OSCAR D.

RAMOS and LUZ AGUDO, petitioners,

vs.
HON. COURT OF APPEALS, ADELAIDA RAMOS and LAZARO E. MENESES, respodents.

Godofredo V. Magbiray for petitioners.

Joselito Lim for private respondents.

REGALADO, J.:

The instant petition for review on certiorari impugns the decision of the Court of Appeals dated
October 7, 1975, 1which affirmed in toto the decision of the Court of First Instance of Tarlac in Civil Case
No. 4168, entitled "Adelaida Ramos, et al. vs. Oscar D. Ramos, et al.," holding that the contracts between
the parties are not ventas con pacto de retro but are equitable mortgages.

Sometime in January 1959, private respondent Adelaida Ramos borrowed from her brother,
petitioner Oscar D. Ramos, the amounts of P 5,000.00 and P 9,000.00 in connection with her
business transaction with one Flor Ramiro, Fred Naboa and Atty. Ruperto Sarandi involving the
recovery of a parcel of land in Tenejeros, Malabon. The said amount was used to finance the trip to
Hawaii of Ramiro, Naboa and Atty. Sarandi. As security for said loan, private respondent Adelaida
Ramos executed in favor of petitioners two (2) deeds of conditional sale dated May 27, 1959 and
August 30, 1959, of her rights, shares, interests and participation respectively over Lot No. 4033
covered by Original Certificate of Title No. 5125 registered in the name of their parents, Valente
Ramos and Margarita Denoga, now deceased; 2 and Lot No. 4221 covered by Transfer Certificate of
Title No. 10788 then registered in the names of Socorro Ramos, Josefina Ramos and Adelaida
Ramos, 3 said properties being of the Cadastral Survey of Paniqui, Tarlac.

Upon the failure of said private respondent as vendor a retro to exercise her right of repurchase
within the redemption period, aforenamed petitioner filed a petition for consolidation and approval of
the conditional sale of Lot No. 4033 in Special Proceedings No. 5174, entitled "Intestate Estate of
the late Margarita Denoga," 4 and a petition for approval of the pacto de retro sale of Lot No. 4221 in the
former Court of First Instance of Tarlac acting as a cadastral court. 5 On January 22, 1960, the said
probate court issued an order with the following disposition:

WHEREFORE, the deed of CONDITIONAL SALE executed on May 27, 1959, by

Adelaida Ramos in favor of spouses Oscar D. Ramos and Luz Agudo, conveying to
the latter by way of pacto de retro sale whatever rights and interests the former may
have in Lot No. 4033 of the Cadastral Survey of Paniqui, which deed of conditional
sale is known as Document No. 14, Page 26, Book VI, Series of 1959, of the notarial
register of Notary Public Jose P. Sibal, is hereby approved. 6

The cadastral Court also issued a similar order dated April 18, 1960, the dispositive portion of which
reads:

WHEREFORE, by way of granting the petition, the Court orders the consolidation of
ownership and dominion in petitioners-spouses Oscar D. Ramos and Luz Agudo over
the rights, shares and interests of Adelaida Ramos in Lot No. 4221 of the Cadastral
 Survey of Paniqui, Tarlac, which the latter sold to the former under a pacto de retro
sale executed in a public instrument known as Document No. 22, Page 28, Book No.
VI. Series of 1959, of the Notarial Registry of Notary Public Jose P. Sibal but which
she failed to repurchase within the period specified in said Document. 7

Private respondents had been and remained in possession of these properties until sometime in
1964 when petitioner took possession thereof.

On February 28, 1968, private respondent filed Civil Case No. 4168 with the then Court of First
Instance of Tarlac for declaration of nullity of orders, reformation of instrument, recovery of
possession with preliminary injunction and damages. The complaint therein alleged that the deeds of
conditional sale, dated May 27, 1959 and August 30, 1959, are mere mortgages and were vitiated by
misrepresentation, fraud and undue influence and that the orders dated January 22, 1960 and April
18, 1960, respectively issued by the probate and cadastral courts, were null and void for lack of
jurisdiction. Petitioners, in their answer to the complaint, specifically deny the allegations of fraud
and misrepresentation and interposed as defense the fact that the questioned conditional sales of
May 27, 1959 and August 30, 1959 were voluntarily executed by private respondent Adelaida Ramos
and truly expressed the intention of the parties; that the action, if any, has long prescribed; that the
questioned orders of January 22, 1960 and April 18, 1960, approving the consolidation of ownership
of the lands in question in favor of petitioner were within the jurisdiction of the lower court, in its
capacity as a probate court insofar as Lot No. 4033 is concerned, and acting as a cadastral court
with respect to Lot No. 4221; and that said lands subject of the conditional sales were in custodia
legis in connection with the settlement of the properties of the late Margarita Denoga, the
predecessor in interest of both petitioners and private respondents.

