[No. L-8437. November 28, 1956] APPEAL from an order of the Court of First Instance of Rizal.
Caluag,
ESTATE OF K.H. HEMADY, deceased, vs. LUZON SURETY CO.,
INC., claimant and appellant.
1. 1.CONTRACTS; BlNDING EFFECT OF CONTRACTS UPON
HEIRS OF DECEASED PARTY.—The binding effect of
contracts upon the heirs of the deceased party is not altered by
the provision in the 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. The
general rule, therefore, is that a party’s contractual rights and
obligations are transmissible to the successors.
1. 2.ID.; SURETYSHIP; NATURE OF OBLIGATION OF
SURETY.—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. The creditor expects of the surety
nothing but the reimbursement of the moneys that said
creditor 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; and to the
creditor, it was indifferent that the reimbursement should be
made by the surety himself or by some one else in his behalf, so
long as the money was paid to it.
1. 3.ID.; ID.; QUALIFICATION OF
GUARANTOR; SUPERVENING INCAPACITY OF
GUARANTOR, EFFECT ON CONTRACT.—The qualification
of integrity in the guarantor or surety is required to be present
only at the time of the perfection of the contract of guaranty.
Once the contract of guaranty has become perfected and
binding, 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: it is his right, not his
duty, he may waive it if he chooses, and hold the guarantor to
his bargain.
1
J.
The facts are stated in the opinion of the Court.
Claro M. Recto for appellee.
Tolentino & Garcia and D.R. Cruz for appellant.
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:
“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; and 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.
* * * * * * * transmissible. Upon the death of Hemady, his integrity was not
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 competent jurisdiction in
the City of Manila, waiving for this purpose any other venue. Our right
to be notified of the acceptance and approval of this indemnity
agreement is hereby likewise waived.
* * * * * * *
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: (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; and (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:
“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: integrity. As correctly pointed out by the
Administratrix, integrity is something purely personal and is 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

2
preceding one) expressely so provide, thereby confirming Article 1311
already qouted.
“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:
“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 can not 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).
* * * * * * * Hemady himself or by some one else in his behalf, so long as the money
“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; they
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
3
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; and to the Luzon Surety
Co., it was indifferent that the reimbursement should be made by
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 vs obligaciones; le excepcion, la intransmisibilidad. Mientras
nada se diga en contrario impera el principio de la transmision, como
elemento natural a toda relación juridica, salvo las personalísimas. Asi,
para la no transmisión, 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, vs para evitarló, si asi se quiere, es indespensable
convension terminante en tal sentido.
Por su esencia, el derecho vs la obligación tienden a ir más allá de
las personas que les dieron vida, vs a ejercer presión sobre los sucesores
de esa persona; cuando no se quiera esto, se impone una estipulacion
limitativa expresamente de la transmisibilidad of de cuyos
tírminos claramente se deduzca la concresión del concreto a las mismas
personas que lo otorgon.” (Scaevola, Codigo Civil, Tomo XX, p. 541–542)
(Italics 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;
hence, 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; and 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:
“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
4
remains optional in the creditor: it is his right, not his duty; he 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; Gaskell & 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; Gibson vs. Mithell, 16 Pla., 519; Maxey vs. Carter, 10 Yarg.
[Tenn.], 521 Reeves vs. Pulliam, 7 Baxt. [Tenn.], 119; Ernst 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; and 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.
Parás, C.J., Bengzon, Padilla, Montemayor, Bautista
Angelo, Labrador, Concepcion, Endencia and Felix, JJ.,concur.
Order reversed.

5
 G.R. No. 68053. May 7, 1990.*
LAURA ALVAREZ, FLORA ALVAREZ and RAYMUNDO ALVAREZ,
petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE
COURT and JESUS YANES, ESTELITA YANES, ANTONIO YANES,
ROSARIO YANES, and ILUMINADO YANES, respondents.
Civil Procedure; Judgments; Decision in Civil Case No. 5022
having long become final and executory is the law of the case between the
parties thereto.—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.
Same; Same; Same; 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.—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. 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.
Same; Same; Reconveyance; 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.—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.
“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
deed. As clearly revealed by the undeviating line of decisions coming
from this Court, such an undesirable eventuality is precisely sought to
be guarded against.”
6
Civil Law; Succession; Contention that the liability arising from the
sale of Lots Nos. 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 is untenable.—Petitioners further contend
that the liability arising from the sale of said Lots Nos. 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.
Same; Same; Same; The general rule is that a party’s contractual
rights and obligations are transmissible to the successors.—“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. x x x”
PETITION for certiorari to review the decision and resolution of the
then Intermediate Appellate Court. Sison, J.
The facts are stated in the opinion of the Court.
Francisco G. Banzon for petitioners.
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 title also contains a certification to the effect that Lot 773-B was
pay jointly and severally the private respondents the sum of P20,000.00 originally registered under OCT No. 8804.
representing the actual value of Lots Nos. 773-A and 773-B of the
On May 30, 1955, Santiago sold Lots 773-A and 773-B to Monico B.
cadastral survey of Murcia, Negros Occidental and reversing the subject
Fuentebella, Jr. in consideration of the sum of
decision insofar as it awarded the sums of P2,000.00, P5,000.00 and
P7,000.00.5 Consequently, on February 20, 1956, TCT Nos. T-19291 and
P2,000.00 as actual damages, moral damages and attorney’s fees,
T-19292 were issued in Fuentebella’s name.6
respectively and (b) the resolution of said appellate court dated May 30,
1984, denying the motion for reconsideration of its decision. After Fuentebella’s death and during the settlement of his estate,
the administratrix thereof (Arsenia R. Vda. de Fuentebella, his wife)
The real properties involved are two parcels of land identified as Lot
filed in Special Proceedings No. 4373 in the Court of First Instance of
773-A and Lot 773-B which were originally known as Lot 773 of the
Negros Occidental, a motion requesting authority to sell Lots 773-A and
cadastral survey of Murcia, Negros Occidental. Lot 773, with an area of
773-B.7 By virtue of a court order granting said motion,8 on March 24,
156,549 square meters, was registered in the name of the heirs of
1958, Arsenia Vda. de Fuentebella sold said lots for P6,000.00 to
Aniceto Yanes under Original Certificate of Title No. RO-4858 (8804)
Rosendo Alvarez.9 Hence, on April 1, 1958. TCT Nos. T-23165 and T-
issued on October 9, 1917 by the Register of Deeds of Occidental Negros
23166 covering Lots 773-A and 773-B were respectively issued to
(Exh. A).
Rosendo Alvarez.10
Aniceto Yanes was survived by his children, Rufino, Felipe and
Two years later or on May 26, 1960, Teodora Yanes and the children
Teodora. Herein private respondents, Estelita, Iluminado and Jesus, are
of her brother Rufino, namely, Estelita, Iluminado and Jesus, filed in
the children of Rufino who died in 1962 while the other private
the Court of First Instance of Negros Occidental a complaint against
respondents, Antonio and Rosario Yanes, are children of Felipe. Teodora
Fortunato Santiago, Arsenia Vda. de Fuentebella, Alvarez and the
was survived by her child, Jovita (Jovito) Alib. 1 It is not clear why the
Register of Deeds of Negros Occidental for the “return” of the ownership
latter is not included as a party in this case.
and possession of Lots 773 and 823. They also prayed that an
Aniceto left his children Lots 773 and 823. Teodora cultivated only accounting of the produce of the land from 1944 up to the filing of the
three hectares of Lot 823 as she could not attend to the other portions of complaint be made by the defendants, that after court approval of said
the two lots which had a total area of around twenty-four hectares. The accounting, the share or money equivalent due the plaintiffs be
record does not show whether the children of Felipe also cultivated delivered to them, and that defendants be ordered to pay plaintiffs
some portions of the lots but it is established that Rufino and his P500.00 as damages in the form of attorney’s fees.11
children left the province to settle in other places as a result of the
During the pendency in court of said case or on November 13, 1961,
outbreak of World War II. According to Estelita, from the “Japanese
Alvarez sold Lots 773-A, 773-B and another lot for P25,000.00 to Dr.
time up to peace time”, they did not visit the parcels of land in question
Rodolfo Siason.12Accordingly, TCT Nos. 30919 and 30920 were issued to
but “after liberation”, when her brother went there to get their share of
Siason,13 who, thereafter, declared the two lots in his name for
the sugar produced therein, he was informed that Fortunato Santiago,
assessment purposes.14
Fuentebella (Puentevella) and Alvarez were in possession of Lot 773. 2
Meanwhile, on November 6, 1962, Jesus Yanes, in his own behalf
It is on record that on May 19, 1938, Fortunato D. Santiago was
and in behelf of the other plaintiffs, and assisted by their counsel, filed a
issued Transfer Certificate of Title No. RF 2694 (29797) covering Lot
manifestation in Civil Case No. 5022 stating that the therein plaintiffs
773-A with an area of 37,818 square meters.3 TCT No. RF 2694
“renounce, forfeit and quitclaims (sic) any claim, monetary or otherwise,
describes Lot 773-A as a portion of Lot 773 of the cadastral survey of
against the defendant Arsenia Vda. de Fuentebella in connection with
Murcia and as originally registered under OCT No. 8804.
the above-entitled case.”15
The bigger portion of Lot 773 with an area of 118,831 square meters
On October 11, 1963, a decision was rendered by the Court of First
was also registered in the name of Fortunato D. Santiago on September
Instance of Negros Occidental in Civil Case No. 5022, the dispositive
6, 1938 under TCT No. RT-2695 (28192).4 Said transfer certificate of
portion of which reads:

7

WHEREFORE, judgment is rendered, ordering the defendant Rosendo
Alvarez to reconvey to the plaintiffs lots Nos. 773 and 823 of the
Cadastral Survey of Murcia, Negros Occidental, now covered by
Transfer Certificates of Title Nos. T-23165 and T-23166 in the name of
said defendant, and thereafter to deliver the possession of said lots to
the plaintiffs. No special pronouncement as to costs.
SO ORDERED.”16
It will be noted that the above-mentioned manifestation of Jesus Yanes
was not mentioned in the aforesaid decision. However, execution of said
decision proved unsuccessful with respect to Lot 773. In his return of
service dated October 20, 1965, the sheriff stated that he discovered
that Lot 773 had been subdivided into Lots 773-A and 773-B; that they
were “in the name” of Rodolfo Siason who had purchased them from
Alvarez, and that Lot 773 could not be delivered to the plaintiffs as
Siason was “not a party per writ of execution.”17
The execution of the decision in Civil Case No. 5022having met a
hindrance, herein private respondents (the Yaneses) filed on July 31,
1965, in the Court of First Instance of Negros Occidental a petition for
the issuance of a new certificate of title and for a declaration of nullity
of TCT Nos. T-23165 and T-23166 issued to Rosendo
Alvarez.18 Thereafter, the court required Rodolfo Siason to produce the
certificates of title covering Lots 773 and 823.
Expectedly, Siason filed a manifestation stating that he purchased Lots
773-A, 773-B and 658, not Lots 773 and 823, “in good faith and for a
valuable consideration without any knowledge of any lien or
encumbrances against said propert(ies)”; that the decision in the
cadastral proceeding19 could not be enforced against him as he was not a
party thereto; and that the decision in Civil Case No. 5022 could neither
be enforced against him not only because he was not a party-litigant
therein but also because it had long become final and
executory.20 Finding said manifestation to be well-founded, the
cadastral court, in its order of September 4, 1965, nullified its previous
order requiring Siason to surrender the certificates of title mentioned
therein.21
In 1968, the Yaneses filed an ex-parte motion for the issuance of an
alias writ of execution in Civil Case No. 5022. Siason opposed it.22 In its
order of September 28, 1968 in Civil Case No. 5022, the lower court,
noting that the Yaneses had instituted another action for the recovery of
8
the land in question, ruled that the judgment therein could not be
enforced against Siason as he was not a party in the case.23
The action filed by the Yaneses on February 21, 1968 was for
recovery of real property with damages.24Named defendants therein
were Dr. Rodolfo Siason, Laura Alvarez, Flora Alvarez, Raymundo
Alvarez and the Register of Deeds of Negros Occidental. The Yaneses
prayed for the cancellation of TCT Nos. T-19291 and 19292 issued to
Siason (sic) for being null and void; the issuance of a new certificate of
title in the name of the Yaneses “in accordance with the sheriff’s return
of service dated October 20, 1965;” Siason’s delivery of possession of Lot
773 to the Yaneses; and if, delivery thereof could not be effected, or, if
the issuance of a new title could not be made, that the Alvarezes 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. 26On their part, the
Alvarezes 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:
1. A.The case against the defendant Dr. Rodolfo Siason and the
Register of Deeds are (sic) hereby dismissed.
2. 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 plaintiffs; 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.
3. C.The cross-claim filed by the defendant Dr. Rodolfo Siason
against the defendants, Laura, Flora and Raymundo, all
surnamed Alvarez is hereby dismissed.
4. D.Defendants, Laura, Flora and Raymundo, all surnamed
Alvarez, are hereby ordered to pay the costs of this suit.
SO ORDERED.”29
The Alvarezes 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.
In their memorandum petitioners raised the following issues:
1. 1.Whether or not the defense of prescription and estoppel had
been timely and properly invoked and raised by the petitioners
in the lower court.
9
2. 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.
1. 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.
2. 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. 5022ordering 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 Petitioners further contend that the liability arising from the sale of
multiply in number to the detriment of the administration of justice. 36 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
There is no dispute that the rights of the Yaneses to the properties
estate, after his death.
in question have been finally adjudicated in Civil Case No. 5022. As
found by the lower court, from the uncontroverted evidence presented, Such contention is untenable for it overlooks the doctrine obtaining
the Yaneses have been illegally deprived of ownership and possession of in this jurisdiction on the general transmissibility of the rights and
the lots in question.37 In fact, Civil Case No. 8474 now under review, obligations of the deceased to his legitimate children and heirs. Thus,
arose from the failure to execute Civil Case No. 5022, as subject lots can the pertinent provisions of the Civil Code state:
no longer be reconveyed to private respondents Yaneses, the same
“Art. 774. Succession is a mode of acquisition by virtue of which the
having been sold during the pendency of the case by the petitioners’
property, rights and obligations to the extent of the value of the
father to Dr. Siason who did not know about the controversy, there
inheritance, of a person are transmitted through his death to another or
being no lis pendens annotated on the titles. Hence, it was also settled
others either by his will or by operation of law.
beyond question that Dr. Siason is a purchaser-in-good faith.
“Art. 776. The inheritance includes all the property, rights and
Under the circumstances, the trial court did not annul the sale
obligations of a person which are not extinguished by his death.
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 “Art. 1311. Contracts take effect only between the parties, their
who lost in Civil Case No. 5022 to pay the plaintiffs (private assigns and heirs, except in case where the rights and obligations
respondents herein) the amount of P20,000.00 representing the actual arising from the contract are not transmissible by their nature, or by
value of the subdivided lots in dispute. It did not order defendant Siason stipulation or by provision of law. The heir is not liable beyond the value
to pay said amount.38 of the property received from the decedent.”
As to the propriety of the present case, it has long been established As explained by this Court through Associate Justice J.B.L. Reyes in
that the sole remedy of the landowner whose property has been the case of Estate of Hemady vs. Luzon Surety Co., Inc.41
wrongfully or erroneously registered in another’s name is to bring an
“The binding effect of contracts upon the heirs of the deceased party is
ordinary action in the ordinary court of justice for reconveyance or, if
not altered by the provision of our Rules of Court that money debts of a
the property has passed into the hands of an innocent purchaser for
deceased must be liquidated and paid from his estate before the residue
value, for damages.39 “It is one thing to protect an innocent third party;
is distributed among said heirs (Rule 89). The reason is that whatever
it is entirely a different matter and one devoid of justification if deceit
payment is thus made from the state is ultimately a payment by the
would be rewarded by allowing the perpetrator to enjoy the fruits of his
heirs or distributees, since the amount of the paid claim in fact
nefarious deed. As clearly revealed by the undeviating line of decisions
diminishes or reduces the shares that the heirs would have been
coming from this Court, such an undesirable eventuality is precisely
entitled to receive.
sought to be guarded against.”40
“Under our law, therefore, the general rule is that a party’s
The issue on the right to the properties in litigation having been
contractual rights and obligations are transmissible to the successors.
finally adjudicated in Civil Case No. 5022in 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
The rule is a consequence of the progressive ‘depersonalization’ of
properly considered by the lower court. Petitioners could have appealed
patrimonial rights and duties that, as observed by Victorio Polacco, has
in the former case but they did not. They have therefore foreclosed their
characterized the history of these institutions. From the Roman concept
rights, if any, and they cannot now be heard to complain in another case
of a relation from person to person, the obligation has evolved into a
in order to defeat the enforcement of a judgment which has long become
relation from patrimony to patrimony, with the persons occupying only
final and executory.
a representative position, barring those rare cases where the obligation

10
is strictly personal, i.e., is contracted intuitu personae, in consideration
of its performance by a specific person and by no other. 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 Cortés, JJ., concur. Bidin, J., No
part. I participated in the appealed decision.
Decision affirmed.
Note.—Reopening of a case which has become final and executory is
disallowed. (Philippine Rabbit Bus Lines, Inc. vs. Arciaga, 148 SCRA
433.)

11
 G.R. No. 149926. February 23, 2005.*
UNION BANK OF THE PHILIPPINES, petitioner, vs. EDMUND
SANTIBAÑEZ and FLORENCE SANTIBAÑEZ ARIOLA, respondents.
Civil Law; Settlement of Estate; Jurisdictions; 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.—
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. The said court is primarily concerned with the
administration, liquidation and distribution of the estate.
Same; Same; Wills; Partition; In our jurisdiction, the rule is that
there can be no valid partition among the heirs until after the will has
been probated.—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.
Same; Same; Same; Same; 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.—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 court’s approval is tantamount to
divesting it with jurisdiction which the Court cannot allow. 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. 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.
Same; Same; Same; Filing of a money claim against the decedent’s
estate in the probate court is mandatory.—The filing of a money claim
12
against the decedent’s estate in the probate court is mandatory. As we
held in the vintage case of Py Eng Chong v. Herrera: . . . This
requirement is for the purpose of protecting the estate of the deceased
by informing the executor or administrator of the claims against it, thus
enabling him to 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 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
against the decedent’s estate in order to settle the affairs of the estate
as soon as possible, pay off its debts and distribute the residue.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Miguel G. Padernal for petitioner U.B.P.
Roberto Cal Catolico for respondents.
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 dismissal2 of the petitioner’s 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. Santibañez entered into a loan agreement3 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 Agreement5 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 Santibañez Ariola, executed a Joint
Agreement8 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
Liabilities9 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 letters10 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 Complaint11 for sum of money against the
heirs of Efraim Santibañez, 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
Answer13 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 63.14Consequently, 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
13
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 Santibañez 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 decedent’s account. Ruling that the
joint agreement executed by the heirs was null and void, the trial court
held that the petitioner’s 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. 1.THE COURT A QUO ERRED IN FINDING THAT THE
JOINT AGREEMENT (EXHIBIT “A”) SHOULD BE
APPROVED BY THE PROBATE COURT.
2. 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. 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 SANTIBAÑEZ 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
14
EFRAIM SANTIBAÑEZ 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
SANTIBAÑEZ 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 petitioner’s 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 Santibañez 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 Santibañez, 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 Santibañez; 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
15
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 Santibañez, left a holographic will24 which
contained, inter alia, the provision which reads as follows:
1. (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 agreement25executed 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 father’s 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 court’s
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.27Thus, in executing any joint agreement which appears to
be in the nature of an extrajudicial 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 abovedescribed 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 Santibañez, 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
administration proceedings. Claims not yet due, or contingent, may be
approved at their present value.
The filing of a money claim against the decedent’s estate in the probate
court is mandatory.30 As we held in the vintage case of Py Eng Chong v.
Herrera:31
16
. . . This requirement is for the purpose of protecting the estate of the
deceased by informing the executor or administrator of the claims
against it, thus enabling him to 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 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 against the decedent's estate in order to
settle the affairs of the estate as soon as possible, pay off its debts and
distribute the residue.32
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 documentary evidence presented, particularly the
promissory notes and the continuing guaranty agreement, were
executed and signed only by the late Efraim Santibañez and his son
Edmund. As the petitioner failed to file its money claim with the
probate court, at 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 may have as against the
petitioner. As the court had not acquired jurisdiction over the person of
Edmund, we find it unnecessary to delve into the matter further.
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 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 and between
First Countryside Credit Corporation and Union Bank of the
Philippines” . . .34 However, the documentary evidence 35 clearly reflects
that the parties in the deed of assignment with assumption of liabilities
were the FCCC, and the Union Savings and Mortgage Bank, with the
conformity of Bancom Philippine Holdings, Inc. Nowhere can the
petitioner’s participation therein as a party be found. Furthermore, no
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 the trial court declared in its decision:
. . . [T]he court also finds merit to the contention of defendant that
plaintiff failed to prove or did not present evidence to prove that Union
Savings and Mortgage Bank is now the 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 the
requisite notoriety exists; and every reasonable doubt upon the subject
should be promptly resolved in the negative.” (Republic vs. Court of
Appeals, 107 SCRA 504).36
This being the case, the petitioner’s personality to file the complaint is
wanting. 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.
IN LIGHT OF ALL THE FOREGOING, the petition is hereby
DENIED. The assailed Court of Appeals Decision is AFFIRMED. No
costs.
SO ORDERED.
Puno (Chairman), Austria-Martinez, Tinga and Chico-Nazario,
JJ., concur.
Petition denied, assailed decision affirmed.
Note.—Every act intended to put an end to indivision among co-
heirs and legatees or devisees would be a partition although it would
purport to be a sale, an exchange, a compromise, a donation or an
extrajudicial settlement (Non vs. Court of Appeals, 325 SCRA
652 [2000])

17
 G.R. No. 169129. March 28, 2007.*
SPS. VIRGILIO F. SANTOS & ESPERANZA LATI SANTOS, SPS.
VICTORINO F. SANTOS, & LAGRIMAS SANTOS, ERNESTO F.
SANTOS, and TADEO F. SANTOS, petitioners, vs. SPS. JOSE
LUMBAO and PROSERFINA LUMBAO, respondents.
Appeals; In the exercise of the Supreme Court’s 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; Exceptions.—It is well-
settled that in the exercise of the Supreme Court’s 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. But, the rule is not
without exceptions. There are several recognized exceptions 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.
Actions; Jurisdictions; Katarungang Pambarangay Law;Barangay
Conciliation; While non-compliance with the condition that there must
first be proper recourse to barangay conciliation before filing of
complaint in court or any government offices could affect the sufficiency
of the plaintiff’s cause of action and make his complaint vulnerable to
dismissal on ground of lack of cause of action or prematurity, 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.—Section 408 of the aforesaid
law and Administrative Circular No. 14-93 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 plaintiff’s 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. 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
18
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 Lumbao’s 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.
Same; Same; Same; 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.—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 court’s jurisdiction and a willingness to abide by the resolution of
the case which will bar said party from later on impugning the court’s
jurisdiction. 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. 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.
Same; Pleadings and Practice; An answer is a mere statement of
fact which the party filing it expects to prove, but it is not evidence; In
spite of the presence of judicial admissions in a party’s pleading, the trial
court is still given leeway to consider other evidence presented.—Facts
alleged in a party’s 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. And in spite of the presence of judicial
admissions in a party’s pleading, the trial court is still given leeway to
consider other evidence presented. 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.” Virgilio’s 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.
Sales; Notarial Law; A document acknowledged before a notary
public is a public document 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; One who
denies the due execution of a deed where one’s 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.—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 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. To overcome this
presumption, there must be presented evidence that is clear and
convincing. Absent such evidence, the presumption must be upheld. In
addition, one who denies the due execution of a deed where one’s
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.
Same; Co-Ownership; 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, and, in any
case, the mere fact that the deed purports to transfer a concrete portion
does not per se render the sale void.—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
19
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.
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.
Same; Actions; Reconveyance; Prescription; Land Titles; When the
plaintiff is in possession of the land to be reconveyed, prescription cannot
set in.—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 person’s 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.
Same; Land Titles; 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.—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
Lumbao’s 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. 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.
Succession; Heirs are bound by contracts entered into by their
predecessors-in-interest—whatever rights and obligations of the decedent
have over a property are transmitted to the heirs by way of succession, a
mode of acquiring the property, rights and obligations of the decedent to
the extent of the value of the inheritance of the heirs.—The general rule
that heirs are bound by contracts entered into by their predecessors-in-
interest applies in the present case. Article 1311 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. 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.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Porfirio Gabiola, Jr. for petitioners.
Domingo E. Chiu, Sr. for respondents.
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorariunder Rule 45 of
the 1997 Revised Rules of Civil Procedure seeking to annul and set
20
aside the Decision1and Resolution2 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 attorney’s fees and litigation expenses, thus, reversing the
Decision3 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.
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 October 1985. The other petitioners
Esperanza Lati and Lagrimas Santos are the daughters-in-law of Rita.
Herein respondents Spouses Jose Lumbao and Proserfina Lumbao
are the alleged owners of the 107-square meter lot (subject property),
which they purportedly bought from Rita during her lifetime.
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 occasion, Rita sold 100 square
meters of her inchoate share in her mother’s estate through a document
denominated as “Bilihan ng Lupa,” dated 17 August 1979. 4Respondents
Spouses Lumbao claimed the execution of the aforesaid document was
witnessed by petitioners Virgilio and Tadeo, as shown by their
signatures affixed therein. On the second occasion, an additional seven
square meters was added to the land as evidenced by a document also
denominated as “Bilihan ng Lupa,” dated 9 January 1981. 5
After acquiring the subject property, respondents Spouses Lumbao
took actual possession thereof and erected thereon a house which they
have been occupying as exclusive owners up to the present. As the
exclusive owners of the subject property, respondents Spouses Lumbao
made several verbal demands upon Rita, during her lifetime, and
thereafter upon herein petitioners, for them to execute the necessary
documents to effect the issuance of a separate title in favor of
respondents Spouses Lumbao insofar as the subject property is
concerned. Respondents Spouses Lumbao alleged that prior to her
death, Rita informed respondent Proserfina Lumbao she could not
deliver the title to the subject property because the entire property
inherited by her and her co-heirs from Maria had not yet been
partitioned.
On 2 May 1986, the Spouses Lumbao claimed that petitioners,
acting fraudulently and in conspiracy with one another, executed a
Deed of Extrajudicial 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. 817297 of the Registry of Deeds of Pasig City.
On 15 June 1992, respondents Spouses Lumbao, through counsel, sent a
formal demand letter8 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 Damages9 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.
150810requiring 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.
21
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
attorney’s 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 attorney’s 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:
1. 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.
1. 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.
2. 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].
 3. 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.
4. V.THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING THAT RESPONDENTS
[SPOUSES LUMBAO’S] ACTION FOR RECONVEYANCE
WITH DAMAGES CANNOT BE SUPPORTED WITH
UNENFORCEABLE DOCUMENTS, SUCH AS THE BILIHAN
NG LUPA DATED [17 AUGUST 1979] AND [9 JANUARY
1981].
5. VI.THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING THAT RESPONDENTS
[SPOUSES LUMBAO’S] 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 Lumbao’s
witness, Carolina Morales, testified that neither petitioner Virgilio nor
22
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 Lumbao’s 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:
1. 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.
2. 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 Lumbao’s action for reconveyance with
damages.
3. 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 Court’s 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
exceptions14 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-
9315 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 precondition before filing a complaint in court or
any government offices. Non-compliance with the said condition
precedent could affect the sufficiency of the plaintiff’s 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 Lumbao’s non-compliance with the
aforesaid condition precedent cannot be considered fatal. Although
petitioners alleged in their answer that the Complaint for Reconveyance
23
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 court’s
jurisdiction and a willingness to abide by the resolution of the case
which will bar said party from later on impugning the court’s
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 Lumbao’s 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. Witness . . . Virgilio Santos, that you
don’t 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 don’t remember, sir, because of the length of time that had
passed.
Q. But that is your signature?
A. I don’t have eyeglasses . . . My signature is different.
24
Q. You never appeared before this notary public Apolinario
Mangahas?
A. I don’t remember.20
As a general rule, facts alleged in a party’s 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.21And in
spite of the presence of judicial admissions in a party’s 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 Virgilio’s 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 Lumbao’s 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 spouses
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 mother’s
voluntary act of selling a portion of her share in her deceased mother’s
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 document25 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
one’s 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 Lumbao’s 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 serender 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
25
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 person’s 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 they bought from Rita, petitioners’ mother. And as correctly ruled by
knowledge of the contracts of sale between their mother and the the appellate court, petitioners must pay respondents Spouses Lumbao
respondents Spouses Lumbao. attorney’s fees and litigation expenses for having been compelled to
litigate and incur expenses to protect their interest.35 On this matter,
Under the above premises, this Court holds that the “Bilihan ng Lupa”
we do not find reasons to reverse the said findings.
documents dated 17 August 1979 and 9 January 1981 are valid and
enforceable and can be made the basis of the respondents Spouses WHEREFORE, premises considered, the instant Petition is hereby
Lumbao’s action for reconveyance. The failure of respondents Spouses DENIED. The Decision and Resolution of the Court of Appeals dated 8
Lumbao to have the said documents registered does not affect its June 2005 and 29 July 2005, respectively, are hereby AFFIRMED.
validity and enforceability. It must be remembered that registration is Herein petitioners are ordered to reconvey to respondents Spouses
not a requirement for validity of the contract as between the parties, for Lumbao the subject property and to pay the latter attorney’s fees and
the effect of registration serves chiefly to bind third persons. The litigation expenses. Costs against petitioners.
principal purpose of registration is merely to notify other persons not
SO ORDERED.
parties to a contract that a transaction involving the property had been
entered into. Where the party has knowledge of a prior existing interest Ynares-Santiago (Chairperson), Austria-Martinez, Callejo,
which is unregistered at the time he acquired a right to the same land, Sr. and Nachura, JJ., concur.
his knowledge of that prior unregistered interest has the effect of
Petition denied, judgment and resolution affirmed.
registration as to him.31 Hence, the “Bilihan ng Lupa” documents dated
17 August 1979 and 9 January 1981, being valid and enforceable, herein Notes.—Failure of a party to specifically allege the fact that there
petitioners are bound to comply with their provisions. In short, such was no compliance with the barangayconciliation procedure constitutes
documents are absolutely valid between and among the parties thereto. a waiver of that defense. (Diu vs. Court of Appeals, 251 SCRA
472[1995])
Finally, the general rule that heirs are bound by contracts entered into
by their predecessors-in-interest applies in the present case. Article An allegation in the complaint that the petitioners had initiated a
131132 of the NCC is the basis of this rule. It is clear from the said proceeding against the respondent for unlawful detainer in
provision that whatever rights and obligations the decedent have over the Katarungang Pambarangay, in compliance with P.D. No. 1508, as
the property were transmitted to the heirs by way of succession, a mode well as the certification to file action by the barangay chairman, is
of acquiring the property, rights and obligations of the decedent to the sufficient compliance with Article 151 of the Family Code. (Martinez vs.
extent of the value of the inheritance of the heirs. 33Thus, the heirs Martinez, 461 SCRA 562 [2005])
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

