to sell.
4. The lower court erred in not ruling on the consideration of the contract to sell which is tantamount to plain unjust enrichment
of [petitioner] at the expense of [private respondents]. 7
Public Respondent's Ruling
Declaring the Contract to Sell valid, subject to the outcome of the testate proceedings on Demetrio Carpena's estate, the
appellate court set aside the trial court's dismissal of the complaint and correctly ruled as follows:
It is apparent from the appealed order that the lower court treated the contract to sell executed by appellee as one made by the
administratrix of the Estate of Demetrio Carpena for the benefit of the estate. Hence, its main reason for voiding the contract in
question was the absence of the probate court's approval. Presumably, what the lower court had in mind was the sale of the
estate or part thereof made by the administrator for the benefit of the estate, as authorized under Rule 89 of the Revised Rules of
Court, which requires the approval of the probate court upon application therefor with notice to the heirs, devisees and legatees.
However, as adverted to by appellants in their brief, the contract to sell in question is not covered by Rule 89 of the Revised
Rules of Court since it was made by appellee in her capacity as an heir, of a property that was devised to her under the will
sought to be probated. Thus, while the document inadvertently stated that appellee executed the contract in her capacity as
"executrix and administratrix" of the estate, a cursory reading of the entire text of the contract would unerringly show that what
she undertook to sell to appellants was one of the "other properties given to her by her late father," and more importantly, it was
not made for the benefit of the estate but for her own needs. To illustrate this point, it is apropos to refer to the preambular or
preliminary portion of the document, which reads:
WHEREAS, the SELLER is the lawful owner of a certain parcel of land, which is more particularly described as follows:
x x x           x x x          x x x
x x x           x x x          x x x
x x x           x x x          x x x
WHEREAS, the SELLER suffers difficulties in her living and has forced to offer the sale of the above-described property,
"which property was only one among the other properties given to her by her late father," to anyone who can wait for complete
clearance of the court on the Last Will Testament of her father.
WHEREAS, the SELLER in order to meet her need of cash, has offered for sale the said property at ONE HUNDRED FIFTY
PESOS (150.00) Philippine Currency, per square meter unto the BUYERS, and with this offer, the latter has accepted to buy
and/or purchase the same, less the area for the road and other easements indicated at the back of Transfer Certificate of Title No.
2125 duly confirmed after the survey to be conducted by the BUYER's Licensed Geodetic Engineer, and whatever area [is] left.
(Emphasis added).
To emphasize, it is evident from the foregoing clauses of the contract that appellee sold Lot 2125 not in her capacity as
executrix of the will or administratrix of the estate of her father, but as an heir and more importantly as owner of said lot which,
along with other properties, was devised to her under the will sought to be probated. That being so, the requisites stipulated in
Rule 89 of the Revised Rules of Court which refer to a sale made by the administrator for the benefit of the estate do not apply.
x x x           x x x          x x x
It is noteworthy that in a Manifestation filed with this court by appellants, which is not controverted by appellee, it is mentioned
that the last will and testament of Demetrio Carpena was approved in a final judgment rendered in Special Proceeding No. B-
979 by the Regional Trial Court, Branch 24 Biñan, Laguna. But of course such approval does not terminate the proceeding[s]
since the settlement of the estate will ensue. Such proceedings will consist, among others, in the issuance by the court of a
notice to creditors (Rule 86), hearing of money claims and payment of taxes and estate debts (Rule 88) and distribution of the
residue to the heirs or persons entitled thereto (Rule 90). In effect, the final execution of the deed of sale itself upon appellants'
payment of the balance of the purchase price will have to wait for the settlement or termination of the administration
proceedings of the Estate of Demetrio Carpena. Under the foregoing premises, what the trial court should have done with the
complaint was not to dismiss it but to simply put on hold further proceedings until such time that the estate or its residue will be
distributed in accordance with the approved will.
The rule is that when a demurrer to the evidence is granted by the trial court but reversed on appeal,
defendant loses the right to adduce his evidence. In such a case, the appellate court will decide the
controversy on the basis of plaintiff's evidence. In the case at bench, while we find the contract to sell valid
and binding between the parties, we cannot as yet order appellee to perform her obligations under the
contract because the result of the administration proceedings of the testate Estate of Demetrio Carpena has
3
 to be awaited. Hence, we shall confine our adjudication to merely declaring the validity of the questioned
Contract to Sell.
Hence, this appeal. 8
The Issue
Petitioner raises only one issue:
Whether or not the Contract to Sell dated 03 February 1989 executed by the [p]etitioner and [p]rivate
[r]espondent[s] without the requisite probate court approval is valid.
The Court's Ruling
The petition has no merit.
Contract to Sell Valid
In a nutshell, petitioner contends that "where the estate of the deceased person is already the subject of a testate or intestate
proceeding, the administrator cannot enter into any transaction involving it without prior approval of the Probate Court." 9 She
maintains that the Contract to Sell is void because it was not approved by the probate court, as required by Section 7, Rule 89 of
the Rules of Court:
Sec. 7. 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,
mortgage, or otherwise encumber real estate, in cases provided by these rules and when it appears
necessary or beneficial, under the following regulations:
x x x           x x x          x x x
Insisting that the above rule should apply to this case, petitioner argues that the stipulations in the Contract to Sell require her to
act in her capacity as an executrix or administratrix. She avers that her obligation to eject tenants pertains to the administratrix
or executrix, the estate being the landlord of the said tenants. 10 Likewise demonstrating that she entered into the contract in her
capacity as executor is the stipulation that she must effect the conversion of subject land from irrigated rice land to residential
land and secure the necessary clearances from government offices. Petitioner alleges that these obligations can be undertaken
only by an executor or administrator of an estate, and not by an heir. 11
The Court is not persuaded. As correctly ruled by the Court of Appeals, Section 7 of Rule 89 of the Rules of Court is not
applicable, because petitioner entered into the Contract to Sell in her capacity as an heiress, not as an executrix or administratrix
of the estate. In the contract, she represented herself as the "lawful owner" and seller of the subject parcel of land. 12 She also
explained the reason for the sale to be "difficulties in her living" conditions and consequent "need of cash." 13 These
representations clearly evince that she was not acting on behalf of the estate under probate when she entered into the Contract to
Sell. Accordingly, the jurisprudence cited by petitioners has no application to the instant case.
We emphasize that hereditary rights are vested in the heir or heirs from the moment of the decedent's death. 14 Petitioner,
therefore, became the owner of her hereditary share the moment her father died. Thus, the lack of judicial approval does not
invalidate the Contract to Sell, because the petitioner has the substantive right to sell the whole or a part of her share in the
estate of her late father. 15 Thus, in Jakosalem vs. Rafols, 16 the Court resolved an identical issue under the old Civil Code and
held:
Art. 440 of the Civil Code provides that "the possession of hereditary property is deemed to be transmitted to the heir without
interruption from the instant of the death of the decedent, in case the inheritance be accepted." And Manresa with reason states
that 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 coowners of the estate
while it remains undivided." . . . And according to article 399 of the Civil Code, every part owner may assign or mortgage his
part in the common property, and the effect of such assignment or mortgage shall be limited to the portion which may be
allotted him in the partition upon the dissolution of the community. Hence, where some of the heirs, without the concurrence of
the others, sold a property left by their deceased father, this Court, speaking thru its then Chief Justice Cayetano Arellano, said
that the sale was valid, but that the effect thereof was limited to the share which may be allotted to the vendors upon the
partition of the estate.
Administration of the Estate Not
Prejudiced by the Contract to Sell
Petitioner further contends that "[t]o sanction the sale at this stage would bring about a partial distribution of the decedent's
estate pending the final termination of the testate proceedings." 17 This becomes all the more significant in the light of the trial
court's finding, as stated in its Order dated August 20, 1997, that "the legitimate of one of the heirs has been impaired." 18
Petitioner's contention is not convincing. The Contract to Sell stipulates that petitioner's offer to sell is contingent on the
"complete clearance of the court on the Last Will Testament of her father." 19 Consequently, although the Contract to Sell was
perfected between the petitioner and private respondents during the pendency of the probate proceedings, the consummation of
the sale or the transfer of ownership over the parcel of land to the private respondents is subject to the full payment of the
purchase price and to the termination and outcome of the testate proceedings. Therefore, there is no basis for petitioner's
apprehension that the Contract to Sell may result in a premature partition and distribution of the properties of the estate. Indeed,
it is settled that "the sale made by an heir of his share in an inheritance, subject to the pending administration, in no wise stands
in the way of such administration." 20
Estoppel
Finally, petitioner is estopped from backing out of her representations in her valid Contract to Sell with private respondents,
from whom she had already received P300,000 as initial payment of the purchase price. Petitioner may not renege on her own
acts and representations, to the prejudice of the private respondents who have relied on them. 21 Jurisprudence teaches us that
neither the law nor the courts will extricate a party from an unwise or undesirable contract he or she entered into with all the
required formalities and with full awareness of its consequences. 22
WHEREFORE, the petition is hereby DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs against
petitioner.
G.R. No. 146006             February 23, 2004
JOSE C. LEE AND ALMA AGGABAO, in their capacities as President and Corporate Secretary, respectively, of
Philippines International Life Insurance Company, and FILIPINO LOAN ASSISTANCE GROUP, petitioners
vs.
REGIONAL TRIAL COURT OF QUEZON CITY BRANCH 85 presided by JUDGE PEDRO M. AREOLA, BRANCH
CLERK OF COURT JANICE Y. ANTERO, DEPUTY SHERIFFS ADENAUER G. RIVERA and PEDRO L. BORJA,
all of the Regional Trial Court of Quezon City Branch 85, MA. DIVINA ENDERES claiming to be Special
Administratrix, and other persons/ public officers acting for and in their behalf, respondents.
DECISION
CORONA, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking to reverse and set aside the decision1 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 1,0115 Philinterlife shares of stocks as his inheritance share in the estate, sold said shares with right to repurchase also
4
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
5
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.
6
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.
7
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?
Furthermore, when the resolution of the SEC hearing officer reached the Supreme Court in 1996 (docketed as G.R. 128525),
herein petitioners who were respondents therein filed their answer which contained statements showing that they knew of the
pending intestate proceedings:
[T]he subject matter of the complaint is not within the jurisdiction of the SEC but with the Regional Trial Court; Ligaya Novicio
and children represented themselves to be the common law wife and illegitimate children of the late Ortañez; that on March 4,
1982, the surviving spouse Juliana Ortañez, on her behalf and for her minor son Antonio, executed a Memorandum of
Agreement with her other sons Rafael and Jose, both surnamed Ortañez, dividing the estate of the deceased composed of his
one-half (1/2) share in the conjugal properties; that in the said Memorandum of Agreement, Jose S. Ortañez acquired as his
share of the estate the 1,329 shares of stock in Philinterlife; that on March 4, 1982, Juliana and Rafael assigned their respective
shares of stock in Philinterlife to Jose; that contrary to the contentions of petitioners, private respondents Jose Lee, Carlos Lee,
Benjamin Lee and Alma Aggabao became stockholders of Philinterlife on March 23, 1983 when Jose S. Ortañez, the principal
stockholder at that time, executed a deed of sale of his shares of stock to private respondents; and that the right of petitioners to
question the Memorandum of Agreement 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 Aggabao
for the nullification of the sale of the shares of stock but said counsel made a conflicting turn-around and appeared instead as
counsel of petitioners, and (2) that the deeds of sale executed between petitioners and the heirs of the decedent (vendors Juliana
Ortañez and Jose Ortañez) were acknowledged before Atty. Ramon Carpio who, during the pendency of the settlement
proceedings, filed a motion for the approval of the sale of Philinterlife shares of stock to 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.
G.R. No. 168970               January 15, 2010
CELESTINO BALUS, Petitioner,
vs.
SATURNINO BALUS and LEONARDA BALUS VDA. DE CALUNOD, Respondents.
DECISION
PERALTA, J.:
Assailed in the present petition for review on certiorari under Rule 45 of the Rules of Court is the Decision 1 of the Court of
Appeals (CA) dated May 31, 2005 in CA-G.R. CV No. 58041 which set aside the February 7, 1997 Decision of the Regional
Trial Court (RTC) of Lanao del Norte, Branch 4 in Civil Case No. 3263.
The facts of the case are as follows:
Herein petitioner and respondents are the children of the spouses Rufo and Sebastiana Balus. Sebastiana died on September 6,
1978, while Rufo died on July 6, 1984.
On January 3, 1979, Rufo mortgaged a parcel of land, which he owns, as security for a loan he obtained from the Rural Bank of
Maigo, Lanao del Norte (Bank). The said property was originally covered by Original Certificate of Title No. P-439(788) and
more particularly described as follows:
A parcel of land with all the improvements thereon, containing an area of 3.0740 hectares, more or less, situated in the Barrio of
Lagundang, Bunawan, Iligan City, and bounded as follows: Bounded on the NE., along line 1-2, by Lot 5122, Csd-292; along
line 2-12, by Dodiongan River; along line 12-13 by Lot 4649, Csd-292; and along line 12-1, by Lot 4661, Csd-292. x x x 2
Rufo failed to pay his loan. As a result, the mortgaged property was foreclosed and was subsequently sold to the Bank as the
sole bidder at a public auction held for that purpose. On November 20, 1981, a Certificate of Sale3 was executed by the sheriff
in favor of the Bank. The property was not redeemed within the period allowed by law. More than two years after the auction,
or on January 25, 1984, the sheriff executed a Definite Deed of Sale 4 in the Bank's favor. Thereafter, a new title was issued in
the name of the Bank.
8
On October 10, 1989, herein petitioner and respondents executed an Extrajudicial Settlement of Estate 5 adjudicating to each of
them a specific one-third portion of the subject property consisting of 10,246 square meters. The Extrajudicial Settlement also
contained provisions wherein the parties admitted knowledge of the fact that their father mortgaged the subject property to the
Bank and that they intended to redeem the same at the soonest possible time.
Three years after the execution of the Extrajudicial Settlement, herein respondents bought the subject property from the Bank.
On October 12, 1992, a Deed of Sale of Registered Land6 was executed by the Bank in favor of respondents. Subsequently,
Transfer Certificate of Title (TCT) No. T-39,484(a.f.) 7 was issued in the name of respondents. Meanwhile, petitioner continued
possession of the subject lot.
On June 27, 1995, respondents filed a Complaint 8 for Recovery of Possession and Damages against petitioner, contending that
they had already informed petitioner of the fact that they were the new owners of the disputed property, but the petitioner still
refused to surrender possession of the same to them. Respondents claimed that they had exhausted all remedies for the amicable
settlement of the case, but to no avail.
On February 7, 1997, the RTC rendered a Decision9 disposing as follows:
WHEREFORE, judgment is hereby rendered, ordering the plaintiffs to execute a Deed of Sale in favor of the defendant, the
one-third share of the property in question, presently possessed by him, and described in the deed of partition, as follows:
A one-third portion of Transfer Certificate of Title No. T-39,484 (a.f.), formerly Original Certificate of Title No. P-788, now in
the name of Saturnino Balus and Leonarda B. Vda. de Calunod, situated at Lagundang, Bunawan, Iligan City, bounded on the
North by Lot 5122; East by shares of Saturnino Balus and Leonarda Balus-Calunod; South by Lot 4649, Dodiongan River; West
by Lot 4661, consisting of 10,246 square meters, including improvements thereon.
and dismissing all other claims of the parties.
The amount of ₱6,733.33 consigned by the defendant with the Clerk of Court is hereby ordered delivered to the plaintiffs, as
purchase price of the one-third portion of the land in question.
Plaintiffs are ordered to pay the costs.
SO ORDERED.10
The RTC held that the right of petitioner to purchase from the respondents his share in the disputed property was recognized by
the provisions of the Extrajudicial Settlement of Estate, which the parties had executed before the respondents bought the
subject lot from the Bank.
Aggrieved by the Decision of the RTC, herein respondents filed an appeal with the CA.
On May 31, 2005, the CA promulgated the presently assailed Decision, reversing and setting aside the Decision of the RTC and
ordering petitioner to immediately surrender possession of the subject property to the respondents. The CA ruled that when
petitioner and respondents did not redeem the subject property within the redemption period and allowed the consolidation of
ownership and the issuance of a new title in the name of the Bank, their co-ownership was extinguished.
Hence, the instant petition raising a sole issue, to wit:
WHETHER OR NOT CO-OWNERSHIP AMONG THE PETITIONER AND THE RESPONDENTS OVER THE PROPERTY
PERSISTED/CONTINUED TO EXIST (EVEN AFTER THE TRANSFER OF TITLE TO THE BANK) BY VIRTUE OF THE
PARTIES' AGREEMENT PRIOR TO THE REPURCHASE THEREOF BY THE RESPONDENTS; THUS, WARRANTING
THE PETITIONER'S ACT OF ENFORCING THE AGREEMENT BY REIMBURSING THE RESPONDENTS OF HIS
(PETITIONER'S) JUST SHARE OF THE REPURCHASE PRICE.11
The main issue raised by petitioner is whether co-ownership by him and respondents over the subject property persisted even
after the lot was purchased by the Bank and title thereto transferred to its name, and even after it was eventually bought back by
the respondents from the Bank.
Petitioner insists that despite respondents' full knowledge of the fact that the title over the disputed property was already in the
name of the Bank, they still proceeded to execute the subject Extrajudicial Settlement, having in mind the intention of
purchasing back the property together with petitioner and of continuing their co-ownership thereof.
Petitioner posits that the subject Extrajudicial Settlement is, in and by itself, a contract between him and respondents, because it
contains a provision whereby the parties agreed to continue their co-ownership of the subject property by "redeeming" or
"repurchasing" the same from the Bank. This agreement, petitioner contends, is the law between the parties and, as such, binds
the respondents. As a result, petitioner asserts that respondents' act of buying the disputed property from the Bank without
notifying him inures to his benefit as to give him the right to claim his rightful portion of the property, comprising 1/3 thereof,
by reimbursing respondents the equivalent 1/3 of the sum they paid to the Bank.
The Court is not persuaded.
Petitioner and respondents are arguing on the wrong premise that, at the time of the execution of the Extrajudicial Settlement,
the subject property formed part of the estate of their deceased father to which they may lay claim as his heirs.
At the outset, it bears to emphasize that there is no dispute with respect to the fact that the subject property was exclusively
owned by petitioner and respondents' father, Rufo, at the time that it was mortgaged in 1979. This was stipulated by the parties
during the hearing conducted by the trial court on October 28, 1996.12 Evidence shows that a Definite Deed of Sale13 was issued
in favor of the Bank on January 25, 1984, after the period of redemption expired. There is neither any dispute that a new title
was issued in the Bank's name before Rufo died on July 6, 1984. Hence, there is no question that the Bank acquired exclusive
ownership of the contested lot during the lifetime of Rufo.
The rights to a person's succession are transmitted from the moment of his death. 14 In addition, the inheritance of a person
consists of the property and transmissible rights and obligations existing at the time of his death, as well as those which have
accrued thereto since the opening of the succession. 15 In the present case, since Rufo lost ownership of the subject property
during his lifetime, it only follows that at the time of his death, the disputed parcel of land no longer formed part of his estate to
which his heirs may lay claim. Stated differently, petitioner and respondents never inherited the subject lot from their father.
Petitioner and respondents, therefore, were wrong in assuming that they became co-owners of the subject lot. Thus, any issue
arising from the supposed right of petitioner as co-owner of the contested parcel of land is negated by the fact that, in the eyes of
the law, the disputed lot did not pass into the hands of petitioner and respondents as compulsory heirs of Rufo at any given point
in time.
The foregoing notwithstanding, the Court finds a necessity for a complete determination of the issues raised in the instant case
to look into petitioner's argument that the Extrajudicial Settlement is an independent contract which gives him the right to
enforce his right to claim a portion of the disputed lot bought by respondents.1avvphi1
It is true that under Article 1315 of the Civil Code of the Philippines, contracts are perfected by mere consent; and from that
moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.
Article 1306 of the same Code also provides that the contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided these are not contrary to law, morals, good customs, public order or public
policy.
In the present case, however, there is nothing in the subject Extrajudicial Settlement to indicate any express stipulation for
petitioner and respondents to continue with their supposed co-ownership of the contested lot.
On the contrary, a plain reading of the provisions of the Extrajudicial Settlement would not, in any way, support petitioner's
contention that it was his and his sibling's intention to buy the subject property from the Bank and continue what they believed
to be co-ownership thereof. It is a cardinal rule in the interpretation of contracts that the intention of the parties shall be
accorded primordial consideration.16 It is the duty of the courts to place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and the purpose which it is intended to serve. 17 Such intention is
determined from the express terms of their agreement, as well as their contemporaneous and subsequent acts. 18 Absurd and
illogical interpretations should also be avoided.19
For petitioner to claim that the Extrajudicial Settlement is an agreement between him and his siblings to continue what they
thought was their ownership of the subject property, even after the same had been bought by the Bank, is stretching the
interpretation of the said Extrajudicial Settlement too far.
In the first place, as earlier discussed, there is no co-ownership to talk about and no property to partition, as the disputed lot
never formed part of the estate of their deceased father.
Moreover, petitioner's asseveration of his and respondents' intention of continuing with their supposed co-ownership is negated
by no less than his assertions in the present petition that on several occasions he had the chance to purchase the subject property
back, but he refused to do so. In fact, he claims that after the Bank acquired the disputed lot, it offered to re-sell the same to him
but he ignored such offer. How then can petitioner now claim that it was also his intention to purchase the subject property from
the Bank, when he admitted that he refused the Bank's offer to re-sell the subject property to him?
In addition, it appears from the recitals in the Extrajudicial Settlement that, at the time of the execution thereof, the parties were
not yet aware that the subject property was already exclusively owned by the Bank. Nonetheless, the lack of knowledge on the
part of petitioner and respondents that the mortgage was already foreclosed and title to the property was already transferred to
the Bank does not give them the right or the authority to unilaterally declare themselves as co-owners of the disputed property;
otherwise, the disposition of the case would be made to depend on the belief and conviction of the party-litigants and not on the
evidence adduced and the law and jurisprudence applicable thereto.
Furthermore, petitioner's contention that he and his siblings intended to continue their supposed co-ownership of the subject
property contradicts the provisions of the subject Extrajudicial Settlement where they clearly manifested their intention of
having the subject property divided or partitioned by assigning to each of the petitioner and respondents a specific 1/3 portion of
the same. Partition calls for the segregation and conveyance of a determinate portion of the property owned in common. It seeks
9
a severance of the individual interests of each co-owner, vesting in each of them a sole estate in a specific property and giving
each one a right to enjoy his estate without supervision or interference from the other. 20 In other words, the purpose of partition
is to put an end to co-ownership,21 an objective which negates petitioner's claims in the present case.
WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals, dated May 31, 2005 in CA-
G.R. CV No. 58041, is AFFIRMED.
G.R. No. 126707 February 25, 1999
BLANQUITA E. DELA MERCED, LUISITO E. DELA MERCED, BLANQUTIA M. MACATANGAY, MA. OLIVIA
M. PAREDES, TERESITA P. RUPISAN, RUBEN M. ADRIANO, HERMINIO M. ADRIANO, JOSELITO M.
ADRIANO, ROGELIO M. ADRIANO, WILFREDO M. ADRIANO, VICTOR M. ADRIANO, CORAZON A.
ONGOCO, JASMIN A. MENDOZA and CONSTANTINO M. ADRIANO, petitioners,
vs.
JOSELITO P. DELA MERCED, respondent.
 
PURISIMA, J.:
This is a Petition for Review on Certiorari of the Decision of the Court of Appeals, dated October 17, 1996, in CA-G.R. CV No.
41283, which reversed the decision, dated June 10, 1992, of the Regional Trial Court, Branch 67, Pasig City, in Civil Case No.
59705.
The facts of the case are, as follows:
On March 23, 1987, Evarista M. dela Merced died intestate, without issue. She left five (5) parcels of land situated in Orambo,
Pasig City.
At the time of her death, Evarista was survived by three sets of heirs, viz: (1) Francisco M. dela Merced, her legitimate brother;
(2) Teresita P. Rupisan, her niece who is the only daughter of Rosa dela Merced-Platon (a sister who died in 1943); and (3) the
legitimate children of Eugenia dela Merced-Adriano (another sister of Evarista who died in 1965), namely: Herminio, Ruben,
Joselito, Rogelio, Wilfredo, Victor and Constantino, all surnamed Adriano, Corazon Adriano-Ongoco and Jasmin Adriano-
Mendoza.
Almost a year later or on March 19, 1988, to be precise, Francisco (Evarista's brother) died. He was survived by his wife
Blanquita Errea dela Merced and their three legitimate children, namely, Luisito E. dela Merced, Blanquita M. Macatangay and
Ma. Olivia M. Paredes.
On April 20, 1989, the three sets of heirs of the decedent, Evarista M. dela Merced, referring to (1) the abovenamed heirs of
Francisco; (2) Teresita P. Rupisan and (3) the nine [9] legitimate children of Eugenia, executed an extrajudicial settlement,
entitled "Extrajudicial Settlement of the Estate of the Deceased Evarista M. dela Merced" adjudicating the properties of Evarista
to them, each set with a share of one-third (1/3) pro-indiviso.
On July 26, 1990, private respondent Joselito P. Dela Merced, illegitimate son of the late Francisco de la Merced, filed a
"Petition for Annulment of the Extrajudicial Settlement of the Estate of the Deceased Evarista M. Dela Merced with Prayer for a
Temporary Restraining Order", alleging that he was fraudulently omitted from the said settlement made by petitioners, who
were fully aware of his relation to the late Francisco. Claiming successional rights, private respondent Joselito prayed that he be
included as one of the beneficiaries, to share in the one-third (1/3) pro-indiviso share in the estate of the deceased Evarista,
corresponding to the heirs of Francisco.
On August 3, 1990, the trial court issued the temporary restraining order prayed for by private respondent Joselito, enjoining the
sale of any of the real properties of the deceased Evarista.
After trial, however, or on June 10, 1992, to be definite, the trial court dismissed the petition, lifted the temporary restraining
order earlier issued, and cancelled the notice of lis pendens on the certificates of title covering the real properties of the
deceased Evarista.
In dismissing the petition, the trial court stated:
The factual setting of the instant motion after considering the circumstances of the entire case and the other evidentiary facts
and documents presented by the herein parties points only to one issue which goes into the very skeleton of the controversy, to
wit: "Whether or not the plaintiff may participate in the intestate estate of the late Evarista M. Dela Merced in his capacity as
representative of his alleged father, Francisdo Dela Merced, brother of the deceased, whose succession is under consideration.
xxx xxx xxx
It is to be noted that Francisco Dela Merced, alleged father of the herein plaintiff, is a legitimate child, not an illegitimate.
Plaintiff, on the other hand, is admittedly an illegitimate child of the late Francisco Dela Merced. Hence, as such, he cannot
represent his alleged father in the succession of the latter in the intestate estate of the late Evarista Dela Merced, because of the
barrier in Art. 992 of the New Civil Code which states that:
An illegitimate child has no right to inherit ab intestato from the legitimate children and relatives of his father or mother, nor
shall such children or relatives inherit in the same manner from the illegitimate child.
The application of Art. 992 cannot be ignored in the instant case, it is clearly worded in such a way that there can be no room
for any doubts and ambiguities. This provision of the law imposes a barrier between the illegitimate and the legitimate family. . .
. (Rollo, p. 87-88)
Not satisfied with the dismissal of his petition, the private respondent appealed to the Court of Appeals.
In its Decision of October 17, 1996, the Court of Appeals reversed the decision of the trial court of origin and ordered the
petitioners to execute an amendatory agreement which shall form part of the original settlement, so as to include private
respondent Joselito as a co-heir to the estate of Francisco, which estate includes one-third (1/3) pro indiviso of the latter's
inheritance from the deceased Evarista.