On January 7, 1970, the court below issued a pre-trial order to the effect that petitioners admit the
genuineness and due execution of the promissory notes marked as Exhibits "F" and "F-1 " and that
the principal triable issue is whether or not the documents purporting to be deeds of conditional sale,
marked as Exhibits "B", "B-1" and "G" were in fact intended to be equitable mortgages. 8 In its order
dated February 17, 1971, the trial court also declared: "Both parties agreed and manifested in open court
the principal obligation in the transaction reflected in Exhibits 'B' and 'B-l' and 'G' is one of loan. The
parties differ, however, on the nature of the security described therein. 9

On May 17, 1971, the court a quo rendered a decision the decretal part of which reads:

WHEREFORE, judgment is hereby rendered:

1) Denying defendants' motion to dismiss of February 23, 1970;

2) Declaring Exhibits 'B', 'B-I' and 'G' as loan transaction secured by

real estate mortgages;

3) Annulling and setting aside Exhibits 'D', 'D-l', 'I', 'I-l' and 'I-2';

4) Ordering plaintiffs, jointly and severally to pay (within ninety [90]

days from receipt of a copy of this judgment) defendants the sum of P
5,000.00 specified in Exhibit 'B', with interest thereon at the legal rate
from November 28, 1959 until full payment together with the sum of P
9,308.00 specified in Exhibit 'G' with interest thereon at the legal rate
 from December 1, 1959 until full payment, and in default of such
payment, let the properties mortgaged under Exhibits 'B', 'B-1' and 'G'
be sold to realize the mortgage debt and costs; and

5) Dismissing defendants' counter-claim.

With costs against defendants. 10

On June 14, 1971, petitioners appealed said decision to the Court of Appeals which, on October 7,
1975; affirmed in all respects the judgment of the trial court. Petitioners' motion for reconsideration of
said decision was denied on November 27, 1975. 11

On January 8, 1976, petitioners filed the petition at bar anchored on the following assignments of
errors:

1. The Hon. Court of Appeals erred in not applying the correct

provisions of law interpreting the conditional sales dated May 27,
1959 and August 30, 1959, Exhibits 'B' and 'G' as equitable
mortgages.

2. That as a consequence of its ruling that the conditional sales,

Exhibits 'B' and 'G', are equitable mortgages, the Hon. Court of
Appeals erred in ordering the reformation of the same.

3. The Honorable Court of Appeals erred in holding that the order

dated January 22, 1960, Exhibit C or 2, and the order dated April 18,
1960, Exhibit H or 6, issued by the probate court in Sp. Proc. No.
5174 and by the cadastral court in G.L.R.O. Rec. No. 395,
respectively, are null and void for lack of jurisdiction.

4. The Hon. Court of Appeals erred in not applying the applicable

provisions of law on the prescription of action and in not dismissing
the complaint filed in the lower court. 12

We find the petition devoid of merit.

Article 1602 of the Civil Code provides:

The contract shall be presumed to be an equitable mortgage, in any of the following

cases:

(1) When the price of a sale with right to repurchase is unusually

inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase

another instrument extending the period of redemption or granting a
new period is executed;
 (4) When the purchaser retains for himself a part of the purchase
price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits or other benefit to be received by the
vendee as rent or otherwise shall be considered as interest which shall be subject to
the usury laws.

The Court of Appeals, in holding that the two (2) deeds purporting to be pacto de retro sale contracts
are equitable mortgages, relied on the following factual findings of the trial court, to wit:

Several undisputed circumstances persuade this Court (that) the questioned deeds
should be construed as equitable mortgages as contemplated in Article 1602 of the
Civil Code, namely: (1) plaintiff vendor remained in possession until 1964 of the
properties she allegedly sold in 1959 to defendants; (2) the sums representing the
alleged purchase price were actually advanced to plaintiff by way of loans, as
expressly admitted by the parties at the hearing of February 17, 1971, reflected in an
Order of the same date: and (3) the properties allegedly purchased by defendant
Oscar Ramos and his wife have never been declared for taxation purposes in their
names. Exhibits K, K-1, L and L-1. 13

Even if we indulge the petitioners in their contention that they are justified in not taking possession of
the lots considering that what were allegedly sold to them were only the rights, shares, interests and
participation of private respondent Adelaida Ramos in the said lots which were under
administration, 14 however, such fact will not justify a reversal of the conclusion reached by respondent
court that the purported deeds of sale con pacto de retro are equitable mortgages. Such a conclusion is
buttressed by the other circumstances catalogued by respondent court especially the undisputed fact that
the two deeds were executed by reason of the loan extended by petitioner Oscar Ramos to private
respondent Adelaida Ramos and that the purchase price stated therein was the amount of the loan itself.

The above-stated circumstances are more than sufficient to show that the true intention of the
parties is that the transaction shall secure the payment of said debt and, therefore, shall be
presumed to be an equitable mortgage under Paragraph 6 of Article 1602 hereinbefore quoted.
Settled is the rule that to create the presumption enunciated by Article 1602, the existence of one
circumstance is enough. 15 The said article expressly provides therefor "in any of the following cases,"
hence the existence of any of the circumstances enumerated therein, not a concurrence nor an
overwhelming number of such circumstances, suffices to give rise to the presumption that the contract
with the right of repurchase is an equitable mortgage. As aptly stated by the Court of Appeals:

Thus, it may be fairly inferred that the real intention of the parties is that the
transactions in question were entered into to secure the payment of the loan and not
to sell the property (Article 1602, Civil Code). Under Article 1603 of the Civil Code it
is provided that 'in case of doubt, a contract purporting to be a sale with right to
repurchase shall be construed as an equitable mortgage' in this case, we have no
 doubt that the transaction between the parties is that of a loan secured by said
properties by way of mortgage. Hence, we find that Exhibits B and G do not reflect
the true and real intention of the parties and should accordingly be reformed and
construed as equitable mortgages. 16

