G.R. No. 118671             January 29, 1996

THE ESTATE OF HILARIO M. RUIZ, EDMOND RUIZ, Executor, petitioner, vs.

THE COURT OF APPEALS (Former Special Sixth Division), MARIA PILAR RUIZ-MONTES, MARIA CATHRYN RUIZ, CANDICE ALBERTINE RUIZ, MARIA ANGELINE RUIZ and THE PRESIDING JUDGE OF THE REGIONAL

TRIAL COURT OF PASIG, respondents.

D E C I S I O N

PUNO, J.:

This petition for review on certiorari seeks to annul and set aside the decision dated November 10, 1994 and the resolution dated January 5, 1995 of the Court of Appeals in CA-G.R. SP No. 33045.

The facts show that on June 27, 1987, Hilario M. Ruiz1 executed a holographic will naming as his heirs his only son, Edmond Ruiz, his adopted daughter, private respondent Maria Pilar Ruiz Montes, and his three granddaughters, private respondents Maria Cathryn, Candice Albertine and Maria Angeline, all children of Edmond Ruiz. The testator bequeathed to his heirs substantial cash, personal and real properties and named Edmond Ruiz executor of his estate.2

On April 12, 1988, Hilario Ruiz died. Immediately thereafter, the cash component of his estate was distributed among Edmond Ruiz and private respondents in accordance with the decedent's will. For unbeknown reasons, Edmond, the named executor, did not take any action for the probate of his father's holographic will.

On June 29, 1992, four years after the testator's death, it was private respondent Maria Pilar Ruiz Montes who filed before the Regional Trial Court, Branch 156, Pasig, a petition for the probate and approval of Hilario Ruiz's will and for the issuance of letters testamentary to Edmond Ruiz,3 Surprisingly, Edmond opposed the petition on the ground that the will was executed under undue influence.

On November 2, 1992, one of the properties of the estate — the house and lot at No. 2 Oliva Street, Valle Verde IV, Pasig which the testator bequeathed to Maria Cathryn, Candice Albertine and Maria Angeline4 — was leased out by Edmond Ruiz to third persons.

On January 19, 1993, the probate court ordered Edmond to deposit with the Branch Clerk of Court the rental deposit and payments totalling P540,000.00 representing the one-year lease of the Valle Verde property. In compliance, on January 25, 1993, Edmond turned over the amount of P348,583.56, representing the balance of the rent after deducting P191,416.14 for repair and maintenance expenses on the estate.5

In March 1993, Edmond moved for the release of P50,000.00 to pay the real estate taxes on the real properties of the estate. The probate court approved the release of P7,722.00.6

On May 14, 1993, Edmond withdrew his opposition to the probate of the will. Consequently, the probate court, on May 18, 1993, admitted the will to probate and ordered the issuance of letters testamentary to Edmond conditioned upon the filing of a bond in the amount of P50,000.00. The letters testamentary were issued on June 23, 1993.

On July 28, 1993, petitioner Testate Estate of Hilario Ruiz, with Edmond Ruiz as executor, filed an "Ex-Parte Motion for Release of Funds." It prayed for the release of the rent payments deposited with the Branch Clerk of Court. Respondent Montes opposed the motion and concurrently filed a "Motion for Release of Funds to Certain Heirs" and "Motion for Issuance of Certificate of Allowance of Probate Will." Montes prayed for the release of the said rent payments to Maria Cathryn, Candice Albertine and Maria Angeline and for the distribution of the testator's properties, specifically the Valle Verde property and the Blue Ridge apartments, in accordance with the provisions of the holographic will.

On August 26, 1993, the probate court denied petitioner's motion for release of funds but granted respondent Montes' motion in view of petitioner's lack of opposition. It thus ordered the release of the rent payments to the decedent's three granddaughters. It further ordered the delivery of the titles to and possession of the properties bequeathed to the three granddaughters and respondent Montes upon the filing of a bond of P50,000.00.

Petitioner moved for reconsideration alleging that he actually filed his opposition to respondent Montes's motion for release of rent payments which opposition the court failed to consider. Petitioner likewise reiterated his previous motion for release of funds.

On November 23, 1993, petitioner, through counsel, manifested that he was withdrawing his motion for release of funds in view of the fact that the lease contract over the Valle Verde property had been renewed for another year.7

Despite petitioner's manifestation, the probate court, on December 22, 1993, ordered the release of the funds to Edmond but only "such amount as may be necessary to cover the expenses of administration and allowances for support" of the testator's three granddaughters subject to collation and deductible from their share in the inheritance. The court, however, held in abeyance the release of the titles to respondent Montes and the three granddaughters until the lapse of six months from the date of first publication of the notice to creditors.8 The court stated thus:

xxx       xxx       xxx

After consideration of the arguments set forth thereon by the parties the court resolves to allow Administrator Edmond M. Ruiz to take possession of the rental payments deposited with the Clerk of Court, Pasig Regional Trial Court, but only such amount as may be necessary to cover the expenses of administration and allowances for support of Maria Cathryn Veronique, Candice Albertine and Maria Angeli, which are subject to collation and deductible from the share in the inheritance of said heirs and insofar as they exceed the fruits or rents pertaining to them.

As to the release of the titles bequeathed to petitioner Maria Pilar Ruiz-Montes and the above-named heirs, the same is hereby reconsidered and held in abeyance until the lapse of six (6) months from the date of first publication of Notice to Creditors.

WHEREFORE, Administrator Edmond M. Ruiz is hereby ordered to submit an accounting of the expenses necessary for administration including provisions for the support Of Maria Cathryn Veronique Ruiz, Candice Albertine Ruiz and Maria Angeli Ruiz before the amount required can be withdrawn and cause the publication of the notice to creditors with reasonable dispatch.9

Petitioner assailed this order before the Court of Appeals. Finding no grave abuse of discretion on the part of respondent judge, the appellate court dismissed the petition and sustained the probate court's order in a decision dated November 10, 199410 and a resolution dated January 5, 1995.11

Hence, this petition.

Petitioner claims that:

THE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AFFIRMING AND CONFIRMING THE ORDER OF RESPONDENT REGIONAL TRIAL COURT OF PASIG, BRANCH 156, DATED DECEMBER 22, 1993, WHICH WHEN GIVEN DUE COURSE AND IS EFFECTED WOULD: (1) DISALLOW THE EXECUTOR/ADMINISTRATOR OF THE ESTATE OF THE LATE HILARIO M. RUIZ TO TAKE POSSESSION OF ALL THE REAL AND PERSONAL PROPERTIES OF THE ESTATE; (2) GRANT SUPPORT, DURING THE PENDENCY OF THE SETTLEMENT OF AN ESTATE, TO CERTAIN PERSONS NOT ENTITLED THERETO; AND (3) PREMATURELY PARTITION AND DISTRIBUTE THE ESTATE PURSUANT TO THE PROVISIONS OF THE HOLOGRAPHIC WILL EVEN BEFORE ITS INTRINSIC VALIDITY HAS BEEN DETERMINED, AND DESPITE THE EXISTENCE OF UNPAID DEBTS AND OBLIGATIONS OF THE ESTATE.12

The issue for resolution is whether the probate court, after admitting the will to probate but before payment of the estate's debts and obligations, has the authority: (1) to grant an allowance from the funds of the estate for the support of the testator's grandchildren; (2) to order the release of the titles to certain heirs; and (3) to grant possession of all properties of the estate to the executor of the will.

On the matter of allowance, Section 3 of Rule 83 of the Revised Rules of Court provides:

Sec. 3. Allowance to widow and family. — The widow and minor or incapacitated children of a deceased person, during the settlement of the estate, shall receive therefrom under the direction of the court, such allowance as are provided by law.

Petitioner alleges that this provision only gives the widow and the minor or incapacitated children of the deceased the right to receive allowances for support during the settlement of estate proceedings. He contends that the testator's three granddaughters do not qualify for an allowance because they are not incapacitated and are no longer minors but of legal age, married and gainfully employed. In addition, the provision expressly states "children" of the deceased which excludes the latter's grandchildren.

It is settled that allowances for support under Section 3 of Rule 83 should not be limited to the "minor or incapacitated" children of the deceased. Article 18813 of the Civil Code of the Philippines, the substantive law in force at the time of the testator's death, provides that during the liquidation of the conjugal partnership, the deceased's legitimate spouse and children, regardless of their age, civil status or gainful employment, are entitled to provisional support from the funds of the estate.14 The law is rooted on the fact that the right and duty to support, especially the right to education, subsist even beyond the age of majority.15

Be that as it may, grandchildren are not entitled to provisional support from the funds of the decedent's estate. The law clearly limits the allowance to "widow and children" and does not extend it to the deceased's grandchildren, regardless of their minority or incapacity.16 It was error, therefore, for the appellate court to sustain the probate court's order granting an allowance to the grandchildren of the testator pending settlement of his estate.

Respondent courts also erred when they ordered the release of the titles of the bequeathed properties to private respondents six months after the date of first publication of notice to creditors. An order releasing titles to properties of the estate amounts to an advance distribution of the estate which is allowed only under the following conditions:

Sec. 2. Advance distribution in special proceedings. — Nothwithstanding a pending controversy or appeal in proceedings to settle the estate of a decedent, the court may, in its discretion and upon such terms as it may deem proper and just, permit that such part of the estate as may not be affected by the controversy or appeal be distributed among the heirs or legatees, upon compliance with the conditions set forth in Rule 90 of these Rules.17

And Rule 90 provides that:

Sec. 1. When order for distribution of residue made. — When the debts, funeral charges, and expenses of administration the allowance to the widow, and inheritance tax if any, chargeable to the estate in accordance with law, have been paid, the court, on the application of the executor or administrator, or of a person interested in the estate, and after hearing upon notice shall assign the residue of the estate to the persons entitled to the same, naming them and the proportions or parts, to which each is entitled, and such persons may demand and recover their respective shares from the executor or administrator, or any other person having the same in his possession. If there is a controversy before the court as to who are the lawful heirs of the deceased person or as to the distributive shares to which each person is entitled under the law, the controversy shall be heard and decided as in ordinary cases.

No distribution shall be allowed until the payment of the obligations above-mentioned has been made or provided for, unless the distributees, or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs.18

In settlement of estate proceedings, the distribution of the estate properties can only be made: (1) after all the debts, funeral charges, expenses of administration, allowance to the widow, and estate tax have been paid; or (2) before payment of said obligations only if the distributees or any of them gives a bond in a sum fixed by the court conditioned upon the payment of said obligations within such time as the court directs, or when provision is made to meet those obligations.19

In the case at bar, the probate court ordered the release of the titles to the Valle Verde property and the Blue Ridge apartments to the private respondents after the lapse of six months from the date of first publication of the notice to creditors. The questioned order speaks of "notice" to creditors, not payment of debts and obligations. Hilario Ruiz allegedly left no debts when he died but the taxes on his estate had not hitherto been paid, much less ascertained. The estate tax is one of those obligations that must be paid before distribution of the estate. If not yet paid, the rule

requires that the distributees post a bond or make such provisions as to meet the said tax obligation in proportion to their respective shares in the inheritance.20 Notably, at the time the order was issued the properties of the estate had not yet been inventoried and appraised.