The relevant and dispositive part of the Decision of the Court of Appeals, reads:
xxx xxx xxx
It is a basic principle embodied in Article 777, New Civil Code that the rights to the succession are transmitted from the
moment of the death of the decedent, so that Francisco dela Merced inherited 1/3 of his sister's estate at the moment of the
latter's death. Said 1/3 of Evarista's estate formed part of Francisco's estate which was subsequently transmitted upon his death
on March 23, 1987 to his legal heirs, among whom is appellant as his illegitimate child. Appellant became entitled to his share
in Francisco's estate from the time of the latter's death in 1987. The extrajudicial settlement therefore is void insofar as it
deprives plaintiff-appellant of his share in the estate of Francisco M. dela Merced. As a consequence, the cancellation of the
notice of lis pendens is not in order because the property is directly affected. Appellant has the right to demand a partition of his
father's estate which includes 1/3 of the property inherited from Evarista dela Merced.
WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE. Defendants-appellees are
hereby ordered to execute an amendatory agreement/settlement to include herein plaintiff-appellant Joselito dela Merced as co-
heir to the estate of Francisco dela Merced which includes 1/3 of the estate subject of the questioned Deed of Extrajudicial
Settlement of the Estate of Evarista M. dela Merced dated April 20, 1989. The amendatory agreement/settlement shall form part
of the original Extrajudicial Settlement. With costs against defendants-appellees.
SO ORDERED. (Rollo, p. 41)
In the Petition under consideration, petitioners insist that being an illegitimate child, private respondent Joselito is barred from
inheriting from Evarista because of the provision of Article 992 of the New Civil Code, which lays down an impassable barrier
between the legitimate and illegitimate families.
The Petition is devoid of merit.
Article 992 of the New Civil Code is not applicable because involved here is not a situation where an illegitimate child would
inherit ab intestato from a legitimate sister of his father, which is prohibited by the aforesaid provision of law. Rather, it is a
scenario where an illegitimate child inherits from his father, the latter's share in or portion of, what the latter already inherited
from the deceased sister, Evarista.
As opined by the Court of Appeals, the law in point in the present case is Article 777 of the New Civil Code which provides that
the rights to succession are transmitted from the moment of death of the decedent.
Since Evarista died ahead of her brother Francisco, the latter inherited a portion of the estate of the former as one of her heirs.
Subsequently, when Francisco died, his heirs, namely: his spouse, legitimate children, and the private respondent, Joselito, an
illegitimate child, inherited his (Francisco's) share in the estate of Evarista. It bears stressing that Joselito does not claim to be an
heir of Evarista by right of representation but participates in his own right, as an heir of the late Francisco, in the latter's share
(or portion thereof) in the estate of Evarista.
Petitioners argue that if Joselito desires to assert successional rights to the intestate estate of his father, the proper forum should
be in the settlement of his own father's intestate estate, as this Court held in the case of Gutierrez vs. Macandog (150 SCRA 422
[1987])
Petitioners' reliance on the case of Gutierrez vs. Macandog (supra) is misplaced. The said case involved a claim for support
filed by one Elpedia Gutierrez against the estate of the decedent, Agustin Gutierrez, Sr., when she was not even an heir to the
estate in question, at the time, and the decedent had no obligation whatsoever to give her support. Thus, this Court ruled that
Elpedia should have asked for support pendente lite before the Juvenile and Domestic Relations Court in which court her
husband (one of the legal heirs of the decedent) had instituted a case for legal separation against her on the ground of an attempt
against his life. When Mauricio (her husband) died, she should have commenced an action for the settlement of the estate of her
husband, in which case she could receive whatever allowance the intestate court would grant her.
10
The present case, however, relates to the rightful and undisputed right of an heir to the share of his late father in the estate of the
decedent Evarista, ownership of which had been transmitted to his father upon the death of Evarista. There is no legal obstacle
for private respondent Joselito, admittedly the son of the late Francisco, to inherit in his own right as an heir to his father's
estate, which estate includes a one-third (1/3) undivided share in the estate of Evarista.
WHEREFORE, for lack of merit, the Petition is hereby DENIED and the Appealed Decision of the Court of Appeals
AFFIRMED in toto.
G.R. No. 103577 October 7, 1996
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for
herself and on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE,
and CATALINA BALAIS MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by
GLORIA F. NOEL as attorney-in-fact, respondents.
MELO, J.:p
The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named,
Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in
Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as Coronels) executed a document
entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as
Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 — Total amount
50,000 — Down payment
———————————
P1,190,000.00 — Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of
our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of
title immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of said property and
Miss Ramona Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father
upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of
Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00)
Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother
of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh. "2").
On February 6, 1985, the property originally registered in the name of the Coronels' father was transferred in their names under
TCT
No. 327043 (Exh. "D"; Exh. "4")
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag
(hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has
paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")
For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by depositing the down payment paid by
Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the Coronels and caused the
annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5").
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of
Deeds of Quezon City (Exh. "F"; Exh. "6").
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. "G";
Exh. "7").
On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. "H";
Exh. "8").
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case for
decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered their
documentary evidence accordingly marked as Exhibits "A" through "J", inclusive of their corresponding submarkings. Adopting
these same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits "1"
through "10", likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court gave them thirty
(30) days within which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit
their corresponding comment or reply thereof, after which, the case would be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed to
preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from his
regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed
of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No.
331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and
encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof,
the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of
the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for
Quezon City in the name of intervenor is hereby canceled and declared to be without force and effect. Defendants and
intervenor and all other persons claiming under them are hereby ordered to vacate the subject property and deliver possession
thereof to plaintiffs. Plaintiffs' claim for damages and attorney's fees, as well as the counterclaims of defendants and intervenors
are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioner before the new presiding judge of the Quezon City RTC but the same was
denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding
Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when
the parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was
Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the
hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2)
When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the
rendition of the decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending
incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now
estopped from questioning said authority of Judge Roura after they received the decision in question which happens to be
adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he
was in all respects the Presiding Judge with full authority to act on any pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve
such cases submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-
11
equal rank with the undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to whom a
case is submitted for decision has the authority to decide the case notwithstanding his transfer to another branch or region of the
same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution
of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence
presented by the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore, should
not be disturbed.
IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by
the Incumbent Presiding Judge" dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad
Santos (P), JJ.) rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents' Reply Memorandum, was
filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente  only on August 28, 1996, due to the
voluntary inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the trial
court's decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise
determination of the legal significance of the document entitled "Receipt of Down Payment" which was offered in evidence by
both parties. There is no dispute as to the fact that said document embodied the binding contract between Ramona Patricia
Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by
TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect
to the other, to give something or to render some service.
While, it is the position of private respondents that the "Receipt of Down Payment" embodied a perfected contract of sale,
which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that what the
document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence
of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract absolute
sale.
Plainly, such variance in the contending parties' contentions is brought about by the way each interprets the terms and/or
conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be available on
record, this, Court, as were the courts below, is now called upon to adjudge what the real intent of the parties was at the time the
said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of
sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of  Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicity reserves the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller
agrees or obliges himself to do is to fulfill is promise to sell the subject property when the entire amount of the purchase price is
delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of
which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further
remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is
retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition
and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey
title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the
prospective seller's obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional
contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event
which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely
abated (cf.  Homesite and housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of
the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having
to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership
will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective
seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject
property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a
contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the
prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the
property will transfer to the buyer after registration because there is no defect in the owner-seller's title per se, but the latter, of
course, may be used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this
will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the subject property, the seller's
ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to
transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had
actual or constructive knowledge of such defect in the seller's title, or at least was charged with the obligation to discover such
defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the
second buyer, the first buyer may seek reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered into
by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning
unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in
the said "Receipt of Down Payment" that they —
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of
Deeds of Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed
is that they sold their property.
When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear intent on the
part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioner's father,
they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price.
Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause
the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said title,
12
now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or
title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute
contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the
purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate
of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale
could not have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the properly to private
respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property,
they undertook to have the certificate of title changed to their names and immediately thereafter, to execute the written deed of
absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain terms
and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings of the
parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father, completely
willing to transfer full ownership of the subject house and lot to the buyer if the documents were then in order. It just happened,
however, that the transfer certificate of title was then still in the name of their father. It was more expedient to first effect the
change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of
the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new
certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only
then will the obligation of the buyer to pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a buyer
who intends to buy the property in installment by withholding ownership over the property until the buyer effects full payment
therefor, in the contract entered into in the case at bar, the sellers were the one who were unable to enter into a contract of
absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. It was the sellers
in this case who, as it were, had the impediment which prevented, so to speak, the execution of an contract of absolute sale.
What is clearly established by the plain language of the subject document is that when the said "Receipt of Down Payment" was
prepared and signed by petitioners Romeo A. Coronel, et al., the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners' father,
Constancio P. Coronel, to their names.
The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on
said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became obligatory, the
only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of
absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the "Receipt
of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which
is the object of the contract and upon the price.
From the moment, the parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners' names was fulfilled
on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable, that is,
petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent
Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to
forthwith pay the balance of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from our deceased
father Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the downpayment
above-stated". The sale was still subject to this suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they contend,
continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied  with this condition of first transferring the title to the property
under their names, there could be no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the fact
that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985 , when a new title was issued in
the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").
The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as "Receipt of Down
Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject only to the suspensive condition that the sellers
shall effect the issuance of new certificate title from that of their father's name to their names and that, on February 6, 1985, this
condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which pertinently provides —
Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact
to the day of the constitution of the obligation . . .
In obligation to do or not to do, the courts shall determine, in each case, the retroactive effect of the
condition that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that
point in time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet the absolute
owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to be
extent and value of the inheritance of a person are transmitted through his death to another or others by his
will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are
compulsory heirs who were called to succession by operation of law. Thus, at the point their father drew his last
breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or
obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to the
succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva,
90 Phil. 850 [1952]).
Be it also noted that petitioners' claim that succession may not be declared unless the creditors have been paid is rendered moot
by the fact that they were able to effect the transfer of the title to the property from the decedent's name to their names on
February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time
and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement with
private respondent Ramona P. Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making
it, and cannot be denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim
now that they were not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz, the
latter breached her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States
of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with
Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were
correct in unilaterally rescinding rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that these
supposed grounds for petitioners' rescission, are mere allegations found only in their responsive pleadings, which by express
provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of
13
Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners' allegations. We have stressed
time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro
vs. Embisan, 2 SCRA 598 [1961]. Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo  that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify
petitioner-sellers' act of unilaterally and extradicially rescinding the contract of sale, there being no express stipulation
authorizing the sellers to extarjudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs.
Vda. de Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence on
record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D.
Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down
payment was made by Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in behalf of Ramona P.
Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's authority to represent Ramona P. Alcaraz
when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third
person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind
the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase price
is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz as above-
explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their names
and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. Ramona's
corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due
and demandable and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default,
to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially
or extrajudicially demands from them the fulfillment of their obligation.
xxx xxx xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfill
his obligation, delay by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where
Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred
to the person who may have first taken possession thereof in good faith, if it should be movable property.
Should if be immovable property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof to the person who presents the oldest title, provided there is good
faith.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was
registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of
Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a) when
the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the
two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the
second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court, Justice
Jose C. Vitug, explains:
The governing principle is  prius tempore, potior jure  (first in time, stronger in right). Knowledge by the first buyer of the
second sale cannot defeat the first buyer's rights except when the second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights
even if he is first to register, since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R.
No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it has held that it is
essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in
registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02
September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioner point out that the notice of lis pendens  in the case at bar was annoted on the title of the subject property only on
February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected
prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the
property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith
but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the
title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered
into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens  had been annotated on the transfer
certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At
the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private
respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner
Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers that sale after he has acquired knowledge that there was a previous
sale of the same property to a third party or that another person claims said property in a pervious sale, the
registration will constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs.
Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43
Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior to
that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion, her
mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion was also acting in
her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such assumption disputed between mother and
daughter. Thus, We will not touch this issue and no longer disturb the lower courts' ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED.
G.R. No. 61584 November 25, 1992
DONATO S. PAULMITAN, JULIANA P. FANESA and RODOLFO FANESA, petitioners,
vs. COURT OF APPEALS, ALICIO PAULMITAN, ELENA PAULMITAN, ABELINO PAULMITAN, ANITA
PAULMITAN, BAKING PAULMITAN, ADELINA PAULMITAN and ANITO PAULMITAN, respondents.
ROMERO, J.:
This is a petition for review on certiorari seeking the reversal of the decision 1 of the Court of Appeals, dated July 14, 1982 in
CA-G.R. No. 62255-R entitled "Alicio Paulmitan, et al. v. Donato Sagario Paulmitan, et al." which affirmed the decision 2 of the
then Court of First Instance (now RTC) of Negros Occidental, 12th Judicial District, Branch IV, Bacolod City, in Civil Case
No. 11770.
The antecedent facts are as follows:
Agatona Sagario Paulmitan, who died sometime in 1953, 3 left the two following parcels of land located in the Province of
Negros Occidental: (1) Lot No. 757 with an area of 1,946 square meters covered by Original Certificate of Title (OCT) No. RO-
8376; and (2) Lot No. 1091 with an area of 69,080 square meters and covered by OCT No. RO-11653. From her marriage with
Ciriaco Paulmitan, who is also now deceased, Agatona begot two legitimate children, namely: Pascual Paulmitan, who also died
in 1953, 4 apparently shortly after his mother passed away, and Donato Paulmitan, who is one of the petitioners. Petitioner
Juliana P. Fanesa is Donato's daughter while the third petitioner, Rodolfo Fanes, is Juliana's husband. Pascual Paulmitan, the
other son of Agatona Sagario, is survived by the respondents, who are his children, name: Alicio, Elena, Abelino, Adelina,
Anita, Baking and Anito, all surnamed Paulmitan.
Until 1963, the estate of Agatona Sagario Paulmitan remained unsettled and the titles to the two lots mentioned above remained
in the name of Agatona. However, on August 11, 1963, petitioner Donato Paulmitan executed an Affidavit of Declaration of
Heirship, extrajudicially adjudicating unto himself Lot No. 757 based on the claim that he is the only surviving heir of Agatona
14
Sagario. The affidavit was filed with the Register of Deeds of Negros Occidental on August 20, 1963, cancelled OCT No. RO-
8376 in the name of Agatona Sagario and issued Transfer Certificate of Title (TCT) No. 35979 in Donato's name.
As regards Lot No. 1091, Donato executed on May 28, 1974 a Deed of Sale over the same in favor of petitioner Juliana P.
Fanesa, his daughter. 5
In the meantime, sometime in 1952, for non-payment of taxes, Lot No. 1091 was forfeited and sold at a public auction, with the
Provincial Government of Negros Occidental being the buyer. A Certificate of Sale over the land was executed by the
Provincial Treasurer in favor of the Provincial Board of Negros Occidental. 6
On May 29, 1974, Juliana P. Fanesa redeemed the property from the Provincial Government of Negros Occidental for the
amount of P2,959.09. 7
On learning of these transactions, respondents children of the late Pascual Paulmitan filed on January 18, 1975 with the Court of
First Instance of Negros Occidental a Complaint against petitioners to partition the properties plus damages.
Petitioners set up the defense of prescription with respect to Lot No. 757 as an affirmative defense, contending that the
Complaint was filed more than eleven years after the issuance of a transfer certificate of title to Donato Paulmitan over the land
as consequence of the registration with the Register of Deeds, of Donato's affidavit extrajudicially adjudicating unto himself Lot
No. 757. As regards Lot No. 1091, petitioner Juliana P. Fanesa claimed in her Answer to the Complaint that she acquired
exclusive ownership thereof not only by means of a deed of sale executed in her favor by her father, petitioner Donato
Paulmitan, but also by way of redemption from the Provincial Government of Negros Occidental.
Acting on the petitioners' affirmative defense of prescription with respect to Lot No. 757, the trial court issued an order dated
April 22, 1976 dismissing the complaint as to the said property upon finding merit in petitioners' affirmative defense. This
order, which is not the object of the present petition, has become final after respondents' failure to appeal therefrom.
Trial proceeded with respect to Lot No. 1091. In a decision dated May 20, 1977, the trial court decided in favor of respondents
as to Lot No. 1091. According to the trial court, the respondents, as descendants of Agatona Sagario Paulmitan were entitled to
one-half (1/2) of Lot No. 1091, pro indiviso. The sale by petitioner Donato Paulmitan to his daughter, petitioner Juliana P.
Fanesa, did not prejudice their rights. And the repurchase by Juliana P. Fanesa of the land from the Provincial Government of
Negros Occidental did not vest in Juliana exclusive ownership over the entire land but only gave her the right to be reimbursed
for the amount paid to redeem the property. The trial court ordered the partition of the land and directed petitioners Donato
Paulmitan and Juliana P. Fanesa to pay private respondents certain amounts representing the latter's share in the fruits of the
land. On the other hand, respondents were directed to pay P1,479.55 to Juliana P. Fanesa as their share in the redemption price
paid by Fanesa to the Provincial Government of Negros Occidental. The dispositive portion of the trial court's decision reads:
WHEREFORE, judgment is hereby rendered on the second cause of action pleaded in the complain as
follows:
1. The deed of sale (Exh. "F") dated May 28, 1974 is valid insofar as the one-half undivided portion of Lot 1091 is concerned as
to vest ownership over said half portion in favor of defendant Juliana Fanesa and her husband Rodolfo Fanesa, while the
remaining half shall belong to plaintiffs,  pro-indiviso;
2. Lot 1091, Cadastral Survey of Pontevedra, Province of Negros Occidental, now covered by TCT No. RO-11653 (N.A.), is
ordered partitioned. The parties must proceed to an actual partition by property instrument of partition, submitting the
corresponding subdivision within sixty (60) days from finality of this decision, and should they fail to agree, commissioners of
partition may be appointed by the Court;
3. Pending the physical partition, the Register of Deeds of Negros Occidental is ordered to cancel Original Certificate of Title
No. RO-11653 (N.A.) covering Lot 1091, Pontevedra Cadastre, and to issue in lieu thereof a new certificate of title in the name
of plaintiffs and defendants, one-half portion each,  pro-indiviso, as indicated in paragraph 1 above;
4. Plaintiffs are ordered to pay, jointly and severally, defendant Juliana Fanesa the amount of P1,479.55 with interest at the legal
rate from May 28, 1974 until paid;
5 Defendants Donato Sagario Paulmitan and Juliana Paulmitan Fanesa are ordered to account to plaintiffs and to pay them,
jointly and severally, the value of the produce from Lot 1091 representing plaintiffs' share in the amount of P5,000.00 per year
from 1966 up to the time of actual partition of the property, and to pay them the sum of P2,000.00 as attorney's fees as well as
the costs of the suit.
x x x           x x x          x x x
On appeal, the Court of Appeals affirmed the trial court's decision. Hence this petition.
To determine the rights and obligations of the parties to the land in question, it is well to review, initially, the relatives who
survived the decedent Agatona Sagario Paulmitan. When Agatona died in 1953, she was survived by two (2) sons, Donato and
Pascual. A few months later in the same year, Pascual died, leaving seven children, the private respondents. On the other had,
Donato's sole offspring was petitioner Juliana P. Fanesa.
At the time of the relevant transactions over the properties of decedent Agatona Sagario Paulmitan, her son Pascual had died,
survived by respondents, his children. It is, thus, tempting to apply the principles pertaining to the right of representation as
regards respondents. It must, however, be borne in mind that Pascual did no predecease his mother, 8 thus precluding the
operation of the provisions in the Civil Code on the right of representation 9 with respect to his children, the respondents. When
Agatona Sagario Paulmitan died intestate in 1952, her two (2) sons Donato and Pascual were still alive. Since it is well-settled
by virtue of Article 777 of the Civil Code that "[t]he rights to the succession are transmitted from the moment of the death of the
decedent," 10 the right of ownership, not only of Donato but also of Pascual, over their respective shares in the inheritance was
automatically and by operation of law vested in them in 1953 when their mother died intestate. At that stage, the children of
Donato and Pascual did not yet have any right over the inheritance since "[i]n every inheritance, the relative nearest in degree
excludes the more distant
ones." 11 Donato and Pascual excluded their children as to the right to inherit from Agatona Sagario Paulmitan, their mother.
From the time of the death of Agatona Sagario Paulmitan to the subsequent passing away of her son Pascual in 1953, the estate
remained unpartitioned. Article 1078 of the Civil Code provides: "Where there are two or more heirs, the whole estate of the
decedent is, before its partition, owned in common by such heirs, subject to the payment of debts of the deceased." 12 Donato
and Pascual Paulmitan were, therefore, co-owners of the estate left by their mother as no partition was ever made.
When Pascual Paulmitan died intestate in 1953, his children, the respondents, succeeded him in the co-ownership of the
disputed property. Pascual Paulmitan's right of ownership over an undivided portion of the property passed on to his children,
who, from the time of Pascual's death, became co-owners with their uncle Donato over the disputed decedent estate.
Petitioner Juliana P. Fanesa claims ownership over Lot No. 1091 by virtue of two transactions, namely: (a) the sale made in her
favor by her father Donato Paulmitan; and (b) her redemption of the land from the Provincial of Negros Occidental after it was
forfeited for non-payment of taxes.
When Donato Paulmitan sold on May 28, 1974 Lot No. 1091 to his daughter Juliana P. Fanesa, he was only a co-owner with
respondents and as such, he could only sell that portion which may be allotted to him upon termination of the co-
ownership. 13 The sale did not prejudice the rights of respondents to one half (1/2) undivided share of the land which they
inherited from their father. It did not vest ownership in the entire land with the buyer but transferred only the seller's pro-
indiviso  share in the property 14 and consequently made the buyer a co-owner of the land until it is partitioned. In Bailon-
Casilao v. Court of Appeals,  15 the Court, through Justice Irene R. Cortes, outlined the effects of a sale by one co-owner without
the consent of all the co-owners, thus:
The rights of a co-owner of a certain property are clearly specified in Article 493 of the Civil Code, Thus:
Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it and even substitute another person its enjoyment, except when personal rights are
involved. But the effect of the alienation or mortgage, with respect to the co-owners, shall be limited to the portion which may
be allotted to him in the division upon the termination of the co-ownership.  [Emphasis supplied.]
As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the sale will affect only his own
share but not those of the other co-owners who did not consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320 (1923)]. This is
because under the aforementioned codal provision, the sale or other disposition affects only his undivided share and the
transferee gets only what would correspond to his grantor in the partition of the thing owned in common [Ramirez v. Bautista,
14 Phil. 528 (1909)]. Consequently, by virtue of the sales made by Rosalia and Gaudencio Bailon which are valid with respect
to their proportionate shares, and the subsequent transfers which culminated in the sale to private respondent Celestino Afable,
the said Afable thereby became a co-owner of the disputed parcel of land as correctly held by the lower court since the sales
produced the effect of substituting the buyers in the enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)].
From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided share, a sale of the entire property
by one co-owner without the consent of the other co-owners is not null and void. However, only the rights of the co-owner-
seller are transferred, thereby making the buyer a co-owner of the property.
Applying this principle to the case at bar, the sale by petitioner Donato Paulmitan of the land to his daughter, petitioner Juliana
P. Fanesa, did not give to the latter ownership over the entire land but merely transferred to her the one half (1/2) undivided
share of her father, thus making her the co-owner of the land in question with the respondents, her first cousins.
Petitioner Juliana P. Fanesa also claims ownership of the entire property by virtue of the fact that when the Provincial
Government of Negros Occidental bought the land after it was forfeited for non-payment of taxes, she redeemed it.
The contention is without merit.
The redemption of the land made by Fanesa did not terminate the co-ownership nor give her title to the entire land subject of the
co-ownership. Speaking on the same issue raised by petitioners, the Court, in Adille v. Court of Appeals,  16 resolved the same
with the following pronouncements:
15
The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the property held in common?
Essentially, it is the petitioners' contention that the property subject of dispute devolved upon him upon the failure of his co-
heirs to join him in its redemption within the period required by law. He relies on the provisions of Article 1515 of the old Civil
Code, Article 1613 of the present Code, giving the vendee a retro the right to demand redemption of the entire property.
There is no merit in this petition.
The right of repurchase may be exercised by co-owner with respect to his share alone (CIVIL CODE, art. 1612, CIVIL CODE
(1889), art. (1514.). While the records show that petitioner redeemed the property in its entirety, shouldering the expenses
therefor, that did not make him the owner of all of it. In other words, it did not put to end the existing state of co-ownership
(Supra,  Art. 489). There is no doubt that redemption of property entails a necessary expense. Under the Civil Code:
Art. 488. Each co-owner shall have a right to compel the other co-owners to contribute to the expenses of preservation of the
thing or right owned in common and to the taxes. Any one of the latter may exempt himself from this obligation by renouncing
so much of his undivided interest as may be equivalent to his share of the expenses and taxes. No such waiver shall be made if it
is prejudicial to the co-ownership.
The result is that the property remains to be in a condition of co-ownership. While a vendee a retro, under Article 1613 of the
Code, "may not be compelled to consent to a partial redemption," the redemption by one co-heir or co-owner of the property in
its totality does not vest in him ownership over it. Failure on the part of all the co-owners to redeem it entitles the vendee a retro
to retain the property and consolidate title thereto in his name (Supra, art. 1607). But the provision does not give to the
redeeming co-owner the right to the entire property. It does not provide for a mode of terminating a co-ownership.
Although petitioner Fanesa did not acquire ownership over the entire lot by virtue of the redemption she made, nevertheless, she
did acquire the right to reimbursed for half of the redemption price she paid to the Provincial Government of Negros Occidental
on behalf of her co-owners. Until reimbursed, Fanesa hold a lien upon the subject property for the amount due her. 17
Finally, petitioners dispute the order of the trial court, which the Court of Appeals affirmed, for them to pay private respondents
P5,000.00 per year from 1966 until the partition of the estate which represents the share of private respondents in the fruits of
the land. According to petitioners, the land is being leased for P2,000.00 per year only. This assigned error, however raises a
factual question. The settled rule is that only questions of law may be raised in a petition for review. As a general rule, findings
of fact made by the trial court and the Court of Appeals are final and conclusive and cannot be reviewed on appeal. 18
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals AFFIRMED.
G.R. No. 129008             January 13, 2004
TEODORA A. RIOFERIO, VERONICA O. EVANGELISTA assisted by her husband ZALDY EVANGELISTA,
ALBERTO ORFINADA, and ROWENA O. UNGOS, assisted by her husband BEDA UNGOS, petitioners,
vs.
COURT OF APPEALS, ESPERANZA P. ORFINADA, LOURDES P. ORFINADA, ALFONSO ORFINADA, NANCY
P. ORFINADA, ALFONSO JAMES P. ORFINADA, CHRISTOPHER P. ORFINADA and ANGELO P.
ORFINADA, respondents.
DECISION
TINGA, J.:
Whether the heirs may bring suit to recover property of the estate pending the appointment of an administrator is the issue in
this case.
This Petition for Review on Certiorari, under Rule 45 of the Rules of Court, seeks to set aside the Decision1 of the Court of
Appeals in CA-G.R. SP No. 42053 dated January 31, 1997, as well as its Resolution2 dated March 26, 1997, denying
petitioners’ motion for reconsideration.
