10. Sabidong vs.

Solas, 699 SCRA, June 2013

A.M. No. P-01-1448 June 25, 2013

(Formerly OCA IPI No. 99-664-P)

RODOLFO C. SABIDONG, Complainant,
vs.
NICOLASITO S. SOLAS (Clerk of Court IV), Respondent.

The Facts

Trinidad Sabidong, complainants mother, is one of the longtime

occupants of a parcel of land, originally registered in the name
of C. N. Hodges and situated at Barangay San Vicente, Jaro,
Iloilo City.
The Sabidongs are in possession of one-half portion of Lot 11 of
the said Estate (Hodges Estate), as the other half-portion was
occupied by Priscila Saplagio.
Lot 11 was the subject of an ejectment suit filed by the Hodges
Estate, ("Rosita R. Natividad in her capacity as Administratrix
of C.N. Hodges Estate, plaintiff vs. Priscila Saplagio,
defendant").
A decision was rendered in said case ordering the defendant to
immediately vacate the portion of Lot 11 leased to her and to
pay the plaintiff rentals due, attorneys fees, expenses and
costs.
At the time, respondent was the Clerk of Court III of MTCC,
Branch 3, Iloilo City.

Sometime in October 1984, respondent submitted an Offer to

Purchase on installment Lots 11 and 12. In a letter dated
January 7, 1986, the Administratrix of the Hodges Estate
rejected respondents offer in view of an application to
purchase already filed by the actual occupant of Lot 12, "in line
with the policy of the Probate Court to give priority to the
actual occupants in awarding approval of Offers". While the
check for initial down payment tendered by respondent was
returned to him, he was nevertheless informed that he may file
an offer to purchase Lot 11 and that if he could put up a
sufficient down payment, the Estate could immediately
endorse it for approval of the Probate Court so that the
property can be awarded to him "should the occupant fail to
avail of the priority given to them."4
 The following day, January 8, 1986, respondent again submitted
an Offer to Purchase Lot 11 with an area of 234 square meters
for the amount of 35,100.

Under the Order by the probate court, respondents Offer to

Purchase Lot 11 was approved upon the courts observation
that the occupants of the subject lots "have not manifested
their desire to purchase the lots they are occupying up to this
date and considering time restraint and considering further,
that the sales in favor of the x x x offerors are most beneficial
to the estate x x x". On January 21, 1987, the probate court
issued another Order granting respondents motion for
issuance of a writ of possession in his favor. The writ of
possession over Lot 11 was eventually issued on June 27,
1989.5

On November 21, 1994, a Deed of Sale With Mortgage covering

Lot 11 was executed between respondent and the Hodges
Estate represented by its Administratrix, Mrs. Ruth R. Diocares.
Lot 11 was thereby conveyed to respondent on installment for
the total purchase price of 50,000.

On June 14, 1999, this Court received the sworn letter-

complaint asserting that as court employee respondent cannot
buy property in litigation (consequently he is not a buyer in
good faith), commit deception, dishonesty, oppression and
grave abuse of authority.

Acting on the complaint, Court Administrator Alfredo L.

Benipayo issued a 1st Indorsement9 dated July 8, 1999,
requiring respondent to file his comment on the Complaint
dated May 29, 1999. On October 21, 1999, respondent
submitted his Comment.10

dismissed the Estafa charge against respondent for insufficiency of

evidence.

On November 29, 2000, Court Administrator Benipayo issued an

Evaluation and Recommendation12 finding respondent guilty of
violating Article 149113 of the Civil Code. Said rule prohibits the
purchase by certain court officers of property and rights in litigation
within their jurisdiction. Court Administrator Benipayo recommended
that:
In a Resolution15 dated January 22, 2001, this Court adopted the
recommendation of the Court Administrator to treat the present
administrative action as a regular administrative matter and to
designate the Executive Judge of the RTC of Iloilo City to hear the
evidence of the parties.

On March 19, 2004, the RTC of Iloilo, Branch 37, dismissed the
case for annulment of title, damages and injunction against
respondent for lack of merit.19

In his Memorandum,23 respondent maintained that his purchase

of the subject land is not covered by the prohibition in
paragraph 5, Article 1491 of the Civil Code.

He pointed out that he bought Lot 11-A a decade after the

MTCC of Iloilo, Branch 3, had ordered the ejectment of Priscila
Saplagio and Trinidad Sabidong from the subject lot.

He insisted that public trust was observed when complainant

was accorded his right of first refusal in the purchase of Lot 11-
A, albeit the latter failed to avail said right. Asserting that he is
a buyer in good faith and for value, respondent cited the
dismissal of the cases for Estafa and annulment of title and
damages which complainant filed against him.

Issue

Whether or not the private respondent is prohibited to purchase the

property subject of the probate.

Ruling

Article 1491, paragraph 5 of the Civil Code prohibits court officers

such as clerks of court from acquiring property involved in litigation
within the jurisdiction or territory of their courts. Said provision
reads:

Article 1491. The following persons cannot acquire by purchase, even

at a public or judicial auction, either in person or through the
mediation of another:

xxxx

(5) Justices, judges, prosecuting attorneys, clerks of superior and

inferior courts, and other officers and employees connected with the
administration of justice, the property and rights in litigation or levied
upon an execution before the court within whose jurisdiction or
territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to
lawyers, with respect to the property and rights which may be the
object of any litigation in which they may take part by virtue of their
profession.
x x x x (Emphasis supplied.)

The rationale advanced for the prohibition is that public policy

disallows the transactions in view of the fiduciary relationship
involved, i.e., the relation of trust and confidence and the
peculiar control exercised by these persons.32"In so providing,
the Code tends to prevent fraud, or more precisely, tends not to
give occasion for fraud, which is what can and must be done."33

For the prohibition to apply, the sale or assignment of the

property must take place during the pendency of the litigation
involving the property.34 Where the property is acquired after
the termination of the case, no violation of paragraph 5, Article
1491 of the Civil Code attaches.35

In the case at bar, when respondent purchased Lot 11-A on

November 21, 1994, the Decision in Civil Case No. 14706 which
was promulgated on May 31, 1983 had long become final.