It was also too early in the day for the probate court to order the release of the titles six months after admitting the will to probate. The probate of a will is conclusive as to its due execution and extrinsic validity21 and settles only the question of whether the testator, being of sound mind, freely executed it in accordance with the formalities prescribed by law.22 Questions as to the intrinsic validity and efficacy of the provisions of the will, the legality of any devise or legacy may be raised even after the will has been authenticated.23

The intrinsic validity of Hilario's holographic will was controverted by petitioner before the probate court in his Reply to Montes' Opposition to his motion for release of funds24 and his motion for reconsideration of the August 26, 1993 order of the said court.25 Therein, petitioner assailed the distributive shares of the devisees and legatees inasmuch as his father's will included the estate of his mother and allegedly impaired his legitime as an intestate heir of his mother. The Rules provide that if there is a controversy as to who are the lawful heirs of the decedent and their distributive shares in his estate, the probate court shall proceed to hear and decide the same as in ordinary cases.26

Still and all, petitioner cannot correctly claim that the assailed order deprived him of his right to take possession of all the real and personal properties of the estate. The right of an executor or administrator to the possession and management of the real and personal properties of the deceased is not absolute and can only be exercised "so long as it is necessary for the payment of the debts and expenses of administration,"27 Section 3 of Rule 84 of the Revised Rules of Court explicitly provides:

Sec. 3. Executor or administrator to retain whole estate to pay debts, and to administer estate not willed . — An executor or administrator shall have the right to the possession and management of the real as well as the personal estate of the deceased so long as it is necessary for the payment of the debts and expenses for administration.28

When petitioner moved for further release of the funds deposited with the clerk of court, he had been previously granted by the probate court certain amounts for repair and maintenance expenses on the properties of the estate, and payment of the real estate taxes thereon. But petitioner moved again for the release of additional funds for the same reasons he previously cited. It was correct for the probate court to require him to submit an accounting of the necessary expenses for administration before releasing any further money in his favor.

It was relevantly noted by the probate court that petitioner had deposited with it only a portion of the one-year rental income from the Valle Verde property. Petitioner did not deposit its succeeding rents after renewal of the lease.29 Neither did he render an accounting of such funds.

Petitioner must be reminded that his right of ownership over the properties of his father is merely inchoate as long as the estate has not been fully settled and partitioned.30 As executor, he is a mere trustee of his father's estate. The funds of the estate in his hands are trust funds and he is held to the duties and responsibilities of a trustee of the highest order.31 He cannot unilaterally assign to himself and possess all his parents' properties and the fruits thereof without first submitting an inventory and appraisal of all real and personal properties of the deceased, rendering a true account of his administration, the expenses of administration, the amount of the obligations and estate tax, all of which are subject to a determination by the court as to their veracity, propriety and justness.32

IN VIEW WHEREOF, the decision and resolution of the Court of Appeals in CA-G.R. SP No. 33045 affirming the order dated December 22, 1993 of the Regional Trial Court, Branch 156, Pasig in SP Proc. No. 10259 are affirmed with the modification that those portions of the order granting an allowance to the testator's grandchildren and ordering the release of the titles to the private respondents upon notice to creditors are annulled and set aside.

Respondent judge is ordered to proceed with dispatch in the proceedings below.

SO ORDERED

[G.R. No. 74618. September 2, 1992.]

ANA LIM KALAW, Petitioner, v. THE HONORABLE INTERMEDIATE APPELLATE COURT, THE HONORABLE RICARDO B. DIAZ and ROSA LIM KALAW, Respondents.

Alberto R. De Joya for Petitioner.

Cheng, Martinez & Associates for Private Respondent.

SYLLABUS

1. REMEDIAL LAW; SPECIAL PROCEEDINGS; ACCOUNTABILITY OF ADMINISTRATOR, WHEN TO RENDER ACCOUNTS; RULE AND EXCEPTION. — The rendering of an accounting by an administrator of his administration within one year from his appointment is mandatory, as shown by the use of the word "shall" in said rule. The only exception is when the Court otherwise directs because of extensions of time for presenting claims against the estate or for paying the debts or disposing the assets of the estate, which do not exist in the case at bar.

2. ID.; ID.; REMOVAL OF ADMINISTRATOR; JUSTIFIED, FOR NEGLIGENCE TO RENDER AN ACCOUNTING OF HIS ADMINISTRATION AS REQUIRED BY LAW. — subsequent compliance in rendering an accounting report did not purge her of her negligence in not rendering an accounting for more than six years, which justifies petitioner’s removal as administratrix and the appointment of private respondent in her place as mandated by Section 2 of Rule 82 of the Rules of Court. As correctly stated by the appellate court: "The settled rule is that the removal of an administrator under Section 2 of Rule 82 lies within the discretion of the Court appointing him. As aptly expressed by the Supreme Court in the case of Degala v. Ceniza and Umipig, 78 Phil. 791, ‘the sufficiency of any ground for removal should thus be determined by said court, whose sensibilities are, in the first place, affected by any act or omission on the part of the administrator not comfortable to or in disregard of the rules or the orders of the court.’ Consequently, appellate tribunals are disinclined to interfere with the action taken by a probate court in the matter of the removal of an executor or administrator unless positive error or gross abuse of discretion is shown. (Borromeo v. Borromeo, 97 Phil. 549; Matute v. Court of Appeals, 26 SCRA 768.) In the case at bar, the removal of petitioner as administratrix was on the ground of her failure for 6 years and 3 months from the time she was appointed as administratrix to render an accounting of her administration as required by Section 8 of Rule 85 of the Rules of Court."

D E C I S I O N

NOCON, J.:

This is a petition for certiorari, prohibition and mandamus with preliminary injunction to annul and set aside the decision dated December 27, 1985 of the then Intermediate Appellate Court 1 affirming the decision of the Regional Trial Court of Manila, Branch 27 in Special Proceeding No. 84520 removing petitioner Ana Lim Kalaw as administratrix and appointing private respondent Rosa Lim Kalaw in her stead as the administratrix of the estate of their late father Carlos Lim Kalaw.

It appears on record that Carlos Lim Kalaw died intestate on July 8, 1970.chanrobles.com:cralaw:red

On June 8, 1972, Victoria Lim Kalaw filed an amended petition for the issuance of Letters of Administration with the then Court of First Instance of Manila in Special Proceeding No. 84520 naming Ana Lim Kalaw (63 years old), Victoria Lim Kalaw (57 years old), Pura Lim Kalaw (53 years old) and Rosa Lim Kalaw (43 years old) as the surviving heirs of the late Carlos Lim Kalaw.

On April 25, 1974, the trial court issued an order appointing petitioner Ana Lim Kalaw as special administratrix. Consequently, petitioner filed a preliminary inventory of all the properties which came into her possession as special administratrix of the estate of her late father on June 3, 1974.

On October 6, 1977, the trial court issued another order appointing petitioner as the judicial administratrix of said estate and a Letter of Administration was issued to the petitioner after the latter took her oath of office on November 11, 1977.

Thereafter, Jose Lim filed a motion to require petitioner to render an accounting of her administration of said estate which was granted by respondent Judge Ricardo Diaz in an order dated December 8, 1982.chanrobles law library

On July 1, 1983, respondent judge issued another order requiring petitioner to render an accounting of her administration with the express instruction that said order be personally served upon the petitioner since the order dated December 8, 1982 was returned to the Court unserved. However, said order was also not received by the petitioner.

On January 31, 1984, private respondent Rosa Lim Kalaw together with her sisters Victoria and Pura Lim Kalaw filed a motion to remove petitioner as administratrix of their father’s estate and to appoint instead private respondent on the ground of negligence on the part of petitioner in her duties for failing to render an accounting of her administration since her appointment as administratrix more than six years ago in violation of Section 8 of Rule 85 of the Revised Rules of Court. The motion was set for hearing on February 10, 1984.

On February 21, 1984, respondent judge issued another order requiring petitioner to render an accounting within 30 days from receipt thereof which she did on March 22, 1984. She likewise filed on the same date, her Opposition to the motion praying for her removal as administratrix alleging that the delay in rendering said accounting was due to the fact that Judge Carlos Sundiam, who was the judge where the intestate proceeding was assigned, had then been promoted to the Court of Appeals causing said sala to be vacated for a considerable length of time, while newly-appointed Judge Joel Tiongco died of cardiac arrest soon after his appointment to said vacancy, so much so that she did not know to whom to render an accounting report.

In their Rejoinder and Manifestation, private respondent and her co-movant alleged that the ground relied upon for petitioner’s removal was not the delay but her failure or neglect to render an accounting of all the properties which came into her possession as required under Section 1 of Rule 83 of the Revised Rules of Court.chanrobles.com : virtual law library

On January 4, 1985, the trial court rendered a decision, the dispositive portion of which reads:jgc:chanrobles.com.ph

"From the foregoing, the Court finds that Administratrix Ana Lim Kalaw violated the provisions of Section 8, Rule 85 of the Rules of Court for not rendering an account of her administration within one (1) year from date of receipt of the letters of administration and this constitutes negligence on her part to perform her duty as Administratrix and under Section 2, Rule 82 of the Rules of Court, neglect on the part of the administratrix to render her account is a ground for her removal as an administratrix. Finding the instant motion to remove Administratrix to be meritorious and well-taken, the same is, as it is hereby, GRANTED.

WHEREFORE, Administratrix Ana Lim Kalaw is hereby REMOVED as such Administratrix of the Estate of the late Carlos Lim Kalaw." 2 

On September 2, 1985, Petitioner, without waiting for the resolution of the motion for reconsideration with the trial court, filed a Petition for Certiorari with Preliminary Injunction or Restraining Order with the then Intermediate Appellate Court to annul and set aside the following Orders issued by respondent Judge Diaz, as follows:jgc:chanrobles.com.ph

"a. Order dated January 4, 1985 removing the Petitioner as Administratrix of the estate of the late Carlos Lim Kalaw;

b. Order dated April 30, 1985 denying Petitioner’s Motion for Reconsideration of the Order of January 4, 1985;

c. Order dated May 13, 1985 appointing private Respondent Rosa Lim Kalaw, as Administratrix of said Estate;chanroblesvirtualawlibrary

d. Order dated June 19, 1985 directing the tenants and/or lessees of the Carlos Lim Kalaw building to deposit the rentals in court and authorizing private respondent to break open the premises in said building." 3 

On December 27, 1985, the appellate court rendered a decision, the dispositive portion of which reads:jgc:chanrobles.com.ph

"WHEREFORE, the petition for certiorari is DENIED. However, respondent Judge is directed to require private

respondent Rosa Lim Kalaw to post the appropriate administrator’s bond within ten (10) days from notice hereof. With costs against petitioner." 4 

On January 21, 1986, petitioner filed a motion for reconsideration of said decision which was however denied for lack of merit on May 12, 1986.

Hence, this petition alleging grave abuse of discretion on the part of the appellate court in sustaining respondent Judge Diaz’ order removing her as judicial administratrix considering that she had already submitted an accounting report covering the period from December, 1977 to December, 1983 in compliance with respondent’s Judge order.