On May 13, 1995, Alfonso P. Orfinada, Jr. died without a will in Angeles City leaving several personal and real properties
located in Angeles City, Dagupan City and Kalookan City.3 He also left a widow, respondent Esperanza P. Orfinada, whom he
married on July 11, 1960 and with whom he had seven children who are the herein respondents, namely: Lourdes P. Orfinada,
Alfonso "Clyde" P. Orfinada, Nancy P. Orfinada-Happenden, Alfonso James P. Orfinada, Christopher P. Orfinada, Alfonso
Mike P. Orfinada (deceased) and Angelo P. Orfinada.4
Apart from the respondents, the demise of the decedent left in mourning his paramour and their children. They are petitioner
Teodora Riofero, who became a part of his life when he entered into an extra-marital relationship with her during the
subsistence of his marriage to Esperanza sometime in 1965, and co-petitioners Veronica5, Alberto and Rowena.6
On November 14, 1995, respondents Alfonso James and Lourdes Orfinada discovered that on June 29, 1995, petitioner Teodora
Rioferio and her children executed an Extrajudicial Settlement of Estate of a Deceased Person with Quitclaim involving the
properties of the estate of the decedent located in Dagupan City and that accordingly, the Registry of Deeds in Dagupan issued
Certificates of Titles Nos. 63983, 63984 and 63985 in favor of petitioners Teodora Rioferio, Veronica Orfinada-Evangelista,
Alberto Orfinada and Rowena Orfinada-Ungos. Respondents also found out that petitioners were able to obtain a loan
of P700,000.00 from the Rural Bank of Mangaldan Inc. by executing a Real Estate Mortgage over the properties subject of the
extra-judicial settlement.7
On December 1, 1995, respondent Alfonso "Clyde" P. Orfinada III filed a Petition for Letters of Administration docketed as
S.P. Case No. 5118 before the Regional Trial Court of Angeles City, praying that letters of administration encompassing the
estate of Alfonso P. Orfinada, Jr. be issued to him.8
On December 4, 1995, respondents filed a Complaint for the Annulment/Rescission of Extra Judicial Settlement of Estate of a
Deceased Person with Quitclaim, Real Estate Mortgage and Cancellation of Transfer Certificate of Titles with Nos. 63983,
63985 and 63984 and Other Related Documents with Damages against petitioners, the Rural Bank of Mangaldan, Inc. and the
Register of Deeds of Dagupan City before the Regional Trial Court, Branch 42, Dagupan City.9
On February 5, 1996, petitioners filed their Answer to the aforesaid complaint interposing the defense that the property subject
of the contested deed of extra-judicial settlement pertained to the properties originally belonging to the parents of Teodora
Riofero10 and that the titles thereof were delivered to her as an advance inheritance but the decedent had managed to register
them in his name.11 Petitioners also raised the affirmative defense that respondents are not the real parties-in-interest but rather
the Estate of Alfonso O. Orfinada, Jr. in view of the pendency of the administration proceedings. 12 On April 29, 1996,
petitioners filed a Motion to Set Affirmative Defenses for Hearing 13 on the aforesaid ground.
The lower court denied the motion in its Order14 dated June 27, 1996, on the ground that respondents, as heirs, are the real
parties-in-interest especially in the absence of an administrator who is yet to be appointed in S.P. Case No. 5118. Petitioners
moved for its reconsideration15 but the motion was likewise denied.16
This prompted petitioners to file before the Court of Appeals their Petition for Certiorari  under Rule 65 of the Rules of Court
docketed as CA G.R. S.P. No. 42053.17 Petitioners averred that the RTC committed grave abuse of discretion in issuing the
assailed order which denied the dismissal of the case on the ground that the proper party to file the complaint for the annulment
of the extrajudicial settlement of the estate of the deceased is the estate of the decedent and not the respondents.18
The Court of Appeals rendered the assailed Decision19 dated January 31, 1997, stating that it discerned no grave abuse of
discretion amounting to lack or excess of jurisdiction by the public respondent judge when he denied petitioners’ motion to set
affirmative defenses for hearing in view of its discretionary nature.
A Motion for Reconsideration was filed by petitioners but it was denied.20 Hence, the petition before this Court.
The issue presented by the petitioners before this Court is whether the heirs have legal standing to prosecute the rights
belonging to the deceased subsequent to the commencement of the administration proceedings.21
Petitioners vehemently fault the lower court for denying their motion to set the case for preliminary hearing on their affirmative
defense that the proper party to bring the action is the estate of the decedent and not the respondents. It must be stressed that the
holding of a preliminary hearing on an affirmative defense lies in the discretion of the court. This is clear from the Rules of
Court, thus:
SEC. 5. Pleadings grounds as affirmative defenses.- Any of the grounds for dismissal provided for in this rule, except
improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a
motion to dismiss had been filed.22 (Emphasis supplied.)
Certainly, the incorporation of the word "may" in the provision is clearly indicative of the optional character of the preliminary
hearing. The word denotes discretion and cannot be construed as having a mandatory effect. 23 Subsequently, the electivity of the
proceeding was firmed up beyond cavil by the 1997 Rules of Civil Procedure with the inclusion of the phrase "in the discretion
of the Court", apart from the retention of the word "may" in Section 6,24 in Rule 16 thereof.
Just as no blame of abuse of discretion can be laid on the lower court’s doorstep for not hearing petitioners’ affirmative defense,
it cannot likewise be faulted for recognizing the legal standing of the respondents as heirs to bring the suit.
Pending the filing of administration proceedings, the heirs without doubt have legal personality to bring suit in behalf of the
estate of the decedent in accordance with the provision of Article 777 of the New Civil Code "that (t)he rights to succession are
transmitted from the moment of the death of the decedent." The provision in turn is the foundation of the principle that the
property, rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to
another or others by his will or by operation of law.25
Even if administration proceedings have already been commenced, the heirs may still bring the suit if an administrator has not
yet been appointed. This is the proper modality despite the total lack of advertence to the heirs in the rules on party
representation, namely Section 3, Rule 326 and Section 2, Rule 8727 of the Rules of Court. In fact, in the case of Gochan v.
Young,28 this Court recognized the legal standing of the heirs to represent the rights and properties of the decedent under
administration pending the appointment of an administrator. Thus:
16
 The above-quoted rules,29 while permitting an executor or administrator to represent or to bring suits on behalf of the
deceased, do not prohibit the heirs from representing the deceased. These rules are easily applicable to cases in
which an administrator has already been appointed. But no rule categorically addresses the situation in which
special proceedings for the settlement of an estate have already been instituted, yet no administrator has been
appointed. In such instances, the heirs cannot be expected to wait for the appointment of an administrator; then wait
further to see if the administrator appointed would care enough to file a suit to protect the rights and the interests of
the deceased; and in the meantime do nothing while the rights and the properties of the decedent are violated or
dissipated.
Even if there is an appointed administrator, jurisprudence recognizes two exceptions, viz: (1) if the executor or administrator is
unwilling or refuses to bring suit;30 and (2) when the administrator is alleged to have participated in the act complained of31 and
he is made a party defendant.32 Evidently, the necessity for the heirs to seek judicial relief to recover property of the estate is as
compelling when there is no appointed administrator, if not more, as where there is an appointed administrator but he is either
disinclined to bring suit or is one of the guilty parties himself.
All told, therefore, the rule that the heirs have no legal standing to sue for the recovery of property of the estate during the
pendency of administration proceedings has three exceptions, the third being when there is no appointed administrator such as
in this case.
As the appellate court did not commit an error of law in upholding the order of the lower court, recourse to this Court is not
warranted.
WHEREFORE, the petition for review is DENIED. The assailed decision and resolution of the Court of Appeals are hereby
AFFIRMED. No costs.
G.R. No. 126334      November 23, 2001
EMILIO EMNACE, petitioner,
vs.
COURT OF APPEALS, ESTATE OF VICENTE TABANAO, SHERWIN TABANAO, VICENTE WILLIAM
TABANAO, JANETTE TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA, ROSELA TABANAO and
VINCENT TABANAO, respondents.
YNARES-SANTIAGO, J.:
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a business concern known as Ma. Nelma
Fishing Industry. Sometime in January of 1986, they decided to dissolve their partnership and executed an agreement of
partition and distribution of the partnership properties among them, consequent to Jacinto Divinagracia's withdrawal from the
partnership.1 Among the assets to be distributed were five (5) fishing boats, six (6) vehicles, two (2) parcels of land located at
Sto. Niño and Talisay, Negros Occidental, and cash deposits in the local branches of the Bank of the Philippine Islands and
Prudential Bank.
Throughout the existence of the partnership, and even after Vicente Tabanao's untimely demise in 1994, petitioner failed to
submit to Tabanao's heirs any statement of assets and liabilities of the partnership, and to render an accounting of the
partnership's finances. Petitioner also reneged on his promise to turn over to Tabanao's heirs the deceased's 1/3 share in the total
assets of the partnership, amounting to P30,000,000.00, or the sum of P10,000,000.00, despite formal demand for payment
thereof.2
Consequently, Tabanao' s heirs, respondents herein, filed against petitioner an action for accounting, payment of shares, division
of assets and damages.3 In their complaint, respondents prayed as follows:
1. Defendant be ordered to render the proper accounting of all the assets and liabilities of the partnership at bar; and
2. After due notice and hearing defendant be ordered to pay/remit/deliver/surrender/yield to the plaintiffs the
following:
A. No less than One Third (1/3) of the assets, properties, dividends, cash, land(s), fishing vessels, trucks,
motor vehicles, and other forms and substance of treasures which belong and/or should belong, had
accrued and/or must accrue to the partnership;
B. No less than Two Hundred Thousand Pesos (P200,000.00) as moral damages;
C. Attorney's fees equivalent to Thirty Percent (30%) of the entire share/amount/award which the
Honorable Court may resolve the plaintiffs as entitled to plus P1,000.00 for every appearance in court.4
Petitioner filed a motion to dismiss the complaint on the grounds of improper venue, lack of jurisdiction over the nature of the
action or suit, and lack of capacity of the estate of Tabanao to sue. 5 On August 30, 1994, the trial court denied the motion to
dismiss. It held that venue was properly laid because, while realties were involved, the action was directed against a particular
person on the basis of his personal liability; hence, the action is not only a personal action but also an action  in personam.  As
regards petitioner's argument of lack of jurisdiction over the action because the prescribed docket fee was not paid considering
the huge amount involved in the claim, the trial court noted that a request for accounting was made in order that the exact value
of the partnership may be ascertained and, thus, the correct docket fee may be paid. Finally, the trial court held that the heirs of
Tabanao had aright to sue in their own names, in view of the provision of Article 777 of the Civil Code, which states that the
rights to the succession are transmitted from the moment of the death of the decedent.6
The following day, respondents filed an amended complaint,7 incorporating the additional prayer that petitioner be ordered to
"sell all (the partnership's) assets and thereafter pay/remit/deliver/surrender/yield to the plaintiffs" their corresponding share in
the proceeds thereof. In due time, petitioner filed a manifestation and motion to dismiss,8 arguing that the trial court did not
acquire jurisdiction over the case due to the plaintiffs' failure to pay the proper docket fees. Further, in a supplement to his
motion to dismiss,9 petitioner also raised prescription as an additional ground warranting the outright dismissal of the complaint.
On June 15, 1995, the trial court issued an Order, 10 denying the motion to dismiss inasmuch as the grounds raised therein were
basically the same as the earlier motion to dismiss which has been denied. Anent the issue of prescription, the trial court ruled
that prescription begins to run only upon the dissolution of the partnership when the final accounting is done. Hence,
prescription has not set in the absence of a final accounting. Moreover, an action based on a written contract prescribes in ten
years from the time the right of action accrues.
Petitioner filed a petition for certiorari before the Court of Appeals,11 raising the following issues:
I.       Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion in taking
cognizance of a case despite the failure to pay the required docket fee;
II.      Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion in insisting to try
the case which involve (sic) a parcel of land situated outside of its territorial jurisdiction;
III.     Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion in allowing the
estate of the deceased to appear as party plaintiff, when there is no intestate case and filed by one who was never
appointed by the court as administratrix of the estates; and
IV.     Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion in not dismissing
the case on the ground of prescription.
On August 8, 1996, the Court of Appeals rendered the assailed decision,12 dismissing the petition for certiorari, upon a finding
that no grave abuse of discretion amounting to lack or excess of jurisdiction was committed by the trial court in issuing the
questioned orders denying petitioner's motions to dismiss.
Not satisfied, petitioner filed the instant petition for review, raising the same issues resolved by the Court of Appeals, namely:
I.       Failure to pay the proper docket fee;
II.      Parcel of land subject of the case pending before the trial court is outside the said court's territorial jurisdiction;
III.     Lack of capacity to sue on the part of plaintiff heirs of Vicente Tabanao; and
IV.     Prescription of the plaintiff heirs' cause of action.
It can be readily seen that respondents' primary and ultimate objective in instituting the action below was to recover the
decedent's 1/3 share in the partnership' s assets. While they ask for an accounting of the partnership' s assets and finances, what
they are actually asking is for the trial court to compel petitioner to pay and turn over their share, or the equivalent value thereof,
from the proceeds of the sale of the partnership assets. They also assert that until and unless a proper accounting is done, the
exact value of the partnership' s assets, as well as their corresponding share therein, cannot be ascertained. Consequently, they
feel justified in not having paid the commensurate docket fee as required by the Rules of Court.1âwphi1.nêt
We do not agree. The trial court does not have to employ guesswork in ascertaining the estimated value of the partnership's
assets, for respondents themselves voluntarily pegged the worth thereof at Thirty Million Pesos (P30,000,000.00). Hence, this
case is one which is really not beyond pecuniary estimation, but rather partakes of the nature of a simple collection case where
the value of the subject assets or amount demanded is pecuniarily determinable. 13 While it is true that the exact value of the
partnership's total assets cannot be shown with certainty at the time of filing, respondents can and must ascertain, through
informed and practical estimation, the amount they expect to collect from the partnership, particularly from petitioner, in order
to determine the proper amount of docket and other fees. 14 It is thus imperative for respondents to pay the corresponding docket
fees in order that the trial court may acquire jurisdiction over the action.15
Nevertheless, unlike in the case of Manchester Development Corp.  v. Court of Appeals,16  where there was clearly an effort to
defraud the government in avoiding to pay the correct docket fees, we see no attempt to cheat the courts on the part of
respondents. In fact, the lower courts have noted their expressed desire to remit to the court "any payable balance or lien on
whatever award which the Honorable Court may grant them in this case should there be any deficiency in the payment of the
docket fees to be computed by the Clerk of Court." 17 There is evident willingness to pay, and the fact that the docket fee paid so
far is inadequate is not an indication that they are trying to avoid paying the required amount, but may simply be due to an
17
inability to pay at the time of filing. This consideration may have moved the trial court and the Court of Appeals to declare that
the unpaid docket fees shall be considered a lien on the judgment award.
Petitioner, however, argues that the trial court and the Court of Appeals erred in condoning the non-payment of the proper legal
fees and in allowing the same to become a lien on the monetary or property judgment that may be rendered in favor of
respondents. There is merit in petitioner's assertion. The third paragraph of Section 16, Rule 141 of the Rules of Court states
that:
The legal fees shall be a lien on the monetary or property judgment in favor of the pauper-litigant.
Respondents cannot invoke the above provision in their favor because it specifically applies to pauper-litigants. Nowhere in the
records does it appear that respondents are litigating as paupers, and as such are exempted from the payment of court fees.18
The rule applicable to the case at bar is Section 5(a) of Rule 141 of the Rules of Court, which defines the two kinds of claims as:
(1) those which are immediately ascertainable; and (2) those which cannot be immediately ascertained as to the exact amount.
This second class of claims, where the exact amount still has to be finally determined by the courts based on evidence presented,
falls squarely under the third paragraph of said Section 5(a), which provides:
In case the value of the property or estate or the sum claimed is less or more in accordance with the appraisal of the
court, the difference of fee shall be refunded or paid as the case may be. (Underscoring ours)
In Pilipinas Shell Petroleum Corporation v. Court of Appeals, 19 this Court pronounced that the above-quoted provision "clearly
contemplates an Initial payment of the filing fees corresponding to the estimated amount of the claim subject to adjustment as to
what later may be proved."20 Moreover, we reiterated therein the principle that the payment of filing fees cannot be made
contingent or dependent on the result of the case. Thus, an initial payment of the docket fees based on an estimated amount must
be paid simultaneous with the filing of the complaint. Otherwise, the court would stand to lose the filing fees should the
judgment later turn out to be adverse to any claim of the respondent heirs.
The matter of payment of docket fees is not a mere triviality. These fees are necessary to defray court expenses in the handling
of cases. Consequently, in order to avoid tremendous losses to the judiciary, and to the government as well, the payment of
docket fees cannot be made dependent on the outcome of the case, except when the claimant is a pauper-litigant.
Applied to the instant case, respondents have a specific claim - 1/3 of the value of all the partnership assets - but they did not
allege a specific amount. They did, however, estimate the partnership's total assets to be worth Thirty Million Pesos
(P30,000,000.00), in a letter21 addressed to petitioner. Respondents cannot now say that they are unable to make an estimate, for
the said letter and the admissions therein form part of the records of this case. They cannot avoid paying the initial docket fees
by conveniently omitting the said amount in their amended complaint. This estimate can be made the basis for the initial docket
fees that respondents should pay. Even if it were later established that the amount proved was less or more than the amount
alleged or estimated, Rule 141, Section 5(a) of the Rules of Court specifically provides that the court may refund the 'excess or
exact additional fees should the initial payment be insufficient. It is clear that it is only the difference between the amount
finally awarded and the fees paid upon filing of this complaint that is subject to adjustment and which may be subjected to alien.
In the oft-quoted case of Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion, 22  this Court held that when the specific claim
"has been left for the determination by the court, the additional filing fee therefor shall constitute a lien on the judgment and it
shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the
additional fee." Clearly, the rules and jurisprudence contemplate the initial payment of filing and docket fees based on the
estimated claims of the plaintiff, and it is only when there is a deficiency that a lien may be constituted on the judgment award
until such additional fee is collected.
Based on the foregoing, the trial court erred in not dismissing the complaint outright despite their failure to pay the proper
docket fees. Nevertheless, as in other procedural rules, it may be liberally construed in certain cases if only to secure a just and
speedy disposition of an action. While the rule is that the payment of the docket fee in the proper amount should be adhered to,
there are certain exceptions which must be strictly construed.23
In recent rulings, this Court has relaxed the strict adherence to the Manchester doctrine, allowing the plaintiff to pay the proper
docket fees within a reasonable time before the expiration of the applicable prescriptive or reglementary period.24
In the recent case of National Steel Corp. v. Court of Appeals,25 this Court held that:
The court acquires jurisdiction over the action if the filing of the initiatory pleading is accompanied by the payment
of the requisite fees, or, if the fees are not paid at the time of the filing of the pleading, as of the time of full payment
of the fees within such reasonable time as the court may grant, unless, of course, prescription has set in the meantime.
It does not follow, however, that the trial court should have dismissed the complaint for failure of private respondent
to pay the correct amount of docket fees. Although the payment of the proper docket fees is a jurisdictional
requirement, the trial court may allow the plaintiff in an action to pay the same within a reasonable time before the
expiration of the applicable prescriptive or reglementary period. If the plaintiff fails to comply within this
requirement, the defendant should timely raise the issue of jurisdiction or else he would be considered in estoppel. In
the latter case, the balance between the appropriate docket fees and the amount actually paid by the plaintiff will be
considered a lien or any award he may obtain in his favor. (Underscoring ours)
Accordingly, the trial court in the case at bar should determine the proper docket fee based on the estimated amount that
respondents seek to collect from petitioner, and direct them to pay the same within a reasonable time, provided the applicable
prescriptive or reglementary period has not yet expired, Failure to comply therewith, and upon motion by petitioner, the
immediate dismissal of the complaint shall issue on jurisdictional grounds.
On the matter of improper venue, we find no error on the part of the trial court and the Court of Appeals in holding that the case
below is a personal action which, under the Rules, may be commenced and tried where the defendant resides or may be found,
or where the plaintiffs reside, at the election of the latter.26
Petitioner, however, insists that venue was improperly laid since the action is a real action involving a parcel of land that is
located outside the territorial jurisdiction of the court a quo.  This contention is not well-taken. The records indubitably show
that respondents are asking that the assets of the partnership be accounted for, sold and distributed according to the agreement of
the partners. The fact that two of the assets of the partnership are parcels of land does not materially change the nature of the
action. It is an action in personam  because it is an action against a person, namely, petitioner, on the basis of his personal
liability. It is not an action in rem  where the action is against the thing itself instead of against the person. 27 Furthermore, there
is no showing that the parcels of land involved in this case are being disputed. In fact, it is only incidental that part of the assets
of the partnership under liquidation happen to be parcels of land.
The time-tested case of Claridades v. Mercader, et al.,28  settled this issue thus:
The fact that plaintiff prays for the sale of the assets of the partnership, including the fishpond in question, did not
change the nature or character of the action, such sale being merely a necessary incident of the liquidation of the
partnership, which should precede and/or is part of its process of dissolution.
The action filed by respondents not only seeks redress against petitioner. It also seeks the enforcement of, and petitioner's
compliance with, the contract that the partners executed to formalize the partnership's dissolution, as well as to implement the
liquidation and partition of the partnership's assets. Clearly, it is a personal action that, in effect, claims a debt from petitioner
and seeks the performance of a personal duty on his part. 29 In fine, respondents' complaint seeking the liquidation and partition
of the assets of the partnership with damages is a personal action which may be filed in the proper court where any of the parties
reside.30 Besides, venue has nothing to do with jurisdiction for venue touches more upon the substance or merits of the case.31 As
it is, venue in this case was properly laid and the trial court correctly ruled so.
On the third issue, petitioner asserts that the surviving spouse of Vicente Tabanao has no legal capacity to sue since she was
never appointed as administratrix or executrix of his estate. Petitioner's objection in this regard is misplaced. The surviving
spouse does not need to be appointed as executrix or administratrix of the estate before she can file the action. She and her
children are complainants in their own right as successors of Vicente Tabanao. From the very moment of Vicente Tabanao' s
death, his rights insofar as the partnership was concerned were transmitted to his heirs, for rights to the succession are
transmitted from the moment of death of the decedent.32
Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were transmitted to respondents by
operation of law, more particularly by succession, which is a mode of acquisition by virtue of which the property, rights and
obligations to the extent of the value of the inheritance of a person are transmitted.33 Moreover, respondents became owners of
their respective hereditary shares from the moment Vicente Tabanao died.34
A prior settlement of the estate, or even the appointment of Salvacion Tabanao as executrix or administratrix, is not necessary
for any of the heirs to acquire legal capacity to sue. As successors who stepped into the shoes of their decedent upon his death,
they can commence any action originally pertaining to the decedent.35 From the moment of his death, his rights as a partner and
to demand fulfillment of petitioner's obligations as outlined in their dissolution agreement were transmitted to respondents.
They, therefore, had the capacity to sue and seek the court's intervention to compel petitioner to fulfill his obligations.
Finally, petitioner contends that the trial court should have dismissed the complaint on the ground of prescription, arguing that
respondents' action prescribed four (4) years after it accrued in 1986. The trial court and the Court of Appeals gave scant
consideration to petitioner's hollow arguments, and rightly so.
The three (3) final stages of a partnership are: (1) dissolution; (2) winding-up; and (3) termination. 36 The partnership, although
dissolved, continues to exist and its legal personality is retained, at which time it completes the winding up of its affairs,
including the partitioning and distribution of the net partnership assets to the partners. 37 For as long as the partnership exists, any
of the partners may demand an accounting of the partnership's business. Prescription of the said right starts to run only upon the
dissolution of the partnership when the final accounting is done.38
18
Contrary to petitioner's protestations that respondents' right to inquire into the business affairs of the partnership accrued in
1986, prescribing four (4) years thereafter, prescription had not even begun to run in the absence of a final accounting. Article
1842 of the Civil Code provides:
The right to an account of his interest shall accrue to any partner, or his legal representative as against the winding up
partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution, in
the absence of any agreement to the contrary.
Applied in relation to Articles 1807 and 1809, which also deal with the duty to account, the above-cited provision states that the
right to demand an accounting accrues at the date of dissolution in the absence of any agreement to the contrary. When a final
accounting is made, it is only then that prescription begins to run. In the case at bar, no final accounting has been made, and that
is precisely what respondents are seeking in their action before the trial court, since petitioner has failed or refused to render an
accounting of the partnership's business and assets. Hence, the said action is not barred by prescription.
In fine, the trial court neither erred nor abused its discretion when it denied petitioner's motions to dismiss. Likewise, the Court
of Appeals did not commit reversible error in upholding the trial court's orders. Precious time has been lost just to settle this
preliminary issue, with petitioner resurrecting the very same arguments from the trial court all the way up to the Supreme Court.
The litigation of the merits and substantial issues of this controversy is now long overdue and must proceed without further
delay.
WHEREFORE, in view of all the foregoing, the instant petition is DENIED for lack of merit, and the case is REMANDED to
the Regional Trial Court of Cadiz City, Branch 60, which is ORDERED to determine the proper docket fee based on the
estimated amount that plaintiffs therein seek to collect, and direct said plaintiffs to pay the same within a reasonable time,
provided the applicable prescriptive or reglementary period has not yet expired. Thereafter, the trial court is ORDERED to
conduct the appropriate proceedings in Civil Case No. 416-C.
Costs against petitioner.1âwphi1.nêt
G.R. No. 200612, April 05, 2017
RAFAEL C. UY (CABANGBANG STORE), Petitioner, v. ESTATE OF VIPA FERNANDEZ, Respondents.
DECISION
REYES, J.:
This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court seeking to annul and set aside the
Decision2 dated November 26, 2010 and Resolution 3 dated January 24, 2012 issued by the Court of Appeals (CA) in CA-G.R.
SP No. 04481.
Facts
Vipa Fernandez Lahaylahay (Vipa) is the registered owner of a parcel of land situated in Lopez Jaena Street, Jaro, Iloilo City
covered by Transfer Certificate of Title No. T-26576 (subject property).4 Vipa and her husband, Levi Lahaylahay (Levi), have
two children – Grace Joy Somosierra (Grace Joy) and Jill Frances Lahaylahay (Jill Frances).5
Sometime in 1990, a contract of lease was executed between Vipa and Rafael Uy (Rafael) over the subject property and the
improvements thereon, pursuant to which, Rafael bound himself to pay Vipa, as consideration for the lease of the property, the
amount of P3,000.00 per month, with a provision for a 10% increase every year thereafter.6
On March 5, 1994, Vipa died leaving no will or testament whatsoever. Grace Joy became the de facto  administrator of the
estate of Vipa. After Vipa's death, Levi lived in Aklan.7
In June 1998, Rafael stopped paying the monthly rents.8 Consequently, on June 12, 2003, the Estate of Vipa, through Grace Joy,
filed a complaint9 for unlawful detainer with the Municipal Trial Court in Cities (MTCC) of Iloilo City against Rafael. It was
alleged therein that, as of June 1998, Rafael was already bound to pay rent at the amount of P3,300.00 per month and that his
last payment was made in May 1998. Accordingly, at the time of the filing of the Complaint, Rafael's unpaid rents amounted to
P271,150.00.10 The Estate of Vipa claimed that despite repeated demands, Rafael refused to pay the rents due.11
In his Answer,12 Rafael denied that he refused to pay the rent for the lease of the subject property. He claimed that sometime in
June 1998 Patria Fernandez-Cuenca (Patria), Vipa's sister, demanded for the payment of the rents, claiming that she is the
rightful heir of Vipa.13 Since he had no idea on who is entitled to receive the rent for the subject property, he deposited the
amount of P10,000.00 with the Office of the Clerk of Court of the Regional Trial Court (RTC) of Iloilo City on November 20,
1998 and that Grace Joy was informed of such consignation.14 He claimed that a case for the settlement of the Estate of Vipa
was instituted by Patria with the RTC, which was docketed as Special Proceeding No. 6910. He averred that he is willing to pay
the rent on the leased property to the rightful heirs of Vipa and that he made another consignation with the RTC in the amount
of P6,000.00.15
On June 12, 2008, the MTCC rendered a Decision,16 the decretal portion of which reads:
WHEREFORE, in the light of the foregoing ratiocination, judgment is hereby rendered in favor of the [Estate of Vipa] and
against [Rafael], ordering the latter, to wit:
1. to vacate the premises subject of this case and covered by TCT No. T-26576 and to peacefully turn over
the possession of the same to the [Estate of Vipa];
2. to pay the [Estate of Vipa] the amount of Php271,150.00 as payment for the unpaid rentals with 12%
interest per annum from the last demand on May 3, 2003 until the whole amount is paid;
3. to pay the [Estate of Vipa] the amount of Php3,000.00 per month with 12% interest per annum for the use
and occupancy of the premises computed from the date of the filing of this case on June 12, 2003 until
fully paid;
4. to pay the [Estate of Vipa] attorney's fees in the amount of Php20,000.00; [and]
5. to pay the costs of suit.