Be that as it may, it cannot be said that the property is no

longer "in litigation" at that time considering that it was part of
the Hodges Estate then under settlement proceedings (Sp.
Proc. No. 1672).

A thing is said to be in litigation not only if there is some

contest or litigation over it in court, but also from the moment
that it becomes subject to the judicial action of the judge. 36 A
property forming part of the estate under judicial settlement
continues to be subject of litigation until the probate court
issues an order declaring the estate proceedings closed and
terminated.

The rule is that as long as the order for the distribution of the
estate has not been complied with, the probate proceedings
cannot be deemed closed and terminated. 37 The probate court
loses jurisdiction of an estate under administration only after
the payment of all the debts and the remaining estate delivered
to the heirs entitled to receive the same.38
 Since there is no evidence to show that Sp. Proc. No. 1672 in
the RTC of Iloilo, Branch 27, had already been closed and
terminated at the time of the execution of the Deed of Sale
With Mortgage dated November 21, 1994, Lot 11 is still deemed
to be "in litigation" subject to the operation of Article 1491 (5)
of the Civil Code.

This notwithstanding, we hold that the sale of Lot 11 in favor of

respondent did not violate the rule on disqualification to
purchase property because Sp. Proc. No. 1672 was then
pending before another court (RTC) and not MTCC where he
was Clerk of Court.

11. Aranas vs. Mercado, 713 SCRA

FIRST DIVISION

G.R. No. 156407, January 15, 2014

THELMA M. ARANAS, Petitioner, v. TERESITA V. MERCADO, FELIMON V. MERCADO,

CARMENCITA M. SUTHERLAND, RICHARD V. MERCADO, MA. TERESITA M. ANDERSON, AND
FRANKLIN L. MERCADO, Respondents.

DECISION

BERSAMIN, J.:

The probate court is authorized to determine the issue of ownership of properties for purposes of
their inclusion or exclusion from the inventory to be submitted by the administrator, but its
determination shall only be provisional unless the interested parties are all heirs of the decedent, 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. Its jurisdiction
extends to matters incidental or collateral to the settlement and distribution of the estate, such as
the determination of the status of each heir and whether property included in the inventory is the
conjugal or exclusive property of the deceased spouse.

Antecedents

Emigdio S. Mercado (Emigdio) died intestate survived by his second wife, Teresita V. Mercado
(Teresita), and their five children, namely: Allan V. Mercado, Felimon V. Mercado, Carmencita M.
Sutherland, Richard V. Mercado, and Maria Teresita M. Anderson; and his two children by his first
marriage, namely: respondent Franklin L. Mercado and petitioner Thelma M. Aranas (Thelma).

Emigdio inherited and acquired real properties during his lifetime. He owned corporate shares in
Mervir Realty Corporation (Mervir Realty) and Cebu Emerson Transportation Corporation (Cebu
Emerson).

He assigned his real properties in exchange for corporate stocks of Mervir Realty, and sold his real
property in Badian, Cebu to Mervir Realty.
On June 3, 1991, Thelma filed in the Regional Trial Court (RTC) in Cebu City a petition for the
appointment of Teresita as the administrator of Emigdios estate.

The RTC granted the petition considering that there was no opposition.

As the administrator, Teresita submitted an inventory of the estate of Emigdio on December 14,
1992 for the consideration and approval by the RTC.

She indicated in the inventory that at the time of his death, Emigdio had left no real properties but
only personal properties worth P6,675,435.25 in all, consisting of cash of P32,141.20; furniture
and fixtures worth P20,000.00; pieces of jewelry valued at P15,000.00; 44,806 shares of stock of
Mervir Realty worth P6,585,585.80; and 30 shares of stock of Cebu Emerson worth P22,708.25. 2

Claiming that Emigdio had owned other properties that were excluded from the inventory, Thelma
moved that the RTC direct Teresita to amend the inventory, and to be examined regarding it.

The RTC granted Thelmas motion.

On January 21, 1993, Teresita filed a compliance with the order of January 8, 1993, 3 supporting her
inventory with copies of three certificates of stocks covering the 44,806 Mervir Realty shares of
stock;4the deed of assignment executed by Emigdio on January 10, 1991 involving real properties
with the market value of P4,440,651.10 in exchange for 44,407 Mervir Realty shares of stock with
total par value of P4,440,700.00;5 and the certificate of stock issued on January 30, 1979 for 300
shares of stock of Cebu Emerson worth P30,000.00.6

Ruling of the RTC

After a series of hearings that ran for almost eight years, the RTC issued on March 14, 2001 an
order finding and holding that the inventory submitted by Teresita had excluded properties that
should be included.

On March 29, 2001, Teresita, joined by other heirs of Emigdio, timely sought the reconsideration of
the order of March 14, 2001 on the ground that one of the real properties affected, Lot No. 3353
located in Badian, Cebu, had already been sold to Mervir Realty, and that the parcels of land
covered by the deed of assignment had already come into the possession of and registered in the
name of Mervir Realty.10

Thelma opposed the motion.

On May 18, 2001, the RTC denied the motion for reconsideration, 11 stating that there was no cogent
reason for the reconsideration, and that the movants agreement as heirs to submit to the RTC the
issue of what properties should be included or excluded from the inventory already estopped them
from questioning its jurisdiction to pass upon the issue.

CA partly granted the petition for certiorari, disposing as follows: 13

Issue

Did the CA properly determine that the RTC committed grave abuse of discretion amounting to lack
or excess of jurisdiction in directing the inclusion of certain properties in the inventory
notwithstanding that such properties had been either transferred by sale or exchanged for corporate
shares in Mervir Realty by the decedent during his lifetime?

Ruling of the Court

The appeal is meritorious.

II
Did the RTC commit grave abuse of discretion
in directing the inclusion of the properties
in the estate of the decedent?

Yes.

In its assailed decision, the CA concluded that the RTC committed grave abuse of discretion for
including properties in the inventory notwithstanding their having been transferred to Mervir Realty
by Emigdio during his lifetime, and for disregarding the registration of the properties in the name of
Mervir Realty, a third party, by applying the doctrine of piercing the veil of corporate fiction.

