G.R. No. 165554 : July 26, 2010 2.

2. That, [petitioners] undertake to pay to the [respondents] their aforementioned obligations, together with attorney's fees
equivalent to ten percentum (10%) of the total sum thereof, directly at the BULACAN OFFICE of the [respondents'] counsel, located
at No. 24 Hornbill Street, St. Francis Subdivision, Bo. Pandayan, Meycauayan, Bulacan, WITHOUT NEED OF FURTHER DEMAND in
LAZARO PASCO and LAURO PASCO, Petitioners, v. HEIRS OF FILOMENA DE GUZMAN, represented by CRESENCIA DE GUZMAN-
the following specific manner, to wit:
PRINCIPE, Respondents.

P60,000.00 - to be paid on or before May 15, 2002

DECISION

P10,000.00 - monthly payments thereafter, starting June 15, 2002 up to and until the aforementioned obligations shall have been
No court should shield a party from compliance with valid obligations based on wholly unsubstantiated claims of mistake or fraud.
fully paid;
Having refused to abide by a compromise agreement, the aggrieved party may either enforce it or regard it as rescinded and insist
upon the original demand.
3. That, provided that [petitioners] shall truely [sic] comply with the foregoing specifically agreed manner of payments,
[respondents] shall forego and waive all the interests charges of 5% monthly from February 7, 1998 and the 25% attorney's fees
This Petition for Review on Certiorari1cralaw assails the May 13, 2004 Decision2cralaw of the Court of Appeals (CA) and its October
provided for in Annex "AA" of the Complaint;
5, 2004 Resolution3cralaw in CA-G.R. SP No. 81464 which dismissed petitioners' appeal and affirmed the validity of the parties'
Compromise Agreement.
4. In the event of failure on the part of the [petitioners] to comply with any of the specific provisions of this Compromise
Agreement, the [respondents] shall be entitled to the issuance of a "Writ of Execution" to enforce the satisfaction of [petitioners']
Factual Antecedents
obligations, as mentioned in paragraph 1, together with the 5% monthly interests charges and attorney's fees mentioned in
paragraph 3 thereof.cra10
The present petition began with a Complaint for Sum of Money and Damages4cralaw filed on December 13, 2000 by respondents,
the heirs of Filomena de Guzman (Filomena), represented by Cresencia de Guzman-Principe (Cresencia), against petitioners Lauro
Ruling of the Municipal Trial Court
Pasco (Lauro) and Lazaro Pasco (Lazaro). The case was filed before the Municipal Trial Court (MTC) of Bocaue, Bulacan, and
docketed as Civil Case No. MM-3191.cra5cralaw
Unfortunately, this was not the end of litigation. On May 2, 2002, petitioners filed a verified Motion to Set Aside
Decision11cralaw alleging that the Agreement was written in a language not understood by them, and the terms and conditions
In theirComplaint,6cralaw herein respondents alleged that on February 7, 1997, petitioners obtained a loan in the amount
thereof were not fully explained to them. Petitioners further questioned the MTC's jurisdiction, arguing that the total amount
of P140,000.00 from Filomena (now deceased). To secure the petitioners' loan, Lauro executed a chattel mortgage on his Isuzu
allegedly covered by the Compromise Agreement amounted to P588,500.00, which exceeded the MTC's P200,000.00 jurisdictional
Jeep in favor of Filomena. Upon her death, her heirs sought to collect from the petitioners, to no avail. Despite numerous
limit. In an Order12cralaw dated June 28, 2002, the MTC denied the motion; it also granted Cresencia's prayer for the issuance of a
demands, petitioners refused to either pay the balance of the loan or surrender the Isuzu Jeep to the respondents. Thus,
writ of execution. The writ of execution13cralaw was subsequently issued on July 3, 2002. Petitioners' Motion for Reconsideration
respondents were constrained to file the collection case to compel the petitioners to pay the principal amount of P140,000.00 plus
and to Quash Writ/Order of Execution14cralaw dated August 1, 2002 was denied by the MTC in an Order15cralaw dated September
damages in the amount of 5% monthly interest from February 7, 1997, 25% attorney's fees, exemplary damages, and expenses of
5, 2002.
litigation.

Filomena's heirs, consisting of Avelina de Guzman-Cumplido, Cecilia de Guzman, Rosita de Guzman, Natividad de Guzman, and
Cresencia de Guzman-Principe, authorized Cresencia to act as their attorney-in-fact through a Special Power of
Attorney7cralaw (SPA) dated April 6, 1999. The SPA authorized Cresencia to do the following on behalf of the co-heirs:
1) To represent us on all matters concerning the intestate estate of our deceased sister, Filomena de Guzman;
2) To file cases for collection of all accounts due said Filomena de Guzman or her estate, including the power to file petition for
foreclosure of mortgaged properties;
3) To do and perform all other acts necessary to carry out the powers hereinabove conferred.
Undeterred, on October 10, 2002, petitioners filed a Petition for Certiorari and Prohibition with Application for Temporary
Restraining Order/Preliminary Injunction16cralaw before the Regional Trial Court (RTC) of Bocaue. The case was raffled to Branch
82,17cralaw and docketed as Civil Case No. 764-M-2002. In their petition, petitioners argued that the MTC gravely abused its
discretion in approving the Compromise Agreement because (1) the amount involved was beyond the jurisdiction of the MTC; (2)
the MTC failed to ascertain that the parties fully understood the contents of the Agreement; (3) Crescencia had no authority to
represent her co-heirs because Filomena's estate had a personality of its own; and (4) the Compromise Agreement was void for
failure of the judge and Cresencia to explain the terms and conditions to the petitioners.
In their Comment18cralaw dated October 29, 2002, respondents argued that (1) the principal claim of P140,000.00 was within the
MTC's jurisdiction; and (2) the records reveal that it was the petitioners themselves, assisted by their counsel, who proposed the
terms of the settlement, which offer of compromise was accepted in open court by the respondents. Thus, the Compromise
Agreement merely reduced the parties' agreement into writing.

During the pre-trial of the case on February 15, 2002, the parties verbally agreed to settle the case. On February 21, 2002, the
parties jointly filed a Compromise Agreement8cralaw that was signed by the parties and their respective counsel. Said Compromise
Agreement, approved by the MTC in an Order9cralaw dated April 4, 2002, contained the following salient provisions:
1. That [petitioners] admit their principal loan and obligation to the [respondents] in the sum of One Hundred Forty Thousand
Pesos (P140,000.00) Philippine currency; in addition to the incidental and other miscellaneous expenses that they have incurred in
the pursuit of this case, in the further sum of P18,700.00;
Ruling of the Regional Trial Court
The RTC initially granted petitioners' prayer for the issuance of a Temporary Restraining Order (TRO)19cralaw on November 18,
2002, and later issued a preliminary injunction in an Order20cralaw dated December 10, 2002, primarily on the ground that the SPA
did not specifically authorize Cresencia to settle the case. However, Presiding Judge Herminia V. Pasamba later inhibited
herself,21cralaw so the case was re-raffled to Branch 6, presided over by Judge Manuel D.J. Siayngo.cra22cralaw The grant of the
preliminary injunction was thus reconsidered and set aside in an Order23cralaw dated May 15, 2003. In the same Order, the RTC

1
dismissed the petition and held that (1) the MTC had jurisdiction over the subject matter; (2) Cresencia was authorized to institute xxx
the action and enter into a Compromise Agreement on behalf of her co-heirs; and (3) the MTC's approval of the Compromise
Agreement was not done in a capricious, whimsical, or arbitrary manner; thus, petitioners' resort to certiorari under Rule 65 was
(e) an order denying a motion to set aside a judgment by consent, confession or compromise on the ground of fraud, mistake or
improper. Petitioners' Motion for Reconsideration24cralaw was denied,25cralaw hence they sought recourse before the CA.
duress, or any other ground vitiating consent.

Ruling of the Court of Appeals

xxx

In its Decision26cralaw dated May 13, 2004 and Resolution27cralaw dated October 5, 2004, the CA dismissed petitioners' appeal,
In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate special
and held that:
civil action under Rule 65.

1) the MTC had jurisdiction, since the principal amount of the loan only amounted to P140,000.00;
2) Cresencia was duly authorized by her co-heirs to enter into the Compromise Agreement;
3) Petitioners improperly sought recourse before the RTC through a Petition for Certiorari under Rule 65, when the proper remedy
was a Petition for Relief from Judgment under Rule 38.
From the express language of Rule 41, therefore, the MTC's denial of petitioners' Motion to Set Aside Decision could not have been
appealed. Indeed, a decision based on a compromise agreement is immediately final and executory and cannot be the subject of
appeal,32cralaw for when parties enter into a compromise agreement and request a court to render a decision on the basis of their
agreement, it is presumed that such action constitutes a waiver of the right to appeal said decision.cra 33cralaw While there may
have been other remedies available to assail the decision,34cralaw petitioners were well within their rights to institute a special civil
action under Rule 65.

The Regional Trial Court rightly dismissed the petition for certiorari.
Issues

On the second issue, petitioners argue that the RTC, in reconsidering the order granting the application for writ of preliminary
Before us, petitioners claim that, first, they correctly resorted to the remedy of certiorari under Rule 65; second, the RTC gravely
injunction, should not have gone so far as dismissing the main case filed by the petitioners. They claim that the issue in their
erred in dismissing their Petition for Certiorari and Prohibition, when the matter under consideration was merely the propriety of
application for writ of preliminary injunction was different from the issues in the main case for certiorari, and that the dissolution
the grant of the preliminary injunction; and third, that the SPA did not validly authorize Cresencia to enter into the Compromise
of the preliminary injunction should have been without prejudice to the conduct of further proceedings in the main case. They also
Agreement on behalf of her co-heirs.
claim that the RTC did not have the power to dismiss the case without requiring the parties to file memoranda.

Our Ruling
These assertions are belied, however, by petitioners' own submissions.

We deny the petition.

Their arguments were exactly the same, whether relating to the preliminary or permanent injunction. Identical matters were at
issue - the MTC's jurisdiction, petitioners' alleged vitiated consent, and the propriety of enforcing the Compromise Agreement. The
The MTC had jurisdiction over the case. reliefs sought, too, were the same, that is, the grant of an injunction against the enforcement of the compromise:35

It bears stressing that the question of the MTC's jurisdiction has not been raised before this Court; hence, petitioners appear to WHEREFORE, it is most respectfully prayed that:
have admitted that the MTC had jurisdiction to approve the Compromise Agreement. In any event, it is beyond dispute that the
Judiciary Reorganization Act of 1980, or Batas Pambansa (BP) Blg. 129,28cralaw as amended by Republic Act No. 7691,29cralaw fixes
1) A Temporary Restraining Order and/or Preliminary Injunction issue ex parte directing the respondents to cease and desist from
the MTC's jurisdiction over cases where "the demand does not exceed Two hundred thousand pesos (P200,000.00) exclusive of
enforcing, executing, or implementing in any manner the Decision dated April 4, 2002 and acting in Civil Case No. MM-3191 until
interest, damages of whatever kind, attorney's fees, litigation expenses, and costs."30cralaw Thus, respondents' initiatory
further orders from this Honorable Court.
complaint, covering the principal amount of P140,000.00, falls squarely within the MTC's jurisdiction.

2) After hearing, the temporary restraining order/ex parte injunction be replaced by a writ of preliminary injunction.
Petitioners properly resorted to the special civil action of certiorari.

3) After hearing on the merits, judgment be rendered:

On the first question, the CA held that the proper remedy from the MTC's Order approving the Compromise Agreement was a
Petition for Relief from Judgment under Rule 38 and not a Petition for Certiorari under Rule 65. We recall that petitioners filed a
verified Motion to Set Aside Decision on May 2, 2002,31cralaw which was denied by the MTC on June 28, 2002. This Order of denial a. Making the injunction permanent.
was properly the subject of a petition for certiorari, pursuant to Rule 41, Section 1, of the Rules of Court:
Since the RTC found at the preliminary injunction phase that petitioners were not entitled to an injunction (whether preliminary or
Section 1. Subject of Appeal - An appeal may be taken from a judgment or final order that completely disposes of the case, or of a permanent), that petitioners' arguments were insufficient to support the relief sought, and that the MTC's approval of the
particular matter therein when declared by these Rules to be appealable. Compromise Agreement was not done in a capricious, whimsical, or arbitary manner, the RTC was not required to engage in
unnecessary duplication of proceedings. As such, it rightly dismissed the petition.
No appeal may be taken from:chan robles virtual law library