Section 8 of Rule 85 of the Revised Rules of Court provides that:jgc:chanrobles.com.ph

"SEC. 8. When executor or administrator to render account. — Every executor or administrator shall render an account of his administration within one (1) year from the time of receiving letters testamentary or of administration, unless the court otherwise directs because of extensions of time for presenting claims against, or paying the debts of, the estate, or for disposing of the estate; and he shall render such further accounts as the court may require until the estate is wholly settled." chanrobles law library

The rendering of an accounting by an administrator of his administration within one year from his appointment is mandatory, as shown by the use of the word "shall" in said rule. The only exception is when the Court otherwise directs because of extensions of time for presenting claims against the estate or for paying the debts or disposing the assets of the estate, which do not exist in the case at bar.

Furthermore, petitioner’s excuse that the sala where the intestate proceeding was pending was vacant most of the time deserves scant consideration since petitioner never attempted to file with said court an accounting report of her administration despite the fact that at one time or another, Judge Sundiam and Judge Tiongco were presiding over said sala during their incumbency.

Likewise, her subsequent compliance in rendering an accounting report did not purge her of her negligence in not rendering an accounting for more than six years, which justifies petitioner’s removal as administratrix and the appointment of private respondent in her place as mandated by Section 2 of Rule 82 of the Rules of Court. 5 

As correctly stated by the appellate court:jgc:chanrobles.com.ph

"The settled rule is that the removal of an administrator under Section 2 of Rule 82 lies within the discretion of the Court appointing him. As aptly expressed by the Supreme Court in the case of Degala v. Ceniza and Umipig, 78 Phil. 791, ‘the sufficiency of any ground for removal should thus be determined by said court, whose sensibilities are, in the first place, affected by any act or omission on the part of the administrator not comfortable to or in disregard of the rules or the orders of the court.’ Consequently, appellate tribunals are disinclined to interfere with the action taken by a probate court in the matter of the removal of an executor or administrator unless positive error or gross abuse of discretion is shown. (Borromeo v. Borromeo, 97 Phil. 549; Matute v. Court of Appeals, 26 SCRA 768.)chanrobles lawlibrary : rednad

In the case at bar, the removal of petitioner as administratrix was on the ground of her failure for 6 years and 3 months from the time she was appointed as administratrix to render an accounting of her administration as required by Section 8 of Rule 85 of the Rules of Court." 6 

As to petitioner’s contention that she was denied due process when she was removed as administratrix since no hearing was held on the motion for her removal, this does not deserve serious consideration. The appellate court’s disposal of this issue is in accordance with the law and evidence. Said the Court:jgc:chanrobles.com.ph

"Petitioner’s contention that her removal was without due process is certainly not borne out by the records. There has been a hearing and, in fact, several pleadings had been filed by the parties on the issue before the order of removal was issued. Thus, the motion to remove petitioner as administratrix was filed on January 3, 1984, which motion was set for hearing on February 10, 1984. Petitioner filed an opposition to the motion on March 22, 1984. This was followed by a Rejoinder and Manifestation filed on April 6, 1984 by private Respondent. The order for petitioner’s removal was issued on January 4, 1985, or after almost a year from the time the motion to remove her was filed. Not satisfied with this order, petitioner filed a motion for reconsideration on January 14, 1985, to which motion private respondent filed an opposition on January 25, 1985. Petitioner filed a rejoinder to the opposition on February 18, 1985. Respondent Judge issued his order denying the motion for reconsideration on April 30, 1985. This recital of events indubitably disproves petitioner’s allegation that she was not afforded due process." 7 

WHEREFORE, finding no merit in the petition for certiorari, prohibition and mandamus with preliminary injunction, the same is hereby DENIED. Costs against petitioner.chanroblesvirtualawlibrary.SO ORDERED. 

HEIRS OF JOSE SY BANG, HEIRS OF JULIAN SY and OSCAR SY,[1]

Petitioners,

- versus -

ROLANDO SY, ROSALINO SY, LUCIO SY, ENRIQUE SY, ROSAURO SY, BARTOLOME SY, FLORECITA SY, LOURDES SY, JULIETA SY, and ROSITA FERRERA-SY,

Respondents.

x - - - - - - - - - - - - - - - - - - - - - - - - - x

G.R. No. 114217

ILUMINADA TAN, SPOUSES JULIAN SY AND ROSA TAN, ZENAIDA TAN, and MA. EMMA SY,

Petitioners,

- versus -

BARTOLOME SY, ROSALINO SY, FLORECITA SY, ROLANDO SY, LOURDES SY, ROSAURO SY, JULIETA SY, and ROSITA FERRERA-SY,

Respondents.

G.R. No. 150797

Present:

CARPIO, J.Chairperson,CHICO-NAZARIO,VELASCO, JR.,NACHURA, andPERALTA, JJ.

Promulgated:

October 13, 2009

x------------------------------------------------------------------------------------x  

DECISION

 

NACHURA, J.:

Before this Court are two Petitions for Review on Certiorari under Rule 45 of the Rules of Court. The first

Petition, G.R. No. 114217, assails the Decision[2] dated May 6, 1993 and the Resolution[3] dated February 28, 1994 of

the Court of Appeals (CA) in CA-G.R. SP No. 17686. On the other hand, the second Petition, G.R. No. 150797,

questions the Decision dated February 28, 2001 and the Resolution dated November 5, 2001 of the CA in CA-G.R.

SP No. 46244.

 

The factual antecedents are as follows:

 

G.R. No. 114217

 

On May 28, 1980, respondent Rolando Sy filed a Complaint for Partition against spouses Jose Sy Bang and

Iluminada Tan, spouses Julian Sy and Rosa Tan, Zenaida Sy, Ma. Emma Sy, Oscar Sy, Rosalino Sy, Lucio Sy,

Enrique Sy, Rosauro Sy, Bartolome Sy, Florecita Sy, Lourdes Sy, Julieta Sy, Rosita Ferrera-Sy, and Renato Sy

before the then Court of First Instance of Quezon, Branch 2, docketed as Civil Case No. 8578.[4]

 

Respondents Rolando Sy, Rosalino Sy, Lucio Sy, Enrique Sy, Rosauro Sy, Bartolome Sy, Julieta Sy, Lourdes Sy,

and Florecita Sy are the children of Sy Bang by his second marriage to respondent Rosita Ferrera-Sy, while

petitioners Jose Sy Bang, Julian Sy and Oscar Sy are the children of Sy Bang from his first marriage to Ba Nga, and

petitioners Zenaida Tan and Ma. Emma Sy are the children of petitioner spouses Jose Sy Bang and Iluminada Tan.[5]

 

Sy Bang died intestate in 1971, leaving behind real and personal properties, including several businesses.[6]

 

During an out-of-court conference between petitioners and respondents, it was agreed that the management,

supervision or administration of the common properties and/or the entire estate of the deceased Sy Bang shall be

placed temporarily in the hands of petitioner Jose Sy Bang, as trustee, with authority to delegate some of his

functions to any of petitioners or private respondents. Thus, the function or duty of bookkeeper was delegated by

Jose Sy Bang to his co-petitioner Julian Sy, and the duty or function of management and operation of the business of

cinema of the common ownership was delegated by petitioner Jose Sy Bang to respondent Rosauro Sy.[7]

 

Herein petitioners and respondents also agreed that the income of the three cinema houses, namely, Long Life, SBS

and Sy-Co Theaters, shall exclusively pertain to respondents for their support and sustenance, pending the

termination of Civil Case No. 8578, for Judicial Partition, and the income from the vast parts of the entire estate and

other businesses of their common father, to pertain exclusively to petitioners. Hence, since the year 1980, private

respondents, through respondent Rosauro Sy, had taken charge of the operation and management of the three

cinema houses, with the income derived therefrom evenly divided among themselves for their support and

maintenance.[8]

 

On March 30, 1981, the Judge rendered a First Partial Decision based on the Compromise Agreement dated

November 10, 1980, submitted in Civil Case No. 8578 by plaintiff Rolando Sy and defendants Jose Sy Bang and

Julian Sy. On April 2, 1981, the Judge rendered a Second Partial Decision based on the pretrial order of the court,

dated March 25, 1981, entered into by and between respondent Renato Sy and petitioner spouses. Said First Partial

Decision and Second Partial Decision had long become final, without an appeal having been interposed by any of the

parties.[9]

 

On June 8, 1982, the Judge rendered a Third Partial Decision,[10] the dispositive portion of which reads as follows:

 WHEREFORE, the Court hereby renders this Third Partial Decision: (a)                Declaring that all the properties, businesses or assets, their income, produce

and improvements, as well as all the rights, interests or participations (sic) in the names of defendants Jose Sy Bang and his wife Iluminada Tan and their children, defendants Zenaida and Ma. Emma; both surnamed Sy, and defendants Julian Sy and his wife Rosa Tan, as belonging to the estate of Sy Bang, including the properties in the names of said defendants which are enumerated in the Complaints in this case and all those properties, rights and interests which said defendants may have concealed or fraudulently transferred in the names of other persons, their agents or representatives;

 (b)               Declaring the following as the heirs of Sy Bang, namely: his surviving widow,

Maria Rosita Ferrera-Sy and her children, Enrique, Bartolome, Rosalino, Rolando, Rosauro, Maria Lourdes, Florecita and Julieta, all surnamed Sy, and his children by his first wife, namely: Jose Sy Bang, Julian Sy, Lucio Sy, Oscar Sy and Renato Sy;

 (c)                Ordering the partition of the Estate of Sy Bang among his heirs entitled

thereto after the extent thereof shall have been determined at the conclusion of the proper accounting which the parties in this case, their agents and representatives, shall render and after segregating and delivering to Maria Rosita Ferrera-Sy her one-half (1/2) share in the conjugal partnership between her and her deceased husband Sy Bang;

 (d)               Deferring resolution on the question concerning the inclusion for partition of

properties in the names of Rosalino, Bartolome, Rolando and Enrique, all surnamed Sy. 

SO ORDERED.  

On June 16, 1982, petitioners filed a Motion to Suspend Proceedings and for Inhibition, alleging, among

others, that the Judge had patently shown partiality in favor of their co-defendants in the case.  This motion was

denied on August 16, 1982.[11]

 

On July 4, 1982, petitioners filed a Petition for Prohibition and for Inhibition (Disqualification) and Mandamus

with Restraining Order with the Supreme Court docketed as G.R. No. 60957. The Petition for Prohibition and for

Inhibition was denied, and the Petition for Mandamus with Restraining Order was Noted.[12]

 

On August 17, 1982, the Judge issued two Orders: (1) in the first Order,[13] Mrs. Lucita L. Sarmiento was

appointed as Receiver, and petitioners Motion for New Trial and/or Reconsideration, dated July 9, 1982 and their

Supplemental Motion, dated July 12, 1982, were denied for lack of merit; and (2) in the second Order, [14] the Judge

ordered the immediate cancellation of the lis pendens annotated at the back of the certificates of title in the names of

Bartolome Sy, Rosalino Sy and Rolando Sy.

 

On August 18, 1982, the trial court approved the bond posted by the receiver, Mrs. Lucita L. Sarmiento,

Bartolome Sy, Rolando Sy and Rosalino Sy.[15]

 

While the Petition for Mandamus with Restraining Order was pending before the First Division of the

Supreme Court, petitioners filed a Petition for Certiorari and Prohibition before the Supreme Court, docketed as G.R.