Was the CA correct in its conclusion?

The answer is in the negative. It is unavoidable to find that the CA, in reaching its conclusion,
ignored the law and the facts that had fully warranted the assailed orders of the RTC.

Under Section 6(a), Rule 78 of the Rules of Court, the letters of administration may be granted at
the discretion of the court to the surviving spouse, who is competent and willing to serve when the
person dies intestate.

Upon issuing the letters of administration to the surviving spouse, the RTC becomes dutybound to
direct the preparation and submission of the inventory of the properties of the estate, and the
surviving spouse, as the administrator, has the duty and responsibility to submit the inventory
within three months from the issuance of letters of administration pursuant to Rule 83 of the Rules
of Court, viz:

Section 1. Inventory and appraisal to be returned within three months. Within three (3) months
after his appointment every executor or administrator shall return to the court a true inventory
and appraisal of all the real and personal estate of the deceased which has come into his
possession or knowledge. In the appraisement of such estate, the court may order one or more
of the inheritance tax appraisers to give his or their assistance.

The usage of the word all in Section 1, supra, demands the inclusion of all the real and personal
properties of the decedent in the inventory. 22

However, the word all is qualified by the phrase which has come into his possession or knowledge,
which signifies that the properties must be known to the administrator to belong to the decedent or
are in her possession as the administrator.

Section 1 allows no exception, for the phrase true inventory implies that no properties appearing to
belong to the decedent can be excluded from the inventory, regardless of their being in the
possession of another person or entity.

The objective of the Rules of Court in requiring the inventory and appraisal of the estate of the
decedent is to aid the court in revising the accounts and determining the liabilities of the executor
or the administrator, and in making a final and equitable distribution (partition) of the estate and
otherwise to facilitate the administration of the estate. 23 Hence, the RTC that presides over the
administration of an estate is vested with wide discretion on the question of what properties should
be included in the inventory.

According to Peralta v. Peralta,24 the CA cannot impose its judgment in order to supplant that of the
RTC on the issue of which properties are to be included or excluded from the inventory in the
absence of positive abuse of discretion, for in the administration of the estates of deceased
persons, the judges enjoy ample discretionary powers and the appellate courts should not interfere
with or attempt to replace the action taken by them, unless it be shown that there has been a
positive abuse of discretion.25 As long as the RTC commits no patently grave abuse of discretion, its
orders must be respected as part of the regular performance of its judicial duty.
There is no dispute that the jurisdiction of the trial court as an intestate court is special and limited.
The trial court cannot adjudicate title to properties claimed to be a part of the estate but are
claimed to belong to third parties by title adverse to that of the decedent and the estate, not by
virtue of any right of inheritance from the decedent. All that the trial court can do regarding said
properties is to determine whether or not they should be included in the inventory of properties to
be administered by the administrator. Such determination is provisional and may be still revised. As
the Court said in Agtarap v. Agtarap:26

The general rule is that the jurisdiction of the trial court, either as a probate court or an intestate
court, relates only to matters having to do with the probate of the will and/or settlement of the
estate of deceased persons, but does not extend to the determination of questions of ownership
that arise during the proceedings. The patent rationale for this rule is that such court merely
exercises special and limited jurisdiction. As held in several cases, a probate court or one in charge
of estate proceedings, whether testate or intestate, cannot adjudicate or determine title to
properties claimed to be a part of the estate and which are claimed to belong to outside parties, not
by virtue of any right of inheritance from the deceased but by title adverse to that of the deceased
and his estate. All that the said court could do as regards said properties is to determine whether or
not they should be included in the inventory of properties to be administered by the administrator.
If there is no dispute, there poses no problem, but if there is, then the parties, the administrator,
and the opposing parties have to resort to an ordinary action before a court exercising general
jurisdiction for a final determination of the conflicting claims of title.

However, this general rule is subject to exceptions as justified by expediency and convenience.

First, the probate court may provisionally pass upon in an intestate or a testate proceeding
the question of inclusion in, or exclusion from, the inventory of a piece of property
without prejudice to final determination of ownership in a separate action. Second, if the
interested parties are all heirs to the estate, 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, then the probate court is competent to resolve issues on
ownership. Verily, its jurisdiction extends to matters incidental or collateral to the settlement and
distribution of the estate, such as the determination of the status of each heir and whether the
property in the inventory is conjugal or exclusive property of the deceased
spouse.27 (Italics in the original; bold emphasis supplied)

It is clear to us that the RTC took pains to explain the factual bases for its directive for the inclusion
of the properties in question in its assailed order of March 14, 2001, viz:

In the first place, the administratrix of the estate admitted that Emigdio Mercado was one of the
heirs of Severina Mercado who, upon her death, left several properties as listed in the inventory of
properties submitted in Court in Special Proceedings No. 306R which are supposed to be divided
among her heirs. The administratrix admitted, while being examined in Court by the counsel for the
petitioner, that she did not include in the inventory submitted by her in this case the shares of
Emigdio Mercado in the said estate of Severina Mercado. Certainly, said properties constituting
Emigdio Mercados share in the estate of Severina Mercado should be included in the inventory of
properties required to be submitted to the Court in this particular case.

In the second place, the administratrix of the estate of Emigdio Mercado also admitted in Court that
she did not include in the inventory shares of stock of Mervir Realty Corporation which are in her
name and which were paid by her from money derived from the taxicab business which she and her
husband had since 1955 as a conjugal undertaking. As these shares of stock partake of being
conjugal in character, onehalf thereof or of the value thereof should be included in the inventory of
the estate of her husband.

In the third place, the administratrix of the estate of Emigdio Mercado admitted, too, in Court that
she had a bank account in her name at Union Bank which she opened when her husband was still
alive. Again, the money in said bank account partakes of being conjugal in character, and so, one
half thereof should be included in the inventory of the properties constituting as estate of her
husband.