2
In addition, nothing in the Rules of Court commands the RTC to require the parties to file Memoranda. Indeed, Rule 65, Sec. 8 is
explicit in that the court "may dismiss the petition if it finds the same to be patently without merit, prosecuted manifestly for
delay, or that the questions raised therein are too unsubstantial to require consideration."36crlwvirtualibrry
Cresencia was authorized to enter into the Compromise Agreement.
As regards the third issue, petitioners maintain that the SPA was fatally defective because Cresencia was not specifically authorized
to enter into a compromise agreement. Here, we fully concur with the findings of the CA that:chan robles virtual law library
x x x It is undisputed that Cresencia's co-heirs executed a Special Power of Attorney, dated 6 April 1999, designating the former as
their attorney-in-fact and empowering her to file cases for collection of all the accounts due to Filomena or her estate.
Consequently, Cresencia entered into the subject Compromise Agreement in order to collect the overdue loan obtained by Pasco
from Filomena. In so doing, Cresencia was merely performing her duty as attorney-in-fact of her co-heirs pursuant to the Special
Power of Attorney given to her.cra37
Our ruling in Trinidad v. Court of Appeals38cralaw is illuminating. In Trinidad, the heirs of Vicente Trinidad executed a SPA in favor of
Nenita Trinidad (Nenita) to be their representative in litigation involving the sale of real property covered by the decedent's estate.
As here, there was no specific authority to enter into a Compromise Agreement. When a compromise agreement was finally
reached, the heirs later sought to invalidate it, claiming that Nenita was not specifically authorized to enter into the compromise
agreement. We held then, as we do now, that the SPA necessarily included the power of the attorney-in-fact to compromise the
case, and that Nenita's co-heirs could not belatedly disavow their original authorization.cra39cralaw This ruling is even more
significant here, where the co-heirs have not taken any action to invalidate the Compromise Agreement or assail their SPA.
Moreover, we note that petitioners never assailed the validity of the SPA during the pre-trial stage prior to entering the
Compromise Agreement. This matter was never even raised as a ground in petitioners' Motion to Set Aside the compromise, or in
the initial Petition before the RTC. It was only months later, in December 2002, that petitioners - rather self-servingly - claimed that
the SPA was insufficient.
The stated interest rate should be reduced.
Although the petition is unmeritorious, we find the 5% monthly interest rate stipulated in Clause 4 of the Compromise Agreement
to be iniquitous and unconscionable. Accordingly, the legal interest of 12% per annum must be imposed in lieu of the excessive
interest stipulated in the agreement. As we held in Castro v. Tan:40cralaw
In several cases, we have ruled that stipulations authorizing iniquitous or unconscionable interests are contrary to morals, if not
against the law. In Medel v. Court of Appeals, we annulled a stipulated 5.5% per month or 66% per annuminterest on a P500,000.00
loan and a 6% per month or 72% per annum interest on a P60,000.00 loan, respectively, for being excessive, iniquitous,
unconscionable and exorbitant. In Ruiz v. Court of Appeals, we declared a 3% monthly interest imposed on four separate loans to
be excessive. In both cases, the interest rates were reduced to 12% per annum.
In this case, the 5% monthly interest rate, or 60% per annum, compounded monthly, stipulated in the Kasulatan is even higher
than the 3% monthly interest rate imposed in the Ruiz case. Thus, we similarly hold the 5% monthly interest to be excessive,
iniquitous, unconscionable and exorbitant, contrary to morals, and the law. It is therefore void ab initio for being violative of Article
1306 of the Civil Code. x x x (citations omitted)
The proceeds of the loan should be released to Filomena's heirs only upon settlement of her estate.
Finally, it is true that Filomena's estate has a different juridical personality than that of the heirs. Nonetheless, her heirs certainly
have an interest in the preservation of the estate and the recovery of its properties,41cralaw for at the moment of Filomena's
death, the heirs start to own the property, subject to the decedent's liabilities. In this connection, Article 777 of the Civil Code
states that "[t]he rights to the succession are transmitted from the moment of the death of the decedent."42cralaw
Unfortunately, the records before us do not show the status of the proceedings for the settlement of the estate of Filomena, if any.
But to allow the release of the funds directly to the heirs would amount to a distribution of the estate; which distribution and
delivery should be made only after, not before, the payment of all debts, charges, expenses, and taxes of the estate have been
paid.cra43cralaw We thus decree that respondent Cresencia should deposit the amounts received from the petitioners with the
MTC of Bocaue, Bulacan and in turn, the MTC of Bocaue, Bulacan should hold in abeyance the release of the amounts to Filomena's
heirs until after a showing that the proper procedure for the settlement of Filomena's estate has been followed.
WHEREFORE, the petition is DENIED. The May 13, 2004 Decision of the Court of Appeals and its October 5, 2004 Resolution
are AFFIRMED with MODIFICATIONS that the interest rate of 5% per month (60% per annum) is ordered reduced to 12 % per
annum. Respondent Cresencia De Guzman-Principe is DIRECTED to deposit with the Municipal Trial Court of Bocaue, Bulacan the
amounts received from the petitioners. The Municipal Trial Court of Bocaue, Bulacan is likewise DIRECTED to hold in abeyance the
release of any amounts recovered from the petitioners until after a showing that the procedure for settlement of estates of
Filomena de Guzman's estate has been followed, and after all charges on the estate have been fully satisfied.
SO ORDERED.
[G.R. No. 125835. July 30, 1998]
NATALIA CARPENA OPULENCIA, petitioner, vs. COURT OF APPEALS, ALADIN SIMUNDAC and MIGUEL OLIVAN, respondents.
DECISION
PANGANIBAN, J.
Is a contract to sell a real property involved in testate proceedings valid and binding without the approval of the probate
court?
Statement of the Case
This is the main question raised in this petition for review before us, assailing the Decision[1] of the Court of Appeals[2] in CA-
GR CV No. 41994 promulgated on February 6, 1996 and its Resolution[3] dated July 19, 1996. The challenged Decision disposed as
follows:
WHEREFORE, premises considered, the order of the lower court dismissing the complaint is SET ASIDE and judgment is hereby
rendered declaring the CONTRACT TO SELL executed by appellee in favor of appellants as valid and binding, subject to the result of
the administration proceedings of the testate Estate of Demetrio Carpena.
SO ORDERED. [4]
Petitioners Motion for Reconsideration was denied in the challenged Resolution.[5]
The Facts
The antecedent facts, as succinctly narrated by Respondent Court of Appeals are:
In a complaint for specific performance filed with the court a quo [herein private respondents] Aladin Simundac and Miguel Oliven
alleged that [herein petitioner] Natalia Carpena Opulencia executed in their favor a CONTRACT TO SELL Lot 2125 of the Sta. Rosa
Estate, consisting of 23,766 square meters located in Sta. Rosa, Laguna at P150.00 per square meter; that plaintiffs paid a
downpayment of P300,000.00 but defendant, despite demands, failed to comply with her obligations under the contract. [Private
3
respondents] therefore prayed that [petitioner] be ordered to perform her contractual obligations and to further pay damages,
attorneys fee and litigation expenses.
In her traverse, [petitioner] admitted the execution of the contract in favor of plaintiffs and receipt of P300,000.00 as
downpayment. However, she put forward the following affirmative defenses: that the property subject of the contract formed part
of the Estate of Demetrio Carpena (petitioners father), in respect of which a petition for probate was filed with the Regional Trial
Court, Branch 24, Bian, Laguna; that at the time the contract was executed, the parties were aware of the pendency of the probate
proceeding; that the contract to sell was not approved by the probate court; that realizing the nullity of the contract [petitioner]
had offered to return the downpayment received from [private respondents], but the latter refused to accept it; that [private
respondents] further failed to provide funds for the tenant who demanded P150,00.00 in payment of his tenancy rights on the
land; that [petitioner] had chosen to rescind the contract.
At the pre-trial conference the parties stipulated on [sic] the following facts:
1. That on February 3, 1989, [private respondents] and [petitioner] entered into a contract to sell involving a parcel of land situated
in Sta. Rosa, Laguna, otherwise known as Lot No. 2125 of the Sta. Rosa Estate.
2. That the price or consideration of the said sell [sic] is P150.00 per square meters;
3. That the amount of P300,000.00 had already been received by [petitioner];
4. That the parties have knowledge that the property subject of the contract to sell is subject of the probate proceedings;
5. That [as] of this time, the probate Court has not yet issued an order either approving or denying the said sale. (p. 3, appealed
Order of September 15, 1992, pp. 109-112, record).
[Private respondents] submitted their evidence in support of the material allegations of the complaint. In addition to testimonies of
witnesses, [private respondents] presented the following documentary evidences: (1) Contract to Sell (Exh A); (2) machine copy of
the last will and testament of Demetrio Carpena (defendants father) to show that the property sold by defendant was one of those
devised to her in said will (Exh B); (3) receipts signed by defendant for the downpayment in the total amount of P300,000.00 (Exhs
C, D & E); and (4) demand letters sent to defendant (Exhs F & G).
It appears that [petitioner], instead of submitting her evidence, filed a Demurrer to Evidence. In essence, defendant maintained
that the contract to sell was null and void for want of approval by the probate court. She further argued that the contract was
subject to a suspensive condition, which was the probate of the will of defendants father Demetrio Carpena. An Opposition was
filed by [private respondents]. It appears further that in an Order dated December 15, 1992 the court a quo granted the demurrer
to evidence and dismissed the complaint. It justified its action in dismissing the complaint in the following manner:
It is noteworthy that when the contract to sell was consummated, no petition was filed in the Court with notice to the heirs of the
time and place of hearing, to show that the sale is necessary and beneficial. A sale of properties of an estate as beneficial to the
interested parties must comply with the requisites provided by law, (Sec. 7, Rule 89, Rules of Court) which are mandatory, and
without them, the authority to sell, the sale itself, and the order approving it, would be null and void ab initio. (Arcilla vs. David, 77
Phil. 718, Gabriel, et al., vs. Encarnacion, et al., L-6736, May 4, 1954; Bonaga vs. Soler, 2 Phil. 755)Besides, it is axiomatic that where
the estate of a deceased person is already the subject of a testate or intestate proceeding, the administrator cannot enter into any
transaction involving it without prior approval of the probate Court. (Estate of Obave, vs. Reyes, 123 SCRA 767).
As held by the Supreme Court, a decedents representative (administrator) is not estopped from questioning the validity of his own
void deed purporting to convey land. (Bona vs. Soler, 2 Phil, 755). In the case at bar, the [petitioner,] realizing the illegality of the
transaction[,] has interposed the nullity of the contract as her defense, there being no approval from the probate Court, and, in
good faith offers to return the money she received from the [private respondents]. Certainly, the administratrix is not estop[ped]
from doing so and the action to declare the inexistence of contracts do not prescribe. This is what precipitated the filing of
[petitioners] demurrer to evidence.[6]
The trial courts order of dismissal was elevated to the Court of Appeals by private respondents who alleged:
1. The lower court erred in concluding that the contract to sell is null and void, there being no approval of the probate court.
2. The lower court erred in concluding that [petitioner] in good faith offers to return the money to [private respondents].
3. The lower court erred in concluding that [petitioner] is not under estoppel to question the validity of the contract to sell.
4. The lower court erred in not ruling on the consideration of the contract to sell which is tantamount to plain unjust enrichment of
[petitioner] at the expense of [private respondents].[7]
Public Respondents Ruling
Declaring the Contract to Sell valid, subject to the outcome of the testate proceedings on Demetrio Carpenas estate, the
appellate court set aside the trial courts dismissal of the complaint and correctly ruled as follows:
It is apparent from the appealed order that the lower court treated the contract to sell executed by appellee as one made by the
administratrix of the Estate of Demetrio Carpena for the benefit of the estate.Hence, its main reason for voiding the contract in
question was the absence of the probate courts approval. Presumably, what the lower court had in mind was the sale of the estate
or part thereof made by the administrator for the benefit of the estate, as authorized under Rule 89 of the Revised Rules of Court,
which requires the approval of the probate court upon application therefor with notice to the heirs, devisees and legatees.
However, as adverted to by appellants in their brief, the contract to sell in question is not covered by Rule 89 of the Revised Rules
of Court since it was made by appellee in her capacity as an heir, of a property that was devised to her under the will sought to be
probated. Thus, while the document inadvertently stated that appellee executed the contract in her capacity as executrix and
administratrix of the estate, a cursory reading of the entire text of the contract would unerringly show that what she undertook to
sell to appellants was one of the other properties given to her by her late father, and more importantly, it was not made for the
benefit of the estate but for her own needs. To illustrate this point, it is apropos to refer to the preambular or preliminary portion
of the document, which reads:
WHEREAS, the SELLER is the lawful owner of a certain parcel of land, which is more particularly described as follows:
WHEREAS, the SELLER suffers difficulties in her living and has forced to offer the sale of the above-described property, which
property was only one among the other properties given to her by her late father, to anyone who can wait for complete clearance
of the court on the Last Will Testament of her father.
WHEREAS, the SELLER in order to meet her need of cash, has offered for sale the said property at ONE HUNDRED FIFTY PESOS
(150.00) Philippine Currency, per square meter unto the BUYERS, and with this offer, the latter has accepted to buy and/or
purchase the same, less the area for the road and other easements indicated at the back of Transfer Certificate of Title No. 2125
duly confirmed after the survey to be conducted by the BUYERs Licensed Geodetic Engineer, and whatever area [is] left. (Emphasis
added).
To emphasize, it is evident from the foregoing clauses of the contract that appellee sold Lot 2125 not in her capacity as executrix of
the will or administratrix of the estate of her father, but as an heir and more importantly as owner of said lot which, along with
other properties, was devised to her under the will sought to be probated. That being so, the requisites stipulated in Rule 89 of the
Revised Rules of Court which refer to a sale made by the administrator for the benefit of the estate do not apply.
4
xxxxxxxxx
It is noteworthy that in a Manifestation filed with this court by appellants, which is not controverted by appellee, it is mentioned
that the last will and testament of Demetrio Carpena was approved in a final judgment rendered in Special Proceeding No. B-979
by the Regional Trial Court, Branch 24 Binan, Laguna. But of course such approval does not terminate the proceeding[s] since the
settlement of the estate will ensue. Such proceedings will consist, among others, in the issuance by the court of a notice to
creditors (Rule 86), hearing of money claims and payment of taxes and estate debts (Rule 88) and distribution of the residue to the
heirs or persons entitled thereto (Rule 90). In effect, the final execution of the deed of sale itself upon appellants payment of the
balance of the purchase price will have to wait for the settlement or termination of the administration proceedings of the Estate of
Demetrio Carpena. Under the foregoing premises, what the trial court should have done with the complaint was not to dismiss it
but to simply put on hold further proceedings until such time that the estate or its residue will be distributed in accordance with
the approved will.
The rule is that when a demurrer to the evidence is granted by the trial court but reversed on appeal, defendant loses the right to
adduce his evidence. In such a case, the appellate court will decide the controversy on the basis of plaintiffs evidence. In the case
at bench, while we find the contract to sell valid and binding between the parties, we cannot as yet order appellee to perform her
obligations under the contract because the result of the administration proceedings of the testate Estate of Demetrio Carpena has
to be awaited. Hence, we shall confine our adjudication to merely declaring the validity of the questioned Contract to Sell.
Hence, this appeal.[8]
The Issue
Petitioner raises only one issue:
Whether or not the Contract to Sell dated 03 February 1989 executed by the [p]etitioner and [p]rivate [r]espondent[s]
without the requisite probate court approval is valid.
The Courts Ruling
The petition has no merit.
Contract to Sell Valid
In a nutshell, petitioner contends that where the estate of the deceased person is already the subject of a testate or
intestate proceeding, the administrator cannot enter into any transaction involving it without prior approval of the Probate
Court.[9] She maintains that the Contract to Sell is void because it was not approved by the probate court, as required by Section 7,
Rule 89 of the Rules of Court:
SEC. 7. Regulations for granting authority to sell, mortgage, or otherwise encumber estate. The court having jurisdiction of the
estate of the deceased may authorize the executor or administrator to sell, mortgage, or otherwise encumber real estate, in cases
provided by these rules and when it appears necessary or beneficial, under the following regulations:
xxx
Insisting that the above rule should apply to this case, petitioner argues that the stipulations in the Contract to Sell require
her to act in her capacity as an executrix or administratrix. She avers that her obligation to eject tenants pertains to the
administratrix or executrix, the estate being the landlord of the said tenants.[10] Likewise demonstrating that she entered into the
contract in her capacity as executor is the stipulation that she must effect the conversion of subject land from irrigated rice land to
residential land and secure the necessary clearances from government offices. Petitioner alleges that these obligations can be
undertaken only by an executor or administrator of an estate, and not by an heir.[11]
The Court is not persuaded. As correctly ruled by the Court of Appeals, Section 7 of Rule 89 of the Rules of Court is not
applicable, because petitioner entered into the Contract to Sell in her capacity as an heiress, not as an executrix or administratrix of
the estate. In the contract, she represented herself as the lawful owner and seller of the subject parcel of land.[12] She also
explained the reason for the sale to be difficulties in her living conditions and consequent need of cash.[13] These representations
clearly evince that she was not acting on behalf of the estate under probate when she entered into the Contract to
Sell. Accordingly, the jurisprudence cited by petitioner has no application to the instant case.
We emphasize that hereditary rights are vested in the heir or heirs from the moment of the decedents death.[14] Petitioner,
therefore, became the owner of her hereditary share the moment her father died. Thus, the lack of judicial approval does not
invalidate the Contract to Sell, because the petitioner has the substantive right to sell the whole or a part of her share in the estate
of her late father.[15] Thus, in Jakosalem vs. Rafols,[16] the Court resolved an identical issue under the old Civil Code and held:
Article 440 of the Civil Code provides that the possession of hereditary property is deemed to be transmitted to the heir without
interruption from the instant of the death of the decedent, in case the inheritance be accepted. And Manresa with reason states
that upon the death of a person, each of his heirs becomes the undivided owner of the whole estate left with respect to the part or
portion which might be adjudicated to him, a community of ownership being thus formed among the coowners of the estate while
it remains undivided. xxx And according to article 399 of the Civil Code, every part owner may assign or mortgage his part in the
common property, and the effect of such assignment or mortgage shall be limited to the portion which may be allotted him in the
partition upon the dissolution of the community. Hence, where some of the heirs, without the concurrence of the others, sold a
property left by their deceased father, this Court, speaking thru its then Chief Justice Cayetano Arellano, said that the sale was
valid, but that the effect thereof was limited to the share which may be allotted to the vendors upon the partition of the estate.
Administration of the Estate Not Prejudiced by the Contract to Sell
Petitioner further contends that [t]o sanction the sale at this stage would bring about a partial distribution of the decedents
estate pending the final termination of the testate proceedings.[17] This becomes all the more significant in the light of the trial
courts finding, as stated in its Order dated August 20, 1997, that the legitime of one of the heirs has been impaired.[18]
Petitioners contention is not convincing. The Contract to Sell stipulates that petitioners offer to sell is contingent on the
complete clearance of the court on the Last Will Testament of her father.[19] Consequently, although the Contract to Sell was
perfected between the petitioner and private respondents during the pendency of the probate proceedings, the consummation of
the sale or the transfer of ownership over the parcel of land to the private respondents is subject to the full payment of the
purchase price and to the termination and outcome of the testate proceedings. Therefore, there is no basis for petitioners
apprehension that the Contract to Sell may result in a premature partition and distribution of the properties of the estate. Indeed,
it is settled that the sale made by an heir of his share in an inheritance, subject to the pending administration, in no wise stands in
the way of such administration.[20]
Estoppel
Finally, petitioner is estopped from backing out of her representations in her valid Contract to Sell with private respondents,
from whom she had already received P300,000 as initial payment of the purchase price. Petitioner may not renege on her own acts
and representations, to the prejudice of the private respondents who have relied on them.[21] Jurisprudence teaches us that neither
the law nor the courts will extricate a party from an unwise or undesirable contract he or she entered into with all the required
formalities and with full awareness of its consequences.[22]
WHEREFORE, the petition is hereby DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs against
petitioner.
SO ORDERED.
5
[G.R. No. 146006. February 23, 2004]
JOSE C. LEE AND ALMA AGGABAO, in their capacities as President and Corporate Secretary, respectively, of Philippines
Internationl Life Insurance Company, and FILIPINO LOAN ASSISTANCE GROUP, petitioners, vs. REGIONAL TRIAL COURT OF
QUEZON CITY BRANCH 85 presided by JUDGE PEDRO M. AREOLA, BRANCH CLERK OF COURT JANICE Y. ANTERO, DEPUTY
SHERIFFS ADENAUER G. RIVERA and PEDRO L. BORJA, all of the Regional Trial Court of Quezon City Branch 85, MA. DIVINA
ENDERES claiming to be Special Administratrix, and other persons/ public officers acting for and in their behalf, respondents.
DECISION
CORONA, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking to reverse and set aside the decision [1] of the Court
of Appeals, First Division, dated July 26, 2000, in CA G.R. 59736, which dismissed the petition for certiorari filed by petitioners Jose
C. Lee and Alma Aggabao (in their capacities as president and secretary, respectively, of Philippine International Life Insurance
Company) and Filipino Loan Assistance Group.
The antecedent facts follow.
Dr. Juvencio P. Ortaez incorporated the Philippine International Life Insurance Company, Inc. on July 6, 1956. At the time of
the companys incorporation, Dr. Ortaez owned ninety percent (90%) of the subscribed capital stock.
On July 21, 1980, Dr. Ortaez died. He left behind a wife (Juliana Salgado Ortaez), three legitimate children (Rafael, Jose and
Antonio Ortaez) and five illegitimate children by Ligaya Novicio (herein private respondent Ma. Divina Ortaez-Enderes and her
siblings Jose, Romeo, Enrico Manuel and Cesar, all surnamed Ortaez).[2]
On September 24, 1980, Rafael Ortaez filed before the Court of First Instance of Rizal, Quezon City Branch (now Regional
Trial Court of Quezon City) a petition for letters of administration of the intestate estate of Dr. Ortaez, docketed as SP Proc. Q-
30884 (which petition to date remains pending at Branch 85 thereof).
Private respondent Ma. Divina Ortaez-Enderes and her siblings filed an opposition to the petition for letters of