26
 No. L-28040. August 18, 1972.
TESTATE ESTATE OF JOSEFA TANGCO,JOSE DE BORJA, admin-
istrator-appellee; JOSE DE BORJA, as administrator, CAYETANO DE
BORJA,MATILDE DE BORJA and CRISANTO DE BORJA (deceased)
as Children of Josefa Tangco, appellees, vs. TASIANA VDA. DE DE
BORJA, Special Ad-ministratrix of the Testate Estate of Francisco de
Bor-ja, appellant.
No. L-28568. August 18, 1972.
TESTATE ESTATE OF THE LATE F RANCISCO DE B ORJA,TA-
SIANA O. VDA. DE DE BORJA, special
Administratrix appellee, vs. JOSE DE BORJA, oppositor-appellant.
No. L-28611. August 18, 1972.
TASIANA O. VDA. DE DE BORJA, as Administratrix of the Tes-tate
Estate of the late Francisco de Borja, plaintiff-appellee, vs. JOSE DE
BORJA, as Administrator of the Testate Estate of the late Josefa
Tangco, defendant-appellant.
Civil law; Wills; Remedial law; Testate and intestate pro.
ceedings; Rule of nullity of extrajudicial settlement prior to probate of
will inapplicable to case at bar.—The doctrine of Guevarra vs.
Guevarra, 74 Phil. 479, which holds that the presentation of a will for
probate is mandatory and that the settlement and distribution of an
estate on the basis of intestacy when the decedent left a will is against
the law and public policy, is not applicable where the clear abject of the
settlement was merely the conveyance by the heir of any and all her
individual share and interest, actual or eventual, in the estate of the
decedent and not the distribution of the said estate among the heirs
before the probate of the will.
Remedial law; Testate and intestate proceedings; Settlement
entered into by heir in his individual capacity does not need court
approval.—Where the compromise agreement entered into by and
between the various heirs in the personal capacity, the same is binding
upon them as individuals, upon the perfection of the contract, even
without previous authority of the Court to enter into such agreement.
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 execu-tion proceedings.
Civil law; Succession; Heir may sell her hereditary rights to co-
heir.—As owner of her individual share, an heir could dispose of it in
27
favor of whomsoever she chose, including another heir of the same
defendant. Such alienation is expressly recognized and provided for by
Article 1088 of the present Civil Code.
Same; Same; Case at bar, agreement does not compromise status of
heir and her marriage.—A contract which describes one of the heirs as
“the heir and surviving spouse of Francisco de Borja by his second
marriage, Tasiana Ongsingco Vda. de Borja,” in itself is a definite
admission of such heir’s civil status in relation to the decedent. There is
nothing in the text of the agreement that would show that this
recognition of Ong-singco’s status as the surviving spouse of Francisco
de Borja was only made in consideration of the cession of her hereditary
rights.
Remedial law; Compromise; Inability of parties to draw new
agreement does not annul a prior one.—The inability among the heirs to
reach a novatory accord can not invalidate the original compromise
among them and any of the latter is justified in finally seeking a court
order for the approval and enforcement of such compromise.
Civil law; Contracts; Party who caused the delay in the enforcement
of a contract cannot complain of subsequent devaluation of currency amd
increase of price of land.—In her brief, 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 agreements
she had formally entered into with the advice of her counsel. And as to
the devaluation of our currency, what we said in Dizon Rivera vs. Dizon,
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 apposite in the present
case.
Remedial law; Evidence; Case at bar. self-serving statement of
decedent overpowered by several admissions against interest.—It may be
true that the inventories relied upon by defendant-appellant 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 Fran-cisco de Borja and his executor-widow, Tasiana
Ongsingco, and as such of much greater probative weight than the self-
serving statement of Francisco. Plainly, the legal presumption in favor
of the conjugal character of the Hacienda now in dispute has not been
rebutted but actually confirmed by proof.
L-28040
APPEAL from an order of the Court of First Instance of Rizal (Branch
I). Cecilio Muñoz-Palma, J.
The facts are stated in the opinion of the Court.
Pelaez, Jalandoni & Jamir for administrator-appellee.
Quiogue & Quiogue for appellee Matilde de Borja.
Andres Matias for appellee Cayetano de Borja.
Sevilla & Aquino for appellant.
L-28568
APPEAL from an order of the Court of First Instance of Nueva Ecija.
Cuevas, J .
The facts are stated in the opinion of the Court.
Sevilla & Aquino for special administratrix-appellee.
Pelaez, Jdtandoni & Jamir for oppositor-appellant.
L-28611
APPEAL from a decision of the Court of First Instance of Rizal (Branch
X). Mariano, J.
The facts are stated in the opinion of the Court.
Sevilla & Aquino for plaintiff-appellee.
Pelaez, Jalandoni & Jamir and David Guevarafor de-fendant-
appellant.
REYES, J.B.L., J.:
Of these cases, the first, numbered L-28040 is an appeal by Tasiana
Ongsingco Vda. de de Borja, special adminis-tratrix 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 Tang-co, Jose de Borja,
Administrator”.
Case No. L-28568 is an appeal by administrator Jose de 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.
28
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
administration 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
Josef a 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, Jose 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 Fran-cisco 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 Tang-
co,” 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.
WITNESSETH
THAT it is the mutual desire of all the parties herein to 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 la 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 Doñation Inter Vivos or Mortis Causa or
purportedly conveyed to her for consideration or otherwise. The funds
29
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 Ongsinco 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 P30,000.00 and
also assumes payment of her 1/5 share of the Estate 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 buyer of
Jalajala, ‘Poblacion’ from the payment to be made to Tasiana Ongsingco
Vda. de Borja under paragraph 2 of this Agreement and paid directly to
the Development Bank of the Philippines and the heirs-children of
Francisco de Borja.
4. Thereafter, the buyer of Jalajala ‘Poblacion’ is hereby authorized
to pay directly Tasiana Ongsingco Vda. de de Borja the balance of the
payment due her under paragraph 2 of this Agreement (approximately
P766,500.00) and issue in the name of Tasiana Ongsingco Vda. de de
Borja, corresponding certified checks/treasury warrants, who, in turn,
will issue the corresponding receipt to Jose de Borja.
5. In consideration of above payment to Tasiana Ongsingco Vda. de
de Borja, Jose de Borja personally and as administrator of the Testate
Estate of Josefa Tangco, and Tasiana Ongsingco Vda. de de Borja, for
themselves and for their heirs, successors, executors, administrators,
and assigns, hereby forever mutually renounce, withdraw, waive,
remise, release and discharge any and all manner of action or actions,
cause or causes of action, suits, debts, sum or sums of money, accounts,
damages, claims and demands whatsoever, in law or in equity, which
they ever had, or now have or may have against each other, more
specifically Sp. Proceedings Nos. 7866 and 1955, CFI-Rizal, and Sp.
Proc. No. 832-Nueva Ecija, Civil Case No. 3033, CFI-Nueva Ecija and
Civil Case No. 7452-CFI, Rizal, as well as the case filed against Manuel
Quijal for perjury with the Provincial Fistal of Rizal, the intention being
to completely, absolutely and finally release each other, their heirs,
successors, and assigns, from any and all liability, arising wholly or
partially, directly or indirectly, from the administration, settlement,
and distribution of the assets as well &s liabilities of the estates of
Francisco de Borja and Josefa Tangco, first spouse of Francisco de
Borja, and lastly, Tasiana Ongsingco Vda. de de Borja expressly and
specifically renounce absolutely her rights as heir over any hereditary
share in the estate of Francisco de Borja.
6. That Tasiana Ongsingco Vda. de de Borja, upon receipt of the
payment under paragraph 4 hereof, shall deliver to the heir Jose de
Borja all the papers, titles and documents belonging to Francisco de
Borja which are in her possession and said heir Jose de Borja shall issue
in turn the corresponding receipt thereof.
7. That this agreement shall take effect only upon the fulfillment of
the sale of the properties mentioned under paragraph 1 of this
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
VOID AND WITHOUT EFFECT THEREAFTER.
IN WITNESS WHEREOF, the parties hereto have here-unto set
their hands in the City of Manila, Philippines, this 12th of October,
1963.”
On 16 May 1968, Jose de Borja submitted for Court approval the
agreement of 12 October 1963 to the Court of First Instance of Rizal, in
Special Proceeding No. R-7866; and again, on 8 August 1966, to the
Court of First Instance of Nueva Ecija, in Special Proceeding No. 832.
Tasiana Ongsingco Vda. de de Borja opposed in both instances. The
Rizal court approved the compromise agreement, but the Nueva Ecija
court declared it void and unenforceable Special administratrix Tasiana
Ongsingco Vda. de de Borja appealed the Rizal Court’s order of approval
(now Supreme Court G.R. case No. L-28040), while administrator Jose
de Borja appealed the order of disapproval (G.R. case No. L-28568) by
the Court of First Instance of Nueva Ecija.
The genuineness and due execution of the compromise agreement of
12 October 1963 is not disputed, but its validity is, nevertheless,
attacked by Tasiana Ongsingco on 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
validity of the marriage between Francisco de Borja and Tasiana
Ongsingco; and (3) that even if it were valid, it has ceased to have force
and effect.
In assailing the validity of the agreement of 12 October 1963, Tasiana
Ongsingco and the Probate Court of Nueva Ecija rely on this Court’s
decision in Guevara vs. Guevara, 74 PhiL 479, wherein the Court’s
majority held the view that the presentation of a will for probate is
mandatory and that the settlement and distribution of an estate on the
basis of intestacy when the decedent left a will, is against the law and
public policy. It is likewise pointed out by appellant Tasiana Ongsingco
that Section 1 of Rule 74 of the Revised Rules explicitly conditions the
30
validity of an extrajudicial settlement of a decedent’s estate by
agreement between heirs, upon the facts that “(if) the decedent left no
will and no debts, and the heirs are all of age, or the minors are
represented by their judicial and legal representatives . . .” The will of
Francisco de Borja having been submitted to the Nueva Ecija Court and
still pending probate when the 1963 agreement was made, those
circumstances, it is argued, bar the validity of the agreement.
Upon the other hand, in claiming the validity of the compromise
agreement, Jose de Borja stresses that at the time it was entered into,
on 12 October 1963, the governing provision was Section 1, Rule 74 of
the original Rules of Court of 1940, which allowed the 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 divided the estate in
accordance with a decedent’s will, the probate of the will is a useless
ceremony; and if they have divided the estate in a different manner, the
probate of the will is worse than useless.
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 and Tasiana Ongsingco. Paragraph 2
of said agreement specifically stipulates that the sum of P800,000
payable to Tasiana Ongsingco—
“shall be considered as full—complete payment—settlement of her
hereditary share in the estate of the late Francisco de Borja as well as
the estate of Josefa Tangco, xxx 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 Ong-singco 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:
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,
31
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 d ay of O ctober 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 “pro rata 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
with Jose de Borja under date 12 October 1963 (Annex A), was designed
to absorb and supersede the separate unformalized 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 coheirs (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 of 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 coheirs 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
32
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. L-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 tha 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 Di-zon 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 defendant (now appellant) Jose de Borja claimed that it was conjugal
case. property of his parents (Francisco de Borja and Josefa Tangco),
conformably to the presumption established by Article 160 of the
Coming now to Case G.R. No. L-28611, the issue is whether the
Philippine Civil Code (reproducing Article 1407 of the Civil Code of
Hacienda de Jalajala (Poblacion), concededly acquired by Francisco de
1889), to the effect that:
Borja during his marriage to his first wife, Josefa Tangco, is the
husband’s private property (as contended by his second spouse, Tasiana “Art. 160. All property of the marriage is presumed to belong to the
Ongsingco), or whether it forms part of the conjugal (ganancial) conjugal partnership, unless it be proved that it pertains exclusively to
partnership with Josefa Tangco. The Court of First Instance of Rizal the husband or to the wife.”
(Judge Herminio Mariano, presiding) declared that there was adequate
Defendant Jose de Borja further counterclaimed for damages,
evidence to overcome the presumption in favor of its conjugal character
compensatory, moral and exemplary, as well as for attorney’s fees.
established by Article 160 of the Civil Code.
After trial, the Court of First Instance of Rizal, per Judge Herminio
We are of the opinion that this question as between Tasiana Ongsingco
Mariano, held that the plaintiff had adduced sufficient evidence to rebut
and Jose de Borja has become moot and academic, in view of the
the presumption, and declared the Hacienda de Jalajala (Poblacion) to
conclusion reached by this Court in the two preceding cases (G.R. No. L-
be the exclusive private property of the late Francisco de Borja, and his
28568), upholding as valid the cession of Tasiana Ongsingco’s eventual
Administratrix, Tasiana Ongsingco Vda. de Borja, to be entitled to its
share in the estate of her late husband, Francisco de Borja, for the sum
possession. Defendant Jose de Borja then appealed to this Court.
of P800,000 with the accompanying reciprocal quitclaims between the
parties. But as the question may affect the rights of possible creditors The evidence reveals, and the appealed order admits, that the
and legatees, its resolution is still imperative. character of the Hacienda in question as owned by the conjugal
partnership De Borja-Tangco was solemnly admitted by the late
It is undisputed that the Hacienda Jalajala, of around 4,363
Francisco de Borja no less than two times: first, in the Reamended
hectares, had been originally acquired jointly by Fran-cisco de Borja,
Inventory that, as executor of ihe estate of his deceased wife Josefa
Bernardo de Borja and Marcelo de Borja, and their title thereto was
Tangco, he filed in the Special Proceedings No. 7866 of the Court of
duly registered in their names as co-owners in Land Registration Case
First Instance of Rizal on 23 July 1953 (Exhibit “2”); and again, in the
No. 528 of the province of Rizal, G.L.R.O. Rec. No. 26403 (De Barjo vs.
Reamended Accounting of the same date, also filed in the proceedings
Jugo, 54 Phil. 465). Subsequently, in 1931, the Hacienda was
aforesaid (Exhibit “7”). Similarly, the plaintiff Tasiana O. Vda. de Borja,
partitioned among the co-owners: the Punta section went to Marcelo de
herself, as oppositor in the Estate of Josefa Tangco, submitted therein
Borja; the Bagombong section to Bernardo de Borja, and the part in
an inventory dated 7 September 1954 (Exhibit “3”) listing the Jalajala
Jalajala proper (Poblacion) corresponded to Francisco de Borja (V. De
property among the “Conjugal Properties of the Spouses Francisco de
Borja vs. De Borja, 101 Phil. 911, 932).
Borja and Josefa Tangco”. And once more, Tasiana Ongsingco, as
The lot allotted to Francisco was described as— administratrix of the Estate of Francisco de Borja, in Special
Proceedings No. 832 of the Court of First Instance of Nueva Ecija,
“Una Parcela de terreno en Poblacion, Jalajala: N. Puang River; E.
submitted therein in December, 1955, an inventory wherein she listed
Hermogena Romero; S. Heirs of Marcelo de Borja, O. Laguna de Bay;
the Jalajala Hacienda under the heading “Conjugal Property of the
containing an area of 13,488,870 sq. m. more or less, assessed at
Deceased Spouses Francisco de Borja and Josefa Tangco, which are in
P297,410.” (Record on Appeal, pages 7 and 105)
the possession of the Administrator of the Testate Estate of the
On 20 November 1962, Tasiana O. Vda. de Borja, as Administratrix of Deceased Josefa Tangco in Special Proceedings No. 7866 of the Court of
the Testate Estate of Francisco de Borja, instituted a complaint in the First Instance of Rizal” (Exhibit “4”).
Court of First Instance of Rizal (Civil Case No. 7452) against Jose de
Notwithstanding the four statements aforesaid, and the fact that they
Borja, in his capacity as Administrator of Josef a Tangco (Francisco de
are plain admissions against interest made by both Francisco de Borja
Borja’s first wife), seeking to have the Hacienda above described
and the Administratrix of his estate, in the course of judicial
declared exclusive private property of Francisco, while in his answer
proceedings in the Rizal and Nueva Ecija Courts, supporting the legal

33
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 Francisco de Borja on 6 August 1951 (Exhibit “F”) that—
“He tornado posesion 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 P15,000.00 by Marcelo de Borja; that upon receipt of a
subsequent demand from the provincial treasurer for realty taxes in 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 issued 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) (Italics 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 own 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
the 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:
xxxxx xxxxx xxxxx
“(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
34
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 “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 proof. Hence,
the appealed order should be reversed and the Hacienda de Jalajala
(Poblacion) declared property of the conjugal partnership of Francisco
de Borja and Josef a Tangco.
No error having been assigned against the ruling of the lower court
that claims for damages should be ventilated in the corresponding
special proceedings for the settlement of the estates of the deceased, the
same requires no pronouncement from this Court.
IN VIEW OF THE FOREGOING, the appealed order of the Court of
First Instance of Rizal in Case No. L-28040 is hereby affirmed; while
those involved in Cases Nos. L-28568 and L-28611 are reversed and set
aside. Costs against the appellant Tasiana Ongsingco Vda. de Borja in
all three (3) cases.
Concepcion,
C.J., Makalintal, Zaldivar, Castro, Teehankee, Barredo, Makasiar, Anto
nio and Esguerra, JJ., concur. Fernando, J., did not take part.
Order in Case No. L-28040 affirmed; those in Cases Nos. L-28568
and L-28611 reversed and set aside.
Notes.—On the matter of the share of the heir before fined
liquidation of the estate.—The participation of an heir in an estate
under judicial administration, although indeterminable before the final
liquidation of the estate, may be attached and sold. While ordinary
execution of property in custodia legis is prohibited in order to avoid
interference with the possession by the court, yet 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
and, is therefore, valid, with the understanding, however, that it would
be effective only as to the portion to be adjudicated to the vendor upon
the partition of the property under administration. Borja vs. Mencias, L-
20609, November 29, 1967, 21 SCRA 1133 1135.
Whatever rights, interest, and participation belong to respondent in the
real properties under judicial administration in the special
proceedings—which have been properly levied upon pursuant to the
writ of execution issued in the civil case—may be sold in accordance
with law, with the understanding that the sale is not of any definite and
fixed share in any particular property, but only of what might be
adjudicated to respondent upon the final liquidation of the estate. The
sale, once made, shall be submitted to the probate court with
jurisdiction over the special proceedings for proper consideration upon
the final liquidation of said estate. Id., p. 1135.

35
 No. L-41715. June 18, 1976.*
ROSALIO BONILLA (a minor) SALVACION BONILLA (a minor) and
PONCIANO BONILLA (their father) who represents the minors,
petitioners, vs.LEON BARCENA, MAXIMA ARIAS BALLENA,
ESPERANZA BARCENA, MANUEL BARCENA, AGUSTINA NERI,
widow of JULIAN TAMAYO and HON. LEOPOLDO GIRONELLA of
the Court of First Instance of Abra, respondents.
Pleadings and practice; Parties; Substitution of parties in case of
death of plaintiff during pendency of proceedings in action which
survives death of said plaintiff.—While it is true that a person who is
dead cannot sue in court, yet he can be substituted by his heirs in
pursuing the case up to its completion.
Same; Same; Duty of attorney upon death of party.—The Rules of
Court prescribes the procedure whereby a party who died during the
pendency of the proceeding can be substituted. Under Section 16, Rule 3
of the Rules of Court “whenever party to a pending case dies x x x it
shall be the duty of his attorney to inform the court promptly of such
death x x x and to give the name and residence of his executor,
administrator, guardian or other legal representatives.”
Same; Same; Duty of court upon death of party.—Under section 17,
Rule 3 of the Rule of Court “after a party dies and the claim is not
thereby extinguished, the court shall order, upon proper notice, the
legal representative of the deceased to appear and be substituted for the
deceased, within such time as may be granted x x x.”
Same; Same; Duty of court where legal representative of deceased
party fails to appear.—Under Section 17, Rule 3 of the Rules of Court, it
is even the duty of the court, if the legal representative fails to appear,
to order the opposing party to procure the appointment of a legal
representative of the deceased.
Same; Same; Duty of court where representative of deceased party
minors.—Under Section 17, Rule 3 of the Rules of Court, the court is
directed to appoint a guardian ad litem for the minor heirs.
Same; Same; Action to quiet title to property as action which
survives death of a party; Test to determine whether action survives or
not.—The question as to whether an action survives or not depends on
the nature of the action and the damage sued for. In the causes of action
which survive, the wrong complained affects primarily and principally
property and property rights, the injuries to the person being merely
incidental, while in the causes of action which do not survive, the injury
complained of is to the person, the property and rights of property
36
affected being incidental. Following the foregoing criterion the claim of
the deceased plaintiff which is an action to quiet title over the parcels of
land in litigation affects primarily and principally property and
property rights and therefore is one that survives even after her death.
Succession; Rights to succession transmitted from the moment of
death of decedent.—Article 777 of the Civil Code provides “that the
rights to the succession are transmitted from the moment of the death
of the decedent.” From the moment of the death of the decedent, the
heirs become the absolute owners of his property, subject to the rights
and obligations of the decedent, and they cannot be deprived of their
rights thereto except by the methods provided for by law. The moment
of death is the determining factor when the heirs acquire a definite
right to the inheritance whether such right be pure or contingent. The
right of the heirs to the property of the deceased vests in them even
before judicial declaration of their being heirs in the testate or intestate
proceedings.
PETITION for review of the order of the Court of First Instance of Abra,
Gironella, J.
The facts are stated in the opinion of the Court.
Federico Paredes for petitioners.
Demetrio V. Pre for private respondents.
MARTIN, J.:
This is a petition for review1 of the Order of the Court of First Instance
of Abra in Civil Case No. 856, entitled Fortunata Barcena vs. Leon
Barcena, et al., denying the motions for reconsideration of its order
dismissing the complaint in the aforementioned case.
On March 31, 1975 Fortunata Barcena, mother of minors Rosalio
Bonilla and Salvacion Bonilla and wife of Ponciano Bonilla, instituted a
civil action in the Court of First Instance of Abra, to quiet title over
certain parcels of land located in Abra.
On May 9, 1975, defendants filed a written motion to dismiss the
complaint, but before the hearing of the motion to dismiss, the counsel
for the plaintiff moved to amend the complaint in order to include
certain allegations therein. The motion to amend the complaint was
granted and on July 17 1975, plaintiffs filed their amended complaint.
On August 4, 1975, the defendants filed another motion to dismiss
the complaint on the ground that Fortunata Barcena is dead and,
therefore, has no legal capacity to sue. Said motion to dismiss was heard
on August 14, 1975. In said hearing, counsel for the plaintiff confirmed
the death of Fortunata Barcena and asked for substitution by her minor
children and her husband, the petitioners herein; but the court after the
hearing immediately dismissed the case on the ground that a dead
person cannot be a real party in interest and has no legal personality to
sue.
On August 19, 1975, counsel for the plaintiff received a copy of the
order dismissing the complaint and on August 23, 1975, he moved to set
aside the order of the dismissal pursuant to Sections 16 and 17 of Rule 3
of the Rules of Court.
On August 28, 1975, the court denied the motion for reconsideration
filed by counsel for the plaintiff for lack of merit. On September 1, 1975,
counsel for deceased plaintiff filed a written manifestation praying that
the minors Rosalio Bonilla and Salvacion Bonilla be allowed to
substitute their deceased mother, but the court denied the counsel’s
prayer for lack of merit. From the order, counsel for the deceased
plaintiff filed a second motion for reconsideration of the order
dismissing the complaint claiming that the same is in violation of
Sections 16 and 17 of Rule 3 of the Rules of Court but the same was
denied.
Hence, this petition for review.
The Court reverses the respondent Court and sets aside its order
dismissing the complaint in Civil Case No. 856 and its orders denying
the motion for reconsideration of said order of dismissal. While it is true
that a person who is dead cannot sue in court, yet he can be substituted
by his heirs in pursuing the case up to its completion. The records of
this case show that the death of Fortunata Barcena took place on July 9,
1975 while the complaint was filed on March 31, 1975. This means that
when the complaint was filed on March 31, 1975, Fortunata Barcena
was still alive, and therefore, the court had acquired jurisdiction over
her person. If thereafter she died, the Rules of Court prescribes the
procedure whereby a party who died during the pendency of the
proceeding can be substituted.
Under Section 16, Rule 3 of the Rules of Court “whenever a party to a
pending case dies x x x it shall be the duty of his attorney to inform the
court promptly of such death x x x and to give the name and residence of
his executor, administrator, guardian or other legal representatives.”
This duty was complied with by the counsel for the deceased plaintiff
when he manifested before the respondent Court that Fortunata
Barcena died on July 9, 1975 and asked for the proper substitution of
parties in the case. The respondent Court, however, instead of allowing
37
the substitution, dismissed the complaint on the ground that a dead
person has no legal personality to sue. This is a grave error. Article 777
of the Civil Code provides “that the rights to the succession are
transmitted from the moment of the death of the decedent.” From the
moment of the death of the decedent, the heirs become the absolute
owners of his property, subject to the rights and obligations of the
decedent, and they cannot be deprived of their rights thereto except by
the methods provided for by law.3The moment of death is the
determining factor when the heirs acquire a definite right to the
inheritance whether such right be pure or contingent. 4 The right of the
heirs to the property of the deceased vests in them even before judicial
declaration of their being heirs in the testate or intestate
proceedings.5 When Fortunata Barcena, therefore, died her claim or
right to the parcels of land in litigation in Civil Case No. 856, was not
extinguished by her death but was transmitted to her heirs upon her
death. Her heirs have thus acquired interest in the properties in
litigation and became parties in interest in the case. There is, therefore,
no reason for the respondent Court not to allow their substitution as
parties in interest for the deceased plaintiff.
Under Section 17, Rule 3 of the Rules of Court “after a party dies and
the claim is not thereby extinguished, the court shall order, upon proper
notice, the legal representative of the deceased to appear and be
substituted for the deceased, within such time as may be granted x x x.”
The question as to whether an action survives or not depends on the
nature of the action and the damage sued for.6 In the causes of action
which survive the wrong complained affects primarily and principally
property and property rights, the injuries to the person being merely
incidental, while in the causes of action which do not survive the injury
complained of is to the person, the property and rights of property
affected being incidental.7 Following the foregoing criterion the claim of
the deceased plaintiff which is an action to quiet title over the parcels of
land in litigation affects primarily and principally property and
property rights and therefore is one that survives even after her death.
It is, therefore, the duty of the respondent Court to order the legal
representative of the deceased plaintiff to appear and to be substituted
for her. But what the respondent Court did, upon being informed by the
counsel for the deceased plaintiff that the latter was dead, was to
dismiss the complaint. This should not have been done for under the
same Section 17, Rule 3 of the Rules of Court, it is even the duty of the
court, if the legal representative fails to appear, to order the opposing
party to procure the appointment of a legal representative of the
deceased. In the instant case the respondent Court did not have to
bother ordering the opposing party to procure the appointment of a legal
representative of the deceased because her counsel has not only asked not the amendment of the complaint, but then appearance of
that the minor children be substituted for her but also suggested that the legal representative of the deceased as provided in section
their uncle be appointed as guardian ad litem for them because their 17, Rule 3 of the Rules of Court. An order to amend the
father is busy in Manila earning a living for the family. But the complaint, before the proper substitution of the deceased
respondent Court refused the request for substitution on the ground parties has been effected, is void. In such a case the order of
that the children were still minors and cannot sue in court. This is the court, dismissing the complaint, for plaintiff’s
another grave error because the respondent Court ought to have known noncompliance with the order to amend it, is likewise void.
that under the same Section 17, Rule 3 of the Rules of Court, the court (Casenas vs. Rosales, L-18707, February 28, 1967).
is directed to appoint a guardian ad litem for the minor heirs. Precisely
in the instant case, the counsel for the deceased plaintiff has suggested
to the respondent Court that the uncle of the minors be appointed to act
as guardian ad litem for them. Unquestionably, the respondent Court
has gravely abused its discretion in not complying with the clear
provision of the Rules of Court in dismissing the complaint of the
plaintiff in Civil Case No. 856 and refusing the substitution of parties in
the case.
IN VIEW OF THE FOREGOING, the order of the respondent Court
dismissing the complaint in Civil Case No. 856 of the Court of First
Instance of Abra and the motions for reconsideration of the order of
dismissal of said complaint are set aside and the respondent Court is
hereby directed to allow the substitution of the minor children, who are
the petitioners therein for the deceased plaintiff and to appoint a
qualified person as guardian ad litem for them. Without pronouncement
as to costs.
SO ORDERED.”
Teehankee (Chairman), Makasiar, Esguerraand Muñoz Palma,
JJ., concur.
Orders set aside.
Notes.—a) Duty of attorney for deceased party—Under Sec. Rule 3 of
the Rules of Court it is the duty of the attorney for the deceased
defendant to inform the Court of his client’s death and furnish it with
the name and residence of the executor, administrator, or legal
representative of the deceased. This rule must have taken into
consideration the fact that the attorney for the deceased party is in a
better position than the attorney for the other party to ascertain who
are the legal representative or heirs of his deceased client. This duty
should not be shifted to the plaintiff or his attorney. (Barrameda vs.
Barbara, L-4227, January 28, 1952).
1. b)Legal representative takes place of deceased party.—When the
trial court is apprised of the death of a party, it should order,

