competent jurisdiction in the City of Manila, waiving for this purpose any other venue.
1. EN BANC Our right to be notified of the acceptance and approval of this indemnity agreement is
[G.R. No. L-8437. November 28, 1956.]
ESTATE OF K. H. HEMADY, deceased, vs. LUZON SURETY CO., INC., claimant-Appellant.
DECISION
REYES, J. B. L., J.:
Appeal by Luzon Surety Co., Inc., from an order of the Court of First Instance of Rizal,
presided by Judge Hermogenes Caluag, dismissing its claim against the Estate of K. H.
Hemady (Special Proceeding No. Q-293) for failure to state a cause of action.
The Luzon Surety Co. had filed a claim against the Estate based on twenty different
indemnity agreements, or counter bonds, each subscribed by a distinct principal and
by the deceased K. H. Hemady, a surety solidary guarantor) in all of them, in
consideration of the Luzon Surety Co.’s of having guaranteed, the various principals in
favor of different creditors. The twenty counterbonds, or indemnity agreements, all
contained the following stipulations:chanroblesvirtuallawlibrary
“Premiums. — As consideration for this suretyship, the undersigned jointly and severally,
agree to pay the COMPANY the sum of ________________ (P______) pesos, Philippines
Currency, in advance as premium there of for every __________ months or fractions
thereof, this ________ or any renewal or substitution thereof is in effect.
Indemnity. — The undersigned, jointly and severally, agree at all times to indemnify the
COMPANY and keep it indemnified and hold and save it harmless from and against any
and all damages, losses, costs, stamps, taxes, penalties, charges, and expenses of
whatsoever kind and nature which the COMPANY shall or may, at any time sustain or
incur in consequence of having become surety upon this bond or any extension,
renewal, substitution or alteration thereof made at the instance of the undersigned or
any of them or any order executed on behalf of the undersigned or any of them; chan
roblesvirtualawlibraryand to pay, reimburse and make good to the COMPANY, its
successors and assigns, all sums and amount of money which it or its representatives
shall pay or cause to be paid, or become liable to pay, on account of the undersigned
or any of them, of whatsoever kind and nature, including 15% of the amount involved in
the litigation or other matters growing out of or connected therewith for counsel or
attorney’s fees, but in no case less than P25. It is hereby further agreed that in case of
extension or renewal of this ________ we equally bind ourselves for the payment thereof
under the same terms and conditions as above mentioned without the necessity of
executing another indemnity agreement for the purpose and that we hereby equally
waive our right to be notified of any renewal or extension of this ________ which may be
granted under this indemnity agreement.
Interest on amount paid by the Company. — Any and all sums of money so paid by the
company shall bear interest at the rate of 12% per annum which interest, if not paid, will
be accummulated and added to the capital quarterly order to earn the same interests
as the capital and the total sum thereof, the capital and interest, shall be paid to the
COMPANY as soon as the COMPANY shall have become liable therefore, whether it
shall have paid out such sums of money or any part thereof or not.
xxx xxx xxx
Waiver. — It is hereby agreed upon by and between the undersigned that any question
which may arise between them by reason of this document and which has to be
submitted for decision to Courts of Justice shall be brought before the Court of
hereby likewise waived.
xxx xxx xxx
Our Liability Hereunder. — It shall not be necessary for the COMPANY to bring suit
against the principal upon his default, or to exhaust the property of the principal, but the
liability hereunder of the undersigned indemnitor shall be jointly and severally, a primary
one, the same as that of the principal, and shall be exigible immediately upon the
occurrence of such default.” (Rec. App. pp. 98- 102.)
The Luzon Surety Co., prayed for allowance, as a contingent claim, of the value of the
twenty bonds it had executed in consideration of the counterbonds, and further asked
for judgment for the unpaid premiums and documentary stamps affixed to the bonds,
with 12 per cent interest thereon.
Before answer was filed, and upon motion of the administratrix of Hemady’s estate, the
lower court, by order of September 23, 1953, dismissed the claims of Luzon Surety Co., on
two grounds:chanroblesvirtuallawlibrary (1) that the premiums due and cost of
documentary stamps were not contemplated under the indemnity agreements to be a
part of the undertaking of the guarantor (Hemady), since they were not liabilities
incurred after the execution of the counterbonds; chan roblesvirtualawlibraryand (2)
that “whatever losses may occur after Hemady’s death, are not chargeable to his
estate, because upon his death he ceased to be guarantor.”
Taking up the latter point first, since it is the one more far reaching in effects, the
reasoning of the court below ran as follows:chanroblesvirtuallawlibrary
“The administratrix further contends that upon the death of Hemady, his liability as a
guarantor terminated, and therefore, in the absence of a showing that a loss or
damage was suffered, the claim cannot be considered contingent. This Court believes
that there is merit in this contention and finds support in Article 2046 of the new Civil
Code. It should be noted that a new requirement has been added for a person to
qualify as a guarantor, that is:chanroblesvirtuallawlibrary integrity. As correctly pointed
out by the Administratrix, integrity is something purely personal and is not transmissible.
Upon the death of Hemady, his integrity was not transmitted to his estate or successors.
Whatever loss therefore, may occur after Hemady’s death, are not chargeable to his
estate because upon his death he ceased to be a guarantor.
Another clear and strong indication that the surety company has exclusively relied on
the personality, character, honesty and integrity of the now deceased K. H. Hemady,
was the fact that in the printed form of the indemnity agreement there is a paragraph
entitled ‘Security by way of first mortgage, which was expressly waived and renounced
by the security company. The security company has not demanded from K. H. Hemady
to comply with this requirement of giving security by way of first mortgage. In the
supporting papers of the claim presented by Luzon Surety Company, no real property
was mentioned in the list of properties mortgaged which appears at the back of the
indemnity agreement.” (Rec. App., pp. 407-408).
We find this reasoning untenable. Under the present Civil Code (Article 1311), as well as
under the Civil Code of 1889 (Article 1257), the rule is that —
“Contracts take effect only as between the parties, their assigns and heirs, except in the
case where the rights and obligations arising from the contract are not transmissible by
their nature, or by stipulation or by provision of law.”
While in our successional system the responsibility of the heirs for the debts of their
decedent cannot exceed the value of the inheritance they receive from him, the
principle remains intact that these heirs succeed not only to the rights of the deceased
but also to his obligations. Articles 774 and 776 of the New Civil Code (and Articles 659
and 661 of the preceding one) expressly so provide, thereby confirming Article 1311
already quoted.
“ART. 774. — Succession is a mode of acquisition by virtue of which the property, rights
and obligations to the extent of the value of the inheritance, of a person are transmitted
through his death to another or others either by his will or by operation of law.”
“ART. 776. — The inheritance includes all the property, rights and obligations of a person
which are not extinguished by his death.”
In Mojica vs. Fernandez, 9 Phil. 403, this Supreme Court ruled:chanroblesvirtuallawlibrary
“Under the Civil Code the heirs, by virtue of the rights of succession are subrogated to all
the rights and obligations of the deceased (Article 661) and cannot be regarded as
third parties with respect to a contract to which the deceased was a party, touching
the estate of the deceased (Barrios vs. Dolor, 2 Phil. 44).
xxx xxx xxx
“The principle on which these decisions rest is not affected by the provisions of the new
Code of Civil Procedure, and, in accordance with that principle, the heirs of a
deceased person cannot be held to be “third persons” in relation to any contracts
touching the real estate of their decedent which comes in to their hands by right of
inheritance; chan roblesvirtualawlibrarythey take such property subject to all the
obligations resting thereon in the hands of him from whom they derive their rights.”
(See also Galasinao vs. Austria, 51 Off. Gaz. (No. 6) p. 2874 and de Guzman vs. Salak, 91
Phil., 265).
The binding effect of contracts upon the heirs of the deceased party is not altered by
the provision in our Rules of Court that money debts of a deceased must be liquidated
and paid from his estate before the residue is distributed among said heirs (Rule 89). The
reason is that whatever payment is thus made from the estate is ultimately a payment
by the heirs and distributees, since the amount of the paid claim in fact diminishes or
reduces the shares that the heirs would have been entitled to receive.
Under our law, therefore, the general rule is that a party’s contractual rights and
obligations are transmissible to the successors. The rule is a consequence of the
progressive “depersonalization” of patrimonial rights and duties that, as observed by
Victorio Polacco, has characterized the history of these institutions. From the Roman
concept of a relation from person to person, the obligation has evolved into a relation
from patrimony to patrimony, with the persons occupying only a representative position,
barring those rare cases where the obligation is strictly personal, i.e., is contracted intuitu
personae, in consideration of its performance by a specific person and by no other. The
transition is marked by the disappearance of the imprisonment for debt.
Of the three exceptions fixed by Article 1311, the nature of the obligation of the surety or
guarantor does not warrant the conclusion that his peculiar individual qualities are
contemplated as a principal inducement for the contract. What did the creditor Luzon
Surety Co. expect of K. H. Hemady when it accepted the latter as surety in the
counterbonds? Nothing but the reimbursement of the moneys that the Luzon Surety Co.
might have to disburse on account of the obligations of the principal debtors. This
reimbursement is a payment of a sum of money, resulting from an obligation to
give; chan roblesvirtualawlibraryand to the Luzon Surety Co., it was indifferent that the
reimbursement should be made by Hemady himself or by some one else in his behalf, so
long as the money was paid to it.
The second exception of Article 1311, p. 1, is intransmissibility by stipulation of the parties.
Being exceptional and contrary to the general rule, this intransmissibility should not be
easily implied, but must be expressly established, or at the very least, clearly inferable
from the provisions of the contract itself, and the text of the agreements sued upon
nowhere indicate that they are non-transferable.
“(b) Intransmisibilidad por pacto. — Lo general es la transmisibilidad de darechos y
obligaciones; chan roblesvirtualawlibraryle excepcion, la intransmisibilidad. Mientras
nada se diga en contrario impera el principio de la transmision, como elemento natural
a toda relacion juridica, salvo las personalisimas. Asi, para la no transmision, es menester
el pacto expreso, porque si no, lo convenido entre partes trasciende a sus herederos.
Siendo estos los continuadores de la personalidad del causante, sobre ellos recaen los
efectos de los vinculos juridicos creados por sus antecesores, y para evitarlo, si asi se
quiere, es indespensable convension terminante en tal sentido.
Por su esencia, el derecho y la obligacion tienden a ir más allá de las personas que les
dieron vida, y a ejercer presion sobre los sucesores de esa persona; chan
roblesvirtualawlibrarycuando no se quiera esto, se impone una estipulacion limitativa
expresamente de la transmisibilidad o de cuyos tirminos claramente se deduzca la
concresion del concreto a las mismas personas que lo otorgon.” (Scaevola, Codigo
Civil, Tomo XX, p. 541-542) (Emphasis supplied.)
Because under the law (Article 1311), a person who enters into a contract is deemed to
have contracted for himself and his heirs and assigns, it is unnecessary for him to
expressly stipulate to that effect; chan roblesvirtualawlibraryhence, his failure to do so is
no sign that he intended his bargain to terminate upon his death. Similarly, that the
Luzon Surety Co., did not require bondsman Hemady to execute a mortgage indicates
nothing more than the company’s faith and confidence in the financial stability of the
surety, but not that his obligation was strictly personal.
The third exception to the transmissibility of obligations under Article 1311 exists when
they are “not transmissible by operation of law”. The provision makes reference to those
cases where the law expresses that the rights or obligations are extinguished by death,
as is the case in legal support (Article 300), parental authority (Article 327), usufruct
(Article 603), contracts for a piece of work (Article 1726), partnership (Article 1830 and
agency (Article 1919). By contract, the articles of the Civil Code that regulate guaranty
or suretyship (Articles 2047 to 2084) contain no provision that the guaranty is
extinguished upon the death of the guarantor or the surety.
The lower court sought to infer such a limitation from Art. 2056, to the effect that “one
who is obliged to furnish a guarantor must present a person who possesses integrity,
capacity to bind himself, and sufficient property to answer for the obligation which he
guarantees”. It will be noted, however, that the law requires these qualities to be
present only at the time of the perfection of the contract of guaranty. It is self-evident
that once the contract has become perfected and binding, the supervening
incapacity of the guarantor would not operate to exonerate him of the eventual liability
he has contracted; chan roblesvirtualawlibraryand if that be true of his capacity to bind
himself, it should also be true of his integrity, which is a quality mentioned in the article
alongside the capacity.
The foregoing concept is confirmed by the next Article 2057, that runs as
follows:chanroblesvirtuallawlibrary
“ART. 2057. — If the guarantor should be convicted in first instance of a crime involving
dishonesty or should become insolvent, the creditor may demand another who has all
the qualifications required in the preceding article. The case is excepted where the
creditor has required and stipulated that a specified person should be guarantor.”
From this article it should be immediately apparent that the supervening dishonesty of
the guarantor (that is to say, the disappearance of his integrity after he has become
bound) does not terminate the contract but merely entitles the creditor to demand a
replacement of the guarantor. But the step remains optional in the
creditor:chanroblesvirtuallawlibrary it is his right, not his duty; chan
roblesvirtualawlibraryhe may waive it if he chooses, and hold the guarantor to his
bargain. Hence Article 2057 of the present Civil Code is incompatible with the trial
court’s stand that the requirement of integrity in the guarantor or surety makes the
latter’s undertaking strictly personal, so linked to his individuality that the guaranty
automatically terminates upon his death.
The contracts of suretyship entered into by K. H. Hemady in favor of Luzon Surety Co. not
being rendered intransmissible due to the nature of the undertaking, nor by the
stipulations of the contracts themselves, nor by provision of law, his eventual liability
thereunder necessarily passed upon his death to his heirs. The contracts, therefore, give
rise to contingent claims provable against his estate under section 5, Rule 87 (2 Moran,
1952 ed., p. 437; chan roblesvirtualawlibraryGaskell & Co. vs. Tan Sit, 43 Phil. 810, 814).
“The most common example of the contigent claim is that which arises when a person is
bound as surety or guarantor for a principal who is insolvent or dead. Under the ordinary
contract of suretyship the surety has no claim whatever against his principal until he
himself pays something by way of satisfaction upon the obligation which is secured.
When he does this, there instantly arises in favor of the surety the right to compel the
principal to exonerate the surety. But until the surety has contributed something to the
payment of the debt, or has performed the secured obligation in whole or in part, he
has no right of action against anybody — no claim that could be reduced to judgment.
(May vs. Vann, 15 Pla., 553; chan roblesvirtualawlibraryGibson vs. Mithell, 16 Pla.,
519; chan roblesvirtualawlibraryMaxey vs. Carter, 10 Yarg. [Tenn.], 521 Reeves vs.
Pulliam, 7 Baxt. [Tenn.], 119; chan roblesvirtualawlibraryErnst vs. Nou, 63 Wis., 134.)”
For Defendant administratrix it is averred that the above doctrine refers to a case where
the surety files claims against the estate of the principal debtor; chan
roblesvirtualawlibraryand it is urged that the rule does not apply to the case before us,
where the late Hemady was a surety, not a principal debtor. The argument evinces a
superficial view of the relations between parties. If under the Gaskell ruling, the Luzon
Surety Co., as guarantor, could file a contingent claim against the estate of the
principal debtors if the latter should die, there is absolutely no reason why it could not
file such a claim against the estate of Hemady, since Hemady is a solidary co-debtor of
his principals. What the Luzon Surety Co. may claim from the estate of a principal debtor
it may equally claim from the estate of Hemady, since, in view of the existing solidarity,
the latter does not even enjoy the benefit of exhaustion of the assets of the principal
debtor.
The foregoing ruling is of course without prejudice to the remedies of the administratrix
against the principal debtors under Articles 2071 and 2067 of the New Civil Code.
Our conclusion is that the solidary guarantor’s liability is not extinguished by his death,
and that in such event, the Luzon Surety Co., had the right to file against the estate a
contingent claim for reimbursement. It becomes unnecessary now to discuss the
estate’s liability for premiums and stamp taxes, because irrespective of the solution to
this question, the Luzon Surety’s claim did state a cause of action, and its dismissal was
erroneous.
Wherefore, the order appealed from is reversed, and the records are ordered
remanded to the court of origin, with instructions to proceed in accordance with law.
Costs against the Administratrix- Appellee. SO ORDERED.
Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion,
Endencia and Felix, JJ., concur.
2.
G.R. No. L-68053 May 7, 1990
LAURA ALVAREZ, FLORA ALVAREZ and RAYMUNDO ALVAREZ, petitioners,
vs.
THE HONORABLE INTERMEDIATE APELLATE COURT and JESUS YANES, ESTELITA YANES,
ANTONIO YANES, ROSARIO YANES, and ILUMINADO YANES, respondents.
Francisco G. Banzon for petitioner.
Renecio R. Espiritu for private respondents.
FERNAN, C.J.:
This is a petition for review on certiorari seeking the reversal of: (a) the decision of the
Fourth Civil Cases Division of the Intermediate Appellate Court dated August 31, 1983 in
AC-G.R. CV No. 56626 entitled "Jesus Yanes et al. v. Dr. Rodolfo Siason et
al." affirming the decision dated July 8, 1974 of the Court of First Instance of Negros
Occidental insofar as it ordered the petitioners to pay jointly and severally the private
respondents the sum of P20,000.00 representing the actual value of Lots Nos. 773-A and
773-B of the cadastral survey of Murcia, Negros Occidental and reversing the subject
decision insofar as it awarded the sums of P2,000.00, P5,000.00 and P2,000.00 as actual
damages, moral damages and attorney's fees, respectively and (b) the resolution of
said appellate court dated May 30, 1984, denying the motion for reconsideration of its
decision.
The real properties involved are two parcels of land identified as Lot 773-A and Lot 773-B
which were originally known as Lot 773 of the cadastral survey of Murcia, Negros
Occidental. Lot 773, with an area of 156,549 square meters, was registered in the name
of the heirs of Aniceto Yanes under Original Certificate of Title No. RO-4858 (8804) issued
on October 9, 1917 by the Register of Deeds of Occidental Negros (Exh. A).
Aniceto Yanes was survived by his children, Rufino, Felipe and Teodora. Herein private
respondents, Estelita, Iluminado and Jesus, are the children of Rufino who died in 1962
while the other private respondents, Antonio and Rosario Yanes, 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 On October 11, 1963, a decision was rendered by the Court of First Instance of Negros
823 as she could not attend to the other portions of the two lots which had a total area Occidental in Civil Case No. 5022, the dispositive portion of which reads:
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
WHEREFORE, judgment is rendered, ordering the defendant Rosendo
children left the province to settle in other places as a result of the outbreak of World
Alvarez to reconvey to the plaintiffs lots Nos. 773 and 823 of the
War II. According to Estelita, from the "Japanese time up to peace time", they did not
Cadastral Survey of Murcia, Negros Occidental, now covered by
visit the parcels of land in question but "after liberation", when her brother went there to
Transfer Certificates of Title Nos. T-23165 and T-23166 in the name of
get their share of the sugar produced therein, he was informed that Fortunato Santiago,
said defendant, and thereafter to deliver the possession of said lots to
Fuentebella (Puentevella) and Alvarez were in possession of Lot 773. 2
the plaintiffs. No special pronouncement as to costs.

It is on record that on May 19, 1938, Fortunato D. Santiago was issued Transfer Certificate
SO ORDERED. 16
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. It will be noted that the above-mentioned manifestation of Jesus Yanes was not
mentioned in the aforesaid decision.
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 However, execution of said decision proved unsuccessful with respect to Lot 773. In his
(28192 ). 4 Said transfer certificate of title also contains a certification to the effect that return of service dated October 20, 1965, the sheriff stated that he discovered that Lot
Lot 773-B was originally registered under OCT No. 8804. 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
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 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
After Fuentebella's death and during the settlement of his estate, the administratrix
declaration of nullity of TCT Nos. T-23165 and T-23166 issued to Rosendo
thereof (Arsenia R. Vda. de Fuentebella, his wife) filed in Special Proceedings No. 4373 in
Alvarez. 18 Thereafter, the court required Rodolfo Siason to produce the certificates of
the Court of First Instance of Negros Occidental, a motion requesting authority to sell
title covering Lots 773 and 823.
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 Expectedly, Siason filed a manifestation stating that he purchased Lots 773-A, 773-B and
773-B were respectively issued to Rosendo Alvarez. 10 658, 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
Two years later or on May 26, 1960, Teodora Yanes and the children of her brother
thereto; and that the decision in Civil Case No. 5022 could neither be enforced against
Rufino, namely, Estelita, Iluminado and Jesus, filed in the Court of First Instance of Negros
him not only because he was not a party-litigant therein but also because it had long
Occidental a complaint against Fortunato Santiago, Arsenia Vda. de Fuentebella,
become final and executory. 20 Finding said manifestation to be well-founded, the
Alvarez and the Register of Deeds of Negros Occidental for the "return" of the ownership
cadastral court, in its order of September 4, 1965, nullified its previous order requiring
and possession of Lots 773 and 823. They also prayed that an accounting of the
Siason to surrender the certificates of title mentioned therein. 21
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 In 1968, the Yaneses filed an ex-parte motion for the issuance of an alias writ of
pay plaintiffs P500.00 as damages in the form of attorney's fees. 11 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
During the pendency in court of said case or on November 13, 1961, Alvarez sold Lots
not be enforced against Siason as he was not a party in the case. 23
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 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
Meanwhile, on November 6, 1962, Jesus Yanes, in his own behalf and in behalf of the
Yaneses prayed for the cancellation of TCT Nos. T-19291 and 19292 issued to Siason (sic)
other plaintiffs, and assisted by their counsel, filed a manifestation in Civil Case No. 5022
for being null and void; the issuance of a new certificate of title in the name of the
stating that the therein plaintiffs "renounce, forfeit and quitclaims (sic) any claim,
Yaneses "in accordance with the sheriffs return of service dated October 20, 1965;"
monetary or otherwise, against the defendant Arsenia Vda. de Fuentebella in
Siason's delivery of possession of Lot 773 to the Yaneses; and if, delivery thereof could
connection with the above-entitled case." 15
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 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.
SO ORDERED.
Gutierrez, Jr., Feliciano and Cortes, JJ., concur.
Bidin J., took no part.
3.
SECOND DIVISION
[G.R. No. 149926. February 23, 2005]
UNION BANK OF THE PHILIPPINES, petitioner, vs. EDMUND SANTIBAEZ and FLORENCE
SANTIBAEZ ARIOLA, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court which seeks the reversal of the Decision[1] of the Court of Appeals dated May 30,
2001 in CA-G.R. CV No. 48831 affirming the dismissal[2] of the petitioners complaint in Civil
Case No. 18909 by the Regional Trial Court (RTC) of Makati City, Branch 63.
The antecedent facts are as follows:
On May 31, 1980, the First Countryside Credit Corporation (FCCC) and Efraim M.
Santibaez entered into a loan agreement[3] in the amount of P128,000.00. The amount
was intended for the payment of the purchase price of one (1) unit Ford 6600
Agricultural All-Purpose Diesel Tractor. In view thereof, Efraim and his son, Edmund,
executed a promissory note in favor of the FCCC, the principal sum payable in five
equal annual amortizations of P43,745.96 due on May 31, 1981 and every May
31st thereafter up to May 31, 1985.
On December 13, 1980, the FCCC and Efraim entered into another loan
agreement,[4] this time in the amount of P123,156.00. It was intended to pay the balance
of the purchase price of another unit of Ford 6600 Agricultural All-Purpose Diesel Tractor,
with accessories, and one (1) unit Howard Rotamotor Model AR 60K. Again, Efraim and
his son, Edmund, executed a promissory note for the said amount in favor of the FCCC.
Aside from such promissory note, they also signed a Continuing Guaranty
Agreement[5] for the loan dated December 13, 1980.
Sometime in February 1981, Efraim died, leaving a holographic will.[6] Subsequently
in March 1981, testate proceedings commenced before the RTC of Iloilo City, Branch 7,
docketed as Special Proceedings No. 2706. On April 9, 1981, Edmund, as one of the
heirs, was appointed as the special administrator of the estate of the
decedent.[7] During the pendency of the testate proceedings, the surviving heirs,
Edmund and his sister Florence Santibaez Ariola, executed a Joint Agreement[8] dated
July 22, 1981, wherein they agreed to divide between themselves and take possession
of the three (3) tractors; that is, two (2) tractors for Edmund and one (1) tractor for
Florence. Each of them was to assume the indebtedness of their late father to FCCC,
corresponding to the tractor respectively taken by them.
On August 20, 1981, a Deed of Assignment with Assumption of Liabilities[9] was
executed by and between FCCC and Union Savings and Mortgage Bank, wherein the
FCCC as the assignor, among others, assigned all its assets and liabilities to Union
Savings and Mortgage Bank.
Demand letters[10] for the settlement of his account were sent by petitioner Union
Bank of the Philippines (UBP) to Edmund, but the latter failed to heed the same and
refused to pay. Thus, on February 5, 1988, the petitioner filed a Complaint[11] for sum of
money against the heirs of Efraim Santibaez, Edmund and Florence, before the RTC of
Makati City, Branch 150, docketed as Civil Case No. 18909. Summonses were issued
against both, but the one intended for Edmund was not served since he was in the
United States and there was no information on his address or the date of his return to the
Philippines.[12] Accordingly, the complaint was narrowed down to respondent Florence
S. Ariola.
On December 7, 1988, respondent Florence S. Ariola filed her Answer[13] and
alleged that the loan documents did not bind her since she was not a party thereto.
Considering that the joint agreement signed by her and her brother Edmund was not
approved by the probate court, it was null and void; hence, she was not liable to the
petitioner under the joint agreement.
On January 29, 1990, the case was unloaded and re-raffled to the RTC of Makati
City, Branch 63.[14] Consequently, trial on the merits ensued and a decision was
subsequently rendered by the court dismissing the complaint for lack of merit. The
decretal portion of the RTC decision reads:
WHEREFORE, judgment is hereby rendered DISMISSING the complaint for lack of merit.[15]
The trial court found that the claim of the petitioner should have been filed with
the probate court before which the testate estate of the late Efraim Santibaez was
pending, as the sum of money being claimed was an obligation incurred by the said
decedent. The trial court also found that the Joint Agreement apparently executed by
his heirs, Edmund and Florence, on July 22, 1981, was, in effect, a partition of the estate
of the decedent. However, the said agreement was void, considering that it had not
been approved by the probate court, and that there can be no valid partition until
after the will has been probated. The trial court further declared that petitioner failed to
prove that it was the now defunct Union Savings and Mortgage Bank to which the
FCCC had assigned its assets and liabilities. The court also agreed to the contention of
respondent Florence S. Ariola that the list of assets and liabilities of the FCCC assigned to
Union Savings and Mortgage Bank did not clearly refer to the decedents account.
Ruling that the joint agreement executed by the heirs was null and void, the trial court
held that the petitioners cause of action against respondent Florence S. Ariola must
necessarily fail.
The petitioner appealed from the RTC decision and elevated its case to the Court
of Appeals (CA), assigning the following as errors of the trial court:
1. THE COURT A QUO ERRED IN FINDING THAT THE JOINT AGREEMENT (EXHIBIT
A) SHOULD BE APPROVED BY THE PROBATE COURT.
2. THE COURT A QUO ERRED IN FINDING THAT THERE CAN BE NO VALID
PARTITION AMONG THE HEIRS UNTIL AFTER THE WILL HAS BEEN PROBATED.
3. THE COURT A QUO ERRED IN NOT FINDING THAT THE DEFENDANT HAD
WAIVED HER RIGHT TO HAVE THE CLAIM RE-LITIGATED IN THE ESTATE
PROCEEDING.[16]
The petitioner asserted before the CA that the obligation of the deceased had
passed to his legitimate children and heirs, in this case, Edmund and Florence; the
unconditional signing of the joint agreement marked as Exhibit A estopped respondent
Florence S. Ariola, and that she cannot deny her liability under the said document; as
the agreement had been signed by both heirs in their personal capacity, it was no
longer necessary to present the same before the probate court for approval; the
property partitioned in the agreement was not one of those enumerated in the
holographic will made by the deceased; and the active participation of the heirs,
particularly respondent Florence S. Ariola, in the present ordinary civil action was
tantamount to a waiver to re-litigate the claim in the estate proceedings.
On the other hand, respondent Florence S. Ariola maintained that the money
claim of the petitioner should have been presented before the probate court.[17]
The appellate court found that the appeal was not meritorious and held that the
petitioner should have filed its claim with the probate court as provided under Sections 1
and 5, Rule 86 of the Rules of Court. It further held that the partition made in the
agreement was null and void, since no valid partition may be had until after the will has
been probated. According to the CA, page 2, paragraph (e) of the holographic will
covered the subject properties (tractors) in generic terms when the deceased referred
to them as all other properties. Moreover, the active participation of respondent
Florence S. Ariola in the case did not amount to a waiver. Thus, the CA affirmed the RTC
decision, viz.:
WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court of
Makati City, Branch 63, is hereby AFFIRMED in toto.
SO ORDERED.[18]
In the present recourse, the petitioner ascribes the following errors to the CA:
I.
THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE JOINT AGREEMENT
SHOULD BE APPROVED BY THE PROBATE COURT.
II.
THE COURT OF APPEALS ERRED IN FINDING THAT THERE CAN BE NO VALID PARTITION
AMONG THE HEIRS OF THE LATE EFRAIM SANTIBAEZ UNTIL AFTER THE WILL HAS BEEN
PROBATED.
III.
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE RESPONDENT HAD WAIVED HER
RIGHT TO HAVE THE CLAIM RE-LITIGATED IN THE ESTATE PROCEEDING.
IV.
RESPONDENTS CAN, IN FACT, BE HELD JOINTLY AND SEVERALLY LIABLE WITH THE
PRINCIPAL DEBTOR THE LATE EFRAIM SANTIBAEZ ON THE STRENGTH OF THE CONTINUING
GUARANTY AGREEMENT EXECUTED IN FAVOR OF PETITIONER-APPELLANT UNION BANK.
V.
THE PROMISSORY NOTES DATED MAY 31, 1980 IN THE SUM OF P128,000.00 AND
DECEMBER 13, 1980 IN THE AMOUNT OF P123,000.00 CATEGORICALLY ESTABLISHED THE
FACT THAT THE RESPONDENTS BOUND THEMSELVES JOINTLY AND SEVERALLY LIABLE WITH
THE LATE DEBTOR EFRAIM SANTIBAEZ IN FAVOR OF PETITIONER UNION BANK.[19]
The petitioner claims that the obligations of the deceased were transmitted to the
heirs as provided in Article 774 of the Civil Code; there was thus no need for the probate
court to approve the joint agreement where the heirs partitioned the tractors owned by
the deceased and assumed the obligations related thereto. Since respondent Florence
S. Ariola signed the joint agreement without any condition, she is now estopped from
asserting any position contrary thereto. The petitioner also points out that the
holographic will of the deceased did not include nor mention any of the tractors subject
of the complaint, and, as such was beyond the ambit of the said will. The active
participation and resistance of respondent Florence S. Ariola in the ordinary civil action
against the petitioners claim amounts to a waiver of the right to have the claim
presented in the probate proceedings, and to allow any one of the heirs who executed
the joint agreement to escape liability to pay the value of the tractors under
consideration would be equivalent to allowing the said heirs to enrich themselves to the
damage and prejudice of the petitioner.
The petitioner, likewise, avers that the decisions of both the trial and appellate
courts failed to consider the fact that respondent Florence S. Ariola and her brother
Edmund executed loan documents, all establishing the vinculum juris or the legal bond
between the late Efraim Santibaez and his heirs to be in the nature of a solidary
obligation. Furthermore, the Promissory Notes dated May 31, 1980 and December 13,
1980 executed by the late Efraim Santibaez, together with his heirs, Edmund and
respondent Florence, made the obligation solidary as far as the said heirs are
concerned. The petitioner also proffers that, considering the express provisions of the
continuing guaranty agreement and the promissory notes executed by the named
respondents, the latter must be held liable jointly and severally liable thereon. Thus, there
was no need for the petitioner to file its money claim before the probate court. Finally,
the petitioner stresses that both surviving heirs are being sued in their respective personal
capacities, not as heirs of the deceased.
 In her comment to the petition, respondent Florence S. Ariola maintains that the
petitioner is trying to recover a sum of money from the deceased Efraim Santibaez; thus
the claim should have been filed with the probate court. She points out that at the time
of the execution of the joint agreement there was already an existing probate
proceedings of which the petitioner knew about. However, to avoid a claim in the
probate court which might delay payment of the obligation, the petitioner opted to
require them to execute the said agreement.
According to the respondent, the trial court and the CA did not err in declaring
that the agreement was null and void. She asserts that even if the agreement was
voluntarily executed by her and her brother Edmund, it should still have been subjected
to the approval of the court as it may prejudice the estate, the heirs or third parties.
Furthermore, she had not waived any rights, as she even stated in her answer in the
court a quo that the claim should be filed with the probate court. Thus, the petitioner
could not invoke or claim that she is in estoppel.
Respondent Florence S. Ariola further asserts that she had not signed any
continuing guaranty agreement, nor was there any document presented as evidence
to show that she had caused herself to be bound by the obligation of her late father.
The petition is bereft of merit.
The Court is posed to resolve the following issues: a) whether or not the partition in
the Agreement executed by the heirs is valid; b) whether or not the heirs assumption of
the indebtedness of the deceased is valid; and c) whether the petitioner can hold the
heirs liable on the obligation of the deceased.
At the outset, well-settled is the rule that a probate court has the jurisdiction to
determine all the properties of the deceased, to determine whether they should or
should not be included in the inventory or list of properties to be administered.[20] The
said court is primarily concerned with the administration, liquidation and distribution of
the estate.[21]
In our jurisdiction, the rule is that there can be no valid partition among the heirs
until after the will has been probated:
In testate succession, there can be no valid partition among the heirs until after the will
has been probated. The law enjoins the probate of a will and the public requires it,
because unless a will is probated and notice thereof given to the whole world, the right
of a person to dispose of his property by will may be rendered nugatory. The
authentication of a will decides no other question than such as touch upon the
capacity of the testator and the compliance with those requirements or solemnities
which the law prescribes for the validity of a will.[22]
This, of course, presupposes that the properties to be partitioned are the same
properties embraced in the will.[23] In the present case, the deceased, Efraim Santibaez,
left a holographic will[24] which contained, inter alia, the provision which reads as follows:
(e) All other properties, real or personal, which I own and may be discovered later after
my demise, shall be distributed in the proportion indicated in the immediately
preceding paragraph in favor of Edmund and Florence, my children.
We agree with the appellate court that the above-quoted is an all-encompassing
provision embracing all the properties left by the decedent which might have escaped
his mind at that time he was making his will, and other properties he may acquire
thereafter. Included therein are the three (3) subject tractors. This being so, any partition
involving the said tractors among the heirs is not valid. The joint agreement[25] executed
by Edmund and Florence, partitioning the tractors among themselves, is invalid,
specially so since at the time of its execution, there was already a pending proceeding
for the probate of their late fathers holographic will covering the said tractors.
It must be stressed that the probate proceeding had already acquired jurisdiction
over all the properties of the deceased, including the three (3) tractors. To dispose of
them in any way without the probate courts approval is tantamount to divesting it with
jurisdiction which the Court cannot allow.[26] Every act intended to put an end to
indivision among co-heirs and legatees or devisees is deemed to be a partition,
although it should purport to be a sale, an exchange, a compromise, or any other
transaction.[27] Thus, in executing any joint agreement which appears to be in the nature
of an extra-judicial partition, as in the case at bar, court approval is imperative, and the
heirs cannot just divest the court of its jurisdiction over that part of the estate. Moreover,
it is within the jurisdiction of the probate court to determine the identity of the heirs of
the decedent.[28] In the instant case, there is no showing that the signatories in the joint
agreement were the only heirs of the decedent. When it was executed, the probate of
the will was still pending before the court and the latter had yet to determine who the
heirs of the decedent were. Thus, for Edmund and respondent Florence S. Ariola to
adjudicate unto themselves the three (3) tractors was a premature act, and prejudicial
to the other possible heirs and creditors who may have a valid claim against the estate
of the deceased.
The question that now comes to fore is whether the heirs assumption of the
indebtedness of the decedent is binding. We rule in the negative. Perusing the joint
agreement, it provides that the heirs as parties thereto have agreed to divide between
themselves and take possession and use the above-described chattel and each of
them to assume the indebtedness corresponding to the chattel taken as herein after
stated which is in favor of First Countryside Credit Corp. [29] The assumption of liability was
conditioned upon the happening of an event, that is, that each heir shall take
possession and use of their respective share under the agreement. It was made
dependent on the validity of the partition, and that they were to assume the
indebtedness corresponding to the chattel that they were each to receive. The partition
being invalid as earlier discussed, the heirs in effect did not receive any such tractor. It
follows then that the assumption of liability cannot be given any force and effect.
The Court notes that the loan was contracted by the decedent. The petitioner,
purportedly a creditor of the late Efraim Santibaez, should have thus filed its money
claim with the probate court in accordance with Section 5, Rule 86 of the Revised Rules
of Court, which provides:
Section 5. Claims which must be filed under the notice. If not filed barred; exceptions. All
claims for money against the decedent, arising from contract, express or implied,
whether the same be due, not due, or contingent, all claims for funeral expenses for the
last sickness of the decedent, and judgment for money against the decedent, must be
filed within the time limited in the notice; otherwise they are barred forever, except that
they may be set forth as counterclaims in any action that the executor or administrator
may bring against the claimants. Where an executor or administrator commences an
action, or prosecutes an action already commenced by the deceased in his lifetime,
the debtor may set forth by answer the claims he has against the decedent, instead of
presenting them independently to the court as herein provided, and mutual claims may
be set off against each other in such action; and if final judgment is rendered in favor of
the defendant, the amount so determined shall be considered the true balance against
the estate, as though the claim had been presented directly before the court in the SO ORDERED.
administration proceedings. Claims not yet due, or contingent, may be approved at
their present value. Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

The filing of a money claim against the decedents estate in the probate court is
mandatory.[30] As we held in the vintage case of Py Eng Chong v. Herrera:[31]
[1] Penned by Associate Justice Bienvenido L. Reyes with Associate Justices Eubulo G.
This requirement is for the purpose of protecting the estate of the deceased by Verzola (deceased), and Marina L. Buzon, concurring.
informing the executor or administrator of the claims against it, thus enabling him to [2] Penned by Presiding Judge Julio R. Logarta.
examine each claim and to determine whether it is a proper one which should be
allowed. The plain and obvious design of the rule is the speedy settlement of the affairs [3] Records, pp. 8-12.
of the deceased and the early delivery of the property to the distributees, legatees, or
heirs. `The law strictly requires the prompt presentation and disposition of the claims [4] Id. at 13-18.
against the decedent's estate in order to settle the affairs of the estate as soon as [5] Id. at 19-20.
possible, pay off its debts and distribute the residue.[32]
[6] Exhibit 7.
Perusing the records of the case, nothing therein could hold private respondent
Florence S. Ariola accountable for any liability incurred by her late father. The
[7] Annex A of the Answer, Records, p. 48.
documentary evidence presented, particularly the promissory notes and the continuing [8] Exhibit A.
guaranty agreement, were executed and signed only by the late Efraim Santibaez and
his son Edmund. As the petitioner failed to file its money claim with the probate court, at [9] Exhibit G.
most, it may only go after Edmund as co-maker of the decedent under the said
promissory notes and continuing guaranty, of course, subject to any defenses Edmund
[10] Exhibits E and F.
may have as against the petitioner. As the court had not acquired jurisdiction over the [11] Records, p. 1.
person of Edmund, we find it unnecessary to delve into the matter further.
[12] See Sheriffs Return of Service, Id. at 39.
We agree with the finding of the trial court that the petitioner had not sufficiently
shown that it is the successor-in-interest of the Union Savings and Mortgage Bank to [13] Records, p. 42.
which the FCCC assigned its assets and liabilities.[33] The petitioner in its complaint
alleged that by virtue of the Deed of Assignment dated August 20, 1981 executed by [14] Id. at 83.
and between First Countryside Credit Corporation and Union Bank of the
Philippines[34] However, the documentary evidence[35] clearly reflects that the parties in
[15] Id. at 522.
the deed of assignment with assumption of liabilities were the FCCC, and the Union [16] CA Rollo, p. 43.
Savings and Mortgage Bank, with the conformity of Bancom Philippine Holdings, Inc.
Nowhere can the petitioners participation therein as a party be found. Furthermore, no [17] Id. at 76.
documentary or testimonial evidence was presented during trial to show that Union
Savings and Mortgage Bank is now, in fact, petitioner Union Bank of the Philippines. As [18] Rollo, p. 30.
the trial court declared in its decision:
[19] Id. at 7-8.

[T]he court also finds merit to the contention of defendant that plaintiff failed to prove or [20] See Ortega v. Court of Appeals, 153 SCRA 96 (1987); See also Morales v. CFI of
did not present evidence to prove that Union Savings and Mortgage Bank is now the Cavite, Br. V, 146 SCRA 373 (1986).
Union Bank of the Philippines. Judicial notice does not apply here. The power to take
judicial notice is to [be] exercised by the courts with caution; care must be taken that
[21] See De la Cruz v. Camon, 16 SCRA 886 (1966).
the requisite notoriety exists; and every reasonable doubt upon the subject should be [22] Vda. de Kilayko v. Tengco, 207 SCRA 600 (1992).
promptly resolved in the negative. (Republic vs. Court of Appeals, 107 SCRA 504).[36]
[23] Ralla v. Untalan, 172 SCRA 858 (1989).
This being the case, the petitioners personality to file the complaint is wanting. [24] Exhibit 7.
Consequently, it failed to establish its cause of action. Thus, the trial court did not err in
dismissing the complaint, and the CA in affirming the same. [25] Exhibit A.
IN LIGHT OF ALL THE FOREGOING, the petition is hereby DENIED. The assailed Court [26] See Sandoval v. Santiago, 83 Phil 784 (1949).
of Appeals Decision is AFFIRMED. No costs.
[27] Article 1082, New Civil Code.
[28] See Reyes v. Ysip, 97 Phil 11 (1955). reconvey to respondents Spouses Lumbao the subject property and to pay the latter
attorneys fees and litigation expenses, thus, reversing the Decision[3] of the Regional Trial
[29] See Exhibit 7. Court (RTC) of Pasig City, dated 17 June 1998 which dismissed the Complaint for
Reconveyance with Damages filed by respondents Spouses Lumbao for lack of merit.
[30] See De Bautista v. De Guzman, 125 SCRA 676 (1983).
[31] 70 SCRA 130 (1976). Herein petitioners Virgilio, Victorino, Ernesto and Tadeo, all surnamed Santos, are the
legitimate and surviving heirs of the late Rita Catoc Santos (Rita), who died on 20
[32] Ibid. October 1985. The other petitioners Esperanza Lati and Lagrimas Santos are the
daughters-in-law of Rita.
[33] See Exhibit G.
[34] Records, p. 4. Herein respondents Spouses Jose Lumbao and Proserfina Lumbao are the alleged
owners of the 107-square meter lot (subject property), which they purportedly bought
[35] Exhibit G. from Rita during her lifetime.

[36] Records, p. 521. The facts of the present case are as follows:

On two separate occasions during her lifetime, Rita sold to respondents Spouses
Lumbao the subject property which is a part of her share in the estate of her deceased
4. mother, Maria Catoc (Maria), who died intestate on 19 September 1978. On the first
THIRD DIVISION occasion, Rita sold 100 square meters of her inchoate share in her mothers estate
through a document denominated as Bilihan ng Lupa, dated 17 August
1979.[4] Respondents Spouses Lumbao claimed the execution of the aforesaid
SPS. VIRGILIO F. SANTOS & ESPERANZA G.R. No. 169129 document was witnessed by petitioners Virgilio and Tadeo, as shown by their signatures
LATI SANTOS, SPS.VICTORINO F. SANTOS, & Present: affixed therein. On the second occasion, an additional seven square meters was added
LAGRIMAS SANTOS, ERNESTO F. SANTOS, and to the land as evidenced by a document also denominated as Bilihan ng Lupa, dated 9
TADEO F. SANTOS, YNARES-SANTIAGO, J., January 1981.[5]
Petitioners, Chairperson,
AUSTRIA-MARTINEZ, After acquiring the subject property, respondents Spouses Lumbao took actual
CALLEJO, SR.,* possession thereof and erected thereon a house which they have been occupying as
- versus - CHICO-NAZARIO, and exclusive owners up to the present. As the exclusive owners of the subject property,
NACHURA, JJ. respondents Spouses Lumbao made several verbal demands upon Rita, during her
lifetime, and thereafter upon herein petitioners, for them to execute the necessary
SPS. JOSE LUMBAO and PROSERFINA documents to effect the issuance of a separate title in favor of respondents Spouses
LUMBAO, Promulgated: Lumbao insofar as the subject property is concerned. Respondents Spouses Lumbao
Respondents. alleged that prior to her death, Rita informed respondent Proserfina Lumbao she could
March 28, 2007 not deliver the title to the subject property because the entire property inherited by her
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x and her co-heirs from Maria had not yet been partitioned.

On 2 May 1986, the Spouses Lumbao claimed that petitioners, acting fraudulently and in
conspiracy with one another, executed a Deed of Extrajudicial
DECISION Settlement,[6]adjudicating and partitioning among themselves and the other heirs, the
estate left by Maria, which included the subject property already sold to respondents
Spouses Lumbao and now covered by TCT No. 81729[7] of the Registry of Deeds of Pasig
CHICO-NAZARIO, J.: City.

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised
Rules of Civil Procedure seeking to annul and set aside the Decision[1] and
Resolution[2] of the Court of Appeals in CA-G.R. CV No. 60450 entitled, Spouses Jose
Lumbao and Proserfina Lumbao v. Spouses Virgilio F. Santos and Esperanza Lati, Spouses
Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo F. Santos, dated
8 June 2005 and 29 July 2005, respectively, which granted the appeal filed by herein
respondents Spouses Jose Lumbao and Proserfina Lumbao (Spouses Lumbao) and
ordered herein petitioners Spouses Virgilio F. Santos and Esperanza Lati, Spouses
Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo F. Santos to
On 15 June 1992, respondents Spouses Lumbao, through counsel, sent a formal
demand letter[8] to petitioners but despite receipt of such demand letter, petitioners still
failed and refused to reconvey the subject property to the respondents Spouses
Lumbao. Consequently, the latter filed a Complaint for Reconveyance with
Damages[9] before the RTC of Pasig City.
Petitioners filed their Answer denying the allegations that the subject property
had been sold to the respondents Spouses Lumbao. They likewise denied that the Deed
of Extrajudicial Settlement had been fraudulently executed because the same was duly
published as required by law. On the contrary, they prayed for the dismissal of the
Complaint for lack of cause of action because respondents Spouses Lumbao failed to
comply with the Revised Katarungang Pambarangay Law under Republic Act No. 7160,
otherwise known as the Local Government Code of 1991, which repealed Presidential
Decree No. 1508[10] requiring first resort to barangay conciliation.
Respondents Spouses Lumbao, with leave of court, amended their Complaint
because they discovered that on 16 February 1990, without their knowledge, petitioners
executed a Deed of Real Estate Mortgage in favor of Julieta S. Esplana for the sum
of P30,000.00. The said Deed of Real Estate Mortgage was annotated at the back of TCT
No. PT-81729 on 26 April 1991. Also, in answer to the allegation of the petitioners that
they failed to comply with the mandate of the Revised Katarungang Pambarangay
Law, respondents Spouses Lumbao said that the Complaint was filed directly in court in
order that prescription or the Statute of Limitations may not set in.
During the trial, respondents Spouses Lumbao presented Proserfina Lumbao
and Carolina Morales as their witnesses, while the petitioners presented only the
testimony of petitioner Virgilio.
The trial court rendered a Decision on 17 June 1998, the dispositive portion of
which reads as follows:
Premises considered, the instant complaint is hereby denied
for lack of merit.
Considering that [petitioners] have incurred expenses in
order to protect their interest, [respondents spouses Lumbao] are
hereby directed to pay [petitioners], to wit: 1) the amount
of P30,000.00 as attorneys fees and litigation expenses, and 2) costs of
the suit.[11]
Aggrieved, respondents Spouses Lumbao appealed to the Court of Appeals. On 8 June
2005, the appellate court rendered a Decision, thus:
WHEREFORE, premises considered, the present appeal is
hereby GRANTED. The appealed Decision dated June 17, 1998 of the
Regional Trial Court of Pasig City, Branch 69 in Civil Case No. 62175 is
hereby REVERSED and SET ASIDE. A new judgment is hereby entered
ordering [petitioners] to reconvey 107 square meters of the subject
[property] covered by TCT No. PT-81729 of the Registry of Deeds of
Pasig City, Metro Manila, and to pay to [respondents spouses
Lumbao] the sum of P30,000.00 for attorneys fees and litigation
expenses.
No pronouncement as to costs.[12]
Dissatisfied, petitioners filed a Motion for Reconsideration of the aforesaid
Decision but it was denied in the Resolution of the appellate court dated 29 July 2005 for
lack of merit.
Hence, this Petition.
The grounds relied upon by the petitioners are the following:
I. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN REVERSING THE DECISION OF THE TRIAL COURT,
THEREBY CREATING A VARIANCE ON THE FINDINGS OF FACTS
OF TWO COURTS.
II. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN ORDERING THE PETITIONERS TO RECONVEY THE
SUBJECT [PROPERTY] TO THE RESPONDENTS [SPOUSES
LUMBAO] AND IN NOT RULING THAT THEY ARE GUILTY OF
LACHES, HENCE THEY CANNOT RECOVER
THE LOT ALLEGEDLY SOLD TO THEM.
III. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING HEREIN PETITIONER[S] TO BE IN GOOD
FAITH IN EXECUTING THE DEED OF EXTRAJUDICIAL SETTLEMENT
DATED [2 MAY 1986].
IV. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING THAT PETITIONERS ARE NOT LEGALLY
BOUND TO COMPLY WITH THE SUPPOSED BILIHAN NG LUPA
DATED [17 AUGUST 1979] AND [9 JANUARY 1981] THAT WERE
SUPPOSEDLY EXECUTED BY THE LATE RITA CATOC.
V. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES
LUMBAOS] ACTION FOR RECONVEYANCE WITH DAMAGES
CANNOT BE SUPPORTED WITH AN UNENFORCEABLE
DOCUMENTS, SUCH AS THE BILIHAN NG LUPA DATED [17
AUGUST 1979] AND [9 JANUARY 1981].
VI. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES
LUMBAOS] COMPLAINT FOR RECONVEYANCE IS DISMISSABLE
(SIC) FOR NON COMPLIANCE OF THE MANDATE OF [P.D.
NO.] 1508, AS AMENDED BY Republic Act No. 7160.
VII. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR
IN NOT FINDING THAT RESPONDENTS [SPOUSES LUMBAO]
SHOULD BE HELD LIABLE FOR PETITIONERS CLAIM FOR
DAMAGES AND ATTORNEY[]S FEES.
Petitioners ask this Court to scrutinize the evidence presented in this case,
because they claim that the factual findings of the trial court and the appellate court
are conflicting. They allege that the findings of fact by the trial court revealed that
petitioners Virgilio and Tadeo did not witness the execution of the documents known as
Bilihan ng Lupa; hence, this finding runs counter to the conclusion made by the
appellate court. And even assuming that they were witnesses to the aforesaid
documents, still, respondents Spouses Lumbao were not entitled to the reconveyance of
the subject property because they were guilty of laches for their failure to assert their
rights for an unreasonable length of time. Since respondents Spouses Lumbao had slept
on their rights for a period of more than 12 years reckoned from the date of execution of
the second Bilihan ng Lupa, it would be unjust and unfair to the petitioners if the
respondents will be allowed to recover the subject property.
 Petitioners allege they are in good faith in executing the Deed of Extrajudicial
Settlement because even respondents Spouses Lumbaos witness, Carolina Morales,
testified that neither petitioner Virgilio nor petitioner Tadeo was present during the
execution of the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981. Petitioners
affirm that the Deed of Extrajudicial Settlement was published in a newspaper of
general circulation to give notice to all creditors of the estate subject of partition to
contest the same within the period prescribed by law. Since no claimant appeared to
interpose a claim within the period allowed by law, a title to the subject property was
then issued in favor of the petitioners; hence, they are considered as holders in good
faith and therefore cannot be barred from entering into any subsequent transactions
involving the subject property.
Petitioners also contend that they are not bound by the documents
denominated as Bilihan ng Lupa because the same were null and void for the following
reasons: 1) for being falsified documents because one of those documents made it
appear that petitioners Virgilio and Tadeo were witnesses to its execution and that they
appeared personally before the notary public, when in truth and in fact they did not; 2)
the identities of the properties in the Bilihan ng Lupa, dated 17 August 1979 and 9
January 1981 in relation to the subject property in litigation were not established by the
evidence presented by the respondents Spouses Lumbao; 3) the right of the
respondents Spouses Lumbao to lay their claim over the subject property had already
been barred through estoppel by laches; and 4) the respondents Spouses Lumbaos
claim over the subject property had already prescribed.
Finally, petitioners claim that the Complaint for Reconveyance with Damages
filed by respondents Spouses Lumbao was dismissible because they failed to comply
with the mandate of Presidential Decree No. 1508, as amended by Republic Act No.
7160, particularly Section 412 of Republic Act No. 7160.
Given the foregoing, the issues presented by the petitioners may be restated
as follows:
I. Whether or not the Complaint for Reconveyance
with Damages filed by respondents spouses Lumbao is
dismissible for their failure to comply with the mandate of
the Revised Katarungang Pambarangay Law under R.A. No.
7160.
II. Whether or not the documents known as Bilihan ng
Lupa are valid and enforceable, thus, they can be the
bases of the respondents spouses Lumbaos action for
reconveyance with damages.
III. Whether or not herein petitioners are legally bound to
comply with the Bilihan ng Lupa dated 17 August
1979 and 9 January 1981 and consequently, reconvey the
subject property to herein respondents spouses Lumbao.
It is well-settled that in the exercise of the Supreme Courts power of review, the
court is not a trier of facts and does not normally undertake the re-examination of the
evidence presented by the contending parties during the trial of the case considering
that the findings of fact of the Court of Appeals are conclusive and binding on the
Court.[13]But, the rule is not without exceptions. There are several recognized
exceptions[14] in which factual issues may be resolved by this Court. One of these
exceptions is when the findings of the appellate court are contrary to those of the trial
court. This exception is present in the case at bar.
Going to the first issue presented in this case, it is the argument of the petitioners that the
Complaint for Reconveyance with Damages filed by respondents Spouses Lumbao
should be dismissed for failure to comply with the barangay conciliation proceedings as
mandated by the Revised Katarungang Pambarangay Law under Republic Act No.
7160.This argument cannot be sustained.
Section 408 of the aforesaid law and Administrative Circular No. 14-93[15] provide that all
disputes between parties actually residing in the same city or municipality are subject to
barangay conciliation. A prior recourse thereto is a pre-condition before filing a
complaint in court or any government offices. Non-compliance with the said condition
precedent could affect the sufficiency of the plaintiffs cause of action and make his
complaint vulnerable to dismissal on ground of lack of cause of action or prematurity;
but the same would not prevent a court of competent jurisdiction from exercising its
power of adjudication over the case before it, where the defendants failed to object to
such exercise of jurisdiction.[16]
While it is true that the present case should first be referred to the Barangay Lupon for
conciliation because the parties involved herein actually reside in the same city (Pasig
City) and the dispute between them involves a real property, hence, the said dispute
should have been brought in the city in which the real property, subject matter of the
controversy, is located, which happens to be the same city where the contending
parties reside. In the event that respondents Spouses Lumbao failed to comply with the
said condition precedent, their Complaint for Reconveyance with Damages can be
dismissed. In this case, however, respondents Spouses Lumbaos non-compliance with
the aforesaid condition precedent cannot be considered fatal. Although petitioners
alleged in their answer that the Complaint for Reconveyance with Damages filed by
respondents spouses Lumbao should be dismissed for their failure to comply with the
condition precedent, which in effect, made the complaint prematurely instituted and
the trial court acquired no jurisdiction to hear the case, yet, they did not file a Motion to
Dismiss the said complaint.
Emphasis must be given to the fact that the petitioners could have prevented
the trial court from exercising jurisdiction over the case had they filed a Motion to
Dismiss. However, instead of doing so, they invoked the very same jurisdiction by filing an
answer seeking an affirmative relief from it. Worse, petitioners actively participated in
the trial of the case by presenting their own witness and by cross-examining the
witnesses presented by the respondents Spouses Lumbao. It is elementary that the
active participation of a party in a case pending against him before a court is
tantamount to recognition of that courts jurisdiction and a willingness to abide by the
resolution of the case which will bar said party from later on impugning the courts
jurisdiction.[17] It is also well-settled that the non-referral of a case for barangay
conciliation when so required under the law is not jurisdictional in nature and may
therefore be deemed waived if not raised seasonably in a motion to dismiss.[18] Hence,
herein petitioners can no longer raise the defense of non-compliance with the
barangay conciliation proceedings to seek the dismissal of the complaint filed by the
respondents Spouses Lumbao, because they already waived the said defense when
they failed to file a Motion to Dismiss.
As regards the second issue, petitioners maintain that the Bilihan ng Lupa,
dated 17 August 1979 and 9 January 1981 are null and void for being falsified
documents as it is made to appear that petitioners Virgilio and Tadeo were present in
the execution of the said documents and that the identities of the properties in those
documents in relation to the subject property has not been established by the evidence
of the respondents Spouses Lumbao. Petitioners also claim that the enforceability of
those documents is barred by prescription of action and laches.
It is the petitioners incessant barking that the Bilihan ng Lupa documents dated
17 August 1979 and 9 January 1981 were falsified because it was made to appear that
petitioners Virgilio and Tadeo were present in the executions thereof, and their
allegation that even respondents Spouses Lumbaos witness Carolina Morales proved
that said petitioners were not present during the execution of the aforementioned
documents. This is specious.
Upon examination of the aforesaid documents, this Court finds that in the
Bilihan ng Lupa, dated 17 August 1979, the signatures of petitioners Virgilio and Tadeo
appeared thereon. Moreover, in petitioners Answer and Amended Answer to the
Complaint for Reconveyance with Damages, both petitioners Virgilio and Tadeo made
an admission that indeed they acted as witnesses in the execution of the Bilihan ng
Lupa, dated 17 August 1979.[19] However, in order to avoid their obligations in the said
Bilihan ng Lupa, petitioner Virgilio, in his cross-examination, denied having knowledge of
the sale transaction and claimed that he could not remember the same as well as his
appearance before the notary public due to the length of time that had
passed. Noticeably, petitioner Virgilio did not categorically deny having signed the
Bilihan ng Lupa, dated 17 August 1979 and in support thereof, his testimony in the cross-
examination propounded by the counsel of the respondents Spouses Lumbao is quoted
hereunder:
ATTY. CHIU:
Q. Now, you said, Mr. WitnessVirgilio Santos, that you dont know
about this document which was marked as Exhibit A for the
[respondents spouses Lumbao]?
ATTY. BUGARING:
The question is misleading, your Honor. Counsel premised the
question that he does not have any knowledge but not that
he does not know.
ATTY. CHIU:
Q. Being you are one of the witnesses of this document? [I]s it not?
WITNESS:
A. No, sir.
Q. I am showing to you this document, there is a signature at the left
hand margin of this document Virgilio Santos, will you please
go over the same and tell the court whose signature is this?
A. I dont remember, sir, because of the length of time that had
passed.
Q. But that is your signature?
A. I dont have eyeglasses My signature is different.
Q. You never appeared before this notary public
Apolinario Mangahas?
A. I dont remember.[20]
As a general rule, facts alleged in a partys pleading are deemed admissions of
that party and are binding upon him, but this is not an absolute and inflexible rule. An
answer is a mere statement of fact which the party filing it expects to prove, but it is not
evidence.[21] And in spite of the presence of judicial admissions in a partys pleading, the
trial court is still given leeway to consider other evidence presented.[22] However, in the
case at bar, as the Court of Appeals mentioned in its Decision, [herein petitioners] had
not adduced any other evidence to override the admission made in their [A]nswer that
[petitioners Virgilio and Tadeo] actually signed the [Bilihan ng Lupa dated 17 August
1979] except that they were just misled as to the purpose of the document, x x
x.[23] Virgilios answers were unsure and quibbled. Hence, the general rule that the
admissions made by a party in a pleading are binding and conclusive upon him applies
in this case.
On the testimony of respondents Spouses Lumbaos witness Carolina Morales,
this Court adopts the findings made by the appellate court. Thus -
[T]he trial court gave singular focus on her reply to a question during
cross-examination if the [petitioners Virgilio and Tadeo] were not with
her and the vendor [Rita] during the transaction. It must be pointed
out that earlier in the direct examination of said witness, she
confirmed that [respondents spouses Lumbao] actually bought the
lot from [Rita] (nagkabilihan). Said witness positively identified and
confirmed the two (2) documents evidencing the sale in favor of
[respondents spouse Lumbao]. Thus, her subsequent statement that
the [petitioners Virgilio and Tadeo] were not with them during the
transaction does not automatically imply that [petitioners Virgilio and
Tadeo] did not at any time sign as witnesses as to the deed of sale
attesting to their mothers voluntary act of selling a portion of her
share in her deceased mothers property. The rule is that testimony of
a witness must be considered and calibrated in its entirety and not by
truncated portions thereof or isolated passages therein.[24]
Furthermore, both Bilihan ng Lupa documents dated 17 August 1979 and 9
January 1981 were duly notarized before a notary public. It is well-settled that a
document acknowledged before a notary public is a public document[25] that enjoys
the presumption of regularity. It is a prima facie evidence of the truth of the facts stated
therein and a conclusive presumption of its existence and due execution.[26] To
overcome this presumption, there must be presented evidence that is clear and
convincing. Absent such evidence, the presumption must be upheld.[27] In addition, one
who denies the due execution of a deed where ones signature appears has the burden
of proving that contrary to the recital in the jurat, one never appeared before the
notary public and acknowledged the deed to be a voluntary act. Nonetheless, in the
present case petitioners denials without clear and convincing evidence to support their
claim of fraud and falsity were not sufficient to overthrow the above-mentioned
presumption; hence, the authenticity, due execution and the truth of the facts stated in
the aforesaid Bilihan ng Lupa are upheld.
The defense of petitioners that the identities of the properties described in the
Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981 in relation to the subject
property were not established by respondents Spouses Lumbaos evidence is likewise not
acceptable.
It is noteworthy that at the time of the execution of the documents
denominated as Bilihan ng Lupa, the entire property owned by Maria, the mother of
Rita, was not yet divided among her and her co-heirs and so the description of the
entire estate is the only description that can be placed in the Bilihan ng Lupa, dated 17
August 1979 and 9 January 1981 because the exact metes and bounds of the subject
property sold to respondents Spouses Lumbao could not be possibly determined at that
time. Nevertheless, that does not make the contract of sale between Rita and
respondents Spouses Lumbao invalid because both the law and jurisprudence have
categorically held that even while an estate remains undivided, co-owners have each
full ownership of their respective aliquots or undivided shares and may therefore
alienate, assign or mortgage them.[28] The co-owner, however, has no right to sell or
alienate a specific or determinate part of the thing owned in common, because such
right over the thing is represented by an aliquot or ideal portion without any physical
division. In any case, the mere fact that the deed purports to transfer a concrete portion
does not per se render the sale void. The sale is valid, but only with respect to the aliquot
share of the selling co-owner. Furthermore, the sale is subject to the results of the
partition upon the termination of the co-ownership.[29]
In the case at bar, when the estate left by Maria had been partitioned on 2
May 1986 by virtue of a Deed of Extrajudicial Settlement, the 107- square meter lot sold
by the mother of the petitioners to respondents Spouses Lumbao should be deducted
from the total lot, inherited by them in representation of their deceased mother, which
in this case measures 467 square meters. The 107-square meter lot already sold to
respondents Spouses Lumbao can no longer be inherited by the petitioners because the
same was no longer part of their inheritance as it was already sold during the lifetime of
their mother.
Likewise, the fact that the property mentioned in the
two Bilihan ng Lupa documents was described as a portion of a parcel of land covered
in Tax Declarations No. A-018-01674, while the subject matter of the Deed of Extrajudicial
Settlement was the property described in Transfer Certificate of Title (TCT) No. 3216 of
the Registry of Deeds of the Province of Rizal in the name of Maria is of no moment
because in the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981, it is clear that
there was only one estate left by Maria upon her death. And this fact was not refuted
by the petitioners. Besides, the property described in Tax Declaration No. A-018-01674
and the property mentioned in TCT No. 3216 are both located in Barrio
Rosario, Municipality of Pasig, Province of Rizal, and almost have the same boundaries. It
is, thus, safe to state that the property mentioned in Tax Declaration No. A-018-01674
and in TCT No. 3216 are one and the same.
The defense of prescription of action and laches is likewise unjustifiable. In an
action for reconveyance, the decree of registration is respected as
incontrovertible. What is sought instead is the transfer of the property or its title which has
been wrongfully or erroneously registered in another persons name to its rightful or legal
owner, or to the one with a better right. It is, indeed, true that the right to seek
reconveyance of registered property is not absolute because it is subject to extinctive
prescription. However, when the plaintiff is in possession of the land to be reconveyed,
prescription cannot set in. Such an exception is based on the theory that registration
proceedings could not be used as a shield for fraud or for enriching a person at the
expense of another.[30]
In the case at bar, the right of the respondents Spouses Lumbao to seek
reconveyance does not prescribe because the latter have been and are still in actual
possession and occupation as owners of the property sought to be reconveyed, which
fact has not been refuted nor denied by the petitioners. Furthermore, respondents
Spouses Lumbao cannot be held guilty of laches because from the very start that they
bought the 107-square meter lot from the mother of the petitioners, they have
constantly asked for the transfer of the certificate of title into their names but Rita, during
her lifetime, and the petitioners, after the death of Rita, failed to do so on the flimsy
excuse that the lot had not been partitioned yet. Inexplicably, after the partition of the
entire estate of Maria, petitioners still included the 107-square meter lot in their
inheritance which they divided among themselves despite their knowledge of the
contracts of sale between their mother and the respondents Spouses Lumbao.
Under the above premises, this Court holds that the Bilihan ng Lupa documents
dated 17 August 1979 and 9 January 1981 are valid and enforceable and can be made
the basis of the respondents Spouses Lumbaos action for reconveyance. The failure of
respondents Spouses Lumbao to have the said documents registered does not affect its
validity and enforceability. It must be remembered that registration is not a requirement
for validity of the contract as between the parties, for the effect of registration serves
chiefly to bind third persons. The principal purpose of registration is merely to notify other
persons not parties to a contract that a transaction involving the property had been
entered into.Where the party has knowledge of a prior existing interest which is
unregistered at the time he acquired a right to the same land, his knowledge of that
prior unregistered interest has the effect of registration as to him.[31] Hence, the Bilihan
ng Lupa documents dated 17 August 1979 and 9 January 1981, being valid and
enforceable, herein petitioners are bound to comply with their provisions. In short, such
documents are absolutely valid between and among the parties thereto.
Finally, the general rule that heirs are bound by contracts entered into by their
predecessors-in-interest applies in the present case. Article 1311[32] of the NCC is the
basis of this rule. It is clear from the said provision that whatever rights and obligations
the decedent have over the property were transmitted to the heirs by way of
succession, a mode of acquiring the property, rights and obligations of the decedent to
the extent of the value of the inheritance of the heirs.[33] Thus, the heirs cannot escape
the legal consequence of a transaction entered into by their predecessor-in-interest
because they have inherited the property subject to the liability affecting their common
ancestor. Being heirs, there is privity of interest between them and their deceased
mother. They only succeed to what rights their mother had and what is valid and
binding against her is also valid and binding as against them. 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.[34]
In the end, despite the death of the petitioners mother, they are still bound to
comply with the provisions of the Bilihan ng Lupa, dated 17 August 1979 and 9 January
1981. Consequently, they must reconvey to herein respondents Spouses Lumbao the
107-square meter lot which they bought from Rita, petitioners mother. And as correctly
ruled by the appellate court, petitioners must pay respondents Spouses Lumbao
attorneys fees and litigation expenses for having been compelled to litigate and incur
expenses to protect their interest.[35] On this matter, we do not find reasons to reverse the
said findings.
WHEREFORE, premises considered, the instant Petition is hereby DENIED. The
Decision and Resolution of the Court of Appeals dated 8 June 2005 and 29 July 2005,
respectively, are hereby AFFIRMED. Herein petitioners are ordered to reconvey to
respondents Spouses Lumbao the subject property and to pay the latter attorneys fees CERTIFICATION
and litigation expenses. Costs against petitioners.
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons
SO ORDERED. attestation, it is hereby certified that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of the opinion of the
Courts Division.
MINITA V. CHICO-NAZARIO
Associate Justice