administration and, in a subsequent urgent motion, prayed that the intestate court appoint a special administrator.
On March 10, 1982, Judge Ernani Cruz Pao, then presiding judge of Branch 85, appointed Rafael and Jose Ortaez joint special
administrators of their fathers estate. Hearings continued for the appointment of a regular administrator (up to now no regular
administrator has been appointed).
As ordered by the intestate court, special administrators Rafael and Jose Ortaez submitted an inventory of the estate of their
father which included, among other properties, 2,029[3]shares of stock in Philippine International Life Insurance Company
(hereafter Philinterlife), representing 50.725% of the companys outstanding capital stock.
On April 15, 1989, the decedents wife, Juliana S. Ortaez, claiming that she owned 1,014[4] Philinterlife shares of stock as her
conjugal share in the estate, sold said shares with right to repurchase in favor of herein petitioner Filipino Loan Assistance Group
(FLAG), represented by its president, herein petitioner Jose C. Lee. Juliana Ortaez failed to repurchase the shares of stock within
the stipulated period, thus ownership thereof was consolidated by petitioner FLAG in its name.
On October 30, 1991, Special Administrator Jose Ortaez, acting in his personal capacity and claiming that he owned the
remaining 1,011[5] Philinterlife shares of stocks as his inheritance share in the estate, sold said shares with right to repurchase also
in favor of herein petitioner FLAG, represented by its president, herein petitioner Jose C. Lee. After one year, petitioner FLAG
consolidated in its name the ownership of the Philinterlife shares of stock when Jose Ortaez failed to repurchase the same.
It appears that several years before (but already during the pendency of the intestate proceedings at the Regional Trial Court
of Quezon City, Branch 85), Juliana Ortaez and her two children, Special Administrators Rafael and Jose Ortaez, entered into a
memorandum of agreement dated March 4, 1982 for the extrajudicial settlement of the estate of Dr. Juvencio Ortaez, partitioning
the estate (including the Philinterlife shares of stock) among themselves. This was the basis of the number of shares separately sold
by Juliana Ortaez on April 15, 1989 (1,014 shares) and by Jose Ortaez on October 30, 1991 (1,011 shares) in favor of herein
petitioner FLAG.
On July 12, 1995, herein private respondent Ma. Divina OrtaezEnderes and her siblings (hereafter referred to as private
respondents Enderes et al.) filed a motion for appointment of special administrator of Philinterlife shares of stock. This move was
opposed by Special Administrator Jose Ortaez.
On November 8, 1995, the intestate court granted the motion of private respondents Enderes et al. and appointed private
respondent Enderes special administratrix of the Philinterlife shares of stock.
On December 20, 1995, Special Administratrix Enderes filed an urgent motion to declare void ab initio the memorandum of
agreement dated March 4, 1982. On January 9, 1996, she filed a motion to declare the partial nullity of the extrajudicial settlement
of the decedents estate. These motions were opposed by Special Administrator Jose Ortaez.
On March 22, 1996, Special Administratrix Enderes filed an urgent motion to declare void ab initio the deeds of sale of
Philinterlife shares of stock, which move was again opposed by Special Administrator Jose Ortaez.
On February 4, 1997, Jose Ortaez filed an omnibus motion for (1) the approval of the deeds of sale of the Philinterlife shares
of stock and (2) the release of Ma. Divina Ortaez-Enderes as special administratrix of the Philinterlife shares of stock on the ground
that there were no longer any shares of stock for her to administer.
On August 11, 1997, the intestate court denied the omnibus motion of Special Administrator Jose Ortaez for the approval of
the deeds of sale for the reason that:
Under the Godoy case, supra, it was held in substance that a sale of a property of the estate without an Order of the probate court
is void and passes no title to the purchaser. Since the sales in question were entered into by Juliana S. Ortaez and Jose S. Ortaez in
their personal capacity without prior approval of the Court, the same is not binding upon the Estate.
WHEREFORE, the OMNIBUS MOTION for the approval of the sale of Philinterlife shares of stock and release of Ma. Divina Ortaez-
Enderes as Special Administratrix is hereby denied.[6]
On August 29, 1997, the intestate court issued another order granting the motion of Special Administratrix Enderes for the
annulment of the March 4, 1982 memorandum of agreement or extrajudicial partition of estate. The court reasoned that:
In consonance with the Order of this Court dated August 11, 1997 DENYING the approval of the sale of Philinterlife shares of stocks
and release of Ma. Divina Ortaez-Enderes as Special Administratrix, the Urgent Motion to Declare Void Ab Initio Memorandum of
Agreement dated December 19, 1995. . . is hereby impliedly partially resolved insofar as the transfer/waiver/renunciation of the
Philinterlife shares of stock are concerned, in particular, No. 5, 9(c), 10(b) and 11(d)(ii) of the Memorandum of Agreement.
WHEREFORE, this Court hereby declares the Memorandum of Agreement dated March 4, 1982 executed by Juliana S. Ortaez,
Rafael S. Ortaez and Jose S. Ortaez as partially void ab initio insofar as the transfer/waiver/renunciation of the Philinterlife shares
of stocks are concerned.[7]
Aggrieved by the above-stated orders of the intestate court, Jose Ortaez filed, on December 22, 1997, a petition for
certiorari in the Court of Appeals. The appellate court denied his petition, however, ruling that there was no legal justification
whatsoever for the extrajudicial partition of the estate by Jose Ortaez, his brother Rafael Ortaez and mother Juliana Ortaez during
the pendency of the settlement of the estate of Dr. Ortaez, without the requisite approval of the intestate court, when it was clear
that there were other heirs to the estate who stood to be prejudiced thereby. Consequently, the sale made by Jose Ortaez and his
mother Juliana Ortaez to FLAG of the shares of stock they invalidly appropriated for themselves, without approval of the intestate
court, was void.[8]
Special Administrator Jose Ortaez filed a motion for reconsideration of the Court of Appeals decision but it was denied. He
elevated the case to the Supreme Court via petition for review under Rule 45 which the Supreme Court dismissed on October 5,
1998, on a technicality. His motion for reconsideration was denied with finality on January 13, 1999. On February 23, 1999, the
resolution of the Supreme Court dismissing the petition of Special Administrator Jose Ortaez became final and was subsequently
recorded in the book of entries of judgments.
6
 Meanwhile, herein petitioners Jose Lee and Alma Aggabao, with the rest of the FLAG-controlled board of directors,
increased the authorized capital stock of Philinterlife, diluting in the process the 50.725% controlling interest of the decedent, Dr.
Juvencio Ortaez, in the insurance company.[9] This became the subject of a separate action at the Securities and Exchange
Commission filed by private respondent-Special Administratrix Enderes against petitioner Jose Lee and other members of the FLAG-
controlled board of Philinterlife on November 7, 1994. Thereafter, various cases were filed by Jose Lee as president of Philinterlife
and Juliana Ortaez and her sons against private respondent-Special Administratrix Enderes in the SEC and civil courts.[10] Somehow,
all these cases were connected to the core dispute on the legality of the sale of decedent Dr. Ortaezs Philinterlife shares of stock to
petitioner FLAG, represented by its president, herein petitioner Jose Lee who later became the president of Philinterlife after the
controversial sale.
On May 2, 2000, private respondent-Special Administratrix Enderes and her siblings filed a motion for execution of the
Orders of the intestate court dated August 11 and August 29, 1997 because the orders of the intestate court nullifying the sale
(upheld by the Court of Appeals and the Supreme Court) had long became final. Respondent-Special Administratrix Enderes served
a copy of the motion to petitioners Jose Lee and Alma Aggabao as president and secretary, respectively, of Philinterlife, [11] but
petitioners ignored the same.
On July 6, 2000, the intestate court granted the motion for execution, the dispositive portion of which read:
WHEREFORE, premises considered, let a writ of execution issue as follows:
1. Confirming the nullity of the sale of the 2,029 Philinterlife shares in the name of the Estate of Dr. Juvencio
Ortaez to Filipino Loan Assistance Group (FLAG);
2. Commanding the President and the Corporate Secretary of Philinterlife to reinstate in the stock and transfer
book of Philinterlife the 2,029 Philinterlife shares of stock in the name of the Estate of Dr. Juvencio P.
Ortaez as the owner thereof without prejudice to other claims for violation of pre-emptive rights
pertaining to the said 2,029 Philinterlife shares;
3. Directing the President and the Corporate Secretary of Philinterlife to issue stock certificates of Philinterlife for
2,029 shares in the name of the Estate of Dr. Juvencio P. Ortaez as the owner thereof without
prejudice to other claims for violations of pre-emptive rights pertaining to the said 2,029 Philinterlife
shares and,
4. Confirming that only the Special Administratrix, Ma. Divina Ortaez-Enderes, has the power to exercise all the
rights appurtenant to the said shares, including the right to vote and to receive dividends.
5. Directing Philinterlife and/or any other person or persons claiming to represent it or otherwise, to
acknowledge and allow the said Special Administratrix to exercise all the aforesaid rights on the said
shares and to refrain from resorting to any action which may tend directly or indirectly to impede,
obstruct or bar the free exercise thereof under pain of contempt.
6. The President, Corporate Secretary, any responsible officer/s of Philinterlife, or any other person or persons
claiming to represent it or otherwise, are hereby directed to comply with this order within three (3)
days from receipt hereof under pain of contempt.
7. The Deputy Sheriffs Adenauer Rivera and Pedro Borja are hereby directed to implement the writ of execution
with dispatch to forestall any and/or further damage to the Estate.
SO ORDERED.[12]
In the several occasions that the sheriff went to the office of petitioners to execute the writ of execution, he was barred by
the security guard upon petitioners instructions. Thus, private respondent-Special Administratrix Enderes filed a motion to cite
herein petitioners Jose Lee and Alma Aggabao (president and secretary, respectively, of Philinterlife) in contempt.[13]
Petitioners Lee and Aggabao subsequently filed before the Court of Appeals a petition for certiorari, docketed as CA G.R. SP
No. 59736. Petitioners alleged that the intestate court gravely abused its discretion in (1) declaring that the ownership of FLAG over
the Philinterlife shares of stock was null and void; (2) ordering the execution of its order declaring such nullity and (3) depriving the
petitioners of their right to due process.
On July 26, 2000, the Court of Appeals dismissed the petition outright:
We are constrained to DISMISS OUTRIGHT the present petition for certiorari and prohibition with prayer for a temporary
restraining order and/or writ of preliminary injunction in the light of the following considerations:
1. The assailed Order dated August 11, 1997 of the respondent judge had long become final and executory;
2. The certification on non-forum shopping is signed by only one (1) of the three (3) petitioners in violation of the
Rules; and
3. Except for the assailed orders and writ of execution, deed of sale with right to repurchase, deed of sale of
shares of stocks and omnibus motion, the petition is not accompanied by such pleadings, documents
and other material portions of the record as would support the allegations therein in violation of the
second paragraph, Rule 65 of the 1997 Rules of Civil Procedure, as amended.
Petition is DISMISSED.
SO ORDERED.[14]
The motion for reconsideration filed by petitioners Lee and Aggabao of the above decision was denied by the Court of
Appeals on October 30, 2000:
This resolves the urgent motion for reconsideration filed by the petitioners of our resolution of July 26, 2000 dismissing outrightly
the above-entitled petition for the reason, among others, that the assailed Order dated August 11, 1997 of the respondent Judge
had long become final and executory.
Dura lex, sed lex.
WHEREFORE, the urgent motion for reconsideration is hereby DENIED, for lack of merit.
SO ORDERED.[15]
On December 4, 2000, petitioners elevated the case to the Supreme Court through a petition for review under Rule 45 but
on December 13, 2000, we denied the petition because there was no showing that the Court of Appeals in CA G.R. SP No. 59736
committed any reversible error to warrant the exercise by the Supreme Court of its discretionary appellate jurisdiction.[16]
However, upon motion for reconsideration filed by petitioners Lee and Aggabao, the Supreme Court granted the motion and
reinstated their petition on September 5, 2001. The parties were then required to submit their respective memoranda.
Meanwhile, private respondent-Special Administratrix Enderes, on July 19, 2000, filed a motion to direct the branch clerk of
court in lieu of herein petitioners Lee and Aggabao to reinstate the name of Dr. Ortaez in the stock and transfer book of
Philinterlife and issue the corresponding stock certificate pursuant to Section 10, Rule 39 of the Rules of Court which provides that
the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the
act when so done shall have the effect as if done by the party. Petitioners Lee and Aggabao opposed the motion on the ground that
the intestate court should refrain from acting on the motion because the issues raised therein were directly related to the issues
raised by them in their petition for certiorari at the Court of Appeals docketed as CA-G.R. SP No. 59736. On October 30, 2000, the
intestate court granted the motion, ruling that there was no prohibition for the intestate court to execute its orders inasmuch as
the appellate court did not issue any TRO or writ of preliminary injunction.
On December 3, 2000, petitioners Lee and Aggabao filed a petition for certiorari in the Court of Appeals, docketed as CA-G.R.
SP No. 62461, questioning this time the October 30, 2000 order of the intestate court directing the branch clerk of court to issue
7
the stock certificates. They also questioned in the Court of Appeals the order of the intestate court nullifying the sale made in their
favor by Juliana Ortaez and Jose Ortaez. On November 20, 2002, the Court of Appeals denied their petition and upheld the power
of the intestate court to execute its order. Petitioners Lee and Aggabao then filed motion for reconsideration which at present is
still pending resolution by the Court of Appeals.
Petitioners Jose Lee and Alma Aggabao (president and secretary, respectively, of Philinterlife) and FLAG now raise the
following errors for our consideration:
THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR:
A. IN FAILING TO RECONSIDER ITS PREVIOUS RESOLUTION DENYING THE PETITION DESPITE THE FACT THAT THE
APPELLATE COURTS MISTAKE IN APPREHENDING THE FACTS HAD BECOME PATENT AND EVIDENT FROM
THE MOTION FOR RECONSIDERATION AND THE COMMENT OF RESPONDENT ENDERES WHICH HAD
ADMITTED THE FACTUAL ALLEGATIONS OF PETITIONERS IN THE PETITION AS WELL AS IN THE MOTION
FOR RECONSIDERATION. MOREOVER, THE RESOLUTION OF THE APPELLATE COURT DENYING THE MOTION
FOR RECONSIDERATION WAS CONTAINED IN ONLY ONE PAGE WITHOUT EVEN TOUCHING ON THE
SUBSTANTIVE MERITS OF THE EXHAUSTIVE DISCUSSION OF FACTS AND SUPPORTING LAW IN THE MOTION
FOR RECONSIDERATION IN VIOLATION OF THE RULE ON ADMINISTRATIVE DUE PROCESS;
B. IN FAILING TO SET ASIDE THE VOID ORDERS OF THE INTESTATE COURT ON THE ERRONEOUS GROUND THAT
THE ORDERS WERE FINAL AND EXECUTORY WITH REGARD TO PETITIONERS EVEN AS THE LATTER WERE
NEVER NOTIFIED OF THE PROCEEDINGS OR ORDER CANCELING ITS OWNERSHIP;
C. IN NOT FINDING THAT THE INTESTATE COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
EXCESS OF JURISDICTION (1) WHEN IT ISSUED THE OMNIBUS ORDER NULLIFYING THE OWNERSHIP OF
PETITIONER FLAG OVER SHARES OF STOCK WHICH WERE ALLEGED TO BE PART OF THE ESTATE AND (2)
WHEN IT ISSUED A VOID WRIT OF EXECUTION AGAINST PETITIONER FLAG AS PRESENT OWNER TO
IMPLEMENT MERELY PROVISIONAL ORDERS, THEREBY VIOLATING FLAGS CONSTITUTIONAL RIGHT
AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS;
D. IN FAILING TO DECLARE NULL AND VOID THE ORDERS OF THE INTESTATE COURT WHICH NULLIFIED THE SALE
OF SHARES OF STOCK BETWEEN THE LEGITIMATE HEIR JOSE S. ORTAEZ AND PETITIONER FLAG BECAUSE
OF SETTLED LAW AND JURISPRUDENCE, I.E., THAT AN HEIR HAS THE RIGHT TO DISPOSE OF THE
DECEDENTS PROPERTY EVEN IF THE SAME IS UNDER ADMINISTRATION PURSUANT TO CIVIL CODE
PROVISION THAT POSSESSION OF HEREDITARY PROPERTY IS TRANSMITTED TO THE HEIR THE MOMENT OF
DEATH OF THE DECEDENT (ACEDEBO VS. ABESAMIS, 217 SCRA 194);
E. IN DISREGARDING THE FINAL DECISION OF THE SUPREME COURT IN G.R. NO. 128525 DATED DECEMBER 17,
1999 INVOLVING SUBSTANTIALLY THE SAME PARTIES, TO WIT, PETITIONERS JOSE C. LEE AND ALMA
AGGABAO WERE RESPONDENTS IN THAT CASE WHILE RESPONDENT MA. DIVINA ENDERES WAS THE
PETITIONER THEREIN. THAT DECISION, WHICH CAN BE CONSIDERED LAW OF THE CASE, RULED THAT
PETITIONERS CANNOT BE ENJOINED BY RESPONDENT ENDERES FROM EXERCISING THEIR POWER AS
DIRECTORS AND OFFICERS OF PHILINTERLIFE AND THAT THE INTESTATE COURT IN CHARGE OF THE
INTESTATE PROCEEDINGS CANNOT ADJUDICATE TITLE TO PROPERTIES CLAIMED TO BE PART OF THE
ESTATE AND WHICH ARE EQUALLY CLAIMED BY PETITIONER FLAG.[17]
The petition has no merit.
Petitioners Jose Lee and Alma Aggabao, representing Philinterlife and FLAG, assail before us not only the validity of the writ
of execution issued by the intestate court dated July 7, 2000 but also the validity of the August 11, 1997 order of the intestate court
nullifying the sale of the 2,029 Philinterlife shares of stock made by Juliana Ortaez and Jose Ortaez, in their personal capacities and
without court approval, in favor of petitioner FLAG.
We cannot allow petitioners to reopen the issue of nullity of the sale of the Philinterlife shares of stock in their favor
because this was already settled a long time ago by the Court of Appeals in its decision dated June 23, 1998 in CA-G.R. SP No.
46342. This decision was effectively upheld by us in our resolution dated October 9, 1998 in G.R. No. 135177 dismissing the
petition for review on a technicality and thereafter denying the motion for reconsideration on January 13, 1999 on the ground that
there was no compelling reason to reconsider said denial.[18] Our decision became final on February 23, 1999 and was accordingly
entered in the book of entry of judgments. For all intents and purposes therefore, the nullity of the sale of the Philinterlife shares
of stock made by Juliana Ortaez and Jose Ortaez in favor of petitioner FLAG is already a closed case. To reopen said issue would set
a bad precedent, opening the door wide open for dissatisfied parties to relitigate unfavorable decisions no end. This is completely
inimical to the orderly and efficient administration of justice.
The said decision of the Court of Appeals in CA-G.R. SP No. 46342 affirming the nullity of the sale made by Jose Ortaez and
his mother Juliana Ortaez of the Philinterlife shares of stock read:
Petitioners asseverations relative to said [memorandum] agreement were scuttled during the hearing before this Court thus:
JUSTICE AQUINO:
Counsel for petitioner, when the Memorandum of Agreement was executed, did the children of
Juliana Salgado know already that there was a claim for share in the inheritance of the children of Novicio?
ATTY. CALIMAG:
Your Honor please, at that time, Your Honor, it is already known to them.
JUSTICE AQUINO:
What can be your legal justification for extrajudicial settlement of a property subject of intestate
proceedings when there is an adverse claim of another set of heirs, alleged heirs? What would be the legal
justification for extra-judicially settling a property under administration without the approval of the intestate
court?
ATTY. CALIMAG:
Well, Your Honor please, in that extra-judicial settlement there is an approval of the honorable court
as to the propertys partition x x x. There were as mentioned by the respondents counsel, Your Honor.
ATTY. BUYCO:
No
JUSTICE AQUINO:
The point is, there can be no adjudication of a property under intestate proceedings without the
approval of the court. That is basic unless you can present justification on that. In fact, there are two steps:
first, you ask leave and then execute the document and then ask for approval of the document executed. Now,
is there any legal justification to exclude this particular transaction from those steps?
ATTY. CALIMAG:
None, Your Honor.
ATTY BUYCO:
With that admission that there is no legal justification, Your Honor, we rest the case for the private
respondent. How can the lower court be accused of abusing its discretion? (pages 33-35, TSN of January 29,
1998).
Thus, We find merit in the following postulation by private respondent:
8
What we have here is a situation where some of the heirs of the decedent without securing court approval have appropriated as
their own personal property the properties of [the] Estate, to the exclusion and the extreme prejudice of the other claimant/heirs.
In other words, these heirs, without court approval, have distributed the asset of the estate among themselves and proceeded to
dispose the same to third parties even in the absence of an order of distribution by the Estate Court. As admitted by petitioners
counsel, there was absolutely no legal justification for this action by the heirs. There being no legal justification, petitioner has no
basis for demanding that public respondent [the intestate court] approve the sale of the Philinterlife shares of the Estate by Juliana
and Jose Ortaez in favor of the Filipino Loan Assistance Group.
It is an undisputed fact that the parties to the Memorandum of Agreement dated March 4, 1982 (see Annex 7 of the Comment). . .
are not the only heirs claiming an interest in the estate left by Dr. Juvencio P. Ortaez. The records of this case. . . clearly show that
as early as March 3, 1981 an Opposition to the Application for Issuance of Letters of Administration was filed by the acknowledged
natural children of Dr. Juvencio P. Ortaez with Ligaya Novicio. . . This claim by the acknowledged natural children of Dr. Juvencio P.
Ortaez is admittedly known to the parties to the Memorandum of Agreement before they executed the same. This much was
admitted by petitioners counsel during the oral argument. xxx
Given the foregoing facts, and the applicable jurisprudence, public respondent can never be faulted for not approving. . . the
subsequent sale by the petitioner [Jose Ortaez] and his mother [Juliana Ortaez] of the Philinterlife shares belonging to the Estate of
Dr. Juvencio P. Ortaez. (pages 3-4 of Private Respondents Memorandum; pages 243-244 of the Rollo)
Amidst the foregoing, We found no grave abuse of discretion amounting to excess or want of jurisdiction committed by respondent
judge.[19]
From the above decision, it is clear that Juliana Ortaez, and her three sons, Jose, Rafael and Antonio, all surnamed Ortaez,
invalidly entered into a memorandum of agreement extrajudicially partitioning the intestate estate among themselves, despite
their knowledge that there were other heirs or claimants to the estate and before final settlement of the estate by the intestate
court. Since the appropriation of the estate properties by Juliana Ortaez and her children (Jose, Rafael and Antonio Ortaez) was
invalid, the subsequent sale thereof by Juliana and Jose to a third party (FLAG), without court approval, was likewise void.
An heir can sell his right, interest, or participation in the property under administration under Art. 533 of the Civil Code
which provides that possession of hereditary property is deemed transmitted to the heir without interruption from the moment of
death of the decedent.[20] However, an heir can only alienate such portion of the estate that may be allotted to him in the division
of the estate by the probate or intestate court after final adjudication, that is, after all debtors shall have been paid or the devisees
or legatees shall have been given their shares.[21]This means that an heir may only sell his ideal or undivided share in the estate, not
any specific property therein. In the present case, Juliana Ortaez and Jose Ortaez sold specific properties of the estate (1,014 and
1,011 shares of stock in Philinterlife) in favor of petitioner FLAG. This they could not lawfully do pending the final adjudication of
the estate by the intestate court because of the undue prejudice it would cause the other claimants to the estate, as what
happened in the present case.
Juliana Ortaez and Jose Ortaez sold specific properties of the estate, without court approval. It is well-settled that court
approval is necessary for the validity of any disposition of the decedents estate. In the early case of Godoy vs. Orellano,[22] we laid
down the rule that the sale of the property of the estate by an administrator without the order of the probate court is void and
passes no title to the purchaser. And in the case of Dillena vs. Court of Appeals,[23] we ruled that:
[I]t must be emphasized that the questioned properties (fishpond) were included in the inventory of properties of the estate
submitted by then Administratrix Fausta Carreon Herrera on November 14, 1974. Private respondent was appointed as
administratrix of the estate on March 3, 1976 in lieu of Fausta Carreon Herrera. On November 1, 1978, the questioned deed of sale
of the fishponds was executed between petitioner and private respondent without notice and approval of the probate court. Even