38

G.R. No. 168970. January 15, 2010.*
CELESTINO BALUS, petitioner, vs. SATURNINO BALUS and
LEONARDA BALUS VDA. DE CALUNOD, respondents.
Civil Law; Property; Succession; Inheritance; What consists
inheritance; The rights to a person’s succession are transmitted from the
moment of his death; 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.—The rights to a person’s succession are transmitted from
the moment of his death. 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. 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.
Same; Same; Partition; Co-ownership; The purpose of partition is to
put an end to co-ownership.—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. In other words, the purpose
of partition is to put an end to co-ownership, an objective which negates
petitioner’s claims in the present case.
Same; Same; Same; Contracts; It is a cardinal rule in the
interpretation of contracts that the intention of the parties shall be
accorded primordial consideration.—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
39
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. 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. Such intention is determined from the express terms
of their agreement, as well as their contemporaneous and subsequent
acts. Absurd and illogical interpretations should also be avoided.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Moises G. Dalisay, Jr. for petitioner.
Alfredo R. Busico for respondents.
PERALTA, J.:
Assailed in the present petition for review on certiorari under Rule
45 of the Rules of Court is the Decision1 of the Court of Appeals (CA)
dated May 31, 2005 in CA-G.R. CV No. 58041 which set aside the
February 7, 1997 Decision of the Regional Trial Court (RTC) of Lanao
del Norte, Branch 4 in Civil Case No. 3263.
The facts of the case are as follows:
Herein petitioner and respondents are the children of the spouses
Rufo and Sebastiana Balus. Sebastiana died on September 6, 1978,
while Rufo died on July 6, 1984.
On January 3, 1979, Rufo mortgaged a parcel of land, which he
owns, as security for a loan he obtained from the Rural Bank of Maigo,
Lanao del Norte (Bank). The said property was originally covered by
Original Certificate of Title No. P-439(788) and more particularly
described as follows:
“A parcel of land with all the improvements thereon, containing an
area of 3.0740 hectares, more or less, situated in the Barrio of
Lagundang, Bunawan, Iligan City, and bounded as follows: Bounded on
the NE., along line 1-2, by Lot 5122, Csd-292; along line 2-12, by
Dodiongan River; along line 12-13 by Lot 4649, Csd-292; and along line
12-1, by Lot 4661, Csd-292. x x x”2
Rufo failed to pay his loan. As a result, the mortgaged property was
foreclosed and was subsequently sold to the Bank as the sole bidder at a
public auction held for that purpose. On November 20, 1981, a
Certificate of Sale3 was executed by the sheriff in favor of the Bank. The
property was not redeemed within the period allowed by law. More than The amount of P6,733.33 consigned by the defendant with the Clerk
two years after the auction, or on January 25, 1984, the sheriff executed of Court is hereby ordered delivered to the plaintiffs, as purchase price
a Definite Deed of Sale4 in the Bank’s favor. Thereafter, a new title was of the one-third portion of the land in question.
issued in the name of the Bank.
Plaintiffs are ordered to pay the costs.
On October 10, 1989, herein petitioner and respondents executed an
SO ORDERED.”10
Extrajudicial Settlement of Estate5 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
The RTC held that the right of petitioner to purchase from the
wherein the parties admitted knowledge of the fact that their father
respondents his share in the disputed property was recognized by the
mortgaged the subject property to the Bank and that they intended to
provisions of the Extrajudicial Settlement of Estate, which the parties
redeem the same at the soonest possible time.
had executed before the respondents bought the subject lot from the
Three years after the execution of the Extrajudicial Settlement, Bank.
herein respondents bought the subject property from the Bank. On
Aggrieved by the Decision of the RTC, herein respondents filed an
October 12, 1992, a Deed of Sale of Registered Land6 was executed by
appeal with the CA.
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. On May 31, 2005, the CA promulgated the presently assailed
Meanwhile, petitioner continued possession of the subject lot. Decision, reversing and setting aside the Decision of the RTC and
ordering petitioner to immediately surrender possession of the subject
On June 27, 1995, respondents filed a Complaint 8for Recovery of
property to the respondents. The CA ruled that when petitioner and
Possession and Damages against petitioner, contending that they had
respondents did not redeem the subject property within the redemption
already informed petitioner of the fact that they were the new owners of
period and allowed the consolidation of ownership and the issuance of a
the disputed property, but the petitioner still refused to surrender
new title in the name of the Bank, their co-ownership was extinguished.
possession of the same to them. Respondents claimed that they had
exhausted all remedies for the amicable settlement of the case, but to no Hence, the instant petition raising a sole issue, to wit:
avail.
WHETHER OR NOT CO-OWNERSHIP AMONG THE
On February 7, 1997, the RTC rendered a Decision 9disposing as PETITIONER AND THE RESPONDENTS OVER THE PROPERTY
follows: PERSISTED/CONTINUED TO EXIST (EVEN AFTER THE
TRANSFER OF TITLE TO THE BANK) BY VIRTUE OF THE
“WHEREFORE, judgment is hereby rendered, ordering the plaintiffs
PARTIES’ AGREEMENT PRIOR TO THE REPURCHASE THEREOF
to execute a Deed of Sale in favor of the defendant, the one-third share
BY THE RESPONDENTS; THUS, WARRANTING THE
of the property in question, presently possessed by him, and described
PETITIONER’S ACT OF ENFORCING THE AGREEMENT BY
in the deed of partition, as follows:
REIMBURSING THE RESPONDENTS OF HIS (PETITIONER’S)
A one-third portion of Transfer Certificate of Title No. T-39,484 (a.f.), JUST SHARE OF THE REPURCHASE PRICE.11
formerly Original Certificate of Title No. P-788, now in the name of
The main issue raised by petitioner is whether co-ownership by him
Saturnino Balus and Leonarda B. Vda. de Calunod, situated at
and respondents over the subject property persisted even after the lot
Lagundang, Bunawan, Iligan City, bounded on the North by Lot 5122;
was purchased by the Bank and title thereto transferred to its name,
East by shares of Saturnino Balus and Leonarda Balus-Calunod; South
and even after it was eventually bought back by the respondents from
by Lot 4649, Dodiongan River; West by Lot 4661, consisting of 10,246
the Bank.
square meters, including improvements thereon and dismissing all
other claims of the parties. 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

40
Settlement, having in mind the intention of purchasing back the
property together with petitioner and of continuing their co-ownership
thereof.
Petitioner posits that the subject Extrajudicial Settlement is, in and
by itself, a contract between him and respondents, because it contains a
provision whereby the parties agreed to continue their co-ownership of
the subject property by “redeeming” or “repurchasing” the same from
the Bank. This agreement, petitioner contends, is the law between the
parties and, as such, binds the respondents. As a result, petitioner
asserts that respondents’ act of buying the disputed property from the
Bank without notifying him inures to his benefit as to give him the right
to claim his rightful portion of the property, comprising 1/3 thereof, by
reimbursing respondents the equivalent 1/3 of the sum they paid to the
Bank.
The Court is not persuaded.
Petitioner and respondents are arguing on the wrong premise that,
at the time of the execution of the Extrajudicial Settlement, the subject
property formed part of the estate of their deceased father to which they
may lay claim as his heirs.
At the outset, it bears to emphasize that there is no dispute with respect
to the fact that the subject property was exclusively owned by petitioner
and respondents’ father, Rufo, at the time that it was mortgaged in
1979. This was stipulated by the parties during the hearing conducted
by the trial court on October 28, 1996.12 Evidence shows that a Definite
Deed of Sale13 was issued in favor of the Bank on January 25, 1984,
after the period of redemption expired. There is neither any dispute that
a new title was issued in the Bank’s name before Rufo died on July 6,
1984. Hence, there is no question that the Bank acquired exclusive
ownership of the contested lot during the lifetime of Rufo.
The rights to a person’s succession are transmitted from the moment
of his death.14 In addition, the inheritance of a person consists of the
property and transmissible rights and obligations existing at the time of
his death, as well as those which have accrued thereto since the opening
of the succession.15 In the present case, since Rufo lost ownership of the
subject property during his lifetime, it only follows that at the time of
his death, the disputed parcel of land no longer formed part of his estate
to which his heirs may lay claim. Stated differently, petitioner and
respondents never inherited the subject lot from their father.
Petitioner and respondents, therefore, were wrong in assuming that
they became co-owners of the subject lot. Thus, any issue arising from
41
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 Corona (Chairperson), Velasco, Jr., Nachura andMendoza, JJ.,
talk about and no property to partition, as the disputed lot never formed concur.
part of the estate of their deceased father.
Petition denied, judgment affirmed.
Moreover, petitioner’s asseveration of his and respondents’ intention
Note.—Partition is premature when ownership of the lot is still in
of continuing with their supposed co-ownership is negated by no less
dispute. (Figuracion-Gerilla vs. Vda. de Figuracion, 499 SCRA 484
than his assertions in the present petition that on several occasions he
[2006])
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.

42
 [No. L-4963. January 29, 1953]
MARIA USON, plaintiff and appellee, vs. MARIA DEL
ROSARIO, CONCEPCION NEBREDA, CONRADO NEBREDA, DOMINADOR
NEBREDA, and FAUSTINO NEBREDA, JR.,defendants and appellants.
1.DESCENT AND DISTRIBUTION; HUSBAND AND WIFE; RIGHTS OF LAWFUL
WIFE AS AFFECTED BY THE NEW CIVIL CODE.—The right of ownership
of the lawful wife of a decedent who had died before the new Civil
Code took effect became vested in her upon his death, and this is so
because of the imperative provision of the law which commands that
the rights of succession are transmitted from the moment of death
(Art. 657, old Civil Code; Ilustre vs. Frondosa, 17 Phil., 321). The
new right recognized by the new Civil Code in favor of the illegi-
timate children of the deceased can not be asserted to
the impairment of the vested right of the lawful wife over the lands
in dispute. While article 2253 of the new Civil Code provides 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, yet this is so only when the
new rights do not prejudice any vested or acquired right of the same
origin.
2.ID.; ID.; RENUNCIATION OF INHERITANCE MADE BY LAWFUL
WIFE; FUTURE INHERITANCE, NOT SUBJECT TO CONTRACT.—Although
the lawful wife has expressly renounced her right to inherit any
future property that her husband may acquire and leave upon his
death, such renunciation cannot be entertained for the simple reason
that future inheritance cannot be the subject of a contract nor can it
be renounced (1 Manresa, 6th ed., 123; Osorio vs. Osorio, et al., 41
Phil., 531).
3.ID.;ID.; DONATIONS BY DECEASED; ESSENTIAL FORMALITIES
OFDONATION.—Assignments, if any, made by the deceased of real
property for which there was no material consideration, should be
made in a public document and must be accepted either in the same
document or in a separate one (Art. 633, old Civil Code).
Assignments or donations which lack this essential formality have
no valid effect.
APPEAL from a judgment of the Court of First Instance of
Pangasinan. Martinez, J.
The facts are stated in the opinion of the Court.
Priscilo Evangelista for appellee.
43
Brigido G. Estrada for appellant.
BAUTISTA ANGELO, J.:
This is an action for the 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 agakist 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 As regards the claim that Maria Uson, while her deceased husband
moment, therefore, the rights of inheritance of Maria Uson over the was lying in state, in a gesture of pity or compassion, agreed to assign
lands in question became vested. the lands in question to the minor children for the reason that they
were acquired while the deceased was living with their mother and
The claim of the defendants that Maria Uson had relinquished her
Maria Uson wanted to assuage somewhat the wrong she has done to
right over the lands in question because she expressly renounced to
them, this much can be said; apart from the fact that this claim is
inherit any future property that her husband may acquire and leave
disputed, we are of the opinion that said assignment, if any, partakes of
upon his death in the deed of separation they had entered into on
the nature of a donation of real property, inasmuch as it involves no
February 21, 1931, cannot be entertained for the simple reason that
material consideration, and in order that it may be valid it shall be
future inheritance cannot be the subject of a contract nor can it be
made in a public document and must be accepted either in the same
renounced (1 Manresa, 123, sixth edition; Tolentino on Civil Code, p. 12;
document or in a separate one (Article 633, old Civil Code). Inasmuch as
Osorio vs. Osorio and Ynchausti Steamship Co., 41 Phil., 531).
this essential formality has not been followed, it results that the alleged
But defendants contend that, while it is true that the four minor assignment or donation has no valid effect.
defendants are illegitimate children of the late Faustino Nebreda and
Wherefore, the decision appealed from is affirmed, without costs.
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, Paras, C. J., Pablo, Bengzon, Padilla, Tuason, Monte-mayor, Reyes,
they are given the status and rights of natural children and are entitled Jugo and Labrador, J J., concur.
to the successional rights which the law accords to the latter (Article
Judgment affirmed.
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.

44
 No. L-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.
Remedial Law; Civil Procedure; Judgments; Rule that the findings
of fact of the trial court are entitled to great respect—The wellsettled rule
that the findings of fact of the trial court are entitled to great respect,
even more weight when affirmed by the Court of Appeals as in the case
at bar.
Same; Special Proceedings; Mortgages; Where the real estate
mortgage was constituted in petitioner's personal capacity and not in her
capacity as administratrix of the estate of her husband, Sec. 7 of Rule 89
of the Rules of Court requiring judicial approval of the mortgage is not
applicable,—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.
Same; Same; Same; Fact alone that in the settlement proceedings of
the estate of the deceased spouse the entire conjugal partnership property
of the marriage is under administration is not sufficient to invalidate the
whole mortgage; Art 493 of the Civil Code applies where the heirs as co-
owners shall each have the full ownership of his part and he may
alienate, assign or mortgage it; Effect of alienation or mortgage with
respect to the co-owners.—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 substitute
another person in its enjoyment, except when personal rights are
involved. But the effect of the alienation or mortgage, with respect to
the co-owners, shall be limited to the portion which may be allotted to
45
him in the division upon the termination of the co-ownership (Philippine
National Bank vs. Court of Appeals, 98 SCRA 207 [1980]).
Same; Same; Same; The mortgage constituted on the property
under administration, by authority of the petitioner, is valid,
notwithstanding lack of judicial approval with respect to her conjugal
share and to her hereditary rights; Fact that what had been mortgaged
was in custodia legis is immaterial as she was the absolute owner
thereof.—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 notdisputed, 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 or impaired
Same: Same: Same; Reference to judicial approval in Sec. 7, Rule
89 of the Rules of Court, cannot adversely affect the substantive rights of
petitioner to dispose of her ideal share in the co-heirship and/or co-
ownership between her and the other heirs/co-owners.—The reference to
judicial approval in Sec. 7, Rule 89 of the Rules of Court cannot
adversely affect the substantive rights 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.
Same; Same; Same; Estoppel, concept of; Petitioner already
estopped from questioning the mortgage; Reason.—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 ' Absent (of) any evidence that the property in question is the capital
(Gonzalo Sy Trading vs. Central Bank, 70 SCRA 570). of the deceased husband brought into the marriage, said property
should be presumed as acquired during the marriage and, therefore,
PETITION for certiorari to review the decision of the Court of Appeals.
conjugal property,
The facts are stated in the opinion of the Court.
'After the dissolution of the marriage with the death of plaintiff s
PARAS, J.: husband, the plaintiff acquired, by law, her conjugal share, together
with the hereditary rights thereon. (Margate vs. Rabacal, L-14302, April
This is a petition for review on certiorari of the March 21, 1986
30, 1963). Consequently, the mortgage constituted on said property,
Decision** of the Court of Appeals in AC-G.R. CV No. 02635, "Julita Ong
upon express authority of plaintiff, notwithstanding the lack of judicial
etc. vs. Allied Banking Corp. et al." affirming, with modification, the
approval, is valid, with respect to her conjugal share thereon, together
January 5, 1984 Decision of the Regional Trial Court of Quezon City
with her hereditary rights.' "
in Civil Case No. Q-35230.
On appeal by petitioner, respondent Court of Appeals affirmed, with
The uncontroverted facts of this case, as found by the Court of
modification, the appealed decision (Record, pp. 19-22). The dispositive
Appeals, are as follows:
portion of the appellate court's decision reads:
"x x x: Two (2) parcels of land in Quezon City identified as Lot No. 12,
"WHEREFORE, with the modification that the extrajudicial foreclosure
Block 407, Psd 37326 with an area of 1960.6 sq. m. and Lot No. 1, Psd
proceedings instituted by defendant against plaintiff shall be held in
15021, with an area of 3,660.8 sq. m., are covered by Transfer
abeyance to await the final result of Civil Case No. 107089 of the Court
Certificate of Title No. 188705 in the name of ' Alfredo Ong Bio Hong
of First Instance of Manila, 6th Judicial District Branch XXXII , entitled
married to Julita Go Ong' (Exh. D). Alfredo Ong Bio Hong died on
"IN THE MATTER OF THE INTESTATE ESTATE OF THE LATE
January 18, 1975 and Julita Go Ong was appointed administratrix of
ALFREDO ONG BIO: JULITA GO ONG, ADMINISTRATRIX'. In
her husband's estate in Civil Case No. 107089. The letters of
pursuance with which the restraining order of the lower court in this
administration was registered on TCT No. 188705 on October 23,1979.
case restraining the sale of the properties levied upon is hereby ordered
Thereafter, Julita Go Ong sold Lot No. 12 to Lim Che Boon, and TCT
to continue in full force and effect coterminous with the final result of
No. 188705 was partially cancelled and TCT No. 262852 was issued in
Civil Case No. 107089, the decision appealed from is hereby affirmed.
favor of Lim Che Boon covering Lot No. 12 (Exh. D-4). On June 8, 1981
Costs against plaintiffappellant.
Julita Go Ong through her attorney-infact Jovita K. Yeo (Exh. 1)
mortgaged Lot No. 1 to the Allied Banking Corporation to secure a loan "SO ORDERED."
of P900,000.00 obtained by JK Exports, Inc. The mortgage was
On April 8,1986, petitioner moved for the reconsideration of the said
registered on TCT No. 188705 on the same date with the following
decision (Ibid., pp. 24-29), but in a Resolution dated September 11,
notation: 'x x x mortgagee's consent necessary in case of subsequent
1986, respondent court denied the motion for lack of merit (Ibid., p. 23).
alienation or encumbrance of the property other conditions set forth in
Hence, the instant petition (Ibid., pp. 6-17).
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 The Second Division of this Court, in a Resolution dated November
Banking Corporation tried to collect it from Julita Go Ong, (Exh. E). 19,1986 (Rollo, p. 30), without giving due course to the petition, resolved
Hence, the complaint alleging nullity of the contract for lack of judicial to require private respondent to comment thereon and it did on
approval which the bank had allegedly promised to secure from the February 19,1987 (Ibid., pp. 37-42). Thereafter, in a Resolution dated
court. In response thereto, the bank averred that it was plaintiff Julita April 6, 1987, the petition was given due course and the parties were
Go Ong who promised to secure the court's approval, adding that Julita required to file their respective memoranda (Ibid., p. 43).
Go Ong informed the defendant that she was promised the sum of
Petitioner filed her Memorandum on May 13, 1987 (Ibid, pp. 45-56).
P300,000.00 by the JK Exports, Inc. which will also take charge of the
while private respondent filed its Memorandum on May
interest of the loan.
20,1987 (Ibid, pp. 62-68).
"Concluding, the trial court ruled;

46
 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 af firmed 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 promised 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,
47
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 substitute another person in its
enjoyment, except when personal rights are involved. But the effect of
the alienation or mortgage, with respect to the co-owners, shall be
limited to the portion which may be allotted to him in the division upon
the termination of the co-ownership (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 defendantappellee
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 Yap (Chairman), Melencio-Herrera, Padillaand Sarmiento,
the one-half of the land conveyed to him by Susana Melgar, and JJ., concur.
declaring the plaintiff owner of the other half by express
Petition denied and decision affirmed.
acknowledgment of the other defendants. The plaintiff appealed from
that part of the judgment which is favorable to Nicolas Rafols. Notes.—Findings of fact of Court of Appeals generally final and
conclusive upon the Supreme Court. (Leonardo vs. Court of Appeals, 120
"The lower court absolved Nicolas Rafols upon the theory that
SCRA 890.)
Susana Melgar could not have sold anything to Pedro Cui because the
land was then in custodia legis, that is, under judicial administration. Findings of facts of trial judge are generally accorded highest degree
This is error. That the land could not ordinarily be levied upon while of respect. (People vs. Bernat,120 SCRA 918.)
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 substantive rights 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.

48
 No. L-24434. January 17, 1968. BENGZON, J.P., /.:
HEIRS OF PEDRO REGANON, JOVENCIA REGANON, MENCIA This is an appeal from the orders dated June 9, 1964, July 14, 1964 and
REGANON, JOSEFA REGANON, VIOLETA REGANON, and FLORA August 11, 1964, respectively, of the Court of First Instance of
REGANON, plaintiffs-appellees, vs. RUFINO IMPERIAL, defendant- Zamboanga del Norte (Dipolog, Branch II).
appellant.
The facts of the case are admitted by both parties.
Remedial law; Attachment; Property in custodia legis is now
On February 22, 1963, the heirs of Pedro Reganon filed a complaint
subject to attachment; Reversal of the former ruling.—It is true that in
for recovery of ownership and possession of about one-hectare portion of
Asia Banking Corp. vs. Elser, 54 Phil. 994, it was held that property
a parcel of land (Lot No. 1 or Lot No. 4952, situated at Miasi, Polanco,
under custodia legis can not be attached. But this was under the old
Zamboanga del Norte, covered by O.T.C. No. 1447, with an area of
Rules of Court. The new Rules of Court (Sec. 7, Rule 57) now specifically
7.9954 hectares), with damages, against Rufino Imperial.
provides for the procedure to be followed in case what is attached is in
custodia legis. The clear import of this new provision is that property Defendant not having filed an answer within the reglementary
under custodia legis is now attachable, subject to the mode set forth in period, the plaintiffs on April 8, 1963 filed a motion to declare the
said rule. former in default. The trial court granted the motion in its order dated
April 10,1963.
Same; Interest of an heir in the estate of a deceased is attachable.—
That the interest of an heir in the estate of a deceased person may be On April 23,1963, the plaintiffs presented their evidence ex parte
attached for purposes of execution, even if the estate is in the process of before the Clerk of Court acting as Commissioner.
settlement before the courts, is already a settled matter in this
The court a quo on May 6, 1963, rendered a decision declaring the
jurisdiction.
plaintiffs lawful owners of the land in question and entitled to its
Same; Exemption from execution of pension of U.S. Veterans is peaceful possession and enjoyment; ordering defendant immediately to
personal.—Any pension, annuity, or gratuity granted by a Government vacate the portion occupied by him and to restore the peaceful
to its officers or employees in recognition of past services rendered, is possession thereof to plaintiffs; and sentencing defendant to pay
primordially aimed at tiding them over during their old age and/or plaintiffs the amount of P1,929.20 and the costs.
disability. This is therefore a right personalissima, purely personal
On November 29, 1963, the plaintiffs filed a motion for issuance of a
because founded on necessity. It requires no argument to show that
writ of execution. This was granted by the trial court in its order of
where the recipient dies, the necessity motivating or underlying its
December 9, 1963.
grant necessarily ceases to be.
The Deputy Provincial Sheriff submitted on February 8, 1964 a
Civil law; Succession; Rights to the succession of a person are
sheriff's return of proceedings reporting the garnishment and sale of a
transmitted from the moment of death.—The rights to the succession of
carabao and goat belonging to defendant for P153.00, and the
a person are transmitted from the moment of death, and where the heir
attachment and sale of defendant's parcel of land covered by Tax
is of legal age and the estate is not burdened with any debts, said heir
Declaration No. 4694, situated in Sicet, Polanco, Zamboanga del Norte,
immediately succeeds, by force of law, to the dominion, ownership, and
for P500.00—both sales having been made to the only bidder, plaintiffs'
possession of the properties of his predecessor, and consequently stands
counsel Atty. Vic T. Lacaya.
legally in the shoes of the latter (Cuevas v. Abesames, 71 Phil. 147).
On March 13, 1964, the Philippine National Bank deposited in the
APPEAL from the orders of the Court of First Instance of Zamboanga
Philippine National Bank-Dipolog Branch the residuary estate of its
del Norte.
former ward, Eulogio Imperial, in the sum of P10,303.80, pursuant to an
The facts are stated in the opinion of the Court. order of Branch I of the Court of First Instance of Zamboanga del Norte
in Sp. Proc. No. R-145.
Torcuato L. Galon for plaintiffs-appellees.
V. Lacaya for defendant-appellant.

49
 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 shar
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
BankDipolog 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 sheriff's
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. (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. (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 case1 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 Court2 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
50
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 proceedings 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 WHEREFORE, the orders appealed from are hereby affirmed, with
jurisdiction.9 costs against defendant-appellant. So ordered.
It is admitted that the heirs of Eulogio Imperial, including herein Concepcion, C.J. , Reye s, J.B. L., Di
defendant-appellant, have on May 25, 1964 executed a Deed of zon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando,
Extrajudicial Partition. This instru- ment suffices to settle the entire JJ., concur.
estate of the decedent—provided all the requisites for its validity are
Orders affirmed.
fulfilled10—even without the approval of the court. Theref ore, ore estate
for all practical purposes have been settled. The heirs are at full liberty Note.—"While ordinary execution of property in custodia legis is
to withdraw the residuary estate from the Philippine National Bank- prohibited in order to avoid interference with the possession by the
Dipolog Branch and divide it among themselves. The only reason they court, yet, the sale made by an heir of his share in an inheritance,
have not done so is because of the alleged illegal withdrawal from said subject to the result of the pending administration, in no wise the way
estate of the amount of P1,080.00 by one Gloria Gomez by authority of of such administration and is, therefore, valid, with the understanding,
Branch I of the Court of First Instance of Zamboanga del Norte, which however, that it would be effective only as to the portion to be
incident is now on appeal before the Court of Appeals. This appeal, adjudicated to the vendor upon the partition of the property under
however, does not detract any from the fact that the guardianship administration." (Borja vs. Mencias, L-20609, Nov. 29,1967, 21 SCRA
proceedings is closed and terminated and the residuary -estate no 1133, citing Jacosalem vs. Rafols, 73 Phil. 628). Under the same
longer under custodia legis. principle and subject to the same condition, the participation of an heir,
albeit indeterminable before the liquidation of the estate under judicial
Finally, it is defendant-appellant's position that the residuary estate
administration, may be attached and sold (Gotauco & Co. vs. Register of
of Eulogio Imperial, a former U.S. veteran, having been set aside from
Deeds of Tayabas, 59 Phil. 756, cited in Borja vs. Mencias, supra).
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
law11 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

51
 No. L-14070. March 29, 1961.
MARIA GERVACIO BLAS, MANUEL GERVACIO BLAS, LEONCIO
GERVACIO BLAS and LOIDA GERVACIO BLAS,
plaintiffsappellants, 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.
Wills; Succession; Contracts; Compromise; Future
inheritance; When agreement to transmit one-half of conjugal share is a
contract as to future inheritance.—-A document signed by the testator's
wife, promising that she would respect and obey all the dispositions in
the latter's will, and that she would hold one-half of her 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 might choose in her last will and testament, is a
compromise and at the same time a contract with sufficient cause or
consideration.
Same; Prescription; Actions; Accrual of cause of action upon
death.—The action to enforce the wife's promise to convey in her
testament, upon her death, one-half of the conjugal properties, did not
arise until and after her death when it was found that she did not
comply with her promise.
Same; Definition of future inheritance.—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.
APPEAL from a judgment of the Court of First Instance of Rizal.
Victoriano, J.
The facts are stated in the opinion of the Court.
Teofilo Sison and Nicanor Sison for plaintiff&-appellants.
De los Santos, Caluag, Pascual and Felizardo for defendants-
appellees.
LABRADOR, J.:
This action was instituted by plaintiffs against the administratrix of the
estate of Maxima Santos, to secure a judicial declaration that one-half of
the properties left by said Maxima Santos Vda. de Blas, the greater bulk
of which are set forth "and described in the project of partition
52
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 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 chil-dren, 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
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 01 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
Gervacio 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 plaintiffs having no
right to recover any portion of Maxima Santos' estate now under
administration by the court. A counterclaim for the amount of P 50,000
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.
Gustavo Victoriano, presiding, rendered judgment dismissing the
complaint, with costs against plaintiff, and dismissing also the
counterclaim and cross-claim filed by the defendants. From this
decision, the plaintiffs 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 1953 and is
survived by three legitimate children who are plaintiffs herein, namely,
Manuel Gervacio Bias, 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 acquired 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 his death on January
9, 1937, Simeon Blas executed a last will and testament. In the said
testament Simeon Blas makes the folloAving 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 AT 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 magasawa, 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, sangayon sa batas." (Record on Appeal, pp. 250-
251.)
The above testamentary provisions may be translated as follows:
I
53
"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, 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 f 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 docu-ment 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.
xxx
"Q— And what happened with that claim of your children
against Simeon Blas regarding these 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 Blas, Marta Gervacio
Blas and Lazaro Gervacio Blas agreed that Simeon Blas
and Maxima Blas will give oneh alf 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 (l/£) sa mga herederos at
legatarios o pinamamanahan ng aking nabanggit na asawa, SIMEON
BLAS, sa kaniyang testamento, na ako'y makapipili o makahihirang
nakahi't 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
54
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 a 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
acquired 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 properties 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 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 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 that such properties where actually 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
suit or terminates one which has already been instituted." (Italics
supplied.)
Exhibit "A" states that the maker (Maxima Santos) had read and knew
the contents of the will of her husband 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
55
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, as 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 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. The document
refers to existing properties which she will receive by operation of law
on 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, 1915, thus:
"Que si bien el art. 1271 del Codigo civil dispone que sobre la herencia
futura no se podra celebrar otros contratos que aquellos cuyo objeto sea
practicar entre vivos la division de un caudal, conforme al articulo
1056, esta prohibicion no es aplicable al caso, porque la obligacion que
contrajo el recurrido en contrato privado de otorgar testamento e
instituir heredera a su sobrina de los bienes que adquirio en virtud de
herencia, procedentes de su finada consorte que le quedasen sobrantes
despu&i de pagar las deudas, y del ganacial que se expresa, asi como de
reconocer, ademas, con alguna cosa a otros sobrinos, se refiere a bienes
conocidos y determinados existentes cuando tal compromiso se otorgo, y
no a la universalidad de una herencia que, seqún el art. 659 del citado
Código civil, se determina a muerte del causante, constituyendola todos transmit one-half of the conjugal properties that she was going to
los bienes, derechos y obligaciones que por ella no se hayan extinguido: receive as her share in the conjugal partnership, upon her death and in
x x x " (Italics supplied.) her will, to the heirs and legatees of her husband Simeon Blas,
It will be noted that what is prohibited to be the subject matter of a Neither can the claim of prescription be considered in favor of the
contract under Article 1271 of the Civil Code is "future inheritance." To defendants. The right of action arose at the time of the death of Maxima
us futureinheritance is any property or right not in existence or capable Santos on October 5, 1956, when she failed to comply with the promise
of determination at the time of the contract, that a person may in the made by her in Exhibit "A". The plaintiffs-appellants immediately
future acquire by succession. The properties subject of the contract presented this action on December 27, 1956, upon learning of such
Exhibit "A" are well-defined properties, existing at the time of the failure on the part of Maxima Santos to comply with said promise. This
agreement, which Simeon Blas declares in his testament as belonging to defense is, therefore, also without merit.
his wife as her share in the conjugal partnership. Certainly his wife's
It is next contended by the defendant-appellee that Maxi-ma Santos
actual share in the conjugal properties may not be considered
complied with her above-mentioned promise, that Andres Pascual,
as future inheritance because they were actually in existence at the
Tomasa Avelino, Justo Garcia, Ludovico Pimpin and Marta Gervacio
time Exhibit "A" was executed.
Blas were given substantial legacies in the will and testament of
The trial court held that the plaintiffs-appellants in the case at bar Maxima Santos. To determine whether she had actually complied with
are concluded by the judgment rendered in the proceedings for the the promise made in Exhibit "A", there is herein set forth a list only of
settlement -of the estate of Simeon Blas for the reason that the the fishponds and their respective areas as contained in the list of
properties left by him belonged to himself and his wife Maxima Santos; properties she acquired as her share in the conjugal partnership, which
that the project of partition in the said case, adjudicating to Maxima list includes, besides, many ricelands as well as residential lots, thus:
Santos one-half as her share in the conjugal properties, is a bar to
"31. Paco, Obando, Bulacan 5.8396 has.
another action on the same subject matter, Maxima Santos having
become absolute owner of the said properties adjudicated in her favor. 32. Pangjolo, Obando, " 3.5857 "
As already adverted to above, these contentions would be correct if
34. Batang Pirasuan, Lubao, Pampanga 11.9515 "
applied to the claim of the plaintiffs-appellants that said properties
were acquired with the first wife of Simeon Blas, Marta Cruz. But the 35. Calangian " " 30.2059 "
main ground upon which plaintiffs base their present action is the
38. Bakuling, " " 215.4325 "
document Exhibit "A", already fully considered above. As this private
document contains the express promise made by Maxima Santos to 39. " " " 8.3763 "
convey in her testament, upon her death, one-half of the conjugal
40. Bangkal, Sinubli, " " 23.0730 "
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 41. Tagulod, " " 6.8692 "
when it was found that she did not comply with her above-mentioned
44. Bangkal Pugad " " (a) 34,2779 "
promise. (Art. 1969, old Civil Code.) The argument that the failure of
the plaintiffs-appellants herein to oppose the project of partition in the (b) 51.7919 "
settlement of the estate of Simeon Blas, especially that portion of the
(c) 2.5202 "
project which assigned to Maxima Santos one-half of all the conjugal
properties, bars their present action, is, therefore, devoid of merit. It 45. Magtapat, " " (a) 18.8024 "
may be added that plaintiffs-appellants did not question the validity of Bangkal,
the project of partition precisely because of the promise made by
(b) 7.3265 "
Maxima Santos in the compromise Exhibit "A"; they acquiesced in the
approval of said project of partition because they were relying on the (c) 53.5180 "
promise made by Maxima Santos in Exhibit "A", that she would