SO ORDERED.17
The MTCC found that after Vipa's death in 1994 until 1998, Rafael was paying the rent for the lease of the subject property to
Grace Joy.18 That the real reason why Patria claimed to be the heir of Vipa is because she owed Rafael money which she could
not pay. Patria then charged the debt she owes to Rafael from the monthly rent of the subject property, an arrangement that
Rafael took advantage to avoid paying Grace Joy the monthly rents. The MTCC further opined that the consignations made by
Rafael in the total amount of P16,000.00 are not valid since there was no prior tender of payment.19
On appeal, the RTC, in its Decision20 dated April 15, 2009, reversed the MTCC's Decision dated June 12, 2008 and, thus,
dismissed the complaint for unlawful detainer filed by the Estate of Vipa. Thus:
WHEREFORE, premises considered, the Decision appealed from is REVERSED and SET ASIDE; and the herein complaint is
hereby DISMISSED for lack of merit; and further DISMISSING [Rafael's] counterclaim for failure to substantiate the same.
SO ORDERED.21
The RTC opined that Grace Joy was actually the plaintiff in the case and not the Estate of Vipa. It then pointed out that Grace
Joy failed to bring the dispute to the barangay for conciliation prior to filing the complaint for unlawful detainer.22
The RTC further held that the MTCC erred in including the entire subject property as part of the Estate of Vipa. The RTC
explained that the subject property was acquired by Vipa during the subsistence of her marriage with Levi and, as such, is part
of their conjugal properties. That after Vipa's death, the conjugal partnership was terminated, entitling Levi to one-half of the
property.23 The RTC then pointed out that Levi sold his share in the subject property to Rafael, as evidenced by a Deed of
Sale24 dated December 29, 2005.25 Accordingly, the RTC ruled that Rafael, as co-owner of the subject property, having bought
Levi's one-half share thereof, had the right to possess the same.26
The Estate of Vipa sought a reconsideration27 of the Decision dated April 15, 2009, but it was denied by the RTC in its Order
dated July 28; 2009.28
The Estate of Vipa then filed a Petition for Review 29 with the CA. On November 26, 2010, the CA rendered a Decision, 30 which
declared:
WHEREFORE, in view of all the foregoing, the instant petition for review is GRANTED and the April 15, 2009 Decision of
the court a quo in Civil Case No. 08-29842 is hereby REVERSED and SET ASIDE. Accordingly, the June 12, 2008 Decision of
the Municipal Trial Court, Branch 4, Iloilo City, in Civil Case No. 03-208 is hereby REINSTATED.
SO ORDERED.31
The CA held that there was no necessity to bring the dispute before the barangay for conciliation since the Estate of Vipa, being
a juridical person, cannot be impleaded to a barangay conciliation proceeding. The CA likewise pointed out that any allegations
against Grace Joy's authority to represent the Estate of Vipa had been laid to rest when she was appointed as administrator of the
Estate of Vipa in Special Proceedings No. 6910 pending before the RTC.32
Further, the CA held that Rafael raised the issue of ownership of the subject property,  i.e., Levi's sale of his one-half share in
the subject property to Rafael, only for the first time in his appeal with the RTC. Accordingly, it was error on the part of the
RTC to have resolved the issue of ownership of the subject property. 33 Furthermore, the CA agreed with the MTCC that Rafael's
consignation of the rent to the RTC is ineffective. It ruled that Rafael made the consignation only twice and the amount
consigned was patently insignificant compared to the amount of rent due.34
Rafael's motion for reconsideration35 was denied by the CA in its Resolution36 dated January 24, 2012.
Hence, the instant petition.
Rafael maintains that Grace Joy has no authority to represent the Estate of Vipa and, when she filed the complaint for unlawful
detainer with the MTCC, she did so in her personal capacity. Thus, Rafael claims that the dispute should have been brought to
the barangay for conciliation before the complaint was filed in the MTCC.37 He further claims that the CA erred in . reversing
19
the RTC's ruling on the issue of ownership of the subject property. He insists that he already purchased Levi's one-half share in
the subject property.38
On the other hand, the Estate of Vipa, in its Comment, 39 avers that the supposed lack of authority of Grace Joy to file the
complaint for unlawful detainer and the ownership of the subject property were never raised in the proceedings before the
MTCC and, hence, could not be passed upon by the RTC in the appellate proceedings. In any case, it pointed out that the RTC's
Decision40 dated October 28, 2005 in Special Proceedings No. 6910, which appointed Grace Joy as the administrator of the
intestate estate of Vipa, recognized that the latter and Jill Frances are legitimate children of Vipa and Levi.
Issue
Essentially, the issue set forth for the Court's resolution is whether the CA erred in reversing the RTC's Decision dated April 15,
2009.
Ruling of the Court
The petition is partly meritorious.
Rafael's claim that the complaint below should have been dismissed since Grace Joy has no authority to represent the Estate of
Vipa and that there was lack of prior barangay conciliation is untenable. Unlawful detainer cases are covered by the Rules on
Summary Procedure.41 Section 5 of the 1991 Revised Rules on Summary Procedure provides that affirmative and negative
defenses not pleaded in the answer shall be deemed waived, except lack of jurisdiction over the subject matter.
Rafael failed to plead in the answer he filed with the MTCC that Grace Joy has no authority to represent the Estate of Vipa.
Neither did he raise therein the lack of barangay conciliation between the parties herein prior to the filing of the complaint for
unlawful detainer. Accordingly, the foregoing defenses are already deemed waived.
In any case, the issue of the supposed lack of authority of Grace Joy to represent the Estate of Vipa had already been rendered
moot with the RTC's appointment of Grace Joy as the administrator of the Estate of Vipa in Special Proceedings No. 6910.
Also, there was no need to refer the dispute between the parties herein to the barangay for conciliation pursuant to
the Katarungang Pambarangay Law.42 It bears stressing that only individuals may be parties to barangay conciliation
proceedings either as complainants or respondents. Complaints by or against corporations, partnerships or other juridical entities
may not be filed with, received or acted upon by the barangay for conciliation.43 The Estate of Vipa, which is the complainant
below, is a juridical entity that has a personality, which is separate and distinct from that of Grace Joy. 44 Thus, there is no
necessity to bring the dispute to the barangay for conciliation prior to filing of the complaint for unlawful detainer with the
MTCC.
The CA, nevertheless, erred in hastily dismissing Rafael's allegation as regards the ownership of the subject property. In
disregarding Rafael's claim that he owns Levi's one-half undivided share in the subject property, the CA ruled that the said issue
was raised for the first time on appeal and should thus not have been considered by the RTC, viz.:
On the second issue, the records show that [Rafael] raised the issue of ownership only for the first time on appeal; hence, the
[RTC] erred in deciding the appeal before it on the findings that part of the subject premises is owned by petitioners, allegedly
having bought the same from [Levi], the husband of [Vipa].
The Court is not unmindful that in forcible entry and unlawful detainer cases, the MTC may rule on the issue [of] ownership in
order to determine the issue of possession. However, the issue of ownership must be raised by the defendant on the earliest
opportunity; otherwise, it is already deemed waived. Moreover, the instant case was covered by the Rules on Summary
Procedure, which expressly provide that affirmative and negative defenses not pleaded therein shall be deemed waived, except
for lack of jurisdiction over the subject matter. Thus, the [RTC] erred in resolving the issue of ownership for the first time on
appeal.45 (Citations omitted)
It is true that fair play, justice, and due process dictate that parties should not raise for the first time on appeal issues that they
could have raised but never did during trial. However, before a party may be barred from raising an issue for the first time on
appeal, it is imperative that the issue could have been raised during the trial.46 What escaped the appellate court's attention is that
the sale of the one-half undivided share in the subject property to Rafael was consummated only on December 29, 2005, more
than two years after Rafael filed with the MTCC his answer to the complaint for unlawful detainer on July 18,
2003.47 Obviously, Rafael could not have raised his acquisition of Levi's share in the subject property as an affirmative defense
in the answer he filed with the MTCC.
Moreover, Rafael's ownership of the one-half undivided share in the subject property would necessarily affect the property
relations between the parties herein. Thus, the CA should have exerted efforts to resolve the said issue instead of dismissing the
same on the flimsy ground that it was not raised during the proceedings before the MTCC.
Levi and Vipa were married on March 24, 1961 48 and, in the absence of a marriage settlement, the system of conjugal
partnership of gains governs their property relations.49 It is presumed that the subject property is part of the conjugal properties
of Vipa and Levi considering that the same was acquired during the subsistence of their marriage and there being no proof to the
contrary.50
When Vipa died on March 5, 1994, the conjugal partnership was automatically terminated. 51 Under Article 130 of the Family
Code, the conjugal partnership property, upon its dissolution due to the death of either spouse, should be liquidated either in the
same proceeding for the settlement of the estate of the deceased or, in the absence thereof, by the surviving spouse within one
year from the death of the deceased spouse. That absent any liquidation, any disposition or encumbrance of the conjugal
partnership property is void. Thus:
Article 130. Upon the termination of the marriage by death, the conjugal partnership property shall be liquidated in the same
proceeding for the settlement of the estate of the deceased.
If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the conjugal partnership property
either judicially or extra-judicially within six months from the death of the deceased spouse. If upon the lapse of the six-
month period no liquidation is made, any disposition or encumbrance involving the conjugal partnership property of the
terminated marriage shall be void.
Should the surviving spouse contract a subsequent marriage without compliance with the foregoing requirements, a mandatory
regime of complete separation of property shall govern the property relations of the subsequent marriage. (Emphasis ours)
Article 130 of the Family Code is applicable to conjugal partnership of gains already established between the spouses prior to
the effectivity of the Family Code pursuant to Article 105 thereof, viz.:
Article 105. In case the future spouses agree in the marriage settlements that the regime of conjugal partnership of gains shall
govern their property relations during marriage, the provisions in this Chapter shall be of supplementary application.
The provisions of this Chapter shall also apply to conjugal partnerships of gains already established between spouses
before the effectivity of this Code, without prejudice to vested rights already acquired in accordance with the Civil Code or
other laws as provided in Article 256. (Emphasis ours)
Rafael bought Levi's one-half share in the subject property in consideration of P500,000.00 as evidenced by the Deed of
Sale52 dated December 29, 2005. At that time, the conjugal partnership properties of Levi and Vipa were not yet liquidated.
However, such disposition, notwithstanding the absence of liquidation of the conjugal partnership properties, is not necessarily
void.
It bears stressing that under the regime of conjugal partnership of gains, the husband and wife are co-owners of all the property
of the conjugal partnership.53 Thus, upon the termination of the conjugal partnership of gains due to the death of either spouse,
the surviving spouse has an actual and vested one-half undivided share of the properties, which does not consist of determinate
and segregated properties until liquidation and partition of the conjugal partnership. 54 With respect, however, to the deceased
spouse's share in the conjugal partnership properties, an implied ordinary co-ownership ensues among the surviving spouse and
the other heirs of the deceased.55
Thus, upon Vipa's death, one half of the subject property was automatically reserved in favor of the surviving spouse, Levi, as
his share in the conjugal partnership. The other half, which is Vipa's share, was transmitted to Vipa's heirs – Grace Joy, Jill
Frances, and her husband Levi, who is entitled to the same share as that of a legitimate child. The ensuing implied co-ownership
is governed by Article 493 of the Civil Code, which provides:
Article 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he
may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal
rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the
portion which may be allotted to him in the division upon the termination of the co-ownership. (Emphasis ours)
Although Levi became a co-owner of the conjugal partnership properties with Grace Joy and Jill Frances, he could not yet assert
or claim title to any specific portion thereof without an actual partition of the property being first done either by agreement or by
judicial decree. Before the partition of a land or thing held in common, no individual or co-owner can claim title to any definite
portion thereof. All that the co-owner has is an ideal or abstract quota or proportionate share in the entire land or thing.56
Nevertheless, a co-owner could sell his undivided share; hence, Levi had the right to freely sell and dispose of his undivided
interest. Thus, the sale by Levi of his one-half undivided share in the subject property was not necessarily void, for his right as a
co-owner thereof was effectively transferred, making the buyer, Rafael, a co-owner of the subject property. It must be stressed
that the binding force of a contract must be recognized as far as it is legally possible to do so (quando res non valet ut ago,
valeat quantum valere potest).57
However, Rafael became a co-owner of the subject property only on December 29, 2005 – the time when Levi sold his one-half
undivided share over the subject property to the former. Thus, from December 29, 2005 Rafael, as a co-owner, has the right to
possess the subject property as an incident of ownership. Otherwise stated, prior to his acquisition of Levi's one-half undivided
share, Rafael was a mere lessee of the subject property and is thus obliged to pay the rent for his possession thereof.
20
Accordingly, Rafael could no longer be directed to vacate the subject property since he is already a co-owner thereof.
Nevertheless, Rafael is still bound to pay the unpaid rentals from June 1998 until April 2003 in the amount of P271,150.00.
In Nacar v. Gallery Frames, et al.,58 the Court pointed out that pursuant to Resolution No. 796 of the Bangko Sentral ng
Pilipinas Monetary Board, the interest rate of loans or forbearance of money, in the absence of stipulation shall be six percent
(6%) effective only from July 1, 2013. Thus, prior to July 1, 2013, the rate of interest on loans or forbearance of money, in the
absence of stipulation, is still 12%. Accordingly, the amount of P271,150.00, representing the unpaid rentals shall earn interest
at the rates of 12% per annum from the date of the last demand on May 3, 2003 until June 30, 2013 and 6% per annum from
July 1, 2013 until fully paid.
Further, Rafael is likewise bound to pay reasonable rent for the use and occupancy of the subject property from May 2003 until
December 28, 2005 at the rate of P3,000.00 per month with interest at the rate of 12% per annum from the date of the last
demand, i.e., the filing of the complaint with the MTCC on June 12, 2003, until June 30, 2013 and 6% per annum from July 1,
2013 until fully paid.
The award of attorney's fees of P20,000.00 is likewise proper. Attorney's fees can be awarded in the cases enumerated in Article
2208 of the Civil Code, specifically:
Article 2208. x x x
xxxx
(2) Where the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to
protect his interest[.]
Certainly, because of Rafael's unjustified refusal to pay the rents due on the lease of the subject prope1iy, the Estate of Vipa was
put to unnecessary expense and trouble to protect its interest under paragraph (2), Article 2208 of the Civil Code. In unlawful
detainer cases, where attorney's fees are awarded, the same shall not exceed P20,000.00.59
WHEREFORE, in view of the foregoing disquisitions, the petition for review on certiorari is PARTIALLY GRANTED. The
Decision dated November 26, 2010 and Resolution dated January 24, 2012 issued by the Court of Appeals in CA-G.R. SP No.
04481 are hereby REVERSED and SET ASIDE. Petitioner Rafael C. Uy is hereby directed to pay the Estate of Vipa
Fernandez the following:
1. The amount of P271,150.00, representing the unpaid rentals, with interest at the rates of twelve percent (12%) per
annum from the date of the last demand on May 3, 2003 until June 30, 2013, and six percent (6%)  per annum from
July 1, 2013 until fully paid;
2. Reasonable rent for the use and occupancy of the subject property from May 2003 until December 28, 2005 at the
rate of P3,000.00 per month with interest at the rates of twelve percent (12%) per annum from the date of the last
demand, i.e., the filing of the complaint for unlawful detainer on June 12, 2003, until June 30, 2013, and six percent
(6%) per annum from July 1, 2013 until fully paid; and
3. The amount of P20,000.00 as attorney's fees.
G.R. No. L-770             April 27, 1948
ANGEL T. LIMJOCO, petitioner,
vs.
INTESTATE ESTATE OF PEDRO O. FRAGRANTE, deceased, respondent.
Angel Limjoco, Jr. and Delfin L. Gonzales for petitioner.
Bienvenido A. Tan for respondent.
HILADO, J.:
Under date of May 21, 1946, the Public Service Commission, through Deputy Commissioner Fidel Ibañez, rendered its decision
in case No. 4572 of Pedro O. Fragante, as applicant for a certificate of public convenience to install, maintain and operate an ice
plant in San Juan, Rizal, whereby said commission held that the evidence therein showed that the public interest and
convenience will be promoted in a proper and suitable manner "by authorizing the operation and maintenance of another ice
plant of two and one-half (2-½) tons in the municipality of San Juan; that the original applicant Pedro O. Fragante was a
Filipino Citizen at the time of his death; and that his intestate estate is financially capable of maintaining the proposed service".
The commission, therefore, overruled the opposition filed in the case and ordered "that under the provisions of section 15 of
Commonwealth Act No. 146, as amended a certificate of public convenience be issued to the Intestate Estate of the deceased
Pedro Fragante, authorizing said Intestate Estate through its Special or Judicial Administrator, appointed by the proper court of
competent jurisdiction, to maintain and operate an ice plant with a daily productive capacity of two and one-half (2-1/2) tons in
the Municipality of San Juan and to sell the ice produced from said plant in the said Municipality of San Juan and in the
Municipality of Mandaluyong, Rizal, and in Quezon City", subject to the conditions therein set forth in detail (petitioner's brief,
pp. 33-34).
Petitioner makes four assignments of error in his brief as follows:
1. The decision of the Public Service Commission is not in accordance with law.
2. The decision of the Public Service Commission is not reasonably supported by evidence.
3. The Public Service Commission erred in not giving petitioner and the Ice and Cold Storage Industries of the
Philippines, Inc., as existing operators, a reasonable opportunity to meet the increased demand.
4. The decision of the Public Service Commission is an unwarranted departure from its announced policy with
respect to the establishment and operation of ice plant. (Pp. 1-2, petitioner's brief.)
In his argument petitioner contends that it was error on the part of the commission to allow the substitution of the legal
representative of the estate of Pedro O. Fragante for the latter as party applicant in the case then pending before the commission,
and in subsequently granting to said estate the certificate applied for, which is said to be in contravention of law.
If Pedro O. Fragante had not died, there can be no question that he would have had the right to prosecute his application before
the commission to its final conclusion. No one would have denied him that right. As declared by the commission in its decision,
he had invested in the ice plant in question P 35,000, and from what the commission said regarding his other properties and
business, he would certainly have been financially able to maintain and operate said plant had he not died. His transportation
business alone was netting him about P1,440 a month. He was a Filipino citizen and continued to be such till his demise. The
commission declared in its decision, in view of the evidence before it, that his estate was financially able to maintain and
operate the ice plant. The aforesaid right of Pedro O. Fragante to prosecute said application to its conclusion was one which by
its nature did not lapse through his death. Hence, it constitutes a part of the assets of his estate, for which a right was property
despite the possibility that in the end the commission might have denied application, although under the facts of the case, the
commission granted the application in view of the financial ability of the estate to maintain and operate the ice plant. Petitioner,
in his memorandum of March 19, 1947, admits (page 3) that the certificate of public convenience once granted "as a rule,
should descend to his estate as an asset". Such certificate would certainly be property, and the right to acquire such a certificate,
by complying with the requisites of the law, belonged to the decedent in his lifetime, and survived to his estate and judicial
administrator after his death.
If Pedro O. Fragrante had in his lifetime secured an option to buy a piece of land and during the life of the option he died, if the
option had been given him in the ordinary course of business and not out of special consideration for his person, there would be
no doubt that said option and the right to exercise it would have survived to his estate and legal representatives. In such a case
there would also be the possibility of failure to acquire the property should he or his estate or legal representative fail to comply
with the conditions of the option. In the case at bar Pedro O. Fragrante's undoubted right to apply for and acquire the desired
certificate of public convenience — the evidence established that the public needed the ice plant — was under the law
conditioned only upon the requisite citizenship and economic ability to maintain and operate the service. Of course, such right
to acquire or obtain such certificate of public convenience was subject to failure to secure its objective through nonfulfillment of
the legal conditions, but the situation here is no different from the legal standpoint from that of the option in the illustration just
given.
Rule 88, section 2, provides that the executor or administrator may bring or defend actions, among other cases, for the
protection of the property or rights of the deceased which survive, and it says that such actions may be brought or defended "in
the right of the deceased".
Rule 82, section 1, paragraph (a), mentions among the duties of the executor or administrator, the making of an inventory of all
goods, chattels, rights, credits, and estate of the deceased which shall come to his possession or knowledge, or to the possession
of any other person for him.
In his commentaries on the Rules of Court (Volume II, 2nd ed., pages 366, 367) the present chief Justice of this Court draws the
following conclusion from the decisions cited by him:
Therefore, unless otherwise expressly provided by law, any action affecting the property or rights  (emphasis
supplied) of a deceased person which may be brought by or against him if he were alive, may likewise be instituted
and prosecuted by or against the administrator, unless the action is for recovery of money, debt or interest thereon, or
unless, by its very nature, it cannot survive, because death extinguishes the right . . . .
It is true that a proceeding upon the application for a certificate of public convenience before the Public Service Commission is
not an "action". But the foregoing provisions and citations go to prove that the decedent's rights which by their nature are not
extinguished by death go to make up a part and parcel of the assets of his estate which, being placed under the control and
management of the executor or administrator, can not be exercised but by him in representation of the estate for the benefit of
21
the creditors, devisees or legatees, if any, and the heirs of the decedent. And if the right involved happens to consist in the
prosecution of an unfinished proceeding upon an application for a certificate of public convenience of the deceased before the
Public Service Commission, it is but logical that the legal representative be empowered and entitled in behalf of the estate to
make the right effective in that proceeding.
Manresa (Vol. III, 6th ed., p. 11) says that No. 10 of article 334 and article 336 of the Civil Code, respectively, consider
as immovable and movable things  rights  which are not material. The same eminent commentator says in the cited volume (p.
45) that article 336 of the Civil Code has been deficiently drafted in that it is not sufficiently expressive of all incorporeal rights
which are also  property for juridical purposes.
Corpus Juris (Vol. 50, p. 737) states that in the broad sense of the term, property includes, among other things, "an option", and
"the certificate of the railroad commission permitting the operation of a bus line", and on page 748 of the same volume we read:
However, these terms (real property, as estate or interest) have also been declared to include every species of
title, inchoate or complete, and embrace rights which lie in contract, whether executory or executed. (Emphasis
supplied.)
Another important question raised by petitioner is whether the estate of Pedro O. Fragrante is a "person" within the meaning of
the Public Service Act.
Words and Phrases, First Series, (Vol. 6, p, 5325), states the following doctrine in the jurisdiction of the State of Indiana:
As the estate of the decedent is in law regarded as a person, a forgery committed after the death of the man whose
name purports to be signed to the instrument may be prosecuted as with the intent to defraud the estate. Billings vs.
State, 107 Ind., 54, 55, 6 N. E. 914, 7 N. E. 763, 57 Am. Rep. 77.
The Supreme Court of Indiana in the decision cited above had before it a case of forgery committed after the death of one
Morgan for the purpose of defrauding his estate. The objection was urged that the information did not aver that the forgery was
committed with the intent to defraud any person. The Court, per Elliott, J., disposed of this objection as follows:
. . . The reason advanced in support of this proposition is that the law does not regard the estate of a decedent as a
person. This intention (contention) cannot prevail. The estate of the decedent is a person in legal contemplation. "The
word "person" says Mr. Abbot, "in its legal signification, is a generic term, and includes artificial as well as natural
persons," 2 Abb. Dict. 271; Douglas vs. Pacific, etc. Co., 4 Cal. 304; Planters', etc., Bank vs. Andrews, 8 Port. (Ala.)
404. It said in another work that 'persons are of two kinds: natural and artificial. A natural person is a human being.
Artificial persons include (1) a collection or succession of natural persons forming a corporation; (2) a collection of
property to which the law attributes the capacity of having rights and duties. The latter class of artificial persons is
recognized only to a limited extent in our law. "Examples are the estate of a bankrupt or deceased person." 2 Rapalje
& L. Law Dict. 954. Our own cases inferentially recognize the correctness of the definition given by the authors from
whom we have quoted, for they declare that it is sufficient, in pleading a claim against a decedent's estate, to
designate the defendant as the estate of the deceased person, naming him. Ginn vs. Collins, 43 Ind. 271. Unless we
accept this definition as correct, there would be a failure of justice in cases where, as here, the forgery is committed
after the death of a person whose name is forged; and this is a result to be avoided if it can be done consistent with
principle. We perceive no difficulty in avoiding such a result; for, to our minds, it seems reasonable that the estate of
a decedent should be regarded as an artificial person. It is the creation of law for the purpose of enabling a disposition
of the assets to be properly made, and, although natural persons as heirs, devises, or creditors, have an interest in the
property, the artificial creature is a distinct legal entity. The interest which natural persons have in it is not complete
until there has been a due administration; and one who forges the name of the decedent to an instrument purporting to
be a promissory note must be regarded as having intended to defraud the estate of the decedent, and not the natural
persons having diverse interests in it, since ha cannot be presumed to have known who those persons were, or what
was the nature of their respective interest. The fraudulent intent is against the artificial person, — the estate — and
not the natural persons who have direct or contingent interest in it. (107 Ind. 54, 55, 6 N.E. 914-915.)
In the instant case there would also be a failure of justice unless the estate of Pedro O. Fragrante is considered a "person", for
quashing of the proceedings for no other reason than his death would entail prejudicial results to his investment amounting to
P35,000.00 as found by the commission, not counting the expenses and disbursements which the proceeding can be presumed to
have occasioned him during his lifetime, let alone those defrayed by the estate thereafter. In this jurisdiction there are ample
precedents to show that the estate of a deceased person is also considered as having legal personality independent of their heirs.
Among the most recent cases may be mentioned that of "Estate of Mota vs. Concepcion, 56 Phil., 712, 717, wherein the
principal plaintiff was the estate of the deceased Lazaro Mota, and this Court gave judgment in favor of said estate along with
the other plaintiffs in these words:
. . . the judgment appealed from must be affirmed so far as it holds that defendants Concepcion and Whitaker are
indebted to he plaintiffs in the amount of P245,804.69 . . . .
Under the regime of the Civil Code and before the enactment of the Code of Civil Procedure, the heirs of a deceased person
were considered in contemplation of law as the continuation of his personality by virtue of the provision of article 661 of the
first Code that the heirs succeed to all the rights and obligations of the decedent by the mere fact of his death. It was so held by
this Court in Barrios vs. Dolor, 2 Phil., 44, 46. However, after the enactment of the Code of Civil Procedure, article 661 of the
Civil Code was abrogated, as held in Suiliong & Co. vs. Chio-Taysan, 12 Phil., 13, 22. In that case, as well as in many others
decided by this Court after the innovations introduced by the Code of Civil Procedure in the matter of estates of deceased
persons, it has been the constant doctrine that it is the estate or the mass of property, rights and assets left by the decedent,
instead of the heirs directly, that becomes vested and charged with his rights and obligations which survive after his demise.