Equally puerile is the other contention of petitioners that respondent court erred in not applying the
exclusionary parol evidence rule in ascertaining the true intendment of the contracting parties. The
present case falls squarely under one of the exceptions to said rule as provided in then Section 7 of
Rule 130, thus:

xxx xxx xxx

(a) Where a mistake or imperfection of the writing or its failure to

express the true intent and agreement of the parties, or the validity of
the agreement is put in issue by the pleadings; 17

xxx xxx xxx

Moreover, it is a well entrenched principle in the interpretation of contracts that if the terms thereof
are clear and leave no doubt as to the intention of the contracting parties the literal meaning of the
stipulation shall control but when the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former. 18

The admission of parol testimony to prove that a deed, absolute in form, was in fact given and
accepted as a mortgage does not violate the rule against the admission of oral evidence to vary or
contradict the terms of a written instrument. 19 Sales with a right to repurchase, as defined by the Civil
Code, are not favored. We will not construe instruments to be sales with a right to repurchase, with the
stringent and onerous effects which follow, unless the terms of the document and the surrounding
circumstances require it. Whenever, under the terms of the writing, any other construction can fairly and
reasonably be made, such construction will be adopted and the contract will be construed as a mere loan
unless the court can see that, if enforced according to its terms, it is not an unconscionable one. 20

On the faces thereof, the contracts purport to be sales with pacto de retro; however, since the same
were actually executed in consideration of the aforesaid loans said contracts are indubitably
equitable mortgages. The rule is firmly settled that whenever it is clearly shown that a deed of sale
with pacto de retro, regular on its face, is given as security for a loan, it must be regarded as an
equitable mortgage. 21

With respect to the orders dated January 22, 1960 and April 18, 1960, issued by the Court below
acting as a probate court and cadastral court, respectively, the same could not preclude the
institution of the case now under review.

A reading of the order of the probate court will show that it is merely an approval of the deed of
conditional sale dated May 27, 1959 executed by petitioner Adelaida Ramos in favor of petitioners.
There is nothing in said order providing for the consolidation of ownership over the lots allegedly sold
to petitioners nor was the issue of the validity of said contract discussed or resolved therein. "To give
approval" means in its essential and most obvious meaning, to confirm, ratify, sanction or consent to
some act or thing done by another. 22 The approval of the probate court of the conditional sale is not a
conclusive determination of the intrinsic or extrinsic validity of the contract but a mere recognition of the
right of private respondent Adelaida Ramos as an heir, to dispose of her rights and interests over her
inheritance even before partition. 23 As held in Duran, et al., vs. Duran 24 the approval by the settlement
court of the assignment pendente lite, made by one heir in favor of the other during the course of the
settlement proceedings, is not deemed final until the estate is closed and said order can still be vacated,
hence the assigning heir remains an interested person in the proceeding even after said approval.

Moreover, the probate jurisdiction of the former court of first instance or the present regional trial
court relates only to matters having to do with the settlement of the estate and probate of wills of
deceased persons, and the appointment and removal of administrators, executors, guardians and
trustees. Subject to settled exceptions not present in this case, the law does not extend the
jurisdiction of a probate court to the determination of questions of ownership that arise during the
proceeding. The parties concerned may choose to bring a separate action as a matter of
convenience in the preparation or presentation of evidence. 25 Obviously, the approval by the probate
court of the conditional sale was without prejudice to the filing of the proper action for consolidation of
ownership and/or reformation of instrument in the proper court within the statutory period of prescription.

The same jurisdictional flaw obtains in the order of consolidation issued by the cadastral court. The
court of first instance or the regional trial court, acting as cadastral court, acts with limited
competence. It has no jurisdiction to take cognizance of an action for consolidation of ownership,
much less to issue an order to that effect, such action must have been filed in the former court of first
instance, now in the regional trial court, in the exercise of its general jurisdiction. That remedy, and
the procedure therefor, is now governed by Rule 64 of the Rules of Court as a special civil action
cognizable by the regional trial court in the exercise of original general jurisdiction.

Antecedent thereto, Article 1607 of the Civil Code provided for consolidation as follows:

In case of real property, the consolidation of ownership in the vendee by virtue of the
failure of the vendor to comply with the provisions of article 1616 shall not be
recorded in the Registry of Property without a judicial order, after the vendor has
been duly heard.

Hence in Crisologo, et al. vs. Centeno, et al., 26 we ruled that said Article 1607 contemplates a
contentious proceeding wherein the vendor a retro must be named respondent in the caption and title of
the petition for consolidation of ownership and duly summoned and heard. An order granting the vendee's
petition for consolidation of ownership, without the vendor a retro being named as respondent, summoned
and heard, is a patent nullity for want of jurisdiction of the court over the person of the latter.