56
46. Pinanganakan, " " 159.0078 " on Record,
47. Emigdio Lingid, " " 34.5229 " pp.
195-241.)
48. Propios, " " 80.5382 "
In her will, Maxima Santos devised to Marta Gervacio Blas the 80-
49. Batang Sexmoan, Pampanga 43.3350 "
hectare fishpond situated in Lubao, Pampanga. The fishpond devised is
Mabuanbuan,
evidently that designated as "Propios" in Lubao, Pampanga, item No. 48
50. Binatang " " 3.5069 " in the list of properties adjudicated to her in the project of partition.
Mabuanbuan, (Record on Appeal, p. 215.) Considering that the total area of the
fishponds amount to 1045.7863 hectares, the 80 hectares devised to
51. Sapang Magtua, " '' 56,8242 "
Marta Gervacio Blas is not even one-tenth of the total area of the
52. Kay Limpin, " " 5.0130 " fishponds. Add to this the fact that in the will she imposed upon Marta
Gervacio Blas de Chivi an existing obligation on said fishponds, namely,
53. Calise " " 23.8935 "
its lease in 1957 and the duty to pay out of the rentals thereof an
Mabalumbum,
obligation to the Rehabilitation Finance Corporation (RFC). (Ibid., pp.
54. Messapinit " " (a) 5.2972 " 262-263.) Angelina Blas was given only a lot of 150 square meters in
Kineke, Hulong Duhat, Malabon, Rizal, and Leony Blas, the sum of
P300.00 (Ibid., p. 264.)
(b) 4.9230 "
It is. evident from a consideration of the above figures and facts that
(c) 1.4638 "
Maxima Santos did not comply with her obligation to devise one-half of
(d) 1.4638 " her conjugal properties to the heirs and legatees of her husband. She
does not state that she had complied with such obligation in her will. If
(e) 2.8316 "
she intended to comply therewith by giving some of the heirs of Simeon
(f) 10.4412 " Blas the properties mentioned above, the most that can be considered in
her favor is to deduct the value of said properties from the total amount
(g) 3.9033 "
of properties which she had undertaken to convey upon her death.
(h) 11.8263 "
All the issues in the pleadings of the parties and in their respective
(i) 6.0574 " briefs, have now been fully discussed and considered. Reiterating what
we have stated above, we declare that by Exhibit "A", a compromise to
55. Dalang, Banga, " " 23.3989 "
avoid litigation, Maxima Santos promised to devise to the heirs and
62. Alaminos, " " 47.1242 " legatees of her husband Simeon Blas, one-half of the properties she
Pangasinan received as her share in the conjugal partnership of herself and her
husband, which share is specified in the project of partition submitted
80 Mangasu, Pampanga " 10.0000 "
by herself on March 14, 1938 in the settlement of the estate of her
Sexmoan,
husband, and which is found on pages 195 to 240 of the record on appeal
81. Don Tomas, " " 21.6435 " and on pages 27 to 46 of the project of partition, submitted by Maxima
Santos herself before the Court of First Instance of Rizal in Civil Case
82. Matikling, Lubao, 16.0000 has.
No. 6707, entitled "Testamentaria del Finado Don Simeon Blas, Maxima
Pampanga
Santos Vda. de Blas, Administradora"; and that she failed to comply
Total area 1045.7863 " with her aforementioned obligation. (Exhibit "A").
.............................
WHEREFORE, the judgment appealed from is hereby reversed and
(See Record the defendant-appellee, administratrix of the estate of Maxima Santos,

57
is ordered to convey and deliver one-half of the properties adjudicated to
Maxima Santos as her share in the conjugal properties in said Civil
Case No. 6707, entitled "Testamentaria del Finado Don Simeon Blas,
Maxima Santos Vda. de Blas, Administradora", to the heirs and the
legatees of her husband Simeon Blas. Considering that all said heirs
and legatees, designated in the will of Simeon Blas as the persons f or
whose benef it Exhibit "A" had been executed, have not appeared in
these proceedings, the record is hereby remanded to the court below,
with instructions that, after the conveyance of the properties
hereinabove 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 properties. Costs against the
defendantappellee Rosalina Santos.
Padilla, Paredes 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.

58
 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.
Civil Law; Wills; 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 testator’s testamentary
capacity and the compliance with the requisites or solemnities prescribed
by law.—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 testator’s 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. The question of the intrinsic validity of a will normally comes
only after the court has declared that the will has been duly
authenticated.
Same; Property; Co-ownership; Well-entrenched is the rule that a
co-owner can only alienate his pro indiviso share in the co-owned
property.—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. Angel’s right over the subject property was limited only
to 1/4 pro indiviso share. As co-owner of the subject property, Angel’s
right to sell, assign or mortgage is limited to that portion that may be
allotted to him upon termination of the coownership. Well-entrenched is
the rule that a co-owner can only alienate his pro indiviso share in the
co-owned property.
Same; Same; Same; Court of Appeals did not err in ruling that
Angel Custodio Nufable had no right to mortgage the subject property in
its entirety.—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 1/4 pro
indivisoshare of the property in question.” 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.”
59
Same; Same; Same; A co-owner does not lose his part ownership of
a co-owned property when his share is mortgaged by another coowner
without the former’s knowledge and consent.—Respondents stipulated
that they were not aware of the mortgage by petitioners of the subject
property. 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 former’s knowledge and consent 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.
Remedial Law; Actions; Parties; Rule on inclusion of indispensable,
proper or necessary parties in the pleadings.—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 or defendants, their inclusion as a party being compulsory. On
the other hand, in case 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 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 persons. 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 separable that a final decree
can be made in their absence without affecting them. Any claim against
a party may be severed and proceeded with separately.
Same; Same; Same; DBP, not being an indispensable party did not
have to be impleaded in this case.—Private respondents do not question
the legality of the foreclosure of the mortgaged property and the
subsequent sale of the same to DBP. The subject property was already
purchased by petitioner Nelson from DBP and the latter, by such sale,
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 can be had of the action despite the non-
inclusion of DBP as party-defendant. Hence, DBP, not being an
indispensable party, did not have to be impleaded in this case.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Lenin R. Victoriano for petitioners.
Quinciano D. Vailoces for private respondents.
GONZAGA-REYES, J.:
This petition for review on certiorari seeks to reverse and set aside the
Decision dated November 25, 1995 of the Fifth Division1 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. ‘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. ‘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. ‘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;
60
4. ‘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:
1. ‘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;
‘x x x x x x x x x.’
(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] (Pretrial
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:
1. ‘(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 (3/4) rights which belongs (sic) to the plaintiffs are
concerned;
2. ‘(b)That the said three fourths (3/4) rights over the above parcel
in question be declared as belonging to the plaintiffs at one
fourth right to each of them;
3. ‘(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 Attorney’s fees, and to
pay the costs.
4. ‘(d)Plus any other amount which this Court may deem just and
equitable.’ (p. 6, Original Records)
 In their Answer, defendants contend:
1. ‘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 3/4 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 portion3 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 3/4 southern portion thereof; and defendant-appellee
Nelson Nufable to 1/4 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 Appeals4 dated October 2, 1996.
Hence, the present petition. Petitioners raise the following grounds
for the petition:
1. “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;
61
2. 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 testator’s 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 decedent’s 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 therefore the will of the decedent that the
subject property should remain undivided, although the restriction
should not exceed twenty (20) years pursuant to Article 87011 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. Angel’s right over the subject property was limited only
to 1/4 pro indiviso share. As coowner of the subject property, Angel’s
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 1/4 pro
indivisoshare of the property in question.”13 Article 493 of the Civil Code
spells out the rights of coowners 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
62
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 former’s
knowledge and consent16 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 3/4 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
bank’s 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 3/4 without making any
pronouncement as to the legality or illegality of the bank’s ownership of
said land. It is argued that there was no evidence to warrant
declaration of nullity of the bank’s 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 1/4 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 3/4 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 necessary parties, i.e., persons who are not indispensable but ought to
succession to any person and he causes the legal title to be put in the be parties if complete relief is to be accorded as between those already
name of another, a trust is established by implication of law for the parties, the court may, in its discretion, proceed in the action without
benefit of the true owner. Likewise, under Article 1456 of the same making such persons parties, and the judgment rendered therein shall
Code, if property is acquired through mistake or fraud, the person be without prejudice to the rights of such persons. 25 Proper parties,
obtaining it is, by force of law, considered a trustee of an implied trust therefore, have been described as parties whose presence is necessary in
for the benefit of the person from whom the property comes. In the case order to adjudicate the whole controversy, but whose interests are so far
of Noel vs. Court of Appeals,22 this Court held that “a buyer of a parcel of separable that a final decree can be made in their absence without
land at a public auction to satisfy a judgment against a widow acquired affecting them.26 Any claim against a party may be severed and
only one-half interest on the land corresponding to the share of the proceeded with separately.27
widow and the other half belonging to the heirs of her husband became
The pivotal issue to be determined is whether DBP is an
impressed with a constructive trust in behalf of said heirs.”
indispensable party in this case.
Neither does the fact that DBP succeeded in consolidating ownership
Private respondents do not question the legality of the foreclosure of
over the subject property in its name terminate the existing co-
the mortgaged property and the subsequent sale of the same to DBP.
ownership. Registration of property is not a means of acquiring
The subject property was already purchased by petitioner Nelson from
ownership.23 When the subject property was sold to and consolidated in
DBP and the latter, by such sale, transferred its rights and obligations
the name of DBP, it being the winning bidder in the public auction,
to the former. Clearly, petitioners’ interest in the controversy is distinct
DBP merely held the 3/4 portion in trust for the private respondents.
and separable from the interest of DBP and a final determination can be
When petitioner Nelson purchased the said property, he merely stepped
had of the action despite the non-inclusion of DBP as partydefendant.
into the shoes of DBP and acquired whatever rights and obligations
Hence, DBP, not being an indispensable party, did not have to be
appertain thereto.
impleaded in this case.
This brings us to the issue of whether or not the DBP should have
WHEREFORE, there being no reversible error in the decision
been impleaded as party-defendant in the case at bar. Petitioners
appealed from, the petition for review on certiorari is hereby DENIED.
contend that DBP was never impleaded and that due process requires
that DBP be impleaded so that it can defend its sale to petitioner SO ORDERED.
Nelson Nufable; and that it was the duty of private respondents, and
Vitug (Actg. Chairman), Panganiban and Purisima, JJ., concur.
not of petitioner Nelson, to implead the bank and ask for the annulment
of documents evidencing the bank’s ownership of the disputed land. Romero, J. (Chairman), Abroad, on official business leave.
In the Rejoinder to the Reply, private respondents stated that the Petition denied.
non-inclusion of DBP as a “necessary party” was not questioned by
Note.—A person’s co-ownership in a property is not inconsistent
petitioners from the time the Complaint was filed until the case was
with her authorizing another to sell her share in the property via an
“finished.” It was only after the adverse decision by the respondent
agency arrangement. (Esguerra vs. Court of Appeals, 267 SCRA
Court of Appeals that petitioners raised the issue.
380 [1997])
At the outset, it should be stated that petitioners never raised this
issue in their Answer and pursuant to Section 2, Rule 9 of the Rules of
Court, defenses and objections not pleaded either in a motion to dismiss
or in the answer are deemed waived.
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 or defendants, their inclusion as a
party being compulsory.24 On the other hand, in case of proper or

63
 No. L-23079. February 27, 1970.
RUBEN AUSTRIA,CONSUELO AUSTRIA-BENTA and LAURO
AUSTRIA Mozo, petitioners, vs.HON.ANDRES REYES, Judge, Court of
First Instance of Rizal, PERFECTO CRUZ,BENITA CRUZ-MENEZ
ISAGANI CRUZ,ALBERTO CRUZ and Luz CRUZ-
SALONGA respondents.
Civil law; Succession; Testamentary succession; Institution of
heir; Requisites for annulment of institution of heir for statement of a
false cause.—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.
Same; Same; Same; Same; Same; Where will does not state cause
for institution of heir.—Where the decedent’s will does not state in a
specific or unequivocal manner the cause for such institution of heirs,
the will cannot be annulled under Article 850 of the Civil Code. Such
institution may be annulled only when it is clear, 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.
Same; Same; Same; Interpretation of will; Testacy favored.—
Testacy is favored and doubts are resolved on its side, especially where
the will evinces an intention on the part of the testator to dispose of
practically his whole estate, as was done in this case. Moreover, so
compelling is the principle that intestacy should be 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.
Remedial law; Courts; Inherent powers; Power to amend and
control processes.—Every court has the inherent power to amend and
control its processes and orders so as to make them conformable to law
and justice. In this case, the lower court had power to reverse its order
of December 22, 1959 because the subsequent orders complained of
served merely to clarify the first—an act which the court could legally
do.
Same; Civil procedure; Intervention; Power of court to limit extent
of intervention.—The court has the power to limit the extent of a party’s
intervention in a probate case within its powers as articulated by the
Rules of Court.
64
PETITION for certiorari to annul the orders of the Court of First
Instance of Rizal.
The facts are stated in the opinion of the Court.
Salonga, Ordonez, Yap, Sicat & Associates for petitioners.
Ruben Austria for himself and co-petitioners.
De los Santos, De los Santos & De los Santos for respondent
Perfecto Cruz.
Villareal, Almacen, Navarra & 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, aatte mortem,of her last will and testament The probate was
opposed by the present petitioners Ruben Austria, Consuelo
AustriarBenta 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-Mefiez,
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 28, 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 3ucceed 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 sideg 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.L 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 y«ars after they were allowed
to intervene, the petitioners Ruben Austria, et 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-Menez, 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,
1863 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,
65
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 con-
cededly the nearest surviving blood relatives of the de-cedent. On the
other side are the respondents brothers and sisters, Perfecto Cruz,
Benita Cruz-Menez, 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 adoptionof 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
testatpr 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
calted 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
apeiyidong Cruz.
x x x could not do otherwise. If this were indeed what prompted the testatrix
“V
“Kung ako ay bawian ng Dios ng buhay, ay aking ipinamaraana 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
apeiyidong Cruz, na parepareho ang kaparti ng bawa’t isa at walang
lamangan (en partes iguales), bilang kanilang sapilitang mana
(legiti[ma]), ang kalahati (1/2) 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 ngtestamentong
ito, ang kalahati (1/2) 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 (1/2) 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 ah as the latter’s legitime. The petitioners
further contend that had the deceased known the adoption to be
66
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
th&t 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
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
sbe believed that the law commanded her to do so, on the false
assumption that her adoption of these respondents was valid, still such
insititution 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 tesitator clearly
would not have made the institution if be had known the cause for it to
be false. Now, would the late Basilia have caused the revocation of the At all events, the legality of the adoption of ihe respondents by the
institution of heirs if she had known that she was mistaken in treating testatrix can be assailed only in a separate action brought for that
tties’e heirs as her legally adopted children? Or would she have purpose, and cannot be the subject of a collateral attack.5
instituted them nonetheless?
To the petitioners’ charge that the lower court had no power to
The decedent’s will, which alone should provide the an&wer, is mute reverse its order of December 22, 1959, suffice it to state that, as borne
on this point or at best is vague and uncertain. The phrases, “mga by the records, the subsequent orders complained of served merely to
sapilitang tagapagmana” and “sapilitang mana” were borrowed from clarify the first—an act which the court could legally do. Every court
the language of the law on succession and were used, respectively, to has the inherent power to amend and control its processes and orders so
describe the class of heirs instituted and the abstract object of the as to make them conformable to law and justice. 6 That the court a
inheritance. They offer no absolute indication that the decedent would quohas limited the extent of the petitioners’ intervention is also within
have willed her estate other than the way she did if she had known that its powers as articulated by the Rules of Court.7
she was not bound by law to make allowance for legitimes. Her
ACCORDINGLY, the present petition is denied, at petitioners cost.
disposition of the free portion of her estate (libre disposition) which
largely favored the respondent Perfecto Cruz, the latter’s children, and Concepcion, C.J., Reyes,
the children of the respondent Benita Cruz, shows a perceptible J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Teehankee, Barredoand
inclination on her part to give to the respondents more than what she Villamor, JJ., concur.
thought the law enjoined her to give to them. Compare this with the
Petition denied.
relatively small devise of land which the decedent had left for her blood
relatives, including the petitioners Consuelo Austria-Benta and Lauro Notes.—(a) “Forced Heirs” and their “legitime”.—Under Art. 808 of
Mozo and the children of the petitioner Ruben Austria. Were we to the old Civil Code, 2/3 of the property of a decedent constitutes the
exclude the respondents Perfecto Cruz, et al. from the inheritance, then legitime of his. legitimate heirs and descendants; one half of this 2/3 (or
the petitioners and the other nephews and nieces would succeed to the 1/3 of the entire estate) is disposable among the heirs and legitimate
bulk of the estate by intestacy—a result which would subvert the clear descendants of the decedent according to his will; and the remaining 1/3
wishes of the decedent. is available for “free disposition” by will to whomsoever the decedent
may see fit to direct its disposition, without exception. (Osorio vs.
Whatever doubts one entertains in his mind should be swept away
Osorio, L-1965, Dec. 29, 1949).
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
Testacy is favored and doubts are resolved on its side, especially
where the will evinces an intention on the part of the testator to dispose
of practically his whole estate,2 as was done in thia case. Moreover, so
compelling is the principle that intestacy should be avoided and the
wishes of the testator allowed to prevail, that we could even vary the
language of tihe will for the purpose of giving it effect 3 A probate court
has found, by 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

67
 No.L-39247. June 27, 1975.*
In the Matter of the Petition to Approve the Will of Leodegaria Julian.
FELIX BALANAY, JR., petitioner, vs.HON. ANTONIO M. MARTINEZ,
Judge of the Court of First Instance of Davao, Branch VI; AVELINA B.
ANTONIO and DELIA B. LANABAN, respondents.
Special proceedings; Testate succession; Probate court may pass
upon intrinsic validity of a will before passing upon its formal
validity.—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.
Same; Same; Invalidity of one testamentary disposition does not
necessarily invalidate all other dispositions made therein.—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).
Same; Same; Statement that testator owns “southern half of
conjugal state is contrary to law because spouses areproindiviso owners
thereof.—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). But that illegal declaration does not nullify the entire will.
It may be disregarded.
Same; Same; Provision in a will that testator’s estate be kept intact
and legitimes of heirs be paid in cash is contrary to Art. 1080 of Civil
Code where whole estate was not assigned to one or more heirs.—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. ... 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 20 years.
68
Same; Same; Renunciation of inheritance by widower subject to
limitation for his support and maintenance and preservation of his
legitime.—Felix Balanay, Sr. could validly renounce his hereditary
rights and his one-half share of the conjugal partnership but insofar as
said renunciation partakes of a donation of his hereditary rights and his
one-half share in the conjugal estate, 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.
Same; Same; Husband’s renunciation of hereditary rights and
share in conjugal estate make these assets part of testator’s estate, but
without prejudice to creditors and other heirs.—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.
Same; Same; Preterition of surviving spouse who conformed thereto
does not produce intestacy.—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.
Same; Same; Testacy is prefereable to intestacy.—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.
Same; Same; Probate court should not issue notice to creditors if
only special administrator has been appointed.—A notice to creditors is
not in order if only a special administrator has been appointed. Section
1, Rule 86 x x x clearly contemplates the appointment of an executor or
regular administrator and not that of a special administrator.
Same; Same; Courts; A court employee should not be appointed as
administrator of decedent’s estate.—The probate court’s appointment of
its branch clerk of court as special administrator 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. x x
x 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.
PETITION for certiorari from an order of the Court of First Instance of
Davao.
The facts are stated in the opinion of the Court.
Roberto M. Sarenas for petitioner.
Jose B. Guyo for private respondents.
AQUINO, J.:
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 ordering the issuance of the
corresponding notice to creditors (Special Case No. 1808). The
antecedents of the appeal are as follows:
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,
69
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
70
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).
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, desires 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.
1050[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 possessed
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.”
71
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).
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. 479and 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 petition for probate, is affirmed. The lower court is directed to conduct
where the will evinces an intention on the part of the testator to dispose further proceedings in Special Case No. 1808 in consonance with this
of practically his whole estate. So compelling is the principle that opinion. Costs, against the private respondents.
intestacy should be avoided and that the wishes of the testator should
SO ORDERED.
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, Fernando (Chairman), Barredo, Antonio and Concepcion Jr.,
1970, 31 SCRA 754, 762). JJ., concur
As far as is legally possible, the expressed desire of the testator must Orders set aside.
be followed and the dispositions of the properties in his will should be
Notes.—A will may be allowed even if some witnesses do not
upheld (Estorque vs. Estorque, L-19573, June 30, 1970, 33 SCRA 540,
remember having attested to it, if other evidence satisfactorily show due
546).
execution; and the failure of a witness to identify his signature does not
The law has a tender regard for the wishes of the testator as bar probate. (Maravilla vs. Maravilla, 37 SCRA 672). The test whether
expressed in his will because any disposition therein is better than that a witness to a will is deemed to have signed in the presence of each
which the law can make (Castro vs. Bustos, L-25913, February 28, other is not whether a witness did see the signing of the will but
1969, 27 SCRA 327, 341). whether he was in a position to see if he chose to do so. (Ibid.)
Two other errors of the lower court may be noticed. It erred in Where a testatrix had no ascendants or descendants, and was
issuing a notice to creditors although no executor or regular accordingly free to leave her property to whom she saw fit, the fact that
administrator has been appointed. The record reveals that it appointed she left it to a niece and the grand-daughter of another niece who lived
a special administrator. A notice to creditors is not in order if only a with her during the latter part of her life did not, of itself, establish
special administrator has been appointed. Section 1, Rule 86 of the undue influence or pressure on
Rules of Court, in providing that “immediately after granting letters of
the part of the said nieces. (Linsangan vs. Ortiz, 89 Phil. 698). There
testamentary or of administration, the court shall issue a notice
may be an estoppel to contest the provisions of a will where the
requiring all persons having money claims against the decedent to file
contestant has accepted benefits under it, where the rights of innocent
them in the office of the clerk of said court” clearly contemplates the
third persons will be unduly prejudiced, or where has been an
appointment of an executor or regular administrator and not that of a
unreasonable delay in the exercise of the right to contest the will. (See
special administrator.
57 Am Jur. 544).
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
(Sec. 10, Rule 86 and see. 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

72
 No. L-23638. October 12, 1967. Fernandez, Eusebio Reyes and Luisa Reyes and one month later,
Mariano, Cesar, Leonor and Paciencia, all surnamed Reyes, all claiming
DIONISIO FERNANDEZ,EUSEBIO REYES,and LUISA REYES,
to be heirs intestate of the decedent, filed oppositions to the probate
petitioners, vs. ISMAELA DIMAGIBA,respondent.
asked. Grounds advanced for the opposition were forgery, vices of
No. L-236 32. October 12, 1967 consent of the testatrix, estoppel by laches of the proponent, and
revocation of the will by two deeds of conveyance of the major portion of
MARIANO REYES,CESAR REYES,LEONOR REYES,and PACIENCIA
the estate made by the testatrix in favor of the proponent in 1943 and
REYES,petitioners, vs.ISMAELA DIMAGIBA, respondent.
1044, but which conveyances were finally set aside by this Supreme
Wills; Probate; Finality of probate decree.—A probate decree finally Court in a decision promulgated on August 3, 1954, in cases G.R. Nos.
and definitively settles all questions concerning capacity of the testator L-5618 and L-5620 (unpublished).
and the proper execution and witnessing of his last will and testament,
After trial on the formulated issues, the Court of First Instance, by
irrespective of whether its provisions are valid and enforceable or
decision of June 20, 1958, found that the will was genuine and properly
otherwise. As such, the probate order is final and appealable, and it is
executed; but deferred resolution on the questions of estoppel and
so recognized by express provisions of Section 1 of Rule 109.
revocation “until such time when we shall pass upon the intrinsic
Same; Estoppel cannot be raised in probate proceedings.—The validity of the provisions of the will or when the question of adjudication
presentation and probate of a will are requirements of public policy, of the properties is opportunely presented.”
being primarily designed to protect the testator’s expressed wishes,
Oppositors Fernandez and Reyes petitioned for reconsideration,
which are entitled to respect as a consequence of the decedent’s
and/or new trial, insisting that the issues of estoppel and revocation be
ownership and right of dispossession within legal limits. It would be
considered and resolved; whereupon, on July 27, 1959, the Court
a non sequiturto allow public policy to be evaded on the pretext of
overruled the claim that proponent was in estoppel to ask for the
estoppel. Whether or not the order overruling the allegation of estoppel
probate of the will, but “reserving unto the parties the right to raise the
is still appealable or not, the defense is patently unmeritorious.
issue of implied revocation at the opportune time.”
APPEAL by certiorari from a decision of the Court of Appeals.
On January 11, 1960, the Court of First Instance appointed Ricardo
The facts are stated in the opinion of the Court. Cruz as administrator for the sole purpose of submitting an inventory of
the estate, and this was done on February 9, 1960.
Jose D. Villena for petitioners.
On February 27, 1962, after receiving further evidence on the issue
Antonio Barredo and Exequiel M. Zaballero for respondent.
whether the execution by the testatrix of deeds of sale of the larger
REYES, J.B.L., Actg. C.J.: portion of her estate in favor of the testamentary heir, made in 1943
and 1944, subsequent to the execution of her 1930 testament, had
The heirs intestate of the late Benedicta de los Reyes have petitioned for
revoked the latter under Article 957(2) of the 1950 Civil Code (Art. 869
a review of the decision of the Court of Appeals (in CA-G. R. No. 31221-
of the Civil Code of 1889), the trial Court resolved against the oppositors
R) affirming that of the Court of First Instance of Bulacan in Special
and held the will of the late Benedicta de los Reyes “unaffected and
Proceeding No. 831 of said Court, admitting to probate tlu alleged last
unrevoked by the deeds of sale.” Whereupon, the oppositors elevated the
will and testament of the deceased, and overruling the opposition to the
case to the Court of Appeals.
probate.
The appellate Court held that the decree of June 20, 1958, admitting
It appears from the record that on January 19, 1955, Ismaela
the will to probate, had become final for lack of opportune appeal; that
Dimagiba, now respondent, submitted to the Court of First Instance a
the same was appealable independently of the issue of implied
petition for the probate of the purported will of the late Benedicta de los
revocation; that contrary to the claim of oppositors-appellants, there
Reyes, executed on October 22, 1930, and annexed to the petition. The
had been no legal revocation by the execution of the 1943 and 1944
will instituted the petitioner as the sole heir of the estate of the
deeds of sale, because the latter had been made in favor of the legatee
deceased. The petition was set for hearing, and in due time, Dionisio
herself, and affirmed the decision of the Court of First Instance.