No. 61519. A Temporary Restraining Order was issued on August 31, 1982, to enjoin the Judge from taking any

action in Civil Case No. 8578 and, likewise, restraining the effectivity of and compliance with the Resolution dated

August 16, 1982, the two Orders dated August 17, 1982, and the Order dated August 18, 1982.

 

On September 2, 1982, petitioners withdrew their Petition for Mandamus with Restraining Order, docketed

as G.R. No. 60957.

 

On September 11, 1982, an Urgent Manifestation and Motion was filed by Mrs. Lucita L. Sarmiento, the

appointed receiver, which was opposed by petitioners on September 24, 1982. [16]

 

After several incidents in the case, the Court, on May 8, 1989, referred the petition to the CA for proper

determination and disposition.

 

The CA rendered the assailed Decision[17] on May 6, 1993, denying due course to and dismissing the

petition for lack of merit. It held that Judge Puno acted correctly in issuing the assailed Third Partial Decision. The CA

said that the act of Judge Puno in rendering a partial decision was in accord with then Rule 36, Section 4, of the

Rules of Court, which stated that in an action against several defendants, the court may, when a judgment is proper,

render judgment against one or more of them, leaving the action to proceed against the others. It found that the

judges decision to defer resolution on the properties in the name of Rosalino, Bartolome, Rolando, and Enrique would

not affect the resolution on the properties in the names of Jose Sy Bang, Iluminada, Julian, Rosa, Zenaida, and Ma.

Emma, since the properties were separable and distinct from one another such that the claim that the same formed

part of the Sy Bang estate could be the subject of separate suits.

 

The CA also upheld the judges appointment of a receiver, saying that the judge did so after both parties had

presented their evidence and upon verified petition filed by respondents, and in order to preserve the properties

under litigation. Further, the CA found proper the order to cancel the notice of lis pendens annotated in the certificates

of title in the names of Rosalino, Rolando and Bartolome.

 

The Motion for Reconsideration was denied on February 28, 1994.[18]

 

On April 22, 1994, petitioners filed this Petition for Review on Certiorari under Rule 43 of the Rules of Court.

 

The Court denied the Petition for non-compliance with Circulars 1-88 and 19-91 for failure of petitioners to

attach the registry receipt. Petitioners moved for reconsideration, and the Petition was reinstated on July 13, 1994.

 

In this Petition for Review, petitioners seek the reversal of the CA Decision and Resolution in CA-G.R. SP

No. 17686 and, consequently, the nullification of the Third Partial Decision and orders of the trial court in Civil Case

No. 8578. They also pray for the Court to direct the trial court to proceed with the reception of further evidence in Civil

Case No. 8578.[19] In particular, petitioners allege that the CA decided questions of substance not in accord with law

when it upheld the trial courts Third Partial Decision which, they alleged, was rendered in violation of their rights to

due process.

 

Petitioners narrate that the trial court initially gave them two trial days May 26 and 27, 1982 to present their

evidence. However, at the hearing on May 26, the judge forced them to terminate the presentation of their

evidence. On June 2, 1982, following petitioners submission of additional documentary evidence, the trial court

scheduled the case for hearing on June 8 and 9, 1982, at 2 oclock in the afternoon in view of the importance of the

issue concerning whether all the properties in the names of Enrique Sy, Bartolome Sy, Rosalino Sy, and Rolando Sy

and/or their respective wives (as well as those in the names of other party-litigants in this case) shall be declared or

included as part of the Estate of Sy Bang, and in view of the numerous documentary evidences (sic) presented by

Attys. Raya and Camaligan. At the June 8 hearing, petitioners presented additional evidence. Unknown to them,

however, the trial court had already rendered its Third Partial Decision at 11 oclock that morning. Thus, petitioners

argue that said Third Partial Decision is void.[20]

 

They also question the trial courts First Order dated August 17, 1982 and Order dated August 18, 1982 granting the

prayer for receivership and appointing a receiver, respectively, both allegedly issued without a hearing and without

showing the necessity to appoint a receiver. Lastly, they question the Second Order dated August 17, 1982 canceling

the notice of lis pendens ex parte and without any showing that the notice was for the purpose of molesting the

adverse parties, or that it was not necessary to protect the rights of the party who caused it to be recorded.[21]

 

On May 9, 1996, Rosita Ferrera-Sy filed a Motion for Payment of Widows Allowance. She alleged that her deceased

husband, Sy Bang, left an extensive estate. The properties of the estate were found by the trial court to be their

conjugal properties. From the time of Sy Bangs death in 1971 until the filing of the motion, Rosita was not given any

widows allowance as provided in Section 3, Rule 83 of the Rules of Court by the parties in possession and control of

her husbands estate, or her share in the conjugal partnership.[22]

 

In their Comment on the Motion for Payment of Widows Allowance, petitioners argued that Section 3, Rule 83 of the

Rules of Court specifically provides that the same is granted only during the settlement of the estate of the decedent,

and this allowance, under Article 188 of the Civil Code (now Article 133 of the Family Code), shall be taken from the

common mass of property during the liquidation of the inventoried properties.[23] Considering that the case before the

trial court is a special civil action for partition under Rule 69 of the Rules of Court, Rosita is not entitled to widows

allowance.

 

On September 23, 1996, the Court granted the Motion for Payment of Widows Allowance and ordered petitioners

jointly and severally to pay Rosita P25,000.00 as the widows allowance to be taken from the estate of Sy Bang,

effective September 1, 1996 and every month thereafter until the estate is finally settled or until further orders from

the Court.[24]

 

In a Manifestation dated October 1, 1996, petitioners informed the Court that Rosita and co-petitioner Enrique Sy had

executed a waiver of past, present and future claims against petitioners and, thus, should be dropped as parties to

the case.[25] Attached thereto was a Sinumpaang Salaysay wherein Rosita and Enrique stated that they were givenP1

million and a 229-square meter parcel of land, for which reason they were withdrawing as plaintiffs in Civil Case No.

8578.[26]

 

Respondents, except Enrique Sy, filed a Counter-Manifestation and Opposition to Drop Rosita Sy as a Party. [27] They

said that it would be ridiculous for Rosita to give up her share in Sy Bangs estate, amounting to hundreds of millions

of pesos, which had already been ordered partitioned by the trial court, to the prejudice of her seven full-blooded

children. They alleged that Rosita was not in possession of her full faculties when she affixed her thumbmark on

the Sinumpaang Salaysay considering her age, her frequent illness, and her lack of ability to read or write. Hence,

they filed a petition before the Regional Trial Court (RTC) of Lucena City for guardianship over her person and

properties.They also alleged that Enrique and some of Jose Sy Bangs children would stealthily visit Rosita in

Rosauros house while the latter was away. On one of those occasions, she was asked to affix her thumbmark on

some documents she could not read and knew nothing about. They claim that Rosita has never received a single

centavo of the P1 million allegedly given her.

 

In their Reply to Counter-Manifestation,[28] petitioners countered that respondents failed to present any concrete

evidence to challenge the Sinumpaang Salaysay. Since the same was duly notarized, it was a public document and

presumed valid. They, likewise, alleged that the Counter-Manifestation was filed without Rositas authorization as, in

fact, she had written her counsel with instructions to withdraw said pleading.[29] Further, they averred that Rosita

executed the Sinumpaang Salaysay while in full possession of her faculties. They alleged that Rosita intended to

oppose the petition for guardianship and they presented a copy of a sworn certification from Rositas physician that

she (Rosita) is physically fit and mentally competent to attend to her personal or business transactions.[30]

 

On the other hand, petitioners filed a Motion for Reconsideration of the Courts September 23, 1996 Resolution. It

alleged that Rosita and Enrique executed their Sinumpaang Salaysay on August 29, 1996. However, this

development was made known to the Court only on October 1, 1996; hence, the Court was not aware of this when it

issued its Resolution. Petitioners prayed for the reconsideration of the September 23, 1996 Resolution and dropping

Rosita and Enrique as parties to the case.[31]

In their Opposition to the Motion for Reconsideration, respondents maintained that the Court should not

consider the Motion for Reconsideration. Respondents alleged that Rosita thumbmarked the Sinumpaang

Salaysay without understanding the contents of the document or the implications of her acts. Respondents also tried

to demonstrate that their mother would thumbmark any document that their children asked her to by exhibiting four

documents each denominated as Sinumpaang Salaysay and thumbmarked by Rosita. One purported to disown the

earlier Sinumpaang Salaysay. The second was a reproduction of the earlier Sinumpaang Salaysay with the amount

changed to P100.00, the Transfer Certificate of Title number changed to 12343567, and the size of the property to as

big as the entire Lucena City. The third purported to bequeath her shares in the conjugal partnership of gains to

Rosauro, Bartolome, Rolando, and Rosalino, while refusing to give any inheritance to Florecita, Lourdes, Julieta, and

Enrique. Lastly, the fourth contradicted the third in that it was in favor of Florecita, Lourdes, Julieta, and Enrique,

while disinheriting Rosauro, Bartolome, Rolando, and Rosalino. These, respondents assert, clearly show that their

mother would sign any document, no matter the contents, upon the request of any of her children.[32]

 

The Court denied the Motion for Reconsideration on November 18, 1996.[33]

 

Petitioners filed a Supplement to their Memorandum, additionally arguing that the Third Partial Decision did not only

unduly bind the properties without due process, but also ignored the fundamental rule on the indefeasibility

of Torrens titles.[34]

 

G.R. No. 150797

 

Meanwhile, on September 30, 1996, respondents filed a Joint Petition for the Guardianship of the

Incompetent Rosita Ferrera-Sy before the RTC of Lucena City, Branch 58 (Guardianship court), docketed as Special

Proceedings No. 96-34. On May 19, 1997, Rosauro Sy, who sought to be named as the special guardian, filed before

the Guardianship court a Motion to Order Court Deposit of Widows Allowance Ordered by the Supreme Court.

[35] Then, he filed a Motion before this Court seeking an Order for petitioners to pay Rosita P2,150,000.00 in widows

allowance and P25,000.00 every month thereafter, as ordered by this Court in its September 23, 1996 Resolution. He

also prayed for petitioners imprisonment should they fail to comply therewith.[36]

 

On July 8, 1997, the Guardianship court issued an Order, the dispositive portion of which reads:  

WHEREFORE, Mr. Jose Sy Bang and his wife Iluminada Tan; and their children, Zenaida Sy and Ma. Emma Sy; and Julian Sy and his wife Rosa Tan, are hereby ordered to deposit to this Court, jointly and severally, the amount of P250,000.00 representing the widows allowance of the incompetent Rosita Ferrera Sy corresponding the (sic) periods from September 1, 1996 to June 30, 1997, and additional amount of P25,000.00 per month and every month thereafter, within the first ten (10) days of each month.[37]

  

Petitioners Motion for Reconsideration was denied. Rosauro, the appointed guardian, then asked the

Guardianship court to issue a writ of execution. Meanwhile, on December 10, 1997, petitioners filed a Petition

for Certiorari with the CA docketed as CA-G.R. SP No. 46244 to annul the July 8, 1997 Order and October 9, 1997

Resolution of the Guardianship court.[38]

 

In a Decision[39] dated February 28, 2001, the CA ruled in respondents favor, finding nothing legally objectionable in

private respondent Rosauro Sys filing of the motion to order the deposit of the widows allowance ordered by the

Supreme Court in G.R. No. 114217 or, for that matter, in the public respondents grant thereof in the order herein

assailed. More so, when the public respondents actions are viewed in the light of the Supreme Courts denial of

petitioners motion for reconsideration of its resolution dated September 23, 1996.[40] Thus it held:  

WHEREFORE, the petition is DENIED for lack of merit and the assailed resolution dated September 23, 1996 (sic) is AFFIRMED in toto. No pronouncement as to costs. SO ORDERED. 