The questioned order of consolidation issued by the cadastral court, being void for lack of
jurisdiction, is in contemplation of law non-existent and may be wholly disregarded. Such judgment
may be assailed any time, either directly or collaterally, by means of a separate action or by resisting
such judgment in any action or proceeding whenever it is invoked. 27 It is not necessary to take any
step to vacate or avoid a void judgment; it may simply be ignored. 28

On the issue of prescription, in addition to what has been said, the present case, having been filed
on February 28, 1960, approximately seven (7) years from the execution of the questioned deeds,
was seasonably instituted. The prescriptive period for actions based upon a written contract and for
reformation is ten (10) years under Article 1144 of the Civil Code. Such right to reformation is
expressly recognized in Article 1365 of the same code. 29
Article 1602 of the Civil Code is designed primarily to curtail the evils brought about by contracts of
sale with right of repurchase, such as the circumvention of the laws against usury and pactum
commissorium. 30 In the present case before us, to rule otherwise would contravene the legislative intent
to accord the vendor a retro maximum safeguards for the protection of his legal rights under the true
agreement of the parties. The judicial experience in cases of this nature and the rationale for the remedial
legislation are worth reiterating, considering that such nefarious practices still persist:

It must be admitted that there are some cases where the parties really intend a sale
with right to repurchase. Although such cases are rare, still the freedom of contract
must be maintained and respected. Therefore, the contract under consideration is
preserved, but with adequate safeguards and restrictions.

One of the gravest problems that must be solved is that raised by the contract of sale
with right of repurchase or pacto de retro. The evils arising from this contract have
festered like a sore on the body politic. ...

xxx xxx xxx

It is a matter of common knowledge that in practically all of the so-called contracts of

sale with right of repurchase, the real intention of the parties is that the pretended
purchase-price is money loaned, and in order to secure the payment of the loan a
contract purporting to be a sale with pacto de retro is drawn up. It is thus that the
provisions contained in articles 1859 and 1858 of the present Civil Code which
respectively prohibit the creditor from appropriating the things given in pledge or
mortgage and ordering that said things be sold or alienated when the principal
obligation becomes due, are circumvented.

Furthermore, it is well-known that the practice in these so-called contracts of sale

with pacto de retro is to draw up another contract purporting to be a lease of the
property to the supposed vendor, who pays in money or in crops a so-called rent. It
is, however, no secret to anyone that this simulated rent is in truth and in fact interest
on the money loaned. In many instances, the interest is usurious. Thus, the usury
law is also circumvented.

It is high time these transgressions of the law were stopped. It is believed by the
Commission that the plan submitted for the solution of the problem will meet with the
approval of an enlightened public opinion, and in general, of everyone moved by a
sense of justice.

During the deliberations of the Commission the question arose as to whether the
contract of purchase with pacto de retro should be abolished and forbidden. On first
impression, this should be done, but there is every reason to fear that in such a case
the usurious money-lenders would demand of the borrowers that, although the real
agreement is one of loan secured with a mortgage, the instrument to be signed
should purport to be an absolute sale of the property involved. Should this happen,
the problem would become aggravated. Moreover, it must be admitted that there are
some cases where the parties really intend a sale with right to repurchase. Although
such cases are rare, still the freedom of contract must be maintained and respected.
 Therefore, the contract under consideration is preserved in the Project of Civil Code,
but with adequate safeguards and restrictions. 31

WHEREFORE, the instant petition is hereby DENIED and the assailed decision of the Court of
Appeals is hereby AFFIRMED.

SO ORDERED.

Testate Estate of Jose M. Valero, FLORA VALERO VDA. DE RODRIGUEZ and ROSIE VALERO
DE GUTIERREZ, petitioners-appellants,
vs.
COURT OF APPEALS and CARMEN VALERO-RUSTIA, respondents-appellees.

Amboriso Padilla Law Office and Iglesia & Associates for appellants.

Angel P. Purisima for appellees.

AQUINO, J.: 1wph1.t

This is supposedly a case about collation. As factual background, it should be stated that the
spouses, Beatriz Bautista and Jose M. Valero, did not beget any child during their marriage In 1951
Beatriz adopted Carmen (Carmencita) Bautista. Jose wanted also to adopt her but because, by his
first marriage, he had two children named Flora Valero Vda. de Rodriguez and Rosie Valero
Gutierrez. he was disqualified to adopt Carmen. Jose manifested in the adoption proceeding that he
consented to the use by Carmen of his surname Valero. (See Civil Case No. 12475, Manila CFI; Art.
338[1], Civil Code and art. 28, Child and Youth Welfare Code.)

On September 18, 1964, Jose M. Valero donated to Carmen B. Valero (who was already married to
Doctor Sergio Rustia) his one-half proindiviso share (apparently his inchoate share) in two conjugal
lots, with the improvements thereon, located at San Lorenzo Village, Makati, Rizal, with an area of
1,500 square meters. His wife, Beatriz, consented to the donation. However, the deed of donation
was not registered.

On January 13, 1966, Jose M. Valero, who was then seventy-three years old, executed his last will
and testament wherein he enumerated the conjugal properties of himself and his wife, including the
two San Lorenzo Village lots. In that will, he did not mention the donation. He devised to his wife
properties sufficient to constitute her legitime and bequeathed the remainder to his two children, Mrs.
Rodriguez and Mrs. Gutierrez.
About a month later, or on February 15, 1966, the Valero spouses, by means of a deed of absolute
sale, conveyed the San Lorenzo Village lots and the improvements thereon to Carmen B. Valero-
Rustia for the sum of one hundred twenty thousand pesos. The sale was registered on the following
day. Transfer Certificates of Title Nos. 163270 and 163271 were issued to the vendee, Mrs. Rustia.

