3.
ALVAREZ vs IAC
Facts:
Action: petition for review on certiorari seeking the
reversal of the decision which ordered the petitioners
to pay jointly and severally the private respondents
the sum of P20,000.00 representing the actual value
of Lots
Properties involved: Two parcels of land registered in
the name of the heirs of Aniceto Yanes
Yanes was survived by his children, Rufino, Felipe and
Teodora
Aniceto left his children Lots 773 and 823
Teodora cultivated only three hectares of Lot 823 as
she could not attend to the other portions of the two
lots
Rufino and his children left the province to settle in
other places as a result of the outbreak of World War
II. When they returned, they found out that Santiago,
Fuentebella and Alvarez were in possession of 1 of the
2 lots.
Santiago sold Lots 773-A and 773-B to Fuentebella.
After Fuentebella’s death, his heir sold said lots to
Alvarez.
Two years later the heirs of Yanes filed a complaint for
the "return" of the ownership and possession of the
lots.
During the pendency of the case, Alvarez sold Lots
773-A, 773-Bto Dr. Siason.
On November 6, 1962, Jesus Yanes, in his own behalf
and in behalf of the other plaintiffs filed a
manifestation that they "renounce, forfeit and
quitclaims (sic) anyclaim, monetary or otherwise,
against the defendant Fuentebella.
The CFI ordered the defendant Rosendo Alvarez to
reconvey to the Yaneses the lots.
Although the Yaneses were negligent in their failure
to place a notice of lis pendens... equity demanded
that they recover the actual value of the land because
the sale thereof executed between Alvarez and Siason
was without court approval
However, one of the lots had been subdivided and
could not be delivered to the plaintiffs as Siason was
"not a party per writ of execution.
The IAC affirmed the CFI’s decision.
Petitioners:
 the Yaneses' cause of action had been "barred
by res judicata,... statute of limitation and
estoppel."...
 the lower court found that Rodolfo Siason,
who purchased the properties in question
thru an agent as he was then in Mexico
pursuing further medical studies, was a buyer
in good faith for a valuable... consideration
 that the liability arising from the sale of said
Lots Nos. 773-A and 773-B made by Resendo
Alvarez to Dr. Rodolfo Siason should be the
sole liability of the late Rosendo Alvarez or of
his estate, after his death.
Issues:
 WON the liability or liabilities of Rosendo
Alvarez arising from the sale of Lots Nos. 773-
A and 773-B to Dr. Rodolfo Siason, could be
legally passed or transmitted by operations
(sic) of law to the petitioners without violation
of law and due process."
Ruling:
The decision ordering Alvarez to reconvey the lots had
long become final and executory and with the
possible exception of Dr. Siason, who was not a party
to said case.
RTC: Yaneses have been illegally deprived of
ownership and possession of the lots in question
Dr. Siason is a purchaser-in-good faith.
The trial court did not annul the sale executed by
Alvarez in favor of Dr. Siason on November 11, 1961
but in fact sustained it
The trial court ordered the heirs of Rosendo Alvarez
who lost in Civil Case to pay the plaintiffs (private
respondents herein) the amount of P20,000.00
representing the actual value of the subdivided lots in
dispute. It did not order defendant Siason to pay said
amount.
1. Yes.
"Art. 774. Succession is a mode of acquisition by
virtue of which the property, rights and obligations to
the extent of the value of the inheritance, of a person
are transmitted through his death to another or
others either by his will or by operation of law
"Art. 776. The inheritance includes all the property,
rights and obligations of a person which are not
extinguished by his death.
Art. 1311. Contracts take effect only between the
parties, their assigns and heirs, except in case where
the rights and obligations arising from the contract
are not transmissible by their nature, or by stipulation
or by provision of... law. The heir is not liable beyond
the value of the property received from the
decedent."... in the case of Estate of Hemady vs.
Luzon Surety Co., Inc
"The binding effect of contracts upon the heirs of the
deceased party is not altered by the provision of our
Rules of Court that money debts of a deceased must
be liquidated and paid from his estate before the
residue is distributed among said heirs.
The reason is that whatever payment is thus made is
ultimately a payment by the heirs or distributees,
since the amount of the paid claim in fact diminishes
or reduces the shares that the heirs would have been
entitled to receive.
The general rule is that a party's contractual rights
and obligations are transmissible to the successors.
Petitioners being the heirs of the late Rosendo
Alvarez, they cannot escape the legal consequences of
their father's transaction, which gave rise to the
present claim for damages.
That petitioners did not inherit the property involved
herein is of no moment because by legal fiction, the
monetary equivalent thereof devolved into the mass
of their father's hereditary estate, and hereditary
assets are always liable in their totality for the
payment of the debts of the estate.
The SC finds no cogent reason to disturb the findings
of the lower courts
the assailed decision of the Court of Appeals is hereby