 

Their Motion for Reconsideration having been denied on November 5, 2001,[41] petitioners filed this Petition for

Review[42] under Rule 45 of the Rules of Court praying for this Court to reverse the CAs February 28, 2001 Decision

and its Resolution denying the Motion for Reconsideration, and to declare the Guardianship court to have exceeded

its jurisdiction in directing the deposit of the widows allowance in Special Proceedings No. 96-34. [43] They argued that

the Guardianship courts jurisdiction is limited to determining whether Rosita was incompetent and, upon finding in the

affirmative, appointing a guardian. Moreover, under Rule 83, Section 3, of the Rules of Court, a widows allowance

can only be paid in an estate proceeding. Even if the complaint for partition were to be considered as estate

proceedings, only the trial court hearing the partition case had the exclusive jurisdiction to execute the payment of the

widows allowance.[44]

 

They raised the following issues:

  

The Court of Appeals erred in affirming the Guardianship Courts Order dated 8 July 1997, and Resolution dated 9 October 1997, in that: IThe trial court, acting as a Guardianship Court, and limited jurisdiction, had no authority to enforce payment of widows allowance. IIThe payment of widows allowance cannot be implemented at [the] present because the estate of Sy Bang the source from which payment is to be taken has not been determined with finality. IIIThe Order of the trial court purporting to enforce payment of widows allowance unduly modified the express terms of this Honorable Courts Resolution granting it.[45]

  

Petitioners, likewise, question the Guardianship courts omission of the phrase to be taken from the estate of Sy Bang

from the July 8, 1997 Order. They interpreted this to mean that the Guardianship court was ordering that the widows

allowance be taken from their own properties and not from the estate of Sy Bang an undue modification of this Courts

September 23, 1996 Resolution.[46]

 

On January 21, 2002, the Court resolved to consolidate G.R. No. 114217 and G.R. No. 150797. The parties

submitted their respective Memoranda on May 21, 2003 and June 19, 2003, both of which were noted by this Court in

its August 11, 2003 Resolution.

 

Pending the issuance of this Courts Decision in the two cases, respondent Rosauro Sy filed, on November 11, 2003,

a Motion to Order Deposit in Court of Supreme Courts Ordered Widows Allowance Effective September 23, 1996 and

Upon Failure of Petitioners Julian Sy, et al. to Comply Therewith to Order Their Imprisonment Until Compliance. He

alleged that his mother had been ill and had no means to support herself except through his financial assistance, and

that respondents had not complied with this Courts September 23, 1996 Resolution, promulgated seven years earlier.[47] He argued that respondents defiance constituted indirect contempt of court. That the Guardianship court had

found them guilty of indirect contempt did not help his mother because she was still unable to collect her widows

allowance.[48]

 

Petitioners opposed said Motion arguing that the estate from which the widows allowance is to be taken has not been

settled. They also reiterated that Rosita, together with son Enrique, had executed a Sinumpaang Salaysay waiving all

claims against petitioners. Hence, there was no legal ground to cite them in contempt.[49]

 

On April 4, 2005, this Court granted Rosauros Motion, to wit:  

WHEREFORE, the Court finds and so holds petitioner Iluminada Tan (widow of deceased petitioner Jose Sy Bang), their children and co-petitioners Zenaida Sy, Ma. Emma Sy, Julian Syand the latters wife Rosa Tan, GUILTY of contempt of this Court and are collectively sentenced to pay a FINE equivalent to ten (10%) percent of the total amount due and unpaid to Rosita Ferrera-Sy by way of a widows allowance pursuant to this Courts Resolution of September 13, 1996, and accordingly ORDERS their immediate imprisonment until they shall have complied with said Resolution by paying Rosita Ferrera-Sy the amount of TWO MILLION SIX HUNDRED THOUSAND ONE HUNDRED PESOS (P2,600,100.00), representing her total accumulated unpaid widows allowance from September, 1996 to April, 2005 at the rate of TWENTY-FIVE THOUSAND PESOS (P25,000.00) a month, plus six (6%) percent interest thereon. The Court further DIRECTS petitioners to faithfully pay Rosita Ferrera-Sy her monthly widows allowance for the succeeding months as they fall due, under pain of imprisonment. This Resolution is immediately EXECUTORY. SO ORDERED.[50]

  

Iluminada, Zenaida and Ma. Emma paid the court fine of P260,010.00 on April 5, 2005.[51]

Respondents, except Rosauro Sy (who had died), filed a Motion for Execution [52] before this Court on April 25, 2005.

On the other hand, petitioner Rosa Tan filed a Motion for Reconsideration with Prayer for Clarification.[53] She alleged

that, in accordance with Chinese culture, she had no participation in the management of the family business or Sy

Bangs estate. After her husbands death, she allegedly inherited nothing but debts and liabilities, and, having no

income of her own, was now in a quandary on how these can be paid.  She asked the Court to consider that she had

not disobeyed its Resolution and to consider her motion.

Other petitioners, Iluminada, Zenaida and Ma. Emma, also filed a Motion for Reconsideration with Prayer for

Clarification.[54] They stressed that the P1 million and the piece of land Rosita had already received from Jose Sy

Bang in 1996 should form part of the widows allowance. They also argued that whatever allowance Rosita may be

entitled to should come from the estate of Sy Bang. They further argued the unfairness of being made to pay the

allowance when none of them participated in the management of Sy Bangs estate; Zenaida and Ma. Emma being

minors at the time of his death, while Iluminada and Rosa had no significant role in the family business.

 

Respondents then filed a Motion for Issuance of Order Requiring Respondents to Deposit with the Supreme Courts

Cashier its Ordered Widows Allowance[55] and a Motion for Execution of Resolution dated April 4, 2005. [56] Petitioners

opposed the same.[57]

 

On July 25, 2005, the Court issued a Resolution granting both of respondents motions and denying petitioners motion

for reconsideration.[58]

 

Petitioners Iluminada, Zenaida and Ma. Emma filed, on August 15, 2005, a Manifestation of Compliance and Motion

for Clarification.[59] They maintained that the issues they had raised in the motion for reconsideration had not been

duly resolved. They argued that when this Court issued its September 23, 1996 Resolution, it was not yet aware that

Rosita had executed a Sinumpaang Salaysay, wherein she waived her claims and causes of action against

petitioners. They also informed this Court that, on April 17, 1998, the Guardianship court had issued an Order which

recognized a temporary agreement based on the voluntary offer of Jose Sy Bang of a financial assistance

of P5,000.00 per month to Rosita while the case was pending. Moreover, as a manifestation of good faith, petitioners

Iluminada, Zenaida and Ma. Emma paid the P430,000.00 out of their own funds in partial compliance with the Courts

Resolution. However, the same did not in any way constitute a waiver of their rights or defenses in the present case.

They underscored the fact that the allowance must come from the estate of Sy Bang, and not from Jose Sy Bang or

any of the latters heirs, the extent of which remained undetermined. They further asked the Court to adjudicate the

liability for the widows allowance to be equally divided between them and the other set of petitioners, the heirs of

Julian Sy.

 

On August 30, 2005, respondents filed a motion asking this Court to issue an Order for the immediate incarceration of

petitioners for refusing to comply with the Courts resolution. [60] They aver that the period within which petitioners were

to comply with the Courts Resolution had now lapsed, and thus, petitioners must now be incarcerated for failure to

abide by said Resolution. They likewise asked the Court to refer petitioners counsel, Atty. Vicente M. Joyas, to the

Integrated Bar of the Philippines (IBP) for violations of the Canons of Professional Responsibility or to declare him in

contempt of court. They alleged that despite the finality of the Courts denial of petitioners motion for reconsideration,

Atty. Joyas still filed a Manifestation with compliance arguing the same points. Further, Atty. Joyas is not petitioners

counsel of record in this case since he never formally entered his appearance before the Court.[61]

 

In a Resolution dated September 14, 2005, the Court denied the motion to refer Atty. Joyas to the IBP for being a

wrong remedy.[62]

 

Petitioners Iluminada, Zenaida and Ma. Emma then filed an Omnibus Motion,[63] seeking an extension of time to

comply with the Courts Resolution and Motion to delete the penalty of fine as a consequence of voluntary

compliance. They insist that their compliance with the order to pay the widows allowance should obliterate, expunge,

and blot out the penalty of fine and imprisonment. They alleged that for their failure to comply with this Courts

Resolution, the RTC, Lucena City, found them guilty of indirect contempt and imposed on them a fine of P30,000.00.

They had appealed said order to the CA.

 

They also tried to make a case out of the use of the terms joint and several in the September 23 Resolution, and

collectively in the April 5, 2005 Resolution. They argued that joint and several creates individual liability for each of

the parties for the full amount of the obligation, while collectively means that all members of the group are responsible

together for the action of the group. Hence, collectively would mean that the liability belongs equally to the two groups

of petitioners. They requested for an additional 60 days to raise the necessary amount. They also asked the Court to

hold their imprisonment in abeyance until their just and reasonable compliance with the Courts orders.

 

Barely a month later, petitioners, through their new counsel, filed another Manifestation stressing that Sy Bangs

marriage to Rosita Ferrera is void. They claimed that respondents have falsified documents to lead the courts into

believing that Rositas marriage to Sy Bang is valid.

 

The Omnibus Motion was denied in a Resolution dated October 17, 2005. Thereafter, respondents filed a Motion to

Immediately Order Incarceration of Petitioners,[64] which petitioners opposed.[65]

 

In a Resolution dated December 12, 2005,[66] the Court issued a Warrant of Arrest[67] against petitioners and directed

the National Bureau of Investigation (NBI) to detain them until they complied with this Courts April 4, 2005 and July

25, 2005 Resolutions.

 

Petitioner Rosa Tan filed a Manifestation with Motion.[68] She informed the Court that, to show that she was not

obstinate and contumacious of the Court and its orders, she had begged and pleaded with her relatives to raise

money to comply, but concedes that she was only able to raise a minimal amount since she has no source of income

herself and needs financial support to buy her food and medicines. She obtained her brothers help and the latter

issued six checks in the total amount of P650,000.00. She also alleged that she was not informed by her husbands

counsel of the developments in the case, and remained unconsulted on any of the matters or incidents of the

case. She reiterated that she had no participation in the management of the Sy Bang estate and received nothing of

value upon her husbands death. She prayed that the Court would not consider her failure to raise any further amount

as contempt or defiance of its orders.

 

The motion was denied in a Resolution dated January 16, 2006.