REYNATO S. PUNO
WE CONCUR: Chief Justice

CONSUELO YNARES-SANTIAGO
Associate Justice * On leave.
Chairperson [1] Penned by Associate Justice Martin S. Villarama, Jr. with Associate Justices Lucas P.
Bersamin and Lucenito N. Tagle, concurring, rollo, pp. 47-62.
[2] Id. at 64.

On leave [3] Penned by Judge Ma. Cristina C. Estrada, rollo, pp. 103-114.

MA. ALICIA AUSTRIA MARTINEZ ROMEO J. CALLEJO, SR. [4] Id. at 73-74.

Associate Justice Associate Justice [5] Id. at 77-78.

[6] Id. at 80-82.
[7] Id. at 83.
[8] Id. at 84-86.
[9] Id. at 66-72.
ANTONIO EDUARDO B. NACHURA [10] A decree, Establishing a System of Amicably Settling Disputes at the Barangay Level.
Associate Justice [11] Rollo, p. 114.
[12] Id. at 61.
[13] Almendrala v. Ngo, G.R. No. 142408, 30 September 2005, 471 SCRA 311, 322.
[14] Recognized exceptions to this rule are: (1) when the findings are grounded entirely

on speculation, surmises or conjectures; (2) when the inference made is

manifestly mistaken, absurd or impossible; (3) when there is grave abuse of
ATTESTATION discretion; (4) when the judgment is based on misapprehension of facts; (5)
when the finding of facts are conflicting; (6) when in making its findings the
I attest that the conclusions in the above Decision were reached in consultation before Court of Appeals went beyond the issues of the case, or its findings are
the case was assigned to the writer of the opinion of the Courts Division. contrary to the admissions of both the appellee and the appellant; (7) when
the findings are contrary to the trial court; (8) when the findings are conclusions
without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioners main and reply briefs
are not disputed by the respondent; (10) when the findings of fact are
CONSUELO YNARES-SANTIAGO premised on the supposed absence of evidence and contradicted by the
Associate Justice evidence on record; or (11) when the Court of Appeals manifestly overlooked
Chairperson, Third Division certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion [Langkaan Realty
Development, Inc. v. United Coconut Planters Bank, G.R. No. 139437, 8
December 2000, 347 SCRA 542; Nokom v. National Labor Relations
Commissions, 390 Phil. 1228, 1243 (2000); Commissioner of Internal Revenue v.
Embroidery and Garments Industries (Phils.), Inc., 364 Phil. 541, 546-547
(1999); Sta. Maria v. Court of Appeals, 349 Phil. 275, 282-283 (1998); Almendrala
v. Ngo, G.R. No. 142408, 30 September 2005, 471 SCRA 311, 322].
[15] Guidelines on the Katarungang Pambarangay Conciliation Procedure to Prevent

Circumvention of the Revised Katarungang Pambarangay Law [Sections 399-

 442, Chapter VII, Title I, Book III, R.A. No. 7160,otherwise known as the Local TESTATE ESTATE OF JOSEFA TANGCO, JOSE DE BORJA, administrator-appellee; JOSE DE
Government Code of 1991] issued by the Supreme Court on 15 July 1993. BORJA, as administrator, CAYETANO DE BORJA, MATILDE DE BORJA and CRISANTO DE
[16] Royales v. Intermediate Appellate Court, G.R. No. L-65072, 31 January 1984, 127 SCRA BORJA (deceased) as Children of Josefa Tangco, appellees,
470, 473-474. vs.
[17] Sta. Rosa Realty Development Corporation v. Amante, G.R. No. 112526, 16 March TASIANA VDA. DE DE BORJA, Special Administratrix of the Testate Estate of Francisco de
2005, 453 SCRA 432, 477. Borja, appellant. .
[18] Baares II v. Balising, G.R. No. 132624, 13 March 2000, 328 SCRA 36, 50-51.
[19] Rollo, pp. 87, 97.
[20] TSN, 12 September 1996. Records, pp. 13-14.
G.R. No L-28568 August 18, 1972
[21] Atillo III v. Court of Appeals, G.R. No. 119053, 23 January 1997, 266 SCRA 596, 604.
[22] Id. at 605. TESTATE ESTATE OF THE LATE FRANCISCO DE BORJA, TASIANA O. VDA. DE DE BORJA,
[23] Rollo, p. 55. special Administratrix appellee,
[24] Id. at 55-56. vs.
[25] Rule 132, Section 19(b) of the Revised Rules on Evidence. JOSE DE BORJA, oppositor-appellant.
[26] Id., Section 23 of the Revised Rules on Evidence; Medina v. Greenfield Development

Corporation, G.R. No. 140228, 19 November 2004, 443 SCRA 150, 160; Agasen G.R. No. L-28611 August 18, 1972
v. Court of Appeals, G.R. No. 115508, 15 February 2000, 325 SCRA 504, 511.
[27] Medina v. Greenfield Development Corporation, id.
TASIANA 0. VDA. DE BORJA, as Administratrix of the Testate Estate of the late Francisco
[28] Barcenas v. Tomas, G.R. No. 150321, 31 March 2005, 454 SCRA 593, 610-611. de Borja, plaintiff-appellee,
[29] Heirs of the Late Spouses Aurelio and Esperanza Balite v. Lim, G.R. No. 152168, 10 vs.
December 2004, 446 SCRA 56, 71. JOSE DE BORJA, as Administrator of the Testate Estate of the late Josefa
[30] Heirs of Pomposa Saludares v. Court of Appeals, G.R. No. 128254, 16 January 2004, Tangco, defendant-appellant.
420 SCRA 51, 56-58.
L-28040
[31] Heirs of Eduardo Manlapat v. Court of Appeals, G.R. No. 125585, 8 June 2005, 459
SCRA 412, 426.
[32] Art. 1311. Contracts take effect only between the parties, their assigns and heirs, Pelaez, Jalandoni & Jamir for administrator-appellee.
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 Quiogue & Quiogue for appellee Matilde de Borja.
is not liable beyond the value of the property he received from the decedent.
[33] Tanay Recreation Center and Development Corp. v. Fausto, G.R. No. 140182, 12 April
Andres Matias for appellee Cayetano de Borja.
2005, 455 SCRA 436, 446
[34] DKC Holdings Corporation v. Court of Appeals, G.R. No. 118248, 5 April 2000, 329

SCRA 666, 674-675. Sevilla & Aquino for appellant.

[35] Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation,

other than judicial costs cannot be recovered, except: L-28568

(1) x x x
(2) When the defendants act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to Sevilla & Aquino for special administratrix-appellee.
protect his interest;
(3) x x x Pelaez, Jalandoni & Jamir for oppositor-appellant.

L-28611
Republic of the Philippines
SUPREME COURT
Sevilla & Aquino for plaintiff-appellee.
Manila

Pelaez, Jalandoni & Jamir and David Gueverra for defendant-appellant.

EN BANC

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

G.R. No. L-28040 August 18, 1972
Of these cases, the first, numbered L-28040 is an appeal by Tasiana Ongsingco Vda. de
de Borja, special administratrix of the testate estate of Francisco de Borja,1 from the
approval of a compromise agreement by the Court of First Instance of Rizal, Branch I, in
its Special Proceeding No. R-7866, entitled, "Testate Estate of Josefa Tangco, Jose de
Borja, Administrator".
WITNESSETH
Case No. L-28568 is an appeal by administrator Jose Borja from the disapproval of the
same compromise agreement by the Court of First Instance of Nueva Ecija, Branch II, in
its Special Proceeding No. 832, entitled, "Testate Estate of Francisco de Borja, Tasiana O.
Vda. de de Borja, Special Administratrix".
And Case No. L-28611 is an appeal by administrator Jose de Borja from the decision of
the Court of First Instance of Rizal, Branch X, in its Civil Case No. 7452, declaring the
Hacienda Jalajala Poblacion, which is the main object of the aforesaid compromise
agreement, as the separate and exclusive property of the late Francisco de Borja and
not a conjugal asset of the community with his first wife, Josefa Tangco, and that said
hacienda pertains exclusively to his testate estate, which is under administrator in
Special Proceeding No. 832 of the Court of First Instance of Nueva Ecija, Branch II.
It is uncontested that Francisco de Borja, upon the death of his wife Josefa Tangco on 6
October 1940, filed a petition for the probate of her will which was docketed as Special
Proceeding No. R-7866 of the Court of First Instance of Rizal, Branch I. The will was
probated on 2 April 1941. In 1946, Francisco de Borja was appointed executor and
administrator: in 1952, their son, Jose de Borja, was appointed co-administrator. When
Francisco died, on 14 April 1954, Jose became the sole administrator of the testate
estate of his mother, Josefa Tangco. While a widower Francisco de Borja allegedly took
unto himself a second wife, Tasiana Ongsingco. Upon Francisco's death, Tasiana
instituted testate proceedings in the Court of First Instance of Nueva Ecija, where, in
1955, she was appointed special administratrix. The validity of Tasiana's marriage to
Francisco was questioned in said proceeding.
The relationship between the children of the first marriage and Tasiana Ongsingco has
been plagued with several court suits and counter-suits; including the three cases at
bar, some eighteen (18) cases remain pending determination in the courts. The testate
estate of Josefa Tangco alone has been unsettled for more than a quarter of a century.
In order to put an end to all these litigations, a compromise agreement was entered into
on 12 October 1963,2 by and between "[T]he heir and son of Francisco de Borja by his
first marriage, namely, Jose de Borja personally and as administrator of the Testate
Estate of Josefa Tangco," and "[T]he heir and surviving spouse of Francisco de Borja by
his second marriage, Tasiana Ongsingco Vda. de Borja, assisted by her lawyer, Atty. Luis
Panaguiton Jr." The terms and conditions of the compromise agreement are as follows:
AGREEMENT
THIS AGREEMENT made and entered into by and between
The heir and son of Francisco de Borja by his first marriage, namely,
Jose de Borja personally and as administrator of the Testate Estate of
Josefa Tangco,
AND
The heir and surviving spouse of Francisco de Borja by his second
marriage, Tasiana Ongsingco Vda. de Borja, assisted by her lawyer,
Atty. Luis Panaguiton Jr.
THAT it is the mutual desire of all the parties herein terminate and
settle, with finality, the various court litigations, controversies, claims,
counterclaims, etc., between them in connection with the
administration, settlement, partition, adjudication and distribution of
the assets as well as liabilities of the estates of Francisco de Borja and
Josefa Tangco, first spouse of Francisco de Borja.
THAT with this end in view, the parties herein have agreed voluntarily
and without any reservations to enter into and execute this
agreement under the following terms and conditions:
1. That the parties agree to sell the Poblacion portion of the Jalajala
properties situated in Jalajala, Rizal, presently under administration in
the Testate Estate of Josefa Tangco (Sp. Proc. No. 7866, Rizal), more
specifically described as follows:
Linda al Norte con el Rio Puwang que la separa de
la jurisdiccion del Municipio de Pililla de la
Provincia de Rizal, y con el pico del Monte
Zambrano; al Oeste con Laguna de Bay; por el Sur
con los herederos de Marcelo de Borja; y por el
Este con los terrenos de la Familia Maronilla
with a segregated area of approximately 1,313 hectares at the
amount of P0.30 per square meter.
2. That Jose de Borja agrees and obligates himself to pay Tasiana
Ongsingco Vda. de de Borja the total amount of Eight Hundred
Thousand Pesos (P800,000) Philippine Currency, in cash, which
represent P200,000 as his share in the payment and P600,000 as pro-
rata shares of the heirs Crisanto, Cayetano and Matilde, all surnamed
de Borja and this shall be considered as full and complete payment
and settlement of her hereditary share in the estate of the late
Francisco de Borja as well as the estate of Josefa Tangco, Sp. Proc.
No. 832-Nueva Ecija and Sp. Proc. No. 7866-Rizal, respectively, and to
any properties bequeathed or devised in her favor by the late
Francisco de Borja by Last Will and Testament or by Donation Inter
Vivos or Mortis Causa or purportedly conveyed to her for
consideration or otherwise. The funds for this payment shall be taken
from and shall depend upon the receipt of full payment of the
proceeds of the sale of Jalajala, "Poblacion."
3. That Tasiana Ongsingco Vda. de de Borja hereby assumes
payment of that particular obligation incurred by the late Francisco
de Borja in favor of the Rehabilitation Finance Corporation, now
Development Bank of the Philippines, amounting to approximately IN WITNESS WHEREOF, the parties hereto have her unto set their hands
P30,000.00 and also assumes payment of her 1/5 share of the Estate in the City of Manila, Philippines, the 12th of October, 1963.
and Inheritance taxes on the Estate of the late Francisco de Borja or
the sum of P3,500.00, more or less, which shall be deducted by the
On 16 May 1966, Jose de Borja submitted for Court approval the agreement of 12
buyer of Jalajala, "Poblacion" from the payment to be made to
October 1963 to the Court of First Instance of Rizal, in Special Proceeding No. R-7866;
Tasiana Ongsingco Vda. de Borja under paragraph 2 of this
and again, on 8 August 1966, to the Court of First Instance of Nueva Ecija, in Special
Agreement and paid directly to the Development Bank of the
Proceeding No. 832. Tasiana Ongsingco Vda. de de Borja opposed in both instances.
Philippines and the heirs-children of Francisco de Borja.
The Rizal court approved the compromise agreement, but the Nueva Ecija court
declared it void and unenforceable. Special administratrix Tasiana Ongsingco Vda. de
4. Thereafter, the buyer of Jalajala "Poblacion" is hereby authorized to de Borja appealed the Rizal Court's order of approval (now Supreme Court G.R. case
pay directly to Tasiana Ongsingco Vda. de de Borja the balance of No. L-28040), while administrator Jose de Borja appealed the order of disapproval (G.R.
the payment due her under paragraph 2 of this Agreement case No. L-28568) by the Court of First Instance of Nueva Ecija.
(approximately P766,500.00) and issue in the name of Tasiana
Ongsingco Vda. de de Borja, corresponding certified checks/treasury
The genuineness and due execution of the compromised agreement of 12 October
warrants, who, in turn, will issue the corresponding receipt to Jose de
1963 is not disputed, but its validity is, nevertheless, attacked by Tasiana Ongsingco on
Borja.
the ground that: (1) the heirs cannot enter into such kind of agreement without first
probating the will of Francisco de Borja; (2) that the same involves a compromise on the
5. In consideration of above payment to Tasiana Ongsingco Vda. de validity of the marriage between Francisco de Borja and Tasiana Ongsingco; and (3)
de Borja, Jose de Borja personally and as administrator of the Testate that even if it were valid, it has ceased to have force and effect.
Estate of Josefa Tangco, and Tasiana Ongsingco Vda. de de Borja,
for themselves and for their heirs, successors, executors,
In assailing the validity of the agreement of 12 October 1963, Tasiana Ongsingco and
administrators, and assigns, hereby forever mutually renounce,
the Probate Court of Nueva Ecija rely on this Court's decision in Guevara vs. Guevara. 74
withdraw, waive, remise, release and discharge any and all manner
Phil. 479, wherein the Court's majority held the view that the presentation of a will for
of action or actions, cause or causes of action, suits, debts, sum or
probate is mandatory and that the settlement and distribution of an estate on the basis
sums of money, accounts, damages, claims and demands
of intestacy when the decedent left a will, is against the law and public policy. It is
whatsoever, in law or in equity, which they ever had, or now have or
likewise pointed out by appellant Tasiana Ongsingco that Section 1 of Rule 74 of the
may have against each other, more specifically Sp. Proceedings Nos.
Revised Rules explicitly conditions the validity of an extrajudicial settlement of a
7866 and 1955, CFI-Rizal, and Sp. Proc. No. 832-Nueva Ecija, Civil
decedent's estate by agreement between heirs, upon the facts that "(if) the
Case No. 3033, CFI Nueva Ecija and Civil Case No. 7452-CFI, Rizal, as
decedent left no will and no debts, and the heirs are all of age, or the minors are
well as the case filed against Manuel Quijal for perjury with the
represented by their judicial and legal representatives ..." The will of Francisco de Borja
Provincial Fiscal of Rizal, the intention being to completely, absolutely
having been submitted to the Nueva Ecija Court and still pending probate when the
and finally release each other, their heirs, successors, and assigns,
1963 agreement was made, those circumstances, it is argued, bar the validity of the
from any and all liability, arising wholly or partially, directly or
agreement.
indirectly, from the administration, settlement, and distribution of the
assets as well as liabilities of the estates of Francisco de Borja and
Josefa Tangco, first spouse of Francisco de Borja, and lastly, Tasiana Upon the other hand, in claiming the validity of the compromise agreement, Jose de
Ongsingco Vda. de de Borja expressly and specifically renounce Borja stresses that at the time it was entered into, on 12 October 1963, the governing
absolutely her rights as heir over any hereditary share in the estate of provision was Section 1, Rule 74 of the original Rules of Court of 1940, which allowed the
Francisco de Borja. extrajudicial settlement of the estate of a deceased person regardless of whether he
left a will or not. He also relies on the dissenting opinion of Justice Moran, in Guevara vs.
Guevara, 74 Phil. 479, wherein was expressed the view that if the parties have already
6. That Tasiana Ongsingco Vda. de de Borja, upon receipt of the
divided the estate in accordance with a decedent's will, the probate of the will is a
payment under paragraph 4 hereof, shall deliver to the heir Jose de
useless ceremony; and if they have divided the estate in a different manner, the
Borja all the papers, titles and documents belonging to Francisco de
probate of the will is worse than useless.
Borja which are in her possession and said heir Jose de Borja shall
issue in turn the corresponding receive thereof.
The doctrine of Guevara vs. Guevara, ante, is not applicable to the case at bar. This is
apparent from an examination of the terms of the agreement between Jose de Borja
7. That this agreement shall take effect only upon the fulfillment of the
and Tasiana Ongsingco. Paragraph 2 of said agreement specifically stipulates that the
sale of the properties mentioned under paragraph 1 of this
sum of P800,000 payable to Tasiana Ongsingco —
agreement and upon receipt of the total and full payment of the
proceeds of the sale of the Jalajala property "Poblacion", otherwise,
the non-fulfillment of the said sale will render this instrument NULL AND shall be considered as full — complete payment — settlement of her
VOID AND WITHOUT EFFECT THEREAFTER. hereditary share in the estate of the late Francisco de Borja as well as
the estate of Josefa Tangco, ... and to any properties bequeathed or
 devised in her favor by the late Francisco de Borja by Last Will and
Testament or by Donation Inter Vivos or Mortis Causa or purportedly
conveyed to her for consideration or otherwise.
This provision evidences beyond doubt that the ruling in the Guevara case is not
applicable to the cases at bar. There was here no attempt to settle or distribute the
estate of Francisco de Borja among the heirs thereto before the probate of his will. The
clear object of the contract was merely the conveyance by Tasiana Ongsingco of any
and all her individual share and interest, actual or eventual in the estate of Francisco de
Borja and Josefa Tangco. There is no stipulation as to any other claimant, creditor or
legatee. And as a hereditary share in a decedent's estate is transmitted or vested
immediately from the moment of the death of such causante or predecessor in interest
(Civil Code of the Philippines, Art. 777)3 there is no legal bar to a successor (with requisite
contracting capacity) disposing of her or his hereditary share immediately after such
death, even if the actual extent of such share is not determined until the subsequent
liquidation of the estate.4 Of course, the effect of such alienation is to be deemed
limited to what is ultimately adjudicated to the vendor heir. However, the aleatory
character of the contract does not affect the validity of the transaction; neither does
the coetaneous agreement that the numerous litigations between the parties (the
approving order of the Rizal Court enumerates fourteen of them, Rec. App. pp. 79-82)
are to be considered settled and should be dismissed, although such stipulation, as
noted by the Rizal Court, gives the contract the character of a compromise that the law
favors, for obvious reasons, if only because it serves to avoid a multiplicity of suits.
It is likewise worthy of note in this connection that as the surviving spouse of Francisco de
Borja, Tasiana Ongsingco was his compulsory heir under article 995 et seq. of the present
Civil Code. Wherefore, barring unworthiness or valid disinheritance, her successional
interest existed independent of Francisco de Borja's last will and testament and would
exist even if such will were not probated at all. Thus, the prerequisite of a previous
probate of the will, as established in the Guevara and analogous cases, can not apply
to the case of Tasiana Ongsingco Vda. de de Borja.
Since the compromise contract Annex A was entered into by and between "Jose de
Borja personally and as administrator of the Testate Estate of Josefa Tangco" on the one
hand, and on the other, "the heir and surviving spouse of Francisco de Borja by his
second marriage, Tasiana Ongsingco Vda. de de Borja", it is clear that the transaction
was binding on both in their individual capacities, upon the perfection of the contract,
even without previous authority of the Court to enter into the same. The only difference
between an extrajudicial compromise and one that is submitted and approved by the
Court, is that the latter can be enforced by execution proceedings. Art. 2037 of the Civil
Code is explicit on the point:
8. Art. 2037. A compromise has upon the parties the effect and
authority of res judicata; but there shall be no execution except in
compliance with a judicial compromise.
It is argued by Tasiana Ongsingco that while the agreement Annex A
expressed no definite period for its performance, the same
was intended to have a resolutory period of 60 days for its
effectiveness. In support of such contention, it is averred that such a
limit was expressly stipulated in an agreement in similar terms entered
into by said Ongsingco with the brothers and sister of Jose de Borja,
to wit, Crisanto, Matilde and Cayetano, all surnamed de Borja,
except that the consideration was fixed at P600,000 (Opposition,
Annex/Rec. of Appeal, L-28040, pp. 39- 46) and which contained the
following clause:
III. That this agreement shall take effect only upon the consummation
of the sale of the property mentioned herein and upon receipt of the
total and full payment of the proceeds of the sale by the herein
owner heirs-children of Francisco de Borja, namely, Crisanto,
Cayetano and Matilde, all surnamed de Borja; Provided that if no
sale of the said property mentioned herein is consummated, or the
non-receipt of the purchase price thereof by the said owners within
the period of sixty (60) days from the date hereof, this agreement will
become null and void and of no further effect.
Ongsingco's argument loses validity when it is considered that Jose de Borja was not a
party to this particular contract (Annex 1), and that the same appears not to have been
finalized, since it bears no date, the day being left blank "this — day of October 1963";
and while signed by the parties, it was not notarized, although plainly intended to be so
done, since it carries a proposed notarial ratification clause. Furthermore, the
compromise contract with Jose de Borja (Annex A), provides in its par. 2 heretofore
transcribed that of the total consideration of P800, 000 to be paid to Ongsingco,
P600,000 represent the "prorata share of the heirs Crisanto, Cayetano and Matilde all
surnamed de Borja" which corresponds to the consideration of P600,000 recited in
Annex 1, and that circumstance is proof that the duly notarized contract entered into
wit Jose de Borja under date 12 October 1963 (Annex A), was designed to absorb and
supersede the separate unformalize agreement with the other three Borja heirs. Hence,
the 60 days resolutory term in the contract with the latter (Annex 1) not being repeated
in Annex A, can not apply to the formal compromise with Jose de Borja. It is moreover
manifest that the stipulation that the sale of the Hacienda de Jalajala was to be made
within sixty days from the date of the agreement with Jose de Borja's co-heirs (Annex 1)
was plainly omitted in Annex A as improper and ineffective, since the Hacienda de
Jalajala (Poblacion) that was to be sold to raise the P800,000 to be paid to Ongsingco
for her share formed part of the estate of Francisco de Borja and could not be sold until
authorized by the Probate Court. The Court of First Instance of Rizal so understood it, and
in approving the compromise it fixed a term of 120 days counted from the finality of the
order now under appeal, for the carrying out by the parties for the terms of the
contract.
This brings us to the plea that the Court of First Instance of Rizal had no jurisdiction to
approve the compromise with Jose de Borja (Annex A) because Tasiana Ongsingco
was not an heir in the estate of Josefa Tangco pending settlement in the Rizal Court, but
she was an heir of Francisco de Borja, whose estate was the object of Special
Proceeding No. 832 of the Court of First Instance of Nueva Ecija. This circumstance is
irrelevant, since what was sold by Tasiana Ongsingco was only her eventual share in the
estate of her late husband, not the estate itself; and as already shown, that eventual
share she owned from the time of Francisco's death and the Court of Nueva Ecija could
not bar her selling it. As owner of her undivided hereditary share, Tasiana could dispose
of it in favor of whomsoever she chose. Such alienation is expressly recognized and
provided for by article 1088 of the present Civil Code:
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger
before the partition, any or all of the co-heirs may be subrogated to
 the rights of the purchaser by reimbursing him for the price of the sale,
provided they do so within the period of one month from the time
they were notified in writing of the sale of the vendor.
If a sale of a hereditary right can be made to a stranger, then a fortiori sale thereof to a
coheir could not be forbidden.
Tasiana Ongsingco further argues that her contract with Jose de Borja (Annex "A") is
void because it amounts to a compromise as to her status and marriage with the late
Francisco de Borja. The point is without merit, for the very opening paragraph of the
agreement with Jose de Borja (Annex "A") describes her as "the heir and surviving
spouse of Francisco de Borja by his second marriage, Tasiana Ongsingco Vda. de de
Borja", which is in itself definite admission of her civil status. There is nothing in the text of
the agreement that would show that this recognition of Ongsingco's status as the
surviving spouse of Francisco de Borja was only made in consideration of the cession of
her hereditary rights.
It is finally charged by appellant Ongsingco, as well as by the Court of First Instance of
Nueva Ecija in its order of 21 September 1964, in Special Proceedings No. 832 (Amended
Record on Appeal in L-28568, page 157), that the compromise agreement of 13
October 1963 (Annex "A") had been abandoned, as shown by the fact that, after its
execution, the Court of First Instance of Nueva Ecija, in its order of 21 September 1964,
had declared that "no amicable settlement had been arrived at by the parties", and
that Jose de Borja himself, in a motion of 17 June 1964, had stated that the proposed
amicable settlement "had failed to materialize".
It is difficult to believe, however, that the amicable settlement referred to in the order
and motion above-mentioned was the compromise agreement of 13 October 1963,
which already had been formally signed and executed by the parties and duly
notarized. What the record discloses is that some time after its formalization, Ongsingco
had unilaterally attempted to back out from the compromise agreement, pleading
various reasons restated in the opposition to the Court's approval of Annex "A" (Record
on Appeal, L-20840, page 23): that the same was invalid because of the lapse of the
allegedly intended resolutory period of 60 days and because the contract was not
preceded by the probate of Francisco de Borja's will, as required by this
Court's Guevarra vs. Guevara ruling; that Annex "A" involved a compromise affecting
Ongsingco's status as wife and widow of Francisco de Borja, etc., all of which objections
have been already discussed. It was natural that in view of the widow's attitude, Jose
de Borja should attempt to reach a new settlement or novatory agreement before
seeking judicial sanction and enforcement of Annex "A", since the latter step might
ultimately entail a longer delay in attaining final remedy. That the attempt to reach
another settlement failed is apparent from the letter of Ongsingco's counsel to Jose de
Borja quoted in pages 35-36 of the brief for appellant Ongsingco in G.R. No. 28040; and
it is more than probable that the order of 21 September 1964 and the motion of 17 June
1964 referred to the failure of the parties' quest for a more satisfactory compromise. But
the inability to reach a novatory accord can not invalidate the original compromise
(Annex "A") and justifies the act of Jose de Borja in finally seeking a court order for its
approval and enforcement from the Court of First Instance of Rizal, which, as heretofore
described, decreed that the agreement be ultimately performed within 120 days from
the finality of the order, now under appeal.
We conclude that in so doing, the Rizal court acted in accordance with law, and,
therefore, its order should be upheld, while the contrary resolution of the Court of First
Instance of Nueva Ecija should be, and is, reversed.
In her brief, Tasiana Ongsingco also pleads that the time elapsed in the appeal has
affected her unfavorably, in that while the purchasing power of the agreed price of
P800,000 has diminished, the value of the Jalajala property has increased. But the fact is
that her delay in receiving the payment of the agreed price for her hereditary interest
was primarily due to her attempts to nullify the agreement (Annex "A") she had formally
entered into with the advice of her counsel, Attorney Panaguiton. And as to the
devaluation de facto of our currency, what We said in Dizon Rivera vs. Dizon, L-24561, 30
June 1970, 33 SCRA 554, that "estates would never be settled if there were to be a
revaluation with every subsequent fluctuation in the values of currency and properties
of the estate", is particularly opposite in the present case.
Coming now to Case G.R. No. L-28611, the issue is whether the Hacienda de Jalajala
(Poblacion), concededly acquired by Francisco de Borja during his marriage to his first
wife, Josefa Tangco, is the husband's private property (as contended by his second
spouse, Tasiana Ongsingco), or whether it forms part of the conjugal (ganancial)
partnership with Josefa Tangco. The Court of First Instance of Rizal (Judge Herminio
Mariano, presiding) declared that there was adequate evidence to overcome the
presumption in favor of its conjugal character established by Article 160 of the Civil
Code.
We are of the opinion that this question as between Tasiana Ongsingco and Jose de
Borja has become moot and academic, in view of the conclusion reached by this Court
in the two preceding cases (G.R. No. L-28568), upholding as valid the cession of Tasiana
Ongsingco's eventual share in the estate of her late husband, Francisco de Borja, for the
sum of P800,000 with the accompanying reciprocal quit-claims between the parties. But
as the question may affect the rights of possible creditors and legatees, its resolution is
still imperative.
It is undisputed that the Hacienda Jalajala, of around 4,363 hectares, had been
originally acquired jointly by Francisco de Borja, Bernardo de Borja and Marcelo de
Borja and their title thereto was duly registered in their names as co-owners in Land
Registration Case No. 528 of the province of Rizal, G.L.R.O. Rec. No. 26403 (De Barjo vs.
Jugo, 54 Phil. 465). Subsequently, in 1931, the Hacienda was partitioned among the co-
owners: the Punta section went to Marcelo de Borja; the Bagombong section to
Bernardo de Borja, and the part in Jalajala proper (Poblacion) corresponded to
Francisco de Borja (V. De Borja vs. De Borja 101 Phil. 911, 932).
The lot allotted to Francisco was described as —
Una Parcela de terreno en Poblacion, Jalajala: N. Puang River; E.
Hermogena Romero; S. Heirs of Marcelo de Borja O. Laguna de Bay;
containing an area of 13,488,870 sq. m. more or less, assessed at
P297,410. (Record on Appeal, pages 7 and 105)
On 20 November 1962, Tasiana O. Vda. de Borja, as Administratrix of the Testate Estate
of Francisco de Borja, instituted a complaint in the Court of First Instance of Rizal (Civil
Case No. 7452) against Jose de Borja, in his capacity as Administrator of Josefa Tangco
(Francisco de Borja's first wife), seeking to have the Hacienda above described
declared exclusive private property of Francisco, while in his answer defendant (now
appellant) Jose de Borja claimed that it was conjugal property of his parents (Francisco
de Borja and Josefa Tangco), conformably to the presumption established by Article
160 of the Philippine Civil Code (reproducing Article 1407 of the Civil Code of 1889), to
the effect that:
Art. 160. All property of the marriage is presumed to belong to the
conjugal partnership, unless it be proved that it pertains exclusively to
the husband or to the wife.
Defendant Jose de Borja further counterclaimed for damages, compensatory, moral
and exemplary, as well as for attorney's fees.
After trial, the Court of First Instance of Rizal, per Judge Herminio Mariano, held that the
plaintiff had adduced sufficient evidence to rebut the presumption, and declared the
Hacienda de Jalajala (Poblacion) to be the exclusive private property of the late
Francisco de Borja, and his Administratrix, Tasiana Ongsingco Vda. de Borja, to be
entitled to its possession. Defendant Jose de Borja then appealed to this Court.
The evidence reveals, and the appealed order admits, that the character of the
Hacienda in question as owned by the conjugal partnership De Borja-Tangco was
solemnly admitted by the late Francisco de Borja no less than two times: first, in the
Reamended Inventory that, as executor of the estate of his deceased wife Josefa
Tangco, he filed in the Special Proceedings No. 7866 of the Court of First Instance of
Rizal on 23 July 1953 (Exhibit "2"); and again, in the Reamended Accounting of the same
date, also filed in the proceedings aforesaid (Exhibit "7"). Similarly, the plaintiff Tasiana O.
Vda. de Borja, herself, as oppositor in the Estate of Josefa Tangco, submitted therein an
inventory dated 7 September 1954 (Exhibit "3") listing the Jalajala property among the
"Conjugal Properties of the Spouses Francisco de Borja and Josefa Tangco". And once
more, Tasiana Ongsingco, as administratrix of the Estate of Francisco de Borja, in Special
Proceedings No. 832 of the Court of First Instance of Nueva Ecija, submitted therein in
December, 1955, an inventory wherein she listed the Jalajala Hacienda under the
heading "Conjugal Property of the Deceased Spouses Francisco de Borja and Josefa
Tangco, which are in the possession of the Administrator of the Testate Estate of the
Deceased Josefa Tangco in Special Proceedings No. 7866 of the Court of First Instance
of Rizal" (Exhibit "4").
Notwithstanding the four statements aforesaid, and the fact that they are plain
admissions against interest made by both Francisco de Borja and the Administratrix of his
estate, in the course of judicial proceedings in the Rizal and Nueva Ecija Courts,
supporting the legal presumption in favor of the conjugal community, the Court below
declared that the Hacienda de Jalajala (Poblacion) was not conjugal property, but the
private exclusive property of the late Francisco de Borja. It did so on the strength of the
following evidences: (a) the sworn statement by Francis de Borja on 6 August 1951
(Exhibit "F") that —
He tomado possession del pedazo de terreno ya delimitado
(equivalente a 1/4 parte, 337 hectareas) adjunto a mi terreno
personal y exclusivo (Poblacion de Jalajala, Rizal).
and (b) the testimony of Gregorio de Borja, son of Bernardo de Borja, that the entire
Hacienda had been bought at a foreclosure sale for P40,100.00, of which amount
P25,100 was contributed by Bernardo de Borja and P15,000. by Marcelo de Borja; that
upon receipt of a subsequent demand from the provincial treasurer for realty taxes the
sum of P17,000, Marcelo told his brother Bernardo that Francisco (son of Marcelo)
wanted also to be a co-owner, and upon Bernardo's assent to the proposal, Marcelo
issue a check for P17,000.00 to pay the back taxes and said that the amount would
represent Francisco's contribution in the purchase of the Hacienda. The witness further
testified that —
Marcelo de Borja said that that money was entrusted to him by
Francisco de Borja when he was still a bachelor and which he
derived from his business transactions. (Hearing, 2 February 1965,
t.s.n., pages 13-15) (Emphasis supplied)
The Court below, reasoning that not only Francisco's sworn statement overweighed the
admissions in the inventories relied upon by defendant-appellant Jose de Borja since
probate courts can not finally determine questions of ownership of inventoried property,
but that the testimony of Gregorio de Borja showed that Francisco de Borja acquired his
share of the original Hacienda with his private funds, for which reason that share can not
be regarded as conjugal partnership property, but as exclusive property of the buyer,
pursuant to Article 1396(4) of Civil Code of 1889 and Article 148(4) of the Civil Code of
the Philippines.
The following shall be the exclusive property of each spouse:
xxx xxx xxx
(4) That which is purchased with exclusive money of the wife or of the
husband.
We find the conclusions of the lower court to be untenable. In the first place, witness
Gregorio de Borja's testimony as to the source of the money paid by Francisco for his
share was plain hearsay, hence inadmissible and of no probative value, since he was
merely repeating what Marcelo de Borja had told him (Gregorio). There is no way of
ascertaining the truth of the statement, since both Marcelo and Francisco de Borja were
already dead when Gregorio testified. In addition, the statement itself is improbable,
since there was no need or occasion for Marcelo de Borja to explain to Gregorio how
and when Francisco de Borja had earned the P17,000.00 entrusted to Marcelo. A ring of
artificiality is clearly discernible in this portion of Gregorio's testimony.
As to Francisco de Borja's affidavit, Exhibit "F", the quoted portion thereof (ante, page
14) does not clearly demonstrate that the "mi terreno personal y exclusivo (Poblacion de
Jalajala, Rizal) " refers precisely to the Hacienda in question. The inventories (Exhibits 3
and 4) disclose that there were two real properties in Jalajala owned by Francisco de
Borja, one of 72.038 sq. m., assessed at P44,600, and a much bigger one of 1,357.260.70
sq. m., which is evidently the Hacienda de Jalajala (Poblacion). To which of these lands
did the affidavit of Francisco de Borja (Exhibit "F") refer to? In addition, Francisco's
characterization of the land as "mi terreno personal y exclusivo" is plainly self-serving,
and not admissible in the absence of cross examination.
It may be true that the inventories relied upon by defendant-appellant (Exhibits "2", "3",
"4" and "7") are not conclusive on the conjugal character of the property in question;
but as already noted, they are clear admissions against the pecuniary interest of the
declarants, Francisco de Borja and his executor-widow, Tasiana Ongsingco, and as such
of much greater probative weight than the self-serving statement of Francisco (Exhibit CELESTINO BALUS, G.R. No. 168970
"F"). Plainly, the legal presumption in favor of the conjugal character of the Hacienda de
Jalajala (Poblacion) now in dispute has not been rebutted but actually confirmed by Petitioner,
proof. Hence, the appealed order should be reversed and the Hacienda de Jalajala
Present:
(Poblacion) declared property of the conjugal partnership of Francisco de Borja and
Josefa Tangco.

No error having been assigned against the ruling of the lower court that claims for CORONA, J., Chairperson,
damages should be ventilated in the corresponding special proceedings for the
- versus - VELASCO, JR.,
settlement of the estates of the deceased, the same requires no pro announcement
from this Court. NACHURA,

IN VIEW OF THE FOREGOING, the appealed order of the Court of First Instance of Rizal in PERALTA, and
Case No. L-28040 is hereby affirmed; while those involved in Cases Nos. L-28568 and L-
MENDOZA, JJ.
28611 are reversed and set aside. Costs against the appellant Tasiana Ongsingco Vda.
de Borja in all three (3) cases. SATURNINO BALUS andLEONARDA BALUS VDA. DE
CALUNOD,
Concepcion, C.J., Makalintal, Zaldivar, Castro, Teehankee, Barredo, Makasiar, Antonio Promulgated:
and Esguerra, JJ., concur. Respondents.

Fernando, J., took no part. January 15, 2010

x----------------------------------------------------------------------------------------x

Footnotes

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

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

3 Also: Osorio vs. Osorio Steamship Co., 41 Phil. 531; Baun vs. Heirs of
Baun, 53 Phil. 654; Barretto vs. Tuason, 59 Phil. 845; Cuevas vs.
Abesamis, 71 Phil. 147; Jayme vs. Gamboa, 75 Phil. 479; Iballe vs. Po.
4 Garcia vs. David, 67 Phil. 279; Jakosalem vs. Rafols, 73 Phil. 628.
BONILLA V BURCENA
THIRD DIVISION
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 Sale[3] 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.
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 Land[6] 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 Decision[9] 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 P6,733.33 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 Sale[13] 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.
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 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.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
WE CONCUR: Third Division, Chairperson

RENATO C. CORONA CERTIFICATION

Associate Justice

Chairperson

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons
Attestation, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Courts
Division.

PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

REYNATO S. PUNO

Chief Justice

JOSE C. MENDOZA

Associate Justice

[1] Penned by Associate Justice Arturo G. Tayag, with Associate Justices Rodrigo F. Lim,
ATTESTATION Jr. and Normandie B. Pizarro, concurring; CA rollo, pp. 69-76.
[2] See Certificate of Sale and Definite Deed of Sale, Exhibits A and B, respectively,

records, pp. 74-75.