In the fourth place, it has been established during the hearing in this case that Lot No. 3353 of Pls
657D located in Badian, Cebu containing an area of 53,301 square meters as described in and
covered by Transfer Certificate of Title No. 3252 of the Registry of Deeds for the Province of Cebu is
still registered in the name of Emigdio S. Mercado until now. When it was the subject of Civil Case
No. CEB12690 which was decided on October 19, 1995, it was the estate of the late Emigdio
Mercado which claimed to be the owner thereof. Mervir Realty Corporation never intervened in the
said case in order to be the owner thereof. This fact was admitted by Richard Mercado himself when
he testified in Court. x x x So the said property located in Badian, Cebu should be included in the
inventory in this case.

Fifthly and lastly, it appears that the assignment of several parcels of land by the late Emigdio S.
Mercado to Mervir Realty Corporation on January 10, 1991 by virtue of the Deed of Assignment
signed by him on the said day (Exhibit N for the petitioner and Exhibit 5 for the administratrix) was
a transfer in contemplation of death. It was made two days before he died on January 12, 1991. A
transfer made in contemplation of death is one prompted by the thought that the transferor has not
long to live and made in place of a testamentary disposition (1959 Prentice Hall, p. 3909). Section
78 of the National Internal Revenue Code of 1977 provides that the gross estate of the decedent
shall be determined by including the value at the time of his death of all property to the extent of
any interest therein of which the decedent has at any time made a transfer in contemplation of
death. So, the inventory to be approved in this case should still include the said properties of
Emigdio Mercado which were transferred by him in contemplation of death. Besides, the said
properties actually appeared to be still registered in the name of Emigdio S. Mercado at least ten
(10) months after his death, as shown by the certification issued by the Cebu City Assessors Office
on October 31, 1991 (Exhibit O).28

Thereby, the RTC strictly followed the directives of the Rules of Court and the jurisprudence relevant
to the procedure for preparing the inventory by the administrator. The aforequoted explanations
indicated that the directive to include the properties in question in the inventory rested on good and
valid reasons, and thus was far from whimsical, or arbitrary, or capricious.

Firstly, the shares in the properties inherited by Emigdio from Severina Mercado should be included
in the inventory because Teresita, et al. did not dispute the fact about the shares being inherited by
Emigdio.

Secondly, with Emigdio and Teresita having been married prior to the effectivity of the Family
Code in August 3, 1988, their property regime was the conjugal partnership of gains. 29

For purposes of the settlement of Emigdios estate, it was unavoidable for Teresita to include his
shares in the conjugal partnership of gains. The party asserting that specific property acquired
during that property regime did not pertain to the conjugal partnership of gains carried the burden
of proof, and that party must prove the exclusive ownership by one of them by clear, categorical,
and convincing evidence.30

In the absence of or pending the presentation of such proof, the conjugal partnership of Emigdio
and Teresita must be provisionally liquidated to establish who the real owners of the affected
properties were,31 and which of the properties should form part of the estate of Emigdio. The
portions that pertained to the estate of Emigdio must be included in the inventory.

Moreover, although the title over Lot 3353 was already registered in the name of Mervir Realty, the
RTC made findings that put that title in dispute. Civil Case No. CEB12692, a dispute that had
involved the ownership of Lot 3353, was resolved in favor of the estate of Emigdio, and Transfer
Certificate of Title No. 3252 covering Lot 3353 was still in Emigdios name. Indeed, the RTC noted in
the order of March 14, 2001, or ten years after his death, that Lot 3353 had remained registered in
the name of Emigdio.

Interestingly, Mervir Realty did not intervene at all in Civil Case No. CEB12692. Such lack of
interest in Civil Case No. CEB12692 was susceptible of various interpretations, including one to the
effect that the heirs of Emigdio could have already threshed out their differences with the assistance
of the trial court. This interpretation was probable considering that Mervir Realty, whose business
was managed by respondent Richard, was headed by Teresita herself as its President. In other
words, Mervir Realty appeared to be a family corporation.

Also, the fact that the deed of absolute sale executed by Emigdio in favor of Mervir Realty was a
notarized instrument did not sufficiently justify the exclusion from the inventory of the properties
involved. A notarized deed of sale only enjoyed the presumption of regularity in favor of its
execution, but its notarization did not per se guarantee the legal efficacy of the transaction under
the deed, and what the contents purported to be. The presumption of regularity could be rebutted
by clear and convincing evidence to the contrary. 32 As the Court has observed in Suntay v. Court of
Appeals:33

x x x. 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.(Bold emphasis supplied)

It should likewise be pointed out that the exchange of shares of stock of Mervir Realty with the real
properties owned by Emigdio would still have to be inquired into. That Emigdio executed the deed of
assignment two days prior to his death was a circumstance that should put any interested party on
his guard regarding the exchange, considering that there was a finding about Emigdio having been
sick of cancer of the pancreas at the time.34 In this regard, whether the CA correctly characterized
the exchange as a form of an estate planning scheme remained to be validated by the facts to be
established in court.

The fact that the properties were already covered by Torrens titles in the name of Mervir Realty
could not be a valid basis for immediately excluding them from the inventory in view of the
circumstances admittedly surrounding the execution of the deed of assignment. This is because:

The Torrens system is not a mode of acquiring titles to lands; it is merely a system of registration of
titles to lands. However, justice and equity demand that the titleholder should not be made to bear
the unfavorable effect of the mistake or negligence of the States agents, in the absence of proof of
his complicity in a fraud or of manifest damage to third persons. The real purpose of the Torrens
system is to quiet title to land and put a stop forever to any question as to the legality of the title,
except claims that were noted in the certificate at the time of registration or that may arise
subsequent thereto. Otherwise, the integrity of the Torrens system shall forever be sullied by the
ineptitude and inefficiency of land registration officials, who are ordinarily presumed to have
regularly performed their duties.35

Assuming that only seven titled lots were the subject of the deed of assignment of January 10,
1991, such lots should still be included in the inventory to enable the parties, by themselves, and
with the assistance of the RTC itself, to test and resolve the issue on the validity of the assignment.