after the sale, administratrix Aurora Carreon still included the three fishponds as among the real properties of the estate in her
inventory submitted on August 13, 1981. In fact, as stated by the Court of Appeals, petitioner, at the time of the sale of the
fishponds in question, knew that the same were part of the estate under administration.
xxxxxxxxx
The subject properties therefore are under the jurisdiction of the probate court which according to our settled jurisprudence has
the authority to approve any disposition regarding properties under administration. . . More emphatic is the declaration We made
in Estate of Olave vs. Reyes (123 SCRA 767) where We stated that when the estate of the deceased person is already the subject of
a testate or intestate proceeding, the administrator cannot enter into any transaction involving it without prior approval of the
probate court.
Only recently, in Manotok Realty, Inc. vs. Court of Appeals (149 SCRA 174), We held that the sale of an immovable property
belonging to the estate of a decedent, in a special proceedings, needs court approval. . . This pronouncement finds support in the
previous case of Dolores Vda. De Gil vs. Agustin Cancio (14 SCRA 797) wherein We emphasized that it is within the jurisdiction of a
probate court to approve the sale of properties of a deceased person by his prospective heirs before final adjudication. x x x
It being settled that property under administration needs the approval of the probate court before it can be disposed of, any
unauthorized disposition does not bind the estate and is null and void. As early as 1921 in the case of Godoy vs. Orellano (42 Phil
347), We laid down the rule that a sale by an administrator of property of the deceased, which is not authorized by the probate
court is null and void and title does not pass to the purchaser.
There is hardly any doubt that the probate court can declare null and void the disposition of the property under administration,
made by private respondent, the same having been effected without authority from said court. It is the probate court that has the
power to authorize and/or approve the sale (Section 4 and 7, Rule 89), hence, a fortiori, it is said court that can declare it null and
void for as long as the proceedings had not been closed or terminated. To uphold petitioners contention that the probate court
cannot annul the unauthorized sale, would render meaningless the power pertaining to the said court. (Bonga vs. Soler, 2 SCRA
755). (emphasis ours)
Our jurisprudence is therefore clear that (1) any disposition of estate property by an administrator or prospective heir
pending final adjudication requires court approval and (2) any unauthorized disposition of estate property can be annulled by the
probate court, there being no need for a separate action to annul the unauthorized disposition.
The question now is: can the intestate or probate court execute its order nullifying the invalid sale?
We see no reason why it cannot. The intestate court has the power to execute its order with regard to the nullity of an
unauthorized sale of estate property, otherwise its power to annul the unauthorized or fraudulent disposition of estate property
would be meaningless. In other words, enforcement is a necessary adjunct of the intestate or probate courts power to annul
unauthorized or fraudulent transactions to prevent the dissipation of estate property before final adjudication.
Moreover, in this case, the order of the intestate court nullifying the sale was affirmed by the appellate courts (the Court of
Appeals in CA-G.R. SP No. 46342 dated June 23, 1998 and subsequently by the Supreme Court in G.R. No. 135177 dated October 9,
1998). The finality of the decision of the Supreme Court was entered in the book of entry of judgments on February 23, 1999.
Considering the finality of the order of the intestate court nullifying the sale, as affirmed by the appellate courts, it was correct for
private respondent-Special Administratrix Enderes to thereafter move for a writ of execution and for the intestate court to grant it.
Petitioners Jose Lee, Alma Aggabao and FLAG, however, contend that the probate court could not issue a writ of execution
with regard to its order nullifying the sale because said order was merely provisional:
The only authority given by law is for respondent judge to determine provisionally whether said shares are included or excluded in
the inventory In ordering the execution of the orders, respondent judge acted in excess of his jurisdiction and grossly violated
settled law and jurisprudence, i.e., that the determination by a probate or intestate court of whether a property is included or
excluded in the inventory of the estate being provisional in nature, cannot be the subject of execution.[24] (emphasis ours)
Petitioners argument is misplaced. There is no question, based on the facts of this case, that the Philinterlife shares of stock
were part of the estate of Dr. Juvencio Ortaez from the very start as in fact these shares were included in the inventory of the
properties of the estate submitted by Rafael Ortaez after he and his brother, Jose Ortaez, were appointed special administrators by
the intestate court.[25]
9
 The controversy here actually started when, during the pendency of the settlement of the estate of Dr. Ortaez, his wife
Juliana Ortaez sold the 1,014 Philinterlife shares of stock in favor petitioner FLAG without the approval of the intestate court. Her
son Jose Ortaez later sold the remaining 1,011 Philinterlife shares also in favor of FLAG without the approval of the intestate court.
We are not dealing here with the issue of inclusion or exclusion of properties in the inventory of the estate because there is
no question that, from the very start, the Philinterlife shares of stock were owned by the decedent, Dr. Juvencio Ortaez. Rather, we
are concerned here with the effect of the sale made by the decedents heirs, Juliana Ortaez and Jose Ortaez, without the
required approval of the intestate court. This being so, the contention of petitioners that the determination of the intestate court
was merely provisional and should have been threshed out in a separate proceeding is incorrect.
The petitioners Jose Lee and Alma Aggabao next contend that the writ of execution should not be executed against them
because they were not notified, nor they were aware, of the proceedings nullifying the sale of the shares of stock.
We are not persuaded. The title of the purchaser like herein petitioner FLAG can be struck down by the intestate court after
a clear showing of the nullity of the alienation. This is the logical consequence of our ruling in Godoy and in several subsequent
cases.[26] The sale of any property of the estate by an administrator or prospective heir without order of the probate or intestate
court is void and passes no title to the purchaser. Thus, in Juan Lao et al. vs. Hon. Melencio Geneto, G.R. No. 56451, June 19, 1985,
we ordered the probate court to cancel the transfer certificate of title issued to the vendees at the instance of the administrator
after finding that the sale of real property under probate proceedings was made without the prior approval of the court. The
dispositive portion of our decision read:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the assailed Order dated February 18, 1981 of the respondent Judge approving the
questioned Amicable Settlement is declared NULL and VOID and hereby SET ASIDE. Consequently, the sale in favor of Sotero
Dioniosio III and by the latter to William Go is likewise declared NULL and VOID. The Transfer Certificate of Title issued to the latter
is hereby ordered cancelled.
It goes without saying that the increase in Philinterlifes authorized capital stock, approved on the vote of petitioners non-
existent shareholdings and obviously calculated to make it difficult for Dr. Ortaezs estate to reassume its controlling interest in
Philinterlife, was likewise void ab initio.
Petitioners next argue that they were denied due process.
We do not think so.
The facts show that petitioners, for reasons known only to them, did not appeal the decision of the intestate court nullifying
the sale of shares of stock in their favor. Only the vendor, Jose Ortaez, appealed the case. A careful review of the records shows
that petitioners had actual knowledge of the estate settlement proceedings and that they knew private respondent Enderes was
questioning therein the sale to them of the Philinterlife shares of stock.
It must be noted that private respondent-Special Administratrix Enderes filed before the intestate court (RTC of Quezon City,
Branch 85) a Motion to Declare Void Ab Initio Deeds of Sale of Philinterlife Shares of Stock on March 22, 1996. But as early as 1994,
petitioners already knew of the pending settlement proceedings and that the shares they bought were under the administration by
the intestate court because private respondent Ma. Divina Ortaez-Enderes and her mother Ligaya Novicio had filed a case against
them at the Securities and Exchange Commission on November 7, 1994, docketed as SEC No. 11-94-4909, for annulment of transfer
of shares of stock, annulment of sale of corporate properties, annulment of subscriptions on increased capital stocks, accounting,
inspection of corporate books and records and damages with prayer for a writ of preliminary injunction and/or temporary
restraining order.[27] In said case, Enderes and her mother questioned the sale of the aforesaid shares of stock to petitioners. The
SEC hearing officer in fact, in his resolution dated March 24, 1995, deferred to the jurisdiction of the intestate court to rule on the
validity of the sale of shares of stock sold to petitioners by Jose Ortaez and Juliana Ortaez:
Petitioners also averred that. . . the Philinterlife shares of Dr. Juvencio Ortaez who died, in 1980, are part of his estate which is
presently the subject matter of an intestate proceeding of the RTC of Quezon City, Branch 85. Although, private respondents [Jose
Lee et al.] presented the documents of partition whereby the foregoing share of stocks were allegedly partitioned and conveyed to
Jose S. Ortaez who allegedly assigned the same to the other private respondents, approval of the Court was not presented. Thus,
the assignments to the private respondents [Jose Lee et al.] of the subject shares of stocks are void.
xxxxxxxxx
With respect to the alleged extrajudicial partition of the shares of stock owned by the late Dr. Juvencio Ortaez, we rule that the
matter properly belongs to the jurisdiction of the regular court where the intestate proceedings are currently pending.[28]
With this resolution of the SEC hearing officer dated as early as March 24, 1995 recognizing the jurisdiction of the intestate
court to determine the validity of the extrajudicial partition of the estate of Dr. Ortaez and the subsequent sale by the heirs of the
decedent of the Philinterlife shares of stock to petitioners, how can petitioners claim that they were not aware of the intestate
proceedings?
Futhermore, when the resolution of the SEC hearing officer reached the Supreme Court in 1996 (docketed as G.R. 128525),
herein petitioners who were respondents therein filed their answer which contained statements showing that they knew of the
pending intestate proceedings:
[T]he subject matter of the complaint is not within the jurisdiction of the SEC but with the Regional Trial Court; Ligaya Novicio and
children represented themselves to be the common law wife and illegitimate children of the late Ortaez; that on March 4, 1982,
the surviving spouse Juliana Ortaez, on her behalf and for her minor son Antonio, executed a Memorandum of Agreement with her
other sons Rafael and Jose, both surnamed Ortaez, dividing the estate of the deceased composed of his one-half (1/2) share in the
conjugal properties; that in the said Memorandum of Agreement, Jose S. Ortaez acquired as his share of the estate the 1,329
shares of stock in Philinterlife; that on March 4, 1982, Juliana and Rafael assigned their respective shares of stock in Philinterlife to
Jose; that contrary to the contentions of petitioners, private respondents Jose Lee, Carlos Lee, Benjamin Lee and Alma Aggabao
became stockholders of Philinterlife on March 23, 1983 when Jose S. Ortaez, the principal stockholder at that time, executed a
deed of sale of his shares of stock to private respondents; and that the right of petitioners to question the Memorandum of
Agreement and the acquisition of shares of stock of private respondent is barred by prescription.[29]
Also, private respondent-Special Administratrix Enderes offered additional proof of actual knowledge of the settlement
proceedings by petitioners which petitioners never denied: (1) that petitioners were represented by Atty. Ricardo Calimag
previously hired by the mother of private respondent Enderes to initiate cases against petitioners Jose Lee and Alma Aggaboa for
the nullification of the sale of the shares of stock but said counsel made a conflicting turn-around and appeared instead as counsel
of petitioners, and (2) that the deeds of sale executed between petitioners and the heirs of the decedent (vendors Juliana Ortaez
and Jose Ortaez) were acknowledged before Atty. Ramon Carpio who, during the pendency of the settlement proceedings, filed a
motion for the approval of the sale of Philinterlife shares of stock to the Knights of Columbus Fraternal Association, Inc. (which
motion was, however, later abandoned).[30] All this sufficiently proves that petitioners, through their counsels, knew of the pending
settlement proceedings.
Finally, petitioners filed several criminal cases such as libel (Criminal Case No. 97-7179-81), grave coercion (Criminal Case No.
84624) and robbery (Criminal Case No. Q-96-67919) against private respondents mother Ligaya Novicio who was a director of
Philinterlife,[31] all of which criminal cases were related to the questionable sale to petitioners of the Philinterlife shares of stock.
Considering these circumstances, we cannot accept petitioners claim of denial of due process. The essence of due process is
the reasonable opportunity to be heard. Where the opportunity to be heard has been accorded, there is no denial of due
process.[32] In this case, petitioners knew of the pending instestate proceedings for the settlement of Dr. Juvencio Ortaezs estate
but for reasons they alone knew, they never intervened. When the court declared the nullity of the sale, they did not bother to
appeal. And when they were notified of the motion for execution of the Orders of the intestate court, they ignored the same.
Clearly, petitioners alone should bear the blame.
Petitioners next contend that we are bound by our ruling in G.R. No. 128525 entitled Ma. Divina Ortaez-Enderes vs. Court of
Appeals, dated December 17, 1999, where we allegedly ruled that the intestate court may not pass upon the title to a certain
property for the purpose of determining whether the same should or should not be included in the inventory but such
determination is not conclusive and is subject to final decision in a separate action regarding ownership which may be constituted
by the parties.
We are not unaware of our decision in G.R. No. 128525. The issue therein was whether the Court of Appeals erred in
affirming the resolution of the SEC that Enderes et al. were not entitled to the issuance of the writ of preliminary injunction. We
ruled that the Court of Appeals was correct in affirming the resolution of the SEC denying the issuance of the writ of preliminary
10
injunction because injunction is not designed to protect contingent rights. Said case did not rule on the issue of the validity of the
sale of shares of stock belonging to the decedents estate without court approval nor of the validity of the writ of execution issued
by the intestate court. G.R. No. 128525 clearly involved a different issue and it does not therefore apply to the present case.
Petitioners and all parties claiming rights under them are hereby warned not to further delay the execution of the Orders of
the intestate court dated August 11 and August 29, 1997.
WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals in CA-G.R. S.P. No. 59736 dated July 26,
2000, dismissing petitioners petition for certiorari and affirming the July 6, 2000 order of the trial court which ordered the
execution of its (trial courts) August 11 and 29, 1997 orders, is hereby AFFIRMED.
SO ORDERED.
CELESTINO BALUS,Petitioner, - versus - SATURNINO BALUS andLEONARDA BALUS VDA. DE CALUNOD,Respondents.
PERALTA, J.:
Assailed in the present petition for review on certiorari under Rule 45 of the Rules of Court is the Decision[1] of the Court of Appeals
(CA) dated May 31, 2005 in CA-G.R. CV No. 58041 which set aside the February 7, 1997 Decision of the Regional Trial Court (RTC) of
Lanao del Norte, Branch 4 in Civil Case No. 3263.
The facts of the case are as follows:
Herein petitioner and respondents are the children of the spouses Rufo and Sebastiana Balus. Sebastiana died on September 6,
1978, while Rufo died on July 6, 1984.
On January 3, 1979, Rufo mortgaged a parcel of land, which he owns, as security for a loan he obtained from the Rural Bank of
Maigo, Lanao del Norte (Bank). The said property was originally covered by Original Certificate of Title No. P-439(788) and more
particularly described as follows:
A parcel of land with all the improvements thereon, containing an area of 3.0740 hectares, more or less,
situated in the Barrio of Lagundang, Bunawan, Iligan City, and bounded as follows: Bounded on the NE.,
along line 1-2, by Lot 5122, Csd-292; along line 2-12, by Dodiongan River; along line 12-13 by Lot 4649, Csd-
292; and along line 12-1, by Lot 4661, Csd-292. x x x [2]
Rufo failed to pay his loan. As a result, the mortgaged property was foreclosed and was subsequently sold to the Bank as the sole
bidder at a public auction held for that purpose. On November 20, 1981, a Certificate of Sale[3] was executed by the sheriff in favor
of the Bank. The property was not redeemed within the period allowed by law. More than two years after the auction, or
on January 25, 1984, the sheriff executed a Definite Deed of Sale[4] in the Bank's favor. Thereafter, a new title was issued in the
name of the Bank.
On October 10, 1989, herein petitioner and respondents executed an Extrajudicial Settlement of Estate[5] adjudicating to each of
them a specific one-third portion of the subject property consisting of 10,246 square meters. The Extrajudicial Settlement also
contained provisions wherein the parties admitted knowledge of the fact that their father mortgaged the subject property to the
Bank and that they intended to redeem the same at the soonest possible time.
Three years after the execution of the Extrajudicial Settlement, herein respondents bought the subject property from the
Bank. On October 12, 1992, a Deed of Sale of Registered Land[6] was executed by the Bank in favor of respondents. Subsequently,
Transfer Certificate of Title (TCT) No. T-39,484(a.f.)[7] was issued in the name of respondents.Meanwhile, petitioner continued
possession of the subject lot.
On June 27, 1995, respondents filed a Complaint[8] for Recovery of Possession and Damages against petitioner, contending that
they had already informed petitioner of the fact that they were the new owners of the disputed property, but the petitioner still
refused to surrender possession of the same to them. Respondents claimed that they had exhausted all remedies for the amicable
settlement of the case, but to no avail.
On February 7, 1997, the RTC rendered a Decision[9] disposing as follows:
WHEREFORE, judgment is hereby rendered, ordering the plaintiffs to execute a Deed of Sale in favor of the
defendant, the one-third share of the property in question, presently possessed by him, and described in the
deed of partition, as follows:
A one-third portion of Transfer Certificate of Title No. T-39,484 (a.f.), formerly Original
Certificate of Title No. P-788, now in the name of Saturnino Balus and Leonarda B. Vda.
de Calunod, situated at Lagundang, Bunawan, Iligan City, bounded on the North by Lot
5122; East by shares of Saturnino Balus and Leonarda Balus-Calunod; South by Lot
4649, Dodiongan River; West by Lot 4661, consisting of 10,246 square meters,
including improvements thereon.
and dismissing all other claims of the parties.
The amount of P6,733.33 consigned by the defendant with the Clerk of Court is hereby ordered delivered to
the plaintiffs, as purchase price of the one-third portion of the land in question.
Plaintiffs are ordered to pay the costs.
SO ORDERED.[10]
The RTC held that the right of petitioner to purchase from the respondents his share in the disputed property was recognized by
the provisions of the Extrajudicial Settlement of Estate, which the parties had executed before the respondents bought the subject
lot from the Bank.
Aggrieved by the Decision of the RTC, herein respondents filed an appeal with the CA.
On May 31, 2005, the CA promulgated the presently assailed Decision, reversing and setting aside the Decision of the RTC and
ordering petitioner to immediately surrender possession of the subject property to the respondents. The CA ruled that when
petitioner and respondents did not redeem the subject property within the redemption period and allowed the consolidation of
ownership and the issuance of a new title in the name of the Bank, their co-ownership was extinguished.
Hence, the instant petition raising a sole issue, to wit:
WHETHER OR NOT CO-OWNERSHIP AMONG THE PETITIONER AND THE RESPONDENTS OVER THE PROPERTY
PERSISTED/CONTINUED TO EXIST (EVEN AFTER THE TRANSFER OF TITLE TO THE BANK) BY VIRTUE OF THE
PARTIES' AGREEMENT PRIOR TO THE REPURCHASE THEREOF BY THE RESPONDENTS; THUS, WARRANTING
THE PETITIONER'S ACT OF ENFORCING THE AGREEMENT BY REIMBURSING THE RESPONDENTS OF HIS
(PETITIONER'S) JUST SHARE OF THE REPURCHASE PRICE.[11]
The main issue raised by petitioner is whether co-ownership by him and respondents over the subject property persisted even
after the lot was purchased by the Bank and title thereto transferred to its name, and even after it was eventually bought back by
the respondents from the Bank.
Petitioner insists that despite respondents' full knowledge of the fact that the title over the disputed property was already in the
name of the Bank, they still proceeded to execute the subject Extrajudicial Settlement, having in mind the intention of purchasing
back the property together with petitioner and of continuing their co-ownership thereof.
Petitioner posits that the subject Extrajudicial Settlement is, in and by itself, a contract between him and respondents, because it
contains a provision whereby the parties agreed to continue their co-ownership of the subject property by redeeming or
repurchasing the same from the Bank. This agreement, petitioner contends, is the law between the parties and, as such, binds the
respondents. As a result, petitioner asserts that respondents' act of buying the disputed property from the Bank without notifying
11
him inures to his benefit as to give him the right to claim his rightful portion of the property, comprising 1/3 thereof, by
reimbursing respondents the equivalent 1/3 of the sum they paid to the Bank.
The Court is not persuaded.
Petitioner and respondents are arguing on the wrong premise that, at the time of the execution of the Extrajudicial Settlement, the
subject property formed part of the estate of their deceased father to which they may lay claim as his heirs.
At the outset, it bears to emphasize that there is no dispute with respect to the fact that the subject property was exclusively
owned by petitioner and respondents' father, Rufo, at the time that it was mortgaged in 1979. This was stipulated by the parties
during the hearing conducted by the trial court on October 28, 1996.[12] Evidence shows that a Definite Deed of Sale[13] was issued
in favor of the Bank on January 25, 1984, after the period of redemption expired. There is neither any dispute that a new title was
issued in the Bank's name before Rufo died on July 6, 1984. Hence, there is no question that the Bank acquired exclusive ownership
of the contested lot during the lifetime of Rufo.
The rights to a person's succession are transmitted from the moment of his death. [14] In addition, the inheritance of a person
consists of the property and transmissible rights and obligations existing at the time of his death, as well as those which have
accrued thereto since the opening of the succession.[15] In the present case, since Rufo lost ownership of the subject property
during his lifetime, it only follows that at the time of his death, the disputed parcel of land no longer formed part of his estate to
which his heirs may lay claim. Stated differently, petitioner and respondents never inherited the subject lot from their father.
Petitioner and respondents, therefore, were wrong in assuming that they became co-owners of the subject lot. Thus, any issue
arising from the supposed right of petitioner as co-owner of the contested parcel of land is negated by the fact that, in the eyes of
the law, the disputed lot did not pass into the hands of petitioner and respondents as compulsory heirs of Rufo at any given point
in time.
The foregoing notwithstanding, the Court finds a necessity for a complete determination of the issues raised in the instant case to
look into petitioner's argument that the Extrajudicial Settlement is an independent contract which gives him the right to enforce
his right to claim a portion of the disputed lot bought by respondents.
It is true that under Article 1315 of the Civil Code of the Philippines, contracts are perfected by mere consent; and from that
moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.
Article 1306 of the same Code also provides that the contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided these are not contrary to law, morals, good customs, public order or public
policy.
In the present case, however, there is nothing in the subject Extrajudicial Settlement to indicate any express stipulation for
petitioner and respondents to continue with their supposed co-ownership of the contested lot.
On the contrary, a plain reading of the provisions of the Extrajudicial Settlement would not, in any way, support petitioner's