[3] Exhibit A, records, p. 74.
[4] Exhibit B, id. at 75.
[5] Exhibit C/4, id. at 76.
I attest that the conclusions in the above Decision had been reached in consultation [6] Exhibit D, id. at 79.
before the case was assigned to the writer of the opinion of the Courts Division. [7] Exhibit E, id. at 80.
[8] Records, pp. 1-6.
[9] Id. at 131-140.
[10] Id. at 139-140.
[11] Rollo, p. 21.
[12] See TSN, October 28, 1996 p. 2.
[13] Exhibit B, records, p. 75.
[14] Civil Code, Art. 777.
[15] Civil Code, Art. 781.
RENATO C. CORONA [16] Alio v. Heirs of Angelica A. Lorenzo, G.R. No. 159550, June 27, 2008, 556 SCRA 139,

148.
Associate Justice
[17] TSPIC Corporation v. TSPIC Employees Union (FFW), G.R. No. 163419, February 13,
2008, 545 SCRA 215, 226.
[18] Tating v. Marcella, G.R. No. 155208, March 27, 2007, 519 SCRA 79, 87.
[19] TSPIC Corporation v. TSPIC Employees Union (FFW), supra note 17.
[20] Arbolario v. Court of Appeals, 449 Phil. 357, 369 (2003).
[21] Cruz v. Court of Appeals, G.R. No. 122904, April 15, 2005, 456 SCRA 165, 171; Lopez v.
Court of Appeals, 446 Phil. 722, 743 (2003).
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-4963 January 29, 1953
MARIA USON, plaintiff-appellee,
vs.
MARIA DEL ROSARIO, CONCEPCION NEBREDA, CONRADO NEBREDA, DOMINADOR
NEBREDA, AND FAUSTINO NEBREDA, Jr., defendants-appellants.
Priscilo Evangelista for appellee.
Brigido G. Estrada for appellant.
BAUTISTA ANGELO, J.:
This is an action for recovery of the ownership and possession of five (5) parcels of land
situated in the Municipality of Labrador, Province of Pangasinan, filed by Maria Uson
against Maria del Rosario and her four children named Concepcion, Conrado,
Dominador, and Faustino, surnamed Nebreda, who are all of minor age, before the
Court of First Instance of Pangasinan.
Maria Uson was the lawful wife of Faustino Nebreda who upon his death in 1945 left the
lands involved in this litigation. Faustino Nebreda left no other heir except his widow
Maria Uson. However, plaintiff claims that when Faustino Nebreda died in 1945, his
common-law wife Maria del Rosario took possession illegally of said lands thus depriving
her of their possession and enjoyment.
Defendants in their answer set up as special defense that on February 21, 1931, Maria
Uson and her husband, the late Faustino Nebreda, executed a public document
whereby they agreed to separate as husband and wife and, in consideration of their
separation, Maria Uson was given a parcel of land by way of alimony and in return she
renounced her right to inherit any other property that may be left by her husband upon
his death (Exhibit 1).
After trial, at which both parties presented their respective evidence, the court
rendered decision ordering the defendants to restore to the plaintiff the ownership and
possession of the lands in dispute without special pronouncement as to costs.
Defendants interposed the present appeal.
There is no dispute that Maria Uson, plaintiff-appellee, is the lawful wife of Faustino
Nebreda, former owner of the five parcels of lands litigated in the present case. There is
likewise no dispute that Maria del Rosario, one of the defendants-appellants, was
merely a common-law wife of the late Faustino Nebreda with whom she had four
illegitimate children, her now co-defendants. It likewise appears that Faustino Nebreda
died in 1945 much prior to the effectivity of the new Civil Code. With this background, it
is evident that when Faustino Nebreda died in 1945 the five parcels of land he was
seized of at the time passed from the moment of his death to his only heir, his widow
Maria Uson (Article 657, old Civil Code).As this Court aptly said, "The property belongs to
the heirs at the moment of the death of the ancestor as completely as if the ancestor
had executed and delivered to them a deed for the same before his death" (Ilustre vs.
Alaras Frondosa, 17 Phil., 321). From that moment, therefore, the rights of inheritance of
Maria Uson over the lands in question became vested.
The claim of the defendants that Maria Uson had relinquished her right over the lands in
question because she expressly renounced to inherit any future property that her
husband may acquire and leave upon his death in the deed of separation they had
entered into on February 21, 1931, cannot be entertained for the simple reason that
future inheritance cannot be the subject of a contract nor can it be renounced (1
Manresa, 123, sixth edition; Tolentino on Civil Code, p. 12; Osorio vs. Osorio and
Ynchausti Steamship Co., 41 Phil., 531).
But defendants contend that, while it is true that the four minor defendants are
illegitimate children of the late Faustino Nebreda and under the old Civil Code are not
entitled to any successional rights, however, under the new Civil Code which became in
force in June, 1950, they are given the status and rights of natural children and are
entitled to the successional rights which the law accords to the latter (article 2264 and
article 287, new Civil Code), and because these successional rights were declared for
the first time in the new code, they shall be given retroactive effect even though the
event which gave rise to them may have occurred under the prior legislation (Article
2253, new Civil Code).
There is no merit in this claim. Article 2253 above referred to provides indeed that rights
which are declared for the first time shall have retroactive effect even though the event
which gave rise to them may have occurred under the former legislation, but this is so
only when the new rights do not prejudice any vested or acquired right of the same
origin. Thus, said article provides that "if a right should be declared for the first time in this
Code, it shall be effective at once, even though the act or event which gives rise
thereto may have been done or may have occurred under the prior legislation,
provided said new right does not prejudice or impair any vested or acquired right, of the
same origin." As already stated in the early part of this decision, the right of ownership of
Maria Uson over the lands in question became vested in 1945 upon the death of her
late husband and this is so because of the imperative provision of the law which
commands that the rights to succession are transmitted from the moment of death
(Article 657, old Civil Code). The new right recognized by the new Civil Code in favor of
the illegitimate children of the deceased cannot, therefore, be asserted to the
impairment of the vested right of Maria Uson over the lands in dispute.
As regards the claim that Maria Uson, while her deceased husband was lying in state, in
a gesture of pity or compassion, agreed to assign the lands in question to the minor
children for the reason that they were acquired while the deceased was living with their
mother and Maria Uson wanted to assuage somewhat the wrong she has done to
them, this much can be said; apart from the fact that this claim is disputed, we are of
the opinion that said assignment, if any, partakes of the nature of a donation of real
property, inasmuch as it involves no material consideration, and in order that it may be
valid it shall be made in a public document and must be accepted either in the same
document or in a separate one (Article 633, old Civil Code). Inasmuch as this essential
formality has not been followed, it results that the alleged assignment or donation has
no valid effect.
WHEREFORE, the decision appealed from is affirmed, without costs.
Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Montemayor, Reyes, Jugo and Labrador,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 75884 September 24, 1987
JULITA GO ONG, FOR HERSELF AND AS JUDICIAL GUARDIAN OF STEVEN GO
ONG, petitioners,
vs.
THE HON. COURT OF APPEALS, ALLIED BANKING CORPORATION and the CITY SHERIFF OF
QUEZON CITY, respondents.
PARAS, J.:
This is a petition for review on certiorari of the March 21, 1986 Decision * of the Court of
Appeals in AC-G.R. CV No. 02635, "Julita Ong etc. vs. Allied Banking Corp. et al."
affirming, with modification, the January 5, 1984 Decision of the Regional Trial Court of
Quezon City in Civil Case No. Q-35230.
The uncontroverted facts of this case, as found by the Court of Appeals, are as follows:
...: Two (2) parcels of land in Quezon City Identified as Lot No. 12,
Block 407, Psd 37326 with an area of 1960.6 sq. m. and Lot No. 1, Psd
15021, with an area of 3,660.8 sq. m. are covered by Transfer
Certificate of Title No. 188705 in the name of "Alfredo Ong Bio Hong
married to Julita Go Ong "(Exh. D). Alfredo Ong Bio Hong died on
January 18, 1975 and Julita Go Ong was appointed administratrix of
her husband's estate in Civil Case No. 107089. The letters of
administration was registered on TCT No. 188705 on October 23, 1979.
Thereafter, Julita Go Ong sold Lot No. 12 to Lim Che Boon, and TCT
No. 188705 was partially cancelled and TCT No. 262852 was issued in
favor of Lim Che Boon covering Lot No. 12 (Exh. D-4). On June 8, 1981
Julita Go Ong through her attorney-in-fact Jovita K. Yeo (Exh. 1)
mortgaged Lot No. 1 to the Allied Banking Corporation to secure a
loan of P900,000.00 obtained by JK Exports, Inc. The mortgage was
registered on TCT No. 188705 on the same date with the following
notation: "... mortgagee's consent necessary in case of subsequent
alienation or encumbrance of the property other conditions set forth
in Doc. No. 340, Page No. 69, Book No. XIX, of the Not. Public of
Felixberto Abad". On the loan there was due the sum of P828,000.00
and Allied Banking Corporation tried to collect it from Julita Go Ong,
(Exh. E). Hence, the complaint alleging nullity of the contract for lack
of judicial approval which the bank had allegedly promised to secure
from the court. In response thereto, the bank averred that it was
plaintiff Julita Go Ong who promised to secure the court's approval,
adding that Julita Go Ong informed the defendant that she was
processed the sum of P300,000.00 by the JK Exports, Inc. which will
also take charge of the interest of the loan.
Concluding, the trial court ruled:
Absent (of) any evidence that the property in
question is the capital of the deceased husband
brought into the marriage, said property should be
presumed as acquired during the marriage and,
therefore, conjugal property,
After the dissolution of the marriage with the death
of plaintiff's husband, the plaintiff acquired, by law,
her conjugal share, together with the hereditary
rights thereon. (Margate vs. Rabacal, L-14302, April
30, 1963). Consequently, the mortgage constituted
on said property, upon express authority of plaintiff,
notwithstanding the lack of judicial approval, is
valid, with respect to her conjugal share thereon,
together with her hereditary rights.
On appeal by petitioner, respondent Court of Appeals affirmed, with modification, the
appealed decision (Record, pp. 19-22). The dispositive portion of the appellate court's
decision reads:
WHEREFORE, with the modification that the extrajudicial foreclosure
proceedings instituted by defendant against plaintiff shall be held in
abeyance to await the final result of Civil Case No. 107089 of the
Court of First Instance of Manila, 6th Judicial District Branch XXXII,
entitled "IN THE MATTER OF THE INTESTATE ESTATE OF THE LATE ALFREDO
ONG BIO: JULITA GO ONG, ADMINISTRATRIX". In pursuance with which
the restraining order of the lower court in this case restraining the sale
of the properties levied upon is hereby ordered to continue in full
force and effect coterminous with the final result of Civil Case No.
107089, the decision appealed from is hereby affirmed. Costs against
plaintiff-appellant.
SO ORDERED.
On April 8, 1986, petitioner moved for the reconsideration of the said decision (Ibid., pp.
24-29), but in a Resolution dated September 11, 1986, respondent court denied the
motion for lack of merit (Ibid., p. 23). Hence, the instant petition (Ibid., pp. 6-17).
The Second Division of this Court, in a Resolution dated November 19, 1986 (Rollo, p. 30),
without giving due course to the petition, resolved to require private respondent to
comment thereon and it did on February 19, 1987 (Ibid., pp. 37-42). Thereafter, in a
Resolution dated April 6, 1987, the petition was given due course and the parties were
required to file their respective memoranda (Ibid., p. 43).
Petitioner filed her Memorandum on May 13, 1987 (Ibid., pp. 45-56), while private
respondent filed its Memorandum on May 20, 1987 (Ibid., pp. 62-68).
The sole issue in this case is —
WHETHER OR NOT THE MORTGAGE CONSTITUTED OVER THE PARCEL OF LAND UNDER
PETITIONER'S ADMINISTRATION IS NULL AND VOID FOR WANT OF JUDICIAL APPROVAL.
The instant petition is devoid of merit.
The well-settled rule that the findings of fact of the trial court are entitled to great
respect, carries even more weight when affirmed by the Court of Appeals as in the case
at bar.
In brief, the lower court found: (1) that the property under the administration of
petitioner — the wife of the deceased, is a community property and not the separate
property of the latter; (2) that the mortgage was constituted in the wife's personal
capacity and not in her capacity as administratrix; and (3) that the mortgage affects
the wife's share in the community property and her inheritance in the estate of her
husband.
Petitioner, asserting that the mortgage is void for want of judicial approval, quoted
Section 7 of Rule 89 of the Rules of Court and cited several cases wherein this Court
ruled that the regulations provided in the said section are mandatory.
While petitioner's assertion may have merit insofar as the rest of the estate of her
husband is concerned the same is not true as regards her conjugal share and her
hereditary rights in the estate. The records show that petitioner willingly and voluntarily
mortgaged the property in question because she was processed by JK Exports, Inc. the
sum of P300,000.00 from the proceeds of the loan; and that at the time she executed
the real estate mortgage, there was no court order authorizing the mortgage, so she
took it upon herself, to secure an order.
Thus, in confirming the findings of the lower court, as supported by law and the
evidence, the Court of Appeals aptly ruled that Section 7 of Rule 89 of the Rules of
Court is not applicable, since the mortgage was constituted in her personal capacity
and not in her capacity as administratrix of the estate of her husband.
Nevertheless, petitioner, citing the cases of Picardal, et al. vs. Lladas (21 SCRA 1483)
and Fernandez, et al. vs. Maravilla (10 SCRA 589), further argues that in the settlement
proceedings of the estate of the deceased spouse, the entire conjugal partnership
property of the marriage is under administration. While such may be in a sense true, that
fact alone is not sufficient to invalidate the whole mortgage, willingly and voluntarily
entered into by the petitioner. An opposite view would result in an injustice. Under similar
circumstances, this Court applied the provisions of Article 493 of the Civil Code, where
the heirs as co-owners shall each have the full ownership of his part and the fruits and
benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and
even 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 (Philippine National Bank vs. Court of Appeals, 98 SCRA 207 [1980]).
Consequently, in the case at bar, the trial court and the Court of Appeals cannot be
faulted in ruling that the questioned mortgage constituted on the property under
administration, by authority of the petitioner, is valid, notwithstanding the lack of judicial
approval, with respect to her conjugal share and to her hereditary rights. The fact that
what had been mortgaged was in custodia legis is immaterial, insofar as her conjugal
share and hereditary share in the property is concerned for after all, she was the
ABSOLUTE OWNER thereof. This ownership by hers is not disputed, nor is there any claim
that the rights of the government (with reference to taxes) nor the rights of any heir or
anybody else have been prejudiced for impaired. As stated by Associate Justice (later
Chief Justice) Manuel Moran in Jakosalem vs. Rafols, et al., 73 Phil. 618 —
The land in question, described in the appealed decision, originally
belonged to Juan Melgar. The latter died and the judicial
administration of his estate was commenced in 1915 and came to a
close on December 2, 1924, only. During the pendency of the said
administration, that is, on July 5, 1917, Susana Melgar, daughter of the
deceased Juan Melgar, sold the land with the right of repurchase to
Pedro Cui, subject to the stipulation that during the period for the
repurchase she would continue in possession of the land as lessee of
the purchase. On December 12, 1920, the partition of the estate left
by the deceased Juan Melgar was made, and the land in question
was adjudicated to Susana Melgar. In 1921, she conveyed, in
payment of professional fees, one-half of the land in favor of the
defendant-appellee Nicolas Rafols, who entered upon the portion
thus conveyed and has been in possession thereof up to the present.
On July 23, 1921, Pedro Cui brought an action to recover said half of
the land from Nicolas Rafols and the other half from the other
defendants, and while that case was pending, or about August 4,
1925, Pedro Cui donated the whole land in question to Generosa
Teves, the herein plaintiff-appellant, after trial, the lower court
rendered a decision absolving Nicolas Rafols as to the one-half of the
land conveyed to him by Susana Melgar, and declaring the plaintiff
owner of the other half by express acknowledgment of the other
defendants. The plaintiff appealed from that part of the judgment
which is favorable to Nicolas Rafols.
The lower court absolved Nicolas Rafols upon the theory that Susana
Melgar could not have sold anything to Pedro Cui because the land
was then in custodia legis, that is, under judicial administration. This is
error. That the land could not ordinary be levied upon while
in custodia legis, does not mean that one of the heirs may not sell the
right, interest or participation which he has or might have in the lands
 under administration. The ordinary execution of property in custodia
legis is prohibited in order to avoid interference with the possession by
the court. But the sale made by an heir of his share in an inheritance,
subject to the result of the pending administration, in no wise stands in
the way of such administration.
The reference to judicial approval in Sec. 7, Rule 89 of the Rules of Court cannot
adversely affect the substantiverights of private respondent to dispose of her Ideal [not
inchoate, for the conjugal partnership ended with her husband's death, and her
hereditary rights accrued from the moment of the death of the decedent (Art. 777, Civil
Code) share in the co-heirship and/or co-ownership formed between her and the other
heirs/co-owners (See Art. 493, Civil Code, supra.). Sec. 7, Art. 89 of the Civil Code applies
in a case where judicial approval has to be sought in connection with, for instance, the
sale or mortgage of property under administration for the payment, say of a conjugal
debt, and even here, the conjugal and hereditary shares of the wife are excluded from
the requisite judicial approval for the reason already adverted to hereinabove,
provided of course no prejudice is caused others, including the government.
Moreover, petitioner is already estopped from questioning the mortgage. An estoppel
may arise from the making of a promise even though without consideration, if it was
intended that the promise should be relied upon and in fact it was relied upon, and if a
refusal to enforce it would be virtually to sanction the perpetration of fraud or would
result in other injustice (Gonzalo Sy Trading vs. Central Bank, 70 SCRA 570).
PREMISES CONSIDERED, the instant petition is hereby DENIED and the assailed decision of
the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
Yap (Chairman), Melencio-Herrera, Padilla and Sarmiento, JJ., concur.
Footnotes
* Penned by Justice Leonor Ines Luciano, concurred in by Justices
Ramon G. Gaviola, Jr. and Ma. Rosario Quetulio-Losa.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24434 January 17, 1968
HEIRS OF PEDRO REGANON, JOVENCIA REGANON, MENCIA REGANON, JOSEFA
REGANON, VIOLETA REGANON, and FLORA REGANON, plaintiffs-appellees,
vs.
RUFINO IMPERIAL, defendant-appellant.
Torcuato L. Galon for plaintiffs-appellees.
V. Lacaya for defendant-appellant.
BENGZON, J.P., J.:
This is an appeal from the orders dated June 9, 1964, July 14, 1964 and August 11, 1964,
respectively, of the Court of First Instance of Zamboanga del Norte (Dipolog, Branch II).
The facts of the case are admitted by both parties.
On February 22, 1963, the heirs of Pedro Reganon filed a complaint for recovery of
ownership and possession of about one-hectare portion of a parcel of land (Lot No. 1 or
Lot No. 4952, situated at Miasi, Polanco, Zamboanga del Norte, covered by O.T.C. No.
1447, with an area of 7.9954 hectares), with damages, against Rufino Imperial.
Defendant not having filed an answer within the reglementary period, the plaintiffs on
April 8, 1963 filed a motion to declare the former in default. The trial court granted the
motion in its order dated April 10, 1963.
On April 23, 1963, the plaintiffs presented their evidence ex parte before the Clerk of
Court acting as Commissioner. The court a quo on May 6, 1963, rendered a decision
declaring the plaintiffs lawful owners of the land in question and entitled to its peaceful
possession and enjoyment; ordering defendant immediately to vacate the portion
occupied by him and to restore the peaceful possession thereof to plaintiffs; and
sentencing defendant to pay plaintiffs the amount of P1,929.20 and the costs.
On November 29, 1963, the plaintiffs filed a motion for issuance of a writ of execution.
This was granted by the trial court in its order of December 9, 1963.
The Deputy Provincial Sheriff submitted on February 8, 1964 a sheriff's return of
proceedings reporting the garnishment and sale of a carabao and goat belonging to
defendant for P153.00, and the attachment and sale of defendant's parcel of land
covered by Tax Declaration No. 4694, situated in Sicet, Polanco, Zamboanga del Norte,
for P500.00 — both sales having been made to the only bidder, plaintiffs' counsel Atty.
Vic T. Lacaya.
On March 13, 1964, the Philippine National Bank deposited in the Philippine National
Bank-Dipolog Branch the residuary estate of its former ward, Eulogio Imperial, in the sum
of P10,303.80, pursuant to an order of Branch I of the Court of First Instance of
Zamboanga del Norte in Sp. Proc. No. R-145.
On May 25, 1964, the heirs of said Eulogio Imperial, one of whom is defendant, executed
a Deed of Extrajudicial Partition of the residuary estate, wherein was apportioned
P1,471.97 as defendant Rufino Imperial's share.
Informed of this development, the plaintiffs filed on June 5, 1964 an ex parte motion for
issuance of an alias writ of execution and of an order directing the manager, or the
representative, of the Philippine National Bank-Dipolog Branch, to hold the share of
defendant and deliver the same to the provincial sheriff of the province to be applied
to the satisfaction of the balance of the money judgment. This was granted by the trial
court (Branch II) in its order dated June 9, 1964.
On June 17, 1964, the Deputy Provincial Sheriff issued a sheriffs notification for levy
addressed to defendant, giving notice of the garnishment of the rights, interests, shares
and participation that defendant may have over the residuary estate of the late Eulogio
Imperial, consisting of the money deposited in the Philippine National Bank-Dipolog
Branch.
Defendant, through counsel, appearing for the first time before the trial court, on June
24, 1964 filed a motion for reconsideration of the order dated June 9, 1964, and to
quash the alias writ of execution issued pursuant to it, to which plaintiffs filed their
opposition on July 6, 1964. On July 14, 1964, the trial court denied defendant's aforesaid
motion.
Defendant's second motion for reconsideration likewise having denied by the trial court
in its order of August 11, 1964, defendant appealed to Us, raising the following issues:
(1) Upon the death of a ward, is the money accumulated in his guardianship
proceedings and deposited in a bank, still considered in custodia legis and
therefore cannot be attached?
(2) Is the residuary estate of a U.S. veteran, which consists in the aggregate
accumulated sum from the monthly allowances given him by the United States
Veterans Administration (USVA) during his lifetime, exempt from execution?
Defendant-appellant argues that the property of an incompetent under guardianship is
in custodia legis and therefore can not be attached.
It is true that in a former case 1 it was held that property under custodia legis can not be
attached. But this was under the old Rules of Court. The new Rules of Court 2 now
specifically provides for the procedure to be followed in case what is attached is
in custodia legis. 3 The clear import of this new provision is that property under custodia
legis is now attachable, subject to the mode set forth in said rule.
Besides, the ward having died, the guardianship proceedings no longer subsist:
The death of the ward necessarily terminates the guardianship, and thereupon
all powers and duties of the guardian cease, except the duty, which remains,
to make a proper accounting and settlement in the probate court. 4
As a matter of fact, the guardianship proceedings was ordered conditionally closed by
Branch I of the Court of First Instance of Zamboanga del Norte in which it was pending,
in its order of February 8, 1964, where it stated —
In the meantime, the guardian Philippine National Bank is hereby directed to
deposit the residuary estate of said ward with its bank agency in Dipolog, this
province, in the name of the estate of the deceased ward Eulogio Imperial,
preparatory to the eventual distribution of the same to the heirs when the latter
shall be known, and upon proof of deposit of said residuary estate, the
guardian Philippine National Bank shall forthwith be relieved from any
responsibility as such, and this proceeding shall be considered closed and
terminated. 5
And the condition has long been fulfilled, because on March 13, 1964 the Philippine
National Bank-Manila deposited the residuary estate of the ward with the Philippine
National Bank-Dipolog Branch, evidenced by a receipt attached to the records in Sp.
Proc. No. R-145. 6
When Eulogio Imperial died on September 13, 1962, the rights to his succession — from
the moment of his death — were transmitted to his heirs, one of whom is his son and heir,
defendant-appellant herein. 7 This automatic transmission can not but proceed with
greater ease and certainty than in this case where the parties agree that the residuary
estate is not burdened with any debt. For,
The rights to the succession of a person are transmitted from the moment of
death, and where, as in this case, the heir is of legal age and the estate is not
burdened with any debts, said heir immediately succeeds, by force of law, to
the dominion, ownership, and possession of the properties of his predecessor
and consequently stands legally in the shoes of the latter. 8
That the interest of an heir in the estate of a deceased person may be attached for
purposes of execution, even if the estate is in the process of settlement before the
courts, is already a settled matter in this jurisdiction. 9
It is admitted that the heirs of Eulogio Imperial, including herein defendant-appellant,
have on May 25, 1964 executed a Deed of Extrajudicial Partition. This instrument suffices
to settle the entire estate of the decedent — provided all the requisites for its validity are
fulfilled 10 — even without the approval of the court. Therefore, the estate for all
practical purposes have been settled. The heirs are at full liberty to withdraw the
residuary estate from the Philippine National Bank-Dipolog Branch and divide it among
themselves. The only reason they have not done so is because of the alleged illegal
withdrawal from said estate of the amount of P1,080.00 by one Gloria Gomez by
authority of Branch I of the Court of First Instance of Zamboanga del Norte, which
incident is now on appeal before the Court of Appeals. This appeal, however, does not
detract any from the fact that the guardianship proceedings is closed and terminated
and the residuary estate no longer under custodia legis.
Finally, it is defendant-appellant's position that the residuary estate of Eulogio Imperial, a
former U.S. veteran, having been set aside from the monthly allowances given him by
the United States Veterans Administration (USVA) during his lifetime, is exempt from
execution.
Any pension, annuity, or gratuity granted by a Government to its officers or employees
in recognition of past services rendered, is primordially aimed at tiding them over during
their old age and/or disability. This is therefore a right personalissima, purely personal
because founded on necessity. It requires no argument to show that where the
recipient dies, the necessity motivating or underlying its grant necessarily ceases to be.
Even more so in this case where the law 11 providing for the exemption is calculated to
benefit U.S. veterans residing here, and is therefore merely a manifestation of comity.
Besides, as earlier stated, the heirs of Eulogio Imperial, one of whom is appellant, have
already executed a Deed of Extrajudicial Partition — the end result of which is that the
property is no longer the property of the estate but of the individual heirs. And it is
settled that:
When the heirs by mutual agreement have divided the estate among
themselves, one of the heirs can not therefore secure the appointment of an
administrator to take charge of and administer the estate or a part
thereof. The property is no longer the property of the estate, but of the
individual heirs, whether it remains undivided or not. 12
WHEREFORE, the orders appealed from are hereby affirmed, with costs against
defendant-appellant. So ordered.1äwphï1.ñët
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles
and Fernando, JJ., concur.
Footnotes
1Asia Banking Corporation v. Elser, 54 Phil. 994.
2Effective January 1, 1964.
3"If
the property sought to be attached is in custodia legis, copy of the order of
attachment shall be filed with the proper court and notice of the attachment
served upon the custodian of such property." (Rule 57, Sec. 7, last par., new
Rules of Court).
439C.J.S. pp. 61-62; citing Armon vs. Craig, 214 N.W. 556, 203 Iowa 1338, and
Greever et al. vs. Barker, et al., 289, S.W. 586, 316 Mo. 308.
5Pp. 82-83, Record on Appeal; Emphasis Ours.
6Pp. 42-43, Record on Appeal.
7See Art. 777, New Civil Code; Butte v. Uy & Sons, L-15499, Feb. 28, 1962.
8Cuevas v. Abesamis, 71 Phil. 147.
9De
Borja, et al. v. De Borja, et al., L-14851, Aug. 31, 1961.
10See Sec. 1, Rule 74, new Rules of Court.
11Republic
Act No. 360, approved June 9, 1949.
12Alcala v. Panganiban, et al., 19 Phil. 520; Emphasis Ours.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-14070 March 29, 1961
MARIA GERVACIO BLAS, MANUEL GERVACIO BLAS, LEONCIO GERVACIO BLAS and LODA
GERVACIO BLAS, plaintiffs-appellants,
vs.
ROSALINA SANTOS, in her capacity as Special Administratrix of the Estate of the
deceased MAXIMA SANTOS VDA. DE BLAS, in Sp. Proc. No. 2524, Court of First Instance of
Rizal, defendants-appellants. MARTA GERVACIO BLAS and DR. JOSE CHIVI, defendants-
appellants.
Teofilo Sison and Nicanor Sison for plaintiffs-appellants.
De los Santos, Caluag, Pascal and Felizardo for defendants-appellees.
LABRADOR, J.:
This action was instituted by plaintiffs against the administration of the estate of Maxima
Santos, to secure a judicial declaration that one-half of the properties left by Maxima
Santos Vda. de Blas, the greater bulk of which are set forth and described in the project
of partition presented in the proceedings for the administration of the estate of the
deceased Simeon Blas, had been promised by the deceased Maxima Santos to be
delivered upon her death and in her will to the plaintiffs, and requesting that the said
properties so promised be adjudicated to the plaintiffs. The complaint also prays for
actual damages in the amount of P50,000. (Record on Appeal, pp. 1-65.) The alleged
promise of the deceased Maxima Santos is contained in a document executed by
Maxima Santos on December 26, 1936 attached to the complaint as Annex "H" and
introduced at the trial as Exhibit "A". (Ibid., pp. 258-259.) The complaint also alleges that
the plaintiffs are entitled to inherit certain properties enumerated in paragraph 3
thereof, situated in Malabon, Rizal and Obando, Bulacan, but which properties have
already been in included in the inventory of the estate of the deceased Simeon Blas
and evidently partitioned and conveyed to his heirs in the proceedings for the
administration of his (Simeon Blas) estate.
Defendant, who is the administratrix of the estate of the deceased Maxima Santos Vda.
de Blas, filed an answer with a counterclaim, and later, an amended answer and a
counterclaim. The said amended answer admits the allegations of the complaint as to
her capacity as administratrix the death of Simeon Blas on January 3, 1937; the fact that
Simeon Blas and Marta Cruz begot three children only one of whom, namely, Eulalio
Blas, left legitimate descendants; that Simeon Blas contracted a second marriage with
Maxima Santos on June 28, 1898. She denies for lack of sufficient information and belief,
knowledge edge of the first marriage of Simeon Blas to Marta Cruz, the averment that
Simeon Blas and Marta Cruz acquired properties situated in Obando, Bulacan, that said
properties were utilized as capital, etc. As special defenses, she alleges that the
properties of the spouses Blas and Santos had been settled and liquidated in the project
of partition of the estate of said Simeon Blas; that pursuant to the project of partition,
plaintiffs and some defendants had already received the respective properties
adjudicated to them; that the plaintiffs and the defendants Marta Geracio and Jose
Chivi are estopped from impugning the validity of the project of partition of the estate
of the deceased Simeon Blas and from questioning the ownership in the properties
conveyed in the project of partition to Maxima Santos as her own exclusive property;
that the testament executed by Maxima Santos is valid, the plain plaintiffs having no
right to recover any portion of Maxima Santos' estate now under administration by the
court. A counterclaim for the amount of P50,000 as damages is also included in the
complaint, as also a cross-claim against Marta Gervacio Blas and Jose Chivi.
Trial of the case was Conducted and, thereafter, the court, Hon. Gustave Victoriano,
presiding, rendered judgment dismissing the complaint, with costs against plaintiff, and
dismissing also the counterclaim and cross-claim decision ,the plaintiffs filed by the
defendants. From this district have appealed to this Court.
The facts essential to an understanding of the issues involved in the case may be briefly
summarized as follows: Simeon Blas contracted a first marriage with Marta Cruz
sometime before 1898. They had three children, only one of whom, Eulalio, left children,
namely, Maria Gervacio Blas, one of the plaintiffs, Marta Gervacio Blas, one of the
defendants, and Lazaro Gervacio Blas. Lazaro died in 1950, and is survived by three
legitimate children who are plaintiffs herein, namely, Manuel Gervacio Blas, Leoncio
Gervacio Blas and Loida Gervacio Blas. Marta Cruz died in 1898, and the following year,
Simeon Blas contracted a second marriage with Maxima Santos. At the time of this
second marriage, no liquidation of the properties required by Simeon Blas and Marta
Cruz was made. Three of the properties left are fishponds located in Obando, Bulacan.
Maxima Santos does not appear to have apported properties to her marriage with
Simeon Blas.
On December 26, 1936, only over a week before over a week before his death on
January 9, 1937, Simeon Blas executed a last will and testament. In the said testament
Simeon Blas makes the following declarations:
I
2. Sa panahon ng aking pangalawang asawa, MAXIMA SANTOS DE BLAS, ay
nagkaroon ako at nakatipon ng mga kayamanan (bienes) at pag-aari
(propriedades) na ang lahat ng lupa, palaisdaan at iba pang pag-aari ay
umaabot sa halagang ANIM NA RAAN PITONG PU'T WALONG DAAN LIBO
WALONG DAAN WALONG PUNG PISO (678,880-00) sang-ayon sa mga halaga
sa amillarimento (valor Amillarado.)
II
1. Ang kalahati ng lahat ng aming pag-aari, matapos mabayaran ang lahat
ng aking o aming pag-kakautang na mag-asawa, kung mayroon man,
yayamang ang lahat ng ito ay kita sa loob ng matrimonio (bienes ganaciales)
ay bahagi ng para sa aking asawa, MAXIMA SANTOS DE BLAS, sang-ayon sa
batas. (Record on Appeal, pp. 250-251.)
The above testamentary provisions may be translated as follows:
I
2. During my second marriage with Maxima Santos de Blas, I possessed and
acquired wealth and properties, consisting of lands, fishponds and other kinds
of properties, the total assessed value of which reached the amount
P678,880.00.
II
1. One-half of our properties, after the payment of my and our indebtedness,
all these properties having been acquired during marriage (conjugal
properties), constitutes the share of my wife Maxima Santos de Blas, according
to the law.
At the time of the execution of said will, Andres Pascual a son-in-law of the testator, and
Avelina Pascual and others, were present. Andres Pascual had married a descendant
by the first marriage. The will was prepared by Andres Pascual, with the help of his
nephew Avelino Pascual. The testator asked Andres Pascual to prepare a document
which was presented in court as Exhibit "A", thus:
Q — Was there anybody who asked you to prepare this document?
A — Don Simeon Blas asked me to prepare this document (referring to Exhibit
"A"), (t.s.n., Sarmiento to, P. 24).
The reason why the testator ordered the preparation of Exhibit "A" was because the
properties that the testator had acquired during his first marriage with Marta Cruz had
not been liquidated and were not separated from those acquired during the second
marriage. Pascual's testimony is as follows:
Q — To whom do you refer with the word "they"?
A — Simeon Blas and his first wife, Marta Cruz. When Marta Cruz died they had
not made a liquidation of their conjugal properties and so all those properties
were included all in the assets of the second marriage, and that is the reason
why this document was prepared. (t.s.n., Sarmiento, p. 36.)
The above testimony is fully corroborated by that of Leoncio Gervacio, son-in-law of
Simeon Blas.
Q — Please state to the Court?
A — My children were claiming from their grandfather Simeon Blas the
properties left by their grandmother Marta Cruz in the year 1936.
Q — And what happened with that claim of your children against Simeon Blas
regarding the assets or properties of the first marriage that were left after the
death of Marta Cruz in 1936?
 A — The claim was not pushed through because they reached into an
agreement whereby the parties Simeon Blas Maxima Santos, Maria Gervacio
Bias, Marta Gervacio Blas and Lazaro Gervacio Blas agreed that Simeon Blas
and Maxima Blas will give one-half of the estate of Simeon Blas. (t.s.n.,
Sarmiento, pp. 143-144).
The document which was thus prepared and which is marked as Exhibit "A" reads in
Tagalog, thus:
MAUNAWA NG SINO MANG MAKABABASA:
Na akong si MAXIMA SANTOS DE BLAS, nasa hustong gulang, kasal kay SIMEON
BLAS, taga bayan ng Malabon, Rizal, Philippines, sa pamamagitan ng
kasulatang ito ay malaya kong ipinahahayag:
Na aking nabasa at naunawa ang testamento at huling kalooban na
nilagdaan ng aking asawa, SIMEON BLAS, at ipinahahayag ko sa ilalim ng
aking karangalan at sa harap ng aking asawa na igagalang at
pagpipitaganan ang lahat at bawa't isang bahagi ng nabanggit na
testamento at ipinangangako ko pa sa pamamagitan ng kasulatang ito na
ang lahat ng maiiwang pag-aari at kayamanan naming mag-asawa, na
nauukol at bahaging para sa akin sa paggawa ko naman ng aking
testamento ay ipagkakaloob ko ang kalahati (½) sa mga herederos at
legatarios o pinamamanahan ng aking nabanggit na asawa, SIMEON BLAS, sa
kaniyang testamento, na ako'y makapipili o makahihirang na kahit kangino sa
kanila ng aking pagbibigyan at pamamanahan sang-ayon sa paggalang,
paglilingkod, at pakikisama ng gagawin sa akin.
SA KATUNAYAN NG LAHAT NG ITO ay nilagdaan ko ang kasulatang ito ngayon
ika 26 ng Diciembre ng taong 1936, dito sa San Francisco del Monte, San Juan,
Rizal, Philippines. (Exh. "A", pp. 29-30 — Appellant's brief).
(Fdo.) MAXIMA SANTOS DE BLAS
and which, translated into English, reads as follows:
KNOW ALL MEN BY THESE PRESENTS:
That I MAXIMA SANTOS DE BLAS, of legal age, married to SIMEON BLAS, resident
of Malabon, Rizal, Philippines, voluntarily state:
That I have read and knew the contents of the will signed by my husband,
SIMEON BLAS, (2) and I promise on my word of honor in the presence of my
husband that I will respect and obey all and every disposition of said will (3)
and furthermore, I promise in this document that all the properties my husband
and I will leave, the portion and share corresponding to me when I make my
will, I will give one-half (½) to the heirs and legatees or the beneficiaries named
in the will of my husband, (4) and that I can select or choose any of them, to
whom I will give depending upon the respect, service and treatment
accorded to me.
IN WITNESS WHEREOF, I signed this document this 26th day of December, 1936
at San Francisco del Monte, San Juan, Rizal, Philippines. (Exh. "A", pp. 30-31,
Appellant's brief).
(Sgd.) MAXIMA SANTOS DE BLAS
The court below held that said Exhibit "A" has not created any right in favor of plaintiffs
which can serve as basis for the complaint; that neither can it be considered as a valid
and enforceable contract for lack of consideration and because it deals with future
inheritance. The court also declared that Exhibit "A" is not a will because it does not
comply with the requisites for the execution of a will; nor could it be considered as a
donation, etc.
Both the court below in its decision and the appellees in their brief before us, argue
vehemently that the heirs of Simeon Blas and his wife Marta Cruz can no longer make
any claim for the unliquidated conjugal properties acquired during said first marriage,
because the same were already included in the mass of properties constituting the
estate of the deceased Simeon Blas and in the adjudications made by virtue of his will,
and that the action to recover the same has prescribed. This contention is correct. The
descendants of Marta Cruz can no longer claim the conjugal properties that she and
her husband may have required during their marriage although no liquidation of such
properties and delivery thereof to the heirs of Marta Cruz have been made, no action to
recover said propertied having been presented in the proceedings for the settlement of
the estate of Simeon Blas.
But the principal basis for the plaintiffs' action in the case at bar is the document Exhibit
"A". It is not disputed that this document was prepared at the instance of Simeon Blas for
the reason that the conjugal properties of me on Blas for the reason his first marriage
had not been liquidated; that it was prepared at the same time as the will of Simeon
Blas on December 26, 1936, at the instance of the latter himself. It is also not disputed
that the document was signed by Maxima Santos and one copy thereof, which was
presented in court as Exhibit "A", was kept by plaintiffs' witness Andres Pascual.
Plaintiffs-appellants argue before us that Exhibit "A" is both a trust agreement and a
contract in the nature of a compromise to avoid litigation. Defendants-appellees, in
answer, claim that it is neither a trust agreement nor a compromise a agreement.
Considering that the properties of the first marriage of Simeon Blas had not been
liquidated when Simeon Blas executed his will on December 26, 1936', and the further
fact such properties where actually , and the further fact that included as conjugal
properties acquired during the second marriage, we find, as contended by plaintiffs-
appellants that the preparation and execution of Exhibit "A" was ordered by Simeon Blas
evidently to prevent his heirs by his first marriage from contesting his will and demanding
liquidation of the conjugal properties acquired during the first marriage, and an
accounting of the fruits and proceeds thereof from the time of the death of his first wife.
Exhibit "A", therefore, appears to be the compromise defined in Article 1809 of the Civil
Code of Spain, in force at the time of the execution of Exhibit "A", which provides as
follows:
Compromise is a contract by which each of the parties in interest, by
giving, promising, or retaining something avoids the provocation of a suitor
terminates one which has already the provocation been instituted. (Emphasis
supplied.)
Exhibit "A" states that the maker (Maxima Santos) had read and knew the contents of
the will of her husband read and knew the contents of the will Simeon Blas — she was
evidently referring to the declaration in the will(of Simeon Blas) that his properties are
conjugal properties and one-half thereof belongs to her (Maxima Santos) as her share of
the conjugal assets under the law. The agreement or promise that Maxima Santos
makes in Exhibit "A" is to hold one-half of her said share in the conjugal assets in trust for
the heirs and legatees of her husband in his will, with the obligation of conveying the
same to such of his heirs or legatees as she may choose in her last will and testament. It
is to be noted that the conjugal properties referred to are those that were actually
existing at that time, December 26, 1936. Simeon Blas died on January 9, 1937. On June
2, 1937, an inventory of the properties left by him, all considered conjugal, was
submitted by Maxima Santos herself as administratrix of his estate. A list of said properties
is found in Annex "E", the complete inventory submitted by Maxima Santos Vda. de Blas,
is administratrix of the estate of her husband, dated March 10, 1939. The properties
which were given to Maxima Santos as her share in the conjugal properties are also
specified in the project of partition submitted by said Maxima Santos herself on March
14, 1939. (Record on Appeal, pp. 195-241.) Under Exhibit "A", therefore, Maxima Santos
contracted the obligation and promised to give one-half of the above indicated
properties to the heirs and legatees of Simeon Blas.
Counsel for the defendant-appellee claims Exhibit "A" is a worthless piece of paper
because it is not a will nor a donation mortis causa nor a contract. As we have in
indicated above, it is a compromise and at the same time a contract with a sufficient
cause or consideration. It is also contended that it deals with future inheritance. We do
not think that Exhibit "A" is a contract on future inheritance. it is an obligation or promise
made by the maker to transmit one-half of her share in the conjugal properties acquired
with her husband, which properties are stated or declared to be conjugal properties in
the will of the husband. The conjugal properties were in existence at the time of the
execution of Exhibit "A" on December 26, 1936. As a matter of fact, Maxima Santos
included these properties in her inventory of her husband's estate of June 2, 1937. The
promise does not refer to any properties that the maker would inherit upon the death of
her husband, because it is her share in the conjugal assets. That the kind of agreement
or promise contained in Exhibit "A" is not void under Article 1271 of the old Civil Code,
has been decided by the Supreme Court of Spain in its decision of October 8, 19154,
thus:
Que si bien el art. 1271 del Codigo civil dispone que sobre la herenciafutura no
se podra celebrar otros contratos que aquellos cuyo objecto seapracticar
entre vivos la division de un caudal, conforme al articulo 1056, esta prohibicion
noes aplicable al caso, porque la obligacion que contrajoel recurr en
contrato privado de otorgar testamento e instituir heredera a su subrina de los
bienes que adquirio en virtud de herencia, procedentes desu finada consorte
que le quedasen sobrantes despues de pagar las deudas, y del ganacial que
se expresa, asi como de reconocer, ademas, con alguna cosaa otros
sobrinos, se refiere a bienes conocidos y determinados existentes cuando tal
compromisi se otorgo, y no a la universalidad de una herencia que, sequn el
art. 659 del citado Codigo civil, as determina a muerte, constituyendola todos
los bienes, derechos y obligaciones que por ella no sehayan extinguido: ..."
(Emphasis supplied.)
It will be noted that what is prohibited to be the subject matter of a contract under
Article 1271 of the Civil Code is "future inheritance." To us future inheritance is any
property or right not in existence or capable of determination at the time of the
contract, that a person may in the future acquire by succession. The properties subject
of the contract Exhibit "A" are well defined properties, existing at the time of the
agreement, which Simeon Blas declares in his statement as belonging to his wife as her
share in the conjugal partnership. Certainly his wife's actual share in the conjugal
properties may not be considered as future inheritance because they were actually in
existence at the time Exhibit "A" was executed.
The trial court held that the plaintiffs-appellants in the case at bar are concluded by the
judgement rendered in the proceedings for the settlement of the estate of Simeon Blas
for the reason that the properties left by him belonged to himself and his wife Maxima
Santos; that the project of partition in the said case, adjudicating to Maxima Santos
one-half as her share in the conjugal properties, is a bar to another action on the same
subject matter, Maxima Santos having become absolute owner of the said properties
adjudicated in her favor. As already adverted to above, these contentions would be
correct if applied to the claim of the plaintiffs-appellants that said properties were
acquired with the first wife of Simeon Blas, Marta Cruz. But the main ground upon which
plaintiffs base their present action is the document Exhibit "A", already fully considered
above. As this private document contains the express promise made by Maxima Santos
to convey in her testament, upon her death, one-half of the conjugal properties she
would receive as her share in the conjugal properties, the action to enforce the said
promise did not arise until and after her death when it was found that she did not
comply with her above-mentioned promise. (Art. 1969, old Civil Code.) The argument
that the failure of the plaintiffs-appellants herein to oppose the project of partition in the
settlement of the estate of Simeon Blas, especially that portion of the project which
assigned to Maxima Santos one-half of all the conjugal properties bars their present
action, is, therefore, devoid of merit. It may be added that plaintiffs-appellants did not
question the validity of the project of partition precisely because of the promise made
by Maxima Santos in the compromise Exhibit "A"; they acquised in the approval of said
project of partition because they were relying on the promise made by Maxima Santos
in Exhibit "A", that she would transmit one-half of the conjugal properties that she was
going to receive as her share in the conjugal partnership upon her death and in her will,
to the heirs and legatees of her husband Simeon Blas.
Neither can the claim of prescription be considered in favor of the defendants. The right
of action arose at the time of the death of Maxima Santos on October 5,1956, when she
failed to comply with the promise made by her in Exhibit "A". The plaintiffs-appellants
immediately presented this action on December 27, 1956, upon learning of such failure
on the part of Maxima Santos to comply with said promise. This defense is, therefore,
also without merit.
It is next contended by the defendant-appellee that Maxima Santos complied with her
above-mentioned promise, — that Andres Pascual, Tomasa Avelino, Justo Garcia,
Ludovico Pimpin and Marta Gervacio Blas were given substancial legacies in the will
and testament of Maxima Santos. To determine whether she had actually complied
with the promise made in Exhibit "A", there is herein set forth a list only of the 81. Don Tomas, Sexmoan, Pampanga 21.6435 "
fishponds and their respective areas as contained in the list of properties she acquired
as her share in the conjugal partnership, which list includes, besides many ricelands as 82. Matikling, Lubao, Pampanga 16.0000 "
well as residential lots, thus: Total area ............................... 1045.7863 "
(See Record on Record, pp. 195-241.)
31. Paco, Obando, Bulacan 5.8396 has.
32. Pangjolo, Obando 3.5857 " In her will, Maxima Santos devised to Marta Gervacio Blas the 80-hectare fishpond
34. Batang Pirasuan, Lubao, Pampanga 11.9515 " situated in Lubao, Pampanga. The fishpond devised is evidently that designated as
"Propios" in Lubao, Pampanga, item No. 8 in the list of properties adjudicated to her in
35. Calangian, Lubao, Pampanga 30.2059 " the project of partition. (Record on Appeal, p. 215.) Considering that the total area of
38. Bakuling, Lubao, Pampanga 215.4325 " the fishponds amount to 1045.7863 hectares, the 80 hectares devised to Marta
Gervacio Blas is not even one-tenth of the total area of the fishponds. Add to this the
39. Bakuling, Lubao, Pampanga 8.3763 " fact that in the will she imposed upon Marta Gervacio Blas de Chivi an existing
40. Bangkal, Sinubli 23.0730 " obligation on said fishponds, namely, its lease in 1957 and the duty to pay out of the
rentals thereof an obligation to the Rehabilitation Finance Corporation RFC (Ibid., pp.
41. Tagulod, 6.8692 " 262-263.) Angelina Blas was given only a lot of 150 square meters in Hulong Duhat,
44. Bangkal Pugad (a) 34.2779 " Malabon, Rizal, and Leony Blas, the sum of P300.00 (Ibid., p. 264.)
(b) 51.7919 "
It is evident from a consideration of the above figures and facts that Maxima Santos did
(c) 2.5202 "
not comply with her obligation to devise one-half of her conjugal properties to the heirs
45. Magtapat Bangkal, Lubao, Pampanga (a) 18.0024 " and legatees of her husband. She does not state that she had complied with such
obligation in her will. If she intended to comply therewith by giving some of the heirs of
(b) 7.3265 "
Simeon Blas the properties mentioned above, the most that can be considered in her
(c) 53.5180 " favor is to deduct the value of said properties from the total amount of properties which
46. Pinanganakan, Lubao, Pampanga 159.0078 " she had undertaken to convey upon her death.