73
Oppositors then appealed to this Court. and hence there would be nothing to revoke. Then, again, the revocation
invoked by the oppositors-appellants is not an express one, but merely
In this instance, both sets of oppositors-appellants pose three main
implied from subsequent acts of the testatrix allegedly evidencing an
issues: (a) whether or not the decree of the Court of First Instance
abandonment of the original intention to bequeath or devise the
allowing the will to probate had become final for lack of appeal; (b)
properties concerned. As such, the revocation would not affect the will
whether or not the order of the Court of origin dated July 27, 1959,
itself, but merely the particular devise or legacy. Only
overruling the estoppel invoked by oppositors-appellants had likewise
the total and absolute revocation can preclude probate of the revoked
become final; and (c) whether or not the 1930 will of Benedicta de los
testament (Trillana vs. Crisostomo, supra.).
Reyes had been impliedly revoked by her execution of deeds of
conveyance in favor of the proponent on March 26, 1943 and April 3, As to the issue of estoppel, we have already ruled in Guevara vs.
1944. Guevara, 98 Phil. 249, that the presentation and probate of a will are
requirements of public policy, being primarily designed to protect the
As to the first point, oppositors-appellants contend that the order
testator’s expressed wishes, which are entitled to respect as a
allowing the will to probate should be considered interlocutory, because
consequence of the decedent’s ownership and right of disposition within
it fails to resolve the issues of estoppel and revocation propounded in
legal limits. Evidence of it is the duty imposed on a custodian of a will to
their opposition. We agree with the Court of Appeals that the
deliver the same to the Court, and the fine and imprisonment
appellant’s stand is untenable. It is elementary that a probate decree
prescribed for its violation (Revised Rule 75). It would be a non
finally and definitively settles all questions concerning capacity of the
sequitur to allow public policy to be evaded on the pretext of estoppel.
testator and the proper execution and witnessing of his last will and
Whether or not the order overruling the allegation of estoppel is still
testament, irrespective of whether its provisions are valid and
appealable or not, the defense is patently unmeritorious and the Court
enforceable or otherwise. (Montañano vs. Suesa, 14 Phil. 676; Mercado
of Appeals correctly so ruled.
vs. Santos, 66 Phil. 215; Trillana vs. Crisostomo, 89 Phil. 710). As such,
the probate order is final and appealable; and it is so recognized by The last issue, that of revocation, is predicated on paragraph 2 of
express provisions of Section 1 of Rule 109, that specifically prescribes Article 957 of the Civil Code of 1950 (Art. 869 of the Code of 1889),
that “any interested person may appeal in special proceedings from an which recites:
order or judgment xxx where such order or judgment: (a) allows or
“ART. 957. The legacy or devise shall be without effect:
disallows a will.”
(1) xxxx
Appellants argue that they were entitled to await the trial Court’s
resolution on the other grounds of their opposition before taking an (2) If the testator by any title or for any cause alienates the thing
appeal, as otherwise there would be a multiplicity of recourses to the bequeathed or any part thereof, it being understood that in the latter
higher Courts. This contention is without weight, since Rule 109, case the legacy or devise shall be without effect only with respect to the
section 1, expressly enumerates six different instances when appeal part thus alienated. If after the alienation the thing should again belong
may be taken in special proceedings. 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
There being no controversy that the probate decree of the Court
shall have been effected by virtue of the exercise of the right of
below was not appealed on time, the same had become final and
repurchase ;
conclusive. Hence, the appellate courts may no longer revoke said
decree nor review the evidence upon which it is made to rest. Thus, the XXX X.”
appeal belatedly lodged against the decree was correctly dismissed.
It is well to note that, unlike in the French and Italian Codes, the basis
The alleged revocation implied from the execution of the deeds of of the quoted provision is a presumed change of intention on the part of
conveyance in favor of the testamentary heir is plainly irrelevant to and the testator. As pointed out by Manresa in his Commentaries on Article
separate from the question of whether the testament was duly executed. 869 of the Civil Code (Vol. 6, 7th Ed., p. 743)—
For one, if the will is not entitled to probate, or its probate is denied, all
questions of revocation become superfluous: in law, there is no such will

74
 “Este caro so funda en ‘a prcsunta voluntad del testador. Si este, can not be taken in an absolute sense.2 Certainly, it could not be
despues de legar, se dcsprcnde de la cosa por título lucrativo a oneroso, maintained, for example, that if a testator’s subsequent alienation were
hace desaparecer su derecho sobra ella, dando lugar a la presuncion de avoided because the testator was mentally deranged at the time, the
que ha cambiado de voluntad, y no quiere que el legado se cumpla. Mas revocatory effect ordained by the article should still ensue. And the
para que pueda presumirse esa voluntad, es necesario que medien actos same thing could be said if the alienation (posterior to the will) were
del testador que la indiquen. Si la perdida del derecho sobre la cosa ha avoided on account of physical or mental duress. Yet, an alienation
sido independiente de la voluntad del testador, el legado podra quedar through undue influence in no way differs from one made through
sin efecto, mas no en virtud del numero 2 del articulo 869, que exige violence or intimidation. In either case, the transferor is not expressing
siempre actos voluntarios de enajenacion por parte del mismo testador.” 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.
As observed by the Court of Appeals, the existence oi any such
change or departure from the original intent of the testatrix, expressed In view of the foregoing considerations, the appealed decision of the
in her 1930 testament, is rendered doubtful by the circumstance that Court of Appeals is hereby affirmed. Costs against appellants Reyes and
the subsequent alienations in 1943 and 1944 were executed in favor of Fernandez. So ordered.
the legatee herself, appellee Dimagiba. In fact, as found by the Court of
Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fern
Appeals in its decision annulling these conveyances (affirmed in that
ando, JJ., concur.
point by this Supreme Court in Reyes vs. Court of Appeals and
Dimagiba, L-5618 and L-5620, promulgated on July 31, 1954), “no Concepcion, CJ. and Bengzon, J.P., J., are on official leave, did
consideration whatever was paid by respondent Dimagiba” on account of not take part.
the transfers, thereby rendering it even more doubtful whether in
Decision affirmed.
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. 1Revocation 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”

75
 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.
Appeals; Evidence; 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.—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.
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.
Notarial Law; Sales; The fact that a deed of sale was notarized is
not a guarantee of the validity of its contents.—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: 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.
Estate Proceedings; Succession; Parties; Judgments; Res
Judicata; The estate of a deceased person is a juridical entity that has a
personality of its own; Judgment in a case binds only the parties therein
and not the estate of a deceased person which might have been
represented at one time by one of the parties.—The estate of a deceased
person is a juridical entity that has a personality of its own. 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.
76
Obligations and Contracts; Indivisible Obligations; 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 and indivisibility
cannot be based on the number of obligors.—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. 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.
Same; The validity of a contract can be questioned by anyone
affected by it.—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. 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.
Same; Trusts; Donations; Succession; Collation; There is an
implied trust when a donation is made to a person but it appears that
though the legal estate is transmitted to the donee, he nevertheless is
either to have no beneficial interest or only a part thereof. Property
received by compulsory heirs from the decedent under an implied trust is
subject to collation.—It cannot be denied that Maximino, Sr. intended to
give the six Quezon City lots to Natividad. As Romeo testified, their
parents executed the Deed of Sale in favor of Natividad because the
latter was the only “female and the only unmarried member of the
family.” She was thus entrusted with the real properties in behalf of her
siblings. As she herself admitted, she intended to convey Lots 10 and 11
to Jose in the event the latter returned from abroad. There was thus an
implied trust constituted in her favor. Art. 1449 of the Civil Code states:
There, is also an implied trust when a donation is made to a person but
it appears that although the legal estate is transmitted to the donee, he
nevertheless is either to have no beneficial interest or only a part
thereof.There being an implied trust, the lots in question are therefore
subject to collation in accordance with Art. 1061 which states: Every
compulsory heir, who succeeds with other compulsory heirs, must bring
into the mass of the estate any property or right which he may have
received from the decedent, during the lifetime of the latter, by way of
donation, or any other gratuitous title, in order that it may be computed
in the determination of the legitime of each heir, and in the account of
the partition.
Land Titles; Sales; Innocent Purchaser for Value; The rule is settled
that “every 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.”—As held by the trial court, the sale of Lots 13 and 14 to
RosAlva Marketing, Corp. on April 20, 1979 will have to be upheld for
RosAlva Marketing is an innocent purchaser for value which relied on
the title of Natividad. The rule is settled that “every 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.”
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Roman C. Cabading for petitioners.
Fortun, Narvasa & Salazar for respondents.
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
77
Regional Trial Court of Naic, Cavite. Romeo was appointed
administrator of his father’s 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. 26’E., 1156.22 m. from B.L.L.M. 9, Quezon City,
thence N. 79 deg. 53’E., 12.50 m. to point 2;
thence S. 10 deg. 07’E., 40.00 m. to point 3;
thence S. 79 deg. 53’W., 12.50 m. to point 4;
thence N. 10 deg. 07’W., 40.00 m. to the point
of beginning; containing an area of FIVE HUNDRED (500) SQUARE
METERS. All points referred to are indicated on the plan and are
marked on the ground as follows: points “1” and “4” by P.L.S. Cyl. Cone.
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. 132019”
“A parcel of land (Lot 3, Block 93 of the subdivision plan Psd-57970
being a portion of Lot 6, Pcs-4786, G.L.R.O. Rec. No. 917) situated in
Quirino District Quezon City. Bounded on the NW., along line 1-2, by
Lot 1, Block 93; on the NE., along line 2-3, by Road Lot 101; on the SE.,
along line 3-4, by Road Lot 100; on the SW., along line 4-1, by Lot 4,
Block 93; all of the subdivision plan. Beginning at point marked “1” on
plan, being S. 65 deg. 40’ 3339.92 m. from B.L.L.M. No. 1, Marikina,
Rizal;
thence N. 23 deg. 28 min. E., 11.70 m. to point “2”;
thence S. 66 deg. 32 min. E., 18.00 m. to point “3”;
thence S. 23 deg. 28 min. W., 11.70 m. to point “4”;
thence N. 66 deg. 32 min. W., 18.00 m. to the point
of beginning; containing an area of TWO HUNDRED TEN SQUARE
METERS AND SIXTY SQUARE DECIMETERS (210.60). All points
referred to are indicated on the plan and are marked on the ground by
B.L. Cyl. Cone. Mons. 15 x 60 cm.; bearings true; date of the original
survey, Nov. 10, 1920 and Jan. 31-March 31, 1924 and that of the
subdivision survey, February 1 to September 30, 1954. Date approved—
March 9, 1962.”
“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. 26’W.,
4269.90 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
thence S. 25 deg. 00’E., 12.00 m. to point “2”;
thence S. 64 deg. 59’W., 29.99 m. to point “3”;
thence N. 25 deg. 00’W., 12.00 m. to point “4”;
thence N. 64 deg. 59’E., 29.99 m. to the point of
78
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. Cone.
Mons. 15 x 60 cm.; bearings true; declination 0 deg. 50’E., date of the
original survey, April 8 to July 15, 1920, and that of the consolidation
and subdivision survey, April 24 to 26, 1941.”
“TRANS. CERT. OF TITLE NO. 118886”
“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, 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. 12 of the consolidation and
subdivision plan; on the SW., by Lot No. 3 of the consolidation and
subdivision plan; on the NW., by Lot No. 10 of the consolidation and
subdivision plan. Beginning at a point marked “1” on plan, being S. 79
deg. 07’W., 4264.00 m. more or less from B.L.L.M. No. 1, Mp. of
Mariquina;
thence S. 64 deg. 59’W., 29.99 m. to point “2”;
thence N. 25 deg. 00’W., 12.00 m. to point “3”;
thence N. 64 deg. 59’E., 29.99 m. to point “4”;
thence S. 26 deg. 00’E., 12.00 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. Cone.
Mons. 15 x 60 cm.; bearings true; declination 0 deg. 50’E.; 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. 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. 48’W., 4258.20 m. more or less from B.L.L.M. No. 1, Mp. of
Mariquina;
 thence S. 64 deg. 58’W., 30.00 m. to point “2”;
thence N. 25 deg. 00’W., 12.00 m. to point “3”;
thence N. 64 deg. 59’E., 29.99 m. to point “4”;
thence S. 25 deg. 00’E., 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. Cone.
Mons. 15 x 60 cm.; bearings true; declination 0 deg. 50’E., 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. 48’W., 4258.20 m. more or less from B.L.L.M. No. 1, Mp. of
Mariquina;
thence S. 25 deg. 00’E., 12.00 m. to point “2”;
thence S. 65 deg. 00’W., 30.00 m. to point “3”;
thence S. 65 deg. 00’W., 12.00 m. to point “4”;
thence N. 64 deg. 58’E., 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. Cone. Mons. 15 x 60 cm.;
bearings true; declination 0 deg. 50’E., 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
79
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),3TCT No. 162739 (Lot
3),4 TCT No. 162735 (Lot 10),5TCT 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 of possession 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. 1.Romeo—Lot 25-L (642 m2)
2. 2.Natividad—Lots 23 (312 m2) and 24 (379 m2)
3. 3.Maximino, Jr.—Lots 6 (338 m2) and 7 (338 m2)
4. 4.Pacifico—Lots 13 (360 m2) and 14 (360 m2)
5. 5.Jose—Lots 10 (360 m2) and 11 (360 m2)
Romeo received the title to Lot 25-L under his name,14while 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 Jose’s 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. Natividad’s share, on the other
hand, was sold to third persons16 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.
80
Romeo also testified that Lot 3-B was bought for him by his father,
while Lot 3 was 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 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 latter’s 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 then-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 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 against him by Maximino, Jr. It appears that
before the case filed by Romeo could be decided, the Court of Appeals
rendered a decision in CA-GR CV No. 12932 affirming the trial court’s
decision in favor of Maximino, Jr.
On August 10, 1992, the trial court rendered a decision, the
dispositive portion of which states:
WHEREFORE, judgment is hereby rendered declaring the nullity of the Nazareno) and Lot 3-B (in the name of Maximino Nazareno, Jr.), as well
Deed of Sale dated January 29, 1970. Except as to Lots 3, 3-B, 13 and 14 as to Lots 10 and 11 were cancelled and ordered restored to the estate of
which had passed on to third persons, the defendant Natividad shall Maximino Nazareno, Sr. The dispositive portion of the decision dated
hold the rest in trust for Jose Nazareno to whom the same had been May 29, 1998 reads:
adjudicated. The Register of Deeds of Quezon City is directed to
WHEREFORE, the appeal is GRANTED. The decision and the order in
annotate this judgment on Transfer Certificate of Titles Nos. 162735
question are modified as follows:
and 162736 as a lien in the titles of Natividad P. Nazareno.
1. 1.The Deed of Absolute Sale dated 29 January 1970 and the
The defendants’ counterclaim is dismissed. Likewise, the third-party
Deed of Absolute Sale dated 31 July 1982 are hereby declared
complaint is dismissed.
null and void;
The defendants are hereby directed to pay to the plaintiff jointly and
2. 2.Except as to Lots 13 and 14 ownership of which has passed on
severally the sum of P30,000.00 as and for attorney’s fees. Likewise, the
to third persons, it is hereby declared that Lots 3, 3-B, 10 and
third-party plaintiff is directed to pay the third-party defendant’s
11 shall form part of the estate of the deceased Maximino
attorney’s fees of P20,000.00.
Nazareno, Sr.;
All other claims by one party against the other are dismissed.
3. 3.The Register of Deeds of Quezon City is hereby ordered to
SO ORDERED.21 restore TCT No. 140946 (covering Lot 3-B), TCT No. 132019
(covering Lot 3), TCT No. 118885 (covering Lot 10), and TCT
Natividad and Maximino, Jr. filed a motion for reconsideration. As a
No. 118886 (covering Lot 11).23
result, on October 14, 1992 the trial court modified its decision as
follows: Petitioners filed a motion for reconsideration but it was denied in a
resolution dated May 27, 1999. Hence this petition.
WHEREFORE, the plaintiff’s Partial Motion for
Reconsideration is hereby granted. The judgment dated August l0, 1992 Petitioners raise the following issues:
is hereby amended, such that the first paragraph of its dispositive
1. 1.WHETHER OR NOT THE UNCORROBORATED
portion is correspondingly modified to read as follows:
TESTIMONY OF PRIVATE RESPONDENT ROMEO P.
“WHEREFORE, judgment is hereby rendered declaring the nullity of NAZARENO CAN DESTROY THE FULL FAITH AND
the Deeds of Sale dated January 29, 1970 and July 31, 1982. CREDIT ACCORDED TO NOTARIZED DOCUMENTS LIKE
THE DEED OF ABSOLUTE SALE DATED JANUARY 29,
“Except as to Lots 3, 13 and 14 which had ‘passed on to third person,
1970 (EXH. 1) EXECUTED BY THE DECEASED SPOUSES
the defendant Natividad shall hold the rest OF THE PROPERTIES
MAXIMINO A. NAZARENO, SR. AND AUREA POBLETE IN
COVERED BY THE DEED OF SALE DATED JANUARY 29, 1970
FAVOR OF PETITIONER NATIVIDAD P. NAZARENO.
(LOTS 10 and 11) in trust for Jose Nazareno to whom the same had
been adjudicated. 1. 2.WHETHER OR NOT THE RESPONDENT COURT GROSSLY
MISAPPRECIATED THE FACTS OF THE CASE WITH
“The Register of Deeds of Quezon City is directed to annotate this
RESPECT TO THE VALIDITY OF THE SAID DEED OF
judgment on Transfer Certificates of Title No. 162735 and 162736 as a
ABSOLUTE SALE DATED JANUARY 29, 1970 (EXH. 1) IN
lien on the titles of Natividad P. Nazareno.
THE LIGHT OF THE FOLLOWING:
“LIKEWISE, THE SAID REGISTER OF DEEDS IS DIRECTED TO
1. A)THE DOCUMENTARY EVIDENCE, ALL OF WHICH ARE
CANCEL TCT NO. 293701 (formerly 162705) OVER LOT 3-B AND
NOTARIZED, EXECUTED BY THE DECEASED SPOUSES
RESTORE TCT NO. 140946 IN THE NAME OF MAXIMINO
DURING THEIR LIFETIME INVOLVING SOME OF THEIR
NAZARENO, SR. AND AUREA POBLETE.”22
CONJUGAL PROPERTIES.
On appeal to the Court of Appeals, the decision of the trial court was
modified in the sense that titles to Lot 3 (in the name of Romeo

81
2. B)THE EXECUTION OF AN EXTRAJUDICIAL PARTITION DEATH, THE ESTATE OF MAXIMINO A. NAZARENO, SR.
WITH WAIVER OF RIGHTS AND CONFIRMATION OF ALONE CAN SEEK THE ANNULMENT OF SAID SALE?
SALE DATED MAY 24, 1975 (EXH. 14A) OF THE ESTATE
2. 4.WHETHER OR NOT THE SALE OF LOT 3 UNDER THE
OF AUREA POBLETE BY THE DECEASED MAXIMINO A.
DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970 IN
NAZARENO, SR. AND THEIR CHILDREN INVOLVING THE
FAVOR OF PETITIONER NATIVIDAD P. NAZARENO, IS
ONLY REMAINING ESTATE OF AUREA POBLETE THUS
VALID CONSIDERING THAT AS PER THE ORDER OF THE
IMPLIEDLY ADMITTING THE VALIDITY OF PREVIOUS
LOWER COURT DATED NOVEMBER 21, 1990. ROMEO
DISPOSITIONS MADE BY SAID DECEASED SPOUSES ON
NAZARENO ADMITTED THAT HE DID NOT PAY THE
THEIR CONJUGAL PROPERTIES, HALF OF WHICH
CONSIDERATION STATED IN THE DEED OF ABSOLUTE
WOULD HAVE BECOME A PART OF AUREA POBLETE’S
SALE DATED JULY 4, 1969 EXECUTED BY THE
ESTATE UPON HER DEMISE.
DECEASED SPOUSES IN HIS FAVOR (EXH. M-2).
3. C)THE ADMISSION MADE BY MAXIMINO A. NAZARENO,
3. 5.WHETHER OR NOT AS A CONSEQUENCE, THE TITLE
SR. IN HIS TESTIMONY IN OPEN COURT ON AUGUST 13,
ISSUED IN THE NAME OF ROMEO P. NAZARENO, TCT
1980 DURING HIS LIFETIME IN CIVIL CASE NO. NC-
NO. 277968 (EXH. M) SHOULD BE CANCELLED AND
712 (EXH. 81, 81B) THAT HE HAD SOLD CERTAIN
DECLARED NULL AND VOID AND A NEW ONE ISSUED
PROPERTIES IN FAVOR OF NATIVIDAD P. NAZARENO
IN FAVOR OF NATIVIDAD P. NAZARENO PURSUANT TO
THUS BELYING THE CLAIM OF ROMEO P. NAZARENO
THE DEED OF ABSOLUTE SALE EXECUTED IN THE
THAT THE DEED OF ABSOLUTE SALE DATED JANUARY
LATTER’S FAVOR ON JANUARY 29, 1970 BY THE
29, 1970 IS ONE AMONG THE DOCUMENTS EXECUTED
DECEASED SPOUSES.24
BY THE DECEASED SPOUSES TO BE WITHOUT
CONSIDERATION. We find the petition to be without merit.
4. D)THE ADMISSIONS MADE BY ROMEO P. NAZARENO First. Petitioners argue that the lone testimony of Romeo is
HIMSELF CONTAINED IN A FINAL DECISION OF THE insufficient to overcome the presumption of validity accorded to a
RESPONDENT COURT IN CA-GR CV NO. 12932 DATED notarized document.
AUGUST 31, 1992 AND AN ANNEX APPEARING IN HIS
To begin with, the findings of fact of the Court of Appeals are
ANSWER TO THE COMPLAINT IN CIVIL CASE NO. Q-
conclusive on the parties and carry even more weight when these
39018(EXH. 11-B) INVOLVING LOT 3B, ONE OF THE
coincide with the factual findings of the trial court. This Court will not
PROPERTIES IN QUESTION THAT THE SAID PROPERTY
weigh the evidence all over again unless there is a showing that the
IS OWNED BY PETITIONER NATIVIDAD P. NAZARENO.
findings of the lower court are totally devoid of support or are clearly
1. E)THE PARTIAL PROJECT OF PARTITION DATED MAY 24, erroneous so as to constitute serious abuse of discretion.25 The lone
1995 WHICH WAS APPROVED BY THE INTESTATE testimony of a witness, if credible, is sufficient. In this case, the
COURT IN SP. PROC. NO. NC-28 AND EXECUTED IN testimony of Romeo that no consideration was ever paid for the sale of
ACCORDANCE WITH THE LATTER COURTS FINAL the six lots to Natividad was found to be credible both by the trial court
ORDER DATED JULY 9, 1991 DETERMINING WHICH and by the Court of Appeals and it has not been successfully rebutted by
WERE THE REMAINING PROPERTIES OF THE ESTATE. petitioners. We, therefore, have no reason to overturn the findings by
the two courts giving credence to his testimony.
1. 3.WHETHER OR NOT THE DEED OF ABSOLUTE SALE
DATED JANUARY 29, 1970 EXECUTED BY THE The fact that the deed of sale was notarized is not a guarantee of the
DECEASED SPOUSES MAXIMINO A. NAZARENO, SR. AND validity of its contents. As held in Suntay v. Court of Appeals:26
AUREA POBLETE DURING THEIR LIFETIME INVOLVING
Though the notarization of the deed of sale in question vests in its favor
THEIR CONJUGAL PROPERTIES IS AN INDIVISIBLE
the presumption of regularity, it is not the intention nor the function of
CONTRACT? AND IF SO WHETHER OR NOT UPON THEIR
the notary public to validate and make binding an instrument never, in

82
the first place, intended to have any binding legal effect upon the To be sure, that case was for recovery of possession based on ownership
parties thereto. The intention of the parties still and always is the of Lot 3-B. The parties in that case were Maximino, Jr., as plaintiff, and
primary consideration in determining the true nature of a contract. 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
Second. Petitioners make capital of the fact that in C.A.-G.R. CV No.
Maximino, Sr., as plaintiff, and Natividad and Maximino, Jr., as
12932, which was declared final by this Court in G.R. No. 107684, the
defendants. Romeo and Eliza were named third-party defendants after
Court of Appeals upheld the right of Maximino, Jr. to recover possession
a third-party complaint was filed by Natividad and Maximino, Jr. As
of Lot 3-B. In that case, the Court of Appeals held:
already stated, however, this third-party complaint concerned Lot 3,
As shown in the preceding disquisition, Natividad P. Nazareno acquired and not Lot 3-B.
the property in dispute by purchase in 1970. She was issued Transfer
The estate of a deceased person is a juridical entity that has a
Certificate of Title No. 162738 of the Registry of Deeds of Quezon City.
personality of its own.28 Though Romeo represented at one time the
When her parents died, her mother Aurea Poblete-Nazareno in 1970
estate of Maximino, Sr., the latter has a separate and distinct
and her father Maximino A. Nazareno, Sr. in 1980, Natividad P.
personality from the former. Hence, the judgment in CA-GR CV No.
Nazareno had long been the exclusive owner of the property in question.
12932 regarding the ownership of Maximino, Jr. over Lot 3-B binds
There was no way therefore that the aforesaid property could belong to
Romeo and Eliza only, and not the estate of Maximino, Sr., which also
the estate of the spouses Maximino Nazareno, Sr. and Aurea Poblete.
has a right to recover properties which were wrongfully disposed.
The mere fact that Romeo P. Nazareno included the same property in
an inventory of the properties of the deceased Maximino A. Nazareno, Furthermore, Natividad’s title was clearly not an issue in the first
Sr. will not adversely affect the ownership of the said realty. Appellant case. In other words, the title to the other five lots subject of the present
Romeo P. Nazareno’s suspicion that his parents had entrusted all their deed of sale was not in issue in that case. If the first case resolved
assets under the care and in the name of Natividad P. Nazareno, their anything, it was the ownership of Maximino, Jr. over Lot 3-B alone.
eldest living sister who was still single, to be divided upon their demise
Third. Petitioners allege that, as shown by several deeds of sale
to all the compulsory heirs, has not progressed beyond mere
executed by Maximino, Sr. and Aurea during their lifetime, the
speculation. His barefaced allegation on the point not only is without
intention to dispose of their real properties is clear. Consequently, they
any corroboration but is even belied by documentary evidence. The deed
argue that the Deed of Sale of January 29, 1970 should also be deemed
of absolute sale (Exhibit “B”), being a public document (Rule 132, Secs.
valid.
19 and 23, Revised Rules on Evidence), is entitled to great weight; to
contradict the same, there must be evidence that is clear, convincing This is a non-sequitur. The fact that other properties had allegedly
and more than merely preponderant (Yturralde vs. Aganon, 28 SCRA been sold by the spouses Maximino, Sr. and Aurea does not necessarily
407; Favor vs. Court of Appeals, 194 SCRA 308). Defendants-appellants’ show that the Deed of Sale made on January 29, 1970 is valid.
own conduct disproves their claim of co-ownership over the property in
Romeo does not dispute that their parents had executed deeds of
question. Being themselves the owner of a ten-unit apartment building
sale. The question, however, is whether these sales were made for a
along Stanford St., Cubao Quezon City, defendants-appellants, in a
consideration. The trial court and the Court of Appeals found that the
letter of demand to vacate addressed to their tenants (Exhibits “P,” “P-
Nazareno spouses transferred their properties to their children by
1” and “P-2”) in said apartment, admitted that the house and lot located
fictitious sales in order to avoid the payment of inheritance taxes.
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 Indeed, it was found both by the trial court and by the Court of
subject property in 1977, they stated that the property belonged to and Appeals that Natividad had no means to pay for the six lots subject of
was registered in the name of Natividad P. Nazareno. Among the the Deed of Sale.
documents submitted to support their application for a building permit
All these convince the Court that Natividad had no means to pay for all
was a copy of TCT No. 162738 of the Registry of Deeds of Quezon City in
the lots she purportedly purchased from her parents. What is more,
the name of Natividad Nazareno (Exhibit “O” and submarkings; tsn
Romeo’s admission that he did not pay for the transfer to him of lots 3
March 15, 1985, pp. 4-5).27
and 25-L despite the considerations stated in the deed of sale is a

83
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. 32In
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.
84
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 was void for having been
simulated. Natividad never acquired ownership over the property
because the Deed of Sale in her favor is also void for being without
consideration and title to Lot 3 cannot be issued in her name.
Nonetheless, it cannot be denied that Maximino, Sr. intended to give
the six Quezon City lots to Natividad. As Romeo testified, their parents
executed the Deed of Sale in favor of Natividad because the latter was
the only “female and the only unmarried member of the family.” 34 She
was thus entrusted with the real properties in behalf of her siblings. As
she herself admitted, she intended to convey Lots 10 and 11 to Jose in
the event the latter returned from abroad. There was thus an implied
trust constituted in her favor. Art. 1449 of the Civil Code states:
There, is also an implied trust when a donation is made to a person but
it appears that although the legal estate is transmitted to the donee, he
nevertheless is either to have no beneficial interest or only a part
thereof.
There being an implied trust, the lots in question are therefore subject
to collation in accordance with Art. 1061 which states:
Every compulsory heir, who succeeds with other compulsory heirs, must
bring into the mass of the estate any property or right which he may
have received from the decedent, during the lifetime of the latter, by
way of donation, or any other gratuitous title, in order that it may be
computed in the determination of the legitime of each heir, and in the
account of the partition.
As held by the trial court, the sale of Lots 13 and 14 to Ros-Alva
Marketing, Corp. on April 20, 197935 will have to be upheld for RosAlva
Marketing is an innocent purchaser for value which relied on the title of
Natividad. The rule is settled that “every 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
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Bellosillo (Chairman), Quisumbing and De Leon, Jr., JJ.,
concur.
Buena, J., No part.
Judgment affirmed.
Notes.—Documents acknowledged before a notary public have in
their favor the presumption of regularity, and to contradict the same,
there must be evidence that is clear, convincing and more than merely
preponderant. (Salame vs. Court of Appeals,239 SCRA 356 [1994])
Contradiction between a witness and the Notary Public who
notarized the purported instrument casts doubt on the credibility of the
former as it is ostensible that his or her version of the story is concocted.
(Lustan vs. Court of Appeals, 266 SCRA 663 [1997])
Collation contemplated under Article 1061 of the Civil Code
contemplates properties conveyed inter vivos by the decedent to an heir
by way of donation or other gratuitous title. (Sanchez vs. Court of
Appeals, 279 SCRA 647 [1997])