contention that it was his and his sibling's intention to buy the subject property from the Bank and continue what they believed to
be co-ownership thereof. It is a cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded
primordial consideration.[16] It is the duty of the courts to place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and the purpose which it is intended to serve. [17] Such intention is determined
from the express terms of their agreement, as well as their contemporaneous and subsequent acts.[18] Absurd and illogical
interpretations should also be avoided.[19]
For petitioner to claim that the Extrajudicial Settlement is an agreement between him and his siblings to continue what they
thought was their ownership of the subject property, even after the same had been bought by the Bank, is stretching the
interpretation of the said Extrajudicial Settlement too far.
In the first place, as earlier discussed, there is no co-ownership to talk about and no property to partition, as the disputed lot never
formed part of the estate of their deceased father.
Moreover, petitioner's asseveration of his and respondents' intention of continuing with their supposed co-ownership is negated
by no less than his assertions in the present petition that on several occasions he had the chance to purchase the subject property
back, but he refused to do so. In fact, he claims that after the Bank acquired the disputed lot, it offered to re-sell the same to him
but he ignored such offer. How then can petitioner now claim that it was also his intention to purchase the subject property from
the Bank, when he admitted that he refused the Bank's offer to re-sell the subject property to him?
In addition, it appears from the recitals in the Extrajudicial Settlement that, at the time of the execution thereof, the parties were
not yet aware that the subject property was already exclusively owned by the Bank. Nonetheless, the lack of knowledge on the
part of petitioner and respondents that the mortgage was already foreclosed and title to the property was already transferred to
the Bank does not give them the right or the authority to unilaterally declare themselves as co-owners of the disputed property;
otherwise, the disposition of the case would be made to depend on the belief and conviction of the party-litigants and not on the
evidence adduced and the law and jurisprudence applicable thereto.
Furthermore, petitioner's contention that he and his siblings intended to continue their supposed co-ownership of the subject
property contradicts the provisions of the subject Extrajudicial Settlement where they clearly manifested their intention of having
the subject property divided or partitioned by assigning to each of the petitioner and respondents a specific 1/3 portion of the
same. Partition calls for the segregation and conveyance of a determinate portion of the property owned in common. It seeks a
severance of the individual interests of each co-owner, vesting in each of them a sole estate in a specific property and giving each
one a right to enjoy his estate without supervision or interference from the other.[20] In other words, the purpose of partition is to
put an end to co-ownership,[21] an objective which negates petitioner's claims in the present case.
WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals, dated May 31, 2005 in CA-G.R. CV No.
58041, is AFFIRMED.
SO ORDERED.
[G.R. No. 126707. February 25, 1999]
BLANQUITA E. DELA MERCED, LUISITO E. DELA MERCED, BLANQUITA M. MACATANGAY, MA. OLIVIA M. PAREDES, TERESITA P.
RUPISAN, RUBEN M. ADRIANO, HERMINIO M. ADRIANO, JOSELITO M. ADRIANO, ROGELIO M. ADRIANO, WILFREDO M.
ADRIANO, VICTOR M. ADRIANO, CORAZON A. ONGOCO, JASMIN A. MENDOZA and CONSTANTINO M. ADRIANO, petitioners,
vs. JOSELITO P. DELA MERCED, respondent.
DECISION
PURISIMA, J.:
This is a Petition for Review on Certiorari of the Decision of the Court of Appeals, dated October 17, 1996, in CA-G.R. CV No.
41283, which reversed the decision, dated June 10, 1992, of the Regional Trial Court, Branch 67, Pasig City, in Civil Case No. 59705.
The facts of the case are, as follows:
On March 23, 1987, Evarista M. dela Merced died intestate, without issue. She left five (5) parcels of land situated in
Orambo, Pasig City.
At the time of her death, Evarista was survived by three sets of heirs, viz: (1) Francisco M. dela Merced, her legitimate
brother ; (2) Teresita P. Rupisan, her niece who is the only daughter of Rosa de la Merced-Platon (a sister who died in 1943) ; and
(3) the legitimate children of Eugenia dela Merced-Adriano (another sister of Evarista who died in 1965), namely: Herminio, Ruben,
Joselito, Rogelio, Wilfredo, Victor and Constantino, all surnamed Adriano, Corazon Adriano-Ongoco and Jasmin Adriano-Mendoza.
Almost a year later or on March 19, 1988, to be precise, Francisco (Evaristas brother) died. He was survived by his wife
Blanquita Errea dela Merced and their three legitimate children, namely, Luisito E. dela Merced, Blanquita M. Macatangay and Ma.
Olivia M. Paredes.
12
 On April 20, 1989, the three sets of heirs of the decedent, Evarista M. dela Merced, referring to (1) the abovenamed heirs of
Francisco; (2) Teresita P. Rupisan and (3) the nine [9] legitimate children of Eugenia, executed an extrajudicial settlement, entitled
Extrajudicial Settlement of the Estate of the Deceased Evarista M. dela Merced adjudicating the properties of Evarista to them,
each set with a share of one-third (1/3) pro-indiviso.
On July 26 ,1990, private respondent Joselito P. Dela Merced , illegitimate son of the late Francisco de la Merced, filed a
Petition for Annulment of the Extrajudicial Settlement of the Estate of the Deceased Evarista M. Dela Merced with Prayer for a
Temporary Restraining Order, alleging that he was fraudulently omitted from the said settlement made by petitioners, who were
fully aware of his relation to the late Francisco. Claiming successional rights, private respondent Joselito prayed that he be included
as one of the beneficiaries, to share in the one-third (1/3) pro-indiviso share in the estate of the deceased Evarista, corresponding
to the heirs of Francisco.
On August 3, 1990, the trial court issued the temporary restraining order prayed for by private respondent Joselito,
enjoining the sale of any of the real properties of the deceased Evarista.
After trial, however, or on June 10, 1992, to be definite, the trial court dismissed the petition, lifted the temporary
restraining order earlier issued, and cancelled the notice of lis pendens on the certificates of title covering the real properties of the
deceased Evarista.
In dismissing the petition, the trial court stated:
The factual setting of the instant motion after considering the circumstances of the entire case and the other evidentiary facts and
documents presented by the herein parties points only to one issue which goes into the very skeleton of the controversy, to
wit: Whether or not the plaintiff may participate in the intestate estate of the late Evarista M. Dela Merced in his capacity as
representative of his alleged father, Francisdo Dela Merced, brother of the deceased, whose succession is under consideration.
xxxxxxxxx
It is to be noted that Francisco Dela Merced, alleged father of the herein plaintiff, is a legitimate child, not an illegitimate. Plaintiff,
on the other hand, is admittedly an illegitimate child of the late FranciscoDela Merced. Hence, as such, he cannot represent his
alleged father in the succession of the latter in the intestate estate of the late Evarista Dela Merced, because of the barrier in Art.
992 of the New Civil Code which states that:
An illegitimate child has no right to inherit ab intestato from the legitimate children and relatives of his father or mother, nor shall
such children or relatives inherit in the same manner from the illegitimate child.
The application of Art. 992 cannot be ignored in the instant case, it is clearly worded in such a way that there can be no room for
any doubts and ambiguities. This provision of the law imposes a barrier between the illegitimate and the legitimate family. x x
x (Rollo, p. 87-88)
Not satisfied with the dismissal of his petition, the private respondent appealed to the Court of Appeals.
In its Decision of October 17,1996, the Court of Appeals reversed the decision of the trial court of origin and ordered the
petitioners to execute an amendatory agreement which shall form part of the original settlement, so as to include private
respondent Joselito as a co-heir to the estate of Francisco, which estate includes one-third (1/3) pro indiviso of the latters
inheritance from the deceased Evarista.
The relevant and dispositive part of the Decision of the Court of Appeals, reads:
xxxxxxxxx
It is a basic principle embodied in Article 777, New Civil Code that the rights to the succession are transmitted from the moment of
the death of the decedent, so that Francisco dela Merced inherited 1/3 of his sisters estate at the moment of the latters
death. Said 1/3 of Evaristas estate formed part of Franciscos estate which was subsequently transmitted upon his death on March
23, 1987 to his legal heirs, among whom is appellant as his illegitimate child. Appellant became entitled to his share in Franciscos
estate from the time of the latters death in 1987. The extrajudicial settlement therefore is void insofar as it deprives plaintiff-
appellant of his share in the estate of Francisco M. dela Merced. As a consequence, the cancellation of the notice of lis pendens is
not in order because the property is directly affected.Appellant has the right to demand a partition of his fathers estate which
includes 1/3 of the property inherited from Evarista dela Merced.
WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE. Defendants-appellees are hereby
ordered to execute an amendatory agreement/settlement to include herein plaintiff-appellant Joselito dela Merced as co-heir to
the estate of Francisco dela Merced which includes 1/3 of the estate subject of the questioned Deed of Extrajudicial Settlement of
the Estate of Evarista M. dela Merced dated April 20, 1989. The amendatory agreement/settlement shall form part of the original
Extrajudicial Settlement. With costs against defendants-appellees.
SO ORDERED. (Rollo, p. 41)
In the Petition under consideration, petitioners insist that being an illegitimate child, private respondent Joselito
is barred from inheriting from Evarista because of the provision of Article 992 of the New Civil Code, which lays down an
impassable barrier between the legitimate and illegitimate families.
The Petition is devoid of merit.
Article 992 of the New Civil Code is not applicable because involved here is not a situation where an illegitimate child would
inherit ab intestato from a legitimate sister of his father, which is prohibited by the aforesaid provision of law. Rather, it is a
scenario where an illegitimate child inherits from his father, the latters share in or portion of, what the latter already inherited
from the deceased sister, Evarista.
As opined by the Court of Appeals, the law in point in the present case is Article 777 of the New Civil Code, which provides
that the rights to succession are transmitted from the moment of death of thedecedent.
Since Evarista died ahead of her brother Francisco, the latter inherited a portion of the estate of the former as one of her
heirs. Subsequently, when Francisco died, his heirs, namely: his spouse, legitimate children, and the private respondent, Joselito,
an illegitimate child, inherited his (Franciscos) share in the estate of Evarista. It bears stressing that Joselito does not claim to be an
heir of Evarista by right of representation but participates in his own right, as an heir of the late Francisco, in the latters share (or
portion thereof) in the estate of Evarista.
Petitioners argue that if Joselito desires to assert successional rights to the intestate estate of his father, the proper forum
should be in the settlement of his own fathers intestate estate, as this Court held in the case of Gutierrez vs. Macandog (150 SCRA
422 [1987])
Petitioners reliance on the case of Gutierrez vs. Macandog (supra) is misplaced. The said case involved a claim for
support filed by one Elpedia Gutierrez against the estate of the decedent, Agustin Gutierrez, Sr., when she was not even an heir to
the estate in question, at the time, and the decedent had no obligation whatsoever to give her support. Thus, this Court ruled that
Elpedia should have asked for support pendente lite before the Juvenile and Domestic Relations Court in which court her husband
(one of the legal heirs of the decedent) had instituted a case for legal separation against her on the ground of an attempt against
his life. When Mauricio (her husband) died, she should have commenced an action for the settlement of the estate of her husband,
in which case she could receive whatever allowance the intestate court would grant her.
The present case, however, relates to the rightful and undisputed right of an heir to the share of his late father in the estate
of the decedent Evarista, ownership of which had been transmitted to his father upon the death of Evarista. There is no legal
obstacle for private respondent Joselito, admittedly the son of the late Francisco, to inherit in his own right as an heir to his fathers
estate, which estate includes a one-third (1/3) undivided share in the estate of Evarista.
WHEREFORE, for lack of merit, the Petition is hereby DENIED and the Appealed Decision of the Court of Appeals
AFFIRMED in toto.
SO ORDERED.
13
[G.R. No. 103577. October 7, 1996]
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of
Floraida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS
MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA PATRICIA ALCARAZ,
assisted by GLORIA F. NOEL as attorney-in-fact, respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last
named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt
Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as Coronels) executed a document
entitled Receipt of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is
reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
------------------------------------------
P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our
inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of
title immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of said property and Miss
Ramona Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father
upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of Ramona
and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of
Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the name of the Coronels father was transferred in their names under
TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag
(hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid
Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by depositing the down payment paid
by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance against the Coronels and caused the
annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of
Deeds of Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. H; Exh. 8).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case
for decision solely on the basis of documentary exhibits.Thus, plaintiffs therein (now private respondents) proffered their
documentary evidence accordingly marked as Exhibits A through J, inclusive of their corresponding submarkings. Adopting these
same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits 1 through 10,
likewise inclusive of their corresponding submarkings.Upon motion of the parties, the trial court gave them thirty (30) days within
which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit their corresponding
comment or reply thereto, after which, the case would be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed
to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from his
regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of
absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No.
331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and
encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof,
the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer
Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared
to be without force and effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate
the subject property and deliver possession thereof to plaintiffs. Plaintiffs claim for damages and attorneys fees, as well as the
counterclaims of defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
14
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon City RTC but the same
was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding
Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when the
parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was
Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the
hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2) When
the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of
the decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending incident in Civil
Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now estopped from
questioning said authority of Judge Roura after they received the decision in question which happens to be adverse to them; (3)
While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the
Presiding Judge with full authority to act on any pending incident submitted before this Court during his incumbency. When he
returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve cases submitted to him
for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned
Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to whom a case is submitted for decision has the
authority to decide the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of
Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution of
which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence presented by
the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the
Incumbent Presiding Judge dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad-
Santos (P), JJ.) rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents Reply Memorandum,
was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on August 28, 1996, due to the
voluntary inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the
trial courts decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise
determination of the legal significance of the document entitled Receipt of Down Payment which was offered in evidence by both
parties. There is no dispute as to the fact that the said document embodied the binding contract between Ramona Patricia Alcaraz
on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No.
119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give
something or to render some service.
While, it is the position of private respondents that the Receipt of Down Payment embodied a perfected contract of sale,
which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that what the
document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence of
Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract of absolute sale.
Plainly, such variance in the contending parties contention is brought about by the way each interprets the terms and/or
conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be available on
record, this Court, as were the courts below, is now called upon to adjudge what the real intent of the parties was at the time the
said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a
contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees
or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is
delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of
which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further
remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is
retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and
failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title
from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the
prospective sellers obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor of the
promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.
15
 A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional
contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which
may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated
(cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the
buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed
by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject
property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract
to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive
condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective
buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will
transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of course, may be
sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and
this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers
ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to
transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or
constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such defect,
cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the second
buyer, the first buyer may seek reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered
into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary
meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners
declared in the said Receipt of Down Payment that they --
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our
inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed is that they
sold their property.
When the Receipt of Down payment is considered in its entirety, it becomes more manifest that there was a clear intent on
the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioners
father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase
price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to
cause the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said
title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership
or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute
contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the
purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate
of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale
could not have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the property to private
respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property,
they undertook to have the certificate of title change to their names and immediately thereafter, to execute the written deed of
absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain
terms and conditions, promised to sell the property to the latter.What may be perceived from the respective undertakings of the
parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father, completely
willing to transfer ownership of the subject house and lot to the buyer if the documents were then in order. It just so happened,
however, that the transfer certificate of title was then still in the name of their father. It was more expedient to first effect the
change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of
the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new
certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only then
will the obligation of the buyer to pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a
buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full
payment therefor, in the contract entered into in the case at bar, the sellers were the ones who were unable to enter into a
contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. It was
the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of an contract of absolute
sale.
What is clearly established by the plain language of the subject document is that when the said Receipt of Down Payment
was prepared and signed by petitioners Romulo A. Coronel, et. al., the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners father,
Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. D; Exh. 4). Thus,
on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became obligatory,
the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of
absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the Receipt of
Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of
contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall
depend upon the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners names was
fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable,
that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent
Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to
forthwith pay the balance of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that:
16
 3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names from our deceased father
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the downpayment above-
stated". The sale was still subject to this suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they
contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names, there
could be no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the
fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985, when a new title was issued
in the names of petitioners as evidenced by TCT No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as Receipt of Down
Payment (Exh. A; Exh. 1), the parties entered into a contract of sale subject to the suspensive condition that the sellers shall effect
the issuance of new certificate title from that of their fathers name to their names and that, on February 6, 1985, this condition
was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which pertinently provides -
Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the
constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been
complied with.
the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of
the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that point in time, reciprocal
obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet the
absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent and value of the
inheritance of a person are transmitted through his death to another or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory
heirs who were called to succession by operation of law.Thus, at the point their father drew his last breath, petitioners stepped
into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became binding
and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the moment of death of the
decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners claim that succession may not be declared unless the creditors have been paid is rendered
moot by the fact that they were able to effect the transfer of the title to the property from the decedents name to their names on
February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that
time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement
with private respondent Ramona P. Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that
they were not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz,
the latter breach her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States
of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with
Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were
correct in unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that
these supposed grounds for petitioners rescission, are mere allegations found only in their responsive pleadings, which by express
provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of
Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners allegations. We have stressed time
and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs.
Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify
petitioners-sellers act of unilaterally and extrajudicially rescinding the contract of sale, there being no express stipulation
authorizing the sellers to extrajudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. De
Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence
on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D.
Alcaraz, Ramonas mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down
payment was made by Concepcion D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P.
Alcaraz. There is no evidence showing that petitioners ever questioned Concepcions authority to represent Ramona P. Alcaraz
when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third
person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the
contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase
price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz as
above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their
names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their
agreement. Ramonas corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer)
never became due and demandable and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in
default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially demands
from them the fulfillment of their obligation.
xxx
17
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. From the moment one of the parties fulfill his obligation, delay by the other begins. (Emphasis
supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale
where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the
absence thereof to the person who presents the oldest title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was
registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina
B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass to the buyer, the exceptions being: (a) when
the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the
two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the second
buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court,
Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the second sale
cannot defeat the first buyers rights except when the second buyer first registers in good faith the second sale (Olivares vs.
Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to
register, since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December
1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to merit the protection of
Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs.
Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject property only
on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected
prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the
property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the second buyer in good faith but
whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of
the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale
entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the
transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April,
1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to
private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the defect in petitioners title to the property at the time of the registration
of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property
to a third party or that another person claims said property in a previous sale, the registration will constitute a registration in bad
faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil.
146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior
to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion,
her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion was also acting in
her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such assumption disputed between mother and
daughter. Thus, We will not touch this issue and no longer disturb the lower courts ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED.
SO ORDERED.
G.R. No. 61584 November 25, 1992
DONATO S. PAULMITAN, JULIANA P. FANESA and RODOLFO FANESA, petitioners, vs.COURT OF APPEALS, ALICIO PAULMITAN,
ELENA PAULMITAN, ABELINO PAULMITAN, ANITA PAULMITAN, BAKING PAULMITAN, ADELINA PAULMITAN and ANITO
PAULMITAN, respondents.
ROMERO, J.:
This is a petition for review on certiorari seeking the reversal of the decision 1 of the Court of Appeals, dated July 14, 1982 in CA-
G.R. No. 62255-R entitled "Alicio Paulmitan, et al. v. Donato Sagario Paulmitan, et al." which affirmed the decision 2 of the then
Court of First Instance (now RTC) of Negros Occidental, 12th Judicial District, Branch IV, Bacolod City, in Civil Case No. 11770.
The antecedent facts are as follows:
Agatona Sagario Paulmitan, who died sometime in 1953, 3 left the two following parcels of land located in the Province of Negros
Occidental: (1) Lot No. 757 with an area of 1,946 square meters covered by Original Certificate of Title (OCT) No. RO-8376; and (2)
Lot No. 1091 with an area of 69,080 square meters and covered by OCT No. RO-11653. From her marriage with Ciriaco Paulmitan,
who is also now deceased, Agatona begot two legitimate children, namely: Pascual Paulmitan, who also died in 1953, 4 apparently
shortly after his mother passed away, and Donato Paulmitan, who is one of the petitioners. Petitioner Juliana P. Fanesa is Donato's
daughter while the third petitioner, Rodolfo Fanes, is Juliana's husband. Pascual Paulmitan, the other son of Agatona Sagario, is
survived by the respondents, who are his children, name: Alicio, Elena, Abelino, Adelina, Anita, Baking and Anito, all surnamed
Paulmitan.
Until 1963, the estate of Agatona Sagario Paulmitan remained unsettled and the titles to the two lots mentioned above remained
in the name of Agatona. However, on August 11, 1963, petitioner Donato Paulmitan executed an Affidavit of Declaration of
Heirship, extrajudicially adjudicating unto himself Lot No. 757 based on the claim that he is the only surviving heir of Agatona
Sagario. The affidavit was filed with the Register of Deeds of Negros Occidental on August 20, 1963, cancelled OCT No. RO-8376 in
the name of Agatona Sagario and issued Transfer Certificate of Title (TCT) No. 35979 in Donato's name.
18
As regards Lot No. 1091, Donato executed on May 28, 1974 a Deed of Sale over the same in favor of petitioner Juliana P. Fanesa,
his daughter. 5
In the meantime, sometime in 1952, for non-payment of taxes, Lot No. 1091 was forfeited and sold at a public auction, with the
Provincial Government of Negros Occidental being the buyer. A Certificate of Sale over the land was executed by the Provincial
Treasurer in favor of the Provincial Board of Negros Occidental. 6
On May 29, 1974, Juliana P. Fanesa redeemed the property from the Provincial Government of Negros Occidental for the amount
of P2,959.09. 7
On learning of these transactions, respondents children of the late Pascual Paulmitan filed on January 18, 1975 with the Court of
First Instance of Negros Occidental a Complaint against petitioners to partition the properties plus damages.
Petitioners set up the defense of prescription with respect to Lot No. 757 as an affirmative defense, contending that the Complaint
was filed more than eleven years after the issuance of a transfer certificate of title to Donato Paulmitan over the land as
consequence of the registration with the Register of Deeds, of Donato's affidavit extrajudicially adjudicating unto himself Lot No.
757. As regards Lot No. 1091, petitioner Juliana P. Fanesa claimed in her Answer to the Complaint that she acquired exclusive
ownership thereof not only by means of a deed of sale executed in her favor by her father, petitioner Donato Paulmitan, but also
by way of redemption from the Provincial Government of Negros Occidental.
Acting on the petitioners' affirmative defense of prescription with respect to Lot No. 757, the trial court issued an order dated April
22, 1976 dismissing the complaint as to the said property upon finding merit in petitioners' affirmative defense. This order, which is
not the object of the present petition, has become final after respondents' failure to appeal therefrom.
Trial proceeded with respect to Lot No. 1091. In a decision dated May 20, 1977, the trial court decided in favor of respondents as to
Lot No. 1091. According to the trial court, the respondents, as descendants of Agatona Sagario Paulmitan were entitled to one-half
(1/2) of Lot No. 1091, pro indiviso. The sale by petitioner Donato Paulmitan to his daughter, petitioner Juliana P. Fanesa, did not
prejudice their rights. And the repurchase by Juliana P. Fanesa of the land from the Provincial Government of Negros Occidental
did not vest in Juliana exclusive ownership over the entire land but only gave her the right to be reimbursed for the amount paid to
redeem the property. The trial court ordered the partition of the land and directed petitioners Donato Paulmitan and Juliana P.
Fanesa to pay private respondents certain amounts representing the latter's share in the fruits of the land. On the other hand,
respondents were directed to pay P1,479.55 to Juliana P. Fanesa as their share in the redemption price paid by Fanesa to the
Provincial Government of Negros Occidental. The dispositive portion of the trial court's decision reads:
WHEREFORE, judgment is hereby rendered on the second cause of action pleaded in the complain as follows:
1. The deed of sale (Exh. "F") dated May 28, 1974 is valid insofar as the one-half undivided portion of Lot 1091 is concerned as to
vest ownership over said half portion in favor of defendant Juliana Fanesa and her husband Rodolfo Fanesa, while the remaining
half shall belong to plaintiffs, pro-indiviso;
2. Lot 1091, Cadastral Survey of Pontevedra, Province of Negros Occidental, now covered by TCT No. RO-11653 (N.A.), is ordered
partitioned. The parties must proceed to an actual partition by property instrument of partition, submitting the corresponding
subdivision within sixty (60) days from finality of this decision, and should they fail to agree, commissioners of partition may be
appointed by the Court;
3. Pending the physical partition, the Register of Deeds of Negros Occidental is ordered to cancel Original Certificate of Title No.
RO-11653 (N.A.) covering Lot 1091, Pontevedra Cadastre, and to issue in lieu thereof a new certificate of title in the name of
plaintiffs and defendants, one-half portion each,pro-indiviso, as indicated in paragraph 1 above;
4. Plaintiffs are ordered to pay, jointly and severally, defendant Juliana Fanesa the amount of P1,479.55 with interest at the legal
rate from May 28, 1974 until paid;
5 Defendants Donato Sagario Paulmitan and Juliana Paulmitan Fanesa are ordered to account to plaintiffs and to pay them, jointly
and severally, the value of the produce from Lot 1091 representing plaintiffs' share in the amount of P5,000.00 per year from 1966
up to the time of actual partition of the property, and to pay them the sum of P2,000.00 as attorney's fees as well as the costs of
the suit.
xxx xxx xxx
On appeal, the Court of Appeals affirmed the trial court's decision. Hence this petition.
To determine the rights and obligations of the parties to the land in question, it is well to review, initially, the relatives who
survived the decedent Agatona Sagario Paulmitan. When Agatona died in 1953, she was survived by two (2) sons, Donato and
Pascual. A few months later in the same year, Pascual died, leaving seven children, the private respondents. On the other had,
Donato's sole offspring was petitioner Juliana P. Fanesa.
At the time of the relevant transactions over the properties of decedent Agatona Sagario Paulmitan, her son Pascual had died,
survived by respondents, his children. It is, thus, tempting to apply the principles pertaining to the right of representation as
regards respondents. It must, however, be borne in mind that Pascual did no predecease his mother, 8 thus precluding the
operation of the provisions in the Civil Code on the right of representation 9 with respect to his children, the respondents. When
Agatona Sagario Paulmitan died intestate in 1952, her two (2) sons Donato and Pascual were still alive. Since it is well-settled by
virtue of Article 777 of the Civil Code that "[t]he rights to the succession are transmitted from the moment of the death of the
decedent," 10 the right of ownership, not only of Donato but also of Pascual, over their respective shares in the inheritance was
automatically and by operation of law vested in them in 1953 when their mother died intestate. At that stage, the children of
Donato and Pascual did not yet have any right over the inheritance since "[i]n every inheritance, the relative nearest in degree
excludes the more distant
ones." 11 Donato and Pascual excluded their children as to the right to inherit from Agatona Sagario Paulmitan, their mother.
From the time of the death of Agatona Sagario Paulmitan to the subsequent passing away of her son Pascual in 1953, the estate
remained unpartitioned. Article 1078 of the Civil Code provides: "Where there are two or more heirs, the whole estate of the
decedent is, before its partition, owned in common by such heirs, subject to the payment of debts of the deceased." 12 Donato and
Pascual Paulmitan were, therefore, co-owners of the estate left by their mother as no partition was ever made.
When Pascual Paulmitan died intestate in 1953, his children, the respondents, succeeded him in the co-ownership of the disputed
property. Pascual Paulmitan's right of ownership over an undivided portion of the property passed on to his children, who, from
the time of Pascual's death, became co-owners with their uncle Donato over the disputed decedent estate.
Petitioner Juliana P. Fanesa claims ownership over Lot No. 1091 by virtue of two transactions, namely: (a) the sale made in her
favor by her father Donato Paulmitan; and (b) her redemption of the land from the Provincial of Negros Occidental after it was
forfeited for non-payment of taxes.
When Donato Paulmitan sold on May 28, 1974 Lot No. 1091 to his daughter Juliana P. Fanesa, he was only a co-owner with
respondents and as such, he could only sell that portion which may be allotted to him upon termination of the co-ownership. 13 The
sale did not prejudice the rights of respondents to one half (1/2) undivided share of the land which they inherited from their father.
It did not vest ownership in the entire land with the buyer but transferred only the seller's pro-indiviso share in the property 14 and
consequently made the buyer a co-owner of the land until it is partitioned. In Bailon-Casilao v. Court of Appeals, 15 the Court,
through Justice Irene R. Cortes, outlined the effects of a sale by one co-owner without the consent of all the co-owners, thus:
The rights of a co-owner of a certain property are clearly specified in Article 493 of the Civil Code, Thus:
19
Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it and even substitute another person its enjoyment, except when personal rights are
involved. But the effect of the alienation or mortgage, with respect to the co-owners, shall be limited to the portion which may be
allotted to him in the division upon the termination of the co-ownership. [Emphasis supplied.]
As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the sale will affect only his own share
but not those of the other co-owners who did not consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320 (1923)]. This is because
under the aforementioned codal provision, the sale or other disposition affects only his undivided share and the transferee gets
only what would correspond to his grantor in the partition of the thing owned in common [Ramirez v. Bautista, 14 Phil. 528 (1909)].
Consequently, by virtue of the sales made by Rosalia and Gaudencio Bailon which are valid with respect to their proportionate
shares, and the subsequent transfers which culminated in the sale to private respondent Celestino Afable, the said Afable thereby
became a co-owner of the disputed parcel of land as correctly held by the lower court since the sales produced the effect of
substituting the buyers in the enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)].
From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided share, a sale of the entire property by
one co-owner without the consent of the other co-owners is not null and void. However, only the rights of the co-owner-seller are
transferred, thereby making the buyer a co-owner of the property.
Applying this principle to the case at bar, the sale by petitioner Donato Paulmitan of the land to his daughter, petitioner Juliana P.
Fanesa, did not give to the latter ownership over the entire land but merely transferred to her the one half (1/2) undivided share of
her father, thus making her the co-owner of the land in question with the respondents, her first cousins.
Petitioner Juliana P. Fanesa also claims ownership of the entire property by virtue of the fact that when the Provincial Government
of Negros Occidental bought the land after it was forfeited for non-payment of taxes, she redeemed it.
The contention is without merit.
The redemption of the land made by Fanesa did not terminate the co-ownership nor give her title to the entire land subject of the
co-ownership. Speaking on the same issue raised by petitioners, the Court, in Adille v. Court of Appeals, 16 resolved the same with
the following pronouncements:
The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the property held in common?
Essentially, it is the petitioners' contention that the property subject of dispute devolved upon him upon the failure of his co-heirs
to join him in its redemption within the period required by law. He relies on the provisions of Article 1515 of the old Civil Code,
Article 1613 of the present Code, giving the vendee a retro the right to demand redemption of the entire property.
There is no merit in this petition.
The right of repurchase may be exercised by co-owner with respect to his share alone (CIVIL CODE, art. 1612, CIVIL CODE (1889),
art. (1514.). While the records show that petitioner redeemed the property in its entirety, shouldering the expenses therefor, that
did not make him the owner of all of it. In other words, it did not put to end the existing state of co-ownership (Supra, Art. 489).
There is no doubt that redemption of property entails a necessary expense. Under the Civil Code:
Art. 488. Each co-owner shall have a right to compel the other co-owners to contribute to the expenses of preservation of the thing
or right owned in common and to the taxes. Any one of the latter may exempt himself from this obligation by renouncing so much
of his undivided interest as may be equivalent to his share of the expenses and taxes. No such waiver shall be made if it is
prejudicial to the co-ownership.
The result is that the property remains to be in a condition of co-ownership. While a vendee a retro, under Article 1613 of the
Code, "may not be compelled to consent to a partial redemption," the redemption by one co-heir or co-owner of the property in its
totality does not vest in him ownership over it. Failure on the part of all the co-owners to redeem it entitles the vendee a retro to
retain the property and consolidate title thereto in his name (Supra, art. 1607). But the provision does not give to the redeeming
co-owner the right to the entire property. It does not provide for a mode of terminating a co-ownership.
Although petitioner Fanesa did not acquire ownership over the entire lot by virtue of the redemption she made, nevertheless, she
did acquire the right to reimbursed for half of the redemption price she paid to the Provincial Government of Negros Occidental on
behalf of her co-owners. Until reimbursed, Fanesa hold a lien upon the subject property for the amount due her. 17
Finally, petitioners dispute the order of the trial court, which the Court of Appeals affirmed, for them to pay private respondents
P5,000.00 per year from 1966 until the partition of the estate which represents the share of private respondents in the fruits of the
land. According to petitioners, the land is being leased for P2,000.00 per year only. This assigned error, however raises a factual
question. The settled rule is that only questions of law may be raised in a petition for review. As a general rule, findings of fact
made by the trial court and the Court of Appeals are final and conclusive and cannot be reviewed on appeal. 18
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals AFFIRMED.
SO ORDERED.
[G.R. No. 129008. January 13, 2004]
TEODORA A. RIOFERIO, VERONICA O. EVANGELISTA assisted by her husband ZALDY EVANGELISTA, ALBERTO ORFINADA, and
ROWENA O. UNGOS, assisted by her husband BEDA UNGOS, petitioners, vs. COURT OF APPEALS, ESPERANZA P. ORFINADA,
LOURDES P. ORFINADA, ALFONSO ORFINADA, NANCY P. ORFINADA, ALFONSO JAMES P. ORFINADA, CHRISTOPHER P. ORFINADA
and ANGELO P. ORFINADA,respondents.
DECISION
TINGA, J.:
Whether the heirs may bring suit to recover property of the estate pending the appointment of an administrator is the issue
in this case.
This Petition for Review on Certiorari, under Rule 45 of the Rules of Court, seeks to set aside the Decision[1] of the Court of
Appeals in CA-G.R. SP No. 42053 dated January 31, 1997, as well as its Resolution[2] dated March 26, 1997, denying petitioners
motion for reconsideration.
On May 13, 1995, Alfonso P. Orfinada, Jr. died without a will in Angeles City leaving several personal and real properties
located in Angeles City, Dagupan City and Kalookan City.[3] He also left a widow, respondent Esperanza P. Orfinada, whom he
married on July 11, 1960 and with whom he had seven children who are the herein respondents, namely: Lourdes P. Orfinada,
Alfonso Clyde P. Orfinada, Nancy P. Orfinada-Happenden, Alfonso James P. Orfinada, Christopher P. Orfinada, Alfonso Mike P.
Orfinada (deceased) and Angelo P. Orfinada.[4]
Apart from the respondents, the demise of the decedent left in mourning his paramour and their children. They are
petitioner Teodora Riofero, who became a part of his life when he entered into an extra-marital relationship with her during the
subsistence of his marriage to Esperanza sometime in 1965, and co-petitioners Veronica[5], Alberto and Rowena.[6]
On November 14, 1995, respondents Alfonso James and Lourdes Orfinada discovered that on June 29, 1995, petitioner
Teodora Rioferio and her children executed an Extrajudicial Settlement of Estate of a Deceased Person with Quitclaim involving the
properties of the estate of the decedent located in Dagupan City and that accordingly, the Registry of Deeds in Dagupan issued
Certificates of Titles Nos. 63983, 63984 and 63985 in favor of petitioners Teodora Rioferio, Veronica Orfinada-Evangelista, Alberto
20
Orfinada and Rowena Orfinada-Ungos. Respondents also found out that petitioners were able to obtain a loan of P700,000.00 from
the Rural Bank of Mangaldan Inc. by executing a Real Estate Mortgage over the properties subject of the extra-judicial
settlement.[7]
On December 1, 1995, respondent Alfonso Clyde P. Orfinada III filed a Petition for Letters of Administration docketed as S.P.
Case No. 5118 before the Regional Trial Court of Angeles City, praying that letters of administration encompassing the estate of
Alfonso P. Orfinada, Jr. be issued to him.[8]
On December 4, 1995, respondents filed a Complaint for the Annulment/Rescission of Extra Judicial Settlement of Estate of a
Deceased Person with Quitclaim, Real Estate Mortgage and Cancellation of Transfer Certificate of Titles with Nos. 63983, 63985 and
63984 and Other Related Documents with Damages against petitioners, the Rural Bank of Mangaldan, Inc. and the Register of
Deeds of Dagupan City before the Regional Trial Court, Branch 42, Dagupan City.[9]
On February 5, 1996, petitioners filed their Answer to the aforesaid complaint interposing the defense that the property
subject of the contested deed of extra-judicial settlement pertained to the properties originally belonging to the parents of
Teodora Riofero[10] and that the titles thereof were delivered to her as an advance inheritance but the decedent had managed to
register them in his name.[11] Petitioners also raised the affirmative defense that respondents are not the real parties-in-interest
but rather the Estate of Alfonso O. Orfinada, Jr. in view of the pendency of the administration proceedings. [12] On April 29, 1996,
petitioners filed a Motion to Set Affirmative Defenses for Hearing[13] on the aforesaid ground.
The lower court denied the motion in its Order[14] dated June 27, 1996, on the ground that respondents, as heirs, are the real
parties-in-interest especially in the absence of an administrator who is yet to be appointed in S.P. Case No. 5118. Petitioners
moved for its reconsideration[15] but the motion was likewise denied.[16]