47. Emigdio Lingid, Lubao, Pampanga 34.5229 "

All the issues in the pleadings of the parties and in their respective briefs, have now been
48. Propios, Lubao, Pampanga 80.5382 " fully discussed and considered. Reiterating what we have stated above, we declare
49. Batang Mabuanbuan, Sexmoan, Pampanga 43.3350 " that by Exhibit "A", a compromise to avoid litigation, Maxima Santos promised to devise
to the heirs and legatees of her husband Simeon Blas, one-half of the properties she
50. Binatang Mabuanbuan, Sexmoan, Pampanga 3.5069 " received as her share in the conjugal partnership of herself and her husband, which
51. Sapang Magtua, Sexmoan, Pampanga 56,8242 " share is specified in the project of partition submitted by herself on March 14, 1939 in the
settlement of the estate of her husband, and which is found on pages 195 to 240 of the
52. Kay Limpin, Sexmoan, Pampanga 5.0130 " record on appeal and on pages 27 to 46 of the project of partition, submitted by
53. Calise Mabalumbum, Sexmoan, Pampanga 23.8935 " Maxima Santos herself before the Court of First Instance of Rizal in Civil Case No. 6707,
entitled "Testamentaria del Finado Don Simeon Blas, Maxima Santos Vda. de Bias,
54. Messapinit Kineke, Sexmoan, Pampanga (a) 5.2972 " Administradora"; and that she failed to comply with her aforementioned obligation.
(b) 5.9230 " (Exhibit "A")
(c) 1.4638 "
WHEREFORE, the judgment appealed from is hereby reversed and the defendant-
(d) 1.4638 "
appellee, administratrix of the estate of Maxima Santos, is ordered to convey and
(e) 2.8316 " deliver one-half of the properties adjudicated o Maxima Santos as her share in the
conjugal properties in said Civil Case No. 6707, entitled "Testamentaria del Finado Don
(f) 10.4412 "
Simeon Blas, Maxima Santos Vda. de Blas, Administradora", to the heirs and the legatees
(g) 3.9033 " of her husband Simeon Blas. Considering that all said heirs and legatees, designated in
the will of Simeon Blas as the persons for whose benefit Exhibit "A" had been executed,
(h) 11.9263 "
have not appeared in these proceedings, the record is hereby remanded to the court
(i) 6.0574 " below, with instructions that, after the conveyance of the properties hereinabove
55. Dalang, Banga, Sexmoan, Pampanga 23.3989 " ordered had been effected, the said heirs and legatees (of Simeon Blas) file adversary
pleadings to determine the participation of each and every one of them in said
62. Alaminos, Pangasinan 147.1242 " properties. Costs against the defendant- appellee Rosalina Santos.
80. Mangasu Sexmoan, Pampanga 10.000 "
Padilla, Parades and Dizon, JJ., concur.
Reyes, J.B.L. and Barrera, JJ., concur in a separate opinion.
Bengzon, C.J., reserves his vote.
Concepcion, J., took no part.
Separate Opinions
REYES, J.B.L., J., concurring:
I concur in the opinion of Mr. Justice Labrador, and would only add that the doctrine in
the decision of 8 October 1915 of the Supreme Court of Spain, applied in the main
opinion, is not a mere accident nor an isolated instance, but one of a series of decisions
reaffirming the legal proposition therein laid down. Thus, the Presiding Justice Castan of
the Spanish Tribunal Supremo, in volume 3 of his Treaties on Civil Law (1951 Edition, page
344, footnote 2), observes that:
(2) IA sentencia de 16 de mayo de 1940 declare que segun la doctrina
sentada por el Tribunal Supremo en sua fallos de 8 de Octubre de 1915 y 26 de
Octubre de 1926 y por la Direction de los Registros en au resolution de 19 de
mayo de 1917, la prohibition contenida en el art. 1271 se refiere unica y
exclusivamente a los paetos sobre la universalidad de una heren cia que,
segun el art. 659, se determine a la muerte del cau sante constituyendola
todos los bienes, derechos y obligaciones que por ella no se hayan extinguido
y no al pacto sobre bienes conocidos y determinados, existentes cuando tal
compromiso se otorgo, en el dominio del cedente.
And in a later decision of 25 April 1951, the Supreme Court of Spain once ore insisted on
the rule that a successional agreement concerning property already owned by the
grantor at the time the contract was perfected is not banned by, Article 1271 of the
Spanish Civil Code according to Article 1847 of the Civil Code of the Philippines):
CONSIDERANDO: Que el tercer motive del recurso de doña M. G. G., y el sexto
del formulado por doña D. G. G., hacen roferencia a la ultima de las tres
cuestiones que son ob jato del debate en ambos recurso interpuestos esto es
la dis cutida cesion que las hermanas senoras G. G., hoy recurrentes, hicieron
a doña C. A. de la mitad de los bienes muebles e innuebles que recibiesen
por herencia de doña M. P., procedentes de la de doña M. A. P., antes N.,
consignada en documents privado de fecha 2 de noviembre de 1929,
firmado y reconocida su autenticidad por las tres senoras interesa das, cuya
validez y eficacia es objeto de la cuarta pieza de los presentee autos
acumulados y si se examination con determiento el documento aludido y el
acto que en el se consigna habra de advertirse de modo notorio que se halla
afectado de vicio de nulidadporque su objeto son unos bienes que clara
mente se petpresa que han de entrar en el patrimonio de las cendentes
mediantes una transmission hereditaria, lo que conatituye el pacto sobre
herencia futura prohibido por el parrafo segundo del articulo 1271 del Codigo
Civil, ya que no se concreta sobre bienes conocido y determinados, existentes
en el del cedents cuando el compromiso de otorgo, sino que se refiem a la
universalidad de que habrian de adra la muerte del causante sentido en el
que conforme a la jurisprudencia de esta Sala es de plena aplicacion la
norma a tiva antes citada, y al no haberio asi entendido la Sala de instancia,
ha incurrido en la infmccion de interpreter erro to y por ello ha hecho
aplicacion de indebida de dicho precepto y precede la estimacion de los
motivo que aprincipio se citan y que denuncian la estimada infraccion,
produciendo la casacion de la sentencia recurrida en el extremo a que los
dichos motives se refieren. (Sentencia 25 abril 1951) (Emphasis Supplied)
It can thus be seen that the constant authoritative in interpretation of the prohibition
against agreements involving future inheritance requires not only that a future
succession be contemplated but also that the subject matter of the bargain should be
either the universality or complex or mass of property owned by the grantor at the time
of his death, or else an aliquot portion thereof. Castan, in his Treaties already
mentioned, sums up the rulings in this wise:
Por otra parte, se ha de entender: 1. Que la cesion oenajenacion de los
derechos hereditarios puede bacerse una vez falle cido el causante, aunque
no se haya entrado en possession matetrial de los bienes 2. Que la prohibition
legal se refiere solo a los contratos concluidos sobre la herencia misma o
alguna de sus cuotas, no sobre objetos aislados que, eventualmente, hayan
de adquirirse a virtud de la herencia.
It has been contended that the doctrine thus stated confuses future inheritance
(herencia futura) with future property (bienes futuros). This is a misapprehension. In
construing the term "future inheritance" as the contingent universality or complex of
property rights and obligations that are passed to the heirs upon the death of the
grantor, the rule advocated merely correlates the prohibition against contracts over
"future inheritance" with the definition of "inheritance" given in Article 659 of the Spanish
Civil Code, which is now Article 776 of the Civil Code of the Philippines:
ART. 776. The inheritance includes all the property, rights and obligations of a
person which are not extinguished by his death.
The inheritance of a person may, and usually does, include not only property that he
already owns at a given time, but also his future property, that is to say, the property
that he may subsequently acquire. But it may include only future property whenever he
should dispose of the present property before he dies. And future inheritance may
include only property he already owns at any given moment, if he should thereafter
acquire no other property until his death. In any case, the inheritance or estate cons of
the totality of and liabilities he holds at the time of his demise, and not what he at any
other time. If the questioned contract envisages all or a fraction of that contingent
mass, then it is a contract over herencia futurall otherwise it is not. The statutory
prohibition, in other words, is not so much concerned with the process of transfer as with
the subject matter of the bargain. It is addressed to "future inheritance", not "future
succession".
Of course, it can be said that every single item of property that a man should hold at
any given instant of his life may become a part of his inheritance if he keeps it long
enough. But is that mere possibility (or even probability) sufficient to do upon a contract
over an individual item of existing property the outlaw brand of "contract over future
inheritance"? If it should ever be, then no agreement concerning present property can
escape the legal ban. No donation inter vivos, no reversionary clause, no borrowing of
money, and no alienation, not even a contract of sale (or other contract in praisenti for
that matter), with or without deferred delivery, will avoid the reproach that it concerns
or affects the grantor's "future inheritance". It is permissible to doubt whether the law
ever contemplated the sweeping away of the entire contractual system so carefully
regulated in the Code.
The restrictive interpretation given by the Spanish Supreme Court to the codal
prohibition of agreements involving future inheritance is justified not only by the fact that
the prohibition limits contractual freedom (and therefore, should not be given extensive
interpretation), but also because there is no real or substantial difference between (1)
an agreement whereby a person, for a valuable consideration, agrees to bequeath
some of the property he already owns, and (2) a contract whereby he dispose of that
property, subject to the condition that he will be entitled to its usufruct until the time he
dies. The court has repeatedly sanctioned even donations inter vivos wherein the donor
has reserved to elf the right to enjoy the donated property for the remainder of his days,
and riders the actual transfer of on to the time of his death (Guzman vs. Ibea 67 Phil.
633; Balagui vs Dongso, 53 Phil. 673; Laureta vs. Mata, 44 Phil. 668). Whatever objection is
raised against the effects of the first kind of contracts can be made to apply to the
second.
Mature reflection will show that where present (existing) property is the object of the
bargain, all arguments brandished against Conventions over future succession (post
mortem) are just as applicable to other contracts de praesenti with deferred execution,
the validity of which has never been questioned. Thus, the loss of the power to
bequeath the bargained property to persons of the grantor's choice, and the
awakening of the grantee's desire for the early death of the grantor (the Roman "votum
mortis captandae") in order to obtain prompt control of the contracted goods, occur in
both cases. In truth, the latter ground would bar even a contract of life insurance in
favor of a stated beneficiary. It may also be noted that since the later part of the
nineteenth century, the civilists have recognized that the progress in social relations has
rendered such objections obsolete (Puig Peña, Derecho Civil, Vol. V, part I, 613 et seq.).
But where the contract involves the universality of the estate that will be left at a
person's death (the "herencia future" as understood by the Spanish Tribunal Supreno),
there is another reason which I believe to be the true justification for the legal
interdiction, and it is this: that if a man were to be allowed to bargain away all the
property he expects to leave behind (i.e., his estate as a whole), he would practically
remain without any incentive to practice thrift and frugality or to conserve and invest his
earnings and property. He would then be irresistibly drawn to be a wasteful spend-thrift,
a social parasite, without any regard for his future, because whatever he leaves belong
to another by virtue of his contract. The disastrous effects upon family and society if such
agreements were to be held binding can be readily imagined. Hence, the
interpretation given to Article 1271 (now Art. 1347) by the Supreme Court of Spain
appears amply supported by practical reasons, and there is no ground to deny its
application.
Much emphasis has been placed on the provisions of the contract Exhibit "A" that the
widow, Maxima Santos de Blas, would execute a testament in favor of the appellees. To
me this is purely secondary, since it is merely the method selected by the parties for
carrying out the widow's agreement to convey to the appellees the property in question
without her losing its enjoyment during her natural life, and does not affect the
substance or the validity of the transaction. To ensure the widow's possession of the
property and the perception of its fruits while she was alive the means logically selected
was to return it by will, since such a conveyance could only be operative after death.
There might be a doubt as to the validity of this arrangement if the widows promise had
been purely gratuitous, because then it could be argued that the promise involved a
hybrid donation mortis causa yet irrevocable;1 but here the obligation to return is
concededly irrevocable and supported by adequate consideration duly received in
advance.
Since the agreement in the instant case did not refer to the future estate of the widow
of Blas, but only to part of her present property at the time the contract was made;
since the promise to retransfer one-half of her conjugal share was supported by
adequate consideration as shown in the main decision; since the contract obviated
protracted litigation and complicated accounting in settling the conjugal partnership of
Blas and his first (deceased) wife; and since the testament that the widow promised to
make was merely the mode chosen to perform the contract and carry out the promised
devolution of the property, being thus of secondary importance, I can see no reason for
declaring the entire arrangement violative of the legal interdiction of contracts over
future inheritance, and disappoint the legitimate expectation held by the heirs of the
first wife during all these years.
BARRERA, J., concurring:
It seems to me clear that the document Exhibit "A", basis of the action of the plaintiffs-
appellants, refers specifically to and affects solely the share of the grantor Maxima
Santos in the conjugal properties as determined and specified in the will of her husband
Simeon Blas, whose provisions, which she expressly acknowledged to have read and
understood, constitute the raison d'etre of her promise to deliver or convey, by will, one-
half of that specific share to the heirs and legatees named in her husband's will (who
are his heirs by his first marriage). Nowhere in the document Exhibit "A" is there reference,
to hereditary estate that she herself would leave behind at the time of her own demise
which legally would be her "future inheritance." For this reason, I believe the contractual
obligation assumed by Maxima Santos in virtue of Exhibit "A" does not come within the
prohibition of Article 1271 of the Spanish Civil Code, now Article 1347 of the Civil Code
of the Philippines.
I, therefore, concur in the opinions of Justices Labrador and Reyes.
BAUTISTA ANGELO, J., dissenting:
While I agree with the theory that the document Exhibit "A" does not involve a contract
on future inheritance but a promise made by Maxima Santos to transmit one-half of her
share in the conjugal property acquired during her marriage to Simeon Blas to the heirs
and legatees of the latter, I am however of the opinion that herein appellants have no
cause of action because Maxima Santos has Substantially complied with her promise.
It should be noted that Maxima Santos' promise to transmit is predicated on the
condition that she can freely choose and select from among the heirs and legatees of
her husband those to whom she would like to give and bequeath depending on the
respect, service and companionship that they may render to her. Her commitment is
not an absolute promise to give to all but only to whom she may choose and select.
And here this promise has been substantially complied with.
Thus, it appears that Maxima Santos selected eight such heirs and legatees instituted in
the will of her husband. Note that appellant Marta Gervacio Bias, who has given a
legacy of only P38,000.00 in the will of Simeon Blas, who was given by her a legacy
worth around P400,000.00, appellants Loida Gervacio Blas (or Luding Blas) and Leoncio
(Leony) Gervacio Blas were given a legacy of P300.00 each every year to last during
their lifetime; And Lorenzo Santos was given a legacy of two fishponds and one-tenth of
the whole residuary estate. It may be stated that although appellant Maria Gervacio
Blas was not given any legacy in Maxima Santos' will, yet her son Simeon Dungao was
given a legacy of a residential land in Tonsuya, Malabon.
I, therefore, consider not in keeping with the nature of the pledge made by Maxima
Santos the decision of the majority in ordering her administratrix to convey and deliver
one-half of her share in the conjugal property to all the heirs and legatees of her
husband Simeon Blas, because only such heirs and legatees are entitled to share in the
property as may be selected by Maxima Santos, and this she has already done. For
these reasons, I dissent.
Footnotes
REYES, J., concurring:
1Note that the original "pactum successorium" was essentially gratuitous: "che
e essenzialmente a titulo gratuito" (Stolfi Diritto Civile Vol. 6)
SYLLABI/SYNOPSIS
THIRD DIVISION
[G.R. No. 126950. July 2, 1999]
NELSON NUFABLE, SILMOR NUFABLE and AQUILINA NUFABLE petitioners, vs. GENEROSA
NUFABLE, VILFOR NUFABLE, MARCELO NUFABLE, and the COURT OF
APPEALS, respondents.
DECISION
GONZAGA-REYES, J.:
This petition for review on certiorari seeks to reverse and set aside the Decision
dated November 25, 1995 of the Fifth Division[1] of the Court of Appeals for allegedly
being contrary to law.
The following facts as found by the Court of Appeals are undisputed:
Edras Nufable owned an untitled parcel of land located at Poblacion, Manjuyod,
Negros Oriental, consisting of 948 square meters, more or less. He died on August 9, 1965
and was survived by his children, namely: Angel Custodio, Generosa, Vilfor and
Marcelo, all surnamed Nufable. Upon petition for probate filed by said heirs and after
due publication and hearing, the then Court of First Instance of Negros Oriental (Branch
II) issued an Order dated March 30, 1966 admitting to probate the last will and
testament executed by the deceased Edras Nufable (Exhs. B, C and C-1).
On June 6, 1966, the same court issued an Order approving the Settlement of Estate
submitted by the heirs of the late Esdras Nufable, portions of which read:
KNOW ALL MEN BY THESE PRESENTS:
We, ANGEL CUSTODIO NUFABLE, GENEROSA NUFABLE, VILFOR NUFABLE, and MARCELO
NUFABLE, all of legal ages (sic), Filipinos, and with residence and postal address at
Manjuyod, Negros Oriental, Philippines,
- HEREBY DECLARE AND MAKE MANIFEST -
1. That on August 9, 1965, Rev. Fr. Esdras Nufable died leaving (a) Last Will and
Testament (marked Exh. G) disposing (of) his properties or estate in favor of his four
legitimate children, namely: Angel Custodio Nufable, Generosa Nufable, Vilfor Nufable
and Marcelo Nufable;
2. That on March 30, 1966, the said Last Will and Testament was probated by the
Honorable Court, Court of First Instance of Negros Oriental, and is embodied in the
same order appointing an Administratrix, Generosa Nufable, but to qualify only if she put
up a necessary bond of P1,000.00;
3. That herein legitimate children prefer not to appoint an Administratrix, as agreed
upon (by) all the heirs, because they have no objection as to the manner of disposition
of their share made by the testator, the expenses of the proceedings and that they
have already taken possession of their respective shares in accordance with the will;
4. That the herein heirs agreed, as they hereby agree to settle the estate in accordance
with the terms and condition of the will in the following manner, to wit:
a) That the parcel of land situated in Poblacion Manjuyod, Negros Oriental remains
undivided for community ownership but respecting conditions imposed therein (sic) in
the will;
 xxx xxx xxx.
(Exhs. E and E-1)
Two months earlier, or on March 15, 1966, spouses Angel Custodio and Aquilina Nufable
mortgaged the entire property located at Manjuyod to the Development Bank of the
Philippines [DBP] (Pre-trial Order, dated January 7, 1992, p. 103, Original Records). Said
mortgagors became delinquent for which reason the mortgaged property was
foreclosed by DBP on February 26, 1973 (id.).
On January 11, 1980, Nelson Nufable, the son of Angel Custodio Nufable (who died on
August 29, 1978 [TSN, Testimony of Nelson Nufable, Hearing of August 18, 1992, p. 17]),
purchased said property from DBP (Exh. 1).
Generosa, Vilfor and Marcelo, all surnamed Nufable filed with the lower court a
complaint dated July 25, 1985 To Annul Fraudulent Transactions, to Quiet Title and To
Recover Damages against Nelson Nufable, and wife, Silnor Nufable and his mother
Aquilina Nufable. Plaintiffs pray:
WHEREFORE, plaintiffs pray this Honorable Court that after trial judgment be rendered
ordering:
(a) That the said Deed of Sale (Annex C) executed by the Development Bank of the
Philippines in favor of the defendants be declared null and void as far as the three
fourths () rights which belongs (sic) to the plaintiffs are concerned;
'(b) That the said three fourths () rights over the above parcel in question be declared as
belonging to the plaintiffs at one fourth right to each of them;
(c) To order the defendants to pay jointly and severally to the plaintiffs by way of actual
and moral damages the amount of P10,000.00 and another P5,000.00 as Attorneys fees,
and to pay the costs.
(d) Plus any other amount which this Court may deem just and equitable. (p. 6, Original
Records)
In their Answer, defendants contend:
4. Paragraph 4 is denied, the truth being that the late Angel Nufable was the exclusive
owner of said property, that as such owner he mortgaged the same to the
Development Bank of the Philippines on March 15, 1966, that said mortgage was
foreclosed and the DBP became the successful bidder at the auction sale, that
ownership was consolidated in the name of the DBP, and that defendant Nelson
Nufable bought said property from the DBP thereafter. During this period, the plaintiffs
never questioned the transactions which were public, never filed any third party claim
nor attempted to redeem said property as redemptioners, and that said Deed of Sale,
Annex B to the complaint, is fictitious, not being supported by any consideration; (pp.
20-21, id.)
The Deed of Sale (Annex B), referred to by the parties is a notarized Deed of Sale, dated
July 12, 1966 (marked as Exhibit H) by virtue of which, spouses Angel and Aquilina
Nufable, as vendors, sold portion of the subject property to herein plaintiffs for and in
consideration of P1,000.00 (Exh. 5).[2]
On November 29, 1995, the Court of Appeals rendered judgment, the dispositive
portion[3] of which reads:
WHEREFORE, the appealed decision of the lower court is REVERSED and SET ASIDE. A
new judgment is hereby entered declaring plaintiffs-appellants as the rightful co-owners
of the subject property and entitled to possession of southern portion thereof; and
defendant-appellee Nelson Nufable to portion.
No award on damages.
No costs.
Defendants-appellees Motion for Reconsideration was denied for lack of merit in
the Resolution of the Court of Appeals[4] dated October 2, 1996.
Hence, the present petition. Petitioners raise the following grounds for the petition:
1. The Honorable Court of Appeals erred in considering as controlling the probate of the
Last Will and Testament of Esdras Nufable, the probate thereof not being an issue in this
case;
2. The Honorable Court of Appeals erred in not considering the fact that the
Development Bank of the Philippines became the absolute, exclusive, legal, and rightful
owner of the land in question, from whom petitioner Nelson Nufable acquired the same
by purchase and that, therefore, no award can be made in favor of private
respondents unless and until the Development Bank of the Philippines title thereto is first
declared null and void by the court.
The Court of Appeals, in its decision, stated that the trial court failed to take into
consideration the probated will of the late Esdras Nufable bequeathing the subject
property to all his four children.[5] In the present petition, petitioners present the issue of
whether or not the Last Will and Testament of Esdras Nufable and its subsequent probate
are pertinent and material to the question of the right of ownership of petitioner Nelson
Nufable who purchased the land in question from, and as acquired property of, the
Development Bank of the Philippines (DBP, for short). They contend that the probate of
the Last Will and Testament of Esdras Nufable did not determine the ownership of the
land in question as against third parties.
As a general rule, courts in probate proceedings are limited only to passing upon
the extrinsic validity of the will sought to be probated, the due execution thereof, the
testators testamentary capacity and the compliance with the requisites or solemnities
prescribed by law. Said court at this stage of the proceedings is not called upon to rule
on the intrinsic validity or efficacy of the provision of the will.[6] The question of the
intrinsic validity of a will normally comes only after the court has declared that the will
has been duly authenticated.
 The records show that upon petition for probate filed by the heirs of the late Esdras
Nufable, an Order dated March 30, 1966 was issued by then Court of First Instance of
Negros Oriental, Branch II, admitting to probate the last will and testament executed by
the decedent.[7] Thereafter, on June 6, 1966, the same court approved the Settlement
of Estate submitted by the heirs of the late Esdras Nufable wherein they agreed (T)hat
the parcel land situated in Poblacion Manjuyod, Negros Oriental remains undivided for
community ownership but respecting conditions imposed therein (sic) in the will. [8] In
paragraph 3 thereof, they stated that they have no objection as to the manner of
disposition of their share made by the testator, the expenses of the proceeding and that
they have already taken possession of their respective shares in accordance with the
will. Verily, it was the heirs of the late Esdras Nufable who agreed among themselves on
the disposition of their shares. The probate court simply approved the agreement
among the heirs which approval was necessary for the validity of any disposition of the
decedents estate.[9]
It should likewise be noted that the late Esdras Nufable died on August 9,
1965. When the entire property located at Manjuyod was mortgaged on March 15, 1966
by his son Angel Custodio with DBP, the other heirs of Esdras - namely: Generosa, Vilfor
and Marcelo - had already acquired successional rights over the said property. This is so
because of the principle contained in Article 777 of the Civil Code to the effect that the
rights to the succession are transmitted from the moment of death of the
decedent. Accordingly, for the purpose of transmission of rights, it does not matter
whether the Last Will and Testament of the late Esdras Nufable was admitted on March
30, 1966 or thereafter or that the Settlement of Estate was approved on June 6, 1966 or
months later. It is to be noted that the probated will of the late Esdras Nufable
specifically referred to the subject property in stating that the land situated in the
Poblacion, Manjuyod, Negros Oriental, should not be divided because this must remain
in common for them, but it is necessary to allow anyone of them brothers and sisters to
construct a house therein.[10] It was therefor the will of the decedent that the subject
property should remain undivided, although the restriction should not exceed twenty
(20) years pursuant to Article 870[11] of the Civil Code.
Thus, when Angel Nufable and his spouse mortgaged the subject property to DBP
on March 15, 1966, they had no right to mortgage the entire property. Angels right over
the subject property was limited only to pro indiviso share. As co-owner of the subject
property, Angels right to sell, assign or mortgage is limited to that portion that may be
allotted to him upon termination of the co-ownership. Well-entrenched is the rule that a
co-owner can only alienate his pro indiviso share in the co-owned property.[12]
The Court of Appeals did not err in ruling that Angel Custodio Nufable had no right
to mortgage the subject property in its entirety. His right to encumber said property was
limited only to pro indivisoshare of the property in question.[13] Article 493 of the Civil
Code spells out the rights of co-owners over a co-owned property. Pursuant to said
Article, a co-owner shall have full ownership of his part and of the fruits and benefits
pertaining thereto. He has the right to alienate, assign or mortgage it, and even
substitute another person in its enjoyment. As a mere part owner, he cannot alienate
the shares of the other co-owners. The prohibition is premised on the elementary rule
that no one can give what he does not have.[14]
Moreover, respondents stipulated that they were not aware of the mortgage by
petitioners of the subject property.[15] This being the case, a co-owner does not lose his
part ownership of a co-owned property when his share is mortgaged by another co-
owner without the formers knowledge and consent[16] as in the case at bar. It has
likewise been ruled that the mortgage of the inherited property is not binding against
co-heirs who never benefitted.[17]
Furthermore, the Deed of Sale dated June 17, 1966 marked as Exhibit H executed
by spouses Angel and Aquilina Nufable in favor of respondents Generosa, Vilfor and
Marcelo wherein the former sold, ceded and transferred back to the latter the portion
of the subject property bolsters respondents claim that there was co-
ownership. Petitioner Nelson himself claimed that he was aware of the aforesaid Deed
of Sale.[18]
Anent the second ground of the petition, petitioners allege that the Development
Bank of the Philippines acquired ownership of the land in question through foreclosure,
purchase and consolidation of ownership. Petitioners argue that if petitioner Nelson
Nufable had not bought said land from the DBP, private respondents, in order to
acquire said property, must sue said bank for the recovery thereof, and in so doing,
must allege grounds for the annulment of documents evidencing the banks ownership
thereof. Petitioners contend that since petitioner Nelson Nufable simply bought the
whole land from the bank, they cannot be deprived of the ownership of without making
any pronouncement as to the legality or illegality of the banks ownership of said land. It
is argued that there was no evidence to warrant declaration of nullity of the banks
acquisition of said land; and that neither was there a finding by the court that the bank
illegally acquired the said property.
As adverted to above, when the subject property was mortgaged by Angel
Custodio, he had no right to mortgage the entire property but only with respect to
his pro indiviso share as the property was subject to the successional rights of the other
heirs of the late Esdras. Moreover, in case of foreclosure, a sale would result in the
transmission of title to the buyer which is feasible only if the seller can be in a position to
convey ownership of the things sold.[19] And in one case,[20] it was held that a foreclosure
would be ineffective unless the mortgagor has title to the property to be
foreclosed. Therefore, as regards the remaining pro indiviso share, the same was held in
trust for the party rightfully entitled thereto,[21] who are the private respondents herein.
Pursuant to Article 1451 of the Civil Code, when land passes by succession to any
person and he causes the legal title to be put in the name of another, a trust is
established by implication of law for the benefit of the true owner. Likewise, under
Article 1456 of the same Code, if property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes. In the case of Noel vs. Court of
Appeals,[22] this Court held that a buyer of a parcel of land at a public auction to satisfy
a judgment against a widow acquired only one-half interest on the land corresponding
to the share of the widow and the other half belonging to the heirs of her husband
became impressed with a constructive trust in behalf of said heirs.
Neither does the fact that DBP succeeded in consolidating ownership over the
subject property in its name terminate the existing co-ownership. Registration of property
is not a means of acquiring ownership.[23] When the subject property was sold to and
consolidated in the name of DBP, it being the winning bidder in the public auction, DBP
merely held the portion in trust for the private respondents.When petitioner Nelson
purchased the said property, he merely stepped into the shoes of DBP and acquired
whatever rights and obligations appertain thereto.
This brings us to the issue of whether or not the DBP should have been impleaded
as party-defendant in the case at bar. Petitioners contend that DBP was never
impleaded and that due process requires that DBP be impleaded so that it can defend
its sale to petitioner Nelson Nufable; and that it was the duty of private respondents, and
not of petitioner Nelson, to implead the bank and ask for the annulment of documents
evidencing the banks ownership of the disputed land.
 In the Rejoinder to the Reply, private respondents that the non-inclusion of DBP as [8] p. 2, CA-Decision, p. 14, Rollo.
a necessary party was not questioned by petitioners from the time the Complaint was
[9] Acebedo vs. Abesamis, 217 SCRA 186.
filed until the case was finished. It was only after the adverse decision by the respondent
Court of Appeals that petitioners raised the issue. [10] p. 7, CA-Decision, p. 19, Rollo.
At the outset, it should be stated that petitioners never raised this issue in their [11] ART.
870: The dispositions of the testator declaring all or part of the estate inalienable
Answer and pursuant to Section 2, Rule 9 of the Rules of Court, defenses and objections
for more than twenty years are void.
not pleaded either in a motion to dismiss or in the answer are deemed waived.
[12] Mercado vs. Court of Appeals, 240 SCRA 616.
Nonetheless, the rule is that indispensable parties, i.e., parties in interest without
whom no final determination can be had of an action, shall be joined either as plaintiffs [13] p. 8, CA-Decision, p. 20, Rollo.
or defendants; the inclusion as a party being compulsory.[24] On the other hand, in case
[14] Mercado vs. Court of Appeals, 240 SCRA 616.
of proper or necessary parties, i.e., persons who are not indispensable but ought to be
parties if complete relief is to be accorded as between those already parties, the court
[15] Pre-Trial Order of January 7, 1992, pp. 103-104, Record.
may, in its discretion, proceed in the action without making such persons parties, and
the judgment rendered therein shall be without prejudice to the rights of such [16] Ibid.
persons.[25] Proper parties, therefore, have been described as parties whose presence is
necessary in order to adjudicate the whole controversy, but whose interests are so far [17] Tan vs. IAC, 186 SCRA 322.
separable that a final decree can be made in their absence without affecting
[18] p. 3, RTC-Decision, p. 147, Record.
them.[26] Any claim against a party may be severed and proceeded with separately.[27]
[19] Article 1458, Civil Code.
The pivotal issue to be determined is whether DBP is an indispensable party in this
case. [20] Castro, Jr. vs. Court of Appeals, 250 SCRA 661.
Private respondents do not question the legality of the foreclosure of the [21] Magallon
mortgaged property and the subsequent sale of the same to DBP. The subject property vs. Montejo, 146 SCRA 282.
was already purchased by petitioner Nelson from DBP and the latter, by such sale, [22] 240 SCRA 78.
transferred its rights and obligations to the former. Clearly, petitioners interest in the
controversy is distinct and separable from the interest of DBP and a final determination [23] Adille vs. Court of Appeals, 157 SCRA 455.
can be had of the action despite the non-inclusion of DBP as party-defendant. Hence,
[24] Section 7, Rule 3.
DBP, not being an indispensable party, did not have to be impleaded in this case.
[25] Section 8, Rule 3.
WHEREFORE, there being no reversible error in the decision appealed from, the
petition for review on certiorari is hereby DENIED. [26] Imson
vs. Court of Appeals, 239 SCRA 58; Servicewide Specialists, Inc. vs. Court of
SO ORDERED. Appeals, 251 SCRA 70.
[27] Section 11, Rule 3.
Vitug, Panganiban, and Purisima, JJ., concur.
Romero, J., (Chairman), on official business leave abroad.
Republic of the Philippines
SUPREME COURT
Manila
[1] Penned by Justice Alicia Austria-Martinez, with Justices Pedro A. Ramirez and
Bernardo LL. Salas, concurring. EN BANC
[2] pp. 1-4, CA-Decision, pp. 13-16, Rollo.
[3] p. 4, thereof, p. 21, Rollo.
[4] Composed G.R. No. L-23079 February 27, 1970
of Justices Pedro A. Ramirez (chairman), Alicia Austria-Martinez (ponente)
and Celia Lipana-Reyes (vice Justice Bernardo LL. Salas who was on leave of absence).
RUBEN AUSTRIA, CONSUELO AUSTRIA-BENTA and LAURO AUSTRIA MOZO, petitioners,
[5] p. 7, thereof, p. 19, Rollo. vs.
[6] Acain HON. ANDRES REYES, Judge, Court of First Instance of Rizal, PERFECTO CRUZ, BENITA
vs. IAC, 155 SCRA 100.
CRUZ-MENEZ ISAGANI CRUZ, ALBERTO CRUZ and LUZ CRUZ-SALONGA respondents.
[7] p. 1, CA-Decision, p. 13, Rollo.
Salonga, Ordoñez, Yap, Sicat and Associates for petitioners.
Ruben Austria for himself and co-petitioners.
De los Santos, De los Santos and De los Santos for respondent Perfecto Cruz.
Villareal, Almacen, Navarra and Amores for other respondents.
CASTRO, J.:
On July 7, 1956 Basilia Austria vda. de Cruz filed with the Court of First Instance of Rizal
(Special Proceedings 2457) a petition for probate, ante mortem, of her last will and
testament. The probate was opposed by the present petitioners Ruben Austria,
Consuelo Austria-Benta and Lauro Austria Mozo, and still others who, like the petitioner,
are nephews and nieces of Basilia. This opposition was, however, dismissed and the
probate of the will allowed after due hearing.
The bulk of the estate of Basilia, admittedly, was destined under the will to pass on to the
respondents Perfecto Cruz, Benita Cruz-Meñez, Isagani Cruz, Alberto Cruz, and Luz Cruz-
Salonga, all of whom had been assumed and declared by Basilia as her own legally
adopted children.
On April 23, 1959, more than two years after her will was allowed to probate, Basilia
died. The respondent Perfecto Cruz was appointed executor without bond by the same
court in accordance with the provisions of the decedent's will, notwithstanding the
blocking attempt pursued by the petitioner Ruben Austria.
Finally, on November 5, 1959, the present petitioners filed in the same proceedings a
petition in intervention for partition alleging in substance that they are the nearest of kin
of Basilia, and that the five respondents Perfecto Cruz, et al., had not in fact been
adopted by the decedent in accordance with law, in effect rendering these
respondents mere strangers to the decedent and without any right to succeed as heirs.
Notwithstanding opposition by the respondent Perfecto Cruz, as executor of the estate,
the court a quo allowed the petitioners' intervention by its order of December 22, 1959,
couched in broad terms, as follows: "The Petition in Intervention for Partition filed by the
above-named oppositors [Ruben Austria, et al.,] dated November 5, 1959 is hereby
granted."
In the meantime, the contending sides debated the matter of authenticity or lack of it
of the several adoption papers produced and presented by the respondents. On
motion of the petitioners Ruben Austria, et al., these documents were referred to the
National Bureau of Investigation for examination and advice. N.B.I. report seems to bear
out the genuineness of the documents, but the petitioners, evidently dissatisfied with the
results, managed to obtain a preliminary opinion from a Constabulary questioned-
document examiner whose views undermine the authenticity of the said documents.
The petitioners Ruben Austria, et al., thus moved the lower court to refer the adoption
papers to the Philippine Constabulary for further study. The petitioners likewise located
former personnel of the court which appeared to have granted the questioned
adoption, and obtained written depositions from two of them denying any knowledge
of the pertinent adoption proceedings.
On February 6, 1963, more than three years after they were allowed to intervene, the
petitioners Ruben Austria, let al., moved the lower court to set for hearing the matter of
the genuineness of the adoption of the respondents Perfecto Cruz, et al., by the late
Basilia. Before the date set by the court for hearing arrived, however, the respondent
Benita Cruz-Meñez who entered an appearance separately from that of her brother
Perfecto Cruz, filed on February 28, 1963 a motion asking the lower court, by way of
alternative relief, to confine the petitioners' intervention, should it be permitted, to
properties not disposed of in the will of the decedent.
On March 4, 1963, the lower court heard the respondent Benita's motion. Both sides
subsequently submitted their respective memoranda, and finally, the lower court issued
an order on June 4, 1963, delimiting the petitioners' intervention to the properties of the
deceased which were not disposed of in the will.
The petitioners moved the lower court to reconsider this latest order, eliciting thereby an
opposition, from the respondents. On October 25, 1963 the same court denied the
petitioners' motion for reconsideration.
A second motion for reconsideration which set off a long exchange of memoranda
from both sides, was summarily denied on April 21, 1964.
Hence this petition for certiorari, praying this Court to annul the orders of June 4 and
October 25, 1963 and the order of April 21, 1964, all restricting petitioners' intervention to
properties that were not included in the decedent's testamentary dispositions.
The uncontested premises are clear. Two interests are locked in dispute over the bulk of
the estate of the deceased. Arrayed on one side are the petitioners Ruben Austria,
Consuelo Austria-Benta and Lauro Austria Mozo, three of a number of nephews and
nieces who are concededly the nearest surviving blood relatives of the decedent. On
the other side are the respondents brothers and sisters, Perfecto Cruz, Benita Cruz-
Meñez, Isagani Cruz, Alberto Cruz and Luz Cruz-Salonga, all of whom heirs in the will of
the deceased Basilia, and all of whom claim kinship with the decedent by virtue of legal
adoption. At the heart of the controversy is Basilia's last will — immaculate in its extrinsic
validity since it bears the imprimatur of duly conducted probate proceedings.
The complaint in intervention filed in the lower court assails the legality of the tie which
the respondent Perfecto Cruz and his brothers and sisters claim to have with the
decedent. The lower court had, however, assumed, by its orders in question, that the
validity or invalidity of the adoption is not material nor decisive on the efficacy of the
institution of heirs; for, even if the adoption in question were spurious, the respondents
Perfecto Cruz, et al., will nevertheless succeed not as compulsory heirs but as
testamentary heirs instituted in Basilia's will. This ruling apparently finds support in article,
842 of the Civil Code which reads:
One who has no compulsory heirs may dispose of by will all his estate
or any part of it in favor of any person having capacity to succeed.
 One who has compulsory heirs may dispose of his estate provided he
does not contravene the provisions of this Code with regard to the
legitime of said heirs.
The lower court must have assumed that since the petitioners nephews and niece are
not compulsory heirs, they do not possess that interest which can be prejudiced by a
free-wheeling testamentary disposition. The petitioners' interest is confined to properties,
if any, that have not been disposed of in the will, for to that extent intestate succession
can take place and the question of the veracity of the adoption acquires relevance.
The petitioners nephews and niece, upon the other hand, insist that the entire estate
should descend to them by intestacy by reason of the intrinsic nullity of the institution of
heirs embodied in the decedent's will. They have thus raised squarely the issue of
whether or not such institution of heirs would retain efficacy in the event there exists
proof that the adoption of the same heirs by the decedent is false.
The petitioners cite, as the controlling rule, article 850 of the Civil Code which reads:
The statement of a false cause for the institution of an heir shall be
considered as not written, unless it appears from the will that the
testator would not have made such institution if he had known the
falsity of such cause.
Coming closer to the center of the controversy, the petitioners have called the
attention of the lower court and this Court to the following pertinent portions of the will
of the deceased which recite:
III
Ang aking mga sapilitang tagapagmana (herederos forzosos) ay ang
aking itinuturing na mga anak na tunay (Hijos legalmente
adoptados) na sina Perfecto, Alberto, Luz, Benita at Isagani, na
pawang may apelyidong Cruz.
xxx xxx xxx
Kung ako ay bawian ng Dios ng buhay, ay aking ipinamamana ang
aking mga ari-ariang maiiwan, sa kaparaanang sumusunod:
A.—Aking ipinamamana sa aking nabanggit na limang anak na sina
Perfecto, Alberto, Luz, Benita at Isagani, na pawang may apelyidong
Cruz, na parepareho ang kaparti ng bawa't isa at walang lamangan
(en partes iguales), bilang kanilang sapilitang mana (legiti[ma]), ang
kalahati (½) ng aking kaparti sa lahat ng aming ari-ariang
gananciales ng aking yumaong asawang Pedro Cruz na
napapaloob sa Actuacion Especial No. 640 ng Hukumang Unang
Dulugan ng Rizal at itinutukoy sa No. 1 ng parafo IV ng testamentong
ito, ang kalahati (½) ng mga lagay na lupa at palaisdaan na nasa
Obando at Polo, Bulacan, na namana ko sa aking yumaong ama na
si Calixto Austria, at ang kalahati (½) ng ilang lagay na lupa na nasa
Tinejeros, Malabon, Rizal, na aking namana sa yumao kong kapatid
na si Fausto Austria.
The tenor of the language used, the petitioners argue, gives rise to the inference that
the late Basilia was deceived into believing that she was legally bound to bequeath
one-half of her entire estate to the respondents Perfecto Cruz, et al. as the latter's
legitime. The petitioners further contend that had the deceased known the adoption to
be spurious, she would not have instituted the respondents at all — the basis of the
institution being solely her belief that they were compulsory heirs. Proof therefore of the
falsity of the adoption would cause a nullity of the institution of heirs and the opening of
the estate wide to intestacy. Did the lower court then abuse its discretion or act in
violation of the rights of the parties in barring the petitioners nephews and niece from
registering their claim even to properties adjudicated by the decedent in her will?
Before the institution of heirs may be annulled under article 850 of the Civil Code, the
following requisites must concur: First, the cause for the institution of heirs must be stated
in the will; second, the cause must be shown to be false; and third, it must appear from
the face of the will that the testator would not have made such institution if he had
known the falsity of the cause.
The petitioners would have us imply, from the use of the terms, "sapilitang
tagapagmana" (compulsory heirs) and "sapilitang mana" (legitime), that the impelling
reason or cause for the institution of the respondents was the testatrix's belief that under
the law she could not do otherwise. If this were indeed what prompted the testatrix in
instituting the respondents, she did not make it known in her will. Surely if she was aware
that succession to the legitime takes place by operation of law, independent of her
own wishes, she would not have found it convenient to name her supposed compulsory
heirs to their legitimes. Her express adoption of the rules on legitimes should very well
indicate her complete agreement with that statutory scheme. But even this, like the
petitioners' own proposition, is highly speculative of what was in the mind of the testatrix
when she executed her will. One fact prevails, however, and it is that the decedent's will
does not state in a specific or unequivocal manner the cause for such institution of heirs.
We cannot annul the same on the basis of guesswork or uncertain implications.
And even if we should accept the petitioners' theory that the decedent instituted the
respondents Perfecto Cruz, et al. solely because she believed that the law commanded
her to do so, on the false assumption that her adoption of these respondents was valid,
still such institution must stand.
Article 850 of the Civil Code, quoted above, is a positive injunction to ignore whatever
false cause the testator may have written in his will for the institution of heirs. Such
institution may be annulled only when one is satisfied, after an examination of the will,
that the testator clearly would not have made the institution if he had known the cause
for it to be false. Now, would the late Basilia have caused the revocation of the
institution of heirs if she had known that she was mistaken in treating these heirs as her
legally adopted children? Or would she have instituted them nonetheless?
The decedent's will, which alone should provide the answer, is mute on this point or at
best is vague and uncertain. The phrases, "mga sapilitang
tagapagmana" and "sapilitang mana," were borrowed from the language of the law on
succession and were used, respectively, to describe the class of heirs instituted and the
abstract object of the inheritance. They offer no absolute indication that the decedent
would have willed her estate other than the way she did if she had known that she was 2 53 Cal. Jur. 2d 678.
not bound by law to make allowance for legitimes. Her disposition of the free portion of
her estate (libre disposicion) which largely favored the respondent Perfecto Cruz, the
3 Rodriguez v. Court of Appeals, L-28734, March 24, 1969, 27 SCRA
latter's children, and the children of the respondent Benita Cruz, shows a perceptible
546, 552; Solla v. Ascueta, 49 Phil. 333, 347-348.
inclination on her part to give to the respondents more than what she thought the law
enjoined her to give to them. Compare this with the relatively small devise of land which
the decedent had left for her blood relatives, including the petitioners Consuelo Austria- 4 Ibid, citing Barrera v. Tampoco, 94 Phil. 346, 353.
Benta and Lauro Mozo and the children of the petitioner Ruben Austria. Were we to
exclude the respondents Perfecto Cruz, et al. from the inheritance, then the petitioners 5 See Gomez v. Concepcion, 47 Phil. 717; Ramos v. Mañalac, 89 Phil.
and the other nephews and nieces would succeed to the bulk of the testate by 270; Santos v. Aranzaso, L-23828, Feb. 28, 1966 16 SCRA 352.
intestacy — a result which would subvert the clear wishes of the decedent.

6 Sec. 5, par. (g), Rules of Court.

Whatever doubts one entertains in his mind should be swept away by these explicit
injunctions in the Civil Code: "The words of a will are to receive an interpretation which
will give to every expression some effect, rather than one which will render any of the
expressions inoperative; and of two modes of interpreting a will, that is to be preferred
which will prevent intestacy." 1
7 Sec. 2, par. (b), Ibid; Seva, et al. v. Rivera, etc., 73 Phil. 477, 479-480,
cited in Moran, Comments on the Rules of Court, 1963 edition, Vol. I,
pp. 354-355.

Testacy is favored and doubts are resolved on its side, especially where the will evinces Republic of the Philippines
an intention on the part of the testator to dispose of practically his whole estate,2 as was SUPREME COURT
done in this case. Moreover, so compelling is the principle that intestacy should be Manila
avoided and the wishes of the testator allowed to prevail, that we could even vary the
language of the will for the purpose of giving it effect.3 A probate court has found, by SECOND DIVISION
final judgment, that the late Basilia Austria Vda. de Cruz was possessed of testamentary
capacity and her last will executed free from falsification, fraud, trickery or undue
influence. In this situation, it becomes our duty to give full expression to her will.4

G.R. No. L-39247 June 27, 1975

At all events, the legality of the adoption of the respondents by the testatrix can be
assailed only in a separate action brought for that purpose, and cannot be the subject
of a collateral attack.5 In the Matter of the Petition to Approve the Will of Leodegaria Julian. FELIX BALANAY,
JR., petitioner,
vs.
To the petitioners' charge that the lower court had no power to reverse its order of
HON. ANTONIO M. MARTINEZ, Judge of the Court of First Instance of Davao, Branch VI;
December 22, 1959, suffice it to state that, as borne by the records, the subsequent
AVELINA B. ANTONIO and DELIA B. LANABAN, respondents.
orders complained of served merely to clarify the first — an act which the court could
legally do. Every court has the inherent power to amend and control its processes and
orders so as to make them conformable to law and justices.6 That the court a quo has Roberto M. Sarenas for petitioner.
limited the extent of the petitioners' intervention is also within its powers as articulated by
the Rules of Court.7
Jose B. Guyo for private respondents.

ACCORDINGLY, the present petition is denied, at petitioners cost.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Teehankee, AQUINO, J.:
Barredo and Villamor, JJ., concur.

Felix Balanay, Jr. appealed by certiorari from the order of the Court of First Instance of
Davao dated February 28, 1974, declaring illegal and void the will of his mother,
Leodegaria Julian, converting the testate proceeding into an intestate proceeding and
Footnotes ordering the issuance of the corresponding notice to creditors (Special Case No. 1808).
The antecedents of the appeal are as follows:
1 Article 791.
Leodegaria Julian, a native of Sta. Maria, Ilocos Sur, died on February 12, 1973 in Davao
City at the age of sixty-seven. She was survived by her husband, Felix Balanay, Sr., and
by their six legitimate children named Felix Balanay, Jr., Avelina B. Antonio, Beatriz B.
Solamo, Carolina B. Manguiob, Delia B. Lanaban and Emilia B. Pabaonon.
Felix J. Balanay, Jr. filed in the lower court a petition dated February 27, 1973 for the
probate of his mother's notarial will dated September 5, 1970 which is written in English.
In that will Leodegaria Julian declared (a) that she was the owner of the "southern half
of nine conjugal lots (par. II); (b) that she was the absolute owner of two parcels of land
which she inherited from her father (par. III), and (c) that it was her desire that her
properties should not be divided among her heirs during her husband's lifetime and that
their legitimes should be satisfied out of the fruits of her properties (Par. IV).
Then, in paragraph V of the will she stated that after her husband's death (he was
eighty-two years old in 1973) her paraphernal lands and all the conjugal lands (which
she described as "my properties") should be divided and distributed in the manner set
forth in that part of her will. She devised and partitioned the conjugal lands as if they
were all owned by her. She disposed of in the will her husband's one half share of the
conjugal assets. *
Felix Balanay, Sr. and Avelina B. Antonio opposed the probate of the will on the grounds
of lack of testamentary capacity, undue influence, preterition of the husband and
alleged improper partition of the conjugal estate. The oppositors claimed that Felix
Balanay, Jr. should collate certain properties which he had received from the testatrix.
Felix Balanay, Jr., in his reply to the opposition, attached thereto an affidavit of Felix
Balanay, Sr. dated April 18, 1973 wherein he withdrew his opposition to the probate of
the will and affirmed that he was interested in its probate. On the same date Felix
Balanay, Sr. signed an instrument captioned "Conformation (sic) of Division and
Renunciation of Hereditary Rights" wherein he manifested that out of respect for his
wife's will he "waived and renounced' his hereditary rights in her estate in favor of their six
children. In that same instrument he confirmed the agreement, which he and his wife
had perfected before her death, that their conjugal properties would be partitioned in
the manner indicated in her will.
Avelina B. Antonio, an oppositor, in her rejoinder contended that the affidavit and
"conformation" of Felix Balanay, Sr. were void. The lower court in its order of June 18,
1973 "denied" the opposition and reset for hearing the probate of the will. It gave effect
to the affidavit and conformity of Felix Balanay, Sr. In an order dated August 28, 1973 it
appointed its branch clerk of court as special administrator of the decedent's estate.
Mrs. Antonio moved for the reconsideration of the lower court's order of June 18, 1973
on the grounds (a) that the testatrix illegally claimed that she was the owner of the
southern half of the conjugal lots and (b) that she could not partition the conjugal
estate by allocating portions of the nine lots to her children. Felix Balanay, Jr., through his
counsel, Hermenegildo Cabreros, opposed that motion. The lower court denied it in its
order of October 15, 1973.
In the meanwhile, another lawyer appeared in the case. David O. Montaña, Sr.,
claiming to be the lawyer of petitioner Felix Balanay, Jr. (his counsel of record was Atty.
Cabreros), filed a motion dated September 25, 1973 for "leave of court to withdraw
probate of alleged will of Leodegaria Julian and requesting authority to proceed by
intestate estate proceeding." In that motion Montaña claimed to be the lawyer not only
of the petitioner but also of Felix Balanay, Sr., Beatriz B. Solamo, Carolina B. Manguiob
and Emilia B. Pabaonon.
Montaña in his motion assailed the provision of the will which partitioned the conjugal
assets or allegedly effected a compromise of future legitimes. He prayed that the
probate of the will be withdrawn and that the proceeding be converted into an
intestate proceeding. In another motion of the same date he asked that the
corresponding notice to creditors be issued.
Avelina B. Antonio and Delia B. Lanaban, through Atty. Jose B. Guyo, in their comments
dated October 15, 1973 manifested their conformity with the motion for the issuance of
a notice to creditors. They prayed that the will be declared void for being contrary to
law and that an intestacy be declared.
The lower court, acting on the motions of Atty. Montaña, assumed that the issuance of
a notice to creditors was in order since the parties had agreed on that point. It adopted
the view of Attys. Montaña and Guyo that the will was void. So, in its order of February
28, 1974 it dismissed the petition for the probate, converted the testate proceeding into
an intestate proceeding, ordered the issuance of a notice to creditors and set the
intestate proceeding for hearing on April 1 and 2, 1974. The lower court did not
abrogate its prior orders of June 18 and October 15, 1973. The notice to creditors was
issued on April 1, 1974 and published on May 2, 9 and 16 in the Davao Star in spite of
petitioner's motion of April 17, 1974 that its publication be held in abeyance.
Felix Balanay, Jr., through a new counsel, Roberto M. Sarenas, in a verified motion dated
April 15, 1974, asked for the reconsideration of the lower court's order of February 28,
1974 on the ground that Atty. Montaña had no authority to withdraw the petition for the
allowance of the will. Attached to the motion was a copy of a letter dated March 27,
1974 addressed to Atty. Montaña and signed by Felix Balanay, Jr., Beatriz V. Solamo,
Carolina B. Manguiob and Emilia B. Pabaonon, wherein they terminated Montaña's
services and informed him that his withdrawal of the petition for the probate of the will
was without their consent and was contrary to their repeated reminder to him that their
mother's will was "very sacred" to them.
Avelina B. Antonio and Delia B. Lanaban opposed the motion for reconsideration. The
lower court denied the motion in its order of June 29, 1974. It clarified that it declared
the will void on the basis of its own independent assessment of its provisions and not
because of Atty. Montaña's arguments.
The basic issue is whether the probate court erred in passing upon the intrinsic validity of
the will, before ruling on its allowance or formal validity, and in declaring it void.
We are of the opinion that in view of certain unusual provisions of the will, which are of
dubious legality, and because of the motion to withdraw the petition for probate (which
the lower court assumed to have been filed with the petitioner's authorization), the trial
court acted correctly in passing upon the will's intrinsic validity even before its formal
validity had been established. The probate of a will might become an idle ceremony if
on its face it appears to be intrinsically void. Where practical considerations demand
that the intrinsic validity of the will be passed upon, even before it is probated, the court
should meet the issue (Nuguid vs. Nuguid, 64 O.G. 1527, 17 SCRA 449. Compare with
Sumilang vs. Ramagosa, L-23135, December 26, 1967, 21 SCRA 1369; Cacho vs. Udan, L-
19996, April 30, 1965, 13 SCRA 693).1äwphï1.ñët
But the probate court erred in declaring, in its order of February 28, 1974 that the will was
void and in converting the testate proceeding into an intestate proceeding
notwithstanding the fact that in its order of June 18, 1973 , it gave effect to the surviving
husband's conformity to the will and to his renunciation of his hereditary rights which
presumably included his one-half share of the conjugal estate.
The rule is that "the invalidity of one of several dispositions contained in a will does not
result in the invalidity of the other dispositions, unless it is to be presumed that the testator
would not have made such other dispositions if the first invalid disposition had not been
made" (Art. 792, Civil Code). "Where some of the provisions of a will are valid and others
invalid, the valid parts will be upheld if they can be separated from the invalid without
defeating the intention of the testator or interfering with the general testamentary
scheme, or doing injustice to the beneficiaries" (95 C.J.S. 873).
The statement of the testatrix that she owned the "southern half of the conjugal lands is
contrary to law because, although she was a coowner thereof, her share was inchoate
and proindiviso (Art. 143, Civil Code; Madrigal and Paterno vs. Rafferty and
Concepcion, 38 Phil. 414). But That illegal declaration does not nullify the entire will. It
may be disregarded.
The provision of the will that the properties of the testatrix should not be divided among
her heirs during her husband's lifetime but should be kept intact and that the legitimes
should be paid in cash is contrary to article 1080 of the Civil Code which reads:
ART. 1080. Should a person make a partition of his estate by an
act inter vivos, or by will, such partition shall be respected, insofar as it
does not prejudice the legitime of the compulsory heirs.
A parent who, in the interest of his or her family, to keep any
agricultural, industrial, or manufacturing enterprise intact, may avail
himself of the right granted him in this article, by ordering that the
legitime of the other children to whom the property is not assigned be
paid in cash. (1056a)
The testatrix in her will made a partition of the entire conjugal estate among her six
children (her husband had renounced his hereditary rights and his one-half conjugal
share). She did not assign the whole estate to one or more children as envisaged in
article 1080. Hence, she had no right to require that the legitimes be paid in cash. On
the other hand, her estate may remain undivided only for a period of twenty years. So,
the provision that the estate should not be divided during her husband's lifetime would
at most be effective only for twenty years from the date of her death unless there are
compelling reasons for terminating the coownership (Art. 1083, Civil Code).
Felix Balanay, Sr. could validly renounce his hereditary rights and his one-half share of
the conjugal partnership (Arts. 179[1] and 1041, Civil Code) but insofar as said
renunciation partakes of a donation of his hereditary rights and his one-half share in the
conjugal estate (Art. 1060[1] Civil Code), it should be subject to the limitations
prescribed in articles 750 and 752 of the Civil Code. A portion of the estate should be
adjudicated to the widower for his support and maintenance. Or at least his legitime
should be respected.
Subject to the foregoing observations and the rules on collation, the will is intrinsically
valid and the partition therein may be given effect if it does not prejudice the creditors
and impair the legitimes. The distribution and partition would become effective upon
the death of Felix Balanay, Sr. In the meantime, the net income should be equitably
divided among the children and the surviving spouse.
It should be stressed that by reason of the surviving husband's conformity to his wife's will
and his renunciation of his hereditary rights, his one-half conjugal share became a part
of his deceased wife's estate. His conformity had the effect of validating the partition
made in paragraph V of the will without prejudice, of course, to the rights of the
creditors and the legitimes of the compulsory heirs.
Article 793 of the Civil Code provides that "property acquired after the making of a will
shall only pass thereby, as if the testator had it at the time of making the will, should it
expressly appear by the will that such was his intention". Under article 930 of the Civil
Code "the legacy or devise of a thing belonging to another person is void, if the testator
erroneously believed that the thing pertained to him. But if the thing bequeathed,
though not belonging to the testator when he made the will, afterwards becomes his,
by whatever title, the disposition shall take effect."
In the instant case there is no doubt that the testatrix and her husband intended to
partition the conjugal estate in the manner set forth in paragraph V of her will. It is true
that she could dispose of by will only her half of the conjugal estate (Art. 170, Civil Code)
but since the husband, after the dissolution of the conjugal partnership, had assented to
her testamentary partition of the conjugal estate, such partition has become valid,
assuming that the will may be probated.
The instant case is different from the Nuguid case, supra, where the testatrix instituted as
heir her sister and preterited her parents. Her will was intrinsically void because it
preterited her compulsory heirs in the direct line. Article 854 of the Civil Code provides
that "the preterition or omission of one, some, or all of the compulsory heirs in
the direct line, whether living at the time of the execution of the will or born after the
death of the testator, shall annul the institution of heir; but the devises and legacies, shall
be valid insofar as they are not inofficious." Since the preterition of the parents annulled
the institution of the sister of the testatrix and there were no legacies and devises, total
intestacy resulted (.Art. 960[2], Civil Code).1äwphï1.ñët
In the instant case, the preterited heir was the surviving spouse. His preterition did not
produce intestacy. Moreover, he signified his conformity to his wife's will and renounced
his hereditary rights. .
It results that the lower court erred in not proceeding with the probate of the will as
contemplated in its uncancelled order of June 18, 1973. Save in an extreme case where
the will on its face is intrinsically void, it is the probate court's duty to pass first upon the
formal validity of the will. Generally, the probate of the will is mandatory (Art. 838, Civil
Code; Guevara vs. Guevara, 74 Phil. 479 and 98 Phil. 249; Fernandez vs. Dimagiba, L-
23638, October 12, 1967, 21 SCRA 428).
As aptly stated by Mr. Justice Barredo, "the very existence of a purported testament is in
itself prima facie proof that the supposed testator has willed that his estate should be
distributed in the manner therein provided, and it is incumbent upon the state that, if
legally tenable, such desire be given effect independent of the attitude of the parties
affected thereby" (Resolution, Vda. de Precilla vs. Narciso, L-27200, August 18, 1972, 46
SCRA 538, 565).
To give effect to the intention and wishes of the testatrix is the first and principal law in
the matter of testaments (Dizon-Rivera vs. Dizon, L-24561, June 30, 1970, 33 SCRA 554,
561). Testacy is preferable to intestacy. An interpretation that will render a testamentary
disposition operative takes precedence over a construction that will nullify a provision of
the will (Arts. 788 and 791, Civil Code).
Testacy is favored. Doubts are resolved in favor of testacy especially where the will
evinces an intention on the part of the testator to dispose of practically his whole estate.
So compelling is the principle that intestacy should be avoided and that the wishes of
the testator should prevail that sometimes the language of the will can be varied for the
purpose of giving it effect (Austria vs. Reyes, L-23079, February 27, 1970, 31 SCRA 754,
762).
As far as is legally possible, the expressed desire of the testator must be followed and the
dispositions of the properties in his will should be upheld (Estorque vs. Estorque, L-19573,
June 30, 1970, 33 SCRA 540, 546).
The law has a tender regard for the wishes of the testator as expressed in his will
because any disposition therein is better than that which the law can make (Castro vs.
Bustos, L-25913, February 28, 1969, 27 SCRA 327, 341).
Two other errors of the lower court may be noticed. It erred in issuing a notice to
creditors although no executor or regular administrator has been appointed. The record
reveals that it appointed a special administrator. A notice to creditors is not in order if
only a special administrator has been appointed. Section 1, Rule 86 of the Rules of
Court, in providing that "immediately after granting letters of testamentary or of
administration, the court shall issue a notice requiring all persons having money claims
against the decedent to file them in the office of the clerk of said court" clearly
contemplates the appointment of an executor or regular administrator and not that of
a special administrator.
It is the executor or regular administrator who is supposed to oppose the claims against
the estate and to pay such claims when duly allowed (See. 10, Rule 86 and sec. 1, Rule
88, Rules of Court).
We also take this occasion to point out that the probate court's appointment of its
branch clerk of court as special administrator (p. 30, Rollo) is not a salutary practice
because it might engender the suspicion that the probate Judge and his clerk of court
are in cahoots in milking the decedent's estate. Should the branch clerk of court commit
any abuse or devastavit in the course of his administration, the probate Judge might
find it difficult to hold him to a strict accountability. A court employee should devote his
official time to his official duties and should not have as a sideline the administration of a
decedent's estate.
WHEREFORE, the lower court's orders of February 28, and June 29, 1974 are set aside and
its order of June 18, 1973, setting for hearing the petition for probate, is affirmed. The
lower court is directed to conduct further proceedings in Special Case No. 1808 in
consonance with this opinion. Costs, against the private respondents.
SO ORDERED.
Fernando (Chairman), Barredo, Antonio and Concepcion, Jr., JJ., concur.
Footnotes
* The pertinent provisions of the will are as follows:
"II. That I am the absolute owner of the southern half of the following
conjugal properties which I acquired during my married life with my
husband, Felix Balanay, Sr., namely: (Here follows an enumeration of
nine lots).1äwphï1.ñët
"III. I am the absolute owner of the following paraphernal properties
which I inherited from my deceased father, Cecilio Julian, namely:
(Here follows a description of two lots).
"IV. It is my desire and I direct that in the interest of my family, my
properties shall not be divided among my heirs during the lifetime of
my husband, Felix Balanay, Sr. but should be kept intact. The
respective legitimes of my husband and my children should be paid
in cash out of the proceeds of sale of the produce and rents derived
from said properties.
"V. After the death of my husband, Felix Balanay, Sr., my properties
shall be divided and distributed in the manner as follows:" (Here
follows a partition of the nine conjugal lots and the two paraphernal
lots. The testatrix divided among her six children not only her two
paraphernal lots, one of which she devised to Emilia Pabaonon and
the other lot to Felix Balanay, Jr., but also the nine conjugal lots. She
did not restrict the partition to her one-half conjugal share but
included her husband's one-half share.).
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-23638 October 12, 1967
DIONISIO FERNANDEZ, EUSEBIO REYES and LUISA REYES, petitioners,
vs.
ISMAELA DIMAGIBA, respondent.
----------------------------------------
G.R. No. L-23662 October 12, 1967 the Civil Code of 1889), the trial Court resolved against the oppositors and held the will
of the late Benedicta de los Reyes "unaffected and unrevoked by the deeds of sale."
Whereupon, the oppositors elevated the case to the Court of Appeals.
MARIANO REYES, CESAR REYES, LEONOR REYES and PACIENCIA REYES, petitioners,
vs.
ISMAELA DIMAGIBA, respondent. The appellate Court held that the decree of June 20, 1958, admitting the will to probate,
had become final for lack of opportune appeal; that the same was appealable
independently of the issue of implied revocation; that contrary to the claim of
Jose D. Villena for petitioners.
oppositors-appellants, there had been no legal revocation by the execution of the 1943
Antonio Barredo and Exequiel M. Zaballero for respondent.
and 1944 deeds of sale, because the latter had been made in favor of the legatee
herself, and affirmed the decision of the Court of First Instance.
REYES, J.B.L., Actg. C.J.:
Oppositors then appealed to this Court.
The heirs intestate of the late Benedicta de los Reyes have petitioned for a review of the
decision of the Court of Appeals (in CA-G. R. No. 31221-R) affirming that of the Court of
In this instance, both sets of oppositors-appellants pose three main issues: (a) whether or
First Instance of Bulacan, in Special Proceeding No. 831 of said Court, admitting to
not the decree of the Court of First Instance allowing the will to probate had become
probate the alleged last will and testament of the deceased, and overruling the
final for lack of appeal; (b) whether or not the order of the Court of origin dated July 27,
opposition to the probate.
1959, overruling the estoppel invoked by oppositors-appellants had likewise become
final; and (c) whether or not the 1930 will of Benedicta de los Reyes had been impliedly
It appears from the record that on January 19, 1955, Ismaela Dimagiba, now revoked by her execution of deeds of conveyance in favor of the proponent on March
respondent, submitted to the Court of First Instance a petition for the probate of the 26, 1943 and April 3, 1944.
purported will of the late Benedicta de los Reyes, executed on October 22, 1930, and
annexed to the petition. The will instituted the petitioner as the sole heir of the estate of
As to the first point, oppositors-appellants contend that the order allowing the will to
the deceased. The petition was set for hearing, and in due time, Dionisio Fernandez,
probate should be considered interlocutory, because it fails to resolve the issues of
Eusebio Reyes and Luisa Reyes and one month later, Mariano, Cesar, Leonor and
estoppel and revocation propounded in their opposition. We agree with the Court of
Paciencia, all surnamed Reyes, all claiming to be heirs intestate of the decedent, filed
Appeals that the appellant's stand is untenable. It is elementary that a probate decree
oppositions to the probate asked. Grounds advanced for the opposition were forgery,
finally and definitively settles all questions concerning capacity of the testator and the
vices of consent of the testatrix, estoppel by laches of the proponent and revocation of
proper execution and witnessing of his last will and testament, irrespective of whether its
the will by two deeds of conveyance of the major portion of the estate made by the
provisions are valid and enforceable or otherwise. (Montañano vs. Suesa, 14 Phil. 676;
testatrix in favor of the proponent in 1943 and 1944, but which conveyances were finally
Mercado vs. Santos, 66 Phil. 215; Trillana vs. Crisostomo, 89 Phil. 710). As such, the
set aside by this Supreme Court in a decision promulgated on August 3, 1954, in cases
probate order is final and appealable; and it is so recognized by express provisions of
G.R. Nos. L-5618 and L-5620 (unpublished).
Section 1 of Rule 109, that specifically prescribes that "any interested person may
appeal in special proceedings from an order or judgment . . . where such order or
After trial on the formulated issues, the Court of First Instance, by decision of June 20, judgment: (a) allows or disallows a will."
1958, found that the will was genuine and properly executed; but deferred resolution on
the questions of estoppel and revocation "until such time when we shall pass upon the
Appellants argue that they were entitled to await the trial Court's resolution on the other
intrinsic validity of the provisions of the will or when the question of adjudication of the
grounds of their opposition before taking an appeal, as otherwise there would be a
properties is opportunely presented."
multiplicity of recourses to the higher Courts. This contention is without weight, since Rule
109, section 1, expressly enumerates six different instances when appeal may be taken
Oppositors Fernandez and Reyes petitioned for reconsideration, and/or new trial, in special proceedings.
insisting that the issues of estoppel and revocation be considered and resolved;
whereupon, on July 27, 1959, the Court overruled the claim that proponent was in
There being no controversy that the probate decree of the Court below was not
estoppel to ask for the probate of the will, but "reserving unto the parties the right to
appealed on time, the same had become final and conclusive. Hence, the appellate
raise the issue of implied revocation at the opportune time."
courts may no longer revoke said decree nor review the evidence upon which it is
made to rest. Thus, the appeal belatedly lodged against the decree was correctly
On January 11, 1960, the Court of First Instance appointed Ricardo Cruz as administrator dismissed.
for the sole purpose of submitting an inventory of the estate, and this was done on
February 9, 1960.
The alleged revocation implied from the execution of the deeds of conveyance in favor
of the testamentary heir is plainly irrelevant to and separate from the question of
On February 27, 1962, after receiving further evidence on the issue whether the whether the testament was duly executed. For one, if the will is not entitled to probate,
execution by the testatrix of deeds of sale of the larger portion of her estate in favor of or its probate is denied, all questions of revocation become superfluous in law, there is
the testamentary heir, made in 1943 and 1944, subsequent to the execution of her 1930 no such will and hence there would be nothing to revoke. Then, again, the revocation
testament, had revoked the latter under Article 957(2) of the 1950 Civil Code (Art. 869 of invoked by the oppositors-appellants is not an express one, but merely implied from
subsequent acts of the testatrix allegedly evidencing an abandonment of the original
intention to bequeath or devise the properties concerned. As such, the revocation
would not affect the will itself, but merely the particular devise or legacy. Only
the total and absolute revocation can preclude probate of the revoked testament
(Trillana vs. Crisostomo, supra.).
As to the issue of estoppel, we have already ruled in Guevara vs. Guevara, 98 Phil. 249,
that the presentation and probate of a will are requirements of public policy, being
primarily designed to protect the testator's, expressed wishes, which are entitled to
respect as a consequence of the decedent's ownership and right of disposition within
legal limits. Evidence of it is the duty imposed on a custodian of a will to deliver the
same to the Court, and the fine and imprisonment prescribed for its violation (Revised
Rule 75). It would be a non sequitur to allow public policy to be evaded on the pretext
of estoppel. Whether or not the order overruling the allegation of estoppel is still
appealable or not, the defense is patently unmeritorious and the Court of Appeals
correctly so ruled.
The last issue, that of revocation, is predicated on paragraph 2 of Article 957 of the Civil
Code of 1950 (Art. 869 of the Code of 1889), which recites:
Art. 957. The legacy or devise shall be without effect:
(1) . . . .
(2) If the testator by any title or for any cause alienates the thing bequeathed
or any part thereof, it being understood that in the latter case the legacy or
devise shall be without effect only with respect to the part thus alienated. If
after the alienation the thing should again belong to the testator, even if it be
by reason of nullity of the contract, the legacy or devise shall not thereafter be
valid, unless the reacquisition shall have been effected by virtue of the
exercise of the right of repurchase;
xxx xxx xxx
It is well to note that, unlike in the French and Italian Codes, the basis of the quoted
provision is a presumed change of intention on the part of the testator. As pointed out
by Manresa in his Commentaries on Article 869 of the Civil Code (Vol. 6, 7th Ed., p. 743)
—
Este caso se funda en la presunta voluntad del testador. Si este, despues de
legar, se desprende de la cosa por titulo lucrativo u oneroso, hace
desaparecer su derecho sobra ella, dando lugar a la presuncion de que ha
cambiado de voluntad, y no quiere que el legado se cumpla. Mas para que
pueda presumirse esa voluntad, es necesario que medien actos del testador
que la indiquen. Si la perdida del derecho sobre la cosa ha sido
independiente de la voluntad del testador, el legado podraquedar sin efecto,
mas no en virtud del numero 2 del articulo 869, que exige siempre actos
voluntarios de enajenacion por parte del mismo testador.
As observed by the Court of Appeals, the existence of any such change or departure
from the original intent of the testatrix, expressed in her 1930 testament, is rendered
doubtful by the circumstance that the subsequent alienations in 1943 and 1944 were
executed in favor of the legatee herself, appellee Dimagiba. In fact, as found by the
Court of Appeals in its decision annulling these conveyances (affirmed in that point by
this Supreme Court in Reyes vs. Court of Appeals and Dimagiba, L-5618 and L-5620,
promulgated on July 31, 1954), "no consideration whatever was paid by respondent
Dimagiba" on account of the transfers, thereby rendering it even more doubtful whether
in conveying the property to her legatee, the testatrix merely intended to comply in
advance with what she had ordained in her testament, rather than an alteration or
departure therefrom.1 Revocation being an exception, we believe, with the Courts
below, that in the circumstances of the particular case, Article 957 of the Civil Code of
the Philippines, does not apply to the case at bar.
Not only that, but even if it were applicable, the annulment of the conveyances would
not necessarily result in the revocation of the legacies, if we bear in mind that the
findings made in the decision decreeing the annulment of the subsequent 1943 and
1944 deeds of sale were also that
it was the moral influence, originating from their confidential relationship,
which was the only cause for the execution of Exhs. A and B (the 1943 and
1944 conveyances). (Decision, L-5618 and L-5620).
If the annulment was due to undue influence, as the quoted passage implies, then the
transferor was not expressing her own free will and intent in making the conveyances.
Hence, it can not be concluded, either, that such conveyances established a decision
on her part to abandon the original legacy.
True it is that the legal provision quoted prescribes that the recovery of the alienated
property "even if it be by reason of the nullity of the contract" does not revive the
legacy; but as pointed out by Scaevola (Codigo Civil, Vol. XV, 4th Ed., pp. 324-325) the
"nullity of the contract" can not be taken in an absolute sense.2 Certainly, it could not be
maintained, for example, that if a testator's subsequent alienation were avoided
because the testator was mentally deranged at the time, the revocatory effect
ordained by the article should still ensue. And the same thing could be said if the
alienation (posterior to the will) were avoided on account of physical or mental duress.
Yet, an alienation through undue influence in no way differs from one made through
violence or intimidation. In either case, the transferor is not expressing his real
intent,3 and it can not be held that there was in fact an alienation that could produce a
revocation of the anterior bequest.
In view of the foregoing considerations, the appealed decision of the Court of Appeals
is hereby affirmed. Costs against appellants Reyes and Fernandez. So ordered.
Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Concepcion, C.J. and Bengzon, J.P., J., are on leave, took no part.
Footnotes
1 Scaevola (Codigo Civil, Vol. XV, 4th Ed., p. 378) aptly remarks:
 "Cuando el testador, a sabiendas de la disposicion contenida en su ultima
voluntad, enajena al legatario la cosa legada, si bien esta sale del poder de
aquel, va a parar al del legatario, acto que no puede interpretarse como
mudanza del a voluntad, puesto que transmits la cosa a la persona a la que
deseaba favoreer con ella. Por esta circunstancia y por la de no revocar el
legado, mas bien parece que persiste en su intencion de beneficiar al
legatario, ya que no con la propia cosa, con el derecho que le concede el
art. 878. Si al donar el testador al futuro legatario la cosa que le dejaba en el
testamento, indica solo una realizacion anticipada de la ultima voluntad, el
venderia sin derogar la disposicion dellegado parece indicae tambien que no
ha habido idea modificadora de la intencion, sino que porsigue en la de
favorecer al instituido, y ya que no es posible conseguirlo con la cosa
misma,se impone el verificarlo en la manera determinada por el articulo, o sea
mediante la entrega del precio."
2 "Deciamos anteriormente que necesitaba alguna explicacion la frase del
num. 20.o del art. 869, "aunque sea por la nulidad del contrato," para no
apartarla de sus verdaderos y prudentes limites. Literalmente entendida,
autorizaria el que fuese revocado un legado por enajenacion que hubiese
realizado el testador con vicio en el consentimiento. Dice con razon
eljurisconsulto frances Demante, "quese llegaria a consecuencias contrariasa
los principios mas elementales del Derecho y de la razon si, exagerandodicha
doctrina, se diese efecto revocatorio a una enajenacion nulapor vicio de
consentimiento." Como una voluntad impotente para transferirla propiedad
podria tener la fuerza de revocar un legado? Si la enajenacionlleva el vicio de
violencia o de error, sera posible artibuir algun efectoa acto semejante? Es
logico deducir entonces que el testador se arrepintio, como dicen las partidas
del otorgamento de la manda?" (Scaevola, op. cit.)
3 Cf. Torres vs. Lopez, 48 Phil. 772; Coso vs. Deza, 42 Phil.
SECOND DIVISION
[G.R. No. 138842. October 18, 2000]
NATIVIDAD P. NAZARENO, MAXIMINO P. NAZARENO, JR., petitioners, vs. COURT OF
APPEALS, ESTATE OF MAXIMINO A. NAZARENO, SR., ROMEO P. NAZARENO and
ELIZA NAZARENO, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision[1] of the Court of Appeals in
CA-GR CV No. 39441 dated May 29, 1998 affirming with modifications the decision of
the Regional Trial Court, Branch 107, Quezon City, in an action for annulment of sale
and damages.
The facts are as follows:
Maximino Nazareno, Sr. and Aurea Poblete were husband and wife. Aurea died
on April 15, 1970, while Maximino, Sr. died on December 18, 1980. They had five children,
namely, Natividad, Romeo, Jose, Pacifico, and Maximino, Jr. Natividad and Maximino,
Jr. are the petitioners in this case, while the estate of Maximino, Sr., Romeo, and his wife
Eliza Nazareno are the respondents.
During their marriage, Maximino Nazareno, Sr. and Aurea Poblete acquired
properties in Quezon City and in the Province of Cavite. It is the ownership of some of
these properties that is in question in this case.
It appears that after the death of Maximino, Sr., Romeo filed an intestate case in
the Court of First Instance of Cavite, Branch XV, where the case was docketed as Sp.
Proc. No. NC-28.Upon the reorganization of the courts in 1983, the case was transferred
to the Regional Trial Court of Naic, Cavite. Romeo was appointed administrator of his
fathers estate.
In the course of the intestate proceedings, Romeo discovered that his parents had
executed several deeds of sale conveying a number of real properties in favor of his
sister, Natividad. One of the deeds involved six lots in Quezon City which were allegedly
sold by Maximino, Sr., with the consent of Aurea, to Natividad on January 29, 1970 for
the total amount of P47,800.00. The Deed of Absolute Sale reads as follows:
DEED OF ABSOLUTE SALE
KNOW ALL MEN BY THESE PRESENTS:
I, MAXIMINO A. NAZARENO, Filipino, married to Aurea Poblete-Nazareno, of legal age
and a resident of the Mun. of Naic, Prov. of Cavite, Philippines,
-WITNESSETH-
That I am the absolute registered owner of six (6) parcels of land with the improvements
thereon situated in Quezon City, Philippines, which parcels of land are herewith
described and bounded as follows, to wit:
TRANS. CERT. OF TITLE NO. 140946
A parcel of land (Lot 3-B of the subdivision plan Psd-47404, being a portion of Lot 3, Block
D-3 described on plan Bsd-10642, G.L.R.O. Record No.) situated in the Quirino District,
Quezon City. Bounded on the N., along line 1-2 by Lot 15, Block D-3 of plan Bsd - 10642;
along line 2-3 by Lot 4, Block D-3 of plan Bsd-10642; along line 3-4 by Aurora Boulevard
(Road Lot-1, Bsd-10642); and along line 4-1 by Lot 3-D of the subdivision plan. Beginning
at a point marked 1 on plan, being S.29 deg. 26E., 1156.22 m. from B.L.L.M. 9, Quezon
City,
thence N. 79 deg. 53E., 12.50 m. to point 2;
thence S. 10 deg. 07E., 40.00 m. to point 3;
thence S. 79 deg. 53W., 12.50 m. to point 4; thence N. 64 deg. 59E., 29.99 m. to the point of

thence N. 10 deg. 07W., 40.00 m. to the point beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360), more or
less. All points referred to are indicated on the plan and on the ground are marked by
P.L.S. Conc. Mons. 15 x 60 cm.; bearings true; declination 0 deg. 50E., date of the
of beginning; containing an area of FIVE HUNDRED (500) SQUARE METERS. All points
original survey, April 8 to July 15, 1920, and that of the consolidation and subdivision
referred to are indicated on the plan and are marked on the ground as follows: points 1
survey, April 24 to 26, 1941.
and 4 by P.L.S. Cyl. Conc. Mons. bearings true; date of the original survey, April 8-July 15,
1920 and that of the subdivision survey, March 25, 1956.
TRANS. CERT. OF TITLE NO. 118886
TRANS. CERT. OF TITLE NO. 132019
A parcel of land (Lot No. 11, of the consolidation and subdivision plan Pcs-988, being a
portion of the consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B,
A parcel of land (Lot 3, Block 93 of the subdivision plan Psd-57970 being a portion of Lot
Psd-14901, G.L.R.O. Record No. 917), situated in the District of Cubao, Quezon City,
6, Pcs-4786, G.L.R.O. Rec. No. 917) situated in Quirino District Quezon City. Bounded on
Island of Luzon. Bounded on the NE., by Lot No. 4 of the consolidation and subdivision
the NW., along line 1-2, by Lot 1, Block 93; on the NE., along line 2-3, by Road Lot 101; on
plan; on the SE., by Lot No. 12 of the consolidation and subdivision plan; on the SW., by
the SE., along line 3-4, by Road Lot 100; on the SW., along line 4-1, by Lot 4, Block 93; all
Lot No. 3 of the consolidation and subdivision plan; on the NW., by Lot No. 10 of the
of the subdivision plan. Beginning at point marked 1 on plan, being S. 65 deg. 40 3339.92
consolidation and subdivision plan. Beginning at a point marked 1 on plan, being S. 79
m. from B.L.L.M. No. 1, Marikina, Rizal;
deg. 07W., 4264.00 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;

thence N. 23 deg. 28 min. E., 11.70 m. to point 2;

thence S. 64 deg. 59W., 29.99 m. to point 2;

thence S. 66 deg. 32 min. E., 18.00 m. to point 3;

thence N. 25 deg. 00W., 12.00 m. to point 3;

thence S. 23 deg. 28 min. W., 11.70 m. to point 4;

thence N. 64 deg. 59E., 29.99 m. to point 4;

thence N. 66 deg. 32. min. W., 18.00 m. to the point

thence S. 26 deg. 00E., 12.00 m. to the point of

of beginning; containing an area of TWO HUNDRED TEN SQUARE METERS AND SIXTY
beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360), more or
SQUARE DECIMETERS (210.60). All points referred to are indicated on the plan and are
less. All points referred to are indicated on the plan and on the ground, are marked by
marked on the ground by B.L. Cyl. Conc. Mons. 15 x 60 cm.; bearings true; date of the
P.L.S. Conc. Mons. 15 x 60 cm.; bearings true; declination 0 deg. 50E.; date of the
original survey, Nov. 10, 1920 and Jan. 31-March 31, 1924 and that of the subdivision
original survey, April 8 to July 15, 1920, and that of the consolidation and subdivision
survey, February 1 to September 30, 1954. Date approved - March 9, 1962.
survey, April 24 to 26, 1941.