 

In an Urgent Manifestation of Compliance with the Contempt Resolutions with Payment of Widows Allowance with

Prayer Reiterating the Lifting of Warrant of Arrest on Humanitarian Grounds, [69] petitioners Iluminada, Zenaida and

Ma. Emma asked the Court to delete the penalty of indefinite imprisonment considering their partial compliance and

the partial compliance of Rosa Tan. They expressed willingness to deposit the widows allowance with the Supreme

Courts Cashier pending the determination of Sy Bangs estate. They reasoned that the money to be deposited is their

own and does not belong to Sy Bangs estate. The deposit is made for the sole purpose of deleting the penalty of

indefinite imprisonment. They claim that they are not willfully disobeying the Courts order but are merely hesitating to

comply because of pending incidents such as the falsification charges against Rosita, the resolution of the partition

case, the Sinumpaang Salaysay executed by Rosita, and the pendency of Rositas guardianship proceedings, as well

as humanitarian considerations. Thus, they prayed for the Court to reconsider the order of contempt and to recall the

warrant of arrest.

 

On February 15, 2006, this Court issued a Resolution[70] lifting the warrant of arrest on petitioners Iluminada, Zenaida,

Ma. Emma, and Rosa Tan on the condition that they issue the corresponding checks to settle the accrued widows

allowance of Rosita Ferrera-Sy. They were also directed to submit proof of their compliance to the Court within ten

(10) days from notice.

 

In a Manifestation[71] dated February 28, 2006, petitioners Iluminada, Zenaida and Ma. Emma informed the Court that

they had deposited the checks in favor of Rosita with the RTC, Lucena City, Branch 58, during the proceedings on

February 28, 2006.[72]

 

Respondents filed a Comment to the Manifestation arguing that the deposit of said checks, amounting

to P1,073,053.00, does not amount to full compliance with the Courts order considering that the accrued widows

allowance now amounted to P4,528,125.00.

 

Then, petitioners Iluminada, Zenaida and Ma. Emma filed a Motion to include Rosalino Sy, Bartolome Sy, Rolando

Sy, and Heirs of Enrique Sy as Likewise Liable for the Payment of Widows Allowance as Heirs of Sy Bang as they

may also hold Assets-Properties of the Estate of Sy Bang.[73] They argued that it is denial of the equal protection

clause for the Court to single out only the two children of the first marriage Jose Sy Bang and Julian Sy and their

heirs, as the ones responsible for the widows allowance. This ruling, they aver, does not take into consideration the

numerous and valuable properties from the estate of Sy Bang being held in the names of Rosalino, Bartolome,

Rolando, and Enrique. They alleged that two compromise agreements, both approved by the trial court, transferred

properties to Rolando and Renato. They further alleged that respondents Rolando, Maria Lourdes, Florecita,

Rosalino, Enrique, and Rosita Ferrera-Sy have executed separate waivers and quitclaims over their shares in the

estate of Sy Bang for certain considerations. However, out of respect for the Court and their fear of incarceration,

they complied with the Courts orders using their personal funds which they claim is unfair because they have never

participated in the management of the properties of Sy Bang. They prayed that the Court pronounce that the liability

for the widows allowance be divided proportionately among the following groups: Iluminada, Zenaida, and Ma.

Emma; Rosa Tan; Rosalino Sy and wife Helen Loo; Bartolome Sy and wife Virginia Lim; Rolando Sy and wife

Anacorita Rioflorido; and the heirs of Enrique Sy, namely, Elaine Destura and Edwin Maceda.

 

On March 23, 2006, petitioners filed an Urgent Reply to respondents Comment on the manifestation of compliance

with Opposition[74] to the motion filed by respondents for the Court to reiterate its order for the NBI to arrest petitioners

for failure to comply with the February 15, 2006 Resolution. They argued that they had fully complied with the Courts

orders. They alleged that on three occasions within the period, they had tried to submit 12 postdated checks to the

Courts cashiers, but the same were refused due to the policy of the Court not to issue receipts on postdated checks.

They then filed a motion before the RTC of Lucena City praying for authority to deposit the checks with the trial

court. The motion was denied but, on reconsideration, was later granted. The checks are now in the custody of the

RTC. The only issue respondents raise, they claim, is the amount of the checks. Hence, there is no basis for the

Court to direct the NBI to effect their arrest.

 

The Court, in a Resolution dated March 29, 2006, required respondents to comment on the motion to include some of

them in the payment of widows allowance. Petitioners, on the other hand, were required to comment on a motion filed

by respondents for the Court to reiterate its order to the NBI to arrest petitioners for failure to comply with the

February 15, 2006 Resolution.[75]

 

Petitioners filed their Comment with Motion for Partial Reconsideration of the March 29, 2006 Resolution.

[76] They reiterated their arguments in their Urgent Reply to respondents Comment on the manifestation of compliance

with Opposition. They further alleged that there is now a Resolution by the Regional State Prosecutor, Region IV, San

Pablo City, finding probable cause to charge respondents with falsification of three marriage contracts between Sy

Bang and Rosita Ferrera. According to them, this development now constitutes a highly prejudicial question on

whether they should comply with the order to pay widows allowance. They claim that, while the filing of the

information is merely the first step in the criminal prosecution of respondents, it already casts doubt on whether

Rosita is legally entitled to the widows allowance. They now seek partial reconsideration of the Resolution inasmuch

as it requires them to deposit with the Clerk of Court, RTC of Lucena City, Branch 58, new checks payable to Rosita

Ferrera.

 

Respondents, on the other hand, filed a Comment and Manifestation [77] on why they should not be made to pay the

widows allowance. They argued that the RTC had already decided that the estate of Sy Bang was comprised of

properties in the names of Jose Sy Bang, Iluminada Tan, Zenaida, Ma. Emma, Julian Sy, and Rosa Tan, and the

same was affirmed by the CA. Pending the resolution of the appeal before this Court, this Decision stands. Thus,

petitioners claim that the estate of Sy Bang is yet undetermined is false.They also claim that, contrary to petitioners

claims of being poor, they still hold enormous properties of the Sy Bang estate, which had been transferred in their

names through falsification of public documents, now subject of several cases which respondents filed against them

before the Department of Justice (DOJ). Respondents further claim that the validity of their mothers marriage to Sy

Bang has been recognized by the courts in several cases where the issue had been raised, including the case for

recognition of Rositas Filipino citizenship, the guardianship proceedings, and the partition proceedings.

 

On June 23, 2006, respondents filed a Motion for Substitution of Parties.[78] They averred that Jose Sy Bang died on

September 11, 2001, leaving behind his widow Iluminada and 14 children, while Julian Sy died on August 28, 2004,

leaving behind his widow Rosa and eight children. The claims against Jose and Julian were not extinguished by their

deaths. It was the duty of petitioners counsel, under Rule 3, Section 16 of the Rules of Court, to inform the Court of

these deaths within 30 days thereof. Petitioners counsel failed to so inform this Court, which should be a ground for

disciplinary action. Hence, respondents prayed that the Court order the heirs of the two deceased to appear and be

substituted in these cases within 30 days from notice.

 

In a Resolution[79] dated July 5, 2006, the Court granted the motion for substitution and noted the Comment and

Manifestation on the Motion to include Rosalino Sy, Bartolome Sy, Rolando Sy, and Heirs of Enrique Sy as Likewise

Liable for the Payment of Widows Allowance as Heirs of Sy Bang.

 

Respondents then filed a Manifestation and Motion to Implement the Supreme Courts Resolutions of September 23,

1996, April 4, 2005, July 25, 2005, December 12, 2005, and February 15, 2006. [80] They prayed that petitioners be

given a last period of five days within which to deposit with the Supreme Court Cashier all the accrued widows

allowances as of June 2006.

 

Petitioners Iluminada, Zenaida and Ma. Emma opposed respondents manifestation and motion. [81] They argued that

the resolutions sought to be implemented were all issued prior to the DOJ Resolution finding probable cause to file

the falsification charges against respondents. They contended that the criminal cases for falsification expose Rosita

as a mere common-law wife and not a widow; hence, there is no legal justification to give her the widows

allowance. They also reiterated their earlier arguments against the grant of widows allowance.

 

Meanwhile, Rosa Tan filed a Comment on the Substitution of Parties with Motion for Reconsideration. [82] She argued

that since the trial court had already appointed a judicial administrator for the estate of Sy Bang, which includes Julian

Sys estate, the proper party to be substituted should be the administrator and not Julians heirs who never exercised

ownership rights over the properties thereof.

 

The Court denied the motion for reconsideration to the Resolution granting substitution of parties for lack of merit on

November 20, 2006.

 

The Courts Ruling

 

G.R. No. 114217

 

Finding no reversible error therein, we affirm the CA Decision.

 

The Third Partial Decision of the RTC

 

To review, the CA held, to wit: 

 The respondent Judge acted correctly inasmuch as his decision to defer the resolution on

the question concerning the properties in the name of Rosalino, Bartolome, Rolando and Enrique, all surnamed Sy, will not necessarily affect the decision he rendered concerning the properties in the names of Jose Sy Bang and wife, Julian Sy and wife, Zenaida Sy and Maria Sy, considering that the properties mentioned were separable and distinct from each other, such that the claim that said properties were not their own, but properties of the late Sy Bang, could have been the subject of separate suits.[83]

  

We agree with the CA.

 

Section 4, Rule 36 of the Revised Rules on Civil Procedure states:  

SEC. 4. Several judgments. In an action against several defendants, the court may, when a several judgment is proper, render judgment against one or more of them, leaving the action to proceed against the others.

  

The trial courts Third Partial Decision is in the nature of a several judgment as contemplated by the rule

quoted above. The trial court ruled on the status of the properties in the names of petitioners (defendants below)

while deferring the ruling on the properties in the names of respondents pending the presentation of evidence.

 

A several judgment is proper when the liability of each party is clearly separable and distinct from that of his

co-parties, such that the claims against each of them could have been the subject of separate suits, and judgment for

or against one of them will not necessarily affect the other.[84]

 

Petitioners, although sued collectively, each held a separate and separable interest in the properties of the

Sy Bang estate.

 

The pronouncement as to the obligation of one or some petitioners did not affect the determination of the

obligations of the others. That the properties in the names of petitioners were found to be part of the Sy Bang estate

did not preclude any further findings or judgment on the status or nature of the properties in the names of the other

heirs.

 

The trial courts June 2, 1982 Order reads:  

IN view of the importance of the issue concerning whether all the properties in the name (sic) of Enrique Sy, Bartolome Sy, Rosalino Sy and Rolando Sy and/or their respective wives (as well as those in the names of the other parties litigants in this case), (sic) shall be declared or included as part of the Estate of Sy Bang, and in view of the numerous documentary evidences (sic) presented by Attys. Raya and Camaligan after the said question was agreed to be submitted for resolution on May 26, 1982, the Court hereby sets for the reception or for the resolution of said issue in this case on June 8 and 9, 1982, both at 2:00 oclock in the afternoon; notify all parties litigants in this case of these settings.[85]

 

 

It is obvious from the trial courts order [86] that the June 8, 1982 hearing is for the purpose of determining

whether properties in the names of Enrique Sy, Bartolome Sy, Rosalino Sy, and Rolando Sy and/or their respective

wives are also part of the Sy Bang estate.