The limited jurisdiction of the RTC as an intestate court might have constricted the determination of
the rights to the properties arising from that deed, 36 but it does not prevent the RTC as
intestate court from ordering the inclusion in the inventory of the properties subject of
that deed.

This is because the RTC as intestate court, albeit vested only with special and limited
jurisdiction, was still deemed to have all the necessary powers to exercise such
jurisdiction to make it effective.

Lastly, the inventory of the estate of Emigdio must be prepared and submitted for the important
purpose of resolving the difficult issues of collation and advancement to the heirs.

xxxx

The determination of which properties should be excluded from or included in the inventory of
estate properties was well within the authority and discretion of the RTC as an intestate court. In
making its determination, the RTC acted with circumspection, and proceeded under the guiding
policy that it was best to include all properties in the possession of the administrator or were known
to the administrator to belong to Emigdio rather than to exclude properties that could turn out in
the end to be actually part of the estate. As long as the RTC commits no patent grave abuse of
discretion, its orders must be respected as part of the regular performance of its judicial
duty. Grave abuse of discretion means either that the judicial or quasijudicial power was exercised
in an arbitrary or despotic manner by reason of passion or personal hostility, or that the respondent
judge, tribunal or board evaded a positive duty, or virtually refused to perform the duty enjoined or
to act in contemplation of law, such as when such judge, tribunal or board exercising judicial or
quasijudicial powers acted in a capricious or whimsical manner as to be equivalent to lack of
jurisdiction.39

12. Butiong vs. Plazo, 765 SCRA 227

G.R. No. 187524 August 5, 2015

SPOUSES MARIA BUTIONG and VILLAFRlA, DR. RUEL B. SPOUSES MARIA

FRANCISCO substituted by VILLAFRIA, Petitioners,
vs.
MA. GRACIA RINOZA PLAZO and MA. FE RINOZA ALARAS, Respondents.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking to reverse and set aside the Decision and Resolution, dated March 13, 2009 and
1 2

April 23, 2009, respectively, of the Court Appeals (CA) in CA-G.R. SP No. 107347, Which
affirmed the Judgment dated October 1, 2001 of the Regional Trial Court (RTC) of
3

Nasugbu, Batangas, Branch 14, in Civil Case No. 217.

The antecedent facts are as follows:

On November 16, 1989, Pedro L. Rifioza died intestate, leaving several heirs, including his_
children with his first wife, respondents Ma. Gracia R. Plazo and Ma. Fe Alaras, as well as
several properties including a resort covered by Transfer Certificates of Title (TCT) No.
51354 and No. 51355, each with an area of 351 square meters, and a family home, the land
on which it stands is covered by TCT Nos. 40807 and 40808, both located in Nasugbu,
Batangas. 4

In their Amended Complaint for Judicial Partition with Annulment of Title and Recovery of
Possession dated September 15, 1993, respondents alleged that sometime in March 1991,
5

they discovered that their co-heirs, Pedros second wife, Benita"Tenorio and other children,
had sold the subject properties to petitioners, spouses Francisco Villafria and Maria Butiong,
who are now deceased and substituted by their son, Dr. Ruel B. Villafria, without their
knowledge and consent.

When confronted about the sale, Benita acknowledged the same, showing respondents a
document she believed evidenced receipt of her share in the sale, which, however, did not
refer to any sort of sale but to a previous loan obtoiined by Pedro and Benita from a
bank. The document actually evidenced receipt from Banco Silangan of the amount of 87,
6

352.62 releasing her and her late husbands indebtedness therefrom. Upon inquiry, the
7

Register of Deeds of Nasugbu informed respondents that he has no record of any

transaction involving the subject properties, giving them certified true copies of the titles to
the same. When respondents went to the subject properties, they discovered that 4 out of
the 8 cottages in the resort had been demolished. They were not, however, able to enter as
the premises were padlocked.
Subsequently, respondents learned that on July 18, 1991, a notice of an extra-judicial
settlement of estate of their late father was published in a tabloid called Balita. Because of
this,

They caused the annotation of their adverse claims over the subject properties before the
Register of Deeds of Nasugbu and filed their complaint praying, among others, for the
annulment of all documents conveying the subject properties to the petitioners and
certificates of title issued pursuant thereto.
8

In their Answer, petitioners denied the allegations of the complaint on the ground of lack of
9

personal knowledge and good faith in acquiring the subject properties. In the course of his
testimony during trial, petitioner Francisco further contended that what they purchased was
only the resort. He also presented an Extra-Judicial Settlement with Renunciation,
10

Repudiations and Waiver of Rights and Sale which provides, among others, that
respondents' co-heirs sold the family home to the spouses Rolando and Ma. Cecilia Bondoc
for Pl million as well as a Deed of Sale whereby Benita sold the resort to petitioners for 650,
000.00. 11

On October 1, 2001, the trial court nullified the transfer of the subject Properties to
petitioners and spouses Bondoc due to irregularities in the Documents of conveyance
offered by petitioners .as well as the circumstances Surrounding the execution of the same.
Specifically, the Extra-Judicial Settlement was notarized by a notary public that was not duly
commissioned as such on the date it was executed. The Deed of Sale was Undated, the
12

date of the acknowledgment therein was left blank, and the Typewritten name "Pedro
Rifioza, Husband" on the left side of the document Was not signed. The trial court also
13

observed that both documents were Never presented to the Office of the Register of Deeds
for registration and That the titles to the subject properties were still in the names of Pedro
and His second wife Benita. In addition, the supposed notaries and buyers of the Subject
properties were not even presented as witnesses whom supposedly witnessed the signing
and execution of the documents of conveyance. On The basis thereof, the triaI court ruled
14

in favor of respondents, in its Judgment, the pertinent portions of its fallo provide:

xxxxx

On appeal, the CA affirmed the trial courts Judgment

Aggrieved, petitioners, substituted by their son Ruel Villafria, filed a Motion for
Reconsideration dated November 24, 2006 raising the trial courts lack of jurisdiction.