This prompted petitioners to file before the Court of Appeals their Petition for Certiorari under Rule 65 of the Rules of Court
docketed as CA G.R. S.P. No. 42053.[17] Petitioners averred that the RTC committed grave abuse of discretion in issuing the assailed
order which denied the dismissal of the case on the ground that the proper party to file the complaint for the annulment of the
extrajudicial settlement of the estate of the deceased is the estate of the decedent and not the respondents.[18]
The Court of Appeals rendered the assailed Decision[19] dated January 31, 1997, stating that it discerned no grave abuse of
discretion amounting to lack or excess of jurisdiction by the public respondent judge when he denied petitioners motion to set
affirmative defenses for hearing in view of its discretionary nature.
A Motion for Reconsideration was filed by petitioners but it was denied.[20] Hence, the petition before this Court.
The issue presented by the petitioners before this Court is whether the heirs have legal standing to prosecute the rights
belonging to the deceased subsequent to the commencement of the administration proceedings.[21]
Petitioners vehemently fault the lower court for denying their motion to set the case for preliminary hearing on their
affirmative defense that the proper party to bring the action is the estate of the decedent and not the respondents. It must be
stressed that the holding of a preliminary hearing on an affirmative defense lies in the discretion of the court. This is clear from the
Rules of Court, thus:
SEC. 5. Pleadings grounds as affirmative defenses.- Any of the grounds for dismissal provided for in this rule, except improper
venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to dismiss had been
filed.[22] (Emphasis supplied.)
Certainly, the incorporation of the word may in the provision is clearly indicative of the optional character of the preliminary
hearing. The word denotes discretion and cannot be construed as having a mandatory effect. [23] Subsequently, the electivity of the
proceeding was firmed up beyond cavil by the 1997 Rules of Civil Procedure with the inclusion of the phrase in the discretion of the
Court, apart from the retention of the word may in Section 6,[24] in Rule 16 thereof.
Just as no blame of abuse of discretion can be laid on the lower courts doorstep for not hearing petitioners affirmative
defense, it cannot likewise be faulted for recognizing the legal standing of the respondents as heirs to bring the suit.
Pending the filing of administration proceedings, the heirs without doubt have legal personality to bring suit in behalf of the
estate of the decedent in accordance with the provision of Article 777 of the New Civil Code that (t)he rights to succession are
transmitted from the moment of the death of the decedent. The provision in turn is the foundation of the principle that the
property, rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to another
or others by his will or by operation of law.[25]
Even if administration proceedings have already been commenced, the heirs may still bring the suit if an administrator has
not yet been appointed. This is the proper modality despite the total lack of advertence to the heirs in the rules on party
representation, namely Section 3, Rule 3[26] and Section 2, Rule 87[27] of the Rules of Court. In fact, in the case of Gochan v.
Young,[28] this Court recognized the legal standing of the heirs to represent the rights and properties of the decedent under
administration pending the appointment of an administrator. Thus:
The above-quoted rules,[29] while permitting an executor or administrator to represent or to bring suits on behalf of the deceased,
do not prohibit the heirs from representing the deceased. These rules are easily applicable to cases in which an administrator has
already been appointed. But no rule categorically addresses the situation in which special proceedings for the settlement of an
estate have already been instituted, yet no administrator has been appointed. In such instances, the heirs cannot be expected to
wait for the appointment of an administrator; then wait further to see if the administrator appointed would care enough to file a
suit to protect the rights and the interests of the deceased; and in the meantime do nothing while the rights and the properties of
the decedent are violated or dissipated.
Even if there is an appointed administrator, jurisprudence recognizes two exceptions, viz: (1) if the executor or administrator
is unwilling or refuses to bring suit;[30] and (2) when the administrator is alleged to have participated in the act complained of[31] and
he is made a party defendant.[32] Evidently, the necessity for the heirs to seek judicial relief to recover property of the estate is as
compelling when there is no appointed administrator, if not more, as where there is an appointed administrator but he is either
disinclined to bring suit or is one of the guilty parties himself.
All told, therefore, the rule that the heirs have no legal standing to sue for the recovery of property of the estate during the
pendency of administration proceedings has three exceptions, the third being when there is no appointed administrator such as in
this case.
As the appellate court did not commit an error of law in upholding the order of the lower court, recourse to this Court is not
warranted.
WHEREFORE, the petition for review is DENIED. The assailed decision and resolution of the Court of Appeals are hereby
AFFIRMED. No costs.
SO ORDERED.
[G.R. No. 126334. November 23, 2001]
EMILIO EMNACE, petitioner, vs. COURT OF APPEALS, ESTATE OF VICENTE TABANAO, SHERWIN TABANAO, VICENTE WILLIAM
TABANAO, JANETTE TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA, ROSELA TABANAO and VINCENT
TABANAO, respondents.
DECISION
YNARES-SANTIAGO, J.:
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a business concern known as Ma.
Nelma Fishing Industry. Sometime in January of 1986, they decided to dissolve their partnership and executed an agreement of
partition and distribution of the partnership properties among them, consequent to Jacinto Divinagracias withdrawal from the
partnership.[1] Among the assets to be distributed were five (5) fishing boats, six (6) vehicles, two (2) parcels of land located at Sto.
Nio and Talisay, Negros Occidental, and cash deposits in the local branches of the Bank of the Philippine Islands and Prudential
Bank.
21
 Throughout the existence of the partnership, and even after Vicente Tabanaos untimely demise in 1994, petitioner failed to
submit to Tabanaos heirs any statement of assets and liabilities of the partnership, and to render an accounting of the partnerships
finances. Petitioner also reneged on his promise to turn over to Tabanaos heirs the deceaseds 1/3 share in the total assets of the
partnership, amounting to P30,000,000.00, or the sum of P10,000,000.00, despite formal demand for payment thereof.[2]
Consequently, Tabanaos heirs, respondents herein, filed against petitioner an action for accounting, payment of shares,
division of assets and damages.[3] In their complaint, respondents prayed as follows:
1. Defendant be ordered to render the proper accounting of all the assets and liabilities of the partnership at bar; and
2. After due notice and hearing defendant be ordered to pay/remit/deliver/surrender/yield to the plaintiffs the following:
A. No less than One Third (1/3) of the assets, properties, dividends, cash, land(s), fishing vessels, trucks, motor vehicles, and other
forms and substance of treasures which belong and/or should belong, had accrued and/or must accrue to the partnership;
B. No less than Two Hundred Thousand Pesos (P200,000.00) as moral damages;
C. Attorneys fees equivalent to Thirty Percent (30%) of the entire share/amount/award which the Honorable Court may resolve the
plaintiffs as entitled to plus P1,000.00 for every appearance in court.[4]
Petitioner filed a motion to dismiss the complaint on the grounds of improper venue, lack of jurisdiction over the nature of
the action or suit, and lack of capacity of the estate of Tabanao to sue.[5] On August 30, 1994, the trial court denied the motion to
dismiss. It held that venue was properly laid because, while realties were involved, the action was directed against a particular
person on the basis of his personal liability; hence, the action is not only a personal action but also an action in personam. As
regards petitioners argument of lack of jurisdiction over the action because the prescribed docket fee was not paid considering the
huge amount involved in the claim, the trial court noted that a request for accounting was made in order that the exact value of
the partnership may be ascertained and, thus, the correct docket fee may be paid. Finally, the trial court held that the heirs of
Tabanao had a right to sue in their own names, in view of the provision of Article 777 of the Civil Code, which states that the rights
to the succession are transmitted from the moment of the death of the decedent.[6]
The following day, respondents filed an amended complaint,[7] incorporating the additional prayer that petitioner be ordered
to sell all (the partnerships) assets and thereafter pay/remit/deliver/surrender/yield to the plaintiffs their corresponding share in
the proceeds thereof. In due time, petitioner filed a manifestation and motion to dismiss,[8] arguing that the trial court did not
acquire jurisdiction over the case due to the plaintiffs failure to pay the proper docket fees. Further, in a supplement to his motion
to dismiss,[9] petitioner also raised prescription as an additional ground warranting the outright dismissal of the complaint.
On June 15, 1995, the trial court issued an Order,[10] denying the motion to dismiss inasmuch as the grounds raised therein
were basically the same as the earlier motion to dismiss which has been denied.Anent the issue of prescription, the trial court ruled
that prescription begins to run only upon the dissolution of the partnership when the final accounting is done. Hence, prescription
has not set in the absence of a final accounting. Moreover, an action based on a written contract prescribes in ten years from the
time the right of action accrues.
Petitioner filed a petition for certiorari before the Court of Appeals,[11] raising the following issues:
I. Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion in taking cognizance
of a case despite the failure to pay the required docket fee;
II. Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion in insisting to try the
case which involve (sic) a parcel of land situated outside of its territorial jurisdiction;
III. Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion in allowing the
estate of the deceased to appear as party plaintiff, when there is no intestate case and filed by one who was
never appointed by the court as administratrix of the estates; and
IV. Whether or not respondent Judge acted without jurisdiction or with grave abuse of discretion in not dismissing the
case on the ground of prescription.
On August 8, 1996, the Court of Appeals rendered the assailed decision,[12] dismissing the petition for certiorari, upon a
finding that no grave abuse of discretion amounting to lack or excess of jurisdiction was committed by the trial court in issuing the
questioned orders denying petitioners motions to dismiss.
Not satisfied, petitioner filed the instant petition for review, raising the same issues resolved by the Court of Appeals,
namely:
I. Failure to pay the proper docket fee;
II. Parcel of land subject of the case pending before the trial court is outside the said courts territorial jurisdiction;
III. Lack of capacity to sue on the part of plaintiff heirs of Vicente Tabanao; and
IV. Prescription of the plaintiff heirs cause of action.
It can be readily seen that respondents primary and ultimate objective in instituting the action below was to recover the
decedents 1/3 share in the partnerships assets. While they ask for an accounting of the partnerships assets and finances, what they
are actually asking is for the trial court to compel petitioner to pay and turn over their share, or the equivalent value thereof, from
the proceeds of the sale of the partnership assets. They also assert that until and unless a proper accounting is done, the exact
value of the partnerships assets, as well as their corresponding share therein, cannot be ascertained.Consequently, they feel
justified in not having paid the commensurate docket fee as required by the Rules of Court.
We do not agree. The trial court does not have to employ guesswork in ascertaining the estimated value of the partnerships
assets, for respondents themselves voluntarily pegged the worth thereof at Thirty Million Pesos (P30,000,000.00). Hence, this case
is one which is really not beyond pecuniary estimation, but rather partakes of the nature of a simple collection case where the
value of the subject assets or amount demanded is pecuniarily determinable.[13] While it is true that the exact value of the
partnerships total assets cannot be shown with certainty at the time of filing, respondents can and must ascertain, through
informed and practical estimation, the amount they expect to collect from the partnership, particularly from petitioner, in order to
determine the proper amount of docket and other fees.[14] It is thus imperative for respondents to pay the corresponding docket
fees in order that the trial court may acquire jurisdiction over the action.[15]
Nevertheless, unlike in the case of Manchester Development Corp. v. Court of Appeals,[16] where there was clearly an effort
to defraud the government in avoiding to pay the correct docket fees, we see no attempt to cheat the courts on the part of
respondents. In fact, the lower courts have noted their expressed desire to remit to the court any payable balance or lien on
whatever award which the Honorable Court may grant them in this case should there be any deficiency in the payment of the
docket fees to be computed by the Clerk of Court.[17] There is evident willingness to pay, and the fact that the docket fee paid so far
is inadequate is not an indication that they are trying to avoid paying the required amount, but may simply be due to an inability to
pay at the time of filing. This consideration may have moved the trial court and the Court of Appeals to declare that the unpaid
docket fees shall be considered a lien on the judgment award.
Petitioner, however, argues that the trial court and the Court of Appeals erred in condoning the non-payment of the proper
legal fees and in allowing the same to become a lien on the monetary or property judgment that may be rendered in favor of
respondents. There is merit in petitioners assertion. The third paragraph of Section 16, Rule 141 of the Rules of Court states that:
The legal fees shall be a lien on the monetary or property judgment in favor of the pauper-litigant.
Respondents cannot invoke the above provision in their favor because it specifically applies to pauper-litigants. Nowhere in
the records does it appear that respondents are litigating as paupers, and as such are exempted from the payment of court fees.[18]
The rule applicable to the case at bar is Section 5(a) of Rule 141 of the Rules of Court, which defines the two kinds of claims
as: (1) those which are immediately ascertainable; and (2) those which cannot be immediately ascertained as to the exact
amount. This second class of claims, where the exact amount still has to be finally determined by the courts based on evidence
presented, falls squarely under the third paragraph of said Section 5(a), which provides:
22
In case the value of the property or estate or the sum claimed is less or more in accordance with the appraisal of the court,
the difference of fee shall be refunded or paid as the case may be. (Underscoring ours)
In Pilipinas Shell Petroleum Corporation v. Court of Appeals,[19] this Court pronounced that the above-quoted provision
clearly contemplates an initial payment of the filing fees corresponding to the estimated amount of the claim subject to adjustment
as to what later may be proved.[20] Moreover, we reiterated therein the principle that the payment of filing fees cannot be made
contingent or dependent on the result of the case. Thus, an initial payment of the docket fees based on an estimated amount must
be paid simultaneous with the filing of the complaint. Otherwise, the court would stand to lose the filing fees should the judgment
later turn out to be adverse to any claim of the respondent heirs.
The matter of payment of docket fees is not a mere triviality. These fees are necessary to defray court expenses in the
handling of cases. Consequently, in order to avoid tremendous losses to the judiciary, and to the government as well, the payment
of docket fees cannot be made dependent on the outcome of the case, except when the claimant is a pauper-litigant.
Applied to the instant case, respondents have a specific claim 1/3 of the value of all the partnership assets but they did not
allege a specific amount. They did, however, estimate the partnerships total assets to be worth Thirty Million Pesos
(P30,000,000.00), in a letter[21] addressed to petitioner. Respondents cannot now say that they are unable to make an estimate, for
the said letter and the admissions therein form part of the records of this case. They cannot avoid paying the initial docket fees by
conveniently omitting the said amount in their amended complaint. This estimate can be made the basis for the initial docket fees
that respondents should pay. Even if it were later established that the amount proved was less or more than the amount alleged or
estimated, Rule 141, Section 5(a) of the Rules of Court specifically provides that the court may refund the excess or exact additional
fees should the initial payment be insufficient. It is clear that it is only the difference between the amount finally awarded and the
fees paid upon filing of this complaint that is subject to adjustment and which may be subjected to a lien.
In the oft-quoted case of Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion,[22] this Court held that when the specific
claim has been left for the determination by the court, the additional filing fee therefor shall constitute a lien on the judgment and
it shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the
additional fee. Clearly, the rules and jurisprudence contemplate the initial payment of filing and docket fees based on the
estimated claims of the plaintiff, and it is only when there is a deficiency that a lien may be constituted on the judgment award
until such additional fee is collected.
Based on the foregoing, the trial court erred in not dismissing the complaint outright despite their failure to pay the proper
docket fees. Nevertheless, as in other procedural rules, it may be liberally construed in certain cases if only to secure a just and
speedy disposition of an action. While the rule is that the payment of the docket fee in the proper amount should be adhered to,
there are certain exceptions which must be strictly construed.[23]
In recent rulings, this Court has relaxed the strict adherence to the Manchester doctrine, allowing the plaintiff to pay the
proper docket fees within a reasonable time before the expiration of the applicable prescriptive or reglementary period.[24]
In the recent case of National Steel Corp. v. Court of Appeals,[25] this Court held that:
The court acquires jurisdiction over the action if the filing of the initiatory pleading is accompanied by the payment of the requisite
fees, or, if the fees are not paid at the time of the filing of the pleading, as of the time of full payment of the fees within such
reasonable time as the court may grant, unless, of course, prescription has set in the meantime.
It does not follow, however, that the trial court should have dismissed the complaint for failure of private respondent to pay the
correct amount of docket fees. Although the payment of the proper docket fees is a jurisdictional requirement, the trial court may
allow the plaintiff in an action to pay the same within a reasonable time before the expiration of the applicable prescriptive or
reglementary period. If the plaintiff fails to comply within this requirement, the defendant should timely raise the issue of
jurisdiction or else he would be considered in estoppel. In the latter case, the balance between the appropriate docket fees and the
amount actually paid by the plaintiff will be considered a lien or any award he may obtain in his favor. (Underscoring ours)
Accordingly, the trial court in the case at bar should determine the proper docket fee based on the estimated amount that
respondents seek to collect from petitioner, and direct them to pay the same within a reasonable time, provided the applicable
prescriptive or reglementary period has not yet expired. Failure to comply therewith, and upon motion by petitioner, the
immediate dismissal of the complaint shall issue on jurisdictional grounds.
On the matter of improper venue, we find no error on the part of the trial court and the Court of Appeals in holding that the
case below is a personal action which, under the Rules, may be commenced and tried where the defendant resides or may be
found, or where the plaintiffs reside, at the election of the latter.[26]
Petitioner, however, insists that venue was improperly laid since the action is a real action involving a parcel of land that is
located outside the territorial jurisdiction of the court a quo. This contention is not well-taken. The records indubitably show that
respondents are asking that the assets of the partnership be accounted for, sold and distributed according to the agreement of the
partners. The fact that two of the assets of the partnership are parcels of land does not materially change the nature of the
action. It is an action in personam because it is an action against a person, namely, petitioner, on the basis of his personal
liability. It is not an action in rem where the action is against the thing itself instead of against the person. [27] Furthermore, there is
no showing that the parcels of land involved in this case are being disputed. In fact, it is only incidental that part of the assets of the
partnership under liquidation happen to be parcels of land.
The time-tested case of Claridades v. Mercader, et al.,[28] settled this issue thus:
The fact that plaintiff prays for the sale of the assets of the partnership, including the fishpond in question, did not change the
nature or character of the action, such sale being merely a necessary incident of the liquidation of the partnership, which should
precede and/or is part of its process of dissolution.
The action filed by respondents not only seeks redress against petitioner. It also seeks the enforcement of, and petitioners
compliance with, the contract that the partners executed to formalize the partnerships dissolution, as well as to implement the
liquidation and partition of the partnerships assets. Clearly, it is a personal action that, in effect, claims a debt from petitioner and
seeks the performance of a personal duty on his part.[29] In fine, respondents complaint seeking the liquidation and partition of the
assets of the partnership with damages is a personal action which may be filed in the proper court where any of the parties
reside.[30] Besides, venue has nothing to do with jurisdiction for venue touches more upon the substance or merits of the
case.[31] As it is, venue in this case was properly laid and the trial court correctly ruled so.
On the third issue, petitioner asserts that the surviving spouse of Vicente Tabanao has no legal capacity to sue since she was
never appointed as administratrix or executrix of his estate. Petitioners objection in this regard is misplaced. The surviving spouse
does not need to be appointed as executrix or administratrix of the estate before she can file the action. She and her children are
complainants in their own right as successors of Vicente Tabanao. From the very moment of Vicente Tabanaos death, his rights
insofar as the partnership was concerned were transmitted to his heirs, for rights to the succession are transmitted from the
moment of death of the decedent.[32]
Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were transmitted to respondents by
operation of law, more particularly by succession, which is a mode of acquisition by virtue of which the property, rights and
obligations to the extent of the value of the inheritance of a person are transmitted.[33] Moreover, respondents became owners of
their respective hereditary shares from the moment Vicente Tabanao died.[34]
A prior settlement of the estate, or even the appointment of Salvacion Tabanao as executrix or administratrix, is not
necessary for any of the heirs to acquire legal capacity to sue. As successors who stepped into the shoes of their decedent upon his
death, they can commence any action originally pertaining to the decedent.[35] From the moment of his death, his rights as a
partner and to demand fulfillment of petitioners obligations as outlined in their dissolution agreement were transmitted to
respondents. They, therefore, had the capacity to sue and seek the courts intervention to compel petitioner to fulfill his
obligations.
Finally, petitioner contends that the trial court should have dismissed the complaint on the ground of prescription, arguing
that respondents action prescribed four (4) years after it accrued in 1986. The trial court and the Court of Appeals gave scant
consideration to petitioners hollow arguments, and rightly so.
The three (3) final stages of a partnership are: (1) dissolution; (2) winding-up; and (3) termination.[36] The partnership,
although dissolved, continues to exist and its legal personality is retained, at which time it completes the winding up of its affairs,
including the partitioning and distribution of the net partnership assets to the partners.[37] For as long as the partnership exists, any
23
of the partners may demand an accounting of the partnerships business. Prescription of the said right starts to run only upon the
dissolution of the partnership when the final accounting is done.[38]