The heirs were formerly considered as the continuation of the decedent's personality simply by legal fiction, for they might not
have been flesh and blood — the reason was one in the nature of a legal exigency derived from the principle that the heirs
succeeded to the rights and obligations of the decedent. Under the present legal system, such rights and obligations as survive
after death have to be exercised and fulfilled only by the estate of the deceased. And if the same legal fiction were not indulged,
there would be no juridical basis for the estate, represented by the executor or administrator, to exercise those rights and to
fulfill those obligations of the deceased. The reason and purpose for indulging the fiction is identical and the same in both cases.
This is why according to the Supreme Court of Indiana in Billings vs. State, supra, citing 2 Rapalje & L. Dictionary, 954,
among the artificial persons recognized by law figures "a collection of property to which the law attributes the capacity of
having rights and duties", as for instance, the estate of a bankrupt or deceased person.
Petitioner raises the decisive question of whether or not the estate of Pedro O. Fragrante can be considered a "citizen of the
Philippines" within the meaning of section 16 of the Public Service Act, as amended, particularly the proviso thereof expressly
and categorically limiting the power of the commission to issue certificates of public convenience or certificates of public
convenience and necessity "only to citizens of the Philippines or of the United States or to corporations, copartnerships,
associations, or joint-stock companies constituted and organized under the laws of the Philippines", and the further proviso that
sixty per centum of the stock or paid-up capital of such entities must belong entirely to citizens of the Philippines or of the
United States.
Within the Philosophy of the present legal system, the underlying reason for the legal fiction by which, for certain purposes, the
estate of the deceased person is considered a "person" is the avoidance of injustice or prejudice resulting from the impossibility
of exercising such legal rights and fulfilling such legal obligations of the decedent as survived after his death unless the fiction
is indulged. Substantially the same reason is assigned to support the same rule in the jurisdiction of the State of Indiana, as
announced in Billings vs. State, supra, when the Supreme Court of said State said:
. . . It seems reasonable that the estate of a decedent should be regarded as an artificial person. it is the creation of law
for the purpose of enabling a disposition of the assets to be properly made . . . .
Within the framework and principles of the constitution itself, to cite just one example, under the bill of rights it seems clear that
while the civil rights guaranteed therein in the majority of cases relate to natural persons, the term "person" used in section 1 (1)
and (2) must be deemed to include artificial or juridical persons, for otherwise these latter would be without the constitutional
guarantee against being deprived of property without due process of law, or the immunity from unreasonable searches and
seizures. We take it that it was the intendment of the framers to include artificial or juridical, no less than natural, persons in
these constitutional immunities and in others of similar nature. Among these artificial or juridical persons figure estates of
deceased persons. Hence, we hold that within the framework of the Constitution, the estate of Pedro O. Fragrante should be
considered an artificial or juridical person for the purposes of the settlement and distribution of his estate which, of course,
include the exercise during the judicial administration thereof of those rights and the fulfillment of those obligations of his
which survived after his death. One of those rights was the one involved in his pending application before the Public Service
Commission in the instant case, consisting in the prosecution of said application to its final conclusion. As stated above, an
injustice would ensue from the opposite course.
How about the point of citizenship? If by legal fiction his personality is considered extended so that any debts or obligations left
by, and surviving, him may be paid, and any surviving rights may be exercised for the benefit of his creditors and heirs,
respectively, we find no sound and cogent reason for denying the application of the same fiction to his citizenship, and for not
considering it as likewise extended for the purposes of the aforesaid unfinished proceeding before the Public Service
Commission. The outcome of said proceeding, if successful, would in the end inure to the benefit of the same creditors and the
heirs. Even in that event petitioner could not allege any prejudice in the legal sense, any more than he could have done if
Fragrante had lived longer and obtained the desired certificate. The fiction of such extension of his citizenship is grounded upon
the same principle, and motivated by the same reason, as the fiction of the extension of personality. The fiction is made
22
necessary to avoid the injustice of subjecting his estate, creditors and heirs, solely by reason of his death to the loss of the
investment amounting to P35,000, which he has already made in the ice plant, not counting the other expenses occasioned by
the instant proceeding, from the Public Service Commission of this Court.
We can perceive no valid reason for holding that within the intent of the constitution (Article IV), its provisions on Philippine
citizenship exclude the legal principle of extension above adverted to. If for reasons already stated our law indulges the fiction
of extension of personality, if for such reasons the estate of Pedro O. Fragrante should be considered an artificial or juridical
person herein, we can find no justification for refusing to declare a like fiction as to the extension of his citizenship for the
purposes of this proceeding.
Pedro O. Fragrante was a Filipino citizen, and as such, if he had lived, in view of the evidence of record, he would have
obtained from the commission the certificate for which he was applying. The situation has suffered but one change, and that is,
his death. His estate was that of a Filipino citizen. And its economic ability to appropriately and adequately operate and
maintain the service of an ice plant was the same that it received from the decedent himself. In the absence of a contrary
showing, which does not exist here, his heirs may be assumed to be also Filipino citizens; and if they are not, there is the simple
expedient of revoking the certificate or enjoining them from inheriting it.
Upon the whole, we are of the opinion that for the purposes of the prosecution of said case No. 4572 of the Public Service
Commission to its final conclusion, both the personality and citizenship of Pedro O. Fragrante must be deemed extended, within
the meaning and intent of the Public Service Act, as amended, in harmony with the constitution: it is so adjudged and decreed.
Decision affirmed, without costs. So ordered.
G.R. No. L-28067             March 10, 1928
BASILIA ARAYATA, plaintiff-appellant,
vs.
FLORENTINO JOYA, ET AL., defendants-appellants.
Emiliano T. Tirona and Andres R. Faustino for plaintiff-appellant.
Fidel Ibanez for defendants-appellants.
VILLA-REAL, J.:
In this instance both parties have appealed from the judgment of the Court of First Instance of Cavite, the dispositive part of
which, as amended, is as follows;
Wherefore, the testamentary clauses and dispositions made by the late Cecilio Joya concerning one-half of the
property left by the deceased and pertaining to the plaintiff, are hereby declared void in so far as they infringe upon
said plaintiff's right, as being contrary to law; the certificate of sale of lot No. 1058, Exhibit 9, executed by the
deceased in favor of defendant Florentino Joya is null and void, and the plaintiff is hereby declared the sole and
exclusive owner of said lots, or such portions thereof or their value, as the plaintiff may be entitled to as a result of
the liquidation of the testamentary estate; and each and every one of the defendants, Florentino and Pablo Joya,
Asuncion Bobadilla, and Delfin and Felicisima Blancaflor, are hereby ordered to deliver lots Nos. 1031, 1058, 1086,
1153, and 2352 to the administrator of the estate of the deceased in order that he may proceed to the liquidation,
partition and distribution of the latter's estate in accordance with the law and this judgment, as soon as it becomes
final and executory, the Director of Lands being hereby ordered to cancel the certificates of transfer of said lots Nos.
1031, 1058, 1086, 1153 and 2352 registered in the name of said defendants, Florentino Joya on his own behalf and
that of Pablo Joya, Felicisimo Joya, Asuncion Bobadilla, Delfin and Felicisima Blancaflor, with the costs of the
action against the defendants. So ordered.
In support of her appeal, plaintiff-appellant assigns the following alleged errors as committed by the trial court in its decision, to
wit: (1) The lower court erred in declaring the plaintiff owner of only one-half of lots Nos. 1031, 1058, 1086, 1153, and 2352,
as conjugal property possessed with the deceased Cecilio Joya, instead of holding her to be the absolute and exclusive owner of
said lots, in accordance with section 16 of Act No. 1120; (2) the lower court erred in not holding the document of sale of lot No.
547, Exhibit 10, fraudulent, (3) the lower court erred in amending its judgment of December 17, 1926, thereby exempting the
defendants from the obligation to pay plaintiff the products of the lots in question, from the year 1920 until their restitution; (4)
the lower court erred in amending its judgment rendered on December 17, 1926, ordering the delivery of all the lots in question
to the administrator of the estate of the deceased Cecilio Joya, in order that he might proceed to the liquidation and distribution
of the latter's estate in accordance with the law and its judgment; (5) the lower court erred in not passing upon petition contained
in the complaint to the effect that defendant, Florentino Joya, who was appointed administrator of the estate of the deceased
Cecilio Joya in case No. 1241, be relieved from such duty; (6) the lower court erred in denying plaintiff's motion for a new trial.
The defendants-appellants, in turn, assign the following alleged errors as committed by the trial court in its decision, to wit: (1)
The trial court erred in annulling the clauses and provisions of the decedent Cecilio Joya's will, Exhibit Y, with respect to one-
half of the property left by said decedent; (2) the trial court erred in holding the certificate of sale of lot No. 1058, exhibit 9,
executed by the deceased Cecilio Joya in favor of defendant Florentino Joya, to be null and void; (3) the trial court erred in
finding that when plaintiff signed the agreement of partition, Exhibit 7, she was unaware of the contents of the same, and that
said agreement of partition has not become legally effective as against the plaintiff; (4) the trial court erred in holding it to be a
fact admitted by both parties that lots 1153 and 2352 were not donated by Pedro Tiongco to Cecilio Joya, the corresponding
certificates of transfer by donation, Exhibits F and G, notwithstanding; (5) the trial court erred in giving more credit to the
testimony of the plaintiff Basilia Arayata than to that of the defendant Florentino Joya; (6) the trial court erred in admitting
plaintiff's Exhibits J, M, N and N-1; (7) the trial court erred in ordering each and every one of the defendants, Florentino,
Feliciano and Pablo Joya, Asuncion Bobadilla Delfin and Feliciana Blancaflor to deliver lots Nos. 1031, 1038, 1086, 1153 and
2352 to the administrator of the estate of the deceased Cecilio Joya in order that he might proceed with the liquidation, partition,
and distribution of the said deceased's estate in accordance with the decision rendered in this case by said trial court; (8) the trial
court erred in holding plaintiff to be sole and exclusive owner of the lots question, or such portions thereof, or their value as
may be due her as a result of said liquidation.
The following are the pertinent and controverted facts necessary for the decision of this case:
Cecilio Joya, during his lifetime, inherited from his deceased parents the right of lease to six lots of the friar lands at Santa Crus
de Malabon, municipality of Tanza, Province of Cavite. On June 4, 1906, Cecilio Joya married the herein plaintiff, Basilia
Arayata. When the Insular Government acquired the said land, Cecilio Joya continued his lease in accordance with the
provisions of the Act of Congress of July 1, 1902 and Act No. 1120 of the Philippine Commission. While married to the herein
plaintiff-appellant, Cecilio Joya purchase the lots he had been leasing, on installments, from the Government, under said Act
No. 1120, which were designated as lots Nos. 1031 (Exhibit C), 1058 (Exhibit D), 1086 (Exhibit E), 1153 (Exhibit F), 2352
(Exhibit G) and 547 (Exhibit H). as the number of lots which a purchaser could acquire under the law was limited, lots Nos.
1153 and 2352 were excluded and put up for sale. In order not to lose them, Cecilio Joya had Pedro Tiongco buy them,
supplying him with the necessary funds. Subsequently, Pedro Tiongco transferred his right to said lots to Cecilio Joya by
donation, as appears from Exhibits F and G. These transfers were approved by the Director of Lands and noted in the proper
registry book. On April 24 1919, Cecilio Joya conveyed his right to lot No. 1058 to Florentino Joya consideration of the sum of
P2,000 said conveyance having been approved by the Director of Lands and registered in the proper registry book (Exhibit 9).
On May 11, 1919, Cecilio Joya conveyed his right to lot No. 547 to Marcelina Joya and Francisco Joya in consideration of the
sum of P450, conveyance having been approved by the Director of Lands and registered in the proper registry book (Exhibit
10). On April 27, 1919, Cecilio Joya executed a will devising lot No. 1058 to Florentino Joya, lot No. 1086 to Pablo Joya, lot
No. 1031 to Delfin and Felicisima Blancaflor, lot No. 1153 to the brothers Agustin and Pedro Joya, lot No. 2352 to Feliciano
and Asuncion Bobadilla, and lot No. 547 (Exhibit Y) to Marcelina and Francisca Joya. At the time of his death, Cecilio Joya
had not yet completed the payment of the price of the lots mentioned above to the Insular Government. All the lots in question
except lot No. 547, are in the possession of the defendants, who enjoy their products. On May 10, 1920 lots Nos. 2352, 1086,
1153 and 1031, were transferred to Florentino Joya as administrator of the estate of the deceased Cecilio Joya. (Exhibits 3, 4, 5
and 6.)
On May 26, 1919, Cecilio Joya died, and on June 9, 1919, his executor, the herein defendant Florentino Joya, presented said
will for probate to the Court of First Instance of Cavite, which was probated after the proper proceedings. In March, 1920, in the
course of the testamentary proceedings, the executor Florentino Joya presented an alleged agreement of partition by the
legatees, which agreement was disapproved by the court in view of the herein plaintiff's opposition, who alleged that her
signature had been obtained by fraud.
The questions to be determined in this appeal are purely legal, and, briefly,, are as follows: (1) Were Cecilio Joya's conveyances
of his interest in lot No. 1958 to Florentino Joya and in No. 547 to the sisters Marcelina and Francisca Joya fraudulent? (2)
Were Cecilio Joya's legacies of lots Nos. 1031, 1086, 1153 and 2352 to the other defendants null and void? (3) Has the plaintiff-
appellant, as the surviving spouse, exclusive right to all the lots in question? (4) In case she has, is she entitled to the possession
and products thereof?
As to the first question, the pertinent part of section 16 of Act No. 1120 says the following:
SEC. 16. . . . In case the holder of the certificate shall have his interest in the land before having complied with all the
conditions thereof, the purchaser from the holder of the certificate shall be entitled to all the rights of the holder of the
certificate upon presenting his assignment to the Chief of the Bureau of Public Lands for registration.
It will be seen that the holder of a certificate off sale of friar has a right to sell his interest therein, even before having fully paid
the purchase price and upon presentation of the certificate of transfer to the Chief of the Bureau of Public Lands for registration,
he is subrogated to all the rights of the holder of the certificate.
23
The evidence shows that during his lifetime Cecilio Joya conveyed his interest in lot No. 1058 to Florentino Joya for the sum of
P2,000, said conveyance having been approved by the Director of Lands, and registered in the proper register book of said
office. (Exhibit 9.) His right to lot No. 547 was also conveyed by Cecilio Joya to Marcelina and Francisca Joya during his
lifetime, said transfer having been approved by the Director of Lands, and registered in the proper book in the Bureau of Public
Lands. (Exhibit 10.) Said conveyance having been made in accordance with the provisions of the law, Florentino Joya on the
one hand, and Marcelina and Francisca Joya on the other, were subrogated to all of Cecilio Joya's rights to said lots, and there is
nothing in the record to show conclusively that said conveyances were fraudulently obtained. The fact that the testator included
said lots in his will and disposed of them in the form of legacies in favor of said persons, does not in itself show the existence of
any fraud. At most, it may be held as an act of ratification.
In regard to the second and third questions, that is, whether or not the legacies are null and void, and the plaintiff-appellant, as
the surviving spouse, is entitled exclusively to the lots in question, the pertinent part of said section 16 of Act No. 1120 provides
as follows:
SEC. 16. In the event of the death of a holder of a certificate the issuance of which is provided for in section twelve
hereof, prior to the execution of a deed by the Government to any purchaser, his widow shall be entitled to receive a
deed of the land stated in the certificate upon showing that she has complied with the requirements of law for the
purchase of the same.
In the case of Jocson vs. Soriano, as administrator of the intestate estate of Silvestre Estacion (45 Phil., 375), this court,
interpreting the above-quoted legal provision, laid down the following doctrine:
FRIAR ESTATE LANDS; RIGHTS OF THE WIDOW OF THE PURCHASER AFTER THE DEATH OF THE
LATTER. — Under the provisions of section 16 of Act No. 1120, the widow of a purchaser of a parcel of land
belonging to the Friar Estate, purchased by the Government, after the death of her husband (the purchaser), is entitled
to have a patent issued to her of the lands purchased, upon a proper showing that she has completed the payment of
the purchase price. The right granted to the original settlers of the friar estate lands to purchase the parcel occupied by
them at the time of the purchase by the Government, is a right conceded by the Government, analogous to the
homestead laws. A homestead privilege does not terminate on the husband's death, but is transferred to his widow
and his family. A homestead selected by the husband in his lifetime vests absolute in his surviving wife, and her
rights are governed by the law in force at the time of the death of her husband. Neither does she lose said right by a
second marriage upon the death of her husband, the purchaser. She may continue to occupy the whole of the
homestead.
We have seen, in discussing and solving the first question, that the holder of a certificate of sale of friar lands, who has not fully
paid the purchase price may transfer and convey his rights, but that the transferee or grantee is not subrogated to all the
transferor's right until the transfer has been approved by the Director of Lands and registered in the registry book in the Bureau
of Public Lands. In other words, in order that a transfer of the rights of a holder of a certificate of sale of friar lands may be
legally effective, it is necessary that a formal certificate of transfer be drawn up and submitted to the Chief of the Bureau of
Public Lands for his approval and registration. The law authorizes no other way of transferring the rights of a holder of a
certificate of sale of friar lands. It provides, however, that in case of the death of said holder, the surviving spouse shall be
entitled to receive the title to the land, upon compliance with the requirements of the law. If, as it was held in the aforecited case
of Jocson vs. Soriano, the right conferred by Act No. 1120 on the holder of a certificate of sale of friar lands in similar to that
conferred on the holder of a "homestead," and if the latter has no right to dispose of said certificate by will to the prejudice of
his surviving spouse and for his children (29 C. J., 930, par. 342), then by analogy, the holder of a certificate of sale of friar
lands cannot dispose of his rights to said lands by will to the prejudice of his widow and children.
The provisions of the Civil Code referring to conjugal property cannot be applied in this case, as was done by the trial court,
because the law regulating the acquisition, disposition, and transmission of rights to the friar lands acquired by the Insular
Government, lays down rules in conflict with the aforesaid provisions of the Civil Code; and as the said Code is of a general
character, while Act No. 1120 is a special law, the latter should prevail.
With respect to the fourth question raised, namely, whether or not the herein plaintiff-appellant is entitled to the possession and
the products of the friar lands acquired by the Insular Government, which, by virtue of the law, pass exclusively to the surviving
spouse upon compliance of the legal requirements, the answer must be in the affirmative. The defendants, who are in possession
of the said lands, cannot invoke the provisions of the Civil Code relative to possession in good faith, inasmuch as the principle
on which the right of a holder in good faith is based is the belief that his possession is with just title under claim of ownership.
While a deceased heirs or legatees acquire the ownership of the property given them in the will and may taken possession of
their respective portions upon the death of their predecessor, yet upon the appointment of an administrator, the latter, by virtue
of his appointment, acquires a right to the possession of the property of estate, subject to the orders of the court, unless he
consents to the heirs continuing in possession thereof. But such consent does not, however, relieve the administrator of all
responsibility for the management of the same and its fruits; because until the judicial partition is made, said property continues
to belong to the testamentary estate. (Pimentel vs. Palanca, 5 Phil., 436; Fernandez vs. Tria, 22 Phil., 603.)
Being a matter of law, the defendants-appellants cannot plead ignorance of the fact that until a judicial partition of the property
left by Cecilio Joya is made, said property belongs to the lather's estate and it together with its products, is subject to the
payment of the testator's debts, if any. Only after judicial partition has been made do they acquire the title to their respective
legacies, if the latter are valid. (Santos vs. Roman Catholic Bishop of Nueva Caceres, 45 Phil., 895.)
We have seen that the legacies given by Cecilio Joya to the defendants were void. If the lands, which are the subject matter of
said legacies and which are in the possession of the defendants, still belong to Cecilio Joya's estate, because no judicial partition
has as yet been made of the property he left, which is subject, together with its fruits, to the payment of his debts, said
defendants cannot invoke the provisions of the Civil Code with respect to possession in good faith insofar as the fruits are
concerned; because even when the legacies are valid they acquired only when the latter judicially assigned to them in the final
partition, and because, while said lands are under administration, the administrator is obliged to render an account of his
management of the same and the products thereof.
In conclusion, them we hold that the defendants are not entitled to the possession of the lands in question or their products, and
they are bound to return them to the herein plaintiff-appellant, after deducting the necessary expenses for cultivation and
preservation. (Art 453, Civil Code.)
Summarizing all that has been said above, we find:
1. That Cecilio Joya's transfers during his lifetime of lot No. 1058 to Florentino Joya and lot No. 547 to the sisters
Marcelina and Francisca Joya, with the approval of the Director of Lands, are bona fide, and therefore legal and
valid.
2. That Cecilio Joya's legacies in his will of lot No. 1031 to Delfin and Felicisima Blancaflor, lot No. 1086 to Pablo
Joya, lot No. 1152 to the brothers Agustin and Pedro Joya, and lot No. 2352 to Feliciano and Asuncion Bobadilla are
null and void, being contrary to the provisions of section 16 of Act No. 1120 which grants his widow, the herein
plaintiff-appellant the ownership of the lands purchased and not transferred by him during his lifetime, provided that
she complies with the legal requirements for the purchase of the same.
3. The plaintiff-appellant is entitled to the exclusive ownership and possession of the aforementioned lots Nos. 1031,
1086, 1153, and 2352 and to their fruits, after deducting the necessary expenses of preservation, cultivation and
production.
For the foregoing, the judgment appealed from is modified, and it is ordered that Feliciano and Pablo Joya, Asuncion Bobadilla,
Delfin and Felicisima Blancaflor return lots Nos. 1031, 1086, 1153, and 2352 to the plaintiff-appellant, Basilia Arayata, together
with their products, or the latter's equivalent in cash from the year 1920 until their restitution, deducting the necessary expenses
of cultivation, preservation, and production. Without any special pronouncement as to costs, it is so ordered.
G.R. No. L-68053 May 7, 1990
LAURA ALVAREZ, FLORA ALVAREZ and RAYMUNDO ALVAREZ, petitioners,
vs.
THE HONORABLE INTERMEDIATE APELLATE COURT and JESUS YANES, ESTELITA YANES, ANTONIO
YANES, ROSARIO YANES, and ILUMINADO YANES, respondents.
Francisco G. Banzon for petitioner.
Renecio R. Espiritu for private respondents.
FERNAN, C.J.:
This is a petition for review on certiorari seeking the reversal of: (a) the decision of the Fourth Civil Cases Division of the
Intermediate Appellate Court dated August 31, 1983 in AC-G.R. CV No. 56626 entitled "Jesus Yanes et al. v. Dr. Rodolfo
Siason et al." affirming the decision dated July 8, 1974 of the Court of First Instance of Negros Occidental insofar as it ordered
the petitioners to pay jointly and severally the private respondents the sum of P20,000.00 representing the actual value of Lots
Nos. 773-A and 773-B of the cadastral survey of Murcia, Negros Occidental and reversing the subject decision insofar as it
awarded the sums of P2,000.00, P5,000.00 and P2,000.00 as actual damages, moral damages and attorney's fees, respectively
and (b) the resolution of said appellate court dated May 30, 1984, denying the motion for reconsideration of its decision.
The real properties involved are two parcels of land identified as Lot 773-A and Lot 773-B which were originally known as Lot
773 of the cadastral survey of Murcia, Negros Occidental. Lot 773, with an area of 156,549 square meters, was registered in the
name of the heirs of Aniceto Yanes under Original Certificate of Title No. RO-4858 (8804) issued on October 9, 1917 by the
Register of Deeds of Occidental Negros (Exh. A).
24
Aniceto Yanes was survived by his children, Rufino, Felipe and Teodora. Herein private respondents, Estelita, Iluminado and
Jesus, are the children of Rufino who died in 1962 while the other private respondents, Antonio and Rosario Yanes, are children
of Felipe. Teodora was survived by her child, Jovita (Jovito) Alib. 1 It is not clear why the latter is not included as a party in this
case.
Aniceto left his children Lots 773 and 823. Teodora cultivated only three hectares of Lot 823 as she could not attend to the other
portions of the two lots which had a total area of around twenty-four hectares. The record does not show whether the children of
Felipe also cultivated some portions of the lots but it is established that Rufino and his children left the province to settle in
other places as a result of the outbreak of World War II. According to Estelita, from the "Japanese time up to peace time", they
did not visit the parcels of land in question but "after liberation", when her brother went there to get their share of the sugar
produced therein, he was informed that Fortunato Santiago, Fuentebella (Puentevella) and Alvarez were in possession of Lot
773. 2
It is on record that on May 19, 1938, Fortunato D. Santiago was issued Transfer Certificate of Title No. RF 2694 (29797)
covering Lot 773-A with an area of 37,818 square meters. 3 TCT No. RF 2694 describes Lot 773-A as a portion of Lot 773 of
the cadastral survey of Murcia and as originally registered under OCT No. 8804.
The bigger portion of Lot 773 with an area of 118,831 square meters was also registered in the name of Fortunato D. Santiago
on September 6, 1938 Under TCT No. RT-2695 (28192 ). 4 Said transfer certificate of title also contains a certification to the
effect that Lot 773-B was originally registered under OCT No. 8804.
On May 30, 1955, Santiago sold Lots 773-A and 773-B to Monico B. Fuentebella, Jr. in consideration of the sum of
P7,000.00. 5 Consequently, on February 20, 1956, TCT Nos. T-19291 and T-19292 were issued in Fuentebella's name. 6
After Fuentebella's death and during the settlement of his estate, the administratrix thereof (Arsenia R. Vda. de Fuentebella, his
wife) filed in Special Proceedings No. 4373 in the Court of First Instance of Negros Occidental, a motion requesting authority to
sell Lots 773-A and 773-B. 7 By virtue of a court order granting said motion, 8 on March 24, 1958, Arsenia Vda. de Fuentebella
sold said lots for P6,000.00 to Rosendo Alvarez. 9 Hence, on April 1, 1958 TCT Nos. T-23165 and T-23166 covering Lots 773-
A and 773-B were respectively issued to Rosendo Alvarez. 10
Two years later or on May 26, 1960, Teodora Yanes and the children of her brother Rufino, namely, Estelita, Iluminado and
Jesus, filed in the Court of First Instance of Negros Occidental a complaint against Fortunato Santiago, Arsenia Vda. de
Fuentebella, Alvarez and the Register of Deeds of Negros Occidental for the "return" of the ownership and possession of Lots
773 and 823. They also prayed that an accounting of the produce of the land from 1944 up to the filing of the complaint be
made by the defendants, that after court approval of said accounting, the share or money equivalent due the plaintiffs be
delivered to them, and that defendants be ordered to pay plaintiffs P500.00 as damages in the form of attorney's fees. 11
During the pendency in court of said case or on November 13, 1961, Alvarez sold Lots 773-A, 773-B and another lot for
P25,000.00 to Dr. Rodolfo Siason. 12 Accordingly, TCT Nos. 30919 and 30920 were issued to Siason, 13 who thereafter,
declared the two lots in his name for assessment purposes. 14
Meanwhile, on November 6, 1962, Jesus Yanes, in his own behalf and in behalf of the other plaintiffs, and assisted by their
counsel, filed a manifestation in Civil Case No. 5022 stating that the therein plaintiffs "renounce, forfeit and quitclaims (sic) any
claim, monetary or otherwise, against the defendant Arsenia Vda. de Fuentebella in connection with the above-entitled case." 15
On October 11, 1963, a decision was rendered by the Court of First Instance of Negros Occidental in Civil Case No. 5022, the
dispositive portion of which reads:
WHEREFORE, judgment is rendered, ordering the defendant Rosendo Alvarez to reconvey to the
plaintiffs lots Nos. 773 and 823 of the Cadastral Survey of Murcia, Negros Occidental, now covered by
Transfer Certificates of Title Nos. T-23165 and T-23166 in the name of said defendant, and thereafter to
deliver the possession of said lots to the plaintiffs. No special pronouncement as to costs.