TRANS. CERT. OF TITLE NO. 118885

A parcel of land (Lot No. 10, of the consolidation and subdivision plan Pcs-988, being a
portion of the consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B,
Psd-14901, G.L.R.O.Record No. 917), situated in the District of Cubao, Quezon City, Island
of Luzon. Bounded on the NE., by Lot No. 4 of the consolidation and subdivision plan; on
the SE., by Lot No. 11 of the consolidation and subdivision plan; on the SW., by Lot No. 3
of the consolidation and subdivision plan; and on the NW., by Lot No. 9 of the
consolidation and subdivision plan. Beginning at a point marked 1 on the plan, being S.
7 deg. 26W., 4269.90 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
A parcel of land (Lot No. 13 of the consolidation and subdivision plan Pcs-988, being a
portion of the consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B,
Psd-14901, G.L.R.O.Record No. 917), situated in the District of Cubao, Quezon City, Island
of Luzon. Bounded on the NE., by Lot No. 4 of the consolidation and subdivision plan; on
the SE., by Lot No. 14, of the consolidation; and subdivision plan; on the SW., by Lot No. 3
of the consolidation and subdivision plan; and on the NW., by Lot No. 12, of the
consolidation and subdivision plan. Beginning at the point marked 1 on plan, being S.78
deg. 48W., 4258.20 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
thence S. 64 deg. 58W., 30.00 m. to point 2;

thence S. 25 deg. 00E., 12.00 m. to point 2;

thence N. 25 deg. 00W., 12.00 m. to point 3;

thence S. 64 deg. 59W., 29.99 m. to point 3;

thence N. 64 deg. 59E., 29.99 m. to point 4;

thence N. 25 deg. 00W., 12.00 m to point 4;

thence S.25 deg. 00E., 12.00 m. to point of
beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360, more or
less. All points referred to are indicated on the plan and on the ground are marked by
P.L.S. Conc. Mons. 15 x 60 cm.; bearings true; declination 0 deg. 50E., date of the
original survey, April 8 to July 15, 1920, and that of the consolidation and subdivision
survey, April 24 to 26, 1941.
A parcel of land (Lot No. 14, of the consolidation and subdivision plan Pcs-988, being a
portion of the consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B,
Psd-14901, G.L.R.O. Record No. 917), situated in the District of Cubao, Quezon City,
Island of Luzon. Bounded on the NE., by Lot No. 4 of the consolidation and subdivision
plan; on the SE., by Lot No. 15, of the consolidation and subdivision plan; on the SW., by
Lot No. 3 of the consolidation and subdivision plan; and on the NW., by Lot No. 13 of the
consolidation and subdivision plan. Beginning at the point marked 1 on plan, being S.78
deg. 48W., 4258.20 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
thence S. 25 deg. 00E., 12.00 m. to point 2;
thence S. 65 deg. 00W., 30.00 m. to point 3;
thence S. 65 deg. 00W., 12.00 m. to point 4;
thence N.64 deg. 58E., 30.00 m. to the point of
beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360), more or
less. All points referred to are indicated on the plan and on the ground are marked by
P.L.S. Conc. Mons. 15 x 60 cm.; bearings true; declination 0 deg. 50E., date of the
original survey, April 8 to July 15, 1920, and that of the consolidation and subdivision
survey, April 24 to 26, 1941.
That for and in consideration of the sum of FORTY THREE THOUSAND PESOS (P43,000.00)
PHILIPPINE CURRENCY, to me in hand paid by NATIVIDAD P. NAZARENO, Filipino, single,
of legal age and a resident of the Mun. of Naic, Prov. of Cavite, Philippines, the receipt
whereof is acknowledged to my entire satisfaction, I do hereby CEDE, SELL, TRANSFER,
CONVEY and ASSIGN unto the said Natividad P. Nazareno, her heirs, administrators and
assigns, all my title, rights, interests and participations to the abovedescribed parcels of
land with the improvements thereon, with the exception of LOT NO. 11 COVERED BY
T.C.T. NO. 118886, free of any and all liens and encumbrances; and
That for and in consideration of the sum of FOUR THOUSAND EIGHT HUNDRED PESOS
(P4,800.00) PHILIPPINE CURRENCY, to me in hand paid by NATIVIDAD P. NAZARENO,
Filipino, single, of legal age and a resident of the Mun. of Naic, Prov. of Cavite,
Philippines, the receipt whereof is acknowledged to my entire satisfaction, I do hereby
CEDE, SELL, TRANSFER, CONVEY and ASSIGN unto the said Natividad P. Nazareno, her
heirs, administrators and assigns, all my title, rights, interests and participations in and to
Lot No. 11 covered by T.C.T. No. 118886 above-described, free of any and all liens and
encumbrances, with the understanding that the title to be issued in relation hereto shall
be separate and distinct from the title to be issued in connection with Lots Nos. 13 and
14, although covered by the same title.
IN WITNESS WHEREOF, I have hereunto signed this deed of absolute sale in the City of
Manila, Philippines, this 29th day of January, 1970.[2]
By virtue of this deed, transfer certificates of title were issued to Natividad, to wit:
TCT No. 162738 (Lot 3-B),[3] TCT No. 162739 (Lot 3),[4] TCT No. 162735 (Lot 10),[5] TCT No.
162736 (Lot 11),[6] and TCT No. 162737 (Lots 13 and 14),[7] all of the Register of Deeds of
Quezon City.
Among the lots covered by the above Deed of Sale is Lot 3-B which is registered
under TCT No. 140946. This lot had been occupied by Romeo, his wife Eliza, and by
Maximino, Jr. since 1969. Unknown to Romeo, Natividad sold Lot 3-B on July 31, 1982 to
Maximino, Jr.,[8] for which reason the latter was issued TCT No. 293701 by the Register of
Deeds of Quezon City.[9]
When Romeo found out about the sale to Maximino, Jr., he and his wife
Eliza locked Maximino, Jr. out of the house. On August 4, 1983, Maximino, Jr. brought an
action for recovery ofpossession and damages with prayer for writs of preliminary
injunction and mandatory injunction with the Regional Trial Court of Quezon City. On
December 12, 1986, the trial court ruled in favor of Maximino, Jr. In CA-G.R. CV No.
12932, the Court of Appeals affirmed the decision of the trial court.[10]
On June 15, 1988, Romeo in turn filed, on behalf of the estate of Maximino, Sr., the
present case for annulment of sale with damages against Natividad and Maximino,
Jr. The case was filed in the Regional Trial Court of Quezon City, where it was docketed
as Civil Case No. 88-58.[11] Romeo sought the declaration of nullity of the sale made on
January 29, 1970 to Natividad and that made on July 31, 1982 to Maximino, Jr. on the
ground that both sales were void for lack of consideration.
On March 1, 1990, Natividad and Maximino, Jr. filed a third-party complaint
against the spouses Romeo and Eliza.[12] They alleged that Lot 3, which was included in
the Deed of Absolute Sale of January 29, 1970 to Natividad, had been surreptitiously
appropriated by Romeo by securing for himself a new title (TCT No. 277968) in his
name.[13] They alleged that Lot 3 is being leased by the spouses Romeo and Eliza to third
persons. They therefore sought the annulment of the transfer to Romeo and the
cancellation of his title, the eviction of Romeo and his wife Eliza and all persons claiming
rights from Lot 3, and the payment of damages.
The issues having been joined, the case was set for trial. Romeo presented
evidence to show that Maximino and Aurea Nazareno never intended to sell the six lots
to Natividad and that Natividad was only to hold the said lots in trust for her siblings. He
presented the Deed of Partition and Distribution dated June 28, 1962 executed by
Maximino Sr. and Aurea and duly signed by all of their children, except Jose, who was
then abroad and was represented by their mother, Aurea. By virtue of this deed, the
nine lots subject of this Deed of Partition were assigned by raffle as follows:
1. Romeo - Lot 25-L (642 m2)
2. Natividad - Lots 23 (312 m2) and 24 (379 m2)
3. Maximino, Jr. - Lots 6 (338 m2) and 7 (338 m2)
4. Pacifico - Lots 13 (360 m2) and 14 (360 m2)
5. Jose - Lots 10 (360 m2) and 11 (360 m2)
Romeo received the title to Lot 25-L under his name,[14] while Maximino, Jr.
received Lots 6 and 7 through a Deed of Sale dated August 16, 1966 for the amount
of P9,500.00.[15]Pacifico and Joses shares were allegedly given to Natividad, who agreed
to give Lots 10 and 11 to Jose, in the event the latter came back from
abroad. Natividads share, on the other hand, was sold to third persons[16] because she
allegedly did not like the location of the two lots. But, Romeo said, the money realized
from the sale was given to Natividad.
 Romeo also testified that Lot 3-B was bought for him by his father, while Lot 3 was All other claims by one party against the other are dismissed.
sold to him for P7,000.00 by his parents on July 4, 1969.[17] However, he admitted that a
document was executed by his parents transferring six properties in Quezon
SO ORDERED.[21]
City, i.e., Lots 3, 3-B, 10, 11, 13, and 14, to Natividad.

Romeo further testified that, although the deeds of sale executed by his parents in
their favor stated that the sale was for a consideration, they never really paid any
amount for the supposed sale. The transfer was made in this manner in order to avoid
the payment of inheritance taxes.[18] Romeo denied stealing Lot 3 from his sister but
instead claimed that the title to said lot was given to him by Natividad in 1981 after their
father died.
Natividad and Maximino, Jr. claimed that the Deed of Partition and Distribution
executed in 1962 was not really carried out. Instead, in December of 1969, their parents
offered to sell to them the six lots in Quezon City, i.e., Lots 3, 3-B, 10, 11, 13 and
14. However, it was only Natividad who bought the six properties because she was the
only one financially able to do so. Natividad said she sold Lots 13 and 14 to Ros-Alva
Marketing Corp.[19] and Lot 3-B to Maximino, Jr. for P175,000.00.[20] Natividad admitted
that Romeo and the latters wife were occupying Lot 3-B at that time and that she did
not tell the latter about the sale she had made to Maximino, Jr.
Natividad said that she had the title to Lot 3 but it somehow got lost. She could not
get an original copy of the said title because the records of the Registrar of Deeds had
been destroyed by fire. She claimed she was surprised to learn that Romeo was able to
obtain a title to Lot 3 in his name.
Natividad insisted that she paid the amount stated in the Deed of Absolute Sale
dated January 29, 1970. She alleged that their parents had sold these properties to their
children instead of merely giving the same to them in order to impose on them the
value of hardwork.
Natividad and Maximino, Jr. filed a motion for reconsideration. As a result, on
October 14, 1992 the trial court modified its decision as follows:
WHEREFORE, the plaintiffs Partial Motion for Reconsideration is hereby granted. The
judgment dated August 10, 1992 is hereby amended, such that the first paragraph of its
dispositive portion is correspondingly modified to read as follows:
WHEREFORE, judgment is hereby rendered declaring the nullity of the Deeds of Sale
dated January 29, 1970 and July 31, 1982.
Except as to Lots 3, 13 and 14 which had passed on to third person, the defendant
Natividad shall hold the rest OF THE PROPERTIES COVERED BY THE DEED OF SALE DATED
JANUARY 29, 1970 (LOTS 10 and 11) in trust for Jose Nazareno to whom the same had
been adjudicated.
The Register of Deeds of Quezon City is directed to annotate this judgment on Transfer
Certificates of Title No. 162735 and 162736 as a lien on the titles of Natividad P.
Nazareno.
LIKEWISE, THE SAID REGISTER OF DEEDS IS DIRECTED TO CANCEL TCT NO. 293701 (formerly
162705) OVER LOT 3-B AND RESTORE TCT NO. 140946 IN THE NAME OF MAXIMINO
NAZARENO SR. AND AUREA POBLETE.[22]

Natividad accused Romeo of filing this case to harass her after Romeo lost in the
action for recovery of possession (Civil Case No. Q-39018) which had been brought On appeal to the Court of Appeals, the decision of the trial court was modified in
against him by Maximino, Jr. It appears that before the case filed by Romeo could be the sense that titles to Lot 3 (in the name of Romeo Nazareno) and Lot 3-B (in the name
decided, the Court of Appeals rendered a decision in CA-GR CV No. 12932 affirming of Maximino Nazareno, Jr.), as well as to Lots 10 and 11 were cancelled and ordered
the trial courts decision in favor of Maximino, Jr. restored to the estate of Maximino Nazareno, Sr. The dispositive portion of the decision
dated May 29, 1998 reads:
On August 10, 1992, the trial court rendered a decision, the dispositive portion of
which states:
WHEREFORE, the appeal is GRANTED. The decision and the order in question are
modified as follows:
WHEREFORE, judgment is hereby rendered declaring the nullity of the Deed of Sale
dated January 29, 1970. Except as to Lots 3, 3-B, 13 and 14 which had passed on to third
1. The Deed of Absolute Sale dated 29 January 1970 and the Deed of Absolute Sale
persons, the defendant Natividad shall hold the rest in trust for Jose Nazareno to whom
dated 31 July 1982 are hereby declared null and void;
the same had been adjudicated. The Register of Deeds of Quezon City is directed to
annotate this judgment on Transfer Certificate of Titles Nos. 162735 and 162736 as a lien
in the titles of Natividad P. Nazareno. 2. Except as to Lots 13 and 14 ownership of which has passed on to third persons, it is
hereby declared that Lots 3, 3-B, 10 and 11 shall form part of the estate of the deceased
Maximino Nazareno, Sr.;
The defendants counterclaim is dismissed. Likewise, the third-party complaint is
dismissed.
3. The Register of Deeds of Quezon City is hereby ordered to restore TCT No. 140946
(covering Lot 3-B), TCT No. 132019 (covering Lot 3), TCT No. 118885 (covering Lot 10),
The defendants are hereby directed to pay to the plaintiff jointly and severally the sum
and TCT No. 118886 (covering Lot 11).[23]
of P30,000 as and for attorneys fees. Likewise, the third-party plaintiff is directed to pay
the third-party defendants attorneys fees of P20,000.
Petitioners filed a motion for reconsideration but it was denied in a resolution
dated May 27, 1999. Hence this petition.
Petitioners raise the following issues:
1. WHETHER OR NOT THE UNCORROBORATED TESTIMONY OF PRIVATE
RESPONDENT ROMEO P. NAZARENO CAN DESTROY THE FULL FAITH AND
CREDIT ACCORDED TO NOTARIZED DOCUMENTS LIKE THE DEED OF
ABSOLUTE SALE DATED JANUARY 29, 1970 (EXH. 1) EXECUTED BY THE
DECEASED SPOUSES MAXIMINO A. NAZARENO, SR. AND AUREA POBLETE
IN FAVOR OF PETITIONER NATIVIDAD P. NAZARENO.
2. WHETHER OR NOT THE RESPONDENT COURT GROSSLY MISAPPRECIATED THE
FACTS OF THE CASE WITH RESPECT TO THE VALIDITY OF THE SAID DEED OF
ABSOLUTE SALE DATED JANUARY 29, 1970 (EXH. 1) IN THE LIGHT OF THE
FOLLOWING:
A) THE DOCUMENTARY EVIDENCE, ALL OF WHICH ARE NOTARIZED,
EXECUTED BY THE DECEASED SPOUSES DURING THEIR LIFETIME
INVOLVING SOME OF THEIR CONJUGAL PROPERTIES.
B) THE EXECUTION OF AN EXTRA-JUDICIAL PARTITION WITH WAIVER OF
RIGHTS AND CONFIRMATION OF SALE DATED MAY 24, 1975 (EXH. 14A)
OF THE ESTATE OF AUREA POBLETE BY THE DECEASED MAXIMINO A.
NAZARENO, SR. AND THEIR CHILDREN INVOLVING THE ONLY
REMAINING ESTATE OF AUREA POBLETE THUS IMPLIEDLY ADMITTING THE
VALIDITY OF PREVIOUS DISPOSITIONS MADE BY SAID DECEASED
SPOUSES ON THEIR CONJUGAL PROPERTIES, HALF OF WHICH WOULD
HAVE BECOME A PART OF AUREA POBLETES ESTATE UPON HER DEMISE.
C) THE ADMISSION MADE BY MAXIMINO A. NAZARENO, SR. IN HIS
TESTIMONY IN OPEN COURT ON AUGUST 13, 1980 DURING HIS LIFETIME
IN CIVIL CASE NO. NC-712 (EXH. 81, 81B) THAT HE HAD SOLD CERTAIN
PROPERTIES IN FAVOR OF NATIVIDAD P. NAZARENO THUS BELYING THE
CLAIM OF ROMEO P. NAZARENO THAT THE DEED OF ABSOLUTE SALE
DATED JANUARY 29, 1970 IS ONE AMONG THE DOCUMENTS EXECUTED
BY THE DECEASED SPOUSES TO BE WITHOUT CONSIDERATION.
D) THE ADMISSIONS MADE BY ROMEO P. NAZARENO HIMSELF CONTAINED
IN A FINAL DECISION OF THE RESPONDENT COURT IN CA-GR CV NO.
12932 DATED AUGUST 31, 1992 AND AN ANNEX APPEARING IN HIS
ANSWER TO THE COMPLAINT IN CIVIL CASE NO. Q-39018 (EXH. 11-B)
INVOLVING LOT 3B, ONE OF THE PROPERTIES IN QUESTION THAT THE
SAID PROPERTY IS OWNED BY PETITIONER NATIVIDAD P. NAZARENO.
E) THE PARTIAL PROJECT OF PARTITION DATED MAY 24, 1995 WHICH WAS
APPROVED BY THE INTESTATE COURT IN SP. PROC. NO. NC-28 AND
EXECUTED IN ACCORDANCE WITH THE LATTER COURTS FINAL ORDER
DATED JULY 9, 1991 DETERMINING WHICH WERE THE REMAINING
PROPERTIES OF THE ESTATE.
3. WHETHER OR NOT THE DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970
EXECUTED BY THE DECEASED SPOUSES MAXIMINO A. NAZARENO, SR. AND
AUREA POBLETE DURING THEIR LIFETIME INVOLVING THEIR CONJUGAL
PROPERTIES IS AN INDIVISIBLE CONTRACT? AND IF SO WHETHER OR NOT
UPON THEIR DEATH, THE ESTATE OF MAXIMINO A. NAZARENO, SR. ALONE
CAN SEEK THE ANNULMENT OF SAID SALE?
4. WHETHER OR NOT THE SALE OF LOT 3 UNDER THE DEED OF ABSOLUTE SALE
DATED JANUARY 29, 1970 IN FAVOR OF PETITIONER NATIVIDAD P.
NAZARENO, IS VALID CONSIDERING THAT AS PER THE ORDER OF THE
LOWER COURT DATED NOVEMBER 21, 1990. ROMEO NAZARENO ADMITTED
THAT HE DID NOT PAY THE CONSIDERATION STATED IN THE DEED OF
ABSOLUTE SALE DATED JULY 4, 1969 EXECUTED BY THE DECEASED
SPOUSES IN HIS FAVOR (EXH. M-2).
5. WHETHER OR NOT AS A CONSEQUENCE, THE TITLE ISSUED IN THE NAME OF
ROMEO P. NAZARENO, TCT NO. 277968 (EXH. M) SHOULD BE CANCELLED
AND DECLARED NULL AND VOID AND A NEW ONE ISSUED IN FAVOR OF
NATIVIDAD P. NAZARENO PURSUANT TO THE DEED OF ABSOLUTE SALE
EXECUTED IN THE LATTERS FAVOR ON JANUARY 29, 1970 BY THE DECEASED
SPOUSES.[24]
We find the petition to be without merit.
First. Petitioners argue that the lone testimony of Romeo is insufficient to overcome
the presumption of validity accorded to a notarized document.
To begin with, the findings of fact of the Court of Appeals are conclusive on the
parties and carry even more weight when these coincide with the factual findings of
the trial court. This Court will not weigh the evidence all over again unless there is a
showing that the findings of the lower court are totally devoid of support or are clearly
erroneous so as to constitute serious abuse of discretion.[25] The lone testimony of a
witness, if credible, is sufficient. In this case, the testimony of Romeo that no
consideration was ever paid for the sale of the six lots to Natividad was found to be
credible both by the trial court and by the Court of Appeals and it has not been
successfully rebutted by petitioners. We, therefore, have no reason to overturn the
findings by the two courts giving credence to his testimony.
The fact that the deed of sale was notarized is not a guarantee of the validity of its
contents. As held in Suntay v. Court of Appeals:[26]
Though the notarization of the deed of sale in question vests in its favor the presumption
of regularity, it is not the intention nor the function of the notary public to validate and
make binding an instrument never, in the first place, intended to have any binding legal
effect upon the parties thereto. The intention of the parties still and always is the primary
consideration in determining the true nature of a contract.
Second. Petitioners make capital of the fact that in C.A.-G.R. CV No. 12932, which
was declared final by this Court in G.R. No. 107684, the Court of Appeals upheld the
right of Maximino, Jr. to recover possession of Lot 3-B. In that case, the Court of Appeals
held:
As shown in the preceding disquisition, Natividad P. Nazareno acquired the property in
dispute by purchase in 1970. She was issued Transfer Certificate of Title No. 162738 of the
Registry of Deeds of Quezon City. When her parents died, her mother Aurea Poblete-
Nazareno in 1970 and her father Maximino A. Nazareno, Sr. in 1980, Natividad P.
Nazareno had long been the exclusive owner of the property in question. There was no
way therefore that the aforesaid property could belong to the estate of the spouses
Maximino Nazareno, Sr. and Aurea Poblete. The mere fact that Romeo P. Nazareno
included the same property in an inventory of the properties of the deceased Maximino
A. Nazareno, Sr. will not adversely affect the ownership of the said realty. Appellant
Romeo P. Nazarenos suspicion that his parents had entrusted all their assets under the
care and in the name of Natividad P. Nazareno, their eldest living sister who was still
single, to be divided upon their demise to all the compulsory heirs, has not progressed
beyond mere speculation. His barefaced allegation on the point not only is without any
corroboration but is even belied by documentary evidence. The deed of absolute sale
(Exhibit B), being a public document (Rule 132, Secs. 19 and 23, Revised Rules on
Evidence), is entitled to great weight; to contradict the same, there must be evidence
that is clear, convincing and more than merely preponderant (Yturralde vs. Aganon, 28
SCRA 407; Favor vs. Court of Appeals, 194 SCRA 308). Defendants-appellants own
conduct disproves their claim of co-ownership over the property in question.Being
themselves the owner of a ten-unit apartment building along Stanford St., Cubao
Quezon City, defendants-appellants, in a letter of demand to vacate addressed to their
tenants (Exhibits P, P-1 and P-2) in said apartment, admitted that the house and lot
located at No. 979 Aurora Blvd., Quezon City where they were residing did not belong
to them. Also, when they applied for a permit to repair the subject property in 1977, they
stated that the property belonged to and was registered in the name of Natividad P.
Nazareno. Among the documents submitted to support their application for a building
permit was a copy of TCT No. 162738 of the Registry of Deeds of Quezon City in the
name of Natividad Nazareno (Exhibit O and submarkings; tsn March 15, 1985, pp. 4-5).[27]
To be sure, that case was for recovery of possession based on ownership of Lot 3-
B. The parties in that case were Maximino, Jr., as plaintiff, and the spouses Romeo and
Eliza, as defendants. On the other hand, the parties in the present case for annulment of
sale are the estate of Maximino, Sr., as plaintiff, and Natividad and Maximino, Jr., as
defendants. Romeo and Eliza were named third-party defendants after a third-party
complaint was filed by Natividad and Maximino, Jr. As already stated, however, this
third-party complaint concerned Lot 3, and not Lot 3-B.
The estate of a deceased person is a juridical entity that has a personality of its
own.[28] Though Romeo represented at one time the estate of Maximino, Sr., the latter
has a separate and distinct personality from the former. Hence, the judgment in CA-GR
CV No. 12932 regarding the ownership of Maximino, Jr. over Lot 3-B binds Romeo and
Eliza only, and not the estate of Maximino, Sr., which also has a right to recover
properties which were wrongfully disposed.
Furthermore, Natividads title was clearly not an issue in the first case. In other
words, the title to the other five lots subject of the present deed of sale was not in issue
in that case. If the first case resolved anything, it was the ownership of Maximino, Jr. over
Lot 3-B alone.
Third. Petitioners allege that, as shown by several deeds of sale executed by
Maximino, Sr. and Aurea during their lifetime, the intention to dispose of their real
properties is clear.Consequently, they argue that the Deed of Sale of January 29, 1970
should also be deemed valid.
This is a non-sequitur. The fact that other properties had allegedly been sold by the
spouses Maximino, Sr. and Aurea does not necessarily show that the Deed of Sale made
on January 29, 1970 is valid.
Romeo does not dispute that their parents had executed deeds of sale. The
question, however, is whether these sales were made for a consideration. The trial court
and the Court of Appeals found that the Nazareno spouses transferred their properties
to their children by fictitious sales in order to avoid the payment of inheritance taxes.
Indeed, it was found both by the trial court and by the Court of Appeals that
Natividad had no means to pay for the six lots subject of the Deed of Sale.
All these convince the Court that Natividad had no means to pay for all the lots she
purportedly purchased from her parents. What is more, Romeos admission that he did
not pay for the transfer to him of lots 3 and 25-L despite the considerations stated in the
deed of sale is a declaration against interest and must ring with resounding truth. The
question is, why should Natividad be treated any differently, i.e., with consideration for
the sale to her, when she is admittedly the closest to her parents and the one staying
with them and managing their affairs? It just seems without reason. Anyway, the Court is
convinced that the questioned Deed of Sale dated January 29, 1970 (Exh. A or 1) is
simulated for lack of consideration, and therefore ineffective and void.[29]
In affirming this ruling, the Court of Appeals said:
Facts and circumstances indicate badges of a simulated sale which make the Deed of
Absolute Sale dated 29 January 1970 void and of no effect. In the case of Suntay vs.
Court of Appeals (251 SCRA 430 [1995]), the Supreme Court held that badges of
simulation make a deed of sale null and void since parties thereto enter into a
transaction to which they did not intend to be legally bound.
It appears that it was the practice in the Nazareno family to make simulated transfers of
ownership of real properties to their children in order to avoid the payment of
inheritance taxes. Per the testimony of Romeo, he acquired Lot 25-L from his parents
through a fictitious or simulated sale wherein no consideration was paid by him. He even
truthfully admitted that the sale of Lot 3 to him on 04 July 1969 (Deed of Absolute Sale,
Records, Vol. II, p. 453) likewise had no consideration. This document was signed by the
spouses Max, Sr. and Aurea as vendors while defendant-appellant Natividad signed as
witness.[30]
Fourth. Petitioners argue further:
The Deed of Absolute Sale dated January 29, 1970 is an indivisible contract founded on
an indivisible obligation. As such, it being indivisible, it can not be annulled by only one
of them. And since this suit was filed only by the estate of Maximino A. Nazareno, Sr.
without including the estate of Aurea Poblete, the present suit must fail. The estate of
Maximino A. Nazareno, Sr. can not cause its annulment while its validity is sustained by
the estate of Aurea Poblete.[31]
An obligation is indivisible when it cannot be validly performed in parts, whatever
may be the nature of the thing which is the object thereof. The indivisibility refers to the
prestation and not to the object thereof.[32] In the present case, the Deed of Sale of
January 29, 1970 supposedly conveyed the six lots to Natividad. The obligation is clearly
indivisible because the performance of the contract cannot be done in parts, otherwise
the value of what is transferred is diminished. Petitioners are therefore mistaken in basing
the indivisibility of a contract on the number of obligors.
In any case, if petitioners only point is that the estate of Maximino, Sr. alone cannot
contest the validity of the Deed of Sale because the estate of Aurea has not yet been
settled, the argument would nonetheless be without merit. The validity of the contract
can be questioned by anyone affected by it.[33] A void contract is inexistent from the
beginning. Hence, even if the estate of Maximino, Sr. alone contests the validity of the
sale, the outcome of the suit will bind the estate of Aurea as if no sale took place at all.
Fifth. As to the third-party complaint concerning Lot 3, we find that this has been
passed upon by the trial court and the Court of Appeals. As Romeo admitted, no
consideration was paid by him to his parents for the Deed of Sale. Therefore, the sale [11] Id., p. 49.
was void for having been simulated. Natividad never acquired ownership over the [12] Id., p. 55.
property because the Deed of Sale in her favor is also void for being without [13] Records, p. 450.

consideration and title to Lot 3 cannot be issued in her name. [14] Id., p. 446.
[15] Rollo, pp. 165-166.
Nonetheless, it cannot be denied that Maximino, Sr. intended to give the six [16] Records, pp. 579-580.
Quezon City lots to Natividad. As Romeo testified, their parents executed the Deed of [17] See Records, p. 453.
Sale in favor of Natividad because the latter was the only female and the only [18] TSN, pp. 31-32, April 10, 1991.
unmarried member of the family.[34] She was thus entrusted with the real properties in [19] Rollo, pp. 242-243.
behalf of her siblings. As she herself admitted, she intended to convey Lots 10 and 11 to [20] Records, pp. 11-12.
Jose in the event the latter returned from abroad. There was thus an implied trust [21] Rollo, p. 104.
constituted in her favor. Art. 1449 of the Civil Code states: [22] Id., pp. 107-108.
[23] CA Decision, p. 17; Rollo, p. 142.
[24] Rollo, pp. 28-30.
There is also an implied trust when a donation is made to a person but it appears that
[25] Fortune Motors (Phils.) Corp. v. Court of Appeals, 267 SCRA 653, 669 (1997).
although the legal estate is transmitted to the donee, he nevertheless is either to have
[26] 251 SCRA 430, 452 (1995).
no beneficial interest or only a part thereof.
[27] Rollo, pp. 82-83.
[28] Limjoco v. Intestate Estate of Fragante, 80 Phil. 776 (1948).
There being an implied trust, the lots in question are therefore subject to collation [29] Rollo, p. 103.
in accordance with Art. 1061 which states: [30] Id., p. 140.
[31] Id., p. 44.

Every compulsory heir, who succeeds with other compulsory heirs, must bring into the [32] 4 A. TOLENTINO, CIVIL CODE OF THE PHILIPPINES, 254 (1991).

mass of the estate any property or right which he may have received from the [33] Id., p. 632.

decedent, during the lifetime of the latter, by way of donation, or any other gratuitous [34] Rollo, p. 94.

title, in order that it may be computed in the determination of the legitime of each heir, [35] Records, pp. 658-659.

and in the account of the partition. [36] Cruz v. Court of Appeals, 281 SCRA 491, 496 (1997).

As held by the trial court, the sale of Lots 13 and 14 to Ros-Alva Marketing, Corp.
Republic of the Philippines
on April 20, 1979[35] will have to be upheld for Ros-Alva Marketing is an innocent
Supreme Court
purchaser for value which relied on the title of Natividad. The rule is settled that every
Manila
person dealing with registered land may safely rely on the correctness of the certificate
of title issued therefor and the law will in no way oblige him to go behind the certificate
to determine the condition of the property.[36]
THIRD DIVISION
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED. HEIRS OF POLICRONIO M. URETA, SR., namely: CONRADO G.R. No. 165748
B. URETA, MACARIO B. URETA, GLORIA URETA-GONZALES,
Bellosillo, (Chairman), Quisumbing, and De Leon, Jr., JJ., concur. ROMEO B. URETA, RITA URETA-SOLANO, NENA URETA-
Buena, J., no part. TONGCUA, VENANCIO B. URETA, LILIA URETA-TAYCO, and
HEIRS OF POLICRONIO B. URETA, JR., namely: MIGUEL T.
URETA, RAMON POLICRONIO T. URETA, EMMANUEL T.
URETA, and BERNADETTE T. URETA,
[1] Per Justice Buenaventura J. Guerrero and concurred in by Justice Arturo B. Buena Petitioners,
(now Associate Justice of the Supreme Court) and Justice Portia Alio-Hormachuelos.
[2] Rollo, pp. 170-173.
[3] Records, p. 567.
- versus -
[4] This was alleged by Natividad Nazareno in her third-party complaint. No copy of the

TCT was presented in court; Rollo, p. 55.