AFFIRMED.
Petitioners are liable only to the extent of the value of
their inheritance.
4. RABADILLA vs CA
Action: Petition for review of the decision of the CA
which set aside the decision of the RTC and ordered
the heirs of Dr. Rabadilla to reconvey title over the lot
to the estate of Belleza
Facts:
Dr. Rabadilla was instituted as a devisee of a parcel of
land in the Codicil of Belleza which includes the
condition that Rabadilla shall have the obligation until
he dies, to give to Malina Belleza (the sister of the
testator), 100 piculs of sugar (75 export and 25
domestic) until the said sister dies.
Such obligation is also imposed on the instituted heir,
Dr. Jorge Rabadilla, his heirs, and their buyer, lessee,
or mortgagee should they sell, lease, mortgage or
otherwise negotiate the property involved.
The Codicil further provides that in the event that the
obligation to deliver the sugar is not respected,
Marlena Belleza Coscuella shall seize the property and
turn it over to the testatrix's near... descendants
When Dr. Rabadilla died, Belleza’s sister brought a
complaint in the RTC against the heirs of Dr. Belleza to
enforce the provisions of the Codicil.
She alleged that the heirs of Dr. Rabilla failed to
comply with their obligation from 1985 and prayed for
the reconveyance of the lot to the surviving heirs of
Belleza.
The RTC dismissed the complaint as it is prematurely
filed as no cause of action of action aginst the
defendant has as yet arose in favour of the plaintiff
(Marlina Belleza)
CA: reversed the decision of the RTC and ordered the
heirs of Rabadilla to reconvey the land to the Bellezas
Hence this petition.
Petitioners (Rabadillas):
 CA erred in ordering the reversion and in
ruling that the testamentary institution of Dr.
Rabilla is a modal institution.
 There was no modal institution and the
testator intended a mere substitution and
since the testator died single and the
substituted heirs are not definite, as they
merely are “near descendants”, there can be
no valid substitution.
ISSUES:
 1. WON the Dr. Rabadilla’s obligation provided
under the Codicil of Belleza can be
transmitted to his heirs.
2. WON modal institutions is not applicable
because what the testatrix intended was a
substitution
HELD:
1. It is a general rule under the law on
succession that successional rights are
transmitted from the moment of death of
the decedent and compulsory heirs are
called to succeed by operation of law
The legitimate children and descendants, in relation
to their legitimate parents, and the widow or
widower, are compulsory heir
Thus, the petitioner, his mother and sisters, as
compulsory heirs of the instituted heir, Dr. Jorge
Rabadilla, succeeded the latter by operation of law,
without need of further... proceedings, and the
successional rights were transmitted to them from the
moment of death of the decedent, Dr. Jorge Rabadilla.
Article 776 of the New Civil Code, inheritance includes
all the property, rights and obligations of a person,
not extinguished by his death.
Conformably, whatever rights Dr. Jorge Rabadilla had
by virtue of subject Codicil were transmitted to his
forced heirs, at the time... of his death.
And since obligations not extinguished by death also
form part of the estate of the decedent; corollarily,
the obligations imposed by the Codicil on the
deceased Dr. Jorge Rabadilla, were likewise
transmitted to his compulsory heirs upon his death.
Upon the death of Dr. Jorge Rabadilla, his compulsory
heirs succeeded to... his rights and title over the said
property, and they also assumed his (decedent's)
obligation to deliver the fruits of the lot involved to
herein private respondent.
Such obligation of the instituted heir reciprocally
corresponds to the right of private respondent over
the... usufruct, the fulfillment or performance of
which is now being demanded by the latter through
the institution of the case at bar. Therefore, private
respondent has a cause of action against petitioner
and the trial court erred in dismissing the complaint
below.
2. Substitution is the designation by the testator
of a person or persons to take the place of the
heir or heirs first instituted.
The testator may either
 provide for the designation of another heir to
whom the property shall pass in case the
original heir should die before him/her,
renounce the inheritance or be incapacitated
to inherit, as in a simple substitution... or
 leave his/her property to one person with the
express charge that it be transmitted
subsequently to another or others
The Codicil contemplates neither of Substitution nor
fideicommissary.
In simple substitutions, the second heir takes the
inheritance in default of the first heir by reason of
incapacity, predecease or renunciation.
ITC, the provisions of subject Codicil do not provide
that should Dr. Rabadilla default due to predecease,
incapacity or renunciation, the testatrix's near
descendants would substitute him.
What the Codicil provides is that, should Dr. Rabadilla
or his heirs not fulfill the conditions imposed in the
Codicil, the property referred to shall be seized and
turned over to the testatrix's near descendants.
Neither is there a fideicommissary substitution here
In a fideicommissary substitution, the first heir is