SO ORDERED. 16
It will be noted that the above-mentioned manifestation of Jesus Yanes was not mentioned in the aforesaid decision.
However, execution of said decision proved unsuccessful with respect to Lot 773. In his return of service dated October 20,
1965, the sheriff stated that he discovered that Lot 773 had been subdivided into Lots 773-A and 773-B; that they were "in the
name" of Rodolfo Siason who had purchased them from Alvarez, and that Lot 773 could not be delivered to the plaintiffs as
Siason was "not a party per writ of execution." 17
The execution of the decision in Civil Case No. 5022 having met a hindrance, herein private respondents (the Yaneses) filed on
July 31, 1965, in the Court of First Instance of Negros Occidental a petition for the issuance of a new certificate of title and for a
declaration of nullity of TCT Nos. T-23165 and T-23166 issued to Rosendo Alvarez. 18 Thereafter, the court required Rodolfo
Siason to produce the certificates of title covering Lots 773 and 823.
Expectedly, Siason filed a manifestation stating that he purchased Lots 773-A, 773-B and 658, not Lots 773 and 823, "in good
faith and for a valuable consideration without any knowledge of any lien or encumbrances against said properties"; that the
decision in the cadastral proceeding 19 could not be enforced against him as he was not a party thereto; and that the decision in
Civil Case No. 5022 could neither be enforced against him not only because he was not a party-litigant therein but also because
it had long become final and executory. 20 Finding said manifestation to be well-founded, the cadastral court, in its order of
September 4, 1965, nullified its previous order requiring Siason to surrender the certificates of title mentioned therein. 21
In 1968, the Yaneses filed an ex-parte motion for the issuance of an alias writ of execution in Civil Case No. 5022. Siason
opposed it. 22 In its order of September 28, 1968 in Civil Case No. 5022, the lower court, noting that the Yaneses had instituted
another action for the recovery of the land in question, ruled that at the judgment therein could not be enforced against Siason as
he was not a party in the case. 23
The action filed by the Yaneses on February 21, 1968 was for recovery of real property with damages. 24 Named defendants
therein were Dr. Rodolfo Siason, Laura Alvarez, Flora Alvarez, Raymundo Alvarez and the Register of Deeds of Negros
Occidental. The Yaneses prayed for the cancellation of TCT Nos. T-19291 and 19292 issued to Siason (sic) for being null and
void; the issuance of a new certificate of title in the name of the Yaneses "in accordance with the sheriffs return of service dated
October 20, 1965;" Siason's delivery of possession of Lot 773 to the Yaneses; and if, delivery thereof could not be effected, or,
if the issuance of a new title could not be made, that the Alvarez and Siason jointly and severally pay the Yaneses the sum of
P45,000.00. They also prayed that Siason render an accounting of the fruits of Lot 773 from November 13, 1961 until the filing
of the complaint; and that the defendants jointly and severally pay the Yaneses moral damages of P20,000.00 and exemplary
damages of P10,000.00 plus attorney's fees of P4, 000.00. 25
In his answer to the complaint, Siason alleged that the validity of his titles to Lots 773-A and 773-B, having been passed upon
by the court in its order of September 4, 1965, had become res judicata and the Yaneses were estopped from questioning said
order. 26 On their part, the Alvarez stated in their answer that the Yaneses' cause of action had been "barred by res judicata,
statute of limitation and estoppel." 27
In its decision of July 8, 1974, the lower court found that Rodolfo Siason, who purchased the properties in question thru an
agent as he was then in Mexico pursuing further medical studies, was a buyer in good faith for a valuable consideration.
Although the Yaneses were negligent in their failure to place a notice of lis pendens "before the Register of Deeds of Negros
Occidental in order to protect their rights over the property in question" in Civil Case No. 5022, equity demanded that they
recover the actual value of the land because the sale thereof executed between Alvarez and Siason was without court
approval. 28 The dispositive portion of the decision states:
IN VIEW OF THE FOREGOING CONSIDERATION, judgment is hereby rendered in the following
manner:
A. The case against the defendant Dr. Rodolfo Siason and the Register of Deeds are (sic) hereby
dismmissed,
B. The defendants, Laura, Flora and Raymundo, all surnamed Alvarez being the legitimate children of the
deceased Rosendo Alvarez are hereby ordered to pay jointly and severally the plaintiffs the sum of
P20,000.00 representing the actual value of Lots Nos. 773-A and 773-B of Murcia Cadastre, Negros
Occidental; the sum of P2,000.00 as actual damages suffered by the plaintiff; the sum of P5,000.00
representing moral damages and the sum of P2.000 as attorney's fees, all with legal rate of interest from
date of the filing of this complaint up to final payment.
C. The cross-claim filed by the defendant Dr. Rodolfo Siason against the defendants, Laura, Flora and
Raymundo, all surnamed Alvarez is hereby dismissed.
D. Defendants, Laura, Flora and Raymundo, all surnamed Alvarez are hereby ordered to pay the costs of
this suit.
SO ORDERED. 29
The Alvarez appealed to the then Intermediate Appellate Court which in its decision of August 31, 1983 30 affirmed the lower
court's decision "insofar as it ordered defendants-appellants to pay jointly and severally the plaintiffs-appellees the sum of
P20,000.00 representing the actual value of Lots Nos. 773-A and 773-B of the cadastral survey of Murcia, Negros Occidental,
and is reversed insofar as it awarded the sums of P2,000.00, P5,000.00 and P2,000.00 as actual damages, moral damages and
attorney's fees, respectively." 31 The dispositive portion of said decision reads:
WHEREFORE, the decision appealed from is affirmed insofar as it ordered defendants-appellants to pay
jointly and severally the plaintiffs- appellees the sum of P20,000.00 representing the actual value of Lots
Nos. 773-A and 773-B of the cadastral survey of Murcia, Negros Occidental, and is reversed insofar as it
25
 awarded the sums of P2,000.00, P5,000.00 and P2,000.00 as actual damages, moral damages and attorney's
fees, respectively. No costs.
SO ORDERED. 32
Finding no cogent reason to grant appellants motion for reconsideration, said appellate court denied the same.
Hence, the instant petition. ln their memorandum petitioners raised the following issues:
1. Whethere or not the defense of prescription and estoppel had been timely and properly invoked and
raised by the petitioners in the lower court.
2. Whether or not the cause and/or causes of action of the private respondents, if ever there are any, as
alleged in their complaint dated February 21, 1968 which has been docketed in the trial court as Civil Case
No. 8474 supra, are forever barred by statute of limitation and/or prescription of action and estoppel.
3. Whether or not the late Rosendo Alvarez, a defendant in Civil Case No. 5022, supra and father of the
petitioners become a privy and/or party to the waiver (Exhibit 4-defendant Siason) in Civil Case No.
8474, supra where the private respondents had unqualifiedly and absolutely waived, renounced and
quitclaimed all their alleged rights and interests, if ever there is any, on Lots Nos. 773-A and 773-B of
Murcia Cadastre as appearing in their written manifestation dated November 6, 1962 (Exhibits "4" Siason)
which had not been controverted or even impliedly or indirectly denied by them.
4. Whether or not the liability or liabilities of Rosendo Alvarez arising from the sale of Lots Nos. 773-A
and 773-B of Murcia Cadastre to Dr. Rodolfo Siason, if ever there is any, could be legally passed or
transmitted by operations (sic) of law to the petitioners without violation of law and due process . 33
The petition is devoid of merit.
As correctly ruled by the Court of Appeals, it is powerless and for that matter so is the Supreme Court, to review the decision in
Civil Case No. 5022 ordering Alvarez to reconvey the lots in dispute to herein private respondents. Said decision had long
become final and executory and with the possible exception of Dr. Siason, who was not a party to said case, the decision in
Civil Case No. 5022 is the law of the case between the parties thereto. It ended when Alvarez or his heirs failed to appeal the
decision against them. 34
Thus, it is axiomatic that when a right or fact has been judicially tried and determined by a court of competent jurisdiction, so
long as it remains unreversed, it should be conclusive upon the parties and those in privity with them in law or estate. 35 As
consistently ruled by this Court, every litigation must come to an end. Access to the court is guaranteed. But there must be a
limit to it. Once a litigant's right has been adjudicated in a valid final judgment of a competent court, he should not be granted
an unbridled license to return for another try. The prevailing party should not be harassed by subsequent suits. For, if endless
litigation were to be allowed, unscrupulous litigations will multiply in number to the detriment of the administration of
justice. 36
There is no dispute that the rights of the Yaneses to the properties in question have been finally adjudicated in Civil Case No.
5022. As found by the lower court, from the uncontroverted evidence presented, the Yaneses have been illegally deprived of
ownership and possession of the lots in question. 37 In fact, Civil Case No. 8474 now under review, arose from the failure to
execute Civil Case No. 5022, as subject lots can no longer be reconveyed to private respondents Yaneses, the same having been
sold during the pendency of the case by the petitioners' father to Dr. Siason who did not know about the controversy, there being
no lis pendens annotated on the titles. Hence, it was also settled beyond question that Dr. Siason is a purchaser in good faith.
Under the circumstances, the trial court did not annul the sale executed by Alvarez in favor of Dr. Siason on November 11,
1961 but in fact sustained it. The trial court ordered the heirs of Rosendo Alvarez who lost in Civil Case No. 5022 to pay the
plaintiffs (private respondents herein) the amount of P20,000.00 representing the actual value of the subdivided lots in dispute.
It did not order defendant Siason to pay said amount. 38
As to the propriety of the present case, it has long been established that the sole remedy of the landowner whose property has
been wrongfully or erroneously registered in another's name is to bring an ordinary action in the ordinary court of justice for
reconveyance or, if the property has passed into the hands of an innocent purchaser for value, for damages. 39 "It is one thing to
protect an innocent third party; it is entirely a different matter and one devoid of justification if deceit would be rewarded by
allowing the perpetrator to enjoy the fruits of his nefarious decided As clearly revealed by the undeviating line of decisions
coming from this Court, such an undesirable eventuality is precisely sought to be guarded against." 40
The issue on the right to the properties in litigation having been finally adjudicated in Civil Case No. 5022 in favor of private
respondents, it cannot now be reopened in the instant case on the pretext that the defenses of prescription and estoppel have not
been properly considered by the lower court. Petitioners could have appealed in the former case but they did not. They have
therefore foreclosed their rights, if any, and they cannot now be heard to complain in another case in order to defeat the
enforcement of a judgment which has longing become final and executory.
Petitioners further contend that the liability arising from the sale of Lots No. 773-A and 773-B made by Rosendo Alvarez to Dr.
Rodolfo Siason should be the sole liability of the late Rosendo Alvarez or of his estate, after his death.
Such contention is untenable for it overlooks the doctrine obtaining in this jurisdiction on the general transmissibility of the
rights and obligations of the deceased to his legitimate children and heirs. Thus, the pertinent provisions of the Civil Code state:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the
extent of the value of the inheritance, of a person are transmitted through his death to another or others
either by his will or by operation of law.
Art. 776. The inheritance includes all the property, rights and obligations of a person which are not
extinguished by his death.
Art. 1311. Contract stake effect only between the parties, their assigns and heirs except in case where the
rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by
provision of law. The heir is not liable beyond the value of the property received from the decedent.
As explained by this Court through Associate Justice J.B.L. Reyes in the case of Estate of Hemady vs. Luzon Surety Co., Inc.  41
The binding effect of contracts upon the heirs of the deceased party is not altered by the provision of our
Rules of Court that money debts of a deceased must be liquidated and paid from his estate before the
residue is distributed among said heirs (Rule 89). The reason is that whatever payment is thus made from
the state is ultimately a payment by the heirs or distributees, since the amount of the paid claim in fact
diminishes or reduces the shares that the heirs would have been entitled to receive.
Under our law, therefore. the general rule is that a party's contractual rights and obligations are
transmissible to the successors.
The rule is a consequence of the progressive "depersonalization" of patrimonial rights and duties that, as
observed by Victorio Polacco has characterized the history of these institutions. From the Roman concept
of a relation from person to person, the obligation has evolved into a relation from patrimony to patrimony
with the persons occupying only a representative position, barring those rare cases where the obligation is
strictly personal, i.e., is contracted intuitu personae, in consideration of its performance by a specific
person and by no other.
xxx xxx xxx
Petitioners being the heirs of the late Rosendo Alvarez, they cannot escape the legal consequences of their father's transaction,
which gave rise to the present claim for damages. That petitioners did not inherit the property involved herein is of no moment
because by legal fiction, the monetary equivalent thereof devolved into the mass of their father's hereditary estate, and we have
ruled that the hereditary assets are always liable in their totality for the payment of the debts of the estate. 42
It must, however, be made clear that petitioners are liable only to the extent of the value of their inheritance. With this
clarification and considering petitioners' admission that there are other properties left by the deceased which are sufficient to
cover the amount adjudged in favor of private respondents, we see no cogent reason to disturb the findings and conclusions of
the Court of Appeals.
WHEREFORE, subject to the clarification herein above stated, the assailed decision of the Court of Appeals is hereby
AFFIRMED. Costs against petitioners.
G.R. No. 124715           January 24, 2000
RUFINA LUY LIM, petitioner,
vs.
COURT OF APPEALS, AUTO TRUCK TBA CORPORATION, SPEED DISTRIBUTING, INC., ACTIVE
DISTRIBUTORS, ALLIANCE MARKETING CORPORATION, ACTION COMPANY, INC. respondents.
BUENA, J.:
May a corporation, in its universality, be the proper subject of and be included in the inventory of the estate of a deceased
person?
Petitioner disputes before us through the instant petition for review on certiorari, the decision1 of the Court of Appeals
promulgated on 18 April 1996, in CA-GR SP No. 38617, which nullified and set aside the orders dated 04 July 1995 2 , 12
September 19953 and 15 September 19954 of the Regional Trial Court of Quezon City, Branch 93, sitting as a probate court.
Petitioner Rufina Luy Lim is the surviving spouse of late Pastor Y. Lim whose estate is the subject of probate proceedings in
Special Proceedings Q-95-23334, entitled, "In Re: Intestate Estate of Pastor Y. Lim Rufina Luy Lim, represented by George
Luy, Petitioner".1âwphi1.nêt
26
Private respondents Auto Truck Corporation, Alliance Marketing Corporation, Speed Distributing, Inc., Active Distributing, xxx     xxx     xxx
Inc. and Action Company are corporations formed, organized and existing under Philippine laws and which owned real
properties covered under the Torrens system. k. Auto Truck TCT No. 617726 Sto. Domingo TBA
On 11 June 1994, Pastor Y. Lim died intestate. Herein petitioner, as surviving spouse and duly represented by her nephew Corporation Cainta, Rizal
George Luy, fried on 17 March 1995, a joint petition5 for the administration of the estate of Pastor Y. Lim before the Regional
q. Alliance Marketing TCT No. 27896 Prance, Metro Manila
Trial Court of Quezon City.
Private respondent corporations, whose properties were included in the inventory of the estate of Pastor Y. Lim, then filed a Copies of the above-mentioned Transfer Certificate of Title and/or Tax Declarations are hereto attached as Annexes
motion6 for the lifting of lis pendens and motion7 for exclusion of certain properties from the estate of the decedent. "C" to "W".
In an order8 dated 08 June 1995, the Regional Trial Court of Quezon City, Branch 93, sitting as a probate court, granted the xxx     xxx     xxx
private respondents' twin motions, in this wise: 7. The aforementioned properties and/or real interests left by the late Pastor Y. Lim, are all conjugal in nature, having
Wherefore, the Register of Deeds of Quezon City is hereby ordered to lift, expunge or delete the annotation of lis been acquired by him during the existence of his marriage with petitioner.
pendens on Transfer Certificates of Title Nos. 116716, 116717, 116718, 116719 and 5182 and it is hereby further 8. There are other real and personal properties owned by Pastor Y. Lim which petitioner could not as yet identify.
ordered that the properties covered by the same titles as well as those properties by (sic) Transfer Certificate of Title Petitioner, however will submit to this Honorable Court the identities thereof and the necessary documents covering
Nos. 613494, 363123, 236236 and 263236 are excluded from these proceedings. the same as soon as possible.
SO ORDERED. On 04 July 1995, the Regional Trial Court acting on petitioner's motion issued an order10 , thus:
Subsequently, Rufina Luy Lim filed a verified amended petition9 which contained the following averments: Wherefore, the order dated 08 June 1995 is hereby set aside and the Registry of Deeds of Quezon City is hereby
3. The late Pastor Y. Lim personally owned during his lifetime the following business entities, to wit: directed to reinstate the annotation of lis pendens in case said annotation had already been deleted and/or cancelled
said TCT Nos. 116716, 116717, 116718, 116719 and 51282.
Business Entity Address:
Further more (sic), said properties covered by TCT Nos. 613494, 365123, 236256 and 236237 by virtue of the
xxx     xxx     xxx petitioner are included in the instant petition.
SO ORDERED.
Alliance Block 3, Lot 6, Dacca BF Homes, On 04 September 1995, the probate court appointed Rufina Lim as special administrator 11 and Miguel Lim and Lawyer Donald
Marketing, Inc. Parañaque, Metro Manila. Lee, as co-special administrators of the estate of Pastor Y. Lim, after which letters of administration were accordingly issued.
xxx     xxx     xxx In an order12 dated 12 September 1995, the probate court denied anew private respondents' motion for exclusion, in this wise:
The issue precisely raised by the petitioner in her petition is whether the corporations are the mere alter egos or
Speed 910 Barrio Niog, Aguinaldo Highway, instrumentalities of Pastor Lim, Otherwise (sic) stated, the issue involves the piercing of the corporate veil, a matter
Distributing Inc. Bacoor, Cavite. that is clearly within the jurisdiction of this Honorable Court and not the Securities and Exchange Commission. Thus,
in the case of Cease vs. Court of Appeals, 93 SCRA 483, the crucial issue decided by the regular court was whether
xxx     xxx     xxx
the corporation involved therein was the mere extension of the decedent. After finding in the affirmative, the Court
Auto Truck TBA ruled that the assets of the corporation are also assets of the estate.
2251 Roosevelt Avenue, Quezon City. A reading of P.D. 902, the law relied upon by oppositors, shows that the SEC's exclusive (sic) applies only to intra-
Corp.
corporate controversy. It is simply a suit to settle the intestate estate of a deceased person who, during his lifetime,
xxx     xxx     xxx acquired several properties and put up corporations as his instrumentalities.
Active Block 3, Lot 6, Dacca BF Homes, SO ORDERED.
Distributors, Inc. Parañaque, Metro Manila. On 15 September 1995, the probate court acting on an ex parte motion filed by petitioner, issued an order13 the dispositive
portion of which reads:
xxx     xxx     xxx Wherefore, the parties and the following banks concerned herein under enumerated are hereby ordered to comply
strictly with this order and to produce and submit to the special administrators, through this Honorable Court within
Action Company 100 20th Avenue Murphy, Quezon City (5) five days from receipt of this order their respective records of the savings/current accounts/time deposits and other
or 92-D Mc-Arthur Highway Valenzuela deposits in the names of Pastor Lim and/or corporations above-mentioned, showing all the transactions made or done
Bulacan. concerning savings/current accounts from January 1994 up to their receipt of this court order.
3.1 Although the above business entities dealt and engaged in business with the public as corporations, all xxx     xxx     xxx
their capital, assets and equity were however, personally owned by the late Pastor Y Lim. Hence the SO ORDERED.
alleged stockholders and officers appearing in the respective articles of incorporation of the above business Private respondent filed a special civil action for certiorari14 , with an urgent prayer for a restraining order or writ of preliminary
entities were mere dummies of Pastor Y. Lim, and they were listed therein only for purposes of registration injunction, before the Court of Appeals questioning the orders of the Regional Trial Court, sitting as a probate court.
with the Securities and Exchange Commission. On 18 April 1996, the Court of Appeals, finding in favor of herein private respondents, rendered the assailed decision 15 , the
4. Pastor Lim, likewise, had Time, Savings and Current Deposits with the following banks: (a) Metrobank, Grace decretal portion of which declares:
Park, Caloocan City and Quezon Avenue, Quezon City Branches and (b) First Intestate Bank (formerly Producers Wherefore, premises considered, the instant special civil action for certiorari is hereby granted, The impugned orders
Bank), Rizal Commercial Banking Corporation and in other banks whose identities are yet to be determined. issued by respondent court on July 4, 1995 and September 12, 1995 are hereby nullified and set aside. The impugned
5. That the following real properties, although registered in the name of the above entities, were actually acquired by order issued by respondent on September 15, 1995 is nullified insofar as petitioner corporations" bank accounts and
Pastor Y. Lim during his marriage with petitioner, to wit: records are concerned.
Corporation Title Location SO ORDERED.

27
Through the expediency of Rule 45 of the Rules of Court, herein petitioner Rufina Luy Lim now comes before us with a lone
assignment of
error16 :
The respondent Court of Appeals erred in reversing the orders of the lower court which merely allowed the
preliminary or provisional inclusion of the private respondents as part of the estate of the late deceased (sic) Pastor Y.
Lim with the respondent Court of Appeals arrogating unto itself the power to repeal, to disobey or to ignore the clear
and explicit provisions of Rules 81,83,84 and 87 of the Rules of Court and thereby preventing the petitioner, from
performing her duty as special administrator of the estate as expressly provided in the said Rules.
Petitioner's contentions tread on perilous grounds.
In the instant petition for review, petitioner prays that we affirm the orders issued by the probate court which were subsequently
set aside by the Court of Appeals.
Yet, before we delve into the merits of the case, a review of the rules on jurisdiction over probate proceedings is indeed in order.
The provisions of Republic Act 769117 , which introduced amendments to Batas Pambansa Blg. 129, are pertinent:
Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization Act of 1980", is
hereby amended to read as follows:
Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive jurisdiction:
xxx     xxx     xxx
(4) In all matters of probate, both testate and intestate, where the gross value of the estate exceeds One Hundred
Thousand Pesos (P100,000) or, in probate matters in Metro Manila, where such gross value exceeds Two Hundred
Thousand Pesos (P200,000);
xxx     xxx     xxx
Sec. 3. Section 33 of the same law is hereby amended to read as follows:
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts in Civil Cases. — Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts shall exercise:
1. Exclusive original jurisdiction over civil actions and probate proceedings, testate and intestate, including
the grant of provisional remedies in proper cases, where the value of the personal property, estate or
amount of the demand does not exceed One Hundred Thousand Pesos (P100,000) or, in Metro Manila
where such personal property, estate or amount of the demand does not exceed Two Hundred Thousand
Pesos (P200,000), exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses and
costs, the amount of which must be specifically alleged, Provided, that interest, damages of whatever kind,
attorney's, litigation expenses and costs shall be included in the determination of the filing fees, Provided
further, that where there are several claims or causes of actions between the same or different parties,
embodied in the same complaint, the amount of the demand shall be the totality of the claims in all the
causes of action, irrespective of whether the causes of action arose out of the same or different
transactions;
xxx     xxx     xxx
Simply put, the determination of which court exercises jurisdiction over matters of probate depends upon the gross value of the
estate of the decedent.
As to the power and authority of the probate court, petitioner relies heavily on the principle that a probate court may pass upon
title to certain properties, albeit provisionally, for the purpose of determining whether a certain property should or should not be
included in the inventory.
In a litany of cases, We defined the parameters by which the court may extend its probing arms in the determination of the
question of title in probate proceedings.
This Court, in PASTOR, JR. vs. COURT OF APPEALS,18 held:
. . . As a rule, the question of ownership is an extraneous matter which the probate court cannot resolve with finality.
Thus, for the purpose of determining whether a certain property should or should not be included in the inventory of
estate properties, the Probate Court may pass upon the title thereto, but such determination is provisional, not
conclusive, and is subject to the final decision in a separate action to resolve title.
We reiterated the rule in PEREIRA vs. COURT OF APPEALS19 :
. . . The function of resolving whether or not a certain property should be included in the inventory or list of
properties to be administered by the administrator is one clearly within the competence of the probate court.
However, the court's determination is only provisional in character, not conclusive, and is subject to the final decision
in a separate action which may be instituted by the parties.
Further, in MORALES vs. CFI OF CAVITE20 citing CUIZON vs. RAMOLETE21 , We made an exposition on the probate court's
limited jurisdiction:
It is a well-settled rule that a probate court or one in charge of proceedings whether testate or intestate cannot
adjudicate or determine title to properties claimed to be a part of the estate and which are equally claimed to belong
to outside parties. All that the said court could do as regards said properties is to determine whether they should or
should not be included in the inventory or list of properties to be administered by the administrator. If there is no
dispute, well and good; but if there is, then the parties, the administrator and the opposing parties have to resort to an
ordinary action for a final determination of the conflicting claims of title because the probate court cannot do so.
Again, in VALERA vs. INSERTO22 , We had occasion to elucidate, through Mr. Justice Andres Narvasa23 :
Settled is the rule that a Court of First Instance (now Regional Trial Court), acting as a probate court, exercises but
limited jurisdiction, and thus has no power to take cognizance of and determine the issue of title to property claimed
by a third person adversely to the decedent, unless the claimant and all other parties having legal interest in the
property consent, expressly or impliedly, to the submission of the question to the probate court for adjudgment, or the
interests of third persons are not thereby prejudiced, the reason for the exception being that the question of whether or
not a particular matter should be resolved by the court in the exercise of its general jurisdiction or of its limited
jurisdiction as a special court (e.g. probate, land registration, etc.), is in reality not a jurisdictional but in essence of
procedural one, involving a mode of practice which may be waived. . . .
. . . . These considerations assume greater cogency where, as here, the Torrens title is not in the decedent's name but
in others, a situation on which this Court has already had occasion to rule . . . . (emphasis Ours)
Petitioner, in the present case, argues that the parcels of land covered under the Torrens system and registered in the name of
private respondent corporations should be included in the inventory of the estate of the decedent Pastor Y. Lim, alleging that
after all the determination by the probate court of whether these properties should be included or not is merely provisional in
nature, thus, not conclusive and subject to a final determination in a separate action brought for the purpose of adjudging once
and for all the issue of title.
Yet, under the peculiar circumstances, where the parcels of land are registered in the name of private respondent corporations,
the jurisprudence pronounced in BOLISAY vs., ALCID  24 is of great essence and finds applicability, thus:
It does not matter that respondent-administratrix has evidence purporting to support her claim of ownership, for, on
the other hand, petitioners have a Torrens title in their favor, which under the law is endowed with incontestability
until after it has been set aside in the manner indicated in the law itself, which of course, does not include, bringing
up the matter as a mere incident in special proceedings for the settlement of the estate of deceased persons. . . .
. . . . In regard to such incident of inclusion or exclusion, We hold that if a property covered by Torrens title is
involved, the presumptive conclusiveness of such title should be given due weight, and in the absence of strong
compelling evidence to the contrary, the holder thereof should be considered as the owner of the property in
controversy until his title is nullified or modified in an appropriate ordinary action, particularly, when as in the case at
bar, possession of the property itself is in the persons named in the title. . . .
A perusal of the records would reveal that no strong compelling evidence was ever presented by petitioner to bolster her bare
assertions as to the title of the deceased Pastor Y. Lim over the properties. Even so, P.D. 1529, otherwise known as, "The
Property Registration Decree", proscribes collateral attack on Torrens Title, hence:
xxx     xxx     xxx
Sec. 48. Certificate not subject to collateral attack. — A certificate of title shall not be subject to collateral attack. It
cannot be altered, modified or cancelled except in a direct proceeding in accordance with law.