85
 G.R. No. 165748. September 14, 2011.* and HEIRS OF POLICRONIO B. URETA, JR., namely: MIGUEL T.
URETA, RAMON POLICRONIO T. URETA, EMMANUEL T. URETA,
HEIRS OF POLICRONIO M. URETA, SR., namely: CONRADO B.
and BERNADETTE T. URETA, respondents.
URETA, MACARIO B. URETA, GLORIA URETA-GONZALES,
ROMEO B. URETA, RITA URETA-SOLANO, NENA URETA-
TONGCUA, VENANCIO B. URETA, LILIA URETA-TAYCO, and
Civil Law; Contracts; Void Contracts; Simulated Contracts; In
HEIRS OF POLICRONIO B. URETA, JR., namely: MIGUEL T.
absolute simulation, there is a colorable contract but it has no substance
URETA, RAMON POLICRONIO T. URETA, EMMANUEL T. URETA,
as the parties have no intention to be bound by it; The main
and BERNADETTE T. URETA, petitioners, vs. HEIRS OF LIBERATO
characteristic of an absolute simulation is that the apparent contract is
M. URETA, namely: TERESA F. URETA, AMPARO URETA-
not really desired or intended to produce legal effect or in any way alter
CASTILLO, IGNACIO F. URETA, SR., EMIRITO F. URETA, WILKIE
the juridical situation of the parties—lacking in an absolutely simulated
F. URETA, LIBERATO F. URETA, JR., RAY F. URETA, ZALDY F.
contract is consent which is essential to a void and enforceable
URETA, and MILA JEAN URETA CIPRIANO; HEIRS OF
contract.—Valerio v. Refresca, 485 SCRA 494 (2006), is instructive on
PRUDENCIA URETA PARADERO, namely: WILLIAM U. PARADERO,
the matter of simulation of contracts: In absolute simulation, there is a
WARLITO U. PARADERO, CARMENCITA P. PERLAS, CRISTINA P.
colorable contract but it has no substance as the parties have no
CORDOVA, EDNA P. GALLARDO, LETICIA P. REYES; NARCISO M.
intention to be bound by it. The main characteristic of an absolute
URETA; VICENTE M.URETA; HEIRS OF FRANCISCO M. URETA,
simulation is that the apparent contract is not really desired or
namely: EDITA T. URETA-REYES and LOLLIE T. URETA-
intended to produce legal effect or in any way alter the juridical
VILLARUEL; ROQUE M. URETA; ADELA URETA-GONZALES;
situation of the parties. As a result, an absolutely simulated or fictitious
HEIRS OF INOCENCIO M. URETA, namely: BENILDA V. URETA,
contract is void, and the parties may recover from each other what they
ALFONSO V. URETA II, DICK RICARDO V. URETA, and ENRIQUE
may have given under the contract. However, if the parties state a false
V. URETA; MERLINDA U. RIVERA; JORGE URETA; ANDRES
cause in the contract to conceal their real agreement, the contract is
URETA, WENEFREDA U. TARAN; and BENEDICT URETA,
relatively simulated and the parties are still bound by their real
respondents.
agreement. Hence, where the essential requisites of a contract are
G.R. No. 165930. September 14, 2011.* present and the simulation refers only to the content or terms of the
contract, the agreement is absolutely binding and enforceable between
HEIRS OF LIBERATO M. URETA, namely: TERESA F. URETA,
the parties and their successors in interest. Lacking, therefore, in an
AMPARO URETA-CASTILLO, IGNACIO F. URETA, SR., EMIRITO F.
absolutely simulated contract is consent which is essential to a valid
URETA, WILKIE F. URETA, LIBERATO F. URETA, JR., RAY F.
and enforceable contract. Thus, where a person, in order to place his
URETA, ZALDY F. URETA, and MILA JEAN URETA CIPRIANO;
property beyond the reach of his creditors, simulates a transfer of it to
HEIRS OF PRUDENCIA URETA PARADERO, namely: WILLIAM U.
another, he does not really intend to divest himself of his title and
PARADERO, WARLITO U. PARADERO, CARMENCITA P. PERLAS,
control of the property; hence, the deed of transfer is but a sham.
CRISTINA P. CORDOVA, EDNA P. GALLARDO, LETICIA P. REYES;
Similarly, in this case, Alfonso simulated a transfer to Policronio purely
NARCISO M. URETA; VICENTE M. URETA; HEIRS OF FRANCISCO
for taxation purposes, without intending to transfer ownership over the
M. URETA, namely: EDITA T. URETA-REYES and LOLLIE T.
subject lands.
URETA-VILLARUEL; ROQUE M. URETA; ADELA URETA-
GONZALES; HEIRS OF INOCENCIO M. URETA, namely: BENILDA Same; Same; Same; Same; The primary consideration in determining
V. URETA, ALFONSO V. URETA II, DICK RICARDO V. URETA, and the true nature of a contract is the intention of the parties—if the words
ENRIQUE V. URETA; MERLINDA U. RIVERA; JORGE URETA; of a contract appear to contravene the evident intention of the parties, the
ANDRES URETA, WENEFREDA U. TARAN; and BENEDICT URETA, latter shall prevail.—The primary consideration in determining the true
petitioners, vs. HEIRS OF POLICRONIO M. URETA, SR., namely: nature of a contract is the intention of the parties. If the words of a
CONRADO B. URETA, MACARIO B. URETA, GLORIA URETA- contract appear to contravene the evident intention of the parties, the
GONZALES, ROMEO B. URETA, RITA URETA-SOLANO, NENA latter shall prevail. Such intention is determined not only from the
URETA-TONGCUA, VENANCIO B. URETA, LILIA URETA-TAYCO, express terms of their agreement, but also from the contemporaneous

86
and subsequent acts of the parties. 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 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.
Same; Same; Same; Same; 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.—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. Policronio’s 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.
Same; Same; Same; Same; Fundamental Characteristics of Void or
Inexistent Contracts.—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.
Same; Same; Same; 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.—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. Thus, although the contract states that the purchase
price of P2,000.00 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.
Pleadings; Practice and Procedure; Objection to Admission of
Evidence; The objection against the admission of any evidence must be
87
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.—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. 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.
Parol Evidence; The exception in paragraph (b), Sec. 9, Rule 130 of
the Rules of Court—failure of the written agreement to express the true
intent and agreement of the parties thereto—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.—
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 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. 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.
Same; The operation of the parol evidence rule requires the existence of a
valid written agreement—it is 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.—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. 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. 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.
Hearsay Evidence Rule; While hearsay evidence whether objected to
or not cannot be given credence for having no probative value, such
principle 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.—It has indeed been held that hearsay evidence
whether objected to or not cannot be given credence for having no
probative value. 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., 138 SCRA 118 (1985), 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.
Civil Law; Contracts; Void Contracts; Simulated Contracts; Rescission;
A simulated contract of sale is without any cause or consideration, and
is, therefore, null and void—no independent action to rescind or annul
the contract is necessary, and it may be treated as non-existent for all
purposes.—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. 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. 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.
Same; Same; Same; Same; 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; Where a contract is absolutely
simulated, even third persons who may be prejudiced thereby may set up
its inexistence.—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
88
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. The Heirs of
Alfonso are the children of Alfonso, with his deceased children
represented by their children (Alfonso’s 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.
Same; Same; Same; Same; Wills and Succession; Art. 842 of the
Civil Code refers to the principle of freedom of disposition by will and
has no application to a disposition by Deed of Sale.—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.
Same; Same; Same; Same; Article 1412 of the Civil Code refers to
contracts with an illegal cause or subject-matter, presupposing the
existence of a cause—it is not applicable to fictitious or simulated
contracts which are in reality non-existent.—Article 1412 is not
applicable to fictitious or simulated contracts, because they refer to
contracts with an illegal cause or subject-matter. This article
presupposes the existence of a cause, it cannot refer to fictitious or
simulated contracts which are in reality non-existent. As it has been
determined that the Deed of Sale is a simulated contract, the provision
cannot apply to it.
Same; Same; Same; Same; Prescription; Waiver; Where 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; The right to set up the defense of inexistence or absolute
nullity cannot be waived or renounced.—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. 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.
Therefore, the Heirs of Alfonso cannot be precluded from setting up the
defense of its inexistence.
Appeals; Pleadings, Practice and Procedure; 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.—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.
Succession; Partition; Extra-Judicial Partition; Special Power of
Attorney; 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; Since a Deed of
Extra-Judicial Partition cannot be considered as an act of strict
dominion, a special power of attorney is not necessary.—This Court finds
that Article 1878 (5) and (15) is inapplicable to the case at bench. It has
been held in several cases 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.
89
Same; Preterition; Words and Phrases; Preterition is the total
omission of a compulsory heir from the inheritance—it consists in the
silence of the testator with regard to a compulsory heir, omitting him in
the testament, either by not mentioning him at all, or by not giving him
anything in the hereditary property but without expressly disinheriting
him, even if he is mentioned in the will in the latter case.—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, omitting him in the testament, either by not
mentioning him at all, or by not giving him anything in the hereditary
property but without expressly disinheriting him, even if he is
mentioned in the will in the latter case. 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.
PETITIONS for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
SV Ramos Law Office for Heirs of Policronio M. Ureta, Sr., et al.
Ma. Regina Mercedes B. Gatmaytan for Heirs of Liberato M. Ureta.
MENDOZA, J.:
These consolidated petitions for review on certiorariunder Rule 45 of
the 1997 Revised Rules of Civil Procedure assail the April 20, 2004
Decision1 of the Court of Appeals (CA), and its October 14, 2004
Resolution2 in CA-G.R. CV No. 71399, which affirmed with modification
the April 26, 2001 Decision3 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, 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
Alfonso’s 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 father’s 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 father’s 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 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,
later, to the administrators of his estate.
Policronio died on November 22, 1974. Except for the said portion of
parcel 5, neither Policronio nor his heirs ever took possession of the
subject lands.
On April 19, 1989, Alfonso’s 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, Policronio’s eldest son, representing the Heirs of
Policronio, signed the Deed of Extra-Judicial Partition in behalf of his
co-heirs.
After their father’s death, the Heirs of Policronio found tax
declarations in his name 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 Alfonso’s
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
90
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 Damages9 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,
P2,000.00 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 Conrado’s claim that
he did not understand the full significance of his signature when he
signed in behalf of his co-heirs, as a gratuitous 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 URETA’S 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.
91
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 father’s 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 RTC’s 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 capacity 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 RTC’s
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.
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
Conrado’s 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?
92
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 as follows:
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 Ureta’s 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
Extrajudicial 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 transaction’s 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 Extrajudicial
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 Alfonso’s 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 Policronio’s 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 latter’s 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 Policronio’s 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 Policronio’s 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. Refresca13 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

93
terms of the contract, the agreement is absolutely binding and xxx
enforceable between the parties and their successors in interest.”
Q: Were there documents of sale executed by Alfonso Ureta in
Lacking, therefore, in an absolutely simulated contract is consent furtherance of their verbal agreement?
which is essential to a valid and enforceable contract. 14 Thus, where a
A: Yes sir.
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 Q: To whom in particular did your grandfather Alfonso Ureta
himself of his title and control of the property; hence, the deed of execute this deed of sale without money consideration
transfer is but a sham.15 Similarly, in this case, Alfonso simulated a according to you?
transfer to Policronio purely for taxation purposes, without intending to
A: To my uncle Policronio Ureta and to Prudencia Ureta
transfer ownership over the subject lands.
Panadero.
The primary consideration in determining the true nature of a
Q: And who else?
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 A: To Valeriana dela Cruz.
prevail. Such intention is determined not only from the express terms of
Q: How about your father?
their agreement, but also from the contemporaneous and subsequent
acts of the parties.16 The true intention of the parties in this case was A: He has.18
sufficiently proven by the Heirs of Alfonso.
The Heirs of Alfonso established by a preponderance of
The other Deeds of Sale executed by Alfonso in favor of his children
evidence17 that the Deed of Sale was one of the four (4) absolutely
Prudencia and Liberato, and second wife Valeriana, all bearing the
simulated Deeds of Sale which involved no actual monetary
same date of execution, were duly presented in evidence by the Heirs of
consideration, executed by Alfonso in favor of his children, Policronio,
Alfonso, and were uncontested by the Heirs of Policronio. The lands
Liberato, and Prudencia, and his second wife, Valeriana, for taxation
which were the subject of these Deeds of Sale were in fact included in
purposes.
the Deed of ExtraJudicial Partition executed by all the heirs of Alfonso,
Amparo Castillo, the daughter of Liberato, testified, to wit: where it was expressly stipulated:
Q: Now sometime in the year 1969 can you recall if your “That the above-named Amparo U. Castillo, Prudencia U. Paradero,
grandfather and his children [met] in your house? Conrado B. Ureta and Merlinda U. Rivera do hereby recognize and
acknowledge as a fact that the properties presently declared in their
A: Yes sir, that was sometime in October 1969 when they [met]
respective names or in the names of their respective parents and are
in our house, my grandfather, my late uncle Policronio
included in the foregoing instrument are actually the properties of the
Ureta, my late uncle Liberato Ureta, my uncle Francisco
deceased Alfonso Ureta and were transferred only for the purpose of
Ureta, and then my auntie Prudencia Ureta they talk[ed]
effective administration and development and convenience in the
about, that idea came from my uncle Francisco Ureta to
payment of taxes and, therefore, all instruments conveying or affecting
[sell] some parcels of land to his children to lessen the
the transfer of said properties are null and void from the beginning.”19
inheritance tax whatever happened to my grandfather,
actually no money involved in this sale 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
Q: Now you said there was that agreement, verbal agreement.
that Alfonso remained in possession of the subject lands and enjoyed
[W]here were you when this Alfonso Ureta and his children
their produce until his death. No credence can be given to the
gather[ed] in your house?
contention of the Heirs of Policrionio that their father did not take
A: I was near them in fact I heard everything they were talking possession of the subject lands or enjoyed the fruits thereof in deference
[about] to a Filipino family practice. Had this been true, Policronio should have

94
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. Policronio’s
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 Policronio’s 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
95
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 Extrajudicial 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 P2,000.00 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
P2,000.00 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 P2,000.00
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 (P2,000.00) 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 P2,000.00 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.
96
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. 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
The failure of the Deed of Sale to express the true intent and
granting that they did not object to her testimony during trial, they
agreement of the parties was clearly put in issue in the Answer 31 of the
argued that it should not have been appreciated by the CA because it
Heirs of Alfonso to the Complaint. It was alleged that the Deed of Sale
had no probative value whatsoever.36
was only made to lessen the payment of estate and inheritance taxes
and not meant to transfer ownership. The exception in paragraph (b) is The Court disagrees.
allowed to enable the court to ascertain the true intent of the parties,
It has indeed been held that hearsay evidence whether objected to or
and once the intent is clear, it shall prevail over what the document
not cannot be given credence for having no probative value. 37 This
appears to be on its face.32 As the true intent of the parties was duly
principle, however, has been relaxed in cases where, in addition to the
proven in the present case, it now prevails over what appears on the
failure to object to the admissibility of the subject evidence, there were
Deed of Sale.
other pieces of evidence presented or there were other circumstances
The validity of the Deed of Sale was also put in issue in the Answer, prevailing to support the fact in issue. In Top-Weld Manufacturing, Inc.
and was precisely one of the issues submitted to the RTC for v. ECED S.A.,38 this Court held:
resolution.33 The operation of the parol evidence rule requires the
“Hearsay evidence alone may be insufficient to establish a fact in an
existence of a valid written agreement. It is, thus, not applicable in a
injunction suit (Parker v. Furlong, 62 P. 490) but, when no objection is
proceeding where the validity of such agreement is the fact in dispute,
made thereto, it is, like any other evidence, to be considered and given
such as when a contract may be void for lack of
the importance it deserves. (Smith v. Delaware & Atlantic Telegraph &
consideration.34 Considering that the Deed of Sale has been shown to be
Telephone Co., 51 A 464). Although we should warn of the undesirability
void for being absolutely simulated and for lack of consideration, the
of issuing judgments solely on the basis of the affidavits submitted,
Heirs of Alfonso are not precluded from presenting evidence to modify,
where as here, said affidavits are overwhelming, uncontroverted by
explain or add to the terms of the written agreement.
competent evidence and not inherently improbable, we are constrained
The Heirs of Policronio must be in a state of confusion in arguing to uphold the allegations of the respondents regarding the multifarious
that the Heirs of Alfonso may not question the Deed of Sale for not violations of the contracts made by the petitioner.”
being parties or successors-in-interest therein on the basis that the
In the case at bench, there were other prevailing circumstances which
parol evidence rule may not be properly invoked in a proceeding or
corroborate the testimony of Amparo Castillo. First, the other Deeds of
litigation where at least one of the parties to the suit is not a party or a
Sale which were executed in favor of Liberato, Prudencia, and Valeriana
privy of a party to the written instrument in question and does not base
on the same day as that of Policronio’s were all presented in
a claim on the instrument or assert a right originating in the
evidence. Second, all the properties subject therein were included in the
instrument or the relation established thereby. If their argument was to
Deed of Extra-Judicial Partition of the estate of Alfonso. Third,
be accepted, then the Heirs of Policronio would themselves be precluded
Policronio, during his lifetime, never exercised acts of ownership over
from invoking the parol evidence rule to exclude the evidence of the
the subject properties (as he never demanded or took possession of
Heirs of Alfonso.
them, never demanded or received the produce thereof, and never paid
Indeed, the applicability of the parol evidence rule requires that the real estate taxes thereon). Fourth, Policronio never informed his
case be between parties and their successors-in-interest.35 In this case, children of the sale.
both the Heirs of Alfonso and the Heirs of Policronio are successors-in-
As the Heirs of Policronio failed to controvert the evidence
interest of the parties to the Deed of Sale as they claim rights under
presented, and to timely object to the testimony of Amparo Castillo,
Alfonso and Policronio, respectively. The parol evidence rule excluding
both the RTC and the CA correctly accorded probative weight to her
evidence aliunde, however, still cannot apply because the present case
testimony.
falls under two exceptions to the rule, as discussed above.
Prior Action Unnecessary
With respect to hearsay, the Heirs of Policronio contended that the
rule on hearsay was violated when the testimony of Amparo Castillo

97
 The Heirs of Policronio averred that the Heirs of Alfonso should have defense of illegality of a contract is not available to third persons whose
filed an action to declare the sale void prior to executing the Deed of interests are not directly affected.
Extra-Judicial Partition. They argued that the sale should enjoy the
Again, the Court disagrees.
presumption of regularity, and until overturned by a court, the Heirs of
Alfonso had no authority to include the land in the inventory of Article 1311 and Article 1421 of the Civil Code provide:
properties of Alfonso’s estate. By doing so, they arrogated upon
Art. 1311. Contracts take effect only between the parties, their
themselves the power of invalidating the Deed of Sale which is
assigns and heirs, x x x
exclusively vested in a court of law which, in turn, can rule only upon
the observance of due process. Thus, they contended that prescription, Art. 1421. The defense of illegality of contracts is not available to third
laches, or estoppel have set in to militate against assailing the validity persons whose interests are not directly affected.
of the sale.
The right to set up the nullity of a void or non-existent contract is
The Heirs of Policronio are mistaken. 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
A simulated contract of sale is without any cause or consideration,
contract. Thus, where a contract is absolutely simulated, even third
and is, therefore, null and void; in such case, no independent action to
persons who may be prejudiced thereby may set up its
rescind or annul the contract is necessary, and it may be treated as non-
inexistence.41 The Heirs of Alfonso are the children of Alfonso, with his
existent for all purposes.39 A void or inexistent contract is one which has
deceased children represented by their children (Alfonso’s
no force and effect from the beginning, as if it has never been entered
grandchildren). The Heirs of Alfonso are clearly his heirs and
into, and which cannot be validated either by time or ratification. A void
successors-in-interest and, as such, their interests are directly affected,
contract produces no effect whatsoever either against or in favor of
thereby giving them the right to question the legality of the Deed of
anyone; it does not create, modify or extinguish the juridical relation to
Sale.
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 Inapplicability of Article 842
executing the Deed of Extrajudicial Partition.
The Heirs of Policronio further argued that even assuming that the
Personality to Question Sale 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
The Heirs of Policronio contended that the Heirs of Alfonso are not
Alfonso must first prove that the sale of Alfonso’s properties to
parties, heirs, or successors-in-interest under the contemplation of law
Policronio substantially diminished their successional rights or that
to clothe them with the personality to question the Deed of Sale. They
their legitimes would be unduly prejudiced, considering that under
argued that under Article 1311 of the Civil Code, contracts take effect
Article 842 of the Civil Code, one who has compulsory heirs may dispose
only between the parties, their assigns and heirs. Thus, the genuine
of his estate provided that he does not contravene the provisions of the
character of a contract which personally binds the parties cannot be put
Civil Code with regard to the legitime of said heirs. Having failed to do
in issue by a person who is not a party thereto. They posited that the
so, they argued that the Heirs of Alfonso should be precluded from
Heirs of Alfonso were not parties to the contract; neither did they
questioning the validity of the Deed of Sale.
appear to be beneficiaries by way of assignment or inheritance. Unlike
themselves who are direct heirs of Policronio, the Heirs of Alfonso are Still, the Court disagrees.
not Alfonso’s direct heirs. For the Heirs of Alfonso to qualify as parties,
Article 842 of the Civil Code provides:
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 Art. 842. One who has no compulsory heirs may dispose by will of all
question the Deed of Sale. his estate or any part of it in favor of any person having capacity to
succeed.
They further argued that the sale cannot be assailed for being
barred under Article 1421 of the Civil Code which provides that the

98
One who has compulsory heirs may dispose of his estate provided he Granting that the Deed of Sale was not simulated, the provision
does not contravene the provisions of this Code with regard to the would still not apply. Since the subject properties were included as
legitime of said heirs. properties of Alfonso in the Deed of Extra-Judicial Partition, they are
covered by corresponding inheritance and estate taxes. Therefore, tax
This article refers to the principle of freedom of disposition by will.
evasion, if at all present, would not arise, and Article 1412 would again
What is involved in the case at bench is not a disposition by will but by
be inapplicable.
Deed of Sale. Hence, the Heirs of Alfonso need not first prove that the
disposition substantially diminished their successional rights or unduly Prescription
prejudiced their legitimes.
From the position that the Deed of Sale is valid and not void, the
Inapplicability of Article 1412 Heirs of Policronio argued that any question regarding its validity
should have been initiated through judicial process within 10 years from
The Heirs of Policronio contended that even assuming that the
its notarization in accordance with Article 1144 of the Civil Code. Since
contract was simulated, the Heirs of Alfonso would still be barred from
21 years had already elapsed when the Heirs of Alfonso assailed the
recovering the properties by reason of Article 1412 of the Civil Code,
validity of the Deed of Sale in 1996, prescription had set in.
which provides that if the act in which the unlawful or forbidden cause
Furthermore, since the Heirs of Alfonso did not seek to nullify the tax
does not constitute a criminal offense, and the fault is both on the
declarations of Policronio, they had impliedly acquiesced and given due
contracting parties, neither may recover what he has given by virtue of
recognition to the Heirs of Policronio as the rightful inheritors and
the contract or demand the performance of the other’s undertaking. As
should, thus, be barred from laying claim on the land.
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 The Heirs of Policronio are mistaken.
Policronio what had been given to their father.
Article 1410 of the Civil Code provides:
On this point, the Court again disagrees.
“Art. 1410. The action for the declaration of the inexistence of a
Article 1412 of the Civil Code is as follows: contract does not prescribe.”
“Art. 1412. If the act in which the unlawful or forbidden cause This is one of the most fundamental characteristics of void or
consists does not constitute a criminal offense, the following rules shall inexistent contracts.44As the Deed of Sale is a void contract, the action
be observed: for the declaration of its nullity, even if filed 21 years after its execution,
cannot be barred by prescription for it is imprescriptible. Furthermore,
(1) When the fault is on the part of both contracting parties, neither
the right to set up the defense of inexistence or absolute nullity cannot
may recover what he has given by virtue of the contract, or
be waived or renounced.45 Therefore, the Heirs of Alfonso cannot be
demand the performance of the other’s undertaking;
precluded from setting up the defense of its inexistence.
(2) When only one of the contracting parties is at fault, he cannot
Validity of the Deed of Extra-Judicial Partition
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 The Court now resolves the issue of the validity of the Deed of Extra-
at fault, may demand the return of what he has given without Judicial Partition.
any obligation to comply with his promise.”
Unenforceability
Article 1412 is not applicable to fictitious or simulated contracts,
The Heirs of Alfonso argued that the CA was mistaken in annulling
because they refer to contracts with an illegal cause or subject-
the Deed of Extra-Judicial Partition due to the incapacity of Conrado to
matter.42 This article presupposes the existence of a cause, it cannot
give the consent of his co-heirs for lack of a special power of attorney.
refer to fictitious or simulated contracts which are in reality non-
They contended that what was involved was not the capacity to give
existent.43 As it has been determined that the Deed of Sale is a
consent in behalf of the co-heirs but the authority to represent them.
simulated contract, the provision cannot apply to it.
They argue that the Deed of Extra-Judicial Partition is not a voidable or

99
an annullable contract under Article 1390 of the Civil Code, but rather, Furthermore, the Heirs of Policronio contended that the defenses of
it is an unenforceable or, more specifically, an unauthorized contract unenforceability, ratification, and preterition are being raised for the
under Articles 1403 (1) and 1317 of the Civil Code. As such, the Deed of first time on appeal by the Heirs of Alfonso. For having failed to raise
Extra-Judicial Partition should not be annulled but only be rendered them during the trial, the Heirs of Alfonso should be deemed to have
unenforceable against the siblings of Conrado. waived their right to do so.
They further argued that under Article 1317 of the Civil Code, when The Court agrees in part with the Heirs of Alfonso.
the persons represented without authority have ratified the
To begin, although the defenses of unenforceability, ratification and
unauthorized acts, the contract becomes enforceable and binding. They
preterition were raised by the Heirs of Alfonso for the first time on
contended that the Heirs of Policronio ratified the Deed of Extra-
appeal, they are concomitant matters which may be taken up. As long
Judicial Partition when Conrado took possession of one of the parcels of
as the questioned items bear relevance and close relation to those
land adjudicated to him and his siblings, and when another parcel was
specifically raised, the interest of justice would dictate that they, too,
used as collateral for a loan entered into by some of the Heirs of
must be considered and resolved. The rule that only theories raised in
Policronio. The Deed of Extra-Judicial Partition having been ratified
the initial proceedings may be taken up by a party thereto on appeal
and its benefits accepted, the same thus became enforceable and
should refer to independent, not concomitant matters, to support or
binding upon them.
oppose the cause of action.47
The Heirs of Alfonso averred that granting arguendo that Conrado
In the RTC, the Heirs of Policronio alleged that Conrado’s consent
was not authorized to represent his co-heirs and there was no
was vitiated by mistake and undue influence, and that he signed the
ratification, the CA should not have remanded the case to the RTC for
Deed of Extra-Judicial Partition without the authority or consent of his
partition of Alfonso’s estate. They argued that the CA should not have
co-heirs.
applied the Civil Code general provision on contracts, but the special
provisions dealing with succession and partition. They contended that The RTC found that Conrado’s credibility had faltered, and his
contrary to the ruling of the CA, the extrajudicial partition was not an claims were rejected by the RTC as gratuitous assertions. On the basis
act of strict dominion, as it has been ruled that partition of inherited of such, the RTC ruled that Conrado duly represented his siblings in the
land is not a conveyance but a confirmation or ratification of title or Deed of Extra-Judicial Partition.
right to the land.46 Therefore, the law requiring a special power of
On the other hand, the CA annulled the Deed of Extra-Judicial
attorney should not be applied to partitions.
Partition under Article 1390 (1) of the Civil Code, holding that a special
On the other hand, the Heirs of Policronio insisted that the CA power of attorney was lacking as required under Article 1878 (5) and
pronouncement on the invalidity of the Deed of Extra-Judicial Partition (15) of the Civil Code. These articles are as follows:
should not be disturbed because the subject properties should not have
“Art. 1878. Special powers of attorney are necessary in the following
been included in the estate of Alfonso, and because Conrado lacked the
cases:
written authority to represent his siblings. They argued with the CA in
ruling that a special power of attorney was required before Conrado xxx
could sign in behalf of his co-heirs.
(5) To enter into any contract by which the ownership of an immovable
The Heirs of Policronio denied that they ratified the Deed of Extra- is transmitted or acquired either gratuitously or for a valuable
Judicial Partition. They claimed that there is nothing on record that consideration;
establishes that they ratified the partition. Far from doing so, they
xxx
precisely questioned its execution by filing a complaint. They further
argued that under Article 1409 (3) of the Civil Code, ratification cannot (15) Any other act of strict dominion.
be invoked to validate the illegal act of including in the partition those
Art. 1390. The following contracts are voidable or annullable, even
properties which do not belong to the estate as it provides another mode
though there may have been no damage to the contracting parties:
of acquiring ownership not sanctioned by law.

100
(1) Those where one of the parties is incapable of giving consent to a A contract entered into in the name of another by one who has no
contract; authority or legal representation, or who has acted beyond his powers,
shall be unenforceable, unless it is ratified, expressly or impliedly, by
(2) Those where the consent is vitiated by mistake, violence,
the person on whose behalf it has been executed, before it is revoked by
intimidation, undue influence or fraud.
the other contracting party.
These contracts are binding, unless they are annulled by a proper action
in court. They are susceptible of ratification.”
Such was similarly held in the case of Badillo v. Ferrer:
This Court finds that Article 1878 (5) and (15) is inapplicable to the
case at bench. It has been held in several cases48 that partition among “The Deed of Extrajudicial Partition and Sale is not a voidable or an
heirs is not legally deemed a conveyance of real property resulting in annullable contract under Article 1390 of the New Civil Code. Article
change of ownership. It is not a transfer of property from one to the 1390 renders a contract voidable if one of the parties is incapable of
other, but rather, it is a confirmation or ratification of title or right of giving consent to the contract or if the contracting party’s consent is
property that an heir is renouncing in favor of another heir who accepts vitiated by mistake, violence, intimidation, undue influence or fraud.
and receives the inheritance. It is merely a designation and segregation xxx
of that part which belongs to each heir. The Deed of Extra-Judicial
The deed of extrajudicial partition and sale is an unenforceable or,
Partition cannot, therefore, be considered as an act of strict dominion.
more specifically, an unauthorized contract under Articles 1403(1) and
Hence, a special power of attorney is not necessary.
1317 of the New Civil Code.”50
In fact, as between the parties, even an oral partition by the heirs is
Therefore, Conrado’s failure to obtain authority from his co-heirs to
valid if no creditors are affected. The requirement of a written
sign the Deed of Extra-Judicial Partition in their behalf did not result in
memorandum under the statute of frauds does not apply to partitions
his incapacity to give consent so as to render the contract voidable, but
effected by the heirs where no creditors are involved considering that
rather, it rendered the contract valid but unenforceable against
such transaction is not a conveyance of property resulting in change of
Conrado’s co-heirs for having been entered into without their authority.
ownership but merely a designation and segregation of that part which
belongs to each heir.49 A closer review of the evidence on record, however, will show that
the Deed of Extra-Judicial Partition is not unenforceable but, in fact,
Neither is Article 1390 (1) applicable. Article 1390 (1) contemplates
valid, binding and enforceable against all the Heirs of Policronio for
the incapacity of a party to give consent to a contract. What is involved
having given their consent to the contract. Their consent to the Deed of
in the case at bench though is not Conrado’s incapacity to give consent
Extra-Judicial Partition has been proven by a preponderance of
to the contract, but rather his lack of authority to do so. Instead,
evidence.
Articles 1403 (1), 1404, and 1317 of the Civil Code find application to
the circumstances prevailing in this case. They are as follows: Regarding his alleged vitiated consent due to mistake and undue
influence to the Deed of Extra-Judicial Partition, Conrado testified, to
“Art. 1403. The following contracts are unenforceable, unless they are
wit:
ratified:
Q: Mr. Ureta you remember having signed a document entitled
(1) Those entered into in the name of another person by one who has
deed of extra judicial partition consisting of 11 pages and
been given no authority or legal representation, or who has acted
which have previously [been] marked as Exhibit I for the
beyond his powers;
plaintiffs?
Art. 1404. Unauthorized contracts are governed by Article 1317 and
A: Yes sir.
the principles of agency in Title X of this Book.
Q: Can you recall where did you sign this document?
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 A: The way I remember I signed that in our house.
him.”