strictly mandated to preserve the property and to
transmit the same later to the second heir
ITC, the instituted heir is in fact allowed under the
Codicil to alienate the property provided the
negotiation is with the near descendants or the sister
of the testatrix.
Without this obligation to preserve clearly imposed by
the testator in his will, there is no fideicommissary
substitution.
Also, the near descendants' right to inherit from the
testatrix is not definite. The property will only pass to
them should Dr. Rabadilla or his heirs not fulfill the
obligation to deliver part of the usufruct to private
respondent.
Under Article 863, the second heir or the
fideicommissary to whom the property is transmitted
must not be beyond one degree from the first heir or
the fiduciar. Fideicommissary substitution is
therefore, void if the first heir is not related by first
degree to the second heir
ITC, the near descendants are not at all related to the
instituted heir, Dr. Rabadilla.
Article 882
In a modal institution, the testator states
(1) the object of the institution
(2) the purpose or application of the property left by
the testator, or
(3) the charge imposed by the testator upon the heirs
A "mode" imposes an obligation upon the heir or
legatee but it does not affect the efficacy of his rights
to the succession
manner of institution of Dr. Jorge Rabadilla under
subject Codicil isevidently modal in nature because it
imposes a charge upon the instituted heir without,
however, affecting the efficacy of such institution.
In case of doubt, the institution should be considered
as modal and not conditional.
The non-performance of the said obligation is thus
with the sanction of seizure of the property and
reversion thereof to the testatrix's near descendants.
Said obligation is clearly imposed by the testatrix, not
only on the instituted heir but also on his successors-
in-interest, the sanction imposed by the testatrix in
case of non-fulfillment of said obligation should
equally apply to the instituted heir and his successors-
in-interest
The Will expresses the manner in which a person
intends how his properties be disposed, the wishes
and desires of the testator must be strictly followed.
Thus, a Will cannot be the subject of a compromise
agreement which would thereby defeat the very
purpose of making a Will.
Principles:
under the law on succession that successional rights
are transmitted from the moment of death of the
decedent... and compulsory heirs are called to
succeed by operation of law
ESTATE OF HEMADY vs LUZON SURETY CO.
Facts:
Luzon Surety appealed the decision of CFI – Rizal
dismissing its claim against the Estate of K. H. Hemady
for failure to state a cause of action.
The claim against the Estate was based on 20 different
indemnity agreements, or counter bonds each
subscribed by a distinct principal and by the deceased
K. H. Hemady
Luzon Surety Co., prayed for allowance, as a
contingent claim, of the value of the twenty bonds it
had executed in consideration of the counterbonds,
and further asked for judgment for the unpaid
premiums and documentary stamps affixed to the
bonds, with 12 per cent interest thereon.
CFI dismissed the claims of Luzon Surety Co., on two
grounds
1. premiums due and cost of documentary
stamps were not contemplated under the
indemnity agreements to be a part of the
undertaking of the guarantor (Hemady), since
they were not liabilities incurred after the
execution of the counter-bonds;
2. whatever losses may occur after Hemady's
death are not chargeable to his estate
because upon his death he ceased to be
guarantor."
Issues:
WON the estate of Hemady is liable to pay indemnity
Ruling:
does not terminate the contract but merely entitles
the creditor to demand a... replacement of the
guarantor... a new requirement has been added for a
person to qualify as a guarantor, that is: integrity.
Upon the death of Hemady, his integrity was not
transmitted to his estate or successors.
Whatever loss therefore, may occur after Hemady's
death, are not chargeable to his estate
Another clear and strong indication that the surety
company has exclusively relied on the personality,
character, honesty and integrity of the now deceased
K. H. Hemady, was the... indemnity agreemen...
entitled 'Security... by way of first mortgage... which
was expressly waived and renounced by the security
company... security company has not demanded from
K. H. Hemady to comply with this requirement of
giving security by way of firat mortgage... nder the
present Civil Code (Article 1311), as well as under the
Civil Code of 1889
Mojica vs. Fernandez
Galasinao vs. Austria... binding effect of contracts
upon the heirs of the deceased party is not altered by
the provision in our Rules of Court that money debts
of a deceased must be liquidated and paid from his
estate before the residue is distributed among said
heirs
Of the three exceptions fixed by Article 1311, the
nature of the obligation of the surety or guarantor
does not warrant the conclusion that his peculiar
individual qualities are contemplated as a principal
inducement for the contract... it was indifferent that
the reimbursement should be made by Hemady
himself or by some one else in his behalf, so long as
the money was paid to it.
this intransmissibility should not be easily implied, but