On December 4, 1967 she mortgaged the two lots to the Quezon City Development Bank as security
for a loan of fifty thousand pesos (page 204, Rollo).

Beatriz B. Valero died intestate on September 12, 1972, survived by her husband and her adopted
child. Her estate is pending settlement in Special Proceeding No. 88896 of the Court of First
Instance of Manila. Mrs. Rustia was named administratrix of her adopted mother's estate.

More than a month later, or on October 18, 1972, Jose M. Valero died testate, survived by his two
children, Mrs. Rodriguez and Mrs. Gutierrez. His will was duly probated in Special Proceeding No.
88677, also of the Court of First Instance of Manila. Lawyer Celso F. Unson, the executor, submitted
an inventory wherein, following the list of conjugal assets in the testator's will, the two San Lorenzo
Village lots were included as part of the testate estate.

That inclusion provoked Mrs. Rustia, the adopted child of Mrs. Valero, and Mrs. Rodriguez and Mrs.
Gutierrez, the legitimate children of the testator, Jose M. Valero, to file (through Mrs. Rustia's lawyer)
in the testate proceeding a motion for the exclusion of the two San Lorenzo Village lots from the
testator's inventoried estate.

Adduced as reason for the exclusion is the fact that since February 16, 1966 Mrs. Rustia has been
the registered owner of the lots as shown by two Torrens titles, copies of which were attached to the
motion.

The executor opposed the motion on the ground that the two lots were donated to Mrs. Rustia and
the donation would allegedly involve collation and the donee's title to the lots. The executor revealed
that he was informed by Mrs. Gutierrez and Mrs. Rodriguez (supposed movants) that the two lots
should be included in the inventory. Thus, the issue of collation was prematurely raised.

The probate court in its order of August 9, 1973 excluded the two lots from the inventory of the
testator's estate but with the understanding "that the same are subject to collation".

On December 4, 1973 or one hundred twelve days after Mrs. Rustia was served with a copy of that
order, she filed a motion for its reconsideration. She insisted that she is the owner of the two San
Lorenzo Village lots as indicated in the Torrens titles. No one opposed that motion. At the hearing of
that motion, Mrs. Rustia's lawyer apprised the court that the executor informed him over the phone
that he was not opposing the motion.

The probate court in its order of December 14, 1973 ruled that the two lots were unconditionally
excluded from the inventory of Jose M. Valero's estate, meaning "that they are not subject to
collation". That order is the bone of contention in this case.

Mrs. Rodriguez (without being joined by her sister, Mrs. Gutierrez) filed a motion for the
reconsideration of the order of December 14, 1973. She alleged that the two San Lorenzo Village
lots were really conveyed to Mrs. Rustia by way of donation because the consideration for the sale
was allegedly only one-fifth of the true value of the lots. Mrs. Rodriguez further contended that the
order of August 9, 1973 was final in character.

In reply, Mrs. Rustia countered that the prior order was interlocutory and that in 1966 the true value
of the two lots was around P120,000 and that their value increased considerably in 1973 or 1974.
Moreover, the relatively low price of the sale could be attributed to the fact that Mrs. Rustia and her
husband lived with the Valeros and were taking care of them.

The probate court denied the motion for reconsideration. Mrs. Rodriguez and Mrs. Gutierrez, in their
petition for certiorari in the Court of Appeals, assailed the probate court's order declaring that the two
lots were not subject to collation.

The Court of Appeals held that the order of exclusion dated August 9, 1973 was interlocutory and
that it could be changed or Modified at anytime during the course of the administration proceedings.

It further held that it was immaterial whether the two lots were donated or sold to Mrs. Rustia as "a
mere subterfuge to avoid payment of the donor's and donee's taxes". According to the Appellate
Court, it was immaterial because under article 1061 of the Civil Code, only compulsory heirs are
required to make collation for the determination of their legitimes and, under section 2, Rule 90 of
the Rules of Court, only heirs are involved in questions as to advancement and Mrs. Rustia is not an
heir of the testator, Jose M. Valero (Vda. de Rodriguez vs. Valero Rustia, CA-G. R. No. SP- 02944,
August 28, 1974, per G. S. Santos, Gaviola, Jr. and De Castro, JJ.).

From that decision, an appeal was made to this Court. The appeal was not given due course.
However, upon motion for reconsideration and over Mrs. Rustia's opposition, the appeal was later
allowed.

The appellants' only assignment of error is that the Court of Appeals should have held that the
probate court's order of exclusion dated August 9, 1973 was not interlocutory but was a final and
appealable order valid that the order of December 14, 1973 modifying the order of August 3 is void.

We hold that the order of exclusion dated August 9, 1973 was not a final order. It was interlocutory in
the sense that it did not settle once and for all the title to the San Lorenzo Village lots. The probate
court in the exclusion incident could not determine the question of title.