[5] Records, p. 563.
HEIRS OF LIBERATO M. URETA, namely: TERESA F. URETA,
[6] Id., p. 564.
AMPARO URETA-CASTILLO, IGNACIO F. URETA, SR.,
[7] Id., p. 565.
EMIRITO F. URETA, WILKIE F. URETA, LIBERATO F. URETA, JR.,
[8] Id., pp. 11-12.
RAY F. URETA, ZALDY F. URETA, and MILA JEAN URETA
[9] Id., p. 568.
CIPRIANO;
[10] Rollo, p. 72.
HEIRS OF PRUDENCIA URETA PARADERO, namely:
WILLIAM U. PARADERO, WARLITO U. PARADERO,
CARMENCITA P. PERLAS, CRISTINA P. CORDOVA, EDNA P.
GALLARDO, LETICIA P. REYES; NARCISO M. URETA;
VICENTE M. URETA;
HEIRS OF FRANCISCO M. URETA, namely: EDITA T. URETA-
REYES and LOLLIE T. URETA-VILLARUEL; ROQUE M. URETA;
ADELA URETA-GONZALES; HEIRS OF INOCENCIO M.
URETA, namely: BENILDA V. URETA, ALFONSO V. URETA II,
DICK RICARDO V. URETA, and ENRIQUE V. URETA;
MERLINDA U. RIVERA; JORGE URETA; ANDRES URETA,
WENEFREDA U. TARAN; and BENEDICT URETA,
Respondents.
x--------------------------------------------------x
HEIRS OF LIBERATO M. URETA, namely: TERESA F. URETA,
AMPARO URETA-CASTILLO, IGNACIO F. URETA, SR.,
EMIRITO F. URETA, WILKIE F. URETA, LIBERATO F. URETA, JR.,
RAY F. URETA, ZALDY F. URETA, and MILA JEAN URETA
CIPRIANO;
HEIRS OF PRUDENCIA URETA PARADERO, namely:
WILLIAM U. PARADERO, WARLITO U. PARADERO,
CARMENCITA P. PERLAS, CRISTINA P. CORDOVA, EDNA P.
GALLARDO, LETICIA P. REYES; NARCISO M. URETA;
VICENTE M. URETA;
HEIRS OF FRANCISCO M. URETA, namely: EDITA T. URETA-
REYES and LOLLIE T. URETA-VILLARUEL; ROQUE M. URETA;
ADELA URETA-GONZALES; HEIRS OF INOCENCIO M.
URETA, namely: BENILDA V. URETA, ALFONSO V. URETA II,
DICK RICARDO V. URETA, and ENRIQUE V. URETA;
MERLINDA U. RIVERA; JORGE URETA; ANDRES URETA,
WENEFREDA U. TARAN; and BENEDICT URETA,
Petitioners,
- versus
HEIRS OF POLICRONIO M. URETA, SR., namely: CONRADO
B. URETA, MACARIO B. URETA, GLORIA URETA-GONZALES,
ROMEO B. URETA, RITA URETA-SOLANO, NENA URETA-
TONGCUA, VENANCIO B. URETA, LILIA URETA-TAYCO, and
HEIRS OF POLICRONIO B. URETA, JR., namely: MIGUEL T.
URETA, RAMON POLICRONIO T. URETA, EMMANUEL T.
URETA, and BERNADETTE T. URETA,
Respondents.
x--------------------------------------------------x
DECISION
MENDOZA, J.:
These consolidated petitions for review on certiorari under Rule 45 of the 1997
Revised Rules of Civil Procedure assail the April 20, 2004 Decision[1] of the Court of
Appeals (CA), and its October 14, 2004 Resolution[2] in C.A.-G.R. CV No. 71399, which
affirmed with modification the April 26, 2001 Decision[3] of the Regional Trial Court,
Branch 9, Kalibo, Aklan (RTC) in Civil Case No. 5026.
The Facts
In his lifetime, Alfonso Ureta (Alfonso) begot 14 children, namely, Policronio, Liberato,
G.R. No. 165930 Narciso, Prudencia, Vicente, Francisco, Inocensio, Roque, Adela, Wenefreda, Merlinda,
Benedicto, Jorge, and Andres. The children of Policronio (Heirs of Policronio), are
opposed to the rest of Alfonsos children and their descendants (Heirs of Alfonso).
Alfonso was financially well-off during his lifetime. He owned several fishpens, a fishpond,
a sari-sari store, a passenger jeep, and was engaged in the buying and selling of copra.
Policronio, the eldest, was the only child of Alfonso who failed to finish schooling and
instead worked on his fathers lands.
Sometime in October 1969, Alfonso and four of his children, namely, Policronio, Liberato,
Prudencia, and Francisco, met at the house of Liberato. Francisco, who was then a
municipal judge, suggested that in order to reduce the inheritance taxes, their father
should make it appear that he had sold some of his lands to his children. Accordingly,
Alfonso executed four (4) Deeds of Sale covering several parcels of land in favor of
Policronio,[4] Liberato,[5] Prudencia,[6] and his common-law wife, Valeriana Dela
Cruz.[7] The Deed of Sale executed on October 25, 1969, in favor of Policronio, covered
six parcels of land, which are the properties in dispute in this case.
Since the sales were only made for taxation purposes and no monetary consideration
was given, Alfonso continued to own, possess and enjoy the lands and their produce.
When Alfonso died on October 11, 1972, Liberato acted as the administrator of his
fathers estate. He was later succeeded by his sister Prudencia, and then by her
daughter, Carmencita Perlas. Except for a portion of parcel 5, the rest of the parcels
Present: transferred to Policronio were tenanted by the Fernandez Family. These tenants never
turned over the produce of the lands to Policronio or any of his heirs, but to Alfonso and,
VELASCO, JR., J., Chairperson, later, to the administrators of his estate.
PERALTA,
ABAD, Policronio died on November 22, 1974. Except for the said portion of parcel 5,
MENDOZA, and neither Policronio nor his heirs ever took possession of the subject lands.
SERENO,* JJ.
On April 19, 1989, Alfonsos heirs executed a Deed of Extra-Judicial
Partition,[8] which included all the lands that were covered by the four (4) deeds of sale
that were previously executed by Alfonso for taxation purposes. Conrado, Policronios
eldest son, representing the Heirs of Policronio, signed the Deed of Extra-Judicial Partition
in behalf of his co-heirs.
Promulgated: After their fathers death, the Heirs of Policronio found tax declarations in his name
September 14, 2011 covering the six parcels of land. On June 15, 1995, they obtained a copy of the Deed of
Sale executed on October 25, 1969 by Alfonso in favor of Policronio.
Not long after, on July 30, 1995, the Heirs of Policronio allegedly learned about the Deed
of Extra-Judicial Partition involving Alfonsos estate when it was published in the July 19,
1995 issue of the Aklan Reporter.
Believing that the six parcels of land belonged to their late father, and as such,
excluded from the Deed of Extra-Judicial Partition, the Heirs of Policronio sought to
amicably settle the matter with the Heirs of Alfonso. Earnest efforts proving futile, the Heirs
of Policronio filed a Complaint for Declaration of Ownership, Recovery of Possession,
Annulment of Documents, Partition, and Damages[9] against the Heirs of Alfonso before
the RTC on November 17, 1995 where the following issues were submitted: (1) whether or
not the Deed of Sale was valid; (2) whether or not the Deed of Extra-Judicial Partition
was valid; and (3) who between the parties was entitled to damages.
The Ruling of the RTC
On April 26, 2001, the RTC dismissed the Complaint of the Heirs of Policronio and ruled in
favor of the Heirs of Alfonso in a decision, the dispositive portion of which reads:
WHEREFORE, the Court finds that the preponderance of
evidence tilts in favor of the defendants, hence the instant case is
hereby DISMISSED.
The counterclaims are likewise DISMISSED.
With costs against plaintiffs.
SO ORDERED.
The RTC found that the Heirs of Alfonso clearly established that the Deed of
Sale was null and void. It held that the Heirs of Policronio failed to rebut the evidence of
the Heirs of Alfonso, which proved that the Deed of Sale in the possession of the former
was one of the four (4) Deeds of Sale executed by Alfonso in favor of his 3 children and
second wife for taxation purposes; that although tax declarations were issued in the
name of Policronio, he or his heirs never took possession of the subject lands except a
portion of parcel 5; and that all the produce were turned over by the tenants to Alfonso
and the administrators of his estate and never to Policronio or his heirs.
The RTC further found that there was no money involved in the sale. Even
granting that there was, as claimed by the Heirs of Policronio, ₱2,000.00 for six parcels of
land, the amount was grossly inadequate. It was also noted that the aggregate area of
the subject lands was more than double the average share adjudicated to each of the
other children in the Deed of Extra-Judicial Partition; that the siblings of Policronio were
the ones who shared in the produce of the land; and that the Heirs of Policronio only
paid real estate taxes in 1996 and 1997. The RTC opined that Policronio must have been
aware that the transfer was merely for taxation purposes because he did not
subsequently take possession of the properties even after the death of his father.
The Deed of Extra-Judicial Partition, on the other hand, was declared valid by
the RTC as all the heirs of Alfonso were represented and received equal shares and all
the requirements of a valid extra-judicial partition were met. The RTC considered
Conrados claim that he did not understand the full significance of his signature when he
signed in behalf of his co-heirs, as a gratutitous assertion. The RTC was of the view that
when he admitted to have signed all the pages and personally appeared before the
notary public, he was presumed to have understood their contents.
Lastly, neither party was entitled to damages. The Heirs of Alfonso failed to
present testimony to serve as factual basis for moral damages, no document was
presented to prove actual damages, and the Heirs of Policronio were found to have
filed the case in good faith.
The Ruling of the CA
Aggrieved, the Heirs of Policronio appealed before the CA, which rendered a
decision on April 20, 2004, the dispositive portion of which reads as follows:
WHEREFORE, the appeal is PARTIALLY GRANTED. The
appealed Decision, dated 26 April 2001, rendered by Hon. Judge
Dean R. Telan of the Regional Trial Court of Kalibo, Aklan, Branch 9, is
hereby AFFIRMED with MODIFICATION:
1.) The Deed of Sale in favor of Policronio Ureta, Sr.,
dated 25 October 1969, covering six (6) parcels of land is hereby
declared VOID for being ABSOLUTELY SIMULATED;
2.) The Deed of Extra-Judicial Partition, dated 19 April 1989,
is ANNULLED;
3.) The claim for actual and exemplary damages
are DISMISSED for lack of factual and legal basis.
The case is hereby REMANDED to the court of origin for the
proper partition of ALFONSO URETAS Estate in accordance with Rule
69 of the 1997 Rules of Civil Procedure. No costs at this instance.
SO ORDERED.
The CA affirmed the finding of the RTC that the Deed of Sale was void. It found the Deed
of Sale to be absolutely simulated as the parties did not intend to be legally bound by it.
As such, it produced no legal effects and did not alter the juridical situation of the
parties. The CA also noted that Alfonso continued to exercise all the rights of an owner
even after the execution of the Deed of Sale, as it was undisputed that he remained in
possession of the subject parcels of land and enjoyed their produce until his death.
Policronio, on the other hand, never exercised any rights pertaining to an
owner over the subject lands from the time they were sold to him up until his death. He
never took or attempted to take possession of the land even after his fathers death,
never demanded delivery of the produce from the tenants, and never paid realty taxes
on the properties. It was also noted that Policronio never disclosed the existence of the
Deed of Sale to his children, as they were, in fact, surprised to discover its existence. The
CA, thus, concluded that Policronio must have been aware that the transfer was only
made for taxation purposes.
The testimony of Amparo Castillo, as to the circumstances surrounding the
actual arrangement and agreement between the parties prior to the execution of the
four (4) Deeds of Sale, was found by the CA to be unrebutted. The RTCs assessment of
the credibility of her testimony was accorded respect, and the intention of the parties
was given the primary consideration in determining the true nature of the contract.
 Contrary to the finding of the RTC though, the CA annulled the Deed of Extra-
Judicial Partition due to the incapacity of one of the parties to give his consent to the
contract. It held that before Conrado could validly bind his co-heirs to the Deed of Extra-
Judicial Partition, it was necessary that he be clothed with the proper authority. The CA
ruled that a special power of attorney was required under Article 1878 (5) and (15) of the
Civil Code. Without a special power of attorney, it was held that Conrado lacked the
legal capactiy to give the consent of his co-heirs, thus, rendering the Deed of Extra-
Judicial Partition voidable under Article 1390 (1) of the Civil Code.
As a consequence, the CA ordered the remand of the case to the RTC for the proper
partition of the estate, with the option that the parties may still voluntarily effect the
partition by executing another agreement or by adopting the assailed Deed of Partition
with the RTCs approval in either case. Otherwise, the RTC may proceed with the
compulsory partition of the estate in accordance with the Rules.
With regard to the claim for damages, the CA agreed with the RTC and
dismissed the claim for actual and compensatory damages for lack of factual and legal
basis.
Both parties filed their respective Motions for Reconsideration, which were
denied by the CA for lack of merit in a Resolution dated October 14, 2004.
as follows:
In their Motion for Reconsideration, the Heirs of Policronio argued that the RTC violated
the best evidence rule in giving credence to the testimony of Amparo Castillo with
regard to the simulation of the Deed of Sale, and that prescription had set in precluding
any question on the validity of the contract.
The CA held that the oral testimony was admissible under Rule 130, Section 9
(b) and (c), which provides that evidence aliunde may be allowed to explain the terms
of the written agreement if the same failed to express the true intent and agreement of
the parties thereto, or when the validity of the written agreement was put in issue.
Furthermore, the CA found that the Heirs of Policronio waived their right to object to
evidence aliunde having failed to do so during trial and for raising such only for the first
time on appeal. With regard to prescription, the CA ruled that the action or defense for
the declaration of the inexistence of a contract did not prescribe under Article 1410 of
the Civil Code.
On the other hand, the Heirs of Alfonso argued that the Deed of Extra-Judicial
Partition should not have been annulled, and instead the preterited heirs should be
given their share. The CA reiterated that Conrados lack of capacity to give his co-heirs
consent to the extra-judicial settlement rendered the same voidable.
Hence, the present Petitions for Review on Certiorari.
The Issues
The issues presented for resolution by the Heirs of Policronio in G.R. No.
165748 are as follows:
I.
Whether the Court of Appeals is correct in ruling that the Deed of
Absolute Sale of 25 October 1969 is void for being absolutely fictitious
and in relation therewith, may parol evidence be entertained to
thwart its binding effect after the parties have both died?
Assuming that indeed the said document is simulated, whether or not
the parties thereto including their successors in interest are estopped
to question its validity, they being bound by Articles 1412 and 1421 of
the Civil Code?
II.
Whether prescription applies to bar any question respecting the
validity of the Deed of Absolute Sale dated 25 October 1969? Whether
prescription applies to bar any collateral attack on the validity of the
deed of absolute sale executed 21 years earlier?
III.
Whether the Court of Appeals correctly ruled in nullifying the Deed of
Extrajudicial Partition because Conrado Ureta signed the same
without the written authority from his siblings in contravention of
Article 1878 in relation to Article 1390 of the Civil Code and in relation
therewith, whether the defense of ratification and/or preterition raised
for the first time on appeal may be entertained?
The issues presented for resolution by the Heirs of Alfonso in G.R. No. 165930 are
I.
Whether or not grave error was committed by the Trial Court and
Court of Appeals in declaring the Deed of Sale of subject properties
as absolutely simulated and null and void thru parol evidence based
on their factual findings as to its fictitious nature, and there being
waiver of any objection based on violation of the parol evidence rule.
II.
Whether or not the Court of Appeals was correct in holding that
Conrado Uretas lack of capacity to give his co-heirs consent to the
Extra-Judicial Partition rendered the same voidable.
III.
Granting arguendo that Conrado Ureta was not authorized to
represent his co-heirs and there was no ratification, whether or not the
Court of Appeals was correct in ordering the remand of the case to
the Regional Trial Court for partition of the estate of Alfonso Ureta.
IV.
Since the sale in favor of Policronio Ureta Sr. was null and void ab
initio, the properties covered therein formed part of the estate of the
late Alfonso Ureta and was correctly included in the Deed of
Extrajudicial Partition even if no prior action for nullification of the sale
was filed by the heirs of Liberato Ureta.
V.
 Whether or not the heirs of Policronio Ureta Sr. can claim that estoppel
based on Article 1412 of the Civil Code as well as the issue of
prescription can still be raised on appeal.
These various contentions revolve around two major issues, to wit: (1) whether
the Deed of Sale is valid, and (2) whether the Deed of Extra-Judicial Partition is valid.
Thus, the assigned errors shall be discussed jointly and in seriatim.
The Ruling of the Court
Validity of the Deed of Sale
Two veritable legal presumptions bear on the validity of the Deed of Sale: (1)
that there was sufficient consideration for the contract; and (2) that it was the result of a
fair and regular private transaction. If shown to hold, these presumptions infer prima
facie the transactions validity, except that it must yield to the evidence adduced.[10]
As will be discussed below, the evidence overcomes these two presumptions.
Absolute Simulation
First, the Deed of Sale was not the result of a fair and regular private transaction
because it was absolutely simulated.
The Heirs of Policronio argued that the land had been validly sold to Policronio
as the Deed of Sale contained all the essential elements of a valid contract of sale, by
virtue of which, the subject properties were transferred in his name as evidenced by the
tax declaration. There being no invalidation prior to the execution of the Deed of Extra-
Judicial Partition, the probity and integrity of the Deed of Sale should remain
undiminished and accorded respect as it was a duly notarized public instrument.
The Heirs of Policronio posited that his loyal services to his father and his being the eldest
among Alfonsos children, might have prompted the old man to sell the subject lands to
him at a very low price as an advance inheritance. They explained that Policronios
failure to take possession of the subject lands and to claim their produce manifests a
Filipino family practice wherein a child would take possession and enjoy the fruits of the
land sold by a parent only after the latters death. Policronio simply treated the lands the
same way his father Alfonso treated them - where his children enjoyed usufructuary
rights over the properties, as opposed to appropriating them exclusively to himself. They
contended that Policronios failure to take actual possession of the lands did not prove
that he was not the owner as he was merely exercising his right to dispose of them. They
argue that it was an error on the part of the CA to conclude that ownership by
Policronio was not established by his failure to possess the properties
sold. Instead, emphasis should be made on the fact that the tax declarations, being
indicia of possession, were in Policronios name.
They further argued that the Heirs of Alfonso failed to appreciate that the
Deed of Sale was clear enough to convey the subject parcels of land. Citing
jurisprudence, they contend that there is a presumption that an instrument sets out the
true agreement of the parties thereto and that it was executed for valuable
consideration,[11] and where there is no doubt as to the intention of the parties to a
contract, the literal meaning of the stipulation shall control.[12] Nowhere in the Deed of
Sale is it indicated that the transfer was only for taxation purposes. On the contrary, the
document clearly indicates that the lands were sold. Therefore, they averred that the
literal meaning of the stipulation should control.
The Court disagrees.
The Court finds no cogent reason to deviate from the finding of the CA that
the Deed of Sale is null and void for being absolutely simulated. The Civil Code provides:
Art. 1345. Simulation of a contract may be absolute or relative. The
former takes place when the parties do not intend to be bound at all;
the latter, when the parties conceal their true agreement.
Art. 1346. An absolutely simulated or fictitious contract is void. A
relative simulation, when it does not prejudice a third person and is
not intended for any purpose contrary to law, morals, good customs,
public order or public policy binds the parties to their real agreement.
Valerio v. Refresca[13] is instructive on the matter of simulation of contracts:
In absolute simulation, there is a colorable contract but it
has no substance as the parties have no intention to be bound by
it. The main characteristic of an absolute simulation is that the
apparent contract is not really desired or intended to produce legal
effect or in any way alter the juridical situation of the parties. As a
result, an absolutely simulated or fictitious contract is void, and the
parties may recover from each other what they may have given
under the contract. However, if the parties state a false cause in the
contract to conceal their real agreement, the contract is relatively
simulated and the parties are still bound by their real
agreement. Hence, where the essential requisites of a contract are
present and the simulation refers only to the content or terms of the
contract, the agreement is absolutely binding and enforceable
between the parties and their successors in interest.
Lacking, therefore, in an absolutely simulated contract is consent which is
essential to a valid and enforceable contract.[14] Thus, where a person, in order to place
his property beyond the reach of his creditors, simulates a transfer of it to another, he
does not really intend to divest himself of his title and control of the property; hence, the
deed of transfer is but a sham.[15] Similarly, in this case, Alfonso simulated a transfer to
Policronio purely for taxation purposes, without intending to transfer ownership over the
subject lands.
The primary consideration in determining the true nature of a contract is the
intention of the parties. If the words of a contract appear to contravene the evident
intention of the parties, the latter shall prevail. Such intention is determined not only from
the express terms of their agreement, but also from the contemporaneous and
subsequent acts of the parties.[16] The true intention of the parties in this case was
sufficiently proven by the Heirs of Alfonso.
The Heirs of Alfonso established by a preponderance of evidence[17] that the
Deed of Sale was one of the four (4) absolutely simulated Deeds of Sale which involved
no actual monetary consideration, executed by Alfonso in favor of his children,
Policronio, Liberato, and Prudencia, and his second wife, Valeriana, for taxation
purposes.
Amparo Castillo, the daughter of Liberato, testified, to wit:
 Q: Now sometime in the year 1969 can you recall if your grandfather
and his children [met] in your house?
A: Yes sir, that was sometime in October 1969 when they [met] in our
house, my grandfather, my late uncle Policronio Ureta, my late uncle
Liberato Ureta, my uncle Francisco Ureta, and then my auntie
Prudencia Ureta they talk[ed] about, that idea came from my uncle
Francisco Ureta to [sell] some parcels of land to his children to lessen
the inheritance tax whatever happened to my grandfather, actually
no money involved in this sale.
Q: Now you said there was that agreement, verbal agreement.
[W]here were you when this Alfonso Ureta and his children gather[ed]
in your house?
A: I was near them in fact I heard everything they were talking
[about]
xxx
Q: Were there documents of sale executed by Alfonso Ureta in
furtherance of their verbal agreement?
A: Yes sir.
Q: To whom in particular did your grandfather Alfonso Ureta execute
this deed of sale without money consideration according to you?
A: To my uncle Policronio Ureta and to Prudencia Ureta Panadero.
Q: And who else?
A: To Valeriana dela Cruz.
Q: How about your father?
A: He has.[18]
The other Deeds of Sale executed by Alfonso in favor of his children Prudencia
and Liberato, and second wife Valeriana, all bearing the same date of execution, were
duly presented in evidence by the Heirs of Alfonso, and were uncontested by the Heirs
of Policronio. The lands which were the subject of these Deeds of Sale were in fact
included in the Deed of Extra-Judicial Partition executed by all the heirs of Alfonso,
where it was expressly stipulated:
That the above-named Amparo U. Castillo, Prudencia U.
Paradero, Conrado B. Ureta and Merlinda U. Rivera do hereby
recognize and acknowledge as a fact that the properties presently
declared in their respective names or in the names of their respective
parents and are included in the foregoing instrument are actually the
properties of the deceased Alfonso Ureta and were transferred only
for the purpose of effective administration and development and
convenience in the payment of taxes and, therefore, all instruments
conveying or affecting the transfer of said properties are null and
void from the beginning.[19]
As found by the CA, Alfonso continued to exercise all the rights of an owner
even after the execution of the Deeds of Sale. It was undisputed that Alfonso remained
in possession of the subject lands and enjoyed their produce until his death. No
credence can be given to the contention of the Heirs of Policrionio that their father did
not take possession of the subject lands or enjoyed the fruits thereof in deference to a
Filipino family practice. Had this been true, Policronio should have taken possession of
the subject lands after his father died. On the contrary, it was admitted that neither
Policronio nor his heirs ever took possession of the subject lands from the time they were
sold to him, and even after the death of both Alfonso and Policronio.
It was also admitted by the Heirs of Policronio that the tenants of the subject
lands never turned over the produce of the properties to Policronio or his heirs but only to
Alfonso and the administrators of his estate. Neither was there a demand for their
delivery to Policronio or his heirs. Neither did Policronio ever pay real estate taxes on the
properties, the only payment on record being those made by his heirs in 1996 and 1997
ten years after his death. In sum, Policronio never exercised any rights pertaining to an
owner over the subject lands.
The most protuberant index of simulation of contract is the complete absence
of an attempt in any manner on the part of the ostensible buyer to assert rights of
ownership over the subject properties. Policronios failure to take exclusive possession of
the subject properties or, in the alternative, to collect rentals, is contrary to the principle
of ownership. Such failure is a clear badge of simulation that renders the whole
transaction void. [20]
It is further telling that Policronio never disclosed the existence of the Deed of
Sale to his children. This, coupled with Policronios failure to exercise any rights pertaining
to an owner of the subject lands, leads to the conclusion that he was aware that the
transfer was only made for taxation purposes and never intended to bind the parties
thereto.
As the above factual circumstances remain unrebutted by the Heirs of Policronio, the
factual findings of the RTC, which were affirmed by the CA, remain binding and
conclusive upon this Court.[21]
It is clear that the parties did not intend to be bound at all, and as such, the
Deed of Sale produced no legal effects and did not alter the juridical situation of the
parties. The Deed of Sale is, therefore, void for being absolutely simulated pursuant to
Article 1409 (2) of the Civil Code which provides:
Art. 1409. The following contracts are inexistent and void from the
beginning:
xxx
(2) Those which are absolutely simulated or fictitious;
xxx
For guidance, the following are the most fundamental characteristics of void
or inexistent contracts:
 1) As a general rule, they produce no legal effects whatsoever in
accordance with the principle "quod nullum est nullum producit
effectum."
2) They are not susceptible of ratification.
3) The right to set up the defense of inexistence or absolute nullity
cannot be waived or renounced.
4) The action or defense for the declaration of their inexistence or
absolute nullity is imprescriptible.
5) The inexistence or absolute nullity of a contract cannot be invoked
by a person whose interests are not directly affected.[22]
Since the Deed of Sale is void, the subject properties were properly included in
the Deed of Extra-Judicial Partition of the estate of Alfonso.
Absence and Inadequacy of Consideration
The second presumption is rebutted by the lack of consideration for the Deed
of Sale.
In their Answer,[23] the Heirs of Alfonso initially argued that the Deed of Sale was
void for lack of consideration, and even granting that there was consideration, such
was inadequate. The Heirs of Policronio counter that the defenses of absence or
inadequacy of consideration are not grounds to render a contract void.
The Heirs of Policronio contended that under Article 1470 of the Civil
Code, gross inadequacy of the price does not affect a contract of sale, except as it
may indicate a defect in the consent, or that the parties really intended a donation or
some other act or contract. Citing jurisprudence, they argued that inadequacy of
monetary consideration does not render a conveyance inexistent as liberality may be
sufficient cause for a valid contract, whereas fraud or bad faith may render it either
rescissible or voidable, although valid until annulled.[24] Thus, they argued that if the
contract suffers from inadequate consideration, it remains valid until annulled, and the
remedy of rescission calls for judicial intervention, which remedy the Heirs of Alfonso
failed to take.
It is further argued that even granting that the sale of the subject lands for a
consideration of ₱2,000.00 was inadequate, absent any evidence of the fair market
value of the land at the time of its sale, it cannot be concluded that the price at which
it was sold was inadequate.[25] As there is nothing in the records to show that the Heirs of
Alfonso supplied the true value of the land in 1969, the amount of ₱2,000.00 must thus
stand as its saleable value.
On this issue, the Court finds for the Heirs of Alfonso.
For lack of consideration, the Deed of Sale is once again found to be void. It
states that Policronio paid, and Alfonso received, the ₱2,000.00 purchase price on the
date of the signing of the contract:
That I, ALFONSO F. URETA, x x x for and in consideration of
the sum of TWO THOUSAND (₱2,000.00) PESOS, Philippine Currency, to
me in hand paid by POLICRONIO M. URETA, x x x, do hereby CEDE,
TRANSFER, and CONVEY, by way of absolute sale, x x x six (6) parcels
of land x x x.[26] [Emphasis ours]
Although, on its face, the Deed of Sale appears to be supported by valuable
consideration, the RTC found that there was no money involved in the sale.[27] This
finding was affirmed by the CA in ruling that the sale is void for being absolutely
simulated. Considering that there is no cogent reason to deviate from such factual
findings, they are binding on this Court.
It is well-settled in a long line of cases that where a deed of sale states that the
purchase price has been paid but in fact has never been paid, the deed of sale is null
and void for lack of consideration.[28] Thus, although the contract states that the
purchase price of ₱2,000.00 was paid by Policronio to Alfonso for the subject properties,
it has been proven that such was never in fact paid as there was no money involved. It
must, therefore, follow that the Deed of Sale is void for lack of consideration.
Given that the Deed of Sale is void, it is unnecessary to discuss the issue on the
inadequacy of consideration.
Parol Evidence and Hearsay
The Heirs of Policronio aver that the rules on parol evidence and hearsay were
violated by the CA in ruling that the Deed of Sale was void.
They argued that based on the parol evidence rule, the Heirs of Alfonso and,
specifically, Amparo Castillo, were not in a position to prove the terms outside of the
contract because they were not parties nor successors-in-interest in the Deed of Sale in
question. Thus, it is argued that the testimony of Amparo Castillo violates the parol
evidence rule.
Stemming from the presumption that the Heirs of Alfonso were not parties to
the contract, it is also argued that the parol evidence rule may not be properly invoked
by either party in the litigation against the other, where at least one of the parties to the
suit is not a party or a privy of a party to the written instrument in question and does not
base a claim on the instrument or assert a right originating in the instrument or the
relation established thereby.[29]
Their arguments are untenable.
The objection against the admission of any evidence must be made at the
proper time, as soon as the grounds therefor become reasonably apparent, and if not
so made, it will be understood to have been waived. In the case of testimonial
evidence, the objection must be made when the objectionable question is asked or
after the answer is given if the objectionable features become apparent only by reason
of such answer.[30] In this case, the Heirs of Policronio failed to timely object to the
testimony of Amparo Castillo and they are, thus, deemed to have waived the benefit of
the parol evidence rule.
Granting that the Heirs of Policronio timely objected to the testimony of
Amparo Castillo, their argument would still fail.
Section 9 of Rule 130 of the Rules of Court provides:
Section 9. Evidence of written agreements. When the terms of an
agreement have been reduced to writing, it is considered as
 containing all the terms agreed upon and there can be, between
the parties and their successors in interest, no evidence of such terms
other than the contents of the written agreement.
However, a party may present evidence to modify, explain or add to
the terms of written agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written
agreement;
(b) The failure of the written agreement to express the true intent and
agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their
successors in interest after the execution of the written agreement.
The term "agreement" includes wills.
[Emphasis ours]
Paragraphs (b) and (c) are applicable in the case at bench.
The failure of the Deed of Sale to express the true intent and agreement of the
parties was clearly put in issue in the Answer[31] of the Heirs of Alfonso to the Complaint. It
was alleged that the Deed of Sale was only made to lessen the payment of estate and
inheritance taxes and not meant to transfer ownership. The exception in paragraph (b)
is allowed to enable the court to ascertain the true intent of the parties, and once the
intent is clear, it shall prevail over what the document appears to be on its face.[32] As
the true intent of the parties was duly proven in the present case, it now prevails over
what appears on the Deed of Sale.
The validity of the Deed of Sale was also put in issue in the Answer, and was
precisely one of the issues submitted to the RTC for resolution.[33] The operation of the
parol evidence rule requires the existence of a valid written agreement. It is, thus, not
applicable in a proceeding where the validity of such agreement is the fact in dispute,
such as when a contract may be void for lack of consideration.[34] Considering that the
Deed of Sale has been shown to be void for being absolutely simulated and for lack of
consideration, the Heirs of Alfonso are not precluded from presenting evidence to
modify, explain or add to the terms of the written agreement.
The Heirs of Policronio must be in a state of confusion in arguing that the Heirs
of Alfonso may not question the Deed of Sale for not being parties or successors-in-
interest therein on the basis that the parol evidence rule may not be properly invoked in
a proceeding or litigation where at least one of the parties to the suit is not a party or a
privy of a party to the written instrument in question and does not base a claim on the
instrument or assert a right originating in the instrument or the relation established
thereby. If their argument was to be accepted, then the Heirs of Policronio would
themselves be precluded from invoking the parol evidence rule to exclude the
evidence of the Heirs of Alfonso.
Indeed, the applicability of the parol evidence rule requires that the case be
between parties and their successors-in-interest.[35] In this case, both the Heirs of Alfonso
and the Heirs of Policronio are successors-in-interest of the parties to the Deed of Sale as
they claim rights under Alfonso and Policronio, respectively. The parol evidence rule
excluding evidence aliunde, however, still cannot apply because the present case falls
under two exceptions to the rule, as discussed above.
With respect to hearsay, the Heirs of Policronio contended that the rule on
hearsay was violated when the testimony of Amparo Castillo was given weight in
proving that the subject lands were only sold for taxation purposes as she was a person
alien to the contract. Even granting that they did not object to her testimony during trial,
they argued that it should not have been appreciated by the CA because it had no
probative value whatsoever.[36]
The Court disagrees.
It has indeed been held that hearsay evidence whether objected to or not
cannot be given credence for having no probative value.[37] This principle, however, has
been relaxed in cases where, in addition to the failure to object to the admissibility of
the subject evidence, there were other pieces of evidence presented or there were
other circumstances prevailing to support the fact in issue. In Top-Weld Manufacturing,
Inc. v. ECED S.A.,[38] this Court held:
Hearsay evidence alone may be insufficient to establish a
fact in an injunction suit (Parker v. Furlong, 62 P. 490) but, when no
objection is made thereto, it is, like any other evidence, to be
considered and given the importance it deserves. (Smith v. Delaware
& Atlantic Telegraph & Telephone Co., 51 A 464). Although we should
warn of the undesirability of issuing judgments solely on the basis of
the affidavits submitted, where as here, said affidavits are
overwhelming, uncontroverted by competent evidence and not
inherently improbable, we are constrained to uphold the allegations
of the respondents regarding the multifarious violations of the
contracts made by the petitioner.
In the case at bench, there were other prevailing circumstances which
corroborate the testimony of Amparo Castillo. First, the other Deeds of Sale which were
executed in favor of Liberato, Prudencia, and Valeriana on the same day as that of
Policronios were all presented in evidence. Second, all the properties subject therein
were included in the Deed of Extra-Judicial Partition of the estate of Alfonso. Third,
Policronio, during his lifetime, never exercised acts of ownership over the subject
properties (as he never demanded or took possession of them, never demanded or
received the produce thereof, and never paid real estate taxes thereon). Fourth,
Policronio never informed his children of the sale.
As the Heirs of Policronio failed to controvert the evidence presented, and to
timely object to the testimony of Amparo Castillo, both the RTC and the CA correctly
accorded probative weight to her testimony.
Prior Action Unnecessary
The Heirs of Policronio averred that the Heirs of Alfonso should have filed an
action to declare the sale void prior to executing the Deed of Extra-Judicial Partition.
They argued that the sale should enjoy the presumption of regularity, and until
overturned by a court, the Heirs of Alfonso had no authority to include the land in the
inventory of properties of Alfonsos estate. By doing so, they arrogated upon themselves
the power of invalidating the Deed of Sale which is exclusively vested in a court of law
which, in turn, can rule only upon the observance of due process. Thus, they contended
that prescription, laches, or estoppel have set in to militate against assailing the validity
of the sale.
The Heirs of Policronio are mistaken.
A simulated contract of sale is without any cause or consideration, and is,
therefore, null and void; in such case, no independent action to rescind or annul the
contract is necessary, and it may be treated as non-existent for all purposes.[39] A void or
inexistent contract is one which has no force and effect from the beginning, as if it has
never been entered into, and which cannot be validated either by time or ratification.
A void contract produces no effect whatsoever either against or in favor of anyone; it
does not create, modify or extinguish the juridical relation to which it refers.[40] Therefore,
it was not necessary for the Heirs of Alfonso to first file an action to declare the nullity of
the Deed of Sale prior to executing the Deed of Extra-Judicial Partition.
Personality to Question Sale
The Heirs of Policronio contended that the Heirs of Alfonso are not parties, heirs,
or successors-in-interest under the contemplation of law to clothe them with the
personality to question the Deed of Sale. They argued that under Article 1311 of the Civil
Code, contracts take effect only between the parties, their assigns and heirs. Thus, the
genuine character of a contract which personally binds the parties cannot be put in
issue by a person who is not a party thereto. They posited that the Heirs of Alfonso were
not parties to the contract; neither did they appear to be beneficiaries by way of
assignment or inheritance. Unlike themselves who are direct heirs of Policronio, the Heirs
of Alfonso are not Alfonsos direct heirs. For the Heirs of Alfonso to qualify as parties,
under Article 1311 of the Civil Code, they must first prove that they are either heirs or
assignees. Being neither, they have no legal standing to question the Deed of Sale.
They further argued that the sale cannot be assailed for being barred under
Article 1421 of the Civil Code which provides that the defense of illegality of a contract
is not available to third persons whose interests are not directly affected.
Again, the Court disagrees.
Article 1311 and Article 1421 of the Civil Code provide:
Art. 1311. Contracts take effect only between the parties, their assigns
and heirs, x x x
Art. 1421. The defense of illegality of contracts is not available to third
persons whose interests are not directly affected.
The right to set up the nullity of a void or non-existent contract is not limited to
the parties, as in the case of annullable or voidable contracts; it is extended to third
persons who are directly affected by the contract. Thus, where a contract is absolutely
simulated, even third persons who may be prejudiced thereby may set up its
inexistence.[41] The Heirs of Alfonso are the children of Alfonso, with his deceased
children represented by their children (Alfonsos grandchildren). The Heirs of Alfonso are
clearly his heirs and successors-in-interest and, as such, their interests are directly
affected, thereby giving them the right to question the legality of the Deed of Sale.
Inapplicability of Article 842
The Heirs of Policronio further argued that even assuming that the Heirs of
Alfonso have an interest in the Deed of Sale, they would still be precluded from
questioning its validity. They posited that the Heirs of Alfonso must first prove that the sale
of Alfonsos properties to Policronio substantially diminished their successional rights or
that their legitimes would be unduly prejudiced, considering that under Article 842 of
the Civil Code, one who has compulsory heirs may dispose of his estate provided that
he does not contravene the provisions of the Civil Code with regard to the legitime of
said heirs. Having failed to do so, they argued that the Heirs of Alfonso should be
precluded from questioning the validity of the Deed of Sale.
Still, the Court disagrees.
Article 842 of the Civil Code provides:
Art. 842. One who has no compulsory heirs may dispose by will of all
his estate or any part of it in favor of any person having capacity to
succeed.
One who has compulsory heirs may dispose of his estate provided he
does not contravene the provisions of this Code with regard to the
legitime of said heirs.
This article refers to the principle of freedom of disposition by will. What is
involved in the case at bench is not a disposition by will but by Deed of Sale. Hence, the
Heirs of Alfonso need not first prove that the disposition substantially diminished their
successional rights or unduly prejudiced their legitimes.
Inapplicability of Article 1412
The Heirs of Policronio contended that even assuming that the contract was
simulated, the Heirs of Alfonso would still be barred from recovering the properties by
reason of Article 1412 of the Civil Code, which provides that if the act in which the
unlawful or forbidden cause does not constitute a criminal offense, and the fault is both
on the contracting parties, neither may recover what he has given by virtue of the
contract or demand the performance of the others undertaking. As the Heirs of Alfonso
alleged that the purpose of the sale was to avoid the payment of inheritance taxes,
they cannot take from the Heirs of Policronio what had been given to their father.
On this point, the Court again disagrees.
Article 1412 of the Civil Code is as follows:
Art. 1412. If the act in which the unlawful or forbidden cause consists
does not constitute a criminal offense, the following rules shall be
observed:
(1) When the fault is on the part of both contracting parties, neither
may recover what he has given by virtue of the contract, or
demand the performance of the others undertaking;
(2) When only one of the contracting parties is at fault, he cannot
recover what he has given by reason of the contract, or ask for
the fulfillment of what has been promised him. The other, who is
 not at fault, may demand the return of what he has given
without any obligation to comply with his promise.
Article 1412 is not applicable to fictitious or simulated contracts, because they
refer to contracts with an illegal cause or subject-matter.[42] This article presupposes the
existence of a cause, it cannot refer to fictitious or simulated contracts which are in
reality non-existent.[43] As it has been determined that the Deed of Sale is a simulated
contract, the provision cannot apply to it.
Granting that the Deed of Sale was not simulated, the provision would still not
apply. Since the subject properties were included as properties of Alfonso in the Deed of
Extra-Judicial Partition, they are covered by corresponding inheritance and estate
taxes. Therefore, tax evasion, if at all present, would not arise, and Article 1412 would
again be inapplicable.
Prescription
From the position that the Deed of Sale is valid and not void, the Heirs of
Policronio argued that any question regarding its validity should have been initiated
through judicial process within 10 years from its notarization in accordance with Article
1144 of the Civil Code. Since 21 years had already elapsed when the Heirs of Alfonso
assailed the validity of the Deed of Sale in 1996, prescription had set in. Furthermore,
since the Heirs of Alfonso did not seek to nullify the tax declarations of Policronio, they
had impliedly acquiesced and given due recognition to the Heirs of Policronio as the
rightful inheritors and should, thus, be barred from laying claim on the land.
The Heirs of Policronio are mistaken.
Article 1410 of the Civil Code provides:
Art. 1410. The action for the declaration of the inexistence of a
contract does not prescribe.
This is one of the most fundamental characteristics of void or inexistent
contracts.[44]
As the Deed of Sale is a void contract, the action for the declaration of its nullity, even if
filed 21 years after its execution, cannot be barred by prescription for it is imprescriptible.
Furthermore, the right to set up the defense of inexistence or absolute nullity cannot be
waived or renounced.[45] Therefore, the Heirs of Alfonso cannot be precluded from
setting up the defense of its inexistence.
Validity of the Deed of Extra-Judicial Partition
The Court now resolves the issue of the validity of the Deed of Extra-Judicial Partition.
Unenforceability
The Heirs of Alfonso argued that the CA was mistaken in annulling the Deed of Extra-
Judicial Partition due to the incapacity of Conrado to give the consent of his co-heirs for
lack of a special power of attorney. They contended that what was involved was not
the capacity to give consent in behalf of the co-heirs but the authority to represent
them. They argue that the Deed of Extra-Judicial Partition is not a voidable or an
annullable contract under Article 1390 of the Civil Code, but rather, it is an
unenforceable or, more specifically, an unauthorized contract under Articles 1403 (1)
and 1317 of the Civil Code. As such, the Deed of Extra-Judicial Partition should not be
annulled but only be rendered unenforceable against the siblings of Conrado.
They further argued that under Article 1317 of the Civil Code, when the persons
represented without authority have ratified the unauthorized acts, the contract
becomes enforceable and binding. They contended that the Heirs of Policronio ratified
the Deed of Extra-Judicial Partition when Conrado took possession of one of the parcels
of land adjudicated to him and his siblings, and when another parcel was used as
collateral for a loan entered into by some of the Heirs of Policronio. The Deed of Extra-
Judicial Partition having been ratified and its benefits accepted, the same thus became
enforceable and binding upon them.
The Heirs of Alfonso averred that granting arguendo that Conrado was not
authorized to represent his co-heirs and there was no ratification, the CA should not
have remanded the case to the RTC for partition of Alfonsos estate. They argued that
the CA should not have applied the Civil Code general provision on contracts, but the
special provisions dealing with succession and partition. They contended that contrary
to the ruling of the CA, the extra-judicial parition was not an act of strict dominion, as it
has been ruled that partition of inherited land is not a conveyance but a confirmation or
ratification of title or right to the land.[46] Therefore, the law requiring a special power of
attorney should not be applied to partitions.
On the other hand, the Heirs of Policronio insisted that the CA pronouncement
on the invalidity of the Deed of Extra-Judicial Partition should not be disturbed because
the subject properties should not have been included in the estate of Alfonso, and
because Conrado lacked the written authority to represent his siblings. They argued with
the CA in ruling that a special power of attorney was required before Conrado could
sign in behalf of his co-heirs.
The Heirs of Policronio denied that they ratified the Deed of Extra-Judicial
Partition. They claimed that there is nothing on record that establishes that they ratified
the partition. Far from doing so, they precisely questioned its execution by filing a
complaint. They further argued that under Article 1409 (3) of the Civil Code, ratification
cannot be invoked to validate the illegal act of including in the partition those
properties which do not belong to the estate as it provides another mode of acquiring
ownership not sanctioned by law.
Furthermore, the Heirs of Policronio contended that the defenses of
unenforceability, ratification, and preterition are being raised for the first time on appeal
by the Heirs of Alfonso. For having failed to raise them during the trial, the Heirs of
Alfonso should be deemed to have waived their right to do so.
The Court agrees in part with the Heirs of Alfonso.
To begin, although the defenses of unenforceability, ratification and preterition
were raised by the Heirs of Alfonso for the first time on appeal, they are concomitant
matters which may be taken up. As long as the questioned items bear relevance and
close relation to those specifically raised, the interest of justice would dictate that they,
too, must be considered and resolved. The rule that only theories raised in the initial
proceedings may be taken up by a party thereto on appeal should refer to
independent, not concomitant matters, to support or oppose the cause of action.[47]
In the RTC, the Heirs of Policronio alleged that Conrados consent was vitiated
by mistake and undue influence, and that he signed the Deed of Extra-Judicial Partition
without the authority or consent of his co-heirs.

The RTC found that Conrados credibility had faltered, and his claims were
rejected by the RTC as gratuitous assertions. On the basis of such, the RTC ruled that
Conrado duly represented his siblings in the Deed of Extra-Judicial Partition.
On the other hand, the CA annulled the Deed of Extra-Judicial Partition under
Article 1390 (1) of the Civil Code, holding that a special power of attorney was lacking
as required under Article 1878 (5) and (15) of the Civil Code. These articles are as follows:
Art. 1878. Special powers of attorney are necessary in the following
cases:
xxx
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a
valuable consideration;
xxx
(15) Any other act of strict dominion.
Art. 1390. The following contracts are voidable or annullable, even
though there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a
contract;
(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper
action in court. They are susceptible of ratification.
This Court finds that Article 1878 (5) and (15) is inapplicable to the case at
bench. It has been held in several cases[48] that partition among heirs is not legally
deemed a conveyance of real property resulting in change of ownership. It is not a
transfer of property from one to the other, but rather, it is a confirmation or ratification of
title or right of property that an heir is renouncing in favor of another heir who accepts
and receives the inheritance. It is merely a designation and segregation of that part
which belongs to each heir. The Deed of Extra-Judicial Partition cannot, therefore, be
considered as an act of strict dominion. Hence, a special power of attorney is not
necessary.
In fact, as between the parties, even an oral partition by the heirs is valid if no
creditors are affected. The requirement of a written memorandum under the statute of
frauds does not apply to partitions effected by the heirs where no creditors are involved
considering that such transaction is not a conveyance of property resulting in change of
ownership but merely a designation and segregation of that part which belongs to each
heir.[49]
Neither is Article 1390 (1) applicable. Article 1390 (1) contemplates the
incapacity of a party to give consent to a contract. What is involved in the case at
bench though is not Conrados incapacity to give consent to the contract, but rather his
lack of authority to do so. Instead, Articles 1403 (1), 1404, and 1317 of the Civil Code find
application to the circumstances prevailing in this case. They are as follows:
Art. 1403. The following contracts are unenforceable, unless they are
ratified:
(1) Those entered into in the name of another person by one who has
been given no authority or legal representation, or who has acted
beyond his powers;
Art. 1404. Unauthorized contracts are governed by Article 1317 and
the principles of agency in Title X of this Book.
Art. 1317. No one may contract in the name of another without being
authorized by the latter, or unless he has by law a right to represent
him.
A contract entered into in the name of another by one who has no
authority or legal representation, or who has acted beyond his
powers, shall be unenforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party.
Such was similarly held in the case of Badillo v. Ferrer:
The Deed of Extrajudicial Partition and Sale is not a voidable
or an annullable contract under Article 1390 of the New Civil Code.
Article 1390 renders a contract voidable if one of the parties is
incapable of giving consent to the contract or if the contracting
partys consent is vitiated by mistake, violence, intimidation, undue
influence or fraud. x x x
The deed of extrajudicial parition and sale is an
unenforceable or, more specifically, an unauthorized contract under
Articles 1403(1) and 1317 of the New Civil Code.[50]
Therefore, Conrados failure to obtain authority from his co-heirs to sign the
Deed of Extra-Judicial Partition in their behalf did not result in his incapacity to give
consent so as to render the contract voidable, but rather, it rendered the contract valid
but unenforceable against Conrados co-heirs for having been entered into without their
authority.
A closer review of the evidence on record, however, will show that the Deed of
Extra-Judicial Partition is not unenforceable but, in fact, valid, binding and enforceable
against all the Heirs of Policronio for having given their consent to the contract. Their
consent to the Deed of Extra-Judicial Partition has been proven by a preponderance of
evidence.
Regarding his alleged vitiated consent due to mistake and undue influence to
the Deed of Extra-Judicial Partition, Conrado testified, to wit:
Q: Mr. Ureta you remember having signed a document entitled deed
of extra judicial partition consisting of 11 pages and which have
previously [been] marked as Exhibit I for the plaintiffs?
A: Yes sir.
Q: Can you recall where did you sign this document?
A: The way I remember I signed that in our house.
Q: And who requested or required you to sign this document?
A: My aunties.
Q: Who in particular if you can recall?
A: Nay Pruding Panadero.
Q: You mean that this document that you signed was brought to your
house by your Auntie Pruding Pa[r]adero [who] requested you to sign
that document?
A: When she first brought that document I did not sign that said
document because I [did] no[t] know the contents of that
document.
Q: How many times did she bring this document to you [until] you
finally signed the document?
A: Perhaps 3 times.
Q: Can you tell the court why you finally signed it?
A: Because the way she explained it to me that the land of my
grandfather will be partitioned.
Q: When you signed this document were your brothers and sisters
who are your co-plaintiffs in this case aware of your act to sign this
document?
A: They do not know.
xxx
Q: After you have signed this document did you inform your brothers
and sisters that you have signed this document?
A: No I did not. [51]
xxx
Q: Now you read the document when it was allegedly brought to
your house by your aunt Pruding Pa[r]adero?
A: I did not read it because as I told her I still want to ask the advise of
my brothers and sisters.
Q: So do I get from you that you have never read the document itself
or any part thereof?
A: I have read the heading.
xxx
Q: And why is it that you did not read all the pages of this document
because I understand that you know also how to read in English?
A: Because the way Nay Pruding explained to me is that the property
of my grandfather will be partitioned that is why I am so happy.
xxx
Q: You mean to say that after you signed this deed of extra judicial
partition up to the present you never informed them?
A: Perhaps they know already that I have signed and they read
already the document and they have read the document.
Q: My question is different, did you inform them?
A: The document sir? I did not tell them.
Q: Even until now?
A: Until now I did not inform them.[52]
This Court finds no cogent reason to reverse the finding of the RTC that
Conrados explanations were mere gratuitous assertions not entitled to any probative
weight. The RTC found Conrados credibility to have faltered when he testified that
perhaps his siblings were already aware of the Deed of Extra-Judicial Partition. The RTC
was in the best position to judge the credibility of the witness testimony. The CA also
recognized that Conrados consent was not vitiated by mistake and undue influence as
it required a special power of attorney in order to bind his co-heirs and, as such, the CA
thereby recognized that his signature was binding to him but not with respect to his co-
heirs. Findings of fact of the trial court, particularly when affirmed by the CA, are binding
to this Court.[53]
Furthermore, this Court notes other peculiarities in Conrados testimony. Despite
claims of undue influence, there is no indication that Conrado was forced to sign by his
aunt, Prudencia Paradero. In fact, he testified that he was happy to sign because his
grandfathers estate would be partitioned. Conrado, thus, clearly understood the
document he signed. It is also worth noting that despite the document being brought to
him on three separate occasions and indicating his intention to inform his siblings about
it, Conrado failed to do so, and still neglected to inform them even after he had signed
the partition. All these circumstances negate his claim of vitiated consent. Having duly
signed the Deed of Extra-Judicial Partition, Conrado is bound to it. Thus, it is enforceable
against him.
Although Conrados co-heirs claimed that they did not authorize Conrado to sign the
Deed of Extra-Judicial Partition in their behalf, several circumstances militate against
their contention.
First, the Deed of Extra-Judicial Partition was executed on April 19, 1989, and the Heirs of
Policronio claim that they only came to know of its existence on July 30, 1995through an
issue of the Aklan Reporter. It is difficult to believe that Conrado did not inform his siblings
about the Deed of Extra-Judicial Partition or at least broach its subject with them for
more than five years from the time he signed it, especially after indicating in his
testimony that he had intended to do so.
Second, Conrado retained possession of one of the parcels of land
adjudicated to him and his co-heirs in the Deed of Extra-Judicial Partition.
Third, after the execution of the partition on April 19, 1989 and more than a
year before they claimed to have discovered the existence of the Deed of Extra-Judicial
Partition on July 30, 1995, some of the Heirs of Policronio, namely, Rita Solano, Macario
Ureta, Lilia Tayco, and Venancio Ureta executed on June 1, 1994, a Special Power of
Attorney[54] in favor of their sister Gloria Gonzales, authorizing her to obtain a loan from a
bank and to mortgage one of the parcels of land adjudicated to them in the Deed of
Extra-Judicial Partition to secure payment of the loan. They were able to obtain the loan
using the land as collateral, over which a Real Estate Mortgage [55] was constituted. Both
the Special Power of Attorney and the Real Estate Mortgage were presented in
evidence in the RTC, and were not controverted or denied by the Heirs of Policronio.
Fourth, in the letter dated August 15, 1995, sent by the counsel of the Heirs of
Policronio to the Heirs of Alfonso requesting for amicable settlement, there was no
mention that Conrados consent to the Deed of Extra-Judicial Partition was vitiated by
mistake and undue influence or that they had never authorized Conrado to represent
them or sign the document on their behalf. It is questionable for such a pertinent detail
to have been omitted. The body of said letter is reproduced hereunder as follows:
Greetings:
Your nephews and nieces, children of your deceased brother
Policronio Ureta, has referred to me for appropriate legal action the
property they inherited from their father consisting of six (6) parcels of
land which is covered by a Deed of Absolute Sale dated October 25,
1969. These properties ha[ve] already been transferred to the name
of their deceased father immediately after the sale, machine copy of
the said Deed of Sale is hereto attached for your ready reference.
Lately, however, there was published an Extra-judicial Partition of the
estate of Alfonso Ureta, which to the surprise of my clients included
the properties already sold to their father before the death of said
Alfonso Ureta. This inclusion of their property is erroneous and illegal
because these properties were covered by the Deed of Absolute
Sale in favor of their father Policronio Ureta no longer form part of the
estate of Alfonso Ureta. Since Policronio Ureta has [sic] died in 1974
yet, these properties have passed by hereditary succession to his
children who are now the true and lawful owners of the said
properties.
My clients are still entitled to a share in the estate of Alfonso Ureta
who is also their grandfather as they have stepped into the shoes of
their deceased father Policronio Ureta. But this estate of Alfonso Ureta
should already exclude the six (6) parcels of land covered by the
Deed of Absolute Sale in favor of Policronio Ureta.
My clients cannot understand why the properties of their
late father [should] be included in the estate of their grandfather and
be divided among his brothers and sisters when said properties should
only be divided among themselves as children of Policronio Ureta.
Since this matter involves very close members of the same family, I
have counseled my clients that an earnest effort towards a
compromise or amicable settlement be first explored before resort to
judicial remedy is pursued. And a compromise or amicable
settlement can only be reached if all the parties meet and discuss
the problem with an open mind. To this end, I am suggesting a
meeting of the parties on September 16, 1995 at 2:00 P.M. at B Place
Restaurant at C. Laserna St., Kalibo, Aklan. It would be best if the
parties can come or be represented by their duly designated
attorney-in-fact together with their lawyers if they so desire so that the
problem can be discussed unemotionally and intelligently.
I would, however, interpret the failure to come to the said meeting as
an indication that the parties are not willing to or interested in
amicable settlement of this matter and as a go signal for me to resort
to legal and/or judicial remedies to protest the rights of my clients.
Thank you very much.[56]
Based on the foregoing, this Court concludes that the allegation of Conrados
vitiated consent and lack of authority to sign in behalf of his co-heirs was a mere
afterthought on the part of the Heirs of Policronio. It appears that the Heirs of Policronio
were not only aware of the existence of the Deed of Extra-Judicial Partition prior to June
30, 1995 but had, in fact, given Conrado authority to sign in their behalf. They are now
estopped from questioning its legality, and the Deed of Extra-Judicial Partition is valid,
binding, and enforceable against them.
In view of the foregoing, there is no longer a need to discuss the issue of
ratification.
Preterition
The Heirs of Alfonso were of the position that the absence of the Heirs of
Policronio in the partition or the lack of authority of their representative results, at the
very least, in their preterition and not in the invalidity of the entire deed of
partition. Assuming there was actual preterition, it did not render the Deed of Extra-
Judicial Partition voidable.Citing Article 1104 of the Civil Code, they aver that a partition
made with preterition of any of the compulsory heirs shall not be rescinded, but the heirs
shall be proportionately obliged to pay the share of the person omitted. Thus, the Deed
of Extra-Judicial Partition should not have been annulled by the CA. Instead, it should
have ordered the share of the heirs omitted to be given to them.
The Heirs of Alfonso also argued that all that remains to be adjudged is the
right of the preterited heirs to represent their father, Policronio, and be declared entitled
to his share. They contend that remand to the RTC is no longer necessary as the issue is
purely legal and can be resolved by the provisions of the Civil Code for there is no
dispute that each of Alfonsos heirs received their rightful share. Conrado, who received
Policronios share, should then fully account for what he had received to his other co-
heirs and be directed to deliver their share in the inheritance.
These arguments cannot be given credence.
 Their posited theory on preterition is no longer viable. It has already been WHEREFORE, the petition in G.R. No. 165748 is DENIED. The petition in G.R. No.
determined that the Heirs of Policronio gave their consent to the Deed of Extra-Judicial 165930 is GRANTED. The assailed April 20, 2004 Decision and October 14, 2004Resolution
Partition and they have not been excluded from it. Nonetheless, even granting that the of the Court of Appeals in CA-G.R. CV No. 71399, are hereby MODIFIED in this wise:
Heirs of Policronio were denied their lawful participation in the partition, the argument of
the Heirs of Alfonso would still fail. (1) The Deed of Extra-Judicial Partition, dated April 19, 1989, is
VALID, and
Preterition under Article 854 of the Civil Code is as follows:
Art. 854. The preterition or omission of one, some, or all of the (2) The order to remand the case to the court of origin is hereby DELETED.
compulsory heirs in the direct line, whether living at the time of the
execution of the will or born after the death of the testator, shall SO ORDERED.
annul the institution of heir; but the devises and legacies shall be valid
insofar as they are not inofficious.
JOSE CATRAL MENDOZA
If the omitted compulsory heirs should die before the testator, the Associate Justice
institution shall be effectual, without prejudice to the right of WE CONCUR:
representation.

Preterition has been defined as the total omission of a compulsory heir from the
inheritance. It consists in the silence of the testator with regard to a compulsory heir, PRESBITERO J. VELASCO, JR.
omitting him in the testament, either by not mentioning him at all, or by not giving him Associate Justice
anything in the hereditary property but without expressly disinheriting him, even if he is Chairperson
mentioned in the will in the latter case.[57] Preterition is thus a concept of testamentary
succession and requires a will. In the case at bench, there is no will involved. Therefore,
preterition cannot apply.

Remand Unnecessary DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice
The Deed of Extra-Judicial Partition is in itself valid for complying with all the
legal requisites, as found by the RTC, to wit:

A persual of the Deed of Extra-judicial Partition would reveal

that all the heirs and children of Alfonso Ureta were represented MARIA LOURDES P. A. SERENO
therein; that nobody was left out; that all of them received as much Associate Justice
as the others as their shares; that it distributed all the properties of
Alfonso Ureta except a portion of parcel 29 containing an area of ATTESTATION
14,000 square meters, more or less, which was expressly reserved; that
Alfonso Ureta, at the time of his death, left no debts; that the heirs of I attest that the conclusions in the above Decision had been reached in consultation
Policronio Ureta, Sr. were represented by Conrado B. Ureta; all the before the case was assigned to the writer of the opinion of the Courts Division.
parties signed the document, was witnessed and duly
acknowledged before Notary Public Adolfo M. Iligan of Kalibo, Aklan;
that the document expressly stipulated that the heirs to whom some
of the properties were transferred before for taxation purposes or their PRESBITERO J. VELASCO, JR.
children, expressly recognize and acknowledge as a fact that the Associate Justice
properties were transferred only for the purpose of effective Chairperson
administration and development convenience in the payment of
taxes and, therefore, all instruments conveying or effecting the
transfer of said properties are null and void from the beginning (Exhs. CERTIFICATION
1-4, 7-d).[58]
Pursuant to Section 13, Article VIII of the Constitution and the Division
Considering that the Deed of Sale has been found void and the Deed of Extra- Chairpersons Attestation, I certify that the conclusions in the above Decision had been
Judicial Partition valid, with the consent of all the Heirs of Policronio duly given, there is reached in consultation before the case was assigned to the writer of the opinion of the
no need to remand the case to the court of origin for partition. Courts Division.

RENATO C. CORONA
Chief Justice
* Designated as additional member of the Third Division per Special Order No. 1028
dated June 21, 2011.
[1] Penned by Associate Justice Perlita J. Tria Tirona with Associate Justice B.A. Adefuin-
De La Cruz and Associate Justice Arturo D. Brion (now a member of this Court),
concurring.
[2] Penned by Associate Justice Perlita J. Tria Tirona with Associate Justice Ruben T. Reyes
and Associate Justice Arturo D. Brion (now a member of this Court), concurring.
[3] Rollo (G.R. No. 165748), pp. 75-81.
[4] Exhibit G, records, p. 349.
[5] Exhibit 5, id. at 526.
[6] Exhibit 11, id. at 528.
[7] Exhibit 6, id. at 527.
[8] Exhibit 7, id. at 529-539.
[9] Rollo (G.R. No. 165748), pp. 51-65.
[10] Manila Banking Corporation v. Silverio, 504 Phil. 17, 25-26 (2005), citing Suntay v. Court
of Appeals, 321 Phil. 809 (1995) and RULES OF COURT, Rule 131, Sec. 3 (r) and (p).
[11] Gatmaitan v. Court of Appeals, G.R. No. 76500, August 2, 1991, 200 SCRA 38.
[12] Ascalon v. Court of Appeals, 242 Phil. 265 (1988).
[13] G.R. No. 163687, March 28, 2006, 485 SCRA 494, 500-501; citing Loyola v. Court of
Appeals, 383 Phil. 171 (2000), and Balite v. Lim, 487 Phil. 281 (2004).
[14] Manila Banking Corporation v. Silverio, supra note 10 at 27, citing Peoples Aircargo
and Warehousing Co., Inc. v. Court of Appeals, 357 Phil. 850 (1998).
[15] Tongoy v. Court of Appeals, 208 Phil. 95, 113 (1983); citing Rodriguez v. Rodriguez, 127
Phil. 294, 301-302 (1967).
[16] Lopez v. Lopez, G.R. No. 161925, November 25, 2009, 605 SCRA 358, 367.
[17] RULES OF COURT, Rule 133, Sec. 1. Preponderance of evidence, how determined. In
civil cases, the party having the burden of proof must establish his case by a
preponderance of evidence. In determining where the preponderance or superior
weight of evidence on the issues involved lies, the court may consider all the facts and
circumstance of the case, the witnesses manner of testifying, their intelligence, their
means and opportunity of knowing the facts to which they are testifying, the nature of
the facts to which they testify, the probability of their testimony, their interest or want of
interest, and also their personal credibility so far as the same may legitimately appear
upon the trial. The court may also consider the number of witnesses, though the
preponderance is not necessarily with the greater number.
[18] TSN, April 6, 1998, pp. 9-10.
[19] Exhibit 7-d, records, p. 533.
[20] Manila Banking Corporation v. Silverio, supra note 10 at 31, citing Suntay v. Court of
Appeals, 321 Phil. 809 (1995); Santiago v. Court of Appeals, 343 Phil. 612 (1997); Cruz v.
Bancom Finance Corporation, 429 Phil. 225 (2002); and Ramos v. Heirs of Ramos, 431
Phil. 337 (2002).
[21] Samala v. Court of Appeals, 467 Phil. 563, 568 (2004).
[22] Tongoy v. Court of Appeals, supra note 15; Manila Banking Corporation v. Silverio, 504
Phil. 17, 33 (2005).
[23] Rollo (G.R. No. 165748), p. 69-70.
[24] Morales Development Company, Inc. v. Court of Appeals, 137 Phil. 307 (1969).
[25] Acabal v. Acabal, 494 Phil. 528 (2005).
[26] Exhibit G, records, p. 349.
[27] Rollo (G.R. No. 165748), p. 79; and TSN, April 6, 1998, p. 9.
[28] Montecillo v. Reynes, 434 Phil. 456, 469 (2002); citing Ocejo Perez & Co. v. Flores, 40
Phil 921 (1920); Mapalo v. Mapalo, 123 Phil. 979 (1966); Vda. de Catindig v. Roque, 165
Phil. 707 (1976); Rongavilla v. Court of Appeals, 355 Phil. 721 (1998); and Yu Bu Guan v.
Ong, 419 Phil. 845 (2001).
[29] Lechugas v. Court of Appeals, 227 Phil. 310 (1986).
[30] RULES OF COURT, Rule 132, Sec. 36.
[31] Rollo (G.R. No. 165748), pp. 66-74.
[32] Premier Insurance v. Intermediate Appellate Court, 225 Phil. 370, 381 (1986);
citing Labasan v. Lacuesta, 175 Phil. 216 (1978).
[33] Rollo (G.R No. 165748), p. 77.
[34] Herrera, Remedial Law, Vol. V, pp. 208-209, [1999].
[35] Lechugas v. Court of Appeals, 227 Phil. 310, 319 (1986).
[36] Eugenio v. Court of Appeals, G.R. No. 103737, December 15, 1994, 239 SCRA 207.
[37] People v. Parungao, 332 Phil. 917, 924 (1996).
[38] 222 Phil. 424, 437 (1985).
[39] Ocejo Perez & Co. v. Flores, 40 Phil. 921 (1920); De Belen v. Collector of Customs, 46
Phil. 241 (1924); Gallion v. Gayares, 53 Phil. 43 (1929); Escutin v. Escutin, 60 Phil. 922
(1934); Gonzales v. Trinidad, 67 Phil. 682 (1939); Portugal v. IAC, 242 Phil. 709 (1988).
[40] Tongoy v. Court of Appeals, supra note 15.
[41] Arsenal v. Intermediate Appellate Court, 227 Phil. 36, 46-47 (1986); Tolentiono, Civil
Code of the Philippines, Vol. IV, p. 643, [2002].
[42] Sta. Romana v. Imperio, 122 Phil. 1001, 1007 (1965); Tolentino, Civil Code of
the Philippines, Vol. IV, p. 634, (2002).
[43] Gonzales v. Trinidad, 67 Phil. 682, 683-684 (1939); Castro v. Escutin, 179 Phil. 277, 284
(1979).
[44] Tongoy v. Court of Appeals, supra note 15; Manila Banking Corporation v. Silverio, 504
Phil. 17, 33 (2005).
[45] Id.
[46] Barcelona v. Barcelona, 100 Phil 251, 255 (1956).
[47] Borbon II v. Servicewide Specialists, Inc., 328 Phil. 150, 160 (1996).
[48] Barcelona v. Barcelona, 100 Phil. 251, 255 (1956); Maestrado v. Court of Appeals, 384
Phil. 418, 432 (2000); Castro v. Miat, 445 Phil. 282 297-298 (2003), citing Pada-Kilario v.
Court of Appeals, 379 Phil. 515 (2000).
[49] Maestrado v. Court of Appeals, 384 Phil. 418, 432 (2000).
[50] 236 Phil. 438, 447-448 (1987).
[51] TSN, October 1, 1997, pp. 4-6.
[52] Id. at 8-11.
[53] Philippine Rabbit Bus Lines Inc. v. Macalinao, 491 Phil. 249, 255 (2005).
[54] Exhibit 2, records, p. 524.
[55] Exhibit 3, id. at 525.
[56] Exhibit A, id. at 335-336.
[57] Neri v. Akutin, 72 Phil. 322, 325 (1914); Maninang v. Court of Appeals, 199 Phil. 640, 647
(1982).
[58] Rollo (G.R. No. 165748), p. 80.
THIRD DIVISION
G.R. No. 198434, February 29, 2016
HEIRS OF LEANDRO NATIVIDAD AND JULIANA V. NATIVIDAD, Petitioners, v. JUANA
MAURICIO-NATIVIDAD, AND SPOUSES JEAN NATIVIDAD CRUZ AND JERRY
CRUZ, Respondents.
 DECISION
PERALTA, J.:
Challenged in the present petition for review on certiorari are the Decision1 and
Resolution2 of the Court of Appeals (CA), dated February 7, 2011 and August 25, 2011,
respectively, in CA-G.R. CV No. 92840. The assailed CA Decision modified the Decision
of the Regional Trial Court. (RTC) of San Mateo, Rizal, Branch 75, in Civil Case No. 1637-
02-SM, while the CA Resolution denied petitioners' motion for reconsideration.
The present petition arose from an action for specific performance and/or recovery of
sum of money filed against herein respondents by the spouses Leandro Natividad
(Leandro) and Juliana Natividad (Juliana), who are the predecessors of herein
petitioners.
In their Complaint, Leandro and Juliana alleged that sometime in 1974, Sergio Natividad
(Sergio), husband of respondent Juana Mauricio-Natividad (Juana) and father of
respondent Jean Natividad-Cruz (Jean), obtained a loan from the Development Bank
of the Philippines (DBP). As security for the loan, Sergio mortgaged two parcels of land,
one of which is co-owned and registered in his name and that of his siblings namely,
Leandro, Domingo and Adoracion. This property is covered by Original Certificate of
Title (OCT) No. 5980. Sergio's siblings executed a Special Power of Attorney authorizing
him to mortgage the said property. The other mortgaged parcel of land, covered by
OCT No. 10271, was registered in the name of Sergio and Juana. Subsequently, Sergio
died without being able to pay his obligations with DBP. Since the loan was nearing its
maturity and the mortgaged properties were in danger of being foreclosed, Leandro
paid Sergio's loan obligations. Considering that respondents were unable to reimburse
Leandro for the advances he made in Sergio's favor, respondents agreed that Sergio's
share in the lot which he co-owned with his siblings and the other parcel of land in the
name of Sergio and Juana, shall be assigned in favor of Leandro and Juliana. Leandro's
and Sergio's brother, Domingo, was tasked to facilitate the transfer of ownership of the
subject properties in favor of Leandro and Juliana. However, Domingo died without
being able to cause such transfer. Subsequently, despite demands and several follow-
ups made by petitioners, respondents failed and refused to honor their undertaking.
Respondents filed their Answer denying the allegations in the complaint and raising the
following defenses: (1) respondents are not parties to the contract between Sergio and
DBP; (2) there is neither verbal nor written agreement between petitioners and
respondents that the latter shall reimburse whatever payment was made by the former
or their predecessor-in-interest; (3) Jean was only a minor during the execution of the
alleged agreement and is not a party thereto; (4) that whatever liability or obligation of
respondents is already barred by prescription, laches and estoppel; (5) that the
complaint states no cause of action as respondents are not duty-bound to reimburse
whatever alleged payments were made by petitioners; and (6) there is no contract
between the parties to the effect that respondents are under obligation to transfer
ownership in petitioners' favor as reimbursement for the alleged payments made by
petitioners to DBP.
Respondents waived their right to present evidence and they merely filed their
memorandum. Also, during pendency' of the trial, Leandro died and was substituted by
his heirs, herein petitioners.
On November. 4, 2008, the RTC rendered its Decision in favor of petitioners, the
dispositive portion of which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Defendants Juana Mauricio [Vda.] de Natividad and Jean Natividad-Cruz are
ordered to effect the transfer of title in OCT No. 5980 with respect to the undivided share
of the late Sergio Natividad; and in OCT No. 10271 both of the Registry of Deeds of the
Province of Rizal in favor of plaintiff Juliana [Vda.] de Natividad and the Heirs of the late
Leandro Natividad.
2. Defendants to pay jointly and severally, attorney's fees in the sum of Thirty Thousand
Pesos (P30,000.00); and cost of suit.
SO ORDERED.3ChanRoblesVirtualawlibrary
Aggrieved by the RTC Decision, respondents filed an Appeal with the CA.
On February 7, 2011, the C A'promulgated its questioned Decision, disposing as follows:
WHEREFORE, the appeal is PARTLY GRANTED. The Decision dated November 4, 2008 is
hereby " MODIFIED in that defendants-appellants Juana Mauricio-Natividad and Jean
Natividad-Cruz are ordered instead to reimburse plaintiffs-appellees Juliana Natividad
and the heirs of the late Leandro Natividad the amount of P162,514.88 representing the
amount of the loan obligation paid to the Development Bank of the Philippines, plus
legal interest of 12% per annum computed from June 23, 2001 until finality of the
judgment, the total amount of which shall be to the extent only of defendants-
appellants' successional rights in the mortgaged properties and Juana1 s conjugal share
in [the] property covered by OCT No. 10271. The award of attorney's fees and cost of
suit are AFFIRMED.
SO ORDERED.4ChanRoblesVirtualawlibrary
Petitioners filed a Motion 'for Partial Reconsideration, while respondents filed their own
Motion for Reconsideration, both of which, however, were denied by the CA in its
assailed Resolution dated August 25, 2011.
Hence, the instant petition based on the following grounds:
I. WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS' RULING THAT THE
VERBAL AGREEMENT TO CONVEY THE PROPERTY SHARES OF SERGIO NATIVIDAD
IN THE PAYMENT OF HIS OBLIGATION IS COVERED BY THE STATUTE OF FRAUDS
DESPITE THE FACT THAT IT HAS BEEN PARTIALLY EXECUTED, IS CONTRARY TO
EXISTING JURISPRUDENCE.
II. WITH DUE RESPECT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT
THE INTEREST ON THE UNPAID LOAN OBLIGATION SHOULD BE IMPOSED ONLY ON
JUNE 23, 2001, DATE OF THE DEMAND FOR PAYMENT INSTEAD OF SEPTEMBER 23,
1994, WHEN THE PARTIES VERBALLY AGREED TO CONVEY THEIR PROPERTY
RIGHTS WITH THE EXECUTION OF THE EXTRAJUDIC1AL SETTLEMENT OF ESTATE OF
SERGIO NATIVIDAD.5
Petitioners, insist that there was a verbal agreement between respondents and Leandro,
their predecessor-in-interest, wherein the subject properties shall be assigned to the
latter as reimbursement for the payments he made in Sergio's favor. To support this
contention, petitioners relied heavily on the Extrajudicial Settlement Among Heirs, which
was executed by respondents to prove that there was indeed such an agreement and
that such a Settlement is evidence of the partial execution of the said agreement. The
provisions of the said Settlement are as follows:
EXTRAJUDICIAL SETTLEMENT AMONG HEIRS
KNOW ALL MEN BY THESE PRESENTS:
This EXTRAJUDICIAL SETTLEMENT, made and entered into by and among:
JUAN M. NATIVIDAD, widow; JEAN N. CRUZ, married to JERRY CRUZ; JOSELITO M.
NATIVIDAD, single, all of legal age, Filipino citizens, and residents of Malanday, San
Mateo, Rizal
WITNESSETH
That the above-named parties, is the legitimate wife and children and sole heirs of the
deceased SERGIO NATIVIDAD, who died in San Mateo, Rizal on May 31, 1981;
That the said deceased, at the time of his death, left certain real estate properties
located at San Mateo, Rizal, and Montalban, Rizal, more particularly described as
follows:
a. A whole portion of a parcel of land (Plan Psu-295655, L.R. Case No. Q-29, L.R.C.
Record No. N-295 ________ , situated in the Barrio of Malanday, Municipality of San
Mateo, Province of Rizal, containing an area of TWO HUNDRED EIGHT (208) SQUARE
METERS, more or less, and covered by OCT NO. 10271.
b. A one-fourth (1/4) share in the parcel of land situated in Guinayang, San Mateo, Rizal,
containing an area of 2,742 square meters, Covered by OCT No. 10493.
c. A one-fourth (1/4) share in the parcel of land situated in San Jose, Montalban, Rizal,
containing an area of 4,775 square meters, and covered by OCT No. ON-403.
d. A one-fourth (1/4) share in the parcel of land situated in Cambal, San Mateo, Rizal,
containing an area of 13,456 square meters, and covered by OCT No. 5980.
That no other personal properties are involved in this extrajudicial settlement.
That to the best knowledge and information of the parties hereto, the said deceased
left certain obligations amounting to PI75,000.00 representing loan obligations with the
Development Bank of the Philippines.
That a notice of this extrajudicial settlement had been published once a week for three
consecutive weeks in____________ a newspaper of general circulation in ___________, as
certified by the said newspaper hereto attached as Annex "A";
That the parties hereto being all of legal age and with full civil capacity to contract,
hereby by these presents, agree to divide and adjudicate, as they hereby divide and
adjudicate, among themselves the above-described real estate property in equal
shares and interest.
IN WITNESS WHEREOF, the parties have signed this document on this 2nd day
of September, 1994 in San Mateo, Rizal, Philippines.
x x x6ChanRoblesVirtualawlibrary
After a careful reading of the abovequoted Extrajudicial Settlement Among Heirs, the
Court agrees with the CA that there is nothing in the said document which would
indicate that respondents agreed to the effect that the subject properties shall be
transferred in the name of Leandro as reimbursement for his payment of Sergio's loan
obligations with the DBP. On the contrary, the second to the last paragraph of the said
Settlement clearly shows that herein respondents, as heirs of Sergio, have divided the
subject properties exclusively among themselves.
There is no competent evidence to prove the verbal agreement being claimed by
respondents. Aside from the subject Extrajudicial Settlement Among Heirs, the self-
serving claims of Leandro on the witness stand, as well as the cash voucher,7 which
supposedly represented payment of P8,000.00 given to Atty. Domingo Natividad for the
expenses in transferring the title of the subject properties in Leandro's favor, would hardly
count as competent evidence in the eyes of the law. Respondents' claim of the
existence of a verbal agreement between them, on one hand, and petitioners'
predecessors-in-interest, on the other, remains to be mere allegation. It is an age-old
rule in civil cases that he who alleges a fact has the burden of proving it and a mere
allegation is not evidence.8
In relation to petitioners' contention that the subject verbal agreement actually existed,
they-reiterate their contention that the conveyance of the subject properties in their
favor is not covered by the Statute of Frauds because they claim that respondents'
execution of the Extrajudicial Settlement Among Heirs constitutes partial execution of
their alleged agreement.
The Court does not agree.
Suffice it to say that there is no partial execution of any contract, whatsoever, because
petitioners failed to prove, in the first place, that there was a verbal agreement that was
entered into.
Even granting that such an agreement existed, the CA did not commit any error in ruling
that the assignment of the shares of Sergio in the subject properties in petitioners' favor
as payment of Sergio's obligation cannot be enforced if there is no written contract to
such effect. Under the Statute of Frauds9, an agreement to convey real properties shall
be unenforceable by action in the absence of a written note or memorandum thereof
and subscribed by the party charged or by his agent. As earlier discussed, the pieces of
evidence presented by petitioners, consisting of respondents' acknowledgment of
Sergio's loan obligations with DBP as embodied in the Extrajudicial Settlement Among
Heirs, as well as the cash voucher which allegedly represents payment for taxes and
transfer of title in petitioners' name do not serve as written notes or memoranda of the
alleged verbal agreement.
The foregoing, notwithstanding, the Court finds it proper to reiterate the CA ruling that,
in any case, since respondents had already acknowledged that Sergio had, in fact,
incurred loan obligations with the DBP, they are liable to reimburse the amount paid by
Leandro for the payment of the said obligation even if such payment was made without
their knowledge or consent.
Article 1236 of the Civil Code clearly provides that:
The creditor is not bound to accept payment or performance by a third person who has
no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if
he paid without the knowledge or against the will of the debtor, he can recover only
insofar as the payment has been beneficial to the debtor. (Emphasis supplied)
Neither can respondents evade liability by arguing that they were not parties to the
contract between Sergio and the DBP. As earlier stated, the fact remains that, in the
Extrajudicial Settlement Among Heirs, respondents clearly acknowledged Sergio's loan
obligations with the DBP. Being Sergio's heirs, they succeed not only to the rights of
Sergio but also to his obligations.
The following provisions of the Civil Code are clear on this matter, to wit:
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 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. 781. The inheritance of a person includes not only the property and the transmissible
rights and obligations existing at the time of his death, but also those which have
accrued thereto since the opening of the succession.
In the present case, respondents, being heirs of Sergio, are now liable to settle his
transmissible obligations, which include the amount due to petitioners, prior to the
distribution of the remainder of Sergio's estate to them, in accordance with Section
I,10 Rule 90 of the Rules of Court.
As to when the interest on the sum due from respondents should be reckoned, the Court
finds no error in the ruling of the CA that such interest should be computed from June
23, 2001, the date when petitioners made a written demand for the payment of
respondents' obligation.11 There is no merit in petitioners' contention that the reckoning
date should have been September 23, 1994, the date when respondents executed the
Extrajudicial Settlement Among Heirs, because there is nothing therein to prove that
petitioners, at that time, made a demand for reimbursement.
However, the rate of interest should be modified in view of the issuance of Circular No.
799, Series of 2013 by the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB). The said
Circular reduced the "rate of interest for the loan or forbearance of any money, goods
or credits and the rate allowed in judgments, in the absence of an express contract as
to such rate of interest," from twelve percent (12%) to six percent (6%) per annum. The
Circular was made effective on July 1-, 2013. Hence, under the modified guidelines in
the imposition of interest, as laid down in the case of Nacar v. Gallery Frames,12 this
Court held that:
xxxx
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed,
as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of stipulation, the rate of interest
shall be 6% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached,
an interest on the amount of damages awarded may be imposed at the discretion,
of the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages, except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at which time the quantification
of damages may be deemed to have been reasonably ascertained). The .actual base
for the computation of legal interest shall, in any case, be on the amount finally
adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
(Emphasis supplied)
x x x13ChanRoblesVirtualawlibrary
The Court explained that:
[F]rom the foregoing, in the absence of an express stipulation as to the rate of interest
that would govern the parties, the rate of legal interest for loans or forbearance of any
money, goods or credits and the rate allowed in judgments shall no longer be twelve
percent (12%) per annum -as reflected in the case of Eastern Shipping Lines and
Subsection X305.1 of the Manual of Regulations for Btoks and Sections 4305Q.1, 4305S.3
and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions, before its
amendment by BSP-MB Circular No. 799 - but will now be six percent (6%) per
annum effective July 1, 2013. It should be noted, nonetheless, that the new rate could
only be applied prospectively and not retroactively. Consequently, the twelve percent
(12%) per annum legal interest shall apply only until June 3.0, 2013. Come July 1, 2013,
the new rate of six percent (6%) per annum shall be the prevailing rate of interest when
applicable.14
Thus, in accordance with the above ruling, the rate of interest on the principal amount
due to petitioners shall be 12% from June 23, 2001, the date when petitioners made a
demand for payment, to June 30, 2013. From July 1, 2013, the effective date of BSP-MB
Circular No. 799, until full satisfaction of the monetary award, the rate of interest shall be
6%.-
WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the Court of
Appeals, dated February 7, 2011 and August 25, 2011, respectively, in CA-G.R. CV No.
92840 are AFFIRMED with MODIFICATION by ORDERING respondents to pay petitioners, in
addition to the principal amount of P162,514.88, interest thereon at the rate of twelve
percent (12%) per annum, computed from June 23, 2001 to June 30, 2013, and six
percent (6%) per annum from July 1, 2013 until full satisfaction of the judgment award. 14 Id. at 456. (Italics in the original)

SO ORDERED.
THIRD DIVISION
Velasco, Jr., (Chairperson), Peralta, Perez, Reyes, and Jardeleza, JJ.,
concur.chanroblesvirtuallawlibrary

JOSELITO MUSNI PUNO G.R. No. 177066

Endnotes:
(as heir of the late Carlos Puno),
Present:
1Penned by Associate Justice Rosmari D. Carandang, witli Associate Justices Ramon R. Petitioner,
Garcia and Manuel M: Barrios, concurring. Annex "A" to Petition, rollo, pp. 5 1-69.