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Q: And who requested or required you to sign this document? 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
A: My aunties.
read in English?
Q: Who in particular if you can recall?
A: Because the way Nay Pruding explained to me is that the
A: Nay Pruding Panadero. property of my grandfather will be partitioned that is why I
am so happy.
Q: You mean that this document that you signed was brought to
your house by your Auntie Pruding Pa[r]adero [who] xxx
requested you to sign that document?
Q: You mean to say that after you signed this deed of extra
A: When she first brought that document I did not sign that judicial partition up to the present you never informed
said document because I [did] no[t] know the contents of them?
that document.
A: Perhaps they know already that I have signed and they read
Q: How many times did she bring this document to you [until] already the document and they have read the document.
you finally signed the document?
Q: My question is different, did you inform them?
A: Perhaps 3 times.
A: The document sir? I did not tell them.
Q: Can you tell the court why you finally signed it?
Q: Even until now?
A: Because the way she explained it to me that the land of my
A: Until now I did not inform them.52
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 This Court finds no cogent reason to reverse the finding of the RTC
act to sign this document? that Conrado’s explanations were mere gratuitous assertions not
entitled to any probative weight. The RTC found Conrado’s credibility to
A: They do not know.
have faltered when he testified that perhaps his siblings were already
xxx 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
Q: After you have signed this document did you inform your
recognized that Conrado’s consent was not vitiated by mistake and
brothers and sisters that you have signed this document?
undue influence as it required a special power of attorney in order to
A: No I did not. 51 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.
xxx
Findings of fact of the trial court, particularly when affirmed by the CA,
Q: Now you read the document when it was allegedly brought to are binding to this Court.53
your house by your aunt Pruding Pa[r]adero?
Furthermore, this Court notes other peculiarities in Conrado’s
A: I did not read it because as I told her I still want to ask the testimony. Despite claims of undue influence, there is no indication that
advise of my brothers and sisters. Conrado was forced to sign by his aunt, Prudencia Paradero. In fact, he
testified that he was happy to sign because his grandfather’s estate
Q: So do I get from you that you have never read the document
would be partitioned. Conrado, thus, clearly understood the document
itself or any part thereof?
he signed. It is also worth noting that despite the document being
A: I have read the heading. brought to him on three separate occasions and indicating his intention
to inform his siblings about it, Conrado failed to do so, and still
xxx
neglected to inform them even after he had signed the partition. All

102
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 Conrado’s 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, 1995 through 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
Attorney54 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 Conrado’s 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
103
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
Conrado’s 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 Extrajudicial 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 ExtraJudicial 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 Alfonso’s heirs received their rightful share.
Conrado, who received Policronio’s 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 determined that the Heirs of Policronio gave their consent to the
Deed of Extra-Judicial Partition and they have not been excluded from
it. Nonetheless, even granting that the Heirs of Policronio were denied
their lawful participation in the partition, the argument of the Heirs of
Alfonso would still fail.
Preterition under Article 854 of the Civil Code is as follows:
104
“Art. 854. 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.
If the omitted compulsory heirs should die before the testator, the
institution shall be effectual, without prejudice to the right of
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, omitting him in the
testament, either by not mentioning him at all, or by not giving him
anything in the hereditary property but without expressly disinheriting
him, even if he is 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
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 therein;
that nobody was left out; that all of them received as much 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 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 Policronio Ureta,
Sr. were represented by Conrado B. Ureta; all the 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 children, expressly
recognize and acknowledge as a fact that the properties were
transferred only for the purpose of effective 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. 1-4, 7-d).”58
Considering that the Deed of Sale has been found void and the Deed
of Extra-Judicial Partition valid, with the consent of all the Heirs of
Policronio duly given, there is no need to remand the case to the court of
origin for partition.
 WHEREFORE, the petition in G.R. No. 165748 is DENIED. The
petition in G.R. No. 165930 is GRANTED. The assailed April 20, 2004
Decision and October 14, 2004 Resolution of the Court of Appeals in CA-
G.R. CV No. 71399, are hereby MODIFIED in this wise:
(1) The Deed of Extra-Judicial Partition, dated April 19, 1989, is
VALID, and
(2) The order to remand the case to the court of origin is hereby
DELETED.
SO ORDERED.
Velasco, Jr. (Chairperson), Peralta, Abad and Sereno,** JJ., concur.
Petition in G.R. No. 165748 denied, while petition in G.R. No. 165930
granted. Judgment and resolution modified.
Notes.—Gross inadequacy of price by itself will not result in a void
contract. (Bacungan vs. Court of Appeals, 574 SCRA 642 [2008])
A void contract cannot give rise to a valid one. (Nool vs. Court of
Appeals, 276 SCRA 149 [1997])

105
 G.R. No. 198434. February 29, 2016.*
HEIRS OF LEANDRO NATIVIDAD and JULIANA V. NATIVIDAD,
petitioners, vs. JUANA MAURICIO-NATIVIDAD, and SPOUSES JEAN
NATIVIDAD CRUZ and JERRY CRUZ, respondents.
Civil Law; Contracts; Statute of Frauds; Under the Statute of
Frauds, 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.—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 Frauds,
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.
Same; Interest Rates; The Supreme Court (SC) finds no error in the
ruling of the Court of Appeals (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.—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. 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.
Same; Same; Circular No. 799, Series of 2013 by the Bangko Sentral
ng Pilipinas-Monetary Board (BSP-MB)reduced the “rate of interest for
the loan or forbearance of any money, goods or credits and the rate
106
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 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.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Panganiban & Associates for petitioners.
Victor F. Bernabe, Jr. for respondents.
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 C.A.-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 DRP.
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.
107
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.3
Aggrieved by the RTC Decision, respondents filed an Appeal with
the CA.
On February 7, 2011, the CA 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 Juana’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.4
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 EXTRAJUDICIAL
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;
108
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
P175,000.00 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 x6
 After a careful reading of the above quoted Extrajudicial Settlement Among Heirs, as well as the cash voucher which allegedly represents
Among Heirs, the Court agrees with the CA that there is nothing in the payment for taxes and transfer of title in petitioners’ name do not serve
said document which would indicate that respondents agreed to the as written notes or memoranda of the alleged verbal agreement.
effect that the subject properties shall be transferred in the name of
The foregoing, notwithstanding, the Court finds it proper to reiterate
Leandro as reimbursement for his payment of Sergio’s loan obligations
the CA ruling that, in any case, since respondents had already
with the DBP. On the contrary, the second to the last paragraph of the
acknowledged that Sergio had, in fact, incurred loan obligations with
said Settlement clearly shows that herein respondents, as heirs of
the DBP, they are liable to reimburse the amount paid by Leandro for
Sergio, have divided the subject properties exclusively among
the payment of the said obligation even if such payment was made
themselves.
without their knowledge or consent.
There is no competent evidence to prove the verbal agreement being
Article 1236 of the Civil Code clearly provides that:
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
The creditor is not bound to accept payment or performance
P8,000.00 given to Atty. Domingo Natividad for the expenses in
by a third person who has no interest in the fulfillment of the
transferring the title of the subject properties in Leandro’s favor, would
obligation, unless there is a stipulation to the contrary.
hardly count as competent evidence in the eyes of the law. Respondents’
claim of the existence of a verbal agreement between them, on one Whoever pays for another may demand from the debtor
hand, and petitioners’ predecessors-in-interest, on the other, remains to what he has paid, except that if he paid without the
be mere allegation. It is an age-old rule in civil cases that he who alleges knowledge or against the will of the debtor, he can
a fact has the burden of proving it and a mere allegation is not recover only insofar as the payment has been beneficial to
evidence.8 the debtor. (Emphasis supplied)
In relation to petitioners’ contention that the subject verbal
agreement actually existed, they reiterate their contention that the
Neither can respondents evade liability by arguing that they were
conveyance of the subject properties in their favor is not covered by the
not parties to the contract between Sergio and the DBP. As earlier
Statute of Frauds because they claim that respondents’ execution of the
stated, the fact remains that, in the Extrajudicial Settlement Among
Extrajudicial Settlement Among Heirs constitutes partial execution of
Heirs, respondents clearly acknowledged Sergio’s loan obligations with
their alleged agreement.
the DBP. Being Sergio’s heirs, they succeed not only to the rights of
The Court does not agree. Sergio but also to his obligations.
Suffice it to say that there is no partial execution of any contract, The following provisions of the Civil Code are clear on this matter, to
whatsoever, because petitioners failed to prove, in the first place, that wit:
there was a verbal agreement that was entered into.
Even granting that such an agreement existed, the CA did not
Art. 774. Succession is a mode of acquisition by virtue of
commit any error in ruling that the assignment of the shares of Sergio
which the property, rights and obligations to the extent of the
in the subject properties in petitioners’ favor as payment of Sergio’s
value of the inheritance, of a person are transmitted through his
obligation cannot be enforced if there is no written contract to such
death to another or others either by will or by operation of law.
effect. Under the Statute of Frauds,9an agreement to convey real
properties shall be unenforceable by action in the absence of a written Art. 776. The inheritance includes all the property, rights
note or memorandum thereof and subscribed by the party charged or by and obligations of a person which are not extinguished by his
his agent. As earlier discussed, the pieces of evidence presented by death.
petitioners, consisting of respondents’ acknowledgment of Sergio’s loan
obligations with DBP as embodied in the Extrajudicial Settlement

109
 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 1,10 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
110
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 x13
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 Banks and Sections
4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non- be unduly burdensome, to the point of oppression on their borrowers.
Bank Financial Institutions, before its amendment by BSP-MB Circular (Marquez vs. Elisan Credit Corporation, 755 SCRA 31 [2015])
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 30,
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 C.A.-G.R. CV No. 92840
are AFFIRMED with MODIFICATION by ORDERINGrespondents
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.
SO ORDERED.
Velasco, Jr. (Chairperson), Perez, Reyes and Jardeleza, JJ., concur.
Petition denied, judgment and resolution affirmed with modification.
Notes.—Unenforceable contracts are those which cannot be
enforced by a proper action in court, unless they are ratified, because
either they are entered into without or in excess of authority or they do
not comply with the statute of frauds or both of the contracting parties
do not possess the required legal capacity. (Iglesia Filipina
Independiente vs. Heirs of Bernardino Taeza, 715 SCRA 138 [2014])
While Central Bank Circular No. 905-82, which took effect on
January 1, 1983, effectively removed the ceiling on interest rates for
both secured and unsecured loans, regardless of maturity, nothing in
the said circular could possibly be read as granting carte
blanche authority to lenders to raise interest rates to levels that would

111
 G.R. No. 177066. September 11, 2009.*
JOSELITO MUSNI PUNO (as heir of the late Carlos Puno),
petitioner, vs. PUNO ENTERPRISES, INC., represented by JESUSA
PUNO, respondent.
Paternity; Evidence; Birth Certificates; Baptismal Certificates; 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; A
baptismal certificate 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 child’s paternity.—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. As correctly observed by the CA, only
petitioner’s mother supplied the data in the birth certificate and signed
the same. There was no evidence that Carlos L. Puno acknowledged
petitioner as his son. 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 child’s paternity.
Corporation Law; Stockholders’ Right of Inspection; The
stockholder’s right of inspection of the corporation’s books and records is
based upon his ownership of shares in the corporation and the necessity
for self-protection.—The stockholder’s right of inspection of the
corporation’s books and records is based upon his ownership of shares in
the corporation and the necessity for self-protection. After all, a
shareholder has the right to be intelligently informed about corporate
affairs. Such right rests upon the stockholder’s underlying ownership of
the corporation’s assets and property. Similarly, only stockholders of
record are entitled to receive dividends declared by the corporation, a
right inherent in the ownership of the shares.
Same; Same; Succession; 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; 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.—
112
Upon the death of a shareholder, the heirs do not automatically become
stockholders of the corporation and acquire the rights and privileges of
the deceased as shareholder of the corporation. The stocks must be
distributed first to the heirs in estate proceedings, and the transfer of
the stocks must be recorded in the books of the corporation. Section 63
of the Corporation Code provides that no transfer shall be valid, except
as between the parties, until the transfer is recorded in the books of the
corporation. During such interim period, the heirs stand as the
equitable owners of the stocks, the executor or administrator duly
appointed by the court being vested with the legal title to the stock.
Until a settlement and division of the estate is effected, the stocks of the
decedent are held by the administrator or executor. Consequently,
during such time, it is the administrator or executor who is entitled to
exercise the rights of the deceased as stockholder. Thus, even if
petitioner presents sufficient evidence in this case to establish that he is
the son of Carlos L. Puno, he would still not be allowed to inspect
respondent’s books and be entitled to receive dividends from
respondent, absent any showing in its transfer book that some of the
shares owned by Carlos L. Puno were transferred to him. This would
only be possible if petitioner has been recognized as an heir and has
participated in the settlement of the estate of the deceased.
Same; Same; Same; 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.—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 decedent’s estate cannot be
adjudicated in an ordinary civil action, as in a case for the recovery of
property. 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.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Enrico G. Barin for petitioner.
Joey D. Morales for respondent.
NACHURA, J.: 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
Upon the death of a stockholder, the heirs do not automatically
order shall be the subject of a bill of costs.
become stockholders of the corporation; neither are they mandatorily
entitled to the rights and privileges of a stockholder. This, we declare in SO ORDERED.”4
this petition for review on certiorari of the Court of Appeals (CA)
On appeal, the CA ordered the dismissal of the complaint in its
Decision1 dated October 11, 2006 and Resolution dated March 6, 2007 in
Decision dated October 11, 2006. According to the CA, petitioner was
CA-G.R. CV No. 86137.
not able to establish the paternity of and his filiation to Carlos L. Puno
The facts of the case follow: since his birth certificate was prepared without the intervention of and
the participatory acknowledgment of paternity by Carlos L. Puno.
Carlos L. Puno, who died on June 25, 1963, was an incorporator of
Accordingly, the CA said that petitioner had no right to demand that he
respondent Puno Enterprises, Inc. On March 14, 2003, petitioner
be allowed to examine respondent’s books. Moreover, petitioner was not
Joselito Musni Puno, claiming to be an heir of Carlos L. Puno, initiated
a stockholder of the corporation but was merely claiming rights as an
a complaint for specific performance against respondent. Petitioner
heir of Carlos L. Puno, an incorporator of the corporation. His action for
averred that he is the son of the deceased with the latter’s common-law
specific performance therefore appeared to be premature; the proper
wife, Amelia Puno. As surviving heir, he claimed entitlement to the
action to be taken was to prove the paternity of and his filiation to
rights and privileges of his late father as stockholder of respondent. The
Carlos L. Puno in a petition for the settlement of the estate of the
complaint thus prayed that respondent allow petitioner to inspect its
latter.5
corporate book, render an accounting of all the transactions it entered
into from 1962, and give petitioner all the profits, earnings, dividends, Petitioner’s motion for reconsideration was denied by the CA in its
or income pertaining to the shares of Carlos L. Puno.2 Resolution6 dated March 6, 2007.
Respondent filed a motion to dismiss on the ground that petitioner In this petition, petitioner raises the following issues:
did not have the legal personality to sue because his birth certificate
I. THE HONORABLE COURT OF APPEALS ERRED IN NOT
names him as “Joselito Musni Muno.” Apropos, there was yet a need for
RULING THAT THE JOSELITO PUNO IS ENTITLED TO THE
a judicial declaration that “Joselito Musni Puno” and “Joselito Musni
RELIEFS DEMANDED HE BEING THE HEIR OF THE LATE
Muno” were one and the same.
CARLOS PUNO, ONE OF THE INCORPORATORS [OF]
The court ordered that the proceedings be held in abeyance, RESPONDENT CORPORATION.
ratiocinating that petitioner’s certificate of live birth was no proof of his
II. HONORABLE COURT OF APPEALS ERRED IN RULING
paternity and relation to Carlos L. Puno.
THAT FILIATION OF JOSELITO PUNO, THE PETITIONER[,]
Petitioner submitted the corrected birth certificate with the name IS NOT DULY PROVEN OR ESTABLISHED.
“Joselito M. Puno,” certified by the Civil Registrar of the City of Manila,
III. THE HONORABLE COURT ERRED IN NOT RULING THAT
and the Certificate of Finality thereof. To hasten the disposition of the
JOSELITO MUNO AND JOSELITO PUNO REFERS TO THE
case, the court conditionally admitted the corrected birth certificate as
ONE AND THE SAME PERSON.
genuine and authentic and ordered respondent to file its answer within
fifteen days from the order and set the case for pretrial.3 IV. THE HONORABLE COURT OF APPEALS ERRED IN NOT
RULING THAT WHAT RESPONDENT MERELY DISPUTES IS
On October 11, 2005, the court rendered a Decision, the dispositive
THE SURNAME OF THE PETITIONER WHICH WAS
portion of which reads:
MISSPELLED AND THE FACTUAL ALLEGATION E.G. RIGHTS
“WHEREFORE, judgment is hereby rendered ordering Jesusa Puno OF PETITIONER AS HEIR OF CARLOS PUNO ARE DEEMED
and/or Felicidad Fermin to allow the plaintiff to inspect the corporate ADMITTED HYPOTHETICALLY IN THE RESPONDENT[’S]
books and records of the company from 1962 up to the present including MOTION TO DISMISS.
the financial statements of the corporation.

113
 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 corporation’s 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 Court’s 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 petitioner’s mother supplied the data in the
birth certificate and signed the same. There was no evidence that Carlos
L. Puno acknowledged petitioner as his son.
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
child’s 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
114
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 stockholder’s right of inspection of the corporation’s books and
records is based upon his ownership of shares in the corporation and the
necessity for self-protection. After all, a shareholder has the right to be
intelligently informed about corporate affairs.13 Such right rests upon
the stockholder’s underlying ownership of the corporation’s 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 respondent’s books and be entitled to receive
dividends from respondent, absent any showing in its transfer book that
some of the shares owned by Carlos L. Puno were transferred to him.
This would only be possible if petitioner has been recognized as an heir
and has participated in the settlement of the estate of the deceased.
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
decedent’s estate cannot be adjudicated in an ordinary civil action, as in
a case for the recovery of property.19The 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.
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.
Ynares-Santiago (Chairperson), Chico-Nazario, Velasco,
Jr. and Peralta, JJ., concur.
Petition denied, judgment and resolution affirmed.
Notes.—When a putative father manifests openly through words
and deeds his recognition of a child, the courts can do no less than
confirm said acknowledgment. (Lim vs. Court of Appeals, 270 SCRA 1
[1997])

115
 G.R. No. 165744. August 11, 2008.*
OSCAR C. REYES, petitioner, vs. HON. REGIONAL TRIAL COURT
OF MAKATI, Branch 142, ZENITH INSURANCE CORPORATION, and
RODRIGO C. REYES, respondents.
Actions; Pleadings and Practice; Fraud; In all averments of fraud
or mistake, the circumstances constituting fraud or mistake must be
stated with particularity.—The rule is that a complaint must contain a
plain, concise, and direct statement of the ultimate facts constituting
the plaintiff’s cause of action and must specify the relief sought. 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. 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.
Same; Same; Same; 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.—
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. 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. 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 court’s 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.
Same; Same; Same; Special Commercial Courts; Jurisdictions; Not
every allegation of fraud done in a corporate setting or perpetrated by
corporate officers will bring the case within the special commercial
court’s jurisdiction.—Not every allegation of fraud done in a corporate
setting or perpetrated by corporate officers will bring the case within
the special commercial court’s jurisdiction. To fall within this
116
jurisdiction, there must be sufficient nexus showing that the
corporation’s 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 corporation’s President. This is the essence
of the complaint read as a whole.
Same; Same; Same; Same; Same; 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, but it is
different in intra-corporate controversies since under the Interim Rules of
Procedure on Intra-Corporate Controversies, a bill of particulars is a
prohibited pleading.—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. 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 court’s 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 court’s 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 court’s
jurisdiction. Regretfully, we cannot read into the complaint any
specifically alleged corporate fraud that will call for the exercise of the
court’s special commercial jurisdiction. Thus, we cannot affirm the
RTC’s assumption of jurisdiction over Rodrigo’s complaint on the basis
of Section 5(a) of P.D. No. 902-A.
Corporation Law; Intra-Corporate Controversies; Relationship Test;
A review of relevant jurisprudence shows a development in the Court’s
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.—A review of relevant jurisprudence shows a
development in the Court’s 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. The types of
relationships embraced under Section 5(b), as declared in the case
of Union Glass & Container Corp. v. SEC, 126 SCRA 31 (1983), 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.
Same; Same; Same; Nature of the Controversy Test; In DMRC
Enterprises v. Esta del Sol Mountain Reserve, Inc., 132 SCRA 293
(1984), the Court introduced the nature of the controversy test, under
which test the incidents of that relationship must also be considered for
the purpose of ascertaining whether the controversy itself is intra-
corporate.—In the 1984 case of DMRC Enterprises v. Esta del Sol
Mountain Reserve, Inc., 132 SCRA 293 (1984), 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. 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. This two-tier test was adopted in the recent
case of Speed Distribution, Inc. v. Court of Appeals, 425 SCRA 691
117
(2004): 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.
Same; Same; Jurisdictions; Succession; Probate Proceedings; The
status of heirs as co-owners of shares of stocks prior to the partition of
the decedent’s estate 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.—Article 777 of the Civil Code declares that the
successional rights are transmitted from the moment of death of the
decedent. Accordingly, upon Anastacia’s death, her children acquired
legal title to her estate (which title includes her shareholdings in
Zenith), and they are, prior to the estate’s partition, deemed co-owners
thereof. 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. Simply stated, the transfer of title by
means of succession, though effective and valid between the parties
involved (i.e., between the decedent’s estate and her heirs), does not
bind the corporation and third parties. The transfer must be registered
in the books of the corporation to make the transferee-heir a stockholder
entitled to recognition as such both by the corporation and by third
parties.
Same; Same; Same; Same; Same; Where there is an absence of partition
and transfer of shares, an heir cannot yet be considered a stockholder of
a corporation, and the Court, therefore, cannot declare that an intra-
corporate relationship exists that would serve as basis to bring the case
within the special commercial court’s jurisdiction.—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 decedent’s 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 facieownership) of the
shares. Without the settlement of Anastacia’s 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., Anastacia’s 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 court’s
jurisdiction under Section 5(b) of PD 902-A, as amended. Rodrigo’s
complaint, therefore, fails the relationship test.
Same; Same; Same; Same; Same; Pleadings and Practice; The body
rather than the title of the complaint determines the nature of an action;
In the instant case, the complaint yields the conclusion that, more than
anything else, it 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.”—The body rather than the title of the
complaint determines the nature of an action. 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.
Same; Same; Same; Same; Same; A Regional Trial Court, acting as a
special commercial court, has no jurisdiction to settle, partition, and
distribute the estate of a deceased; 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.—
118
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 Anastacia’s 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 Court’s statements in the case
of Natcher v. Court of Appeals, 366 SCRA 385 (2001): 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.
Same; Same; Same; Same; Same; That an accounting of the funds
and assets of a corporation to determine the extent and value of a
deceased’s shareholdings will be undertaken by a probate court and not
by a special commercial court is completely consistent with the probate
court’s 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.—That an accounting of the funds and assets of Zenith to
determine the extent and value of Anastacia’s shareholdings will be
undertaken by a probate court and not by a special commercial court is
completely consistent with the probate court’s 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.
Same; Same; Same; Derivative Suits; Requisites.—Rodrigo’s bare
claim that the complaint is a derivative suit will not suffice to confer
jurisdiction on the RTC (as a special commercial court) if he cannot
comply with the requisites for the existence of a derivative suit. These
requisites are: a. the party bringing suit should be a shareholder during
the time of the act or transaction complained of, the number of shares
not being material; b. the party has tried to exhaust intra-corporate
remedies, i.e., has made a demand on the board of directors for the
appropriate relief, but the latter has failed or refused to heed his plea;
and c. the cause of action actually devolves on the corporation; the
wrongdoing or harm having been or being caused to the corporation and
not to the particular stockholder bringing the suit.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Santos, Parungao, Aquino & Santos Law Office and Benjamin C.
Santos & Ray Montri C. Santos for petitioner.
Job B. Madayag for respondents.
BRION, J.:
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, 20022 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 Pedro’s
estate was judicially partitioned among his heirs sometime in the 1970s,
no similar settlement and partition appear to have been made with
Anastacia’s estate, which included her shareholdings in Zenith. 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
On May 9, 2000, Zenith and Rodrigo filed a complaint 4 with the
Securities and Exchange Commission (SEC) against Oscar, docketed as
SEC Case No. 05-00-6615. The complaint 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
119
determine the shares of stock of deceased spouses Pedro and
Anastacia Reyes that were arbitrarily and fraudulently appropriated
[by Oscar] for himself [and] which were not collated and taken into
account in the partition, distribution, and/or settlement of the estate of
the deceased spouses, 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.”5[Emphasis supplied.]
In his Answer with Counterclaim,6 Oscar denied the charge that he
illegally acquired the shares of Anastacia Reyes. He asserted, as a
defense, that he purchased the subject shares with his own funds from
the unissued stocks of Zenith, and that the suit is not a bona
fide derivative suit because the requisites therefor have not been
complied with. He thus questioned the SEC’s jurisdiction to entertain
the complaint because it pertains to the settlement of the estate of
Anastacia Reyes.
When Republic Act (R.A.) No. 87997 took effect, the SEC’s 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 Rodrigo’s SEC
case were thus turned over to the RTC, Branch 142, Makati, and
docketed as Civil Case No. 00-1553.
On October 22, 2002, Oscar filed a Motion to Declare Complaint as
Nuisance or Harassment Suit.9He claimed that the complaint is a mere
nuisance or harassment suit and should, according to the Interim Rules
of Procedure for Intra-Corporate Controversies, be dismissed; and that
it is not a bona fide derivative suit as it partakes of the nature of a
petition for the settlement of estate of the deceased Anastacia that is
outside the jurisdiction of a special commercial court. The RTC, in its
Order dated November 29, 2002 (RTC Order), denied the motion in part
and declared:
“A close reading of the Complaint disclosed the presence of two (2)
causes of action, namely: a) a 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] 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
consisting of the first cause of action will be taken cognizance of by this
Court.”10
Oscar thereupon went to the CA on a petition for certiorari,
prohibition, and mandamus11 and prayed that the RTC Order be
annulled and set aside and that the trial court be prohibited from
continuing with the proceedings. The appellate court affirmed the RTC
Order and denied the petition in its Decision dated May 26, 2004. It
likewise denied Oscar’s motion for reconsideration in a Resolution dated
October 21, 2004.
Petitioner now comes before us on appeal through a petition for
review on certiorari under Rule 45 of the Rules of Court.
ASSIGNMENT OF ERRORS
Petitioner Oscar presents the following points as conclusions the CA
should have made:
1. that the complaint is a mere nuisance or harassment suit
that should be dismissed under the Interim Rules of Procedure of
Intra-Corporate Controversies; and
2. that the complaint is not a bona fidederivative suit but is
in fact in the nature of a petition for settlement of estate; hence,
it is outside the jurisdiction of the RTC acting as a special
commercial court.
Accordingly, he prays for the setting aside and annulment of the CA
decision and resolution, and the dismissal of Rodrigo’s complaint before
the RTC.
THE COURT’S 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 Rodrigo’s 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
120
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 Rodrigo’s complaint principally invoke
Section 5, paragraphs (a) and (b) above as basis for the exercise of the
RTC’s 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 plaintiff’s 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 complaint . . . to 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, Doña 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
121
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 respondent’s [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 court’s
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 court’s jurisdiction. To fall within this jurisdiction, there
must be sufficient nexus showing that the corporation’s 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
corporation’s 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, Doña
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 respondent’s [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 court’s special
commercial jurisdiction.
122
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 court’s 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 court’s jurisdiction. Regretfully, we cannot
read into the complaint any specifically alleged corporate fraud that will
call for the exercise of the court’s special commercial jurisdiction. Thus,
we cannot affirm the RTC’s assumption of jurisdiction over Rodrigo’s
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 Court’s
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 intracorporate 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?
123
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 Rodrigo’s interest as an heir since the
subject matter of the present controversy centers on the shares of stocks
belonging to Anastacia, not on Rodrigo’s 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 Anastacia’s death, her children acquired legal title to her estate
(which title includes her shareholdings in Zenith), and they are, prior to
the estate’s partition, deemed co-owners thereof.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
decedent’s estate and her heirs), does not bind the corporation and third
parties. The transfer must be registered in the books of the corporation shares. Without the settlement of Anastacia’s estate, there can be no
to make the transferee-heir a stockholder entitled to recognition as such definite partition and distribution of the estate to the heirs. Without the
both by the corporation and by third parties.26 partition and distribution, there can be no registration of the transfer.
And without the registration, we cannot consider the transferee-heir a
We note, in relation with the above statement, that in Abejo v. Dela
stockholder who may invoke the existence of an intra-corporate
Cruz27 and TCL Sales Corporation v. Court of Appeals28 we did not
relationship as premise for an intra-corporate controversy within the
require the registration of the transfer before considering the transferee
jurisdiction of a special commercial court.
a stockholder of the corporation (in effect upholding the existence of an
intra-corporate relation between the parties and bringing the case In sum, we find that—insofar as the subject shares of stock (i.e.,
within the jurisdiction of the SEC as an intra-corporate controversy). A Anastacia’s shares) are concerned—Rodrigo cannot be considered a
marked difference, however, exists between these cases and the present stockholder of Zenith. Consequently, we cannot declare that an intra-
one. corporate relationship exists that would serve as basis to bring this case
within the special commercial court’s jurisdiction under Section 5(b) of
In Abejo and TCL Sales, the transferees held definite and
PD 902-A, as amended. Rodrigo’s complaint, therefore, fails the
uncontested titles to a specific number of shares of the
relationship test.
corporation; after the transferee had established prima
facie ownership over the shares of stocks in question, registration Application of the Nature of Controversy Test
became a mere formality in confirming their status as stockholders. In
The body rather than the title of the complaint determines the
the present case, each of Anastacia’s heirs holds only an undivided
nature of an action.31 Our examination of the complaint yields the
interest in the shares. This interest, at this point, is still inchoate and
conclusion that, more than anything else, the complaint is about the
subject to the outcome of a settlement proceeding; the right of the heirs
protection and enforcement of successional rights. The controversy it
to specific, distributive shares of inheritance will not be determined
presents is purely civil rather than corporate, although it is
until all the debts of the estate of the decedent are paid. In short, the
denominated as a “complaint for accounting of all corporate funds and
heirs are only entitled to what remains after payment of the decedent’s
assets.”
debts;29 whether there will be residue remains to be seen. Justice
Jurado aptly puts it as follows: Contrary to the findings of both the trial and appellate courts, we
read only one cause of action alleged in the complaint. The “derivative
“No succession shall be declared unless and until a liquidation of the
suit for accounting of the funds and assets of the corporation which are
assets and debts left by the decedent shall have been made and all his
in the control, custody, and/or possession of the respondent [herein
creditors are fully paid. Until a final liquidation is made and all the
petitioner Oscar]” does not constitute a separate cause of action but is,
debts are paid, the right of the heirs to inherit remains inchoate. This is
as correctly claimed by Oscar, only an incident to the “action for
so because under our rules of procedure, liquidation is necessary in
determination of the shares of stock of deceased spouses Pedro and
order to determine whether or not the decedent has left any
Anastacia Reyes allegedly taken by respondent, its accounting and the
liquid assets which may be transmitted to his heirs.”30 [Emphasis
corresponding delivery of these shares to the parties’ brothers and
supplied.]
sisters.” There can be no mistake of the relationship between the
Rodrigo must, therefore, hurdle two obstacles before he can be “accounting” mentioned in the complaint and the objective of partition
considered a stockholder of Zenith with respect to the shareholdings and distribution when Rodrigo claimed in paragraph 10.1 of the
originally belonging to Anastacia. First, he must prove that there are complaint that:
shareholdings that will be left to him and his co-heirs, and this can be
“10.1 By refusal of the respondent to account of [sic] his
determined only in a settlement of the decedent’s estate. No such
shareholdings in the company, he illegally and fraudulently transferred
proceeding has been commenced to date. Second, he must register the
solely in his name wherein [sic] the shares of stock of the deceased
transfer of the shares allotted to him to make it binding against the
Anastacia C. Reyes [which] must be properly collated and/or distributed
corporation. He cannot demand that this be done unless and until he
equally amongst the children including the complainant Rodrigo C.
has established his specific allotment (and prima facie ownership) of the
Reyes herein to their damage and prejudice.”