must be expressly established, or at the very... least,
clearly inferable from the provisions of the contract
itself, and the text of the agreements sued upon
nowhere indicate that they are non-transferable
Article 1311), a person who enters into a contract is
deemed to have contracted for himself and hid heirs
and assigns, it is unnecessary for him to expressly
stipulate to that effec
; hence, his failure to do so, is no sign that he
intended his bargain... to terminate upon his death.
uzon Surety Co,. did not require bondsman Hemady to
execute a mortgage indicates nothing more than the
company's faith and confidence in the financial
stability of the surety, but not that his obligation was
strictly... personal.
when they are "not transmissible by operation of law"
, parental authority (Article 327), usufruct (Article
603), contracts for a piece of work (Article 1726),
partnership (Article 1830 and agency (Article 1919).
By contract, the articles of the Civil Code that...
regulate guaranty or suretyship (Articles 2047 to
2084) contain no provision that the guaranty is
extinguished upon the death of the guarantor or the
surety.
s integrit... that the law requires these qualities to be
present only at the time of the perfection of the
contract of guaranty... once the contract has become
perfected and binding, the supervening incapacity of
the guarantor... would not operate to exonerate him
of the eventual liability he has contracted; and if that
be true of his capacity to bind himself, it should also
be true of his integrity, which is a quality mentioned
in the article alongside the capacity.
the supervening dishonesty of the guarantor... oes not
terminate the contract but merely entitles the
creditor to demand a... replacement of the guarantor.
Hence Article. 2057 of the present Civil Code is
incompatible with the trial... court's stand that the
requirement of integrity in the guarantor or surety
makes the latter's undertaking strictly personal, so
linked to his individual ity that the guaranty
automatically terminates upon his death.
The contracts of suretyship entered into by K. H.
Hemady in favor of Luzon Surety Co. not being
rendered intransmissible due to the nature of the
undertaking, nor by the stipulations of the contracts
themselves, nor by provision of law, his eventual
liability thereunder... necessarily passed upon his
death to his heirs.
The conT tracts, therefore, give rise to contingent
claims provable against his estate under section 5,
Rule 87... under the Gaskell ruling, the Luzon Surety
Co., as guarantor, could file a contingent claim against
the estate of the principal debtors... if the latter
should die, there is absolutely no reason why it could
not file such a claim against the estate of Hemady,
since Hemady is a solidary co-debtor of his principals.
What the Luzon Surety Co. may claim from the estate
of a principal debtor it may equally... claim from the
estate of Hemady, since, in view of the existing
solidarity, the latter does not even enjoy the benefit
of exhaustion of the assets of the principal debtor.
the solidary guarantor's liability is not extinguished by
his death, and that in such event, the Luzon Surety
Co., had the right to file against the estate a
contingent claim for reimbursement.
Principles:
Article 2046 of the new Civil Cod... integrity is
something purely personal... and is not
transmissible... upon his death he ceased to be a
guarantor.
Contracts take effect only as between the parties,
their assigns and heirs, except in the case
where the rights and obligations arising from the
contract are not transmissible by their nature, or by
stipulation or by provision of law."... the responsibility
of the heirs for the debts of their decedent cannot
exceed the value of the inheritance... they receive
from him... these heirs succeed not only to the rights
of the deceased but also to his... obligations

Articles 774 and 776

"Art. 774. Succession is a mode of acquisition by

virtue of which the property, rights and obligations to
the extent of the value of the inheritance, of a person
are transmitted through his death to another or
others either by his will or by operation of law."

Art. 776, The inheritance includes all the property,

rights and obligations of a person which are not
extinguished by his death."... t... he heirs, by virtue of
the rights of succession are subrogated to all the
rights and obligations of the deceased (Article 661)
and can not be regarded as third parties with respect
to a contract to which the deceased was a party,
touching the estate of... the decease... whatever
payment is thus made from the estate is ultimately a
payment by the heirs and distributees... eneral rule is
that a party's contractual rights and obligations are
transmissible to the successors... intransmissibility by
stipulation of the partie... rights or obligations are...
extinguished by death,... s is the case in legal support
(Article 300

"ART. 2057. If the guarantor should be convicted in

first instance of a crime involving dishonesty or should
become insolvent, the creditor may demand another
who has all the qualifications required in the
preceding article. The case is excepted where the
creditor has... required and stipulated that a specified
person should be guarantor.