2Rollo, YNARES-SANTIAGO, J.,

pp. 70-73.
Chairperson,
3Id. at 121.
CHICO-NAZARIO,
4 Id. at. 67-68. (Emphasis in the original)
VELASCO, JR.,
5 Id. at 40. - versus -
NACHURA, and
6 Id. at 102-103.
PERALTA, JJ.
7 Id. at 08.

8 Dantis v. Maghinang, Jr., GR. No. 191696, April 10, 2013, 695 SCRA 599, 608-609.

9 Civil Code, Art. 1403. Promulgated:

PUNO ENTERPRISES, INC., represented by JESUSA PUNO,
10Section 1. When order for distribution of residue made. - When the debts, funeral
charges, and Respondent.
September 11, 2009
expenses of administration, the allowance to the widow, and inheritance tax, if any,
chargeable to the estate in accordance with law, have been paid, the court,, on the
application of the executor or administrator, or of a person interested in the estate, and x------------------------------------------------------------------------------------x
after hearing upon notice, shall assign the residue of the estate to the persons entitled to
the same, naming them and the proportions, or parts, to which each is entitled, and
such persons may demand and recover their respective shares from the executor or
administrator, or any other person having the same in his possession. If there is a
controversy before the court as to who are the lawful heirs of the deceased person or as
to the distributive shares to which each person is entitled under the law, the controversy DECISION
shall be heard and decided as in ordinary cases.

No distribution shall be allowed until the payment of the obligations abovementioned NACHURA, J.:
has been made or provided for, unless the distributees, or any of them, give a bond, in a
sum to be fixed by the court, conditioned for the payment of said obligations within
such time as the court directs.
Upon the death of a stockholder, the heirs do not automatically become
11 See rollo, p. 101. stockholders of the corporation; neither are they mandatorily entitled to the rights and
privileges of a stockholder. This, we declare in this petition for review on certiorari of the
12 G.R. No. 189871, August 13, 2013, 703 SCRA 439. Court of Appeals (CA) Decision[1] dated October 11, 2006 and Resolution dated March
6, 2007 in CA-G.R. CV No. 86137.
13Nacar v. Gallery Frames, supra, at 457-458.
 The facts of the case follow:
Carlos L. Puno, who died on June 25, 1963, was an incorporator of respondent
Puno Enterprises, Inc. On March 14, 2003, petitioner Joselito Musni Puno, claiming to be
an heir of Carlos L. Puno, initiated a complaint for specific performance against
respondent. Petitioner averred that he is the son of the deceased with the latters
common-law wife, Amelia Puno. As surviving heir, he claimed entitlement to the rights
and privileges of his late father as stockholder of respondent. The complaint thus prayed
that respondent allow petitioner to inspect its corporate book, render an accounting of
all the transactions it entered into from 1962, and give petitioner all the profits, earnings,
dividends, or income pertaining to the shares of Carlos L. Puno.[2]
Respondent filed a motion to dismiss on the ground that petitioner did not
have the legal personality to sue because his birth certificate names him as Joselito
Musni Muno. Apropos, there was yet a need for a judicial declaration that Joselito Musni
Puno and Joselito Musni Muno were one and the same.
The court ordered that the proceedings be held in abeyance, ratiocinating
that petitioners certificate of live birth was no proof of his paternity and relation to Carlos
L. Puno.
Petitioner submitted the corrected birth certificate with the name Joselito M.
Puno, certified by the Civil Registrar of the City of Manila, and the Certificate of Finality
thereof. To hasten the disposition of the case, the court conditionally admitted the
corrected birth certificate as genuine and authentic and ordered respondent to file its
answer within fifteen days from the order and set the case for pretrial.[3]
On October 11, 2005, the court rendered a Decision, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered ordering Jesusa
Puno and/or Felicidad Fermin to allow the plaintiff to inspect the
corporate books and records of the company from 1962 up to the
present including the financial statements of the corporation.
The costs of copying shall be shouldered by the plaintiff. Any
expenses to be incurred by the defendant to be able to comply with
this order shall be the subject of a bill of costs.
SO ORDERED.[4]
On appeal, the CA ordered the dismissal of the complaint in its Decision dated October
11, 2006. According to the CA, petitioner was not able to establish the paternity of and
his filiation to Carlos L. Puno since his birth certificate was prepared without the
intervention of and the participatory acknowledgment of paternity by Carlos L.
Puno. Accordingly, the CA said that petitioner had no right to demand that he be
allowed to examine respondents books. Moreover, petitioner was not a stockholder of
the corporation but was merely claiming rights as an heir of Carlos L. Puno, an
incorporator of the corporation. His action for specific performance therefore appeared
to be premature; the proper action to be taken was to prove the paternity of and his
filiation to Carlos L. Puno in a petition for the settlement of the estate of the latter.[5]
Petitioners motion for reconsideration was denied by the CA in its Resolution[6] dated
March 6, 2007.
In this petition, petitioner raises the following issues:
I. THE HONORABLE COURT OF APPEALS ERRED IN NOT
RULING THAT THE JOSELITO PUNO IS ENTITLED TO THE RELIEFS
DEMANDED HE BEING THE HEIR OF THE LATE CARLOS PUNO,
ONE OF THE INCORPORATORS [OF] RESPONDENT
CORPORATION.
II. HONORABLE COURT OF APPEALS ERRED IN RULING THAT
FILIATION OF JOSELITO PUNO, THE PETITIONER[,] IS NOT DULY
PROVEN OR ESTABLISHED.
III. THE HONORABLE COURT ERRED IN NOT RULING THAT
JOSELITO MUNO AND JOSELITO PUNO REFERS TO THE ONE
AND THE SAME PERSON.
IV. THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING
THAT WHAT RESPONDENT MERELY DISPUTES IS THE SURNAME
OF THE PETITIONER WHICH WAS MISSPELLED AND THE
FACTUAL ALLEGATION E.G. RIGHTS OF PETITIONER AS HEIR OF
CARLOS PUNO ARE DEEMED ADMITTED HYPOTHETICALLY IN
THE RESPONDENT[S] MOTION TO DISMISS.
V. THE HONORABLE COURT OF APPEALS THEREFORE ERRED
I[N] DECREEING THAT PETITIONER IS NOT ENTITLED TO INSPECT
THE CORPORATE BOOKS OF DEFENDANT CORPORATION.[7]
 The petition is without merit. Petitioner failed to establish the right to inspect
respondent corporations books and receive dividends on the stocks owned by Carlos L.
Puno.
Petitioner anchors his claim on his being an heir of the deceased
stockholder. However, we agree with the appellate court that petitioner was not able to
prove satisfactorily his filiation to the deceased stockholder; thus, the former cannot
claim to be an heir of the latter.
Incessantly, we have declared that factual findings of the CA supported by
substantial evidence, are conclusive and binding.[8] In an appeal via certiorari, the
Court may not review the factual findings of the CA. It is not the Courts function under
Rule 45 of the Rules of Court to review, examine, and evaluate or weigh the probative
value of the evidence presented.[9]
A certificate of live birth purportedly identifying the putative father is not
competent evidence of paternity when there is no showing that the putative father had
a hand in the preparation of the certificate. The local civil registrar has no authority to
record the paternity of an illegitimate child on the information of a third person.[10] As
correctly observed by the CA, only petitioners mother supplied the data in the birth
certificate and signed the same. There was no evidence that Carlos L. Puno
acknowledged petitioner as his son.
As for the baptismal certificate, we have already decreed that it can only
serve as evidence of the administration of the sacrament on the date specified but not
of the veracity of the entries with respect to the childs paternity.[11]
In any case, Sections 74 and 75 of the Corporation Code enumerate the
persons who are entitled to the inspection of corporate books, thus
Sec. 74. Books to be kept; stock transfer agent. x x x.
The records of all business transactions of the corporation
and the minutes of any meeting shall be open to the inspection of
any director, trustee, stockholder or member of the corporation at
reasonable hours on business days and he may demand, in writing,
for a copy of excerpts from said records or minutes, at his expense.
xxxx
Sec. 75. Right to financial statements. Within ten (10) days
from receipt of a written request of any stockholder or member, the
corporation shall furnish to him its most recent financial statement,
which shall include a balance sheet as of the end of the last taxable
year and a profit or loss of statement for said taxable year, showing in
reasonable detail its assets and liabilities and the result of its
operations.[12]
The stockholders right of inspection of the corporations books and records is
based upon his ownership of shares in the corporation and the necessity for self-
protection. After all, a shareholder has the right to be intelligently informed about
corporate affairs.[13] Such right rests upon the stockholders underlying ownership of the
corporations assets and property.[14]
Similarly, only stockholders of record are entitled to receive dividends declared
by the corporation, a right inherent in the ownership of the shares.[15]
Upon the death of a shareholder, the heirs do not automatically become
stockholders of the corporation and acquire the rights and privileges of the deceased
as shareholder of the corporation. The stocks must be distributed first to the heirs in
estate proceedings, and the transfer of the stocks must be recorded in the books of the
corporation. Section 63 of the Corporation Code provides that no transfer shall be valid,
except as between the parties, until the transfer is recorded in the books of the
corporation.[16] During such interim period, the heirs stand as the equitable owners of the
stocks, the executor or administrator duly appointed by the court being vested with the
legal title to the stock.[17]Until a settlement and division of the estate is effected, the
stocks of the decedent are held by the administrator or executor.[18] Consequently,
during such time, it is the administrator or executor who is entitled to exercise the rights
of the deceased as stockholder.
Thus, even if petitioner presents sufficient evidence in this case to establish that
he is the son of Carlos L. Puno, he would still not be allowed to inspect respondents
books and be entitled to receive dividends from respondent, absent any showing in its
transfer book that some of the shares owned by Carlos L. Puno were transferred to him.
This would only be possible if petitioner has been recognized as an heir and has
participated in the settlement of the estate of the deceased.
Corollary to this is the doctrine that a determination of whether a person,
claiming proprietary rights over the estate of a deceased person, is an heir of the
deceased must be ventilated in a special proceeding instituted precisely for the
purpose of settling the estate of the latter. The status of an illegitimate child who claims
to be an heir to a decedents estate cannot be adjudicated in an ordinary civil action,
as in a case for the recovery of property.[19] The doctrine applies to the instant case,
which is one for specific performance to direct respondent corporation to allow
petitioner to exercise rights that pertain only to the deceased and his representatives.
DIOSDADO M. PERALTA

Associate Justice
WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals
Decision dated October 11, 2006 and Resolution dated March 6, 2007 are AFFIRMED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

ATTESTATION

WE CONCUR:
I attest that the conclusions in the above Decision were reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO

Associate Justice
CONSUELO YNARES-SANTIAGO
Chairperson
Associate Justice

Chairperson, Third Division

MINITA V. CHICO-NAZARIO PRESBITERO J. VELASCO, JR.

CERTIFICATION
Associate Justice Associate Justice

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's
Attestation, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Courts
Division.
 OSCAR C. REYES, G.R. No. 165744
Petitioner,

Present:
REYNATO S. PUNO

Chief Justice
QUISUMBING, J., Chairperson,
*CORONA,

- versus - CARPIO MORALES,

[1] Penned by Associate Justice Conrado M. Vasquez, Jr. (now Presiding Justice of the VELASCO, JR., and
Court of Appeals) with Associate Justices Mariano C. del Castillo (now Associate Justice
of the Supreme Court) and Santiago Javier Ranada, concurring; rollo,pp. 28-36. BRION, JJ.
[2] Records, pp. 1-4.
[3] Id. at 96.
[4] Rollo, p. 30.
[5] Id. at 31-35.
[6] CA rollo, pp. 90-91.
HON. REGIONAL TRIAL COURT OF MAKATI, Branch Promulgated:
[7] Rollo, pp. 21-22.
142, ZENITH INSURANCE CORPORATION, and
[8] Fernandez v. Tarun, 440 Phil. 334, 349 (2002).
RODRIGO C. REYES,
[9] Social Security System v. Aguas, G.R. No. 165546, February 27, 2006, 483 SCRA 383,

395-396. Respondents. August 11, 2008

[10] Cabatania v. Court of Appeals, 484 Phil. 42, 51 (2004).
[11] Id.
[12] Emphasis supplied.
[13] 5A Fletcher Cyclopedia of the Law of Private Corporations, 2213. x -------------------------------------------------------------------------------------------x
[14] Gokongwei, Jr. v. Securities and Exchange Commission, 178 Phil. 266, 314 (1979).
[15] Cesar Villanueva, Philippine Corporate Law, p. 259, citing Nielson & Co., Inc. v.

Lepanto Consolidated Mining Co., 26 SCRA 540 (1968); Lopez, Rosario, the Corporation
Code of the Philippines, p. 617, citing Knight v. Schultz, 141 Ohio St. 267, 47 NE (2d) 286. DECISION
[16] Rosario Lopez, The Corporation Code of the Philippines, Vol. 2, p. 718, citing Miguel

A.B. Sison et al v. Hon. Agellon et al, SEC-EB No. 293, November 23, 1992.
[17] 5A Fletcher Cyclopedia of the Law of Private Corporations., 2213.
[18] Tan v. Sycip, G.R. No. 153468, August 17, 2006, 499 SCRA 216, 231. BRION, J.:
[19] Joaquino v. Reyes, G.R. No. 154645, July 13, 2004, 434 SCRA 260, 274.

SECOND DIVISION
This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to
set aside the Decision of the Court of Appeals (CA)[1] promulgated on May 26, 2004 in
CA-G.R. SP No. 74970. The CA Decision affirmed the Order of the Regional Trial Court
(RTC), Branch 142, Makati City dated November 29, 2002[2] in Civil Case No. 00-1553
(entitled "Accounting of All Corporate Funds and Assets, and Damages") which denied
petitioner Oscar C. Reyes (Oscar) Motion to Declare Complaint as Nuisance or
Harassment Suit.

BACKGROUND FACTS
Oscar and private respondent Rodrigo C. Reyes (Rodrigo) are two of the four children of
the spouses Pedro and Anastacia Reyes. Pedro, Anastacia, Oscar, and Rodrigo each
owned shares of stock of Zenith Insurance Corporation (Zenith), a domestic corporation
established by their family. Pedro died in 1964, while Anastacia died in 1993. Although
Pedros estate was judicially partitioned among his heirs sometime in the 1970s, no similar
settlement and partition appear to have been made with Anastacias estate, which
included her shareholdings in Zenith. As of June 30, 1990, Anastacia owned 136,598
shares of Zenith; Oscar and Rodrigo owned 8,715,637 and 4,250 shares, respectively.[3]
and/or possession of the respondent [herein petitioner Oscar] with
prayer to appoint a management committee; and b) an action for
determination of the shares of stock of deceased spouses Pedro and
Anastacia Reyes allegedly taken by respondent, its accounting and
the corresponding delivery of these shares to the parties brothers and
sisters. The latter is not a derivative suit and should properly be
threshed out in a petition for settlement of estate.

Accordingly, the motion is denied. However, only the derivative suit

On May 9, 2000, Zenith and Rodrigo filed a complaint[4] with the Securities and Exchange consisting of the first cause of action will be taken cognizance of by
Commission (SEC) against Oscar, docketed as SEC Case No. 05-00-6615. The complaint this Court.[10]
stated that it is a derivative suit initiated and filed by the complainant Rodrigo C.
Reyes to obtain an accounting of the funds and assets of ZENITH INSURANCE
CORPORATION which are now or formerly in the control, custody, and/or possession of
respondent [herein petitioner Oscar] and to determine the shares of stock of deceased
spouses Pedro and Anastacia Reyes that were arbitrarily and fraudulently appropriated
Oscar thereupon went to the CA on a petition for certiorari, prohibition,
[by Oscar] for himself [and] which were not collated and taken into account in the
and mandamus[11] and prayed that the RTC Order be annulled and set aside and that
partition, distribution, and/or settlement of the estate of the deceased spouses, for which
the trial court be prohibited from continuing with the proceedings. The appellate court
he should be ordered to account for all the income from the time he took these shares
affirmed the RTC Order and denied the petition in its Decision dated May 26, 2004. It
of stock, and should now deliver to his brothers and sisters their just and respective
likewise denied Oscars motion for reconsideration in a Resolution dated October 21,
shares.[5] [Emphasis supplied.]
2004.

In his Answer with Counterclaim,[6] Oscar denied the charge that he illegally acquired
Petitioner now comes before us on appeal through a petition for review
the shares of Anastacia Reyes. He asserted, as a defense, that he purchased the subject
on certiorari under Rule 45 of the Rules of Court.
shares with his own funds from the unissued stocks of Zenith, and that the suit is not
a bona fide derivative suit because the requisites therefor have not been complied
with. He thus questioned the SECs jurisdiction to entertain the complaint because it
pertains to the settlement of the estate of Anastacia Reyes.

ASSIGNMENT OF ERRORS

When Republic Act (R.A.) No. 8799[7] took effect, the SECs exclusive and original
jurisdiction over cases enumerated in Section 5 of Presidential Decree (P.D.) No. 902-A
was transferred to the RTC designated as a special commercial court.[8] The records of Petitioner Oscar presents the following points as conclusions the CA should have made:
Rodrigos SEC case were thus turned over to the RTC, Branch 142, Makati, and docketed
as Civil Case No. 00-1553.
1. that the complaint is a mere nuisance or harassment suit that
should be dismissed under the Interim Rules of Procedure of Intra-
On October 22, 2002, Oscar filed a Motion to Declare Complaint as Nuisance or Corporate Controversies; and
Harassment Suit.[9] He claimed that the complaint is a mere nuisance or harassment suit
and should, according to the Interim Rules of Procedure for Intra-Corporate 2. that the complaint is not a bona fide derivative suit but is in fact
Controversies, be dismissed; and that it is not a bona fide derivative suit as it partakes of in the nature of a petition for settlement of estate; hence, it is
the nature of a petition for the settlement of estate of the deceased Anastacia that is outside the jurisdiction of the RTC acting as a special
outside the jurisdiction of a special commercial court. The RTC, in its Order commercial court.
dated November 29, 2002 (RTC Order), denied the motion in part and declared:

Accordingly, he prays for the setting aside and annulment of the CA decision and
A close reading of the Complaint disclosed the presence of two (2) resolution, and the dismissal of Rodrigos complaint before the RTC.
causes of action, namely: a) a derivative suit for accounting of the
funds and assets of the corporation which are in the control, custody,
 THE COURTS RULING
We find the petition meritorious.
The core question for our determination is whether the trial court, sitting as a special
commercial court, has jurisdiction over the subject matter of Rodrigos complaint. To
resolve it, we rely on the judicial principle that jurisdiction over the subject matter of a
case is conferred by law and is determined by the allegations of the complaint,
irrespective of whether the plaintiff is entitled to all or some of the claims asserted
therein.[12]
JURISDICTION OF SPECIAL COMMERCIAL COURTS
P.D. No. 902-A enumerates the cases over which the SEC (now the RTC acting as a
special commercial court) exercises exclusive jurisdiction:
SECTION 5. In addition to the regulatory and
adjudicative functions of the Securities and Exchange
Commission over corporations, partnership, and other
forms of associations registered with it as expressly
granted under existing laws and decrees, it shall have
original and exclusive jurisdiction to hear and decide
cases involving:
a) Devices or schemes
employed by or any acts of the board
of directors, business associates, its
officers or partners, amounting to fraud
and misrepresentation which may be
detrimental to the interest of the public
and/or of the stockholders, partners,
members of associations or
organizations registered with the
Commission.
b) Controversies arising out
of intra-corporate or partnership
relations, between and among
stockholders, members, or associates;
between any or all of them and the
corporation, partnership or association
of which they are stockholders,
members, or associates, respectively;
and between such corporation,
partnership or association and the
State insofar as it concerns their
individual franchise or right to exist as
such entity; and
c) Controversies in the
election or appointment of directors,
trustees, officers, or managers of such
corporations, partnerships, or
associations.
The allegations set forth in Rodrigos complaint principally invoke Section 5, paragraphs
(a) and (b) above as basis for the exercise of the RTCs special court jurisdiction. Our
focus in examining the allegations of the complaint shall therefore be on these two
provisions.
Fraudulent Devices and Schemes
The rule is that a complaint must contain a plain, concise, and direct statement of the
ultimate facts constituting the plaintiffs cause of action and must specify the relief
sought.[13]Section 5, Rule 8 of the Revised Rules of Court provides that in all averments of
fraud or mistake, the circumstances constituting fraud or mistake must be stated with
particularity.[14] These rules find specific application to Section 5(a) of P.D. No. 902-A
which speaks of corporate devices or schemes that amount to fraud or
misrepresentation detrimental to the public and/or to the stockholders.
In an attempt to hold Oscar responsible for corporate fraud, Rodrigo alleged in the
complaint the following:
3. This is a complaintto determine the shares of stock of
the deceased spouses Pedro and Anastacia Reyes that
were arbitrarily and fraudulently appropriated for himself
[herein petitioner Oscar] which were not collated and
taken into account in the partition, distribution, and/or
settlement of the estate of the deceased Spouses Pedro
and Anastacia Reyes, for which he should be ordered
to account for all the income from the time he took
these shares of stock, and should now deliver to his
brothers and sisters their just and respective shares with
the corresponding equivalent amount of P7,099,934.82
plus interest thereon from 1978 representing his
obligations to the Associated Citizens Bank that was
paid for his account by his late mother, Anastacia C.
Reyes. This amount was not collated or taken into
account in the partition or distribution of the estate of
their late mother, Anastacia C. Reyes.
 3.1. Respondent Oscar C. Reyes, through other
schemes of fraud including misrepresentation,
unilaterally, and for his own benefit, capriciously
transferred and took possession and control of the
management of Zenith Insurance Corporation which is
considered as a family corporation, and other
properties and businesses belonging to Spouses Pedro
and Anastacia Reyes.
xxxx
4.1. During the increase of capitalization of
Zenith Insurance Corporation, sometime in 1968, the
property covered by TCT No. 225324 was illegally and
fraudulently used by respondent as a collateral.
xxxx
5. The complainant Rodrigo C. Reyes
discovered that by some manipulative scheme, the
shareholdings of their deceased mother, Doa Anastacia
C. Reyes, shares of stocks and [sic] valued in the
corporate books at P7,699,934.28, more or
less, excluding interest and/or dividends, had been
transferred solely in the name of respondent. By such
fraudulent manipulations and misrepresentation, the
shareholdings of said respondent Oscar C. Reyes
abruptly increased to P8,715,637.00 [sic] and becomes
[sic] the majority stockholder of Zenith Insurance
Corporation, which portion of said shares must be
distributed equally amongst the brothers and sisters of
the respondent Oscar C. Reyes including the
complainant herein.
xxxx
9.1 The shareholdings of deceased Spouses Pedro Reyes
and Anastacia C. Reyes valued at P7,099,934.28
were illegally and fraudulently transferred solely to the
respondents [herein petitioner Oscar] name and
installed himself as a majority stockholder of
Zenith Insurance Corporation [and] thereby deprived his
brothers and sisters of their respective equal shares
thereof including complainant hereto.
xxxx
10.1 By refusal of the respondent to account of his [sic]
shareholdings in the company, he illegally and
fraudulently transferred solely in his name wherein [sic]
the shares of stock of the deceased Anastacia C. Reyes
[which] must be properly collated and/or distributed
equally amongst the children, including the
complainant Rodrigo C. Reyes herein, to their damage
and prejudice.
xxxx
11.1 By continuous refusal of the respondent to account
of his [sic] shareholding with Zenith Insurance
Corporation[,] particularly the number of shares of
stocks illegally and fraudulently transferred to him from
their deceased parents Sps. Pedro and Anastacia
Reyes[,] which are all subject for collation and/or
partition in equal shares among their children. [Emphasis
supplied.]
Allegations of deceit, machination, false pretenses, misrepresentation, and threats are
largely conclusions of law that, without supporting statements of the facts to which the
allegations of fraud refer, do not sufficiently state an effective cause of action.[15] The
late Justice Jose Feria, a noted authority in Remedial Law, declared that fraud and
mistake are required to be averred with particularity in order to enable the opposing
party to controvert the particular facts allegedly constituting such fraud or mistake.[16]
Tested against these standards, we find that the charges of fraud against Oscar were
not properly supported by the required factual allegations. While the complaint
contained allegations of fraud purportedly committed by him, these allegations are not
particular enough to bring the controversy within the special commercial courts
jurisdiction; they are not statements of ultimate facts, but are mere conclusions of law:
how and why the alleged appropriation of shares can be characterized as illegal and
fraudulent were not explained nor elaborated on.
Not every allegation of fraud done in a corporate setting or perpetrated by corporate
officers will bring the case within the special commercial courts jurisdiction. To fall within
this jurisdiction, there must be sufficient nexus showing that the corporations nature,
structure, or powers were used to facilitate the fraudulent device or scheme. Contrary
to this concept, the complaint presented a reverse situation. No corporate power or
office was alleged to have facilitated the transfer of the shares; rather, Oscar, as an
individual and without reference to his corporate personality, was alleged to have
transferred the shares of Anastacia to his name, allowing him to become the majority
and controlling stockholder of Zenith, and eventually, the corporations President. This is
the essence of the complaint read as a whole and is particularly demonstrated under
the following allegations:
5. The complainant Rodrigo C. Reyes
discovered that by some manipulative scheme, the
shareholdings of their deceased mother, Doa Anastacia
C. Reyes, shares of stocks and [sic] valued in the
corporate books at P7,699,934.28, more or less,
excluding interest and/or dividends, had been
transferred solely in the name of respondent. By such
fraudulent manipulations and misrepresentation, the
shareholdings of said respondent Oscar C. Reyes
abruptly increased to P8,715,637.00 [sic] and becomes
[sic] the majority stockholder of Zenith Insurance
Corporation, which portion of said shares must be
distributed equally amongst the brothers and sisters of
the respondent Oscar C. Reyes including the
complainant herein.
xxxx
9.1 The shareholdings of deceased Spouses Pedro Reyes
and Anastacia C. Reyes valued at
P7,099,934.28 were illegally and fraudulently transferred
solely to the respondents [herein petitioner Oscar] name
and installed himself as a majority stockholder of
Zenith Insurance Corporation [and] thereby deprived his
brothers and sisters of their respective equal shares
thereof including complainant hereto. [Emphasis
supplied.]
In ordinary cases, the failure to specifically allege the fraudulent acts does not
constitute a ground for dismissal since such defect can be cured by a bill of
particulars. In cases governed by the Interim Rules of Procedure on Intra-Corporate
Controversies, however, a bill of particulars is a prohibited pleading.[17] It is essential,
therefore, for the complaint to show on its face what are claimed to be the fraudulent
corporate acts if the complainant wishes to invoke the courts special commercial
jurisdiction.
We note that twice in the course of this case, Rodrigo had been given the opportunity
to study the propriety of amending or withdrawing the complaint, but he consistently
refused. The courts function in resolving issues of jurisdiction is limited to the review of the
allegations of the complaint and, on the basis of these allegations, to the determination
of whether they are of such nature and subject that they fall within the terms of the law
defining the courts jurisdiction. Regretfully, we cannot read into the complaint any
specifically alleged corporate fraud that will call for the exercise of the courts special
commercial jurisdiction. Thus, we cannot affirm the RTCs assumption of jurisdiction over
Rodrigos complaint on the basis of Section 5(a) of P.D. No. 902-A.[18]
Intra-Corporate Controversy
A review of relevant jurisprudence shows a development in the Courts approach in
classifying what constitutes an intra-corporate controversy. Initially, the main
consideration in determining whether a dispute constitutes an intra-corporate
controversy was limited to a consideration of the intra-corporate relationship existing
between or among the parties.[19] The types of relationships embraced under Section
5(b), as declared in the case of Union Glass & Container Corp. v. SEC,[20] were as follows:
a) between the corporation, partnership, or association
and the public;
b) between the corporation, partnership, or association
and its stockholders, partners, members, or officers;
c) between the corporation, partnership, or association
and the State as far as its franchise, permit or license to
operate is concerned; and
d) among the stockholders, partners, or associates
themselves. [Emphasis supplied.]
The existence of any of the above intra-corporate relations was sufficient to
confer jurisdiction to the SEC, regardless of the subject matter of the dispute. This came
to be known as the relationship test.
However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve,
Inc.,[21] the Court introduced the nature of the controversy test. We declared in this case
that it is not the mere existence of an intra-corporate relationship that gives rise to an
intra-corporate controversy; to rely on the relationship test alone will divest the regular
courts of their jurisdiction for the sole reason that the dispute involves a corporation, its
directors, officers, or stockholders. We saw that there is no legal sense in disregarding or
minimizing the value of the nature of the transactions which gives rise to the dispute.
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intra-
corporate.[22] The controversy must not only be rooted in the existence of an intra-
corporate relationship, but must as well pertain to the enforcement of the parties
correlative rights and obligations under the Corporation Code and the internal and
intra-corporate regulatory rules of the corporation. If the relationship and its incidents
are merely incidental to the controversy or if there will still be conflict even if the
relationship does not exist, then no intra-corporate controversy exists.
The Court then combined the two tests and declared that jurisdiction should be
determined by considering not only the status or relationship of the parties, but also the
nature of the question under controversy.[23] This two-tier test was adopted in the recent
case of Speed Distribution, Inc. v. Court of Appeals:[24]
To determine whether a case involves an intra-
corporate controversy, and is to be heard and decided
by the branches of the RTC specifically designated by
the Court to try and decide such cases, two elements
must concur: (a) the status or relationship of the parties;
and (2) the nature of the question that is the subject of
their controversy.
The first element requires that the controversy must
arise out of intra-corporate or partnership relations
between any or all of the parties and the corporation,
partnership, or association of which they are
stockholders, members or associates; between any or
all of them and the corporation, partnership, or
association of which they are stockholders, members, or
associates, respectively; and between such
corporation, partnership, or association and the State
insofar as it concerns their individual franchises. The
second element requires that the dispute among the
parties be intrinsically connected with the regulation of
the corporation. If the nature of the controversy involves
matters that are purely civil in character, necessarily, the
case does not involve an intra-corporate controversy.
Given these standards, we now tackle the question posed for our determination under
the specific circumstances of this case:
Application of the Relationship Test
Is there an intra-corporate relationship between the parties that would characterize the
case as an intra-corporate dispute?
We point out at the outset that while Rodrigo holds shares of stock in Zenith, he holds
them in two capacities: in his own right with respect to the 4,250 shares registered in his
name, and as one of the heirs of Anastacia Reyes with respect to the 136,598 shares
registered in her name. What is material in resolving the issues of this case under the
allegations of the complaint is Rodrigos interest as an heir since the subject matter of the
present controversy centers on the shares of stocks belonging to Anastacia, not on
Rodrigos personally-owned shares nor on his personality as shareholder owning these
shares. In this light, all reference to shares of stocks in this case shall pertain to the
shareholdings of the deceased Anastacia and the parties interest therein as her heirs.
Article 777 of the Civil Code declares that the successional rights are transmitted from
the moment of death of the decedent. Accordingly, upon Anastacias death, her
children acquired legal title to her estate (which title includes her shareholdings in
Zenith), and they are, prior to the estates partition, deemed co-owners thereof.[25] This
status as co-owners, however, does not immediately and necessarily make them
stockholders of the corporation. Unless and until there is compliance with Section 63 of
the Corporation Code on the manner of transferring shares, the heirs do not become
registered stockholders of the corporation. Section 63 provides:
Section 63. Certificate of stock and transfer of shares.
The capital stock of stock corporations shall be divided
into shares for which certificates signed by the president
or vice-president, countersigned by the secretary or
assistant secretary, and sealed with the seal of the
corporation shall be issued in accordance with the by-
laws. Shares of stock so issued are personal property
and may be transferred by delivery of the certificate or
certificates indorsed by the owner or his attorney-in-fact
or other person legally authorized to make the
transfer. No transfer, however, shall be valid, except as
between the parties, until the transfer is recorded in the
books of the corporation so as to show the names of the
parties to the transaction, the date of the transfer, the
number of the certificate or certificates, and the number
of shares transferred. [Emphasis supplied.]
No shares of stock against which the corporation holds
any unpaid claim shall be transferable in the books of
the corporation.
Simply stated, the transfer of title by means of succession, though effective and valid
between the parties involved (i.e., between the decedents estate and her heirs), does
not bind the corporation and third parties. The transfer must be registered in the books
of the corporation to make the transferee-heir a stockholder entitled to recognition as
such both by the corporation and by third parties.[26]

We note, in relation with the above statement, that in Abejo v. Dela Cruz[27]
and TCL
Sales Corporation v. Court of Appeals[28] we did not require the registration of the
transfer before considering the transferee a stockholder of the corporation (in effect
upholding the existence of an intra-corporate relation between the parties and bringing
the case within the jurisdiction of the SEC as an intra-corporate controversy). A marked
difference, however, exists between these cases and the present one.
In Abejo and TCL Sales, the transferees held definite and uncontested titles to a
specific number of shares of the corporation; after the transferee had established prima
facie ownership over the shares of stocks in question, registration became a mere
formality in confirming their status as stockholders. In the present case, each of
Anastacias heirs holds only an undivided interest in the shares. This interest, at this point,
is still inchoate and subject to the outcome of a settlement proceeding; the right of the
heirs to specific, distributive shares of inheritance will not be determined until all the
debts of the estate of the decedent are paid. In short, the heirs are only entitled to what
remains after payment of the decedents debts;[29] whether there will be residue remains
to be seen. Justice Jurado aptly puts it as follows:
No succession shall be declared unless and until a
liquidation of the assets and debts left by the decedent
shall have been made and all his creditors are fully
paid. Until a final liquidation is made and all the debts
are paid, the right of the heirs to inherit remains
inchoate. This is so because under our rules of
procedure, liquidation is necessary in order to
determine whether or not the decedent has left any
liquid assets which may be transmitted to his
heirs.[30] [Emphasis supplied.]
Rodrigo must, therefore, hurdle two obstacles before he can be considered a
stockholder of Zenith with respect to the shareholdings originally belonging to
Anastacia. First, he must prove that there are shareholdings that will be left to him and
his co-heirs, and this can be determined only in a settlement of the decedents
estate. No such proceeding has been commenced to date. Second, he must register
the transfer of the shares allotted to him to make it binding against the corporation. He
cannot demand that this be done unless and until he has established his specific
allotment (and prima facie ownership) of the shares. Without the settlement of
Anastacias estate, there can be no definite partition and distribution of the estate to the
heirs. Without the partition and distribution, there can be no registration of the
transfer. And without the registration, we cannot consider the transferee-heir a
stockholder who may invoke the existence of an intra-corporate relationship as premise
for an intra-corporate controversy within the jurisdiction of a special commercial court.
In sum, we find that insofar as the subject shares of stock (i.e., Anastacias shares) are
concerned Rodrigo cannot be considered a stockholder of Zenith. Consequently, we
cannot declare that an intra-corporate relationship exists that would serve as basis to
bring this case within the special commercial courts jurisdiction under Section 5(b) of PD
902-A, as amended. Rodrigos complaint, therefore, fails the relationship test.
Application of the Nature of Controversy Test
The body rather than the title of the complaint determines the nature of an
action.[31] Our examination of the complaint yields the conclusion that, more than
anything else, the complaint is about the protection and enforcement of successional
rights. The controversy it presents is purely civil rather than corporate, although it is
denominated as a complaint for accounting of all corporate funds and assets.
Contrary to the findings of both the trial and appellate courts, we read only one cause
of action alleged in the complaint. The derivative suit for accounting of the funds and
assets of the corporation which are in the control, custody, and/or possession of the
respondent [herein petitioner Oscar] does not constitute a separate cause of action but
is, as correctly claimed by Oscar, only an incident to the action for determination of the
shares of stock of deceased spouses Pedro and Anastacia Reyes allegedly taken by
respondent, its accounting and the corresponding delivery of these shares to the parties
brothers and sisters. There can be no mistake of the relationship between the
accounting mentioned in the complaint and the objective of partition and distribution
when Rodrigo claimed in paragraph 10.1 of the complaint that:
10.1 By refusal of the respondent to account of [sic] his
shareholdings in the company, he illegally and
fraudulently transferred solely in his name wherein [sic]
the shares of stock of the deceased Anastacia C. Reyes
[which] must be properly collated and/or distributed
equally amongst the children including the
complainant Rodrigo C. Reyes herein to their damage
and prejudice.
We particularly note that the complaint contained no sufficient allegation that justified
the need for an accounting other than to determine the extent of Anastacias
shareholdings for purposes of distribution.
Another significant indicator that points us to the real nature of the complaint are
Rodrigos repeated claims of illegal and fraudulent transfers of Anastacias shares by
Oscar to the prejudice of the other heirs of the decedent; he cited these allegedly
fraudulent acts as basis for his demand for the collation and distribution of Anastacias
shares to the heirs.These claims tell us unequivocally that the present controversy arose
from the parties relationship as heirs of Anastacia and not as shareholders of
Zenith. Rodrigo, in filing the complaint, is enforcing his rights as a co-heir and not as a
stockholder of Zenith. The injury he seeks to remedy is one suffered by an heir (for the
impairment of his successional rights) and not by the corporation nor by Rodrigo as a
shareholder on record.
More than the matters of injury and redress, what Rodrigo clearly aims to accomplish
through his allegations of illegal acquisition by Oscar is the distribution of Anastacias
shareholdings without a prior settlement of her estate an objective that, by law and
established jurisprudence, cannot be done. The RTC of Makati, acting as a special
commercial court, has no jurisdiction to settle, partition, and distribute the estate of a
deceased. A relevant provision Section 2 of Rule 90 of the Revised Rules of Court that
contemplates properties of the decedent held by one of the heirs declares:
Questions as to advancement made or alleged to have
been made by the deceased to any heir may be heard
and determined by the court having jurisdiction of the
estate proceedings; and the final order of the court
thereon shall be binding on the person raising the
questions and on the heir. [Emphasis supplied.]
Worth noting are this Courts statements in the case of Natcher v. Court of Appeals:[32]
Matters which involve settlement and distribution of the
estate of the decedent fall within the exclusive province
of the probate court in the exercise of its limited
jurisdiction.
xxxx
It is clear that trial courts trying an ordinary action
cannot resolve to perform acts pertaining to a special
proceeding because it is subject to specific prescribed
rules. [Emphasis supplied.]
That an accounting of the funds and assets of Zenith to determine the extent and value
of Anastacias shareholdings will be undertaken by a probate court and not by a special
commercial court is completely consistent with the probate courts limited jurisdiction. It
has the power to enforce an accounting as a necessary means to its authority to
determine the properties included in the inventory of the estate to be administered,
divided up, and distributed. Beyond this, the determination of title or ownership over the
subject shares (whether belonging to Anastacia or Oscar) may be conclusively
settled by the probate court as a question of collation or advancement. We had
occasion to recognize the courts authority to act on questions of title or ownership in a
collation or advancement situation in Coca v. Pangilinan[33] where we ruled:
It should be clarified that whether a particular matter should be
resolved by the Court of First Instance in the exercise of its general
jurisdiction or of its limited probate jurisdiction is in reality not a
jurisdictional question. In essence, it is a procedural question involving
a mode of practice "which may be waived."
As a general rule, the question as to title to property should not be
passed upon in the testate or intestate proceeding. That question
should be ventilated in a separate action. That general rule has
qualifications or exceptions justified by expediency and
convenience.
Thus, the probate court may provisionally pass upon in an intestate or
testate proceeding the question of inclusion in, or exclusion from, the
inventory of a piece of property without prejudice to its final
determination in a separate action.
Although generally, a probate court may not decide a question of
title or ownership, yet if the interested parties are all heirs, or the
question is one of collation or advancement, or the parties consent to
the assumption of jurisdiction by the probate court and the rights of
third parties are not impaired, the probate court is competent to
decide the question of ownership. [Citations omitted. Emphasis
supplied.]
In sum, we hold that the nature of the present controversy is not one which may be
classified as an intra-corporate dispute and is beyond the jurisdiction of the special
commercial court to resolve. In short, Rodrigos complaint also fails the nature of the
controversy test.
DERIVATIVE SUIT
Rodrigos bare claim that the complaint is a derivative suit will not suffice to confer
jurisdiction on the RTC (as a special commercial court) if he cannot comply with the
requisites for the existence of a derivative suit. These requisites are:
a. the party bringing suit should be a shareholder during
the time of the act or transaction complained of, the
number of shares not being material;
In summary, whether as an individual or as a derivative suit, the RTC sitting as special
commercial court has no jurisdiction to hear Rodrigos complaint since what is involved is
the determination and distribution of successional rights to the shareholdings of
Anastacia Reyes. Rodrigos proper remedy, under the circumstances, is to institute a
special proceeding for the settlement of the estate of the deceased Anastacia Reyes, a
move that is not foreclosed by the dismissal of his present complaint.

b. the party has tried to exhaust intra-corporate

remedies, i.e., has made a demand on the board of WHEREFORE, we hereby GRANT the petition and REVERSE the decision of the Court of
directors for the appropriate relief, but the latter has Appeals dated May 26, 2004 in CA-G.R. SP No. 74970. The complaint before the
failed or refused to heed his plea; and Regional Trial Court, Branch 142, Makati, docketed as Civil Case No. 00-1553, is
ordered DISMISSED for lack of jurisdiction.
c. the cause of action actually devolves on the
corporation; the wrongdoing or harm having been or
being caused to the corporation and not to the
particular stockholder bringing the suit.[34]
SO ORDERED.

Based on these standards, we hold that the allegations of the present complaint do not ARTURO D. BRION
amount to a derivative suit.
Associate Justice

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

LEONARDO A. QUISUMBING
Associate Justice
Second, in order that a stockholder may show a right to sue on behalf of the
corporation, he must allege with some particularity in his complaint that he has Chairperson
exhausted his remedies within the corporation by making a sufficient demand upon the
directors or other officers for appropriate relief with the expressed intent to sue if relief is
denied.[35]Paragraph 8 of the complaint hardly satisfies this requirement since what the
rule contemplates is the exhaustion of remedies within the corporate setting:

8. As members of the same family,

complainant Rodrigo C. Reyes has resorted [to] and
exhausted all legal means of resolving the dispute with RENATO C. CORONA CONCHITA CARPIO MORALES
the end view of amicably settling the case, but the
Associate Justice Associate Justice
dispute between them ensued.

Lastly, we find no injury, actual or threatened, alleged to have been done to the
corporation due to Oscars acts. If indeed he illegally and fraudulently transferred
Anastacias shares in his own name, then the damage is not to the corporation but to his
co-heirs; the wrongful transfer did not affect the capital stock or the assets of Zenith. As
already mentioned, neither has Rodrigo alleged any particular cause or wrongdoing PRESBITERO J. VELASCO, JR.
against the corporation that he can champion in his capacity as a shareholder on
record.[36] Associate Justice
 [6] Id., pp. 92-115.
[7] Section 5.2 thereof states: The Commissions jurisdiction over all cases enumerated
under Section 5 of P.D. No. 902-A is hereby transferred to the courts of general
jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme
Court in the exercise of its authority may designate the Regional Trial Court
ATTESTATION branches that shall exercise jurisdiction over these cases. x x x.
[8] Per A.M. No. 00-11-03 SC dated November 21, 2000.

I attest that the conclusions in the above Decision had been reached in consultation
[9] Rollo, pp. 119-132.
before the case was assigned to the writer of the opinion of the Courts Division. [10] Supra note 2.
[11] Under Rule 65 of the Revised Rules of Court, rollo, pp. 11-49.
[12] Speed Distributing Corp. v. Court of Appeals, G.R. No. 149351, March 17, 2004, 425
SCRA 691; Intestate Estate of Alexander Ty v. Court of Appeals, G.R. No. 112872,
April 19, 2001, 356 SCRA 661.
[13] See REVISED RULES OF COURT, Rule 6, Section 1; Rule 7 Section 2(c); and Rule 8,
LEONARDO A. QUISUMBING Section 1.
[14] Abad v. CFI Pangasinan, G.R. No. 58507-08, February 26, 1992, 206 SCRA 567, 580.
Associate Justice [15] Santos v. Liwag, G.R. No. L-24238, November 28, 1980, 101 SCRA 327.
Chairperson [16] Civil Procedure Annotated, Vol. 1 (2001 ed.), p. 303.
[17] Rule 1, Section 8(2).
[18] Referring specifically to corporate fraud; see quoted provision at page 5 hereof.
CERTIFICATION [19] See Sunset View Condominium Corp. v. Campos, Jr., 104 SCRA 295; Philex Mining
Corp. v. Reyes, 118 SCRA 502; Desa Enterprises, Inc. v. SEC, 117 SCRA 321.
[20] G.R. No. 64013, November 28, 1983, 126 SCRA 31.
Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the
[21] G.R. No. 57936, September 28, 1984, 132 SCRA 293.
above Decision were reached in consultation before the case was assigned to the [22] PSBA v. Leao, G.R. No. L-58468, February 24, 1984, 127 SCRA 778, 783.
writer of the opinion of the Courts Division. [23] CMH Agricultural Corporation v. Court of Appeals, G.R. No. 112625, March 7, 2002,
378 SCRA 545.
[24] Speed Distributing Corp., v. Court of Appeals, supra note 12.
[25] Article 1078 of the Civil Code states: Where there are two or more heirs, the whole
REYNATO S. PUNO estate of the decedent is, before its partition, owned in common by such heirs,
subject to the payment of debts of the deceased.
Chief Justice [26] Additionally, Section 97 of the National Internal Revenue Code requires a
certification from the Commissioner of Internal Revenue that the estate taxes have
been paid before any shares in a domestic corporation is transferred in the name
of the new owner.
[27] G.R. No. L-63558, May 19, 1987, 149 SCRA 654.
* Designated Additional Member of the Second Division per Special Order No. 512
[28] G.R. No. 129777, January 5, 2001, 349 SCRA 35.
dated July 16, 2008. [29] Salvador v. Sta. Maria, G.R. No. L-25952, June 30, 1967, 20 SCRA 603.
[1] Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justice Romeo A.
[30] Comments and Jurisprudence on Succession (1991 ed.), p. 5.
Brawner (deceased) and Associate Justice Aurora Santiago-Lagman, [31] 13 Fletcher 5912.
concurring; rollo, pp. 55-60. [32] G.R. 133000, October 2, 2001, 366 SCRA 385, 392.
[2] Quoted in full in Petition, id., p. 18. [33] G.R. No. L-27082, January 21, 1978, 81 SCRA 278.
[3] Id., p. 64. [34] Villanueva, C., Philippine Corporate Law (1998 ed.), p. 370.
[4] Id., pp. 63-74. [35] 13 Fletcher 5963.
[5] Id., p. 65. [36] See 13 Fletcher 5915.
 THIRD DIVISION
G.R. No. 141634 February 5, 2001
Heirs of Spouses REMEDIOS R. SANDEJAS and ELIODORO P. SANDEJAS SR. -- ROBERTO R.
SANDEJAS, ANTONIO R. SANDEJAS, CRISTINA SANDEJAS MORELAND, BENJAMIN
R. SANDEJAS, REMEDIOS R. SANDEJAS, and heirs of SIXTO S. SANDEJAS II, RAMON R.
SANDEJAS, TERESITA R. SANDEJAS, and ELIODORO R. SANDEJAS JR., all represented by
ROBERTO R. SANDEJAS, petitioners,
vs.
ALEX A. LINA, respondent.
PANGANIBAN, J.:
A contract of sale is not invalidated by the fact that it is subject to probate court
approval. The transaction remains binding on the seller-heir, but not on the other heirs
who have not given their consent to it. In settling the estate of the deceased, a probate
court has jurisdiction over matters incidental and collateral to the exercise of its
recognized powers. Such matters include selling, mortgaging or otherwise encumbering
realty belonging to the estate. Rule 89, Section 8 of the Rules of Court, deals with the
conveyance of real property contracted by the decedent while still alive. In contrast
with Sections 2 and 4 of the same Rule, the said provision does not limit to the executor
or administrator the right to file the application for authority to sell, mortgage or
otherwise encumber realty under administration. The standing to pursue such course of
action before the probate court inures to any person who stands to be benefited or
injured by the judgment or to be entitled to the avails of the suit.1âwphi1.nêt
The Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to reverse
and set aside the Decision1 dated April 16, 1999 and the Resolution2 dated January 12,
2000, both promulgated by the Court of Appeals in CA-GR CV No. 49491. The dispositive
portion of the assailed Decision reads as follows:3
"WHEREFORE, for all the foregoing, [w]e hereby MODIFY the [O]rder of the
lower court dated January 13, 1995, approving the Receipt of Earnest Money
With Promise to Buy and Sell dated June 7, 1982, only to the three-fifth (3/5)
portion of the disputed lots covering the share of [A]dministrator Eliodoro
Sandejas, Sr. [in] the property. The intervenor is hereby directed to pay
appellant the balance of the purchase price of the three-fifth (3/5) portion of
the property within thirty (30) days from receipt of this [O]rder and x x x the
administrator [is directed] to execute the necessary and proper deeds of
conveyance in favor of appellee within thirty (30) days thereafter."
The assailed Resolution denied reconsideration of the foregoing disposition.
The Facts
The facts of the case, as narrated by the Court of Appeals (CA), are as follows:4
"On February 17, 1981, Eliodoro Sandejas, Sr. filed a petition (Record, SP. Proc.
No. R-83-15601, pp. 8-10) in the lower court praying that letters of
administration be issued in his favor for the settlement of the estate of his wife,
REMEDIOS R. SANDEJAS, who died on April 17, 1955. On July 1, 1981, Letters of
Administration [were issued by the lower court appointing Eliodoro Sandejas,
Sr. as administrator of the estate of the late Remedios Sandejas (Record, SP.
Proc. No. R-83-15601, p. 16). Likewise on the same date, Eliodoro Sandejas, Sr.
took his oath as administrator (Record, SP. Proc. No. R-83-15601, p. 17). x x x.
"On November 19, 1981, the 4th floor of Manila City Hall was burned and
among the records burned were the records of Branch XI of the Court of First
Instance of Manila. As a result, [A]dministrator Eliodoro Sandejas, Sr. filed a
[M]otion for [R]econstitution of the records of the case on February 9, 1983
(Record, SP. Proc. No. R-83-15601, pp. 1-5). On February 16, 1983, the lower
court in its [O]rder granted the said motion (Record, SP. Proc. No. R-83-15601,
pp. 28-29).
"On April 19, 1983, an Omnibus Pleading for motion to intervene and petition-
in-intervention was filed by [M]ovant Alex A. Lina alleging among others that
on June 7, 1982, movant and [A]dministrator Eliodoro P. Sandejas, in his
capacity as seller, bound and obligated himself, his heirs, administrators, and
assigns, to sell forever and absolutely and in their entirety the following parcels
of land which formed part of the estate of the late Remedios R. Sandejas, to
wit:
1. 'A parcel of land (Lot No.22 Block No. 45 of the subdivision plan
Psd-21121, being a portion of Block 45 described on plan Psd-19508,
G.L.R.O. Rec. No. 2029), situated in the "Municipality of Makati,
province of Rizal, containing an area of TWO HUNDRED SEVENTY (270)
SQUARE METERS, more or less, with TCT No. 13465;
2. 'A parcel of land (Lot No. 21 Block No. 45 of the subdivision plan
Psd-21141, being a portion of Block 45 described on plan Psd-19508
G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati,
Province of Rizal, containing an area of TWO HUNDRED SEVENTY (270)
SQUARE METERS, more or less, with TCT No. 13464;'
3. 'A parcel of land (Lot No. 5 Block No. 45 of the subdivision plan Psd-
21141, being a portion of Block 45 described on plan Psd-19508
G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati,
Province of Rizal, containing an area of TWO HUNDRED EIGHT (208)
SQUARE METERS, more or less, with TCT No. 13468;'
4. 'A parcel of land (Lot No. 6, Block No. 45 of the subdivision plan
Psd-21141, being a portion of Block 45 described on plan Psd-19508
G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati,
Province of Rizal, containing an area of TWO HUNDRED EIGHT (208)
SQUARE METERS, more or less, with TCT No. 13468;'
"The [R]eceipt of the [E]arnest [M]oney with [P]romise to [S]ell and to [B]uy is
hereunder quoted, to wit:
'Received today from MR. ALEX A. LINA the sum of ONE HUNDRED
THOUSAND (P100,000.00) PESOS, Philippine Currency, per
Metropolitan Bank & Trust Company Chec[k] No. 319913 dated today
for P100,000.00, x x x as additional earnest money for the following:
xxx xxx xxx
all registered with the Registry of Deeds of the [P]rovince of Rizal
(Makati Branch Office) in the name of SELLER 'EL!ODORO SANDEJAS,
Filipino Citizen, of legal age, married to Remedios Reyes de Sandejas;'
and which undersigned, as SELLER, binds and obligates himself, his
heirs, administrators and assigns, to sell forever and absolutely in their
entirety (all of the four (4) parcels of land above described, which are
contiguous to each other as to form one big lot) to said Mr. Alex A.
Lina, who has agreed to buy all of them, also binding on his heirs,
administrators and assigns, for the consideration of ONE MILLION
(P1,000,000.00) PESOS, Philippine Currency, upon such reasonable
terms of payment as may be agreed upon by them. The parties
have, however, agreed on the following terms and conditions:
'1. The P100,000.00 herein received is in addition to the P70,000.00
earnest money already received by SELLER from BUYER, all of which
shall form part of, and shall be deducted from, the purchase price of
P1,000,000.00, once the deed of absolute [sale] shall be executed;
'2. As a consideration separate and distinct from the price,
undersigned SELLER also acknowledges receipt from Mr. Alex A. Lina
of the sum of ONE THOUSAND (P1,000.00) PESOS, Philippine Currency,
per Metropolitan Bank & Trust Company Check No. 319912 dated
today and payable to SELLER for P1,000.00;
'3. Considering that Mrs. Remedios Reyes de Sandejas is already
deceased and as there is a pending intestate proceedings for the
settlement of her estate (Spec. Proc. No.138393, Manila CFI, Branch
XI), wherein SELLER was appointed as administrator of said Estate,
and as SELLER, in his capacity as administrator of said Estate, has
informed BUYER that he (SELLER) already filed a [M]otion with the
Court for authority to sell the above parcels of land to herein BUYER,
but which has been delayed due to the burning of the records of
said Spec. Pro. No. 138398, which records are presently under
reconstitution, the parties shall have at least ninety (90) days from
receipt of the Order authorizing SELLER, in his capacity as
administrator, to sell all THE ABOVE DESCRIBED PARCELS OF LAND TO
HEREIN BUYER (but extendible for another period of ninety (90) days
upon the request of either of the parties upon the other), within which
to execute the deed of absolute sale covering all above parcels of
land;
'4. In the event the deed of absolute sale shall not proceed or not be
executed for causes either due to SELLER'S fault, or for causes of
which the BUYER is innocent, SELLER binds himself to personally return
to Mr. Alex A. Lina the entire ONE HUNDRED SEVENTY THOUSAND
([P]170,000.00) PESOS In earnest money received from said Mr. Lina
by SELLER, plus fourteen (14%) percentum interest per annum, all of
which shall be considered as liens of said parcels of land, or at least
on the share therein of herein SELLER;
'5. Whether indicated or not, all of above terms and conditions shall
be binding on the heirs, administrators, and assigns of both the SELLER
(undersigned MR. ELIODORO P. SANDEJAS, SR.) and BUYER (MR. ALEX
A. LINA).' (Record, SP. Proc. No. R-83-15601, pp. 52-54)
"On July 17, 1984, the lower court issued an [O]rder granting the intervention of
Alex A. Lina (Record, SP. Proc. No. R-83-15601, p. 167).
"On January 7, 1985, the counsel for [A]dministrator Eliodoro P. Sandejas filed a
[M]anifestation alleging among others that the administrator, Mr. Eliodoro P.
Sandejas, died sometime in November 1984 in Canada and said counsel is still
waiting for official word on the fact of the death of the administrator. He also
alleged, among others that the matter of the claim of Intervenor Alex A. Lina
becomes a money claim to be filed in the estate of the late Mr. Eliodoro P.
Sandejas (Record, SP. Proc. No. R-83-15601, p. 220). On February 15, 1985, the,
lower court issued an [O]rder directing, among others, that the counsel for the
four (4) heirs and other heirs of Teresita R. Sandejas to move for the
appointment of [a] new administrator within fifteen (15) days from receipt of
this [O]rder (Record, SP. Proc. No. R-83-15601, p. 227). In the same manner, on
November 4, 1985, the lower court again issued an order, the content of which
reads:
'On October 2, 1985, all the heirs, Sixto, Roberto, Antonio, Benjamin all
surnamed Sandejas were ordered to move for the appointment of
[a] new administrator. On October 16, 1985, the same heirs were
given a period of fifteen (15) days from said date within which to
move for the appointment of the new administrator. Compliance was
set for October 30, 1985, no appearance for the aforenamed heirs.
The aforenamed heirs are hereby ordered to show cause within
fifteen (15) days from receipt of this Order why this Petition for
Settlement of Estate should not be dismissed for lack of interest and
failure to comply with a lawful order of this Court.
'SO ORDERED.' (Record, SP. Proc. No. R-83-15601, p. 273).
"On November 22, 1985, Alex A. Lina as petitioner filed with the Regional Trial
Court of Manila an Omnibus Pleading for (1) petition for letters of
administration [and] (2) to consolidate instant case with SP. Proc. No. R-83-
15601 RTC-Branch XI-Manila, docketed therein as SP. Proc. No. 85- 33707
entitled 'IN RE: INTESTATE ESTATE OF ELIODORO P. SANDEJAS, SR., ALEX A. LINA
PETITIONER", [for letters of administration] (Record, SP. Proc. No.85-33707, pp. 1-
7). On November 29, 1985, Branch XXXVI of the Regional Trial Court of Manila
issued an [O]rder consolidating SP. Proc. No. 85-33707, with SP. Proc. No. R-83-
15601 (Record, SP. Proc. No. 85-33707, p. 13). Likewise, on December 13, 1985,
the Regional Trial Court of Manila, Branch XI, issued an [O]rder stating that 'this
Court has no objection to the consolidation of Special proceedings No. 85-
331707, now pending before Branch XXXVI of this Court, with the present
proceedings now pending before this Branch' (Record, SP. Proc. No. R-83- "On November 29, 1993, Intervenor filed [an] Omnibus Motion (a) to approve
15601, p. 279). the deed of conditional sale executed between Plaintiff-in-lntervention Alex A.
Lina and Elidioro [sic] Sandejas, Sr. on June 7, 1982; (b) to compel the heirs of
Remedios Sandejas and Eliodoro Sandejas, Sr. thru their administrator, to
"On January 15, 1986, Intervenor Alex A. Lina filed [a] Motion for his
execute a deed of absolute sale in favor of [I]ntervenor Alex A. Lina pursuant
appointment as a new administrator of the Intestate Estate of Remedios R.
to said conditional deed of sale (Record, SP. Proc. No. 83-15601, pp. 554-561)
Sandejas on the following reasons:
to which the administrator filed a [M]otion to [D]ismiss and/or [O]pposition to
said omnibus motion on December 13, 1993 (Record, SP. Proc. No.83-15601,
'5.01. FIRST, as of this date, [i]ntervenor has not received any motion pp. 591-603).
on the part of the heirs Sixto, Antonio, Roberto and Benjamin, all
surnamed Sandejas, for the appointment of anew [a]dministrator in
"On January 13, 1995, the lower court rendered the questioned order granting
place of their father, Mr. Eliodoro P. Sandejas, Sr.;
intervenor's [M]otion for the [A]pproval of the Receipt of Earnest Money with
promise to buy between Plaintiff-in-lntervention Alex A. Lina and Eliodoro
'5.02. SECOND, since Sp. Proc. 85-33707, wherein the [p]etitioner is Sandejas, Sr. dated June 7, 1982 (Record, SP. Proc. No. 83-15601, pp. 652-654 ).
herein Intervenor Alex A. Lina and the instant Sp. PROC. R-83-15601, in x x x."
effect are already consolidated, then the appointment of Mr. Alex
Lina as [a]dministrator of the Intestate Estate of Remedios R. Sandejas
The Order of the intestate courts disposed as follows:
in instant Sp. Proc. R-83-15601, would be beneficial to the heirs and
also to the Intervenor;
"WHEREFORE, [i]ntervenor's motion for the approval of the Receipt Of Earnest
Money With Promise To Sell And To Buy dated June 7, 1982, is granted. The
'5.03. THIRD, of course, Mr. Alex A. Lina would be willing to give way at
[i]ntervenor is directed to pay the balance of the purchase price amounting to
anytime to any [a]dministrator who may be proposed by the heirs of
P729,000.00 within thirty (30) days from receipt of this Order and the
the deceased Remedios R. Sandejas, so long as such [a]dministrator
Administrator is directed to execute within thirty (30) days thereafter the
is qualified.' (Record, SP. Proc. No. R-83-15601, pp. 281-283)
necessary and proper deeds of conveyancing."6