The prevailing rule is that for the purpose of determining whether a certain property should or should
not be included in the inventory, the probate court may pass upon the title thereto but such
determination is not conclusive and is subject to the final decision in a separate action regarding
ownership which may be instituted by the parties (3 Moran's Comments on the Rules of Court, 1970
Edition, pages 448-9 and 473; Lachenal vs. Salas, L-42257, June 14, 1976, 71 SCRA 262, 266).

We hold further that the dictum of the Court of Appeals and the probate court that the two disputed
lots are not subject to collation was a supererogation and was not necessary to the disposition of the
case which merely involved the issue of inclusion in, or exclusion from, the inventory of the testator's
estate. The issue of collation was not yet justifiable at that early stage of the testate proceeding. It is
not necessary to mention in the order of exclusion the controversial matter of collation.

Whether collation may exist with respect to the two lots and whether Mrs. Rustia's Torrens titles
thereto are indefeasible are matters that may be raised later or may not be raised at all. How those
issues should be resolved, if and when they are raised, need not be touched upon in the
adjudication of this appeal.

The intestate and testate proceedings for the settlement of the estates of the deceased Valero
spouses were consolidated, as ordered by the lower court on November 21, 1974, so that the
conjugal estate of the deceased spouses may be properly liquidated, as contemplated in section 2,
Rule 73 of the Rules of Court and Act No. 3176 (Pages 223 and 235-6, Rollo).

We have examined the expedientes of the two cases. We found that the proceedings have not yet
reached the stage when the question of collation or advancement to an heir may be raised and
decided. The numerous debts of the decedents are still being paid. The net remainder (remanente
liquido) of their conjugal estate has not yet been determined. On the other hand, up to this time, no
separate action has been brought by the appellants to nullify Mrs. Rustia's Torrens titles to the
disputed lots or to show that the sale was in reality a donation.

In this appeal, it is not proper to pass upon the question of collation and to decide whether Mrs.
Rustia's titles to the disputed lots are questionable. The proceedings below have not reached the
stage of partition and distribution when the legitimes of the compulsory heirs have to be determined.

WHEREFORE, we affirm the decision of the Court of Appeals and the orders of the, lower court
dated August 9 and December 14, 1973, excluding from the inventory of Jose M. Valeros estate the
two San Lorenzo Village lots now registered in the name of Carmen B. Valero-Rustia, but we delete
from that decision and the two orders any ruling regarding collation which is a matter that may be
passed upon by the probate court at the time when it is seasonably raised by the interested parties,
if it is ever raised at all. No costs.

CYNTHIA V. NITTSCHER, PETITIONER, VS. DR. WERNER KARL

JOHANN NITTSCHER (DECEASED), ATTY. ROGELIO P. NOGALES
AND THE REGIONAL TRIAL COURT OF MAKATI (BRANCH 59),
RESPONDENTS.

G.R. NO. 160530, November 20, 2007

QUISUMBING, J.:

Nature of the case:

For review on certiorari are the Decision dated July 31, 2003 and Resolution dated
October 21, 2003 of the Court of Appeals.

Facts:
Dr. Werner Karl Johann Nittscher filed his petition for probate of his holographic
will at RTC of Makati on January 31, 1990 and for the issuance of letters
testamentary to herein respondent Atty. Rogelio Nogales. On Sptember 19,1991,
after hearing and with due notice to the compulsory heirs, the probate court issued
an order allowing the said holographic will. But on September 26,1994, Dr.
Nittscher died. Hence Atty Nogales filed a petition for letters testamentary for the
administration of the estate of the deceased. However, Dr. Nittschers surviving
spouse, herein petitioner Cynthia Nittscher moved for the dismissal of the said
petition. But the court denied her motion to dismiss and granted the respondents
petition for the issuance of letters testamentary and been granted by the court.

Where the Court contends that under Section 4, Rule 78 of the Revised Rules of
Court, provides when a will has been proved and allowed, the court shall issue
letters testamentary thereon to the person named as executor therein, if he is
competent, accepts the trust and gives bond as required by these rules. In the case
at bar, petitioner Atty. Rogelio Nogales has been named executor under
Holographic Will of Dr. Werner Nittscher. But the wife moved for reconsideration
but her motion was denied for lack of merit.

And Atty. Nogales was issued letters testamentary and was sworn in as executor.
Then the wife again appealed to the Court of Appeals alleging that respondents
petition for the issuance of letters testamentary should have been dismissed
outright as he RTC has no jurisdiction over the subject matter and that she was
denied due process. The appellate court dismissed the appeal and the assailed order
is affirmed in toto. Then the wife still filed a motion for reconsideration for the said
decision with the following grounds that his husband, Dr. Nittscher has no property
in the Philippines and also he is not a resident of the Philippines and that Atty
Nogales did not secure a certification against forum shopping which was one of the
requirement. And therefore she has all the rights to claim the properties of his
husband. But the respondent, Atty. Nogales pointed out that Dr. Nittscher did
reside and own real properties in Las Pinas, Metro Manila and the petition for the
issuance of letters of testamentary need not contain a certification against forum
shopping as it is merely a continuation of the original proceeding for the probate of
the will.
Issue:
1.)Whether or not the appointment of Dr. Nittscher to Atty. Nogales as his
executor of his estate is valid.
2.)Whether or not the petitioner, Dr. Nittschers wife, was denied of due process in
the probate proceedings.