It was alleged that when the Complaint for Judicial Partition with Annulment of Title and
Recovery of Possession was filed, there was yet no settlement of Pedro's estate,
determination as to the nature thereof, nor was there an identification of the number of
legitimate heirs. As such, the trial court ruled on the settlement of the intestate estate of
Pedro in its ordinary jurisdiction when the action filed was for Judicial Partition.

Considering that the instant action is really one for settlement of intestate estate, the trial
court, sitting merely in its probate jurisdiction, exceeded its jurisdiction when it ruled upon the
issues of forgery and ownership. Thus, petitioner argued that. Said ruling is void and has no
effect for having been rendered without jurisdiction. The Motion for Reconsideration was,
however, denied by the appellate court on February 26, 2007.

Issue
W/N the trial court exceeded its jurisdiction when it ruled upon the issue of forgery and
owenership.

Ruling

No.

Section 2 of the Rules as stated above provides that the annulment of a judgment may "be
based only on grounds of extrinsic fraud and lack of jurisdiction." In RP v. The Heirs of
Sancho Magdato, the High Tribunal stressed that: There is extrinsic fraud when "the
unsuccessful party had been prevented from exhibiting fully his case, by fraud or deception
practiced on him by his opponent, as by keeping him away from court, ... or where the
defendant never had knowledge of the suit, being kept in ignorance by the acts of the
plaintiff; ... "

Otherwise put, extrinsic or collateral fraud pertains to such fraud, which prevents the
aggrieved party from having a trial or presenting his case to the court, or is used to procure
the judgment without fair submission of the controversy. This refers to acts intended to keep
the unsuccessful party away from the courts as when there is a false promise of compromise
or when one is kept in ignorance of the suit. The pivotal issues before us are (1) whether.
There was a time during the proceedings below that the Petitioners ever prevented from
exhibiting fully their case, by fraud or deception, practiced on them by Respondents, and (2)
whether the Petitioners were kept away from the court or kept in ignorance by the acts of the
Respondent?

Petitioner asserts that while the complaint filed by respondents was captioned as "Judicial
Partition with Annulment of Title and Recovery of Possession," the allegations therein show
that the cause of action is actually one for settlement of estate of decedent Pedro.

Considering that settlement of estate is a special proceeding cognizable by a probate court

of limited jurisdiction while judicial partition with annulment of title and recovery of possession
are ordinary civil actions cognizable by a court of general jurisdiction, the trial court exceeded
its jurisdiction in entertaining the latter while it was sitting merely in its probate jurisdiction.

This is in view of the prohibition found in the Rules on the joiner of special civil actions and
ordinary civil actions. Thus, petitioner argued that the ruling of the trial court is void and has
25

no effect for having been rendered in without jurisdiction.

The petition is bereft of merit. Petitioner maintains that since. Respondents complaint
alleged the following causes of action, the same is actually one for settlement of estate and
not of judicial partition: FIRST CAUSE OF ACTION

1. That Pedro L. Rifi.oza, Filipino and resident of Nasugbu, Batangas at the time of
his death, died intestate on November 16, 1989. Copy of his death certificate is
hereto attached as Annex "A";

2. That Plaintiffs together with the Defendants enumerated from paragraph 2-A to 2-J
are the only known heirs of the above-mentioned decedent. The plaintiffs and the
Defendants Rolando, Rafael, Antonio, Angelita, Loma all surnamed Rifioza, and
 Myrna R. Limon or Myrna R. Rogador, Epifania Belo and Ma. Theresa R. Demafelix
are the decedents legitimate children with his first wife, while Benita Tenorio Rifioza,
is the decedents widow and Bernadette Rifioza, the decedent's daughter with said
widow. As such, said parties are co-owners by virtue of an intestate inheritance from
the decedent, of the properties enumerated in the succeeding paragraph;

3. That the decedent left the following real properties all located in Nasugbu,
Batangas:

xxxx

16. That the estate of decedent Pedro L. Rifioza has no known legal indebtedness;

17. That said estate remains undivided up to this date and it will be to the best
interest of all heirs that it be partitioned judicially. .
26

Petitioner is mistaken. It is true that some of respondents' causes of action pertaining to the
properties left behind by the decedent Pedro, his known heirs, and the nature and extent of
their interests thereon may fall under an action for settlement of estate. However, a complete
reading of the complaint would readily show that, based on the nature of the suit, the
llegations therein, and the reliefs prayed for, the action, is clearly one for judicial partition
with annulment of title and recovery of possession.

Section 1, Rule 74 of the Rules of Court proyides:

RULE 74
Summary Settlement of Estate

Section 1. Extrajudicial settlement by agreement between heirs. - If the decedent left no will
and no debts and the heirs are all of age5 or the minors are represented by their judicial or
legal representatives duly authorized for the purpose, the parties may without securing
letters of administration, divide the estate among themselves as they see fit by means of a
public instrument filed in the office of the register of deeds, and should they disagree, they
may do so in an ordinary action of partition. If there is only one heir, he may adjudicate to
himself the entire estate by means of an affidavit filled in the office of the register of deeds.
The parties to an Extrajudicial settlement, whether by public instrument or by stipulation in a
pending action for partition, or the sole heir who adjudicates the entire estate to himself by
means of an affidavit shall file, simultaneously with and as a condition precedent to the filing
of the public instrument, or stipulation in the action for partition, or of the affidavit in the office
of the register of deeds, a bond with the said register of deeds, in an amount equivalent to
the value of the personal property involved as certified to under oath by the parties
concerned and conditioned upon the payment of any just claim that may be filed under
section 4 of this rule. It shall be presumed that the decedent left no debts if no creditor files a
petition for letters of administration within two (2) years after the death of the decedent.