 

Hence, in the assailed Decision, the trial court said: 

 [I]n fact, the Court will require further evidence for or against any of the parties in this case in the matter of whatever sums of money, property or asset belonging to the estate of Sy Bang that came into their possession in order that the Court may be properly guided in the partition and adjudication of the rightful share and interest of the heirs of Sy Bang over the latters estate; this becomes imperative in view of new matters shown in the Submission and Formal Offer of Reserve Exhibits and the Offer of Additional Documentary Evidence filed respectively by Oscar Sy and Jose Sy Bang, et al., thru their respective counsels after the question of whether or not the properties in the names of Enrique, Bartolome, Rosalino, and Rolando, all surnamed Sy, should form part or be included as part of the estate of Sy Bang, had been submitted for resolution as of May 26, 1982; the Court deems it proper to receive additional evidence on the part of any of the parties litigants in this case if only to determine the true extent of the estate belonging to Sy Bang.[87]

  

The trial court painstakingly examined the evidence on record and narrated the details, then carefully laid

out the particulars in the assailed Decision. The evidence that formed the basis for the trial courts conclusion is

embodied in the Decision itself evidence presented by the parties themselves, including petitioners.

 

However, notwithstanding the trial courts pronouncement, the Sy Bang estate cannot be partitioned or

distributed until the final determination of the extent of the estate and only until it is shown that the obligations under

Rule 90, Section 1,[88] have been settled.[89]

 

In the settlement of estate proceedings, the distribution of the estate properties can only be made: (1) after

all the debts, funeral charges, expenses of administration, allowance to the widow, and estate tax have been paid; or

(2) before payment of said obligations only if the distributees or any of them gives a bond in a sum fixed by the court

conditioned upon the payment of said obligations within such time as the court directs, or when provision is made to

meet those obligations.[90]

 

Settling the issue of ownership is the first stage in an action for partition.[91] As this Court has ruled:  

 The issue of ownership or co-ownership, to be more precise, must first be resolved in order to effect a partition of properties. This should be done in the action for partition itself. As held in the case of Catapusan v. Court of Appeals:  

In actions for partition, the court cannot properly issue an order to divide the property, unless it first makes a determination as to the existence of co-ownership. The court must initially settle the issue of ownership, the first stage in an action for partition. Needless to state, an action for partition will not lie if the claimant has no rightful interest over the subject property. In fact, Section 1 of Rule 69 requires the party filing the action to state in his complaint the nature and extent of his title to the real estate. Until and unless the issue of ownership is definitely resolved, it would be premature to effect a partition of the properties x x x.[92]

  

Moreover, the Third Partial Decision does not have the effect of terminating the proceedings for partition. By

its very nature, the Third Partial Decision is but a determination based on the evidence presented thus far. There

remained issues to be resolved by the court. There would be no final determination of the extent of the Sy Bang

estate until the courts examination of the properties in the names of Rosalino, Bartolome, Rolando, and

Enrique. Based on the evidence presented, the trial court will have to make a pronouncement whether the properties

in the names of Rosalino, Bartolome, Rolando, and Enrique indeed belong to the Sy Bang estate. Only after the full

extent of the Sy Bang estate has been determined can the trial court finally order the partition of each of the heirs

share.

 

Appointment of Receiver

 

As to the issue of the judges appointment of a receiver, suffice it to say that the CA conclusively found thus: 

 The records show that the petitioners were never deprived of their day in court. Upon

Order of the respondent Judge, counsel for the petitioners submitted their opposition to [the] petition for appointment of a receiver filed by private respondents. x x x.

 Moreover, evidence on record shows that respondent Judge appointed the receiver after

both parties have presented their evidence and after the Third Partial Decision has been promulgated. Such appointment was made upon verified petition of herein private respondents, alleging that petitioners are mismanaging the properties in litigation by either mortgaging or disposing the same, hence, the said properties are in danger of being lost, wasted, dissipated, misused, or disposed of. The respondent Judge acted correctly in granting the appointment of a receiver in Civil Case No. 8578, in order to preserve the properties in litis pendentia and neither did he abuse his discretion nor acted arbitrarily in doing s. On the contrary, We find that it was the petitioners who violated the status quo sought to be maintained by the Supreme Court, in G.R. No. 61519, by their intrusion and unwarranted seizures of the 3 theaters, subject matter of the litigation, and which are admittedly under the exclusive management and operation of private respondent, Rosauro Sy.[93]

  

Cancellation of Notice of Lis Pendens

 

Next, petitioners question the trial courts Order canceling the notice of lis pendens.[94]

 

Section 77 of Presidential Decree No. 1529, or the Property Registration Decree, provides: 

 SEC. 77.  Cancellation of lis pendens.  Before final judgment, a notice

of lis pendens may be cancelled upon order of the court, after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be registered.  It may also be cancelled by the Register of Deeds upon verified petition of the party who caused the registration thereof.

 At any time after final judgment in favor of the defendant, or other disposition of the action

such as to terminate finally all rights of the plaintiff in and to the land and/or buildings involved, in any case in which a memorandum or notice of lis pendens has been registered as provided in the preceding section, the notice of lis pendens shall be deemed cancelled upon the registration of certificate of the clerk of court in which the action or proceeding was pending stating the manner of disposal thereof.

  

The filing of a notice of lis pendens has a two-fold effect: (1) to keep the subject matter of the litigation within

the power of the court until the entry of the final judgment in order to prevent the final judgment from being defeated

by successive alienations; and (2) to bind a purchaser, bona fide or not, of the land subject of the litigation to the

judgment or decree that the court will promulgate subsequently.[95]

 

While the trial court has an inherent power to cancel a notice of lis pendens, such power is to be exercised

within the express confines of the law. As provided in Section 14, Rule 13 of the 1997 Rules of Civil Procedure, a

notice of lis pendens may be cancelled on two grounds: (1) when the annotation was for the purpose of molesting the

title of the adverse party, or (2) when the annotation is not necessary to protect the title of the party who caused it to

be recorded.[96]

 

This Court has interpreted the notice as:The notice is but an incident in an action, an extrajudicial one, to be sure. It does not affect the merits thereof. It is intended merely to constructively advise, or warn, all people who deal with the property that they so deal with it at their own risk, and whatever rights they may acquire in the property in any voluntary transaction are subject to the results of the action, and may well be inferior and subordinate to those which may be finally determined and laid down therein. The cancellation of such a precautionary notice is therefore also a mere incident in the action, and may be ordered by the Court having jurisdiction of it at any given time. And its continuance or removal-like the continuance or removal of a preliminary attachment of injunction-is not contingent on the existence of a final judgment in the action, and ordinarily has no effect on the merits thereof.[97]

  

The CA found, and we affirm, that Rosalino, Bartolome and Rolando were able to prove that the notice was

intended merely to molest and harass the owners of the property, some of whom were not parties to the case.  It was

also proven that the interest of Oscar Sy, who caused the notice to be annotated, was only 1/14 of the assessed

value of the property. Moreover, Rosalino, Bartolome and Rolando were ordered to post a P50,000.00 bond to

protect whatever rights or interest Oscar Sy may have in the properties under litis pendentia.[98]

 

G.R. No. 150797

 

In G.R. No. 150797, petitioners are asking this Court to reverse the CAs February 28, 2001 Decision and its

Resolution denying the Motion for Reconsideration, and to declare the Guardianship court to have exceeded its

jurisdiction in directing the deposit of the widows allowance in Special Proceedings No. 96-34.

 

We find merit in petitioners contention.

 

The court hearing the petition for guardianship had limited jurisdiction. It had no jurisdiction to enforce

payment of the widows allowance ordered by this Court.

 

Reviewing the antecedents, we note that the claim for widows allowance was made before the Supreme

Court in a case that did not arise from the guardianship proceedings. The case subject of the Supreme Court petition

(Civil Case No. 8578) is still pending before the RTC of Lucena City.

 

Rule 83, Sec. 3, of the Rules of Court states: 

 SEC. 3. Allowance to widow and family. The widow and minor or incapacitated children of a deceased person, during the settlement of the estate, shall receive therefrom, under the direction of the court, such allowance as are provided by law.

 

Correlatively, Article 188 of the Civil Code states:

 Art. 188. From the common mass of property support shall be given to the surviving

spouse and to the children during the liquidation of the inventoried property and until what belongs to them is delivered; but from this shall be deducted that amount received for support which exceeds the fruits or rents pertaining to them.

 

Obviously, the court referred to in Rule 83, Sec. 3, of the Rules of Court is the court hearing the settlement

of the estate. Also crystal clear is the provision of the law that the widows allowance is to be taken from the common

mass of property forming part of the estate of the decedent.

 

Thus, as evident from the foregoing provisions, it is the court hearing the settlement of the estate that should

effect the payment of widows allowance considering that the properties of the estate are within its jurisdiction, to the

exclusion of all other courts.[99]

 

In emphasizing the limited jurisdiction of the guardianship court, this Court has pronounced that: 

 Generally, the guardianship court exercising special and limited jurisdiction cannot actually order the delivery of the property of the ward found to be embezzled, concealed, or conveyed. In a categorical language of this Court, only in extreme cases, where property clearly belongs to the ward or where his title thereto has been already judicially decided, may the court direct its delivery

to the guardian. In effect, there can only be delivery or return of the embezzled, concealed or conveyed property of the ward, where the right or title of said ward is clear and undisputable. However, where title to any property said to be embezzled, concealed or conveyed is in dispute, x x x the determination of said title or right whether in favor of the persons said to have embezzled, concealed or conveyed the property must be determined in a separate ordinary action and not in a guardianship proceedings.[100]

  

Further, this Court has held that the distribution of the residue of the estate of the deceased incompetent is a

function pertaining properly, not to the guardianship proceedings, but to another proceeding in which the heirs are at

liberty to initiate.[101]

 

Other Unresolved Incidents

 

Payment of Widows Allowance

 

It has been 13 years since this Court ordered petitioners to pay Rosita Ferrera-Sy her monthly widows

allowance. Petitioners Iluminada, Zenaida and Ma. Emma have since fought tooth and nail against paying the said

allowance, grudgingly complying only upon threat of incarceration. Then, they again argued against the grant of

widows allowance after the DOJ issued its Resolution finding probable cause in the falsification charges against

respondents. They contended that the criminal cases for falsification proved that Rosita is a mere common-law wife

and not a widow and, therefore, not entitled to widows allowance.

 

This argument deserves scant consideration.

 

A finding of probable cause does not conclusively prove the charge of falsification against respondents.

 

In a preliminary investigation, probable cause has been defined as the existence of such facts and

circumstances as would excite the belief, in a reasonable mind, acting on the facts within the knowledge of the

prosecutor, that the person charged was guilty of the crime for which he was prosecuted.   It is well-settled that a

finding of probable cause needs to rest only on evidence showing that more likely than not a crime has been

committed and was committed by the suspects.  Probable cause need not be based on clear and convincing

evidence of guilt, neither on evidence establishing guilt beyond reasonable doubt, and definitely not on evidence

establishing absolute certainty of guilt.[102]

 

Hence, until the marriage is finally declared void by the court, the same is presumed valid and Rosita is

entitled to receive her widows allowance to be taken from the estate of Sy Bang.

 

We remind petitioners again that they are duty-bound to comply with whatever the courts, in relation to the

properties under litigation, may order.

 Motion to Include Rosalino Sy, Bartolome Sy, Rolando Sy, and Heirs of Enrique Sy as Likewise Liable for the Payment of Widows Allowance as Heirs of Sy Bang

  

On March 14, 2006, petitioners filed a Motion to include Rosalino Sy, Bartolome Sy, Rolando Sy, and Heirs

of Enrique Sy as Likewise Liable for the Payment of Widows Allowance as Heirs of Sy Bang.