Held:

Dr. Nittscher correctly filed in the RTC of Makati City, which then covered Las
Pias, Metro Manila, the petition for the probate of his will and for the issuance of
letters testamentary to respondent making him as his executor.

And as to the petitioners contention that she was denied of due process, the
records show that petitioner, with whom Dr. Nittscher had no child, and Dr.
Nittschers children from his previous marriage were all duly notified, by
registered mail, of the probate proceedings. Petitioner even appeared in court to
oppose respondents petition for the issuance of letters testamentary and she also
filed a motion to dismiss the said petition. She likewise filed a motion for
reconsideration of the issuance of the letters testamentary and of the denial of her
motion to dismiss. We are convinced petitioner was accorded every opportunity to
defend her cause. Therefore, petitioners allegation that she was denied due process
in the probate proceedings is without basis.

As a final word, petitioner should realize that the allowance of her husbands will
is conclusive only as to its due execution. The authority of the probate court is
limited to ascertaining whether the testator, being of sound mind, freely executed
the will in accordance with the formalities prescribed by law. Thus, petitioners
claim of title to the properties forming part of her husbands estate should be
settled in an ordinary action before the regular courts.

WHEREFORE, the petition is DENIED for lack of merit.

MILAGROS A. CORTES, petitioner, vs. COURT OF APPEALS and
MENANDRO A. RESELVA, respondents.

DECISION
BUENA, J.:

This is a petition for review on certiorari seeking a reversal of the decision dated
September 9, 1994 of the Court of Appeals[1] in C.A.-G.R. SP. No. 33826;

"IN VIEW OF THE FOREGOING, the petition is GIVEN DUE COURSE and the
assailed order of October 18, 1993, issued by the respondent court in Special
Proceeding No. 90-54955 is hereby SET ASIDE and declared NULL and VOID. With
costs against the private respondent."[2]

and the reinstatement of the order of the probate court, thus:

"WHEREFORE, Menandro Reselva and all those acting for or through him, is/are
ordered to vacate forthwith the house and lot of the estate situated in 173 Ilaw St.,
Balut, Tondo, Manila, and to deliver to the executrix Milagros R. Cortes the
possession thereof as well as the owner's duplicate certificate of the title thereof." [3]

The following facts, as found by the Court of Appeals, are undisputed:

"Herein petitioner Menandro A. Reselva, private respondent (petitioner in this

petition) Milagros R. Cortes, and Florante Reselva are brothers and sister and children
- heirs of the late spouses Teodoro T. Reselva and Lucrecia Aguirre Reselva, who died
on April 11, 1989 and May 13, 1987, respectively. During their lifetime, they acquired
a property particularly a house and lot consisting of 100 square meters, more or less,
with address at 173 Ilaw St., Balut, Tondo, Manila. As can be gleaned from the
records, Lucrecia Aguirre Reselva died ahead of Teodoro T. Reselva. The latter
executed a holographic will which was probated in this case on July 31, 1991, with
Milagros R. Cortes, as the appointed Executrix. After having been appointed and
qualified as Executrix, she filed a motion before respondent probate court praying that
Menandro A. Reselva, the occupant of the property, be ordered to vacate the property
at No. 173 Ilaw St., Balut, Tondo, Manila and turn over to said Executrix the
possession thereof (Annex 'D').This is the motion which the respondent court granted
in the assailed order of October 18, 1993."[4]

In the Appellate Court, the Regional Trial Court's order was set aside for having
been issued beyond the latter's limited jurisdiction as a probate court. [5]

The long standing rule is that probate courts, or those in charge of proceedings
whether testate or intestate, cannot adjudicate or determine title to properties claimed to
be part of the estate and which are claimed to belong to outside parties. [6] Stated
otherwise, "claims for title to, or right of possession of, personal or real property, made
by the heirs themselves, by title adverse to that of the deceased, or made by third
persons, cannot be entertained by the (probate) court."[7]

In the present case, however, private respondent Menandro A. Reselva, who

refused to vacate the house and lot being eyed as part of the estate of the late Teodoro
T. Reselva, cannot be considered an "outside party" for he is one of the three
compulsory heirs of the former. As such, he is very much involved in the settlement of
Teodoro's estate.[8] By way of exception to the above-mentioned rule, "when the parties
are all heirs of the decedent, it is optional upon them to submit to the probate court the
question of title to property." [9] Here, the probate court is competent to decide the
question of ownership. More so, when the opposing parties belong to the poor stratum
of society and a separate action would be most expensive and inexpedient. [10]
 In addition, Menandro's claim is not at all adverse to, or in conflict with that of, the
decedent since the former's theory merely advances co-ownership with the latter. [11] In
the same way, when the controversy is whether the property in issue belongs to the
conjugal partnership or exclusively to the decedent, the same is properly within the
jurisdiction of the probate court, which necessarily has to liquidate the conjugal
partnership in order to determine the estate of the decedent which is to be distributed
among the heirs.[12]

More importantly, the case at bar falls squarely under Rule 73, Section 2 of the
Revised Rules of Court, thus:

"RULE 73

"SEC. 2. Where estate upon dissolution of marriage. - When the marriage is dissolved
by the death of the husband or wife, the community property shall be inventoried,
administered, and liquidated, and the debts thereof paid, in the testate or intestate
proceedings of the deceased spouse. If both spouses have died, the conjugal
partnership shall be liquidated in the testate or intestate proceedings of either."