124
 We particularly note that the complaint contained no sufficient
allegation that justified the need for an accounting other than to
determine the extent of Anastacia’s shareholdings for purposes of
distribution.
Another significant indicator that points us to the real nature of the
complaint are Rodrigo’s repeated claims of illegal and fraudulent
transfers of Anastacia’s 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 Anastacia’s 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 Anastacia’s 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 Court’s 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.]
125
That an accounting of the funds and assets of Zenith to determine the
extent and value of Anastacia’s shareholdings will be undertaken by a
probate court and not by a special commercial court is completely
consistent with the probate court’s 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 court’s authority to act on questions of title or
ownership in a collation or advancement situation in Coca v.
Pangilinan33 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,
Rodrigo’s complaint also fails the nature of the controversy test.
DERIVATIVE SUIT
Rodrigo’s bare claim that the complaint is a derivative suit will not
suffice to confer jurisdiction on the RTC (as a special commercial court)
if he cannot comply with the requisites for the existence of a derivative In summary, whether as an individual or as a derivative suit, the
suit. These requisites are: RTC—sitting as special commercial court—has no jurisdiction to hear
Rodrigo’s complaint since what is involved is the determination and
“a. the party bringing suit should be a shareholder during the time
distribution of successional rights to the shareholdings of Anastacia
of the act or transaction complained of, the number of shares not being
Reyes. Rodrigo’s proper remedy, under the circumstances, is to institute
material;
a special proceeding for the settlement of the estate of the deceased
b. the party has tried to exhaust intra-corporate remedies, i.e., has Anastacia Reyes, a move that is not foreclosed by the dismissal of his
made a demand on the board of directors for the appropriate relief, but present complaint.
the latter has failed or refused to heed his plea; and
WHEREFORE, we hereby GRANT the petition and REVERSE the
c. the cause of action actually devolves on the corporation; the decision of the Court of Appeals dated May 26, 2004 in CA-G.R. SP No.
wrongdoing or harm having been or being caused to the corporation and 74970. The complaint before the Regional Trial Court, Branch 142,
not to the particular stockholder bringing the suit.”34 Makati, docketed as Civil Case No. 00-1553, is ordered DISMISSED for
lack of jurisdiction.
Based on these standards, we hold that the allegations of the present
complaint do not amount to a derivative suit. SO ORDERED.
First, as already discussed above, Rodrigo is not a shareholder with Quisumbing (Chairperson), Corona,** Carpio-Morales and Velasco,
respect to the shareholdings originally belonging to Anastacia; he only Jr., JJ., concur.
stands as a transferee-heir whose rights to the share are inchoate and
Petition granted, judgment reversed, complaint before the Regional
unrecorded. With respect to his own individually-held shareholdings,
Trial Court of Makati City, Br. 142 dismissed.
Rodrigo has not alleged any individual cause or basis as a shareholder
on record to proceed against Oscar. Notes.—A court not designated as Special Commercial Court is not
vested with jurisdiction over cases previously cognizable by the SEC
Second, in order that a stockholder may show a right to sue on
and does not have the requisite authority or power to order the transfer
behalf of the corporation, he must allege with some particularity in his
of cases erroneously filed with it to another branch of the Regional Trial
complaint that he has exhausted his remedies within the corporation by
Court—the only action that it could take on the matter is to dismiss the
making a sufficient demand upon the directors or other officers for
petition for lack of jurisdiction. (Calleja vs. Panday, 483 SCRA 680
appropriate relief with the expressed intent to sue if relief is
[2006])
denied.35 Paragraph 8 of the complaint hardly satisfies this requirement
since what the rule contemplates is the exhaustion of Concomitant to the power of the RTC to hear and decide intra-
remedies within the corporate setting: corporate controversies is the authority to issue orders necessary or
incidental to the carrying out of the powers expressly granted to it,
“8. As members of the same family, complainant Rodrigo C. Reyes
including in appropriate cases, the holding of a special stockholders’
has resorted [to] and exhausted all legal means of resolving the dispute
meeting. (Yujuico vs. Quiambao, 513 SCRA 243 [2007])
with the end view of amicably settling the case, but the dispute between
them ensued.”
Lastly, we find no injury, actual or threatened, alleged to have been
done to the corporation due to Oscar’s acts. If indeed he illegally and
fraudulently transferred Anastacia’s shares in his own name, then the
damage is not to the corporation but to his co-heirs; the wrongful
transfer did not affect the capital stock or the assets of Zenith. As
already mentioned, neither has Rodrigo alleged any particular cause or
wrongdoing against the corporation that he can champion in his
capacity as a shareholder on record.36

126
 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.
Contracts; 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.—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. Thus, the intestate court’s grant of the Motion
for Approval of the sale filed by respondent resulted in petitioners’
obligation to execute the Deed of Sale of the disputed lots in his favor.
The condition having been satisfied, the contract was perfected.
Henceforth, the parties were bound to fulfill what they had expressly
agreed upon.
Succession; Probate Courts; Probate Proceedings: Court approval is
required in any disposition of the decedent’s estate, but reference to
judicial approval, cannot adversely affect the substantive rights of heirs
to dispose of their own pro indiviso shares in the co-heirship or co-
ownership.—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. 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. It would seem that the suspensive condition in the present
conditional sale was imposed only for this reason.
Same: Same; Same; Where other heirs did not consent to the sale of
their ideal shares in the inherited property, the sale will only be limited
to the pro indiviso share of the selling heir.—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.
127
Same; Same; Same; Probate jurisdiction covers all matters relating
to the settlement of estates and the probate of wills of deceased persons,
including the appointment and the removal of administrators and
executors, and extends as well 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.—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.
Same; Same; Same; Parties; While Section 8, Rule 89 of the Rules
of Court does not specify who should file the application for the approval
of a sale of realty under administration, 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.—
Petitioners contend that under said Rule 89, only the executor or
administrator is authorized to apply for the approval of a sale of realty
under administration. Hence, the settlement court allegedly erred in
entertaining and granting respondent’s Motion for Approval. We read
no such limitation. Section 8, Rule 89 of the Rules of Court, provides: 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); 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). 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.
 Same; Same; Same; Husband and Wife; The spouse’s share as an
heir should be based only on the remaining half, after deducting the
conjugal 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. 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.
Petitioners’ computation is correct. The CA computed Eliodoro’s share
as an heir based on one tenth of the entire disputed property. It should
be based only on the remaining half, after deducting the conjugal share.
Same; Same; Same; Same; 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.—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. 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.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Lacas, Lao & Associates for petitioners.
Rudegelio C. Tacorda for 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.
128
In settling the estate of the deceased, a probate court has jurisdiction
over matters incidental and collateral to the exercise of its recognized
powers. Such matters include selling, mortgaging or otherwise
encumbering realty belonging to the estate. Rule 89, Section 8 of the
Rules of Court, deals with the conveyance of real property contracted by
the decedent while still alive. In contrast with Sections 2 and 4 of the
same Rule, the said provision does not limit to the executor or
administrator the right to file the application for authority to sell,
mortgage or otherwise encumber realty under administration. The
standing to pursue such course of action before the probate court inures
to any person who stands to be benefited or injured by the judgment or
to be entitled to the avails of the suit.
The Case
Before us is a Petition for Review under Rule 45 of the Rules of Court,
seeking to reverse and set aside the Decision1 dated April 16, 1999 and
the Resolution2dated 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. 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. 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. 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’;
129
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 ‘ELIODORO
SANDEJAS, Filipino Citizen, of legal age, married to Remedios Reyes
de Sandejas’; and which undersigned, as SELLER, binds and obligates
himself, his heirs, administrators and assigns, to sell forever and
absolutely in their entirety (all of the four [4] parcels of land above
described, which are contiguous to each other as to form one big lot) to
said Mr. Alex A. Lina, who has agreed to buy all of them, also binding
on his heirs, administrators and assigns, for the consideration of ONE
MILLION (P1,000,000.00) PESOS, Philippine Currency, upon such
reasonable terms of payment as may be agreed upon by them. The
parties have, however, agreed on the following terms and conditions:
1. ‘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. ‘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. ‘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. ‘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. ‘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
130
appointment of the new administrator. Compliance was set for October
30, 1985, no appearance for the afore-named 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, SF. Proc. No. R-83-15601, p. 273)
“On November 22, 1985, Alex A. Lina as petitioner filed with the
Regional Trial Court of Manila an Omnibus Pleading for (1) petition for
letters of administration [and] (2) to consolidate instant case with SP.
Proc. No. R-83-15601 RTC Branch XI-Manila, docketed therein as SP.
Proc. No. 85-33707 entitled ‘IN RE: INTESTATE ESTATE OF
ELIODORO P. SANDEJAS, SR., ALEX A. LINA PETITIONER,” [for
letters of administration] (Record, SP. Proc. No. 85-33707, pp. 1-7). On
November 29, 1985, Branch XXXVI of the Regional Trial Court of
Manila issued an [O]rder consolidating SP. Proc. No. 85-33707, with SP.
Proc. No. R-83-15601 (Record, SP. Proc. No.85-33707, p. 13). Likewise,
on December 13, 1985, the Regional Trial Court of Manila, Branch XI,
issued an [O]rder stating that ‘this Court has no objection to the
consolidation of Special Proceedings No. 85-331707, now pending before
Branch XXXVI of this Court, with the present proceedings now pending
before this Branch’ (Record, SP. Proc. No. R-83-15601, p. 279).
“On January 15, 1986, Intervenor Alex A. Lina filed [a] Motion for
his appointment as a new administrator of the Intestate Estate of
Remedios R. Sandejas on the following reasons:
1. ‘5.01.FIRST, as of this date, [i]ntervenor has not received any
motion on the part of the heirs Sixto, Antonio, Roberto and
Benjamin, all surnamed Sandejas, for the appointment of a
new [a]dministrator in place of their father, Mr. Eliodoro P.
Sandejas, Sr.;
2. ‘5.02.SECOND, since Sp. Proc. 85-33707, wherein the
[petitioner is herein Intervenor Alex A. Lina and the instant
Sp. PROC. R-83-15601, in effect are already consolidated, then
the appointment of Mr. Alex Lina as [a]dministrator of the
Intestate Estate of Remedios R. Sandejas in instant Sp. Proc.
R-83-15601, would be beneficial to the heirs and also to the
Intervenor;
3. ‘5.03.THIRD, of course, Mr. Alex A. Lina would be willing to
give way at anytime to any [a]dministrator who may be
proposed by the heirs of the deceased Remedios R. Sandejas, so
 long as such [a]dministrator is qualified’ (Record, SP. Proc. No.
R-83-15601, pp. 281-283)
“On May 15, 1986, the lower court issued an order granting the
[M]otion of Alex A. Lina as the new [a]dministrator of the Intestate
Estate of Remedios R. Sandejas in this proceedings. (Record, SP. Proc.
No. R-83-15601, pp. 288-290)
“On August 28, 1986, heirs Sixto, Roberto, Antonio and Benjamin, all
surnamed Sandejas, and heirs [sic] filed a [M]otion for [R]econsideration
and the appointment of another administrator Mr. Sixto Sandejas, in
lieu of [I]ntervenor Alex A. Lina stating among others that it [was] only
lately that Mr. Sixto Sandejas, a son and heir, expressed his willingness
to act as a new administrator of the intestate estate of his mother,
Remedios R. Sandejas (Record, SP. Proc. No. 85-33707, pp. 29-31). On
October 2, 1986, Intervenor Alex A. Lina filed his [M]anifestation and
[C]ounter [M]otion alleging that he ha[d] no objection to the
appointment of Sixto Sandejas as [a]dministrator of the [i]ntestate
[e]state of his mother Remedios R. Sandejas (Sp. Proc. No. 85-15601),
provided that Sixto Sandejas be also appointed as administrator of the
[i]ntestate [e]state of his father, Eliodoro P. Sandejas, Sr. (Spec. Proc.
No. 85-33707), which two (2) cases have been consolidated (Record, SP.
Proc. No. 85-33707, pp. 34-36). On March 30, 1987, the lower court
granted the said [M]otion and substituted Alex Lina with Sixto
Sandejas as petitioner in the said [P]etitions (Record, SP. Proc. No. 85-
33707, p. 52). After the payment of the administrator’s bond (Record,
SP. Proc. No. 83-15601, pp. 348-349) and approval thereof by the court
(Record, SP. Proc. No. 83-15601, p. 361), Administrator Sixto Sandejas
on January 16, 1989 took his oath as administrator of the estate of the
deceased Remedios R. Sandejas and Eliodoro P. Sandejas, Sr. (Record,
SP. Proc. No. 83-15601, p. 367) and was likewise issued Letters of
Administration on the same day (Record, SP. Proc. No. 83-15601, p.
366).
“On November 29, 1993, Intervenor filed [an] Omnibus Motion (a) to
approve the deed of conditional sale executed between Plaintiff-in-
Intervention Alex A. Lina and Elidioro [sic] Sandejas, Sr. on June 7,
1982; (b) to compel the heirs of Remedios Sandejas and Eliodoro
Sandejas, Sr. thru their administrator, to execute a deed of absolute
sale in favor of [I]ntervenor Alex A. Lina pursuant to said conditional
deed of sale (Record, SP. Proc. No. 83-15601, pp. 554-561) to which the
administrator filed a [M]otion to [D]ismiss and/or [O]pposition to said
omnibus motion on December 13, 1993 (Record, SP. Proc. No. 83-15601,
pp. 591-603).
131
“On January 13, 1995, the lower court rendered the questioned order
granting intervenor’s [M]otion for the [A]pproval of the Receipt of
Earnest Money with promise to buy between Plaintiff-in-Intervention
Alex A. Lina and Eliodoro Sandejas, Sr. dated June 7, 1982 (Record, SP.
Proc. No. 83-15601, pp. 652-654). x x x.”
The Order of the intestate court5 disposed as follows:
“WHEREFORE, [i]ntervenor’s motion for the approval of the Receipt Of
Earnest Money With Promise To Sell And To Buy dated June 7, 1982, is
granted. The intervenor is directed to pay the balance of the purchase
price amounting to P729,000.00 within thirty (30) days from receipt of
this Order and the Administrator is directed to execute within thirty
(30) days thereafter the necessary and proper deeds of conveyancing.” 6
Ruling of the Court of Appeals
Overturning the RTC ruling, the CA held that the contract between
Eliodoro Sandejas, Sr. and respondent was merely a contract to sell, not
a perfected contract of sale. It ruled that the ownership of the four lots
was to remain in the intestate estate of Remedios Sandejas until the
approval of the sale was obtained from the settlement court. That
approval was a positive suspensive condition, the non-fulfillment of
which was not tantamount to a breach. It was simply an event that
prevented the obligation from maturing or becoming effective. If the
condition did not happen, the obligation would not arise or come into
existence.
The CA held that Section 1, Rule 897 of the Rules of Court was
inapplicable, because the lack-of written notice to the other heirs
showed the lack of consent of those heirs other than Eliodoro Sandejas,
Sr. For this reason, bad faith was imputed to him, for no one is allowed
to enjoy a claim arising from one’s own wrongdoing. Thus, Eliodoro, Sr.
was bound, as a matter of justice and good faith, to comply with his
contractual commitments as an owner and heir. When he entered into
the agreement with respondent, he bound his conjugal and successional
shares in the property.
Hence, this Petition.8
Issues
In their Memorandum, petitioners submit the following issues for our
resolution:
1. “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;
2. 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;
3. “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
4. “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 Issues:
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 non-fulfillment of the
suspensive condition—court approval of the sale—as contained in the
“Receipt of Earnest Money with Promise to Sell and to Buy’s (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
132
positive suspensive condition. The vendor’s obligation to convey the title
does not become effective in case of failure to pay.10
On the other hand, the agreement between Eliodoro, Sr. and
respondent is subject to a suspensive condition—the procurement of a
court approval, not full payment. There was no reservation of ownership
in the agreement. In accordance with paragraph 1 of the Receipt,
petitioners were supposed to deed the disputed lots over to respondent.
This they could do upon the court’s approval, even before full payment.
Hence, their contract was a conditional sale, rather than a contract to
sell as determined by the CA.
When a contract is subject to a suspensive condition, its birth or
effectivity can take place only if and when the condition happens or is
fulfilled.11 Thus, the intestate court’s grant of the Motion for Approval of
the sale filed by respondent resulted in petitioners’ obligation to execute
the Deed of Sale of the disputed lots in his favor. The condition having
been satisfied, the contract was perfected. Henceforth, the parties were
bound to fulfill what they had expressly agreed upon.
Court approval is required in any disposition of the decedent’s estate
per Rule 89 of the Rules of Court. Reference to judicial approval,
however, cannot adversely affect the substantive rights of heirs to
dispose of their own pro indiviso shares in the co-heirship or co-
ownership.12 In other words, they can sell their rights, interests or
participation in the property under administration. A stipulation
requiring court approval does not affect the validity and the effectivity
of the sale as regards the selling heirs. It merely implies that the
property may be taken out of custodia legis, but only with the court’s
permission.13 It would seem that the suspensive condition in the present
conditional sale was imposed only for this reason.
Thus, we are not persuaded by petitioners’ argument that the
obligation was converted into a mere monetary claim. Paragraph 4 of
the Receipt, which petitioners rely on, refers to a situation wherein the
sale has not materialized. In such a case, the seller is bound to return to
the buyer the earnest money paid plus interest at fourteen percent per
annum. But the sale was approved by the intestate court; hence, the
proviso does not apply.
Because petitioners did not consent to the sale of their ideal shares
in the disputed lots, the CA correctly limited the scope of the Receipt to
the pro-indiviso share of Eliodoro, Sr. Thus, it correctly modified the
intestate court’s ruling by excluding their shares from the ambit of the
transaction.
First Collateral Issue:
Jurisdiction of Settlement Court
Petitioners also fault the CA Decision by arguing, inter alia, (a)
jurisdiction over ordinary civil action seeking not merely to enforce a
sale but to compel performance of a contract falls upon a civil court, not
upon an intestate court; and (b) that Section 8 of Rule 89 allows the
executor or administrator, and no one else, to file an application for
approval of a sale of the property under administration.
Citing Gil v. Cancio14 and Acebedo v. Abesamis,15petitioners 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
133
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.
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 SO ORDERED.
his own properties to which he alone had a title in fee simple. The fact
Melo (Chairman), Vitug, Gonzaga-Reyes and Sandoval-
that he failed to obtain the approval of the conditional sale did not
Gutierrez, JJ., concur.
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 Petition partially granted, judgment affirmed with modification.
unnecessary because his being bound to it is, as already shown, beyond
Notes.—The declaration of heirship must be made in an
cavil.
administration proceeding, and not in an independent civil action.
Fourth Collateral Issue: (Heirs of Guido and Isabel Yaptinchay vs. Del Rosario, 304 SCRA
Computation of Eliodoro’s Share 18 [1999])
Petitioners aver that the CA’s computation of Eliodoro, Sr.’s share in The probate court is not vested with the power to order the special
the disputed parcels of land was erroneous because, as the conjugal administrator to sell real properties of the estate pending determination
partner of Remedios, he owned one half of these lots plus a further one of the validity of the regular administrator’s appointment. (Silverio, Sr.
tenth of the remaining half, in his capacity as a one of her legal heirs. vs. Court of Appeals, 304 SCRA 541 [1999])
Hence, Eliodoro’s share should be 11/20 of the entire property.
Respondent poses no objection to this computation. 22
On the other hand, the CA held that, at the very least, the
conditional sale should cover the one half (1/2) pro indiviso conjugal
share of Eliodoro plus his one tenth (1/10) hereditary share as one of the
ten legal heirs of the decedent, or a total of three fifths (3/5) of the lots
in administration.23
Petitioners’ computation is correct. The CA computed Eliodoro’s
share as an heir based on one tenth of the entire disputed property. It
should be based only on the remaining half, after deducting the conjugal
share.24
The proper determination of the seller-heir’s shares requires further
explanation. Succession laws and jurisprudence require that when a
marriage is dissolved by the death of the husband or the wife, the
decedent’s entire estate—under the concept of conjugal properties of
gains—must be divided equally, with one half going to the surviving
spouse and the other half to the heirs of the deceased. 25 After the
settlement of the debts and obligations, the remaining half of the estate
is then distributed to the legal heirs, legatees and devices. We assume,
however, that this preliminary determination of the decedent’s estate
has already been taken into account by the parties, since the only issue
raised in this case is whether Eliodoro’s share is 11/20 or 3/5 of the
disputed lots.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The
appealed Decision and Resolution are AFFIRMED with the
MODIFICATION that respondent is entitled to only a pro-indiviso
share equivalent to 11/20 of the disputed lots.

134
 G.R. No. 169129. March 28, 2007.*
SPS. VIRGILIO F. SANTOS & ESPERANZA LATI SANTOS, SPS.
VICTORINO F. SANTOS, & LAGRIMAS SANTOS, ERNESTO F.
SANTOS, and TADEO F. SANTOS, petitioners, vs. SPS. JOSE
LUMBAO and PROSERFINA LUMBAO, respondents.
Appeals; In the exercise of the Supreme Court’s 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; Exceptions.—It is well-
settled that in the exercise of the Supreme Court’s 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. But, the rule is not
without exceptions. There are several recognized exceptions 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.
Actions; Jurisdictions; Katarungang Pambarangay Law;Barangay
Conciliation; While non-compliance with the condition that there must
first be proper recourse to barangay conciliation before filing of
complaint in court or any government offices could affect the sufficiency
of the plaintiff’s cause of action and make his complaint vulnerable to
dismissal on ground of lack of cause of action or prematurity, 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.—Section 408 of the aforesaid
law and Administrative Circular No. 14-93 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 plaintiff’s 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. 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
135
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 Lumbao’s 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.
Same; Same; Same; 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.—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 court’s jurisdiction and a willingness to abide by the resolution of
the case which will bar said party from later on impugning the court’s
jurisdiction. 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. 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.
Same; Pleadings and Practice; An answer is a mere statement of
fact which the party filing it expects to prove, but it is not evidence; In
spite of the presence of judicial admissions in a party’s pleading, the trial
court is still given leeway to consider other evidence presented.—Facts
alleged in a party’s 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. And in spite of the presence of judicial
admissions in a party’s pleading, the trial court is still given leeway to
consider other evidence presented. 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.” Virgilio’s 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.
Sales; Notarial Law; A document acknowledged before a notary
public is a public document 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; One who
denies the due execution of a deed where one’s 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.—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 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. To overcome this
presumption, there must be presented evidence that is clear and
convincing. Absent such evidence, the presumption must be upheld. In
addition, one who denies the due execution of a deed where one’s
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.
Same; Co-Ownership; 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, and, in any
case, the mere fact that the deed purports to transfer a concrete portion
does not per se render the sale void.—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
136
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.
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.
Same; Actions; Reconveyance; Prescription; Land Titles; When the
plaintiff is in possession of the land to be reconveyed, prescription cannot
set in.—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 person’s 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.
Same; Land Titles; 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.—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
Lumbao’s 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. 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.
Succession; Heirs are bound by contracts entered into by their
predecessors-in-interest—whatever rights and obligations of the decedent
have over a property are transmitted to the heirs by way of succession, a
mode of acquiring the property, rights and obligations of the decedent to
the extent of the value of the inheritance of the heirs.—The general rule
that heirs are bound by contracts entered into by their predecessors-in-
interest applies in the present case. Article 1311 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. 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.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Porfirio Gabiola, Jr. for petitioners.
Domingo E. Chiu, Sr. for respondents.
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorariunder Rule 45 of
the 1997 Revised Rules of Civil Procedure seeking to annul and set
137
aside the Decision1and Resolution2 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 attorney’s fees and litigation expenses, thus, reversing the
Decision3 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.
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 October 1985. The other petitioners
Esperanza Lati and Lagrimas Santos are the daughters-in-law of Rita.
Herein respondents Spouses Jose Lumbao and Proserfina Lumbao
are the alleged owners of the 107-square meter lot (subject property),
which they purportedly bought from Rita during her lifetime.
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 occasion, Rita sold 100 square
meters of her inchoate share in her mother’s estate through a document
denominated as “Bilihan ng Lupa,” dated 17 August 1979.4Respondents
Spouses Lumbao claimed the execution of the aforesaid document was
witnessed by petitioners Virgilio and Tadeo, as shown by their
signatures affixed therein. On the second occasion, an additional seven
square meters was added to the land as evidenced by a document also
denominated as “Bilihan ng Lupa,” dated 9 January 1981. 5
After acquiring the subject property, respondents Spouses Lumbao
took actual possession thereof and erected thereon a house which they
have been occupying as exclusive owners up to the present. As the
exclusive owners of the subject property, respondents Spouses Lumbao
made several verbal demands upon Rita, during her lifetime, and
thereafter upon herein petitioners, for them to execute the necessary
documents to effect the issuance of a separate title in favor of
respondents Spouses Lumbao insofar as the subject property is
concerned. Respondents Spouses Lumbao alleged that prior to her
death, Rita informed respondent Proserfina Lumbao she could not
deliver the title to the subject property because the entire property
inherited by her and her co-heirs from Maria had not yet been
partitioned.
On 2 May 1986, the Spouses Lumbao claimed that petitioners,
acting fraudulently and in conspiracy with one another, executed a
Deed of Extrajudicial 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. 817297 of the Registry of Deeds of Pasig City.
On 15 June 1992, respondents Spouses Lumbao, through counsel, sent a
formal demand letter8 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 Damages9 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.
150810requiring 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.
138
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
attorney’s 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 attorney’s 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:
1. 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.
1. II.THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN ORDERING THE PETITIONERS TO RECONVEY
THE SUBJECT [PROPERTY] TO THE RESPONDENTS
[SPOUSESLUMBAO] AND IN NOT RULING THAT THEY
ARE GUILTY OF LACHES, HENCE THEY CANNOT
RECOVER THE LOT ALLEGEDLY SOLD TO THEM.
2. 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].
 3. 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.
4. V.THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING THAT RESPONDENTS
[SPOUSES LUMBAO’S] ACTION FOR RECONVEYANCE
WITH DAMAGES CANNOT BE SUPPORTED WITH
UNENFORCEABLE DOCUMENTS, SUCH AS THE BILIHAN
NG LUPA DATED [17 AUGUST 1979] AND [9 JANUARY
1981].
5. VI.THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT FINDING THAT RESPONDENTS
[SPOUSES LUMBAO’S] 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 Lumbao’s
witness, Carolina Morales, testified that neither petitioner Virgilio nor
139
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 Lumbao’s 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:
1. 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.
2. 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 Lumbao’s action for reconveyance with
damages.
3. 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 Court’s 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
exceptions14 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-
9315 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 precondition before filing a complaint in court or
any government offices. Non-compliance with the said condition
precedent could affect the sufficiency of the plaintiff’s 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 Lumbao’s non-compliance with the
aforesaid condition precedent cannot be considered fatal. Although
petitioners alleged in their answer that the Complaint for Reconveyance
140
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 court’s
jurisdiction and a willingness to abide by the resolution of the case
which will bar said party from later on impugning the court’s
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 Lumbao’s 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. Witness . . . Virgilio Santos, that you
don’t 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 don’t remember, sir, because of the length of time that had
passed.
Q. But that is your signature?
A. I don’t have eyeglasses . . . My signature is different.
141
Q. You never appeared before this notary public Apolinario
Mangahas?
A. I don’t remember.20
As a general rule, facts alleged in a party’s 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. 21And in
spite of the presence of judicial admissions in a party’s 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 Virgilio’s 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 Lumbao’s 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 spouses
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 mother’s
voluntary act of selling a portion of her share in her deceased mother’s
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 document25 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
one’s 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 Lumbao’s 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 serender 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
142
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 person’s 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 the appellate court, petitioners must pay respondents Spouses Lumbao
respondents Spouses Lumbao. attorney’s fees and litigation expenses for having been compelled to
litigate and incur expenses to protect their interest.35 On this matter,
Under the above premises, this Court holds that the “Bilihan ng
we do not find reasons to reverse the said findings.
Lupa” documents dated 17 August 1979 and 9 January 1981 are valid
and enforceable and can be made the basis of the respondents Spouses WHEREFORE, premises considered, the instant Petition is hereby
Lumbao’s action for reconveyance. The failure of respondents Spouses DENIED. The Decision and Resolution of the Court of Appeals dated 8
Lumbao to have the said documents registered does not affect its June 2005 and 29 July 2005, respectively, are hereby AFFIRMED.
validity and enforceability. It must be remembered that registration is Herein petitioners are ordered to reconvey to respondents Spouses
not a requirement for validity of the contract as between the parties, for Lumbao the subject property and to pay the latter attorney’s fees and
the effect of registration serves chiefly to bind third persons. The litigation expenses. Costs against petitioners.
principal purpose of registration is merely to notify other persons not
SO ORDERED.
parties to a contract that a transaction involving the property had been
entered into. Where the party has knowledge of a prior existing interest Ynares-Santiago (Chairperson), Austria-Martinez, Callejo,
which is unregistered at the time he acquired a right to the same land, Sr. and Nachura, JJ., concur.
his knowledge of that prior unregistered interest has the effect of
Petition denied, judgment and resolution affirmed.
registration as to him.31 Hence, the “Bilihan ng Lupa” documents dated
17 August 1979 and 9 January 1981, being valid and enforceable, herein Notes.—Failure of a party to specifically allege the fact that there
petitioners are bound to comply with their provisions. In short, such was no compliance with the barangayconciliation procedure constitutes
documents are absolutely valid between and among the parties thereto. a waiver of that defense. (Diu vs. Court of Appeals, 251 SCRA
472[1995])
Finally, the general rule that heirs are bound by contracts entered into
by their predecessors-in-interest applies in the present case. Article An allegation in the complaint that the petitioners had initiated a
131132 of the NCC is the basis of this rule. It is clear from the said proceeding against the respondent for unlawful detainer in
provision that whatever rights and obligations the decedent have over the Katarungang Pambarangay, in compliance with P.D. No. 1508, as
the property were transmitted to the heirs by way of succession, a mode well as the certification to file action by the barangay chairman, is
of acquiring the property, rights and obligations of the decedent to the sufficient compliance with Article 151 of the Family Code. (Martinez vs.
extent of the value of the inheritance of the heirs. 33Thus, the heirs Martinez, 461 SCRA 562 [2005])
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

143