"On May 15, 1986, the lower court issued an order granting the [M]otion of Alex
Ruling of the Court of Appeals
A. Lina as the new [a]dministrator of the Intestate Estate of Remedios R.
Sandejas in this proceedings. (Record, SP. Proc. No. R-83-15601, pp. 288- 290)
Overturning the RTC ruling, the CA held that the contract between Eliodoro Sandejas Sr.
and respondent was merely a contract to sell, not a perfected contract of sale. It ruled
"On August 281 1986, heirs Sixto, Roberto, Antonio and Benjamin, all surnamed
that the ownership of the four lots was to remain in the intestate estate of Remedios
Sandejas, and heirs [sic] filed a [M]otion for [R]econsideration and the
Sandejas until the approval of the sale was obtained from the settlement court. That
appointment of another administrator Mr. Sixto Sandejasl in lieu of [I]ntervenor
approval was a positive suspensive condition, the nonfulfillment of which was not
Alex A. Lina stating among others that it [was] only lately that Mr. Sixto
tantamount to a breach. It was simply an event that prevented the obligation from
Sandejas, a son and heir, expressed his willingness to act as a new
maturing or becoming effective. If the condition did not happen, the obligation would
administrator of the intestate estate of his mother, Remedios R. Sandejas
not arise or come into existence.
(Record, SP. Proc. No. 85-33707, pp. 29-31). On October 2, 1986, Intervenor Alex
A. Lina filed his [M]anifestation and [C]ounter [M]otion alleging that he ha[d]
no objection to the appointment of Sixto Sandejas as [a]dministrator of the The CA held that Section 1, Rule 897 of the Rules of Court was inapplicable, because the
[i]ntestate [e]state of his mother Remedios R. Sandejas (Sp. Proc. No.85-15601), lack of written notice to the other heirs showed the lack of consent of those heirs other
provided that Sixto Sandejas be also appointed as administrator of the than Eliodoro Sandejas Sr. For this reason, bad faith was imputed to him, for no one is
[i]ntestate [e]state of his father, Eliodoro P . Sandejas, Sr. (Spec. Proc. No. 85- allowed to enjoyed a claim arising from one’s own wrongdoing. Thus, Eliodoro Sr. was
33707), which two (2) cases have been consolidated (Record, SP. Proc. No. 85- bound, as a matter of justice and good faith, to comply with his contractual
33707, pp. 34-36). On March 30, 1987, the lower court granted the said commitments as an owner and heir. When he entered into the agreement with
[M]otion and substituted Alex Lina with Sixto Sandejas as petitioner in the said respondent, he bound his conjugal and successional shares in the property.
[P]etitions (Record, SP. Proc. No. 85-33707, p. 52). After the payment of the
administrator's bond (Record, SP. Proc. No. 83-15601, pp. 348-349) and
Hence, this Petition.8
approval thereof by the court (Record, SP. Proc. No. 83-15601, p. 361),
Administrator Sixto Sandejas on January 16, 1989 took his oath as administrator
of the estate of the deceased Remedios R. Sandejas and Eliodoro P. Sandejas Issues
(Record, SP. Proc. No. 83-15601, p. 367) and was likewise issued Letters of
Administration on the same day (Record, SP. Proc. No. 83-15601, p. 366). In their Memorandum, petitioners submit the following issues for our resolution:
 "a) Whether or not Eliodoro P. Sandejas Sr. is legally obligated to convey title to
the property referred to in the subject document which was found to be in the
nature of a contract to sell - where the suspensive condition set forth therein
[i.e.] court approval, was not complied with;
"b) Whether or not Eliodoro P. Sandejas Sr. was guilty of bad faith despite the
conclusion of the Court of Appeals that the respondent [bore] the burden of
proving that a motion for authority to sell ha[d] been filed in court;
"c) Whether or not the undivided shares of Eliodoro P. Sandejas Sr. in the
subject property is three-fifth (3/5) and the administrator of the latter should
execute deeds of conveyance therefor within thirty days from receipt of the
balance of the purchase price from the respondent; and
"d) Whether or not the respondent's petition-in-intervention was converted to a
money claim and whether the [trial court] acting as a probate court could
approve the sale and compel the petitioners to execute [a] deed of
conveyance even for the share alone of Eliodoro P. Sandejas Sr."9
In brief, the Petition poses the main issue of whether the CA erred in modifying the trial
court's Decision and in obligating petitioners to sell 3/5 of the disputed properties to
respondent, even if the suspensive condition had not been fulfilled. It also raises the
following collateral issues: (1) the settlement court's jurisdiction; (2) respondent-
intervenor's standing to file an application for the approval of the sale of realty in the
settlement case, (3) the decedent's bad faith, and (4) the computation of the
decedent's share in the realty under administration.
This Court’s Ruling
The Petition is partially meritorious.
Main Issue:
Obligation With a Suspensive Condition
Petitioners argue that the CA erred in ordering the conveyance of the disputed 3/5 of
the parcels of land, despite the nonfulfillment of the suspensive condition -- court
approval of the sale -- as contained in the "Receipt of Earnest Money with Promise to Sell
and to Buy" (also referred to as the "Receipt"). Instead, they assert that because this
condition had not been satisfied, their obligation to deliver the disputed parcels of land
was converted into a money claim.
We disagree. Petitioners admit that the agreement between the deceased Eliodoro
Sandejas Sr. and respondent was a contract to sell. Not exactly. In a contract to sell, the
payment of the purchase price is a positive suspensive condition. The vendor's
obligation to convey the title does not become effective in case of failure to pay.10
On the other hand, the agreement between Eliodoro Sr. and respondent is subject to a
suspensive condition -- the procurement of a court approval, not full payment. There
was no reservation of ownership in the agreement. In accordance with paragraph 1 of
the Receipt, petitioners were supposed to deed the disputed lots over to respondent.
This they could do upon the court's approval, even before full payment. Hence, their
contract was a conditional sale, rather than a contract to sell as determined by the CA.
When a contract is subject to a suspensive condition, its birth or effectivity can take
place only if and when the condition happens or is fulfilled.11 Thus, the intestate court's
grant of the Motion for Approval of the sale filed by respondent resulted in petitioners'
obligation to execute the Deed of Sale of the disputed lots in his favor. The condition
having been satisfied, the contract was perfected. Henceforth, the parties were bound
to fulfil what they had expressly agreed upon.
Court approval is required in any disposition of the decedent's estate per Rule 89 of the
Rules of Court. Reference to judicial approval, however, cannot adversely affect the
substantive rights of heirs to dispose of their own pro indiviso shares in the co-heirship or
co-ownership.12 In other words, they can sell their rights, interests or participation in the
property under administration. A stipulation requiring court approval does not affect the
validity and the effectivity of the sale as regards the selling heirs. It merely implies that
the property may be taken out of custodia legis, but only with the court's permission.13 It
would seem that the suspensive condition in the present conditional sale was imposed
only for this reason.
Thus, we are not persuaded by petitioners' argument that the obligation was converted
into a mere monetary claim. Paragraph 4 of the Receipt, which petitioners rely on, refers
to a situation wherein the sale has not materialized. In such a case," the seller is bound
to return to the buyer the earnest money paid plus interest at fourteen percent per
annum. But the sale was approved by the intestate court; hence, the proviso does not
apply.
Because petitioners did not consent to the sale of their ideal shares in the disputed lots,
the CA correctly limited the scope of the Receipt to the pro-indiviso share of Eliodoro Sr.
Thus, it correctly modified the intestate court's ruling by excluding their shares from the
ambit of the transaction.
First Collateral Issue:
Jurisdiction of Settlement Court
Petitioners also fault the CA Decision by arguing, inter alia, (a) jurisdiction over ordinary
civil action seeking not merely to enforce a sale but to compel performance of a
contract falls upon a civil court, not upon an intestate court; and (b) that Section 8 of
Rule 89 allows the executor or administrator, and no one else, to file an application for
approval of a sale of the property under administration.
Citing Gil v. Cancio14 and Acebedo v. Abesamis, 15 petitioners contend that the CA
erred in clothing the settlement court with the jurisdiction to approve the sale and to
compel petitioners to execute the Deed of Sale. They allege factual differences
between these cases and the instant case, as follows: in Gil, the sale of the realty in
administration was a clear and an unequivocal agreement for the support of the widow
and the adopted child of the decedent; and in Acebedo, a clear sale had been
made, and all the heirs consented to the disposition of their shares in the realty in
administration.
We are not persuaded. We hold that Section 8 of Rule 89 allows this action to proceed.
The factual differences alleged by petitioners have no bearing on the intestate court's
jurisdiction over the approval of the subject conditional sale. Probate jurisdiction covers
all matters relating to the settlement of estates (Rules 74 & 86-91) and the probate of
wills (Rules 75-77) of deceased persons, including the appointment and the removal of
administrators and executors (Rules 78-85). It also extends to matters incidental and
collateral to the exercise of a probate court's recognized powers such as selling,
mortgaging or otherwise encumbering realty belonging to the estate. Indeed, the rules
on this point are intended to settle the estate in a speedy manner, so that the benefits
that may flow from such settlement may be immediately enjoyed by the heirs and the
beneficiaries.16
In the present case, the Motion for Approval was meant to settle the decedent's
obligation to respondent; hence, that obligation clearly falls under the jurisdiction of the
settlement court. To require respondent to file a separate action -- on whether
petitioners should convey the title to Eliodoro Sr.'s share of the disputed realty -- will
unnecessarily prolong the settlement of the intestate estates of the deceased spouses.
The suspensive condition did not reduce the conditional sale between Eliodoro Sr. and
respondent to one that was "not a definite, clear and absolute document of sale," as
contended by petitioners. Upon the occurrence of the condition, the conditional sale
became a reciprocally demandable obligation that is binding upon the
parties.17 That Acebedo also involved a conditional sale of real property18 proves that
the existence of the suspensive condition did not remove that property from the
jurisdiction of the intestate court.
Second Collateral Issue:
Intervenor's Standing
Petitioners contend that under said Rule 89, only the executor or administrator is
authorized to apply for the approval of a sale of realty under administration. Hence, the
settlement court allegedly erred in entertaining and granting respondent's Motion for
Approval.1âwphi1.nêt
We read no such limitation. Section 8, Rule 89 of the Rules of Court, provides:
"SEC. 8. When court may authorize conveyance of realty which deceased
contracted to convey. Notice. Effect of deed. -- Where the deceased was in
his lifetime under contract, binding in law, to deed real property, or an interest
therein, the court having jurisdiction of the estate may, on application for that
purpose, authorize the executor or administrator to convey such property
according to such contract, or with such modifications as are agreed upon by
the parties and approved by the court; and if the contract is to convey real
property to the executor or administrator, the clerk of the court shall execute
the deed. x x x."
This provision should be differentiated from Sections 2 and 4 of the same Rule,
specifically requiring only the executor or administrator to file the application for
authority to sell, mortgage or otherwise encumber real estate for the purpose of paying
debts, expenses and legacies (Section 2);19 or for authority to sell real or personal estate
beneficial to the heirs, devisees or legatees and other interested persons, although such
authority is not necessary to pay debts, legacies or expenses of administration (Section
4).20 Section 8 mentions only an application to authorize the conveyance of realty under
a contract that the deceased entered into while still alive. While this Rule does not
specify who should file the application, it stands to reason that the proper party must be
one .who is to be benefited or injured by the judgment, or one who is to be entitled to
the avails of the suit.21
Third Collateral Issue:
Bad Faith
Petitioners assert that Eliodoro Sr. was not in bad faith, because (a) he informed
respondent of the need to secure court approval prior to the sale of the lots, and (2) he
did not promise that he could obtain the approval.
We agree. Eliodoro Sr. did not misrepresent these lots to respondent as his own
properties to which he alone had a title in fee simple. The fact that he failed to obtain
the approval of the conditional sale did not automatically imply bad faith on his part.
The CA held him in bad faith only for the purpose of binding him to the conditional sale.
This was unnecessary because his being bound to it is, as already shown, beyond cavil.
Fourth Collateral Issue:
Computation of Eliodoro's Share
Petitioners aver that the CA's computation of Eliodoro Sr.'s share in the disputed parcels
of land was erroneous because, as the conjugal partner of Remedios, he owned one
half of these lots plus a further one tenth of the remaining half, in his capacity as a one
of her legal heirs. Hence, Eliodoro's share should be 11/20 of the entire property.
Respondent poses no objection to this computation.22
On the other hand, the CA held that, at the very least, the conditional sale should cover
the one half (1/2) pro indiviso conjugal share of Eliodoro plus his one tenth (1/10)
hereditary share as one of the ten legal heirs of the decedent, or a total of three fifths
(3/5) of the lots in administration.23
Petitioners' correct. The CA computed Eliodoro's share as an heir based on one tenth of
the entire disputed property. It should be based only on the remaining half, after
deducting the conjugal share.24
The proper determination of the seller-heir's shares requires further explanation.
Succession laws and jurisprudence require that when a marriage is dissolved by the
death of the husband or the wife, the decedent's entire estate - under the concept of
conjugal properties of gains -- must be divided equally, with one half going to the
surviving spouse and the other half to the heirs of the deceased.25 After the settlement
of the debts and obligations, the remaining half of the estate is then distributed to the
legal heirs, legatees and devices. We assume, however, that this preliminary
determination of the decedent's estate has already been taken into account by the
parties, since the only issue raised in this case is whether Eliodoro's share is 11/20 or 3/5 of
the disputed lots.
WHEREFORE, The Petition is hereby PARTIALLY GRANTED. The appealed Decision and
Resolution are AFFIRMED with the MODIFICATION that respondent is entitled to only a
pro-indiviso share equivalent to 11/20 of the disputed lots.
SO ORDERED.
Melo, Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.
Footnote
1Penned by Justice Mariano M. Umali of the Special Seventh Division of the
Court of Appeals with the concurrence of Justices Romeo J. Callejo Sr., acting
Division Chairman; and Bernardo P. Abesamis, member. Rollo, pp. 39-56.
2 Rollo, p. 58.
3 CA Decision, p. 18; rollo, p. 56.
4 CA Decision, pp. 2-8; rollo, pp. 40-46.
5Penned by Judge Roberto A. Barrios of the Regional Trial Court of Manila,
Branch 11.
6 RTC Order, p. 3; rollo, p. 73.
7 "SECTION 1. Order of sale of personalty. – Upon the application of the
executor or administrator, and on written notice to the heirs and other persons
interested, the court may order the whole or a part of the personal estate to
be sold, if it appears necessary for the purpose of paying debts, expenses of
administration, or legacies, or the preservation of the property."
8 This case was submitted for resolution upon the receipt by this Court of the
Memorandum for the Petitioners on October 12, 2000, signed by Atty. Pascual
T. Lacas of Lacas, Lao & Associates. Respondent’s Memorandum, signed by
Atty. Rudegelio D. Tacorda, was submitted on October 5, 2000.
9 Rollo, p. 139.
10Justice Jose C. Vitug, Compendium of Civil Law and Jurisprudence, rev. ed.,
p. 580; Cheng v. Genato, 300 SCRA 722, 734, December 29, 1998; Odyssey
Park, Inc. v. Court of Appeals, 280 SCRA 253, 260, October 8, 1997.
11Cheng v. Genato, supra, pp. 735-736; Coronel v. Court of Appeals, 263 SCRA
15, 33, October 7, 1996; Compendium, pp. 487-488, 580 & 603.
12 Acebedo v. Abesamis, 217 SCRA 186, 193, January 18, 1993.
13 Vda. de Cruz v. Ilagan, 81 SCRA 554, 561, September 30, 1948.
14 SCRA 796, 796-801, July 30, 1965.
15 Supra.
16 Sikat v. Vda. de Villanueva, 57 Phil. 486, 494, November 10, 1932; Magbanua
v. Akol, 72 Phil. 567, 572, June 27, 1941; Del Castillo v. Enriquez, 109 Phil. 491,
494-495, September 30, 1960.
17 Art. 1458, Civil Code.
18 Supra, p.188.
19 "SEC. 2. When court may authorize sale, mortgage, or other encumbrance of
realty to pay debts and legacies through personalty not exhausted. - When
the personal estate of the deceased is not sufficient to pay the debts,
expenses of administration, and legacies, or where the sale of such personal
estate may injure the business or other interests of those interested in the
estate, and where a testator has not otherwise made sufficient provision for
the payment of such debts, expenses, and legacies, the court, on the
application of the executor or administrator and on written notice to the heirs,
devisees, and legatees residing in the Philippines, may authorize the executor
or administrator to sell, mortgage, or otherwise encumber so much as may be
necessary of the real estate, in lieu of personal estate, for the purpose of
paying such debts, expenses, and legacies, if it clearly appears that such sale,
mortgage, or encumbrance would be beneficial to the persons interested;
and if a part cannot be sold, mortgaged, or otherwise encumbered without
injury to those interested in the remainder, the authority may be for the sale,
mortgage, or other encumbrance of the whole of such .real estate, or so
much thereof as is necessary or beneficial under the circumstances."
20"Sec. 4. When court may authorize sale of estate as beneficial to interested
persons. Disposal of proceeds. - When it appears that the sale of the whole or
a part of the real or personal estate, will be beneficial to the heirs, devisees, It
legatees, and other interested persons, the court may, upon application of the
executor or administrator and on written notice to the heirs, devisees, and
legatees who are interested in the estate to be sold, authorize the executor or
administrator to sell the whole or apart of said estate, although not necessary
to pay debts, legacies, or expenses of administration; but such authority shall
not be granted if inconsistent with the provisions of a will. In case of such sale,
the proceeds shall be assigned to the persons entitled to the estate in the
proper proportions."
21 Section 2, Rule 3, Rules of Court.
 22 Respondent's Memorandum; rollo, p. 124.
Herein petitioners Virgilio, Victorino, Ernesto and Tadeo, all surnamed Santos, are the
legitimate and surviving heirs of the late Rita Catoc Santos (Rita), who died on 20
23 1/2 + 1/10 = 6/10 or 3/5 reduced to the lowest term.
October 1985. The other petitioners Esperanza Lati and Lagrimas Santos are the
daughters-in-law of Rita.
24 1/2 + [1/10 x 1/2] = 1/2+[1/20] = 10/20+ 1/20 = 11/20
Herein respondents Spouses Jose Lumbao and Proserfina Lumbao are the alleged
25 Art. 129(7), Family Code; Armas v. Calisterio, GR No. 136467, April 6, 2000, p. owners of the 107-square meter lot (subject property), which they purportedly bought
8, per Vitug, J.; and Del Mundo v. Court of Appeals, 97 SCRA 373, 382, April 30, from Rita during her lifetime.
1980.
The facts of the present case are as follows:

On two separate occasions during her lifetime, Rita sold to respondents Spouses
Lumbao the subject property which is a part of her share in the estate of her deceased
mother, Maria Catoc (Maria), who died intestate on 19 September 1978. On the first
THIRD DIVISION occasion, Rita sold 100 square meters of her inchoate share in her mothers estate
through a document denominated as Bilihan ng Lupa, dated 17 August
1979.[4] Respondents Spouses Lumbao claimed the execution of the aforesaid
SPS. VIRGILIO F. SANTOS & ESPERANZA G.R. No. 169129 document was witnessed by petitioners Virgilio and Tadeo, as shown by their signatures
LATI SANTOS, SPS.VICTORINO F. SANTOS, & Present: affixed therein. On the second occasion, an additional seven square meters was added
LAGRIMAS SANTOS, ERNESTO F. SANTOS, and to the land as evidenced by a document also denominated as Bilihan ng Lupa, dated 9
TADEO F. SANTOS, YNARES-SANTIAGO, J., January 1981.[5]
Petitioners, Chairperson,
AUSTRIA-MARTINEZ, After acquiring the subject property, respondents Spouses Lumbao took actual
CALLEJO, SR.,* possession thereof and erected thereon a house which they have been occupying as
- versus - CHICO-NAZARIO, and exclusive owners up to the present. As the exclusive owners of the subject property,
NACHURA, JJ. respondents Spouses Lumbao made several verbal demands upon Rita, during her
lifetime, and thereafter upon herein petitioners, for them to execute the necessary
SPS. JOSE LUMBAO and PROSERFINA documents to effect the issuance of a separate title in favor of respondents Spouses
LUMBAO, Promulgated: Lumbao insofar as the subject property is concerned. Respondents Spouses Lumbao
Respondents. alleged that prior to her death, Rita informed respondent Proserfina Lumbao she could
March 28, 2007 not deliver the title to the subject property because the entire property inherited by her
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x and her co-heirs from Maria had not yet been partitioned.

On 2 May 1986, the Spouses Lumbao claimed that petitioners, acting fraudulently and in
conspiracy with one another, executed a Deed of Extrajudicial
DECISION Settlement,[6]adjudicating and partitioning among themselves and the other heirs, the
estate left by Maria, which included the subject property already sold to respondents
Spouses Lumbao and now covered by TCT No. 81729[7] of the Registry of Deeds of Pasig
CHICO-NAZARIO, J.: City.

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised
Rules of Civil Procedure seeking to annul and set aside the Decision [1] and
Resolution[2] of the Court of Appeals in CA-G.R. CV No. 60450 entitled, Spouses Jose
Lumbao and Proserfina Lumbao v. Spouses Virgilio F. Santos and Esperanza Lati, Spouses
Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo F. Santos, dated
8 June 2005 and 29 July 2005, respectively, which granted the appeal filed by herein
respondents Spouses Jose Lumbao and Proserfina Lumbao (Spouses Lumbao) and
ordered herein petitioners Spouses Virgilio F. Santos and Esperanza Lati, Spouses
Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo F. Santos to
reconvey to respondents Spouses Lumbao the subject property and to pay the latter
attorneys fees and litigation expenses, thus, reversing the Decision[3] of the Regional Trial
Court (RTC) of Pasig City, dated 17 June 1998 which dismissed the Complaint for
Reconveyance with Damages filed by respondents Spouses Lumbao for lack of merit.
On 15 June 1992, respondents Spouses Lumbao, through counsel, sent a formal
demand letter[8] to petitioners but despite receipt of such demand letter, petitioners still
failed and refused to reconvey the subject property to the respondents Spouses
Lumbao. Consequently, the latter filed a Complaint for Reconveyance with
Damages[9] before the RTC of Pasig City.
Petitioners filed their Answer denying the allegations that the subject property
had been sold to the respondents Spouses Lumbao. They likewise denied that the Deed
of Extrajudicial Settlement had been fraudulently executed because the same was duly
published as required by law. On the contrary, they prayed for the dismissal of the
Complaint for lack of cause of action because respondents Spouses Lumbao failed to
comply with the Revised Katarungang Pambarangay Law under Republic Act No. 7160,
otherwise known as the Local Government Code of 1991, which repealed Presidential
Decree No. 1508[10] requiring first resort to barangay conciliation.
 Respondents Spouses Lumbao, with leave of court, amended their Complaint
because they discovered that on 16 February 1990, without their knowledge, petitioners
executed a Deed of Real Estate Mortgage in favor of Julieta S. Esplana for the sum
of P30,000.00. The said Deed of Real Estate Mortgage was annotated at the back of TCT
No. PT-81729 on 26 April 1991. Also, in answer to the allegation of the petitioners that
they failed to comply with the mandate of the Revised Katarungang Pambarangay
Law, respondents Spouses Lumbao said that the Complaint was filed directly in court in
order that prescription or the Statute of Limitations may not set in.
During the trial, respondents Spouses Lumbao presented Proserfina Lumbao
and Carolina Morales as their witnesses, while the petitioners presented only the
testimony of petitioner Virgilio.
The trial court rendered a Decision on 17 June 1998, the dispositive portion of
which reads as follows:
Premises considered, the instant complaint is hereby denied
for lack of merit.
Considering that [petitioners] have incurred expenses in
order to protect their interest, [respondents spouses Lumbao] are
hereby directed to pay [petitioners], to wit: 1) the amount
of P30,000.00 as attorneys fees and litigation expenses, and 2) costs of
the suit.[11]
Aggrieved, respondents Spouses Lumbao appealed to the Court of Appeals. On 8 June
2005, the appellate court rendered a Decision, thus:
WHEREFORE, premises considered, the present appeal is
hereby GRANTED. The appealed Decision dated June 17, 1998 of the
Regional Trial Court of Pasig City, Branch 69 in Civil Case No. 62175 is
hereby REVERSED and SET ASIDE. A new judgment is hereby entered
ordering [petitioners] to reconvey 107 square meters of the subject
[property] covered by TCT No. PT-81729 of the Registry of Deeds of
Pasig City, Metro Manila, and to pay to [respondents spouses
Lumbao] the sum of P30,000.00 for attorneys fees and litigation
expenses.
No pronouncement as to costs.[12]
Dissatisfied, petitioners filed a Motion for Reconsideration of the aforesaid
Decision but it was denied in the Resolution of the appellate court dated 29 July 2005 for
lack of merit.
Hence, this Petition.
The grounds relied upon by the petitioners are the following:
I. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN REVERSING THE DECISION OF THE TRIAL COURT,
THEREBY CREATING A VARIANCE ON THE FINDINGS OF FACTS
OF TWO COURTS.
II. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN ORDERING THE PETITIONERS TO RECONVEY THE
SUBJECT [PROPERTY] TO THE RESPONDENTS [SPOUSES
LUMBAO] AND IN NOT RULING THAT THEY ARE GUILTY OF
LACHES, HENCE THEY CANNOT RECOVER
THE LOT ALLEGEDLY SOLD TO THEM.
III. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING HEREIN PETITIONER[S] TO BE IN GOOD
FAITH IN EXECUTING THE DEED OF EXTRAJUDICIAL SETTLEMENT
DATED [2 MAY 1986].
IV. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING THAT PETITIONERS ARE NOT LEGALLY
BOUND TO COMPLY WITH THE SUPPOSED BILIHAN NG LUPA
DATED [17 AUGUST 1979] AND [9 JANUARY 1981] THAT WERE
SUPPOSEDLY EXECUTED BY THE LATE RITA CATOC.
V. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES
LUMBAOS] ACTION FOR RECONVEYANCE WITH DAMAGES
CANNOT BE SUPPORTED WITH AN UNENFORCEABLE
DOCUMENTS, SUCH AS THE BILIHAN NG LUPA DATED [17
AUGUST 1979] AND [9 JANUARY 1981].
VI. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES
LUMBAOS] COMPLAINT FOR RECONVEYANCE IS DISMISSABLE
(SIC) FOR NON COMPLIANCE OF THE MANDATE OF [P.D.
NO.] 1508, AS AMENDED BY Republic Act No. 7160.
VII. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR
IN NOT FINDING THAT RESPONDENTS [SPOUSES LUMBAO]
SHOULD BE HELD LIABLE FOR PETITIONERS CLAIM FOR
DAMAGES AND ATTORNEY[]S FEES.
Petitioners ask this Court to scrutinize the evidence presented in this case,
because they claim that the factual findings of the trial court and the appellate court
are conflicting. They allege that the findings of fact by the trial court revealed that
petitioners Virgilio and Tadeo did not witness the execution of the documents known as
Bilihan ng Lupa; hence, this finding runs counter to the conclusion made by the
appellate court. And even assuming that they were witnesses to the aforesaid
documents, still, respondents Spouses Lumbao were not entitled to the reconveyance of
the subject property because they were guilty of laches for their failure to assert their
rights for an unreasonable length of time. Since respondents Spouses Lumbao had slept
on their rights for a period of more than 12 years reckoned from the date of execution of
the second Bilihan ng Lupa, it would be unjust and unfair to the petitioners if the
respondents will be allowed to recover the subject property.
Petitioners allege they are in good faith in executing the Deed of Extrajudicial
Settlement because even respondents Spouses Lumbaos witness, Carolina Morales,
testified that neither petitioner Virgilio nor petitioner Tadeo was present during the
execution of the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981. Petitioners
affirm that the Deed of Extrajudicial Settlement was published in a newspaper of
general circulation to give notice to all creditors of the estate subject of partition to
contest the same within the period prescribed by law. Since no claimant appeared to
interpose a claim within the period allowed by law, a title to the subject property was
then issued in favor of the petitioners; hence, they are considered as holders in good
faith and therefore cannot be barred from entering into any subsequent transactions
involving the subject property.
Petitioners also contend that they are not bound by the documents
denominated as Bilihan ng Lupa because the same were null and void for the following
reasons: 1) for being falsified documents because one of those documents made it
appear that petitioners Virgilio and Tadeo were witnesses to its execution and that they
appeared personally before the notary public, when in truth and in fact they did not; 2)
the identities of the properties in the Bilihan ng Lupa, dated 17 August 1979 and 9
January 1981 in relation to the subject property in litigation were not established by the
evidence presented by the respondents Spouses Lumbao; 3) the right of the
respondents Spouses Lumbao to lay their claim over the subject property had already
been barred through estoppel by laches; and 4) the respondents Spouses Lumbaos
claim over the subject property had already prescribed.
Finally, petitioners claim that the Complaint for Reconveyance with Damages
filed by respondents Spouses Lumbao was dismissible because they failed to comply
with the mandate of Presidential Decree No. 1508, as amended by Republic Act No.
7160, particularly Section 412 of Republic Act No. 7160.
Given the foregoing, the issues presented by the petitioners may be restated
as follows:
I. Whether or not the Complaint for Reconveyance
with Damages filed by respondents spouses Lumbao is
dismissible for their failure to comply with the mandate of
the Revised Katarungang Pambarangay Law under R.A. No.
7160.
II. Whether or not the documents known as Bilihan ng
Lupa are valid and enforceable, thus, they can be the
bases of the respondents spouses Lumbaos action for
reconveyance with damages.
III. Whether or not herein petitioners are legally bound to
comply with the Bilihan ng Lupa dated 17 August
1979 and 9 January 1981 and consequently, reconvey the
subject property to herein respondents spouses Lumbao.
It is well-settled that in the exercise of the Supreme Courts power of review, the
court is not a trier of facts and does not normally undertake the re-examination of the
evidence presented by the contending parties during the trial of the case considering
that the findings of fact of the Court of Appeals are conclusive and binding on the
Court.[13]But, the rule is not without exceptions. There are several recognized
exceptions[14] in which factual issues may be resolved by this Court. One of these
exceptions is when the findings of the appellate court are contrary to those of the trial
court. This exception is present in the case at bar.
Going to the first issue presented in this case, it is the argument of the petitioners that the
Complaint for Reconveyance with Damages filed by respondents Spouses Lumbao
should be dismissed for failure to comply with the barangay conciliation proceedings as
mandated by the Revised Katarungang Pambarangay Law under Republic Act No.
7160.This argument cannot be sustained.
Section 408 of the aforesaid law and Administrative Circular No. 14-93[15] provide that all
disputes between parties actually residing in the same city or municipality are subject to
barangay conciliation. A prior recourse thereto is a pre-condition before filing a
complaint in court or any government offices. Non-compliance with the said condition
precedent could affect the sufficiency of the plaintiffs cause of action and make his
complaint vulnerable to dismissal on ground of lack of cause of action or prematurity;
but the same would not prevent a court of competent jurisdiction from exercising its
power of adjudication over the case before it, where the defendants failed to object to
such exercise of jurisdiction.[16]
While it is true that the present case should first be referred to the Barangay Lupon for
conciliation because the parties involved herein actually reside in the same city (Pasig
City) and the dispute between them involves a real property, hence, the said dispute
should have been brought in the city in which the real property, subject matter of the
controversy, is located, which happens to be the same city where the contending
parties reside. In the event that respondents Spouses Lumbao failed to comply with the
said condition precedent, their Complaint for Reconveyance with Damages can be
dismissed. In this case, however, respondents Spouses Lumbaos non-compliance with
the aforesaid condition precedent cannot be considered fatal. Although petitioners
alleged in their answer that the Complaint for Reconveyance with Damages filed by
respondents spouses Lumbao should be dismissed for their failure to comply with the
condition precedent, which in effect, made the complaint prematurely instituted and
the trial court acquired no jurisdiction to hear the case, yet, they did not file a Motion to
Dismiss the said complaint.
Emphasis must be given to the fact that the petitioners could have prevented
the trial court from exercising jurisdiction over the case had they filed a Motion to
Dismiss. However, instead of doing so, they invoked the very same jurisdiction by filing an
answer seeking an affirmative relief from it. Worse, petitioners actively participated in
the trial of the case by presenting their own witness and by cross-examining the
witnesses presented by the respondents Spouses Lumbao. It is elementary that the
active participation of a party in a case pending against him before a court is
tantamount to recognition of that courts jurisdiction and a willingness to abide by the
resolution of the case which will bar said party from later on impugning the courts
jurisdiction.[17] It is also well-settled that the non-referral of a case for barangay
conciliation when so required under the law is not jurisdictional in nature and may
therefore be deemed waived if not raised seasonably in a motion to dismiss.[18] Hence,
herein petitioners can no longer raise the defense of non-compliance with the
barangay conciliation proceedings to seek the dismissal of the complaint filed by the
respondents Spouses Lumbao, because they already waived the said defense when
they failed to file a Motion to Dismiss.
As regards the second issue, petitioners maintain that the Bilihan ng Lupa,
dated 17 August 1979 and 9 January 1981 are null and void for being falsified
documents as it is made to appear that petitioners Virgilio and Tadeo were present in
the execution of the said documents and that the identities of the properties in those
documents in relation to the subject property has not been established by the evidence
of the respondents Spouses Lumbao. Petitioners also claim that the enforceability of
those documents is barred by prescription of action and laches.
It is the petitioners incessant barking that the Bilihan ng Lupa documents dated
17 August 1979 and 9 January 1981 were falsified because it was made to appear that
petitioners Virgilio and Tadeo were present in the executions thereof, and their
allegation that even respondents Spouses Lumbaos witness Carolina Morales proved
that said petitioners were not present during the execution of the aforementioned
documents. This is specious.
Upon examination of the aforesaid documents, this Court finds that in the
Bilihan ng Lupa, dated 17 August 1979, the signatures of petitioners Virgilio and Tadeo
appeared thereon. Moreover, in petitioners Answer and Amended Answer to the
Complaint for Reconveyance with Damages, both petitioners Virgilio and Tadeo made
an admission that indeed they acted as witnesses in the execution of the Bilihan ng
Lupa, dated 17 August 1979.[19] However, in order to avoid their obligations in the said
Bilihan ng Lupa, petitioner Virgilio, in his cross-examination, denied having knowledge of
the sale transaction and claimed that he could not remember the same as well as his
appearance before the notary public due to the length of time that had
passed. Noticeably, petitioner Virgilio did not categorically deny having signed the
Bilihan ng Lupa, dated 17 August 1979 and in support thereof, his testimony in the cross-
examination propounded by the counsel of the respondents Spouses Lumbao is quoted
hereunder:
ATTY. CHIU:
Q. Now, you said, Mr. WitnessVirgilio Santos, that you dont know
about this document which was marked as Exhibit A for the
[respondents spouses Lumbao]?
ATTY. BUGARING:
The question is misleading, your Honor. Counsel premised the
question that he does not have any knowledge but not that
he does not know.
ATTY. CHIU:
Q. Being you are one of the witnesses of this document? [I]s it not?
WITNESS:
A. No, sir.
Q. I am showing to you this document, there is a signature at the left
hand margin of this document Virgilio Santos, will you please
go over the same and tell the court whose signature is this?
A. I dont remember, sir, because of the length of time that had
passed.
Q. But that is your signature?
A. I dont have eyeglasses My signature is different.
Q. You never appeared before this notary public
Apolinario Mangahas?
A. I dont remember.[20]
As a general rule, facts alleged in a partys pleading are deemed admissions of
that party and are binding upon him, but this is not an absolute and inflexible rule. An
answer is a mere statement of fact which the party filing it expects to prove, but it is not
evidence.[21] And in spite of the presence of judicial admissions in a partys pleading, the
trial court is still given leeway to consider other evidence presented.[22] However, in the
case at bar, as the Court of Appeals mentioned in its Decision, [herein petitioners] had
not adduced any other evidence to override the admission made in their [A]nswer that
[petitioners Virgilio and Tadeo] actually signed the [Bilihan ng Lupa dated 17 August
1979] except that they were just misled as to the purpose of the document, x x
x.[23] Virgilios answers were unsure and quibbled. Hence, the general rule that the
admissions made by a party in a pleading are binding and conclusive upon him applies
in this case.
On the testimony of respondents Spouses Lumbaos witness Carolina Morales,
this Court adopts the findings made by the appellate court. Thus -
[T]he trial court gave singular focus on her reply to a question during
cross-examination if the [petitioners Virgilio and Tadeo] were not with
her and the vendor [Rita] during the transaction. It must be pointed
out that earlier in the direct examination of said witness, she
confirmed that [respondents spouses Lumbao] actually bought the
lot from [Rita] (nagkabilihan). Said witness positively identified and
confirmed the two (2) documents evidencing the sale in favor of
[respondents spouse Lumbao]. Thus, her subsequent statement that
the [petitioners Virgilio and Tadeo] were not with them during the
transaction does not automatically imply that [petitioners Virgilio and
Tadeo] did not at any time sign as witnesses as to the deed of sale
attesting to their mothers voluntary act of selling a portion of her
share in her deceased mothers property. The rule is that testimony of
a witness must be considered and calibrated in its entirety and not by
truncated portions thereof or isolated passages therein.[24]
Furthermore, both Bilihan ng Lupa documents dated 17 August 1979 and 9
January 1981 were duly notarized before a notary public. It is well-settled that a
document acknowledged before a notary public is a public document[25] that enjoys
the presumption of regularity. It is a prima facie evidence of the truth of the facts stated
therein and a conclusive presumption of its existence and due execution.[26] To
overcome this presumption, there must be presented evidence that is clear and
convincing. Absent such evidence, the presumption must be upheld.[27] In addition, one
who denies the due execution of a deed where ones signature appears has the burden
of proving that contrary to the recital in the jurat, one never appeared before the
notary public and acknowledged the deed to be a voluntary act. Nonetheless, in the
present case petitioners denials without clear and convincing evidence to support their
claim of fraud and falsity were not sufficient to overthrow the above-mentioned
presumption; hence, the authenticity, due execution and the truth of the facts stated in
the aforesaid Bilihan ng Lupa are upheld.
The defense of petitioners that the identities of the properties described in the
Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981 in relation to the subject
property were not established by respondents Spouses Lumbaos evidence is likewise not
acceptable.
 It is noteworthy that at the time of the execution of the documents
denominated as Bilihan ng Lupa, the entire property owned by Maria, the mother of
Rita, was not yet divided among her and her co-heirs and so the description of the
entire estate is the only description that can be placed in the Bilihan ng Lupa, dated 17
August 1979 and 9 January 1981 because the exact metes and bounds of the subject
property sold to respondents Spouses Lumbao could not be possibly determined at that
time. Nevertheless, that does not make the contract of sale between Rita and
respondents Spouses Lumbao invalid because both the law and jurisprudence have
categorically held that even while an estate remains undivided, co-owners have each
full ownership of their respective aliquots or undivided shares and may therefore
alienate, assign or mortgage them.[28] The co-owner, however, has no right to sell or
alienate a specific or determinate part of the thing owned in common, because such
right over the thing is represented by an aliquot or ideal portion without any physical
division. In any case, the mere fact that the deed purports to transfer a concrete portion
does not per se render the sale void. The sale is valid, but only with respect to the aliquot
share of the selling co-owner. Furthermore, the sale is subject to the results of the
partition upon the termination of the co-ownership.[29]
In the case at bar, when the estate left by Maria had been partitioned on 2
May 1986 by virtue of a Deed of Extrajudicial Settlement, the 107- square meter lot sold
by the mother of the petitioners to respondents Spouses Lumbao should be deducted
from the total lot, inherited by them in representation of their deceased mother, which
in this case measures 467 square meters. The 107-square meter lot already sold to
respondents Spouses Lumbao can no longer be inherited by the petitioners because the
same was no longer part of their inheritance as it was already sold during the lifetime of
their mother.
Likewise, the fact that the property mentioned in the
two Bilihan ng Lupa documents was described as a portion of a parcel of land covered
in Tax Declarations No. A-018-01674, while the subject matter of the Deed of Extrajudicial
Settlement was the property described in Transfer Certificate of Title (TCT) No. 3216 of
the Registry of Deeds of the Province of Rizal in the name of Maria is of no moment
because in the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981, it is clear that
there was only one estate left by Maria upon her death. And this fact was not refuted
by the petitioners. Besides, the property described in Tax Declaration No. A-018-01674
and the property mentioned in TCT No. 3216 are both located in Barrio
Rosario, Municipality of Pasig, Province of Rizal, and almost have the same boundaries. It
is, thus, safe to state that the property mentioned in Tax Declaration No. A-018-01674
and in TCT No. 3216 are one and the same.
The defense of prescription of action and laches is likewise unjustifiable. In an
action for reconveyance, the decree of registration is respected as
incontrovertible. What is sought instead is the transfer of the property or its title which has
been wrongfully or erroneously registered in another persons name to its rightful or legal
owner, or to the one with a better right. It is, indeed, true that the right to seek
reconveyance of registered property is not absolute because it is subject to extinctive
prescription. However, when the plaintiff is in possession of the land to be reconveyed,
prescription cannot set in. Such an exception is based on the theory that registration
proceedings could not be used as a shield for fraud or for enriching a person at the
expense of another.[30]
In the case at bar, the right of the respondents Spouses Lumbao to seek
reconveyance does not prescribe because the latter have been and are still in actual
possession and occupation as owners of the property sought to be reconveyed, which
fact has not been refuted nor denied by the petitioners. Furthermore, respondents
Spouses Lumbao cannot be held guilty of laches because from the very start that they
bought the 107-square meter lot from the mother of the petitioners, they have
constantly asked for the transfer of the certificate of title into their names but Rita, during
her lifetime, and the petitioners, after the death of Rita, failed to do so on the flimsy
excuse that the lot had not been partitioned yet. Inexplicably, after the partition of the
entire estate of Maria, petitioners still included the 107-square meter lot in their
inheritance which they divided among themselves despite their knowledge of the
contracts of sale between their mother and the respondents Spouses Lumbao.
Under the above premises, this Court holds that the Bilihan ng Lupa documents
dated 17 August 1979 and 9 January 1981 are valid and enforceable and can be made
the basis of the respondents Spouses Lumbaos action for reconveyance. The failure of
respondents Spouses Lumbao to have the said documents registered does not affect its
validity and enforceability. It must be remembered that registration is not a requirement
for validity of the contract as between the parties, for the effect of registration serves
chiefly to bind third persons. The principal purpose of registration is merely to notify other
persons not parties to a contract that a transaction involving the property had been
entered into.Where the party has knowledge of a prior existing interest which is
unregistered at the time he acquired a right to the same land, his knowledge of that
prior unregistered interest has the effect of registration as to him.[31] Hence, the Bilihan
ng Lupa documents dated 17 August 1979 and 9 January 1981, being valid and
enforceable, herein petitioners are bound to comply with their provisions. In short, such
documents are absolutely valid between and among the parties thereto.
Finally, the general rule that heirs are bound by contracts entered into by their
predecessors-in-interest applies in the present case. Article 1311[32] of the NCC is the
basis of this rule. It is clear from the said provision that whatever rights and obligations
the decedent have over the property were transmitted to the heirs by way of
succession, a mode of acquiring the property, rights and obligations of the decedent to
the extent of the value of the inheritance of the heirs.[33] Thus, the heirs cannot escape
the legal consequence of a transaction entered into by their predecessor-in-interest
because they have inherited the property subject to the liability affecting their common
ancestor. Being heirs, there is privity of interest between them and their deceased
mother. They only succeed to what rights their mother had and what is valid and
binding against her is also valid and binding as against them. 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.[34]
In the end, despite the death of the petitioners mother, they are still bound to
comply with the provisions of the Bilihan ng Lupa, dated 17 August 1979 and 9 January
1981. Consequently, they must reconvey to herein respondents Spouses Lumbao the
107-square meter lot which they bought from Rita, petitioners mother. And as correctly
ruled by the appellate court, petitioners must pay respondents Spouses Lumbao
attorneys fees and litigation expenses for having been compelled to litigate and incur
expenses to protect their interest.[35] On this matter, we do not find reasons to reverse the
said findings.
WHEREFORE, premises considered, the instant Petition is hereby DENIED. The
Decision and Resolution of the Court of Appeals dated 8 June 2005 and 29 July 2005,
respectively, are hereby AFFIRMED. Herein petitioners are ordered to reconvey to
respondents Spouses Lumbao the subject property and to pay the latter attorneys fees
and litigation expenses. Costs against petitioners.
SO ORDERED.
 reached in consultation before the case was assigned to the writer of the opinion of the
Courts Division.
MINITA V. CHICO-NAZARIO
Associate Justice

REYNATO S. PUNO
WE CONCUR: Chief Justice

CONSUELO YNARES-SANTIAGO
Associate Justice * On leave.
Chairperson [1] Penned by Associate Justice Martin S. Villarama, Jr. with Associate Justices Lucas P.
Bersamin and Lucenito N. Tagle, concurring, rollo, pp. 47-62.
[2] Id. at 64.

On leave [3] Penned by Judge Ma. Cristina C. Estrada, rollo, pp. 103-114.

MA. ALICIA AUSTRIA MARTINEZ ROMEO J. CALLEJO, SR. [4] Id. at 73-74.

Associate Justice Associate Justice [5] Id. at 77-78.

[6] Id. at 80-82.
[7] Id. at 83.
[8] Id. at 84-86.
[9] Id. at 66-72.
ANTONIO EDUARDO B. NACHURA [10] A decree, Establishing a System of Amicably Settling Disputes at the Barangay Level.
Associate Justice [11] Rollo, p. 114.
[12] Id. at 61.
[13] Almendrala v. Ngo, G.R. No. 142408, 30 September 2005, 471 SCRA 311, 322.
[14] Recognized exceptions to this rule are: (1) when the findings are grounded entirely

on speculation, surmises or conjectures; (2) when the inference made is

manifestly mistaken, absurd or impossible; (3) when there is grave abuse of
ATTESTATION discretion; (4) when the judgment is based on misapprehension of facts; (5)
when the finding of facts are conflicting; (6) when in making its findings the
I attest that the conclusions in the above Decision were reached in consultation before Court of Appeals went beyond the issues of the case, or its findings are
the case was assigned to the writer of the opinion of the Courts Division. contrary to the admissions of both the appellee and the appellant; (7) when
the findings are contrary to the trial court; (8) when the findings are conclusions
without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioners main and reply briefs
are not disputed by the respondent; (10) when the findings of fact are
CONSUELO YNARES-SANTIAGO premised on the supposed absence of evidence and contradicted by the
Associate Justice evidence on record; or (11) when the Court of Appeals manifestly overlooked
Chairperson, Third Division certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion [Langkaan Realty
Development, Inc. v. United Coconut Planters Bank, G.R. No. 139437, 8
December 2000, 347 SCRA 542; Nokom v. National Labor Relations
Commissions, 390 Phil. 1228, 1243 (2000); Commissioner of Internal Revenue v.
Embroidery and Garments Industries (Phils.), Inc., 364 Phil. 541, 546-547
(1999); Sta. Maria v. Court of Appeals, 349 Phil. 275, 282-283 (1998); Almendrala
v. Ngo, G.R. No. 142408, 30 September 2005, 471 SCRA 311, 322].
[15] Guidelines on the Katarungang Pambarangay Conciliation Procedure to Prevent

Circumvention of the Revised Katarungang Pambarangay Law [Sections 399-

442, Chapter VII, Title I, Book III, R.A. No. 7160,otherwise known as the Local
CERTIFICATION Government Code of 1991] issued by the Supreme Court on 15 July 1993.
[16] Royales v. Intermediate Appellate Court, G.R. No. L-65072, 31 January 1984, 127 SCRA
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons 470, 473-474.
attestation, it is hereby certified that the conclusions in the above Decision were
[17] Sta. Rosa Realty Development Corporation v. Amante, G.R. No. 112526, 16 March
2005, 453 SCRA 432, 477.
[18] Baares II v. Balising, G.R. No. 132624, 13 March 2000, 328 SCRA 36, 50-51.
[19] Rollo, pp. 87, 97.
[20] TSN, 12 September 1996. Records, pp. 13-14.
[21] Atillo III v. Court of Appeals, G.R. No. 119053, 23 January 1997, 266 SCRA 596, 604.
[22] Id. at 605.
[23] Rollo, p. 55.
[24] Id. at 55-56.
[25] Rule 132, Section 19(b) of the Revised Rules on Evidence.
[26] Id., Section 23 of the Revised Rules on Evidence; Medina v. Greenfield Development

Corporation, G.R. No. 140228, 19 November 2004, 443 SCRA 150, 160; Agasen
v. Court of Appeals, G.R. No. 115508, 15 February 2000, 325 SCRA 504, 511.
[27] Medina v. Greenfield Development Corporation, id.

[28] Barcenas v. Tomas, G.R. No. 150321, 31 March 2005, 454 SCRA 593, 610-611.
[29] Heirs of the Late Spouses Aurelio and Esperanza Balite v. Lim, G.R. No. 152168, 10
December 2004, 446 SCRA 56, 71.
[30] Heirs of Pomposa Saludares v. Court of Appeals, G.R. No. 128254, 16 January 2004,

420 SCRA 51, 56-58.

[31] Heirs of Eduardo Manlapat v. Court of Appeals, G.R. No. 125585, 8 June 2005, 459
SCRA 412, 426.
[32] 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.
[33] Tanay Recreation Center and Development Corp. v. Fausto, G.R. No. 140182, 12 April

2005, 455 SCRA 436, 446

[34] DKC Holdings Corporation v. Court of Appeals, G.R. No. 118248, 5 April 2000, 329

SCRA 666, 674-675.

[35] Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation,

other than judicial costs cannot be recovered, except:

(1) x x x
(2) When the defendants act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to
protect his interest;
(3) x x x