Hence, in the 1991 case of Vita vs. Montanano we ruled:

"(I)t is not necessary to file a separate proceeding in court for the proper disposition of
the estate of Isidra Montanano. Under Rule 73, Section 2 of the Rules of Court, if both
spouses have died, the conjugal partnership shall be liquidated in the testate or
intestate proceedings of either. In the present case, therefore, the conjugal partnership
of Isidra Montanano and Edilberto Vita should be liquidated in the testate proceedings
of the latter."[13]

Consequently, this case before us should be returned to the probate court for the
liquidation of the conjugal partnership of Teodoro and Lucrecia Reselva prior to the
settlement of the estate of Teodoro.

WHEREFORE, without reinstating the assailed order of the trial court, the
questioned decision of the Court of Appeals dated September 9, 1994 in CA-G.R. SP
No. 33826 is hereby SET ASIDE and the case REMANDED to the court of origin for
further proceedings. No pronouncement as to costs.

SO ORDERED
 ANITA REYES-MESUGAS, Petitioner,
vs.
ALEJANDRO AQUINO REYES, Respondent.
G.R. No. 174835, March 22,

THIRD DIVISION, CORONA, J.:

FACTS:
Lourdes Aquino Reyes, mother of petitioner and respondent, died intestate,
leaving to her heirs, among others, three parcels of land, including a lot covered by
Transfer Certificate of Title (TCT) No. 24475. A compromise agreement was entered
into by the parties whereby the estate of Lourdes was partitioned. A decision was
rendered by the RTC pursuant to the said compromise agreement.
Petitioner filed a motion to cancel lis pendens annotation for TCT No. 24475
arguing that the settlement of the estate proceeding had terminated; hence, the
annotation of lis pendens could already be cancelled since it had served its purpose.
Respondent opposed the motion and claimed that the parties, in addition to the
compromise agreement, executed side agreements which had yet to be fulfilled.
One such agreement was executed between petitioner and respondent granting
respondent a one-meter right of way on the lot covered by TCT No. 24475.
The RTC denied the motion to cancel the notice of lis pendens annotation for
lack of sufficient merit but was denied.
ISSUE:
Whether the RTC, sitting as probate court, has jurisdiction over the issue of
right of way.
RULING:
NONE.
In this instance, the case filed with the RTC was a special proceeding for the
settlement of the estate of Lourdes. The RTC therefore took cognizance of the case
as a probate court.
Settled is the rule that a probate court is a tribunal of limited jurisdiction. It
acts on matters pertaining to the estate but never on the rights to property arising
from the contract. It approves contracts entered into for and on behalf of the estate
or the heirs to it but this is by fiat of the Rules of Court. It is apparent therefore that
when the RTC approved the compromise agreement, the settlement of the estate
proceeding came to an end
Moreover, judgment rendered in accordance with a compromise agreement is
immediately executory as there is no appeal from such judgment. When both
parties enter into an agreement to end a pending litigation and request that a
decision be rendered approving said agreement, such action constitutes an implied
waiver of the right to appeal against the said decision.

Romero vs. CA
GR. No. 188921, April 18, 2012
Facts: On 1974, when Judge Romero died his wife, Aurora was appointed as legal
guardian. During the pendency of Settlement Proceedings of the estate of their
deceased father, Leo and David Romero filed a Complaint for Annulment of Sale,
Nullification of Title, and Conveyance of Title against their mother Aurora C.
Romero and brother Vittorio C. Romero alleging that their brother Vittorio
through fraud, misrepresentation and duress succeeded in registering the several
properties in his name through of Deeds of Sale executed by their mother, Aurora.
The RTC dismissed the complaint. Likewise, the RTC denied their MR, citing
Section 3, Rule 87 of the Rules of Court which bars an heir or a devisee from
maintaining an action to recover the title or possession of lands until such lands
have actually been assigned. The court ruled that plaintiffs must first cause the
termination of settlement proceedings to its logical conclusion before their case
could be entertained by the Court. Leo and David filed Petition for Certiorari
before the CA alleging grave abuse of discretion in the Resolutions issued by the
RTC of Lingayen, Pangasinan. The CA dismissed the petition. Petitioners assert
that the jurisdiction of the RTC sitting as a probate or intestate court relates only to
matters having to do with the settlement of the estate of deceased persons or the
appointment of executors, but does not extend to the determination of questions of
ownership that arise during the proceedings. Hence this appeal.

Issue: Whether or not a separate civil action for annulment of sale and
reconveyance of title, despite the pendency of the settlement proceedings for the
estate of the late Judge Dante Y. Romero may prosper.
Ruling :
NO. Section 3, Rule 87 bars petitioners from filing the present action.
The said provision states that:
Sec. 3. Heir may not sue until share assigned. When an executor or
administrator is appointed and assumes the trust, no action to recover the title or
possession of lands or for damages done to such lands shall be maintained against
him by an heir or devisee until there is an order of the court assigning such lands to
such heir or devisee or until the time allowed for paying debts has expired.