In CUIZON vs. RAMOLETE, where similarly as in the case at bar, the property subject of the controversy was duly registered
under the Torrens system, We categorically stated:
. . . Having been apprised of the fact that the property in question was in the possession of third parties and more
important, covered by a transfer certificate of title issued in the name of such third parties, the respondent court
should have denied the motion of the respondent administrator and excluded the property in question from the
inventory of the property of the estate. It had no authority to deprive such third persons of their possession and
ownership of the property. . . .
Inasmuch as the real properties included in the inventory of the estate of the Late Pastor Y. Lim are in the possession of and are
registered in the name of private respondent corporations, which under the law possess a personality separate and distinct from
28
their stockholders, and in the absence of any cogency to shred the veil of corporate fiction, the presumption of conclusiveness of
said titles in favor of private respondents should stand undisturbed.
Accordingly, the probate court was remiss in denying private respondents' motion for exclusion. While it may be true that the
Regional Trial Court, acting in a restricted capacity and exercising limited jurisdiction as a probate court, is competent to issue
orders involving inclusion or exclusion of certain properties in the inventory of the estate of the decedent, and to adjudge, albeit,
provisionally the question of title over properties, it is no less true that such authority conferred upon by law and reinforced by
jurisprudence, should be exercised judiciously, with due regard and caution to the peculiar circumstances of each individual
case.
Notwithstanding that the real properties were duly registered under the Torrens system in the name of private respondents, and
as such were to be afforded the presumptive conclusiveness of title, the probate court obviously opted to shut its eyes to this
gleamy fact and still proceeded to issue the impugned orders.
By its denial of the motion for exclusion, the probate court in effect acted in utter disregard of the presumption of
conclusiveness of title in favor of private respondents. Certainly, the probate court through such brazen act transgressed the
clear provisions of law and infringed settled jurisprudence on this matter.
Moreover, petitioner urges that not only the properties of private respondent corporations are properly part of the decedent's
estate but also the private respondent corporations themselves. To rivet such flimsy contention, petitioner cited that the late
Pastor Y. Lim during his lifetime, organized and wholly-owned the five corporations, which are the private respondents in the
instant case.25 Petitioner thus attached as Annexes "F"26 and "G"27 of the petition for review affidavits executed by Teresa Lim
and Lani Wenceslao which among others, contained averments that the incorporators of Uniwide Distributing, Inc. included on
the list had no actual and participation in the organization and incorporation of the said corporation. The affiants added that the
persons whose names appeared on the articles of incorporation of Uniwide Distributing, Inc., as incorporators thereof, are mere
dummies since they have not actually contributed any amount to the capital stock of the corporation and have been merely
asked by the late Pastor Y. Lim to affix their respective signatures thereon.
It is settled that a corporation is clothed with personality separate and distinct from that of the persons composing it. It may not
generally be held liable for that of the persons composing it. It may not be held liable for the personal indebtedness of its
stockholders or those of the entities connected with it.28
Rudimentary is the rule that a corporation is invested by law with a personality distinct and separate from its stockholders or
members. In the same vein, a corporation by legal fiction and convenience is an entity shielded by a protective mantle and
imbued by law with a character alien to the persons comprising it.
Nonetheless, the shield is not at all times invincible. Thus, in FIRST PHILIPPINE INTERNATIONAL BANK vs. COURT OF
APPEALS29 , We enunciated:
. . . When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an
existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the
perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the members or
stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals. . . .
Piercing the veil of corporate entity requires the court to see through the protective shroud which exempts its stockholders from
liabilities that ordinarily, they could be subject to, or distinguishes one corporation from a seemingly separate one, were it not
for the existing corporate fiction.30
The corporate mask may be lifted and the corporate veil may be pierced when a corporation is just but the alter ego of a person
or of another corporation. Where badges of fraud exist, where public convenience is defeated; where a wrong is sought to be
justified thereby, the corporate fiction or the notion of legal entity should come to naught.31
Further, the test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows: 1) Control,
not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice
in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or
existence of its own; (2) Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiffs legal right; and (3)
The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. The absence of any of
these elements prevent "piercing the corporate veil".32
Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not
of itself a sufficient reason for disregarding the fiction of separate corporate personalities.33
Moreover, to disregard the separate juridical personality of a corporation, the wrong-doing must be clearly and convincingly
established. It cannot be presumed.34
Granting arguendo that the Regional Trial Court in this case was not merely acting in a limited capacity as a probate court,
petitioner nonetheless failed to adduce competent evidence that would have justified the court to impale the veil of corporate
fiction. Truly, the reliance reposed by petitioner on the affidavits executed by Teresa Lim and Lani Wenceslao is unavailing
considering that the aforementioned documents possess no weighty probative value pursuant to the hearsay rule. Besides it is
imperative for us to stress that such affidavits are inadmissible in evidence inasmuch as the affiants were not at all presented
during the course of the proceedings in the lower court. To put it differently, for this Court to uphold the admissibility of said
documents would be to relegate from Our duty to apply such basic rule of evidence in a manner consistent with the law and
jurisprudence.
Our pronouncement in PEOPLE BANK AND TRUST COMPANY vs. LEONIDAS35 finds pertinence:
Affidavits are classified as hearsay evidence since they are not generally prepared by the affiant but by another who
uses his own language in writing the affiant's statements, which may thus be either omitted or misunderstood by the
one writing them. Moreover, the adverse party is deprived of the opportunity to cross-examine the affiants. For this
reason, affidavits are generally rejected for being hearsay, unless the affiant themselves are placed on the witness
stand to testify thereon.
As to the order36 of the lower court, dated 15 September 1995, the Court of Appeals correctly observed that the Regional Trial
Court, Branch 93 acted without jurisdiction in issuing said order; The probate court had no authority to demand the production
of bank accounts in the name of the private respondent corporations.
WHEREFORE, in view of the foregoing disquisitions, the instant petition is hereby DISMISSED for lack of merit and the
decision of the Court of Appeals which nullified and set aside the orders issued by the Regional Trial Court, Branch 93, acting
as a probate court, dated 04 July 1995 and 12 September 1995 is AFFIRMED.1âwphi1.nêt
G.R. No. 145736               March 4, 2009
ESTATE OF ORLANDO LLENADO and WENIFREDA T. LLENADO, in her capacity as (a) Administratrix of the
Estate of Orlando A. Llenado and (b) Judicial Guardian of the Minor children of Orlando A. Llenado, and (c) in her
Own behalf as the Surviving Spouse and Legal Heir of Orlando A. Llenado, Petitioners,
vs.
EDUARDO LLENADO, JORGE LLENADO, FELIZA GALLARDO VDA. DE LLENADO and REGISTER OF
DEEDS of Valenzuela City, Metro Manila, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the May 30, 2000 Decision 1 of the Court of Appeals in CA-G.R. CV No. 58911
which reversed the May 5, 1997 Decision 2 of the Regional Trial Court of Valenzuela City, Branch 75 in Civil Case No. 4248-V-
93, and the October 6, 2000 Resolution 3 which denied the motion for reconsideration. The appellate court dismissed for lack of
merit the complaint for annulment of deed of conveyance, title and damages filed by petitioner against herein respondents.
The subject of this controversy is a parcel of land denominated as Lot 249-D-1 (subject lot) consisting of 1,554 square meters
located in Barrio Malinta, Valenzuela, Metro Manila and registered in the names of Eduardo Llenado (Eduardo) and Jorge
Llenado (Jorge) under Transfer of Certificate of Title (TCT) No. V-1689. 4 The subject lot once formed part of Lot 249-D owned
by and registered in the name of their father, Cornelio Llenado (Cornelio), under TCT No. T-16810.
On December 2, 1975, Cornelio leased Lot 249-D-1 to his nephew, Romeo Llenado (Romeo), for a period of five years,
renewable for another five years at the option of Cornelio. On March 31, 1978, Cornelio, Romeo and the latter’s cousin Orlando
Llenado (Orlando) executed an Agreement 5 whereby Romeo assigned all his rights to Orlando over the unexpired portion of the
aforesaid lease contract. The parties further agreed that Orlando shall have the option to renew the lease contract for another
three years commencing from December 3, 1980, up to December 2, 1983, renewable for another four years or up to December
2, 1987, and that "during the period that [this agreement] is enforced, the x x x property cannot be sold, transferred, alienated or
conveyed in whatever manner to any third party."
Shortly thereafter or on June 24, 1978, Cornelio and Orlando entered into a Supplementary Agreement 6 amending the March 31,
1978 Agreement. Under the Supplementary Agreement, Orlando was given an additional option to renew the lease contract for
an aggregate period of 10 years at five-year intervals, that is, from December 3, 1987 to December 2, 1992 and from December
3, 1992 to December 2, 1997. The said provision was inserted in order to comply with the requirements of Mobil Philippines,
Inc. for the operation of a gasoline station which was subsequently built on the subject lot.
Upon the death of Orlando on November 7, 1983, his wife, Wenifreda Llenado (Wenifreda), took over the operation of the
gasoline station. Meanwhile, on January 29, 1987, Cornelio sold Lot 249-D to his children, namely, Eduardo, Jorge, Virginia
and Cornelio, Jr., through a deed of sale, denominated as "Kasulatan sa Ganap Na Bilihan," 7 for the sum of P160,000.00. As
29
stated earlier, the subject lot, which forms part of Lot 249-D, was sold to Eduardo and Jorge, and titled in their names under
TCT No. V-1689. Several months thereafter or on September 7, 1987, Cornelio passed away.
Sometime in 1993, Eduardo informed Wenifreda of his desire to take over the subject lot. However, the latter refused to vacate
the premises despite repeated demands. Thus, on September 24, 1993, Eduardo filed a complaint for unlawful detainer before
the Metropolitan Trial Court of Valenzuela, Metro Manila against Wenifreda, which was docketed as Civil Civil Case No. 6074.
On July 22, 1996, the Metropolitan Trial Court rendered its Decision in favor of Eduardo and ordered Wenifreda to: (1) vacate
the leased premises; (2) pay Eduardo reasonable compensation for the use and occupation of the premises plus attorney’s fees,
and (3) pay the costs of the suit.
Wenifreda appealed to the Regional Trial Court of Valenzuela, Metro Manila, which reversed the decision of the court a quo.
Thus, Eduardo appealed to the Court of Appeals which rendered a Decision8 on March 31, 1998 reversing the decision of the
Regional Trial Court and reinstating the decision of the Metropolitan Trial Court. It also increased the amount of reasonable
compensation awarded to Eduardo for the use of the leased premises. Wenifreda’s appeal to this Court, docketed as G.R. No.
135001, was dismissed in a Resolution9 dated December 2, 1998. Accordingly, an Entry of Judgment 10 was made in due course
on July 8, 1999.
Previously, after Eduardo instituted the aforesaid unlawful detainer case on September 24, 1993, herein petitioner Wenifreda, in
her capacity as administratrix of the estate of Orlando Llenado, judicial guardian of their minor children, and surviving spouse
and legal heir of Orlando, commenced the subject Complaint,11 later amended, on November 10, 1993 for annulment of deed of
conveyance, title and damages against herein respondents Eduardo, Jorge, Feliza Llenado (mother of the Llenado brothers), and
the Register of Deeds of Valenzuela, Metro Manila. The case was docketed as Civil Case No. 4248-V-93 and raffled to Branch
75 of the Regional Trial Court of Valenzuela, Metro Manila.
Petitioner alleged that the transfer and conveyance of the subject lot by Cornelio in favor of respondents Eduardo and Jorge,
was fraudulent and in bad faith considering that the March 31, 1978 Agreement provided that while the lease is in force, the
subject lot cannot be sold, transferred or conveyed to any third party; that the period of the lease was until December 3, 1987
with the option to renew granted to Orlando; that the subject lot was transferred and conveyed to respondents Eduardo and Jorge
on January 29, 1987 when the lease was in full force and effect making the sale null and void; that Cornelio verbally promised
Orlando that in case he (Cornelio) decides to sell the subject lot, Orlando or his heirs shall have first priority or option to buy the
subject lot so as not to prejudice Orlando’s business and because Orlando is the owner of the property adjacent to the subject
lot; and that this promise was wantonly disregarded when Cornelio sold the said lot to respondents Jorge and Eduardo.
In their Answer,12 respondents Eduardo and Jorge claimed that they bought the subject lot from their father, Cornelio, for value
and in good faith; that the lease agreement and its supplement were not annotated at the back of the mother title of the subject
lot and do not bind them; that said agreements are personal only to Cornelio and Orlando; that the lease expired upon the death
of Orlando on November 7, 1983; that they were not aware of any verbal promise to sell the subject lot granted by Cornelio to
Orlando and, even if there was, said option to buy is unenforceable under the statute of frauds.
After the parties presented their respective evidence, the Regional Trial Court rendered judgment on May 5, 1997 in favor of
petitioner, viz:
WHEREFORE, PREMISES CONSIDERED, this Court finds the [petitioner’s] civil action duly established by preponderance
of evidence, renders judgment (adjudicates) in favor of the [petitioner], Estate of Orlando Llenado represented by Wenifreda
Llenado, and against [respondents] e.g. Jorge, Eduardo, Felisa Gallardo, all surnamed Llenado, and the Register of Deeds of
Valenzuela, Metro Manila, as follows:
1) It hereby judicially declare as non-existence (sic) and null and void, the following:
a) The Kasulatan Sa Ganap na Kasunduan or Deed of Sale;
b) TCT- Transfer Certificate of Title No. V-9440, in the name of [respondent] Eduardo Llenado, TCT-
Transfer Certificate of Title No. V-1689, in the name of Jorge Llenado, and Eduardo Llenado, and all
deeds, documents or proceedings leading to the issuance of said title, and all subsequent title issued
therefrom and likewise whatever deeds, documents or proceedings leading to the issuance of said
subsequent titles;
2) It hereby orders the reconveyance of the said properties embraced in the said TCTs-Transfer Certificate of Title
Nos. V-9440 and V-1689 to the [petitioner] for the same consideration, or purchase price, paid by [respondents]
Eduardo Llenado and Jorge Llenado for the same properties;
3) It hereby orders [respondent], Register of Deeds of Valenzuela, Metro Manila, to cause the issuance of new
transfer certificates of title over the said property in the name of the [petitioner];
4) And, because this Court is not only a court of law, but of equity, it hereby rendered the following damages to be
paid by the [respondents], as the [respondents] litigated under bonafide assertions that they have meritorious defense,
viz:
a) P400,000.00 as moral damages;
b) 10,000.00 as nominal damages;
c) 10,000.00 as temperate damages;
d) 10,000.00 as exemplary damages;
e) 10,000.00 attorney’s fees on the basis of quantum merit; and
f) costs of suit.
SO ORDERED.13
The Regional Trial Court found that upon the death of Orlando on November 7, 1983, his rights under the lease contract were
transmitted to his heirs; that since the lease was in full force and effect at the time the subject lot was sold by Cornelio to his
sons, the sale violated the prohibitory clause in the said lease contract. Further, Cornelio’s promise to sell the subject lot to
Orlando may be established by parole evidence since an option to buy is not covered by the statute of frauds. Hence, the same is
binding on Cornelio and his heirs.
Respondents appealed before the Court of Appeals which rendered the assailed May 30, 2000 Decision reversing the judgment
of the Regional Trial Court and dismissing the Complaint. The appellate court held that the death of Orlando did not extinguish
the lease agreement and had the effect of transmitting his lease rights to his heirs. However, the breach of the non-alienation
clause of the said agreement did not nullify the sale between Cornelio and his sons because the heirs of Orlando are mere
lessees on the subject lot and can never claim a superior right of ownership over said lot as against the registered owners
thereof. It further ruled that petitioner failed to establish by a preponderance of evidence that Cornelio made a verbal promise to
Orlando granting the latter the right of first refusal if and when the subject lot was sold.
Upon the denial of its motion for reconsideration, petitioner is now before this Court on the following assignment of errors:
[T]he Court of Appeals erred:
1.- In finding and concluding that there is no legal basis to annul the deed of conveyance involved in the case and in
not applying R.A. No. 3516, further amending R.A. No. 1162; and
2.- In not finding and holding as null and void the subject deed of conveyance, the same having been executed in
direct violation of an expressed covenant in said deed and in total disregard of the pre-emptive, or preferential rights
of the herein petitioners to buy the property subject of their lease contract under said R.A. No. 3516, further
amending R.A. No. 1162.14
The petition lacks merit.
Petitioner contends that the heirs of Orlando are entitled to the rights of a tenant under Republic Act (R.A.) No. 1162, 15 as
amended by R.A. No. 3516.16 The right of first refusal or preferential right to buy the leased premises is invoked pursuant to
Section 517 of said law and this Court’s ruling in Mataas Na Lupa Tenants Association, Inc. v. Dimayuga.18
This issue is being raised for the first time on appeal. True, in Mataas Na Lupa Tenants Association, Inc., the Court explained
that Section 1 of R.A. No. 1162, as amended by R.A. No. 3516, authorizes the expropriation of any piece of land in the City of
Manila, Quezon City and suburbs which have been and are actually being leased to tenants for at least 10 years, provided said
lands have at least 40 families of tenants thereon.19 Prior to and pending the expropriation, the tenant shall have a right of first
refusal or preferential right to buy the leased premises should the landowner sell the same. However, compliance with the
conditions for the application of the aforesaid law as well as the qualifications of the heirs of Orlando to be beneficiaries
thereunder were never raised before the trial court, or even the Court of Appeals, because petitioner solely anchored its claim of
ownership over the subject lot on the alleged violation of the prohibitory clause in the lease contract between Cornelio and
Orlando, and the alleged non-performance of the right of first refusal given by Cornelio to Orlando. The rule is settled, impelled
by basic requirements of due process, that points of law, theories, issues and arguments not adequately brought to the attention
of the lower court will not be ordinarily considered by a reviewing court as they cannot be raised for the first time on
appeal.20 As the issue of the applicability of R.A. No. 1162, as amended, was neither averred in the pleadings nor raised during
the trial below, the same cannot be raised for the first time on appeal.
At any rate, the allegations in the Complaint and the evidence presented during the trial below do not establish that Orlando or
his heirs are covered by R.A. No. 1162, as amended. It was not alleged nor shown that the subject lot is part of the landed estate
or haciendas in the City of Manila which were authorized to be expropriated under said law; that the Solicitor General has
instituted the requisite expropriation proceedings pursuant to Section 2 21 thereof; that the subject lot has been actually leased for
a period of at least ten (10) years; and that the subject lot has at least forty (40) families of tenants thereon. Instead, what was
merely established during the trial is that the subject lot was leased by Cornelio to Orlando for the operation of a gasoline
30
station, thus, negating petitioner’s claim that the subject lot is covered by the aforesaid law. In Mataas Na Lupa Tenants
Association, Inc., the Court further explained that R.A. No. 1162, as amended, has been superseded by Presidential Decree
(P.D.) No. 151722 entitled "Proclaiming Urban Land Reform in the Philippines and Providing for the Implementing Machinery
Thereof."23 However, as held in Tagbilaran Integrated Settlers Association Incorporated v. Court of Appeals,24 P.D. No. 1517 is
applicable only in specific areas declared, through presidential proclamation, 25 to be located within the so-called urban
zones.26 Further, only legitimate tenants who have resided on the land for ten years or more who have built their homes on the
land and residents who have legally occupied the lands by contract, continuously for the last ten years, are given the right of
first refusal to purchase the land within a reasonable time. 27 Consequently, those lease contracts entered into for commercial use
are not covered by said law.28 Thus, considering that petitioner failed to prove that a proclamation has been issued by the
President declaring the subject lot as within the urban land reform zone and considering further that the subject lot was leased
for the commercial purpose of operating a gasoline station, P.D. No. 1517 cannot be applied to this case.
In fine, the only issue for our determination is whether the sale of the subject lot by Cornelio to his sons, respondents Eduardo
and Jorge, is invalid for (1) violating the prohibitory clause in the lease agreement between Cornelio, as lessor-owner, and
Orlando, as lessee; and (2) contravening the right of first refusal of Orlando over the subject lot.
It is not disputed that the lease agreement contained an option to renew and a prohibition on the sale of the subject lot in favor of
third persons while the lease is in force. Petitioner claims that when Cornelio sold the subject lot to respondents Eduardo and
Jorge the lease was in full force and effect, thus, the sale violated the prohibitory clause rendering it invalid. In resolving this
issue, it is necessary to determine whether the lease agreement was in force at the time of the subject sale and, if it was in force,
whether the violation of the prohibitory clause invalidated the sale.
Under Article 1311 of the Civil Code, the heirs are bound by the contracts entered into by their predecessors-in-interest except
when the rights and obligations therein are not transmissible by their nature, by stipulation or by provision of law. A contract of
lease is, therefore, generally transmissible to the heirs of the lessor or lessee. It involves a property right and, as such, the death
of a party does not excuse non-performance of the contract. 29 The rights and obligations pass to the heirs of the deceased and the
heir of the deceased lessor is bound to respect the period of the lease.30 The same principle applies to the option to renew the
lease. As a general rule, covenants to renew a lease are not personal but will run with the land. 31 Consequently, the successors-
in-interest of the lessee are entitled to the benefits, while that of the lessor are burdened with the duties and obligations, which
said covenants conferred and imposed on the original parties.
The foregoing principles apply with greater force in this case because the parties expressly stipulated in the March 31, 1978
Agreement that Romeo, as lessee, shall transfer all his rights and interests under the lease contract with option to renew "in
favor of the party of the Third Part (Orlando), the latter’s heirs, successors and assigns" 32 indicating the clear intent to allow the
transmissibility of all the rights and interests of Orlando under the lease contract unto his heirs, successors or assigns.
Accordingly, the rights and obligations under the lease contract with option to renew were transmitted from Orlando to his heirs
upon his death on November 7, 1983.
It does not follow, however, that the lease subsisted at the time of the sale of the subject lot on January 29, 1987. When Orlando
died on November 7, 1983, the lease contract was set to expire 26 days later or on December 3, 1983, unless renewed by
Orlando’s heirs for another four years. While the option to renew is an enforceable right, it must necessarily be first exercised to
be given effect.33 As the Court explained in Dioquino v. Intermediate Appellate Court:34
A clause found in an agreement relative to the renewal of the lease agreement at the option of the lessee gives the latter an
enforceable right to renew the contract in which the clause is found for such time as provided for. The agreement is understood
as being in favor of the lessee, and the latter is authorized to renew the contract and to continue to occupy the leased
property after notifying the lessor to that effect. A lessor’s covenant or agreement to renew gives a privilege to the tenant, but is
nevertheless an executory contract, and until the tenant has exercised the privilege by way of some affirmative act, he cannot be
held for the additional term. In the absence of a stipulation in the lease requiring notice of the exercise of an option or an
election to renew to be given within a certain time before the expiration of the lease, which of course, the lessee must comply
with, the general rule is that a lessee must exercise an option or election to renew his lease and notify the lessor thereof before,
or at least at the time of the expiration of his original term, unless there is a waiver or special circumstances warranting
equitable relief.1avvphi1.zw+
There is no dispute that in the instant case, the lessees (private respondents) were granted the option to renew the lease for
another five (5) years after the termination of the original period of fifteen years. Yet, there was never any positive act on the
part of private respondents before or after the termination of the original period to show their exercise of such option. The
silence of the lessees after the termination of the original period cannot be taken to mean that they opted to renew the contract
by virtue of the promise by the lessor, as stated in the original contract of lease, to allow them to renew. Neither can the exercise
of the option to renew be inferred from their persistence to remain in the premises despite petitioners’ demand for them to
vacate. x x x.35
Similarly, the election of the option to renew the lease in this case cannot be inferred from petitioner Wenifreda’s continued
possession of the subject lot and operation of the gasoline station even after the death of Orlando on November 7, 1983 and the
expiration of the lease contract on December 3, 1983. In the unlawful detainer case against petitioner Wenifreda and in the
subject complaint for annulment of conveyance, respondents consistently maintained that after the death of Orlando, the lease
was terminated and that they permitted petitioner Wenifreda and her children to remain in possession of the subject property out
of tolerance and respect for the close blood relationship between Cornelio and Orlando. It was incumbent, therefore, upon
petitioner as the plaintiff with the burden of proof during the trial below to establish by some positive act that Orlando or his
heirs exercised the option to renew the lease. After going over the records of this case, we find no evidence, testimonial or
documentary, of such nature was presented before the trial court to prove that Orlando or his heirs exercised the option to renew
prior to or at the time of the expiration of the lease on December 3, 1983. In particular, the testimony of petitioner Wenifreda is
wanting in detail as to the events surrounding the implementation of the subject lease agreement after the death of Orlando and
any overt acts to establish the renewal of said lease.
Given the foregoing, it becomes unnecessary to resolve the issue on whether the violation of the prohibitory clause invalidated
the sale and conferred ownership over the subject lot to Orlando’s heirs, who are mere lessees, considering that at the time of
said sale on January 29, 1987 the lease agreement had long been terminated for failure of Orlando or his heirs to validly renew
the same. As a result, there was no obstacle to the sale of the subject lot by Cornelio to respondents Eduardo and Jorge as the
prohibitory clause under the lease contract was no longer in force.
Petitioner also anchors its claim over the subject lot on the alleged verbal promise of Cornelio to Orlando that should he
(Cornelio) sell the same, Orlando would be given the first opportunity to purchase said property. According to petitioner, this
amounted to a right of first refusal in favor of Orlando which may be proved by parole evidence because it is not one of the
contracts covered by the statute of frauds. Considering that Cornelio sold the subject lot to respondents Eduardo and Jorge
without first offering the same to Orlando’s heirs, petitioner argues that the sale is in violation of the latter’s right of first refusal
and is, thus, rescissible.
The question as to whether a right of first refusal may be proved by parole evidence has been answered in the affirmative by this
Court in Rosencor Development Corporation v. Inquing:36
We have previously held that not all agreements "affecting land" must be put into writing to attain enforceability. Thus, we have
held that the setting up of boundaries, the oral partition of real property, and an agreement creating a right of way are not
covered by the provisions of the statute of frauds. The reason simply is that these agreements are not among those enumerated
in Article 1403 of the New Civil Code.
A right of first refusal is not among those listed as unenforceable under the statute of frauds. Furthermore, the application of
Article 1403, par. 2(e) of the New Civil Code presupposes the existence of a perfected, albeit unwritten, contract of sale. A right
of first refusal, such as the one involved in the instant case, is not by any means a perfected contract of sale of real property. At
best, it is a contractual grant, not of the sale of the real property involved, but of the right of first refusal over the property
sought to be sold.
It is thus evident that the statute of frauds does not contemplate cases involving a right of first refusal. As such, a right of first
refusal need not be written to be enforceable and may be proven by oral evidence.37
In the instant case, the Regional Trial Court ruled that the right of first refusal was proved by oral evidence while the Court of
Appeals disagreed by ruling that petitioner merely relied on the allegations in its Complaint to establish said right. We have
reviewed the records and find that no testimonial evidence was presented to prove the existence of said right. The testimony of
petitioner Wenifreda made no mention of the alleged verbal promise given by Cornelio to Orlando. The two remaining
witnesses for the plaintiff, Michael Goco and Renato Malindog, were representatives from the Register of Deeds of Caloocan
City who naturally were not privy to this alleged promise. Neither was it established that respondents Eduardo and Jorge were
aware of said promise prior to or at the time of the sale of the subject lot. On the contrary, in their answer to the Complaint,
respondents denied the existence of said promise for lack of knowledge thereof. 38 Within these parameters, petitioner’s
allegations in its Complaint cannot substitute for competent proof on such a crucial factual issue. Necessarily, petitioner’s
claims based on this alleged right of first refusal cannot be sustained for its existence has not been duly established.
WHEREFORE, the petition is DENIED. The May 30, 2000 Decision of the Court of Appeals in CA-G.R. CV No. 58911
dismissing the complaint for annulment of deed of conveyance, title and damages, and the October 6, 2000 Resolution denying
the motion for reconsideration, are AFFIRMED.