The fact of the Extrajudicial settlement or administration shall be Published in a newspaper

of general circulation in the manner provided in the next succeeding section; but no
Extrajudicial settlement shall be binding upon any person who has not participated therein or
had no notice thereof. 27

In this relation, Section 1, Rule 69 of the Rules of Court provides:

Section 1. Complaint in action for partition of real estate. - A person having the right to
compel the partition of real estate may do so as provided in this Rule, setting forth in his
complaint the nature and extent of his title and an adequate description of the real estate of
which partition is demanded and joining as defendants all other persons interested in the
property.28

As can be gleaned from the foregoing provisions, the allegations of respondents in their
complaint are but customary, in fact, mandatory, to a complaint for partition of real estate.
Particularly, the complaint alleged: (1) that Pedro died intestate; (2) that respondents,
together with their co-heirs, are all of legal age, with the exception of one who is represented
by a judicial representative duly authorized for the purpose; (3) that the heirs enumerated are
the only known heirs of Pedro; (4) that there is an account and description of all real
properties left by Pedro; (5) that Pedro's estate has no known indebtedness; and (6) that
respondents, as rightful heirs to the decedents estate, pray for the partition of the same in
accordance with the laws of intestacy. It is clear, therefore, that based on the allegations of
the complaint, the case is one for judicial partition. That the complaint alleged causes of
action identifying the heirs of the decedent, properties of the estate, and their rights thereto,
does not perforce make it an action for settlement of estate.

It must be recalled that the general rule is that when a person dies intestate, or, if testate,
failed to name an executor in his will or the executor named is incompetent, or refuses the
trust, or. Fails to furnish the bond equipped by the Rules of Court, then the decedent's estate
shall be judicially administered and the competent court shall appoint a qualified
administrator the order established in Section 6 of Rule 78 of the Rules of Court. An 29

exception to this rule, however, is found in the aforequoted Section 1 of Rule 4 wherein the
heirs of a decedent, who left no will and no debts due from is estate, may divide the estate
either extrajudicially or in an ordinary action or partition without submitting the same for
judicial administration nor applying for the appointment of an administrator by the court. The
30

reasons that where the deceased dies without pending obligations, there is no necessity for
the appointment of an administrator to administer the. Estate for hem and to deprive the real
owners of their possession to which they are immediately entitled. 31

In this case, it was expressly alleged in the complaint, and was not disputed, that Pedro died
without a will, leaving his estate without any ending obligations. Thus, contrary to petitioners
contention, respondents were under no legal obligation to submit the subject properties of
the estate of a special proceeding for settlement of intestate estate, and are, in fact,
encouraged to have the same partitioned, judicially or extrajudicially, by ereira v. Court of
Appeals: 32

Section 1, Rule 74 of the Revised Rules of Court, however, does not preclude the heirs from
instituting administration proceedings, even if the estate has no debts or obligations, if they
do not desire to resort for good reasons to an ordinary action for partition. While Section 1
allows the heirs to divide the estate among themselves as they may see fit, qr. to resort to an
ordinary action for partition, the said provision does not compel them to do so if they have
good reasons to take a different course of action. It should be noted that recourse to an
administration proceeding even if the estate has no debts is sanctioned only if the heirs have
good reasons for not resorting to an action for partition. Where partition is possible, either in
or out of court, the estate should not be burdened with an administration proceeding without
good and compelling reasons.

Thus, it has been repeatedly held that when a person dies without leaving pending
obligations to be paid, his heirs, whether of age or not, are not bound to submit the property
to a judicial administration, which is always long and costly, or to apply for the appointment of
an administrator by the Court. It has been uniformly held that in such case the judicial
administration and the appointment of an administrator are superfluous and unnecessary
proceedings. 33

Thus, respondents committed no error in. filing an action for judicial partition instead of a
special proceeding for the settlement of estate as law expressly permits the same. That the 1avvphi1

complaint contained allegations inherent in an action for settlement of estate does not. Mean
that there was a prohibited joined of causes of action for questions as to the estate's
properties as well as a determination of the heirs, their status as such, and the nature and
extent of their titles to the estate, may also be properly ventilated in partition proceedings
alone.34

In fact, a complete inventory of the estate may likewise be done during the partition
proceedings, especially since the estate has no debts.~5 Indeed, where the more
expeditious remedy 9f partition is available to the heirs, then they may not be compelled to
submit to administration proceedings, dispensing of the risks of delay and of the properties
being dissipated. 36

Moreover, the fact that respondents' complaint also prayed for the annulment of title and
recovery of possession does not strip the trial court off of its jurisdiction to hear and decide
the case. Asking for the annulment of certain transfers of property could very well be
achieved in an action for partition, as can be seen in cases where 1-ourts determine the
37

parties' rights arising from complaints asking not only for the partition of estates but also for
the annulment of titles and recovery of ownership and possession of property. In fact, in
38

Bagayas v. Bagayas, wherein a complaint for annulment of sale and partition was
39

dismissed by the trial court due to the impropriety of an action for annulment as it constituted
a collateral attack on the certificates of title of the respondents therein, this Court found the
dismissal to be improper in the following manner:

In Lacbayan v. Samoy, Jr. (Lacbayan) which is an action. For partition premised on the
existence or non-existence of co-ownership between the parties, the Court categorically
pronounced that a resolution on the issue of ownership does not subject the Torrens title
issued over the disputed realties 'to a collateral attack. It must be borne in mind that what
cannot be collaterally attacked is the certificate of title and not the title itself. As pronounced
in Lacbayan:

There is no dispute that a Torrens certificate of title cannot be collaterally attacked, but that
rule is not material to the case at bar. What cannot be collaterally attacked is the certificate of
title and not the title itself. The' certificate referred to is that -document issued by the Register
of Deeds known as the TCT. In contrast, the title referred to by law means ownership, which
is, more often than not, represented by that document. Petitioner c.pparently confuses title
with the certificate of title. Title as a concept of ownership should not be confused with the
certificate of title as evidence of such ownership although both are interchangeably used.
(Emphases supplied)

Thus, the RTC erroneously dismissed petitioner's petition for annulment of sale on the
ground that it constituted a collateral attack since she was actually assailing Rogelio and
Orlando's title to the subject lands and not any Torrens certificate oftitle over the same.
Indeed, an action for partition does not preclude the settlement of the issue of ownership. In
fact, the determination as to the existence of the same is necessary in the resolution of an
action for partition, as held in Municipality of Bifzanv. Garcia:
40