Contrary to petitioners protestations that respondents right to inquire into the business affairs of the partnership accrued in
1986, prescribing four (4) years thereafter, prescription had not even begun to run in the absence of a final accounting. Article
1842 of the Civil Code provides:

The right to an account of his interest shall accrue to any partner, or his legal representative as against the winding up partners or
the surviving partners or the person or partnership continuing the business, at the date of dissolution, in the absence of any
agreement to the contrary.

Applied in relation to Articles 1807 and 1809, which also deal with the duty to account, the above-cited provision states that
the right to demand an accounting accrues at the date of dissolution in the absence of any agreement to the contrary. When a final
accounting is made, it is only then that prescription begins to run. In the case at bar, no final accounting has been made, and that is
precisely what respondents are seeking in their action before the trial court, since petitioner has failed or refused to render an
accounting of the partnerships business and assets. Hence, the said action is not barred by prescription.

In fine, the trial court neither erred nor abused its discretion when it denied petitioners motions to dismiss. Likewise, the
Court of Appeals did not commit reversible error in upholding the trial courts orders. Precious time has been lost just to settle this
preliminary issue, with petitioner resurrecting the very same arguments from the trial court all the way up to the Supreme
Court. The litigation of the merits and substantial issues of this controversy is now long overdue and must proceed without further
delay.

WHEREFORE, in view of all the foregoing, the instant petition is DENIED for lack of merit, and the case is REMANDED to the
Regional Trial Court of Cadiz City, Branch 60, which is ORDERED to determine the proper docket fee based on the estimated
amount that plaintiffs therein seek to collect, and direct said plaintiffs to pay the same within a reasonable time, provided the
applicable prescriptive or reglementary period has not yet expired. Thereafter, the trial court is ORDERED to conduct the
appropriate proceedings in Civil Case No. 416-C.

Costs against petitioner.

SO ORDERED.

24