G.R. No. 118248             April 5, 2000
31
DKC HOLDINGS CORPORATION,petitioner,
vs.
COURT OF APPEALS, VICTOR U. BARTOLOME and REGISTER OF DEEDS FOR METRO MANILA, DISTRICT
III, respondents.
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari seeking the reversal of the December 5, 1994 Decision of the Court of Appeals in CA-
G.R. CV No. 40849 entitled "DKC Holdings Corporation vs. Victor U. Bartolome, et al.",1 affirming in toto the January 4, 1993
Decision of the Regional Trial Court of Valenzuela, Branch 172,2 which dismissed Civil Case No. 3337-V-90 and ordered
petitioner to pay P30,000.00 as attorney's fees.
The subject of the controversy is a 14,021 square meter parcel of land located in Malinta, Valenzuela, Metro Manila which was
originally owned by private respondent Victor U. Bartolome's deceased mother, Encarnacion Bartolome, under Transfer
Certificate of Title No. B-37615 of the Register of Deeds of Metro Manila, District III. This lot was in front of one of the textile
plants of petitioner and, as such, was seen by the latter as a potential warehouse site.
On March 16, 1988, petitioner entered into a Contract of Lease with Option to Buy with Encarnacion Bartolome, whereby
petitioner was given the option to lease or lease with purchase the subject land, which option must be exercised within a period
of two years counted from the signing of the Contract. In turn, petitioner undertook to pay P3,000.00 a month as consideration
for the reservation of its option. Within the two-year period, petitioner shall serve formal written notice upon the lessor
Encarnacion Bartolome of its desire to exercise its option. The contract also provided that in case petitioner chose to lease the
property, it may take actual possession of the premises. In such an event, the lease shall be for a period of six years, renewable
for another six years, and the monthly rental fee shall be P15,000.00 for the first six years and P18,000.00 for the next six years,
in case of renewal.
Petitioner regularly paid the monthly P3,000.00 provided for by the Contract to Encarnacion until her death in January 1990.
Thereafter, petitioner coursed its payment to private respondent Victor Bartolome, being the sole heir of Encarnacion. Victor,
however, refused to accept these payments.
Meanwhile, on January 10, 1990, Victor executed an Affidavit of Self-Adjudication over all the properties of Encarnacion,
including the subject lot. Accordingly, respondent Register of Deeds cancelled Transfer Certificate of Title No. B-37615 and
issued Transfer Certificate of Title No. V-14249 in the name of Victor Bartolome.
On March 14, 1990, petitioner served upon Victor, via registered mail, notice that it was exercising its option to lease the
property, tendering the amount of P15,000.00 as rent for the month of March. Again, Victor refused to accept the tendered
rental fee and to surrender possession of the property to petitioner.
Petitioner thus opened Savings Account No. 1-04-02558-I-1 with the China Banking Corporation, Cubao Branch, in the name
of Victor Bartolome and deposited therein the P15,000.00 rental fee for March as well as P6,000.00 reservation fees for the
months of February and March.
Petitioner also tried to register and annotate the Contract on the title of Victor to the property. Although respondent Register of
Deeds accepted the required fees, he nevertheless refused to register or annotate the same or even enter it in the day book or
primary register.1âwphi1.nêt
Thus, on April 23, 1990, petitioner filed a complaint for specific performance and damages against Victor and the Register of
Deeds,3 docketed as Civil Case No. 3337-V-90 which was raffled off to Branch 171 of the Regional Trial Court of Valenzuela.
Petitioner prayed for the surrender and delivery of possession of the subject land in accordance with the Contract terms; the
surrender of title for registration and annotation thereon of the Contract; and the payment of P500,000.00 as actual damages,
P500,000.00 as moral damages, P500,000.00 as exemplary damages and P300,000.00 as attorney's fees.
Meanwhile, on May 8, 1990, a Motion for Intervention with Motion to Dismiss4 was filed by one Andres Lanozo, who claimed
that he was and has been a tenant-tiller of the subject property, which was agricultural riceland, for forty-five years. He
questioned the jurisdiction of the lower court over the property and invoked the Comprehensive Agrarian Reform Law to
protect his rights that would be affected by the dispute between the original parties to the case.
On May 18, 1990, the lower court issued an Order5 referring the case to the Department of Agrarian Reform for preliminary
determination and certification as to whether it was proper for trial by said court.
On July 4, 1990, the lower court issued another Order6 referring the case to Branch 172 of the RTC of Valenzuela which was
designated to hear cases involving agrarian land, after the Department of Agrarian Reform issued a letter-certification stating
that referral to it for preliminary determination is no longer required.
On July 16, 1990, the lower court issued an Order denying the Motion to Intervene,7 holding that Lanozo's rights may well be
ventilated in another proceeding in due time.
After trial on the merits, the RTC of Valenzuela, Branch 172 rendered its Decision on January 4, 1993, dismissing the
Complaint and ordering petitioner to pay Victor P30,000.00 as attorney's fees. On appeal to the CA, the Decision was
affirmed in toto.
Hence, the instant Petition assigning the following errors:
(A)
FIRST ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE PROVISION ON THE NOTICE TO
EXERCISE OPTION WAS NOT TRANSMISSIBLE.
(B)
SECOND ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE NOTICE OF OPTION MUST BE
SERVED BY DKC UPON ENCARNACION BARTOLOME PERSONALLY.
(C)
THIRD ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE CONTRACT WAS ONE-SIDED
AND ONEROUS IN FAVOR OF DKC.
(D)
FOURTH ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE EXISTENCE OF A REGISTERED
TENANCY WAS FATAL TO THE VALIDITY OF THE CONTRACT.
(E)
FIFTH ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT PLAINTIFF-APPELLANT WAS
LIABLE TO DEFENDANT-APPELLEE FOR ATTORNEY'S FEES.8
The issue to be resolved in this case is whether or not the Contract of Lease with Option to Buy entered into by the late
Encarnacion Bartolome with petitioner was terminated upon her death or whether it binds her sole heir, Victor, even after her
demise.
Both the lower court and the Court of Appeals held that the said contract was terminated upon the death of Encarnacion
Bartolome and did not bind Victor because he was not a party thereto.
Art. 1311 of the Civil Code provides, as follows —
Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and
obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.
The heir is not liable beyond the value of the property he received from the decedent.
x x x           x x x          x x x
The general rule, therefore, is that heirs are bound by contracts entered into by their predecessors-in-interest except when the
rights and obligations arising therefrom are not transmissible by (1) their nature, (2) stipulation or (3) provision of law.
In the case at bar, there is neither contractual stipulation nor legal provision making the rights and obligations under the contract
intransmissible. More importantly, the nature of the rights and obligations therein are, by their nature, transmissible.
The nature of intransmissible rights as explained by Arturo Tolentino, an eminent civilist, is as follows:
Among contracts which are intransmissible are those which are purely personal, either by provision of law, such as in
cases of partnerships and agency, or by the very nature of the obligations arising therefrom, such as those requiring
special personal qualifications of the obligor. It may also be stated that contracts for the payment of money debts are
not transmitted to the heirs of a party, but constitute a charge against his estate. Thus, where the client in a contract
for professional services of a lawyer died, leaving minor heirs, and the lawyer, instead of presenting his claim for
professional services under the contract to the probate court, substituted the minors as parties for his client, it was
held that the contract could not be enforced against the minors; the lawyer was limited to a recovery on the basis
of quantum meruit.9
In American jurisprudence, "(W)here acts stipulated in a contract require the exercise of special knowledge, genius, skill, taste,
ability, experience, judgment, discretion, integrity, or other personal qualification of one or both parties, the agreement is of a
personal nature, and terminates on the death of the party who is required to render such service." 10
It has also been held that a good measure for determining whether a contract terminates upon the death of one of the parties is
whether it is of such a character that it may be performed by the promissor's personal representative. Contracts to perform
personal acts which cannot be as well performed by others are discharged by the death of the promissor. Conversely, where the
32
service or act is of such a character that it may as well be performed by another, or where the contract, by its terms, shows that
performance by others was contemplated, death does not terminate the contract or excuse nonperformance. 11
In the case at bar, there is no personal act required from the late Encarnacion Bartolome. Rather, the obligation of Encarnacion
in the contract to deliver possession of the subject property to petitioner upon the exercise by the latter of its option to lease the
same may very well be performed by her heir Victor.
As early as 1903, it was held that "(H)e who contracts does so for himself and his heirs." 12 In 1952, it was ruled that if the
predecessor was duty-bound to reconvey land to another, and at his death the reconveyance had not been made, the heirs can be
compelled to execute the proper deed for reconveyance. This was grounded upon the principle that 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. 13
It is futile for Victor to insist that he is not a party to the contract because of the clear provision of Article 1311 of the Civil
Code. Indeed, being an heir of Encarnacion, there is privity of interest between him and his deceased mother. He only succeeds
to what rights his mother had and what is valid and binding against her is also valid and binding as against him. 14 This is clear
from Parañaque Kings Enterprises vs.  Court of Appeals, 15 where this Court rejected a similar defense —
With respect to the contention of respondent Raymundo that he is not privy to the lease contract, not being the lessor
nor the lessee referred to therein, he could thus not have violated its provisions, but he is nevertheless a proper party.
Clearly, he stepped into the shoes of the owner-lessor of the land as, by virtue of his purchase, he assumed all the
obligations of the lessor under the lease contract. Moreover, he received benefits in the form of rental payments.
Furthermore, the complaint, as well as the petition, prayed for the annulment of the sale of the properties to him. Both
pleadings also alleged collusion between him and respondent Santos which defeated the exercise by petitioner of its
right of first refusal.
In order then to accord complete relief to petitioner, respondent Raymundo was a necessary, if not indispensable,
party to the case. A favorable judgment for the petitioner will necessarily affect the rights of respondent Raymundo
as the buyer of the property over which petitioner would like to assert its right of first option to buy.
In the case at bar, the subject matter of the contract is likewise a lease, which is a property right. 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. 16
Under both Article 1311 of the Civil Code and jurisprudence, therefore, Victor is bound by the subject Contract of Lease with
Option to Buy.
That being resolved, we now rule on the issue of whether petitioner had complied with its obligations under the contract and
with the requisites to exercise its option. The payment by petitioner of the reservation fees during the two-year period within
which it had the option to lease or purchase the property is not disputed. In fact, the payment of such reservation fees, except
those for February and March, 1990 were admitted by Victor. 17 This is clear from the transcripts, to wit —
ATTY. MOJADO:
One request, Your Honor. The last payment which was allegedly made in January 1990 just indicate in that
stipulation that it was issued November of 1989 and postdated January 1990 and then we will admit all.
COURT:
All reservation fee?
ATTY. MOJADO:
Yes, Your Honor.
COURT:
All as part of the lease?
ATTY. MOJADO:
Reservation fee, Your Honor. There was no payment with respect to payment of rentals. 18
Petitioner also paid the P15,000.00 monthly rental fee on the subject property by depositing the same in China Bank Savings
Account No. 1-04-02558-I-1, in the name of Victor as the sole heir of Encarnacion Bartolome, 19 for the months of March to
July 30, 1990, or a total of five (5) months, despite the refusal of Victor to turn over the subject property. 20
Likewise, petitioner complied with its duty to inform the other party of its intention to exercise its option to lease through its
letter dated Match 12, 1990, 21 well within the two-year period for it to exercise its option. Considering that at that time
Encarnacion Bartolome had already passed away, it was legitimate for petitioner to have addressed its letter to her heir.1âwphi1
It appears, therefore, that the exercise by petitioner of its option to lease the subject property was made in accordance with the
contractual provisions. Concomitantly, private respondent Victor Bartolome has the obligation to surrender possession of and
lease the premises to petitioner for a period of six (6) years, pursuant to the Contract of Lease with Option to Buy.
Coming now to the issue of tenancy, we find that this is not for this Court to pass upon in the present petition. We note that the
Motion to Intervene and to Dismiss of the alleged tenant, Andres Lanozo, was denied by the lower court and that such denial
was never made the subject of an appeal. As the lower court stated in its Order, the alleged right of the tenant may well be
ventilated in another proceeding in due time.
WHEREFORE, in view of the foregoing, the instant Petition for Review is GRANTED. The Decision of the Court of Appeals
in CA-G.R. CV No. 40849 and that of the Regional Trial Court of Valenzuela in Civil Case No. 3337-V-90 are both SET
ASIDE and a new one rendered ordering private respondent Victor Bartolome to:
(a) surrender and deliver possession of that parcel of land covered by Transfer Certificate of Title No. V-14249 by
way of lease to petitioner and to perform all obligations of his predecessor-in-interest, Encarnacion Bartolome, under
the subject Contract of Lease with Option to Buy;
(b) surrender and deliver his copy of Transfer Certificate of Title No. V-14249 to respondent Register of Deeds for
registration and annotation thereon of the subject Contract of Lease with Option to Buy;
(c) pay costs of suit.
Respondent Register of Deeds is, accordingly, ordered to register and annotate the subject Contract of Lease with Option to Buy
at the back of Transfer Certificate of Title No. V-14249 upon submission by petitioner of a copy thereof to his office.
G.R. No. 121940            December 4, 2001
JESUS SAN AGUSTIN, petitioner,
vs.
HON. COURT OF APPEALS and MAXIMO MENEZ, JR., respondents.
QUISUMBING, J.:
This petition for review on certiorari seeks the reversal of the decision 1 of the Court of Appeals dated May 19, 1995, affirming
that of the Regional Trial Court in LRC Case No. R-4659.
The relevant facts, as summarized by the CA, are as follows:
On February 11, 1974, the Government Service Insurance System (GSIS) sold to a certain Macaria Vda. de Caiquep, a parcel of
residential land with an area of 168 square meters located in Rosario, Pasig City and denominated as Lot 13, Block 7, Pcs-5816
of the Government Service and Insurance System Low Cost Housing Project (GSIS-LCHP). The sale is evidenced by a Deed of
Absolute Sale. 2 On February 19, 1974, the Register of Deeds of Rizal issued in the name of Macaria Vda. de Caiquep. Transfer
Certificate of Title (TCT) No. 436465 with the following encumbrance annotated at the back of the title:
This Deed of Absolute Sale is subject to the conditions enumerated below which shall be permanent encumbrances
on the property, the violation of any of which shall entitle the vendor to cancel x x x. this Deed of Absolute Sale and
reenter the property;
The purpose of the sale be to aid the vendee in acquiring a lot for himself/themselves and not to provide him/them
with a means for speculation or profit by a future assignment of his/their right herein acquired or the resale of the lot
through rent, lease or subletting to others of the lot and subject of this deed, and therefore, the vendee shall not sell,
convey, lease or sublease, or otherwise encumber the property in favor of any other party within five (5) years from
the dates final and absolute ownership thereof becomes vested in the vendee, except in cases of hereditary succession
or resale in favor of the vendor:
x x x (emphasis supplied).3
A day after We issuance of TCT No. 436465, or on February 20, 1974, Macaria Vda. de Caiquep sold the subject lot to private
respondent, Maximo Menez, Jr., as evidenced by a Deed of Absolute Sale (Exhibit "D").4 This deed was notarized but was not
registered immediately upon its execution in 1974 because GSIS prohibited him from registering the same in view of the five-
year prohibition to sell during the period ending in 1979.
Sometime in 1979, for being suspected as a subversive, an Arrest, Search and Seizure Order (ASSO) was issued against private
respondent. Military men ransacked his house in Cainta, Rizal. Upon learning that he was wanted by the military, he voluntarily
surrendered and was detained for two (2) years. When released, another order for his re-arrest was issued so he hid in Mindanao
for another four (4) years or until March 1984. In December of 1990, he discovered that the subject TCT was missing. He
consulted a lawyer but the latter did not act immediately on the matter. Upon consulting a new counsel, an Affidavit of
Loss5 was filed with the Register of Deeds of Pasig and a certified copy6 of TCT No. 436465 was issued. Private respondent
also declared the property for tax purposes and obtained a certification thereof from the Assessor's Office.7
33
Private respondent sent notices to the registered owner at her address appearing in the title and in the Deed of Sale. And, with
his counsel, he searched for the ,registered owner in Metro Manila and Rizal and as far as Samar, Leyte, Calbayog City,
Tacloban City, and in Eastern and Northern Samar. However, their search proved futile.
On July 8, 1992 private respondent filed a petition docketed as LRC Case No. R-4659 with the RTC, Branch 154, Pasig, Metro
Manila for the issuance of owner's duplicate copy of TCT No. 436465 to replace the lost one. To show he was the owner of the
contested lot, he showed the Deed of Absolute Sale, Exhibit "D". The petition was set for hearing and the court's order dated
July 10, 1992 was published once in Malaya, a nationally circulated newspaper in the Philippines.8
During the hearing on September 3, 1992, only Menez and his counsel appeared. The Register of Deeds who was not served
notice, and the Office of the Solicitor General and the Provincial Prosecutor who were notified did not attend.
On September 18, 1992, there being no opposition, Menez presented his evidence ex-parte. The trial court granted his petition
in its decision9 dated September 30, 1992, the dispositive portion of which reads:
WHEREFORE, the petition is hereby GRANTED and the Registry of Deeds of Pasig, Metro Manila, is hereby directed to issue
a new Owner's Duplicate Copy of Transfer Certificate of Title No. 436465 based on the original thereon filed in his office
which shall contain the memorandum of encumbrance and an additional memorandum of the fact that it was issued in place of
the lost duplicate and which shall, in all respect, be entitled to like faith and credit as the original duplicate, for all legal intents
and purposes.
Issuance of new owner's duplicate copy shall be made only after this decision shall have become final and executory. The said
lost owner's duplicate is hereby declared null and void.
Petitioner shall pay all legal fees in connection with the issuance of the new owner's copy.
Let copies of this Order be furnished the petitioner, the registered owner of his given address in the title, in the deed
of sale, and in the tax declaration; the Registry of Deeds of Pasig, the Office of the Solicitor General; and the
Provincial Fiscal of Pasig, Metro Manila.
SO ORDERED.10
On October 13, 1992, herein petitioner, Jesus San Agustin, received a copy of the abovecited decision. He-claimed this was the
first time he became aware of the case of her aunt, Macaria Vda. de Caiquep who, according to him, died sometime in 1974.
Claiming that he was the present occupant of the property and the heir of Macaria, he filed his "Motion to Reopen
Reconstitution Proceedings''11 on October 27, 1992. On December 3, 1992, RTC issued an order denying said motion.12
Petitioner filed an appeal with the Court of Appeals, which, as earlier stated, was denied in its decision of May 19, 1995.
Petitioner moved for a reconsideration, but it was denied in a resolution dated September 11, 1995.13
Thus, the present petition, attributing the following errors to the court a quo:
A.
THE RESPONDENT COURT GRAVELY ERRED IN HOLDING THAT LRC CASE NO. R-4659 BEING ONLY A
PETITION FOR THE ISSUANCE OF A NEW OWNER'S DUPLICATE OF TITLE, THERE IS NO NEED OF PERSONAL
NOTICE TO THE PETITIONER, THE ACTUAL POSSESSOR [WHO HAS] AND ACTUALLY BEEN PAYING THE
REAL ESTATE TAX, DESPITE PRIVATE RESPONDENT'S KNOWLEDGE OF ACTUAL POSSESSION OF AND
INTEREST OVER THE PROPERTY COVERED BY TCT NO. 436465.14
B.
RESPONDENT COURT GRAVELY ERRED IN HOLDING THAT THE SALE BETWEEN THE PRIVATE RESPONDENT
AND MACARIA VDA. DE CAIQUEP IS NOT NULL AND VOID AND UNDER ARTICLE 1409 OF THE CIVIL CODE
SPECIFICALLY PARAGRAPH (7) THEREOF WHICH REFERS TO CONTRACTS EXPRESSLY PROHIBITED OR
DECLARED VOID BY LAW.15
Considering the above assignment of errors, let us resolve the corresponding issues raised by petitioner.
The first issue involves private respondent's alleged failure to send notice to petitioner who is the actual possessor of the
disputed lot. Stated briefly, is petitioner entitled to notice? Our finding is in the negative.
Presidential Decree No. 1529, otherwise known as the "Property Registration Decree" is decisive. It provides:
Sec. 109. Notice and replacement of lost duplicate certificate. — In case of loss or theft of an owner's duplicate certificate of
title, due notice under oath shall be sent by the owner or by someone in his behalf to the Register of Deeds of the province or
city where the land lies as soon as the loss or theft is discovered. If a duplicate certificate is lost or destroyed, or cannot be
produced by a person applying for the entry of a new certificate to him or for :the registration of any instrument, a sworn
statement of the fact of such loss or destruction may be filed by the registered owner or other person it interest and registered.
Upon the petition of the registered owner or other person in interest, the court may, after notice and due hearing, direct the
issuance of a new duplicate certificate, which shall contain a memorandum of the fact that it is issued in place of the lost
duplicate certificate, but shall in all respects be entitled to like faith and credit as the original duplicate, and shall thereafter be
regarded as such for all purposes of this decree.
In Office of Court Administrator vs. Matas, A.M. No. RTJ-92-836, 247 SCRA 9, 16-17 (1995), we held:
In the case at bar, the respective certificate of title of the properties in question on file with the Register of Deeds are existing,
and it is the owner's copy of the certificate of title that was alleged to have been lost or destroyed. Thus, it is Section 109 of P.D.
1529 which was approved on June 11, 1978 that becomes effective and is applicable, a reading of which shows that it is
practically the same as Section 109 of Act No. 496, governing reconstitution of a duplicate certificate of title lost or destroyed.
Consequently, it is sufficient that the notice under Section 109 is sent to the Register of Deeds and to those persons who are
known to have, or appear to have, an interest in the property as shown in the Memorandum of encumbrances at the back of the
original or transfer certificate of title on file in the office of the Register of Deeds. From a legal standpoint, there are no other
interested parties who should be notified, except those abovementioned since they are the only ones who may be deemed to have
a claim to the property involved. A person dealing with registered is not charged with notice of encumbrances not annotated on
the back of the title. (Emphasis supplied.)
Here, petitioner does not appear to have an interest in the property based on the memorandum of encumbrances annotated at the
back of the title. His claim, that he is an heir (nephew) of the original owner of the lot covered by the disputed lot and the
present occupant thereof is not annotated in the said memorandum of encumbrances. Neither was his claim entered on the
Certificate of Titles in the name of their original/former owners on file with the Register of Deeds at the time of the filing or
pendency of LRC Case No. R-4659. Clearly, petitioner is not entitled to notice.
Noteworthy is the fact that there was compliance by private respondent of the RTC's order of publication of the petition in a
newspaper of general circulation. This is sufficient notice of the petition to the public at large.
Petitioner contends that as possessor or actual occupant of the lot in controversy, he is entitled under the law to be notified. He
relies on Alabang Development Corporation vs. Valenzuela, G.R. No. L-54094, 116 SCRA 261, 277 (1982)) which held that in
reconstitution proceedings, courts must make sure that indispensable parties, i.e.. the actual owners and possessors of the lands
involved, are duly served with actual and personal notice of the petition. As pointed out by the appellate court, his reliance
on Alabang is misplaced because the cause of action in that case is based on Republic Act i No. 26, entitled "An Act Providing
A Special Procedure for the Reconstitution of Torrens Certificate of Title Lost or Destroyed," while the present case is based on
Section 109 of P.D. 1529 as above explained.
Under Republic Act No. 26, reconstitution is validly made only in case the original copy of the certificate of title with the
Register of Deeds is lost or destroyed. And if no notice of the date of hearing of a reconstitution case is served on a possessor or
one having interest in the property involved, he is deprived of his day in court and the order of reconstitution is null and
void.16 The case at bar is not for reconstitution, but merely for replacement of lost duplicate certificate.
On the second assigned error, petitioner contends that Exhibit "D" is null and void under Article 1409 of the Civil Code,
specifically paragraph (7),17 because the deed of sale was executed within the five-year prohibitory period under
Commonwealth Act No. 141, as amended, otherwise known as "The Public Land Act."18
We find petitioner's contention less than meritorious. We agree with respondent court that the proscription under Com. Act No.
141 on sale within the 5-year restrictive period refers to homestead lands only. Here the lot in dispute is not a homestead land,
as found by the trial and appellate courts. Said lot is owned by GSIS, under TCT No. 10028 in its proprietary capacity.
Moreover, as far as the violation of the 5-year restrictive condition imposed by GSIS in its contract with petitioner's
predecessor-in-interest is concerned, it is the GSIS and not petitioner who had a cause of action against private respondent. Vide
the instructive case of Sarmiento vs. Salud:
The condition that the appellees Sarmiento spouses could not resell the property except to the People's Homesite and
Housing Corporation (PHHC for short) within the next 25 years after appellees' purchasing the lot is manifestly a
condition in favor of the PHHC, and not one in favor of the Sarmiento spouses. The condition conferred no
actionable right on appellees herein, since it operated as a restriction upon their jus disponendi of the property they
bought, and thus limited their right of ownership. It follows that on the assumption that the mortgage to appellee
Salud and the foreclosure sale violated the condition in the Sarmiento contract, only the PHHC was entitled to invoke
the condition aforementioned, and not the Sarmientos. The validity or invalidity of the sheriff's foreclosure sale to
appellant Salud thus violative of its right of exclusive reacquisition; but it (PHHC) also could waive the condition and
treat the sale as good, in which event, the sale can not be assailed for breach of the condition aforestated.19
In this case, the GSIS has not filed any action for the annulment of Exhibit "D", nor for the forfeiture of the lot in question. In
our view, the contract of sale remains valid between the parties, unless and until annulled in the proper suit filed by the rightful
party, the GSIS. For now, the said contract of sale is binding upon the heirs of Macaria Vda. de Caiquep, including petitioner
34
who alleges to be one of her heirs, in line with the rule that heirs are bound by contracts entered into by their predecessors-in-
interest.20
We are not unmindful of the social justice policy of R.A. 8291 otherwise known as "Government Service Insurance Act of
1997" in granting housing assistance to the less-privileged GSIS members and their dependents payable at an affordable
payment scheme.21 This is the same policy which the 5-year restrictive clause in the contract seeks to implement by stating in
the encumbrance itself annotated at the back of TCT No. 436465 that, "The purpose of the sale is to aid the vendee in acquiring
a lot for himself/themselves and not to provide him/them with a means for speculation or profit by a future assignment of
his/their right herein acquired or the resale of the lot through rent, lease or subletting to others of the lot and subject of this deed,
. . . within five (5) years from the date final and absolute ownership thereof becomes vested in the vendee, except in cases of
hereditary succession or resale in favor of the vendor." 22 However, absent the proper action taken by the GSIS as the original
vendor referred to, the contract between petitioner's predecessor-in-interest and private respondent deserves to be upheld. For as
pointed out by said private respondent, it is protected by the Constitution under Section 10, Article III, of the Bill of Rights
stating that, "No law impairing the obligation of contracts shall be passed." Much as we would like to see a salutary policy
triumph, that provision of the Constitution duly calls for compliance.
More in point, however, is the fact that, following Sarmiento v. Salud,23 "Even if the transaction between the original awardee
and herein petitioner were wrongful, still, as between themselves, the purchaser and the seller were both in pari delicto,
being participes criminis as it were." As in Sarmiento, in this case both were aware of the existence of the stipulated condition
in favor of the original seller, GSIS, yet both entered into an agreement violating said condition and nullifying its effects.
Similarly, as Acting Chief Justice JBL Reyes concluded in Sarmiento, "Both parties being equally guilty, neither is entitled to
complain against the other. Having entered into the transaction with open eyes, and having benefited from it, said parties should
be held in estoppel to assail and annul their own deliberate acts."
WHEREFORE, the appeal is DENIED, and the decision of the respondent court is AFFIRMED.

35