The first phase of a partition and/or accounting suit is taken up with the determination of
whether or not a co-ownership in fact exists, and a partition is proper (i.e., not otherwise
legally proscribed) and may be made by voluntary agreement of all the parties interested in
the property. This phase may end with a declaration that plaintiff is not entitled to have a
partition either because a co-ownership does not exist, or partition is_ legally prohibited. It
may end, on the other hand, with an adjudgment that a co-ownership does in truth exist,
partition is proper in the premises and an accounting of rents and profits received by the
defendant from the real estate in question is in order. x x x

The second phase commences when it appears that "the parties are unable to agree upon
the partition" directed by the court. In that event [,] partition shall be done for the parties by
the [c] ourt with the assistance of not more than three (3) commissioners. This second stage
may well also deal with the rendition of the accounting itself and its approval by the [c] ourt
after the. Parties have been accorded opportunity to be heard Thereon, and an award for the
recovery by the party or parties thereto entitled of their just share in the rents and profits of
the real estate in question. xx x.
41

An action for partition, therefore, is premised on the existence or non-existence of co-

ownership between the parties. Unless and until the issue of co-ownership is definitively
42

resolved, it would be premature to effect a partition of an estate. 43

In view of the foregoing, petitioner' s argument that the trial court acted without jurisdiction in
entertaining the action of settlement of estate and annulment of title in a single proceeding is
clearly erroneous for the instant complaint is precisely one for judicial partition with
annulment of title and recovery of possession, filed within the confines of applicable law and
jurisprudence. Under Section 1 of Republic Act No. 7691 (RA 7691), amending Batas
44 45

Pambansa Big. 129, the RTC shall exercise exclusive original jurisdiction over all civil actions
in which the subject of the litigation is incapable of pecuniary estimation. Since the action
herein was not merely for partition and recovery of ownership but also for annulment of title
and documents, the action is incapable of pecuniary estimation and thus cognizable by the
RTC. Hence, considering that the trial court clearly had jurisdiction in rendering its decision,
the instant petition for annulment of judgment must necessarily fail.

Note that even if the instant action was one for annulment of title alone, without the prayer
for judicial partition, the requirement of instituting a separate special proceeding for the
determination of the status and rights of the respondents as putative heirs may be dispensed
with, in light of the fact that the parties had voluntarily submitted the issue to the trial court
and had already presented evidence regarding the issue of heirship. In Portugal v. 46

Portugal-Beltran, the Court explained:

47

In the case at bar, respondent, believing rightly or wrongly that she was the sole heir to
Portugal's estate, executed on February 15, 1988 the questioned Affidavit of Adjudication
under the second sentence of Rule 74, Section 1 of the Revised Rules of Court. Said rule is
an exception to the general rule that when a person dies leaving a property, it should be
judicially administered and the competent court should appoint a qualified administrator, in
the order established in Sec. 6, Rule 78 in case the deceased left no will, or in case he did,
he failed to name an executor therein.
xxxx

It appearing, however, that in the present case the only property of the intestate estate of
Portugal is the Caloocan parcel of land, to still subject it, under the circumstances of the
case, to a special proceeding which could be long, hence, not expeditious, just to establish
the status of petitioners as heirs is not only impractical; it is burdensome to the estate with
the costs and expenses of an administration proceeding. And it is superfluous in light of the
fact that the parties to the evil case - subject of the present case, could and had already in
fact presented evidence before the trial court which assumed jurisdiction over the case upon
the issues it defined during pre-trial.

In fine, under the circumstances of the present case, there being no compelling reason to
still subject Portugals estate to administration proceedings since a determination of
petitioners status as heirs could be achieved in the civil case filed by petitioners, the trial
court should proceed to evaluate the evidence presented by the parties during the trial and
render a decision thereon upon the issues it defined during pre-trial, x x x. 48

Thus, in view of the clarity of respondents' complaint and the causes of action alleged
therein, as well as the fact that the trial court, in arriving at its decision, gave petitioner more
than ample opportunity to advance his claims, petitioner cannot now be permitted to allege
lack of jurisdiction just because the judgment rendered was adverse to them. To repeat, the
action filed herein is one for judicial partition and not for settlement of intestate estate.
Consequently, that respondents also prayed for the annulment of title and recovery of
possession in the same proceeding does not strip the court off of its jurisdiction for asking for
'the annulment of certain transfers of property could very well be achieved in an action for

Neither can they be considered as innocent purchasers for value and builders in good faith.
Good faith consists in the belief of title builder that the land the latter is building on is one's
own without knowledge of any defect or flaw in one's. Title. 52

However, in view of .the manifest defects in the instruments conveying their titles, petitioners
should have been placed on guard. Yet, they still demolished several cottages and
constructed improvement on the properties. Thus, their claim of. Good faith cannot be given
credence.

Indeed, a judgment which has acquired finality becomes immutable and unalterable, hence,
may no longer be modified in any respect except to correct clerical errors or mistakes, all the
issues between the parties being deemed resolved and. laid to rest. it is a fundamental
53

principle in our judicial system and essential to an effective and efficient administration of
justice that, once a judgment has become final, the winning party be, not through a mere
subterfuge, deprived of the fruits of the verdict. Exceptions to the immutability of final
54

judgment is allowed only under the most extraordinary of circumstances. Yet, when 55

petitioner is given more than ample opportunity to be heard, unbridled access to the
appellate courts, as well as unbiased judgments rendered after a consideration of evidence
presented by the parties, as in the case at hand, the Court shall refrain from reversing the
rulings of the courts below in the absence of any showing that the same were rendered with
fraud or lack of jurisdiction.

WHEREFORE, premises considered, .the instant petition is DENIED. The Decision and
Resolution, dated March 13, 2009 and April 23, 2009, respectively, of the Court Appeals for
CA-G.R. SP No. 107347, which affirmed the Judgment dated October 1, 2001 of the
Regional Trial Court of Nasugbu, Batangas, Branch 14, in Civil Case No. 217, insofar as it
conce1ns the resort covered by Transfer Certificates of Title No. 513 54 and No. 51355, and
family home covered by TCT No. 40807 and 40808, are AFFIRMED.

SO ORDERED.