 

The Motion is denied.

 

The widows allowance, as discussed above, is chargeable to Sy Bangs estate. It must be stressed that the

issue of whether the properties in the names of Rosalino, Bartolome, Rolando, and Enrique Sy form part of Sy Bangs

estate remains unsettled since this Petition questioning the trial courts Third Partial Decision has been pending. On

the other hand, there has been a categorical pronouncement that petitioners are holding properties belonging to Sy

Bangs estate.

 

That the full extent of Sy Bangs estate has not yet been determined is no excuse from complying with this

Courts order. Properties of the estate have been identified i.e., those in the names of petitioners thus, these

properties should be made to answer for the widows allowance of Rosita. In any case, the amount Rosita receives for

support, which exceeds the fruits or rents pertaining to her, will be deducted from her share of the estate.[103]

 

A Final Note

 

We are appalled by the delay in the disposition of this case brought about by petitioners propensity to

challenge the Courts every directive. That the petitioners would go to extreme lengths to evade complying with their

duties under the law and the orders of this Court is truly deplorable. Not even a citation for contempt and the threat of

imprisonment seemed to deter them. Their contumacious attitude and actions have dragged this case for far too long

with practically no end in sight. Their abuse of legal and court processes is shameful, and they must not be allowed to

continue with their atrocious behavior. Petitioners deserve to be sanctioned, and ordered to pay the Court treble

costs.

 

WHEREFORE, the foregoing premises considered, the Petition in G.R. No. 150797 is GRANTED, while the

Petition in G.R. No. 114217 is DENIED. The RegionalTrial Court of Lucena City is directed to hear and decide Civil

Case No. 8578 with dispatch. The Motion to include Rosalino Sy, Bartolome Sy, Rolando Sy, and Heirs of Enrique Sy

as Likewise Liable for the Payment of Widows Allowance as Heirs of Sy Bang is DENIED. Treble costs against

petitioners.

 

 SO ORDERED.

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

THELMA M. ARANAS, Petitioner, v. TERESITA V. MERCADO, FELIMON V. MERCADO, CARMENCITA M. SUTHERLAND, RICHARD V. MERCADO, MA. TERESITA M. ANDERSON, AND FRANKLIN L. MERCADO, Respondents.

D E C I S I O N

BERSAMIN, J.:

The probate court is authorized to determine the issue of ownership of properties for purposes of their inclusion or exclusion from the inventory to be submitted by the administrator, but its determination shall only be provisional unless the interested parties are all heirs of the decedent, or the question is one of collation or advancement, or the parties consent to the assumption of jurisdiction by the probate court and the rights of third parties are not impaired. Its jurisdiction extends to matters incidental or collateral to the settlement and distribution of the estate, such as the determination of the status of each heir and whether property included in the inventory is the conjugal or exclusive property of the deceased spouse.

Antecedents

Emigdio S. Mercado (Emigdio) died intestate on January 12, 1991, survived by his second wife, Teresita V. Mercado (Teresita), and their five children, namely: Allan V. Mercado, Felimon V. Mercado, Carmencita M. Sutherland, Richard V. Mercado, and Maria Teresita M. Anderson; and his two children by his first marriage, namely: respondent Franklin L. Mercado and petitioner Thelma M. Aranas (Thelma).

Emigdio inherited and acquired real properties during his lifetime. He owned corporate shares in Mervir Realty Corporation (Mervir Realty) and Cebu Emerson Transportation Corporation (Cebu Emerson). He assigned his real properties in exchange for corporate stocks of Mervir Realty, and sold his real property in Badian, Cebu (Lot 3353 covered by Transfer Certificate of Title No. 3252) to Mervir Realty.

On June 3, 1991, Thelma filed in the Regional Trial Court (RTC) in Cebu City a petition for the appointment of Teresita as the administrator of Emigdio’s estate (Special Proceedings No. 3094–CEB).1 The RTC granted the petition considering that there was no opposition. The letters of administration in favor of Teresita were issued on September 7, 1992.

As the administrator, Teresita submitted an inventory of the estate of Emigdio on December 14, 1992 for the consideration and approval by the RTC. She indicated in the inventory that at the time of his death, Emigdio had “left no real properties but only personal properties” worth P6,675,435.25 in all, consisting of cash of P32,141.20; furniture and fixtures worth P20,000.00; pieces of jewelry valued at P15,000.00; 44,806 shares of stock of Mervir Realty worth P6,585,585.80; and 30 shares of stock of Cebu Emerson worth P22,708.25.2

Claiming that Emigdio had owned other properties that were excluded from the inventory, Thelma moved that the RTC direct Teresita to amend the inventory, and to be examined regarding it. The RTC granted Thelma’s motion through the order of January 8, 1993.

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

issued on January 30, 1979 for 300 shares of stock of Cebu Emerson worth P30,000.00.6

On January 26, 1993, Thelma again moved to require Teresita to be examined under oath on the inventory, and that she (Thelma) be allowed 30 days within which to file a formal opposition to or comment on the inventory and the supporting documents Teresita had submitted.

On February 4, 1993, the RTC issued an order expressing the need for the parties to present evidence and for Teresita to be examined to enable the court to resolve the motion for approval of the inventory.7cralawred 

On April 19, 1993, Thelma opposed the approval of the inventory, and asked leave of court to examine Teresita on the inventory.

With the parties agreeing to submit themselves to the jurisdiction of the court on the issue of what properties should be included in or excluded from the inventory, the RTC set dates for the hearing on that issue.8cralawlawlibrary 

Ruling of the RTC

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

WHEREFORE, in view of all the foregoing premises and considerations, the Court hereby denies the administratrix’s motion for approval of inventory. The Court hereby orders the said administratrix to re–do the inventory of properties which are supposed to constitute as the estate of the late Emigdio S. Mercado by including therein the properties mentioned in the last five immediately preceding paragraphs hereof and then submit the revised inventory within sixty (60) days from notice of this order.

The Court also directs the said administratrix to render an account of her administration of the estate of the late Emigdio S. Mercado which had come to her possession. She must render such accounting within sixty (60) days from notice hereof.

SO ORDERED.9

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

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

Decision of the CA

Alleging that the RTC thereby acted with grave abuse of discretion in refusing to approve the inventory, and in ordering her as administrator to include real properties that had been transferred to Mervir Realty, Teresita, joined by her four children and her stepson Franklin, assailed the adverse orders of the RTC promulgated on March 14, 2001 and May 18, 2001 by petition for certiorari, stating:

I

THE HONORABLE RESPONDENT JUDGE HAS COMMITTED GRAVE ABUSE OF JURISDICTION (sic) AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT THE REAL PROPERTY WHICH WAS SOLD BY THE LATE EMIGDIO S. MERCADO DURING HIS LIFETIME TO A PRIVATE CORPORATION (MERVIR REALTY CORPORATION) BE INCLUDED IN THE INVENTORY OF THE ESTATE OF THE LATE EMIGDIO S. MERCADO.

II

THE HONORABLE RESPONDENT JUDGE HAS COMMITTED GRAVE ABUSE OF JURISDICTION (sic)

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT REAL PROPERTIES WHICH ARE IN THE POSSESSION OF AND ALREADY REGISTERED IN THE NAME (OF) PRIVATE CORPORATION (MERVIR REALTY CORPORATION) BE INCLUDED IN THE INVENTORY OF THE ESTATE OF THE LATE EMIGDIO S. MERCADO.

III

THE HONORABLE RESPONDENT JUDGE HAS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT PETITIONERS ARE NOW ESTOPPED FROM QUESTIONING ITS JURISDICTION IN PASSING UPON THE ISSUE OF WHAT PROPERTIES SHOULD BE INCLUDED IN THE INVENTORY OF THE ESTATE OF THE LATE EMIGDIO MERCADO.12

On May 15, 2002, the CA partly granted the petition for certiorari, disposing as follows:13

WHEREFORE, FOREGOING PREMISES CONSIDERED, this petition is GRANTED partially. The assailed Orders dated March 14, 2001 and May 18, 2001 are hereby reversed and set aside insofar as the inclusion of parcels of land known as Lot No. 3353 located at Badian, Cebu with an area of 53,301 square meters subject matter of the Deed of Absolute Sale dated November 9, 1989 and the various parcels of land subject matter of the Deeds of Assignment dated February 17, 1989 and January 10, 1991 in the revised inventory to be submitted by the administratrix is concerned and affirmed in all other respects.

SO ORDERED.

The CA opined that Teresita, et al. had properly filed the petition for certiorari because the order of the RTC directing a new inventory of properties was interlocutory; that pursuant to Article 1477 of theCivil Code, to the effect that the ownership of the thing sold “shall be transferred to the vendee” upon its “actual and constructive delivery,” and to Article 1498 of the Civil Code, to the effect that the sale made through a public instrument was equivalent to the delivery of the object of the sale, the sale by Emigdio and Teresita had transferred the ownership of Lot No. 3353 to Mervir Realty because the deed of absolute sale executed on November 9, 1989 had been notarized; that Emigdio had thereby ceased to have any more interest in Lot 3353; that Emigdio had assigned the parcels of land to Mervir Realty as early as February 17, 1989 “for the purpose of saving, as in avoiding taxes with the difference that in the Deed of Assignment dated January 10, 1991, additional seven (7) parcels of land were included”; that as to the January 10, 1991 deed of assignment, Mervir Realty had been “even at the losing end considering that such parcels of land, subject matter(s) of the Deed of Assignment dated February 12, 1989, were again given monetary consideration through shares of stock”; that even if the assignment had been based on the deed of assignment dated January 10, 1991, the parcels of land could not be included in the inventory “considering that there is nothing wrong or objectionable about the estate planning scheme”; that the RTC, as an intestate court, also had no power to take cognizance of and determine the issue of title to property registered in the name of third persons or corporation; that a property covered by the Torrens system should be afforded the presumptive conclusiveness of title; that the RTC, by disregarding the presumption, had transgressed the clear provisions of law and infringed settled jurisprudence on the matter; and that the RTC also gravely abused its discretion in holding that Teresita,  et al. were estopped from questioning its jurisdiction because of their agreement to submit to the RTC the issue of which properties should be included in the inventory.

The CA further opined as follows:

In the instant case, public respondent court erred when it ruled that petitioners are estopped from questioning its jurisdiction considering that they have already agreed to submit themselves to its jurisdiction of determining what properties are to be included in or excluded from the inventory to be submitted by the administratrix, because actually, a reading of petitioners’ Motion for Reconsideration dated March 26, 2001 filed before public respondent court clearly shows that petitioners are not questioning its jurisdiction but the manner in which it was exercised for which they are not estopped, since that is their right, considering that there is grave abuse of discretion amounting to lack or in excess of limited jurisdiction when it issued the assailed Order dated March 14, 2001 denying the administratrix’s motion for approval of the inventory of properties which were already titled and in possession of a third person that is, Mervir Realty Corporation, a private corporation, which under the law possessed a personality distinct and separate from its stockholders, and in the absence of any cogency to shred the veil of corporate fiction, the presumption of conclusiveness of said titles in favor of Mervir Realty Corporation should stand undisturbed.

Besides, public respondent court acting as a probate court had no authority to determine the applicability of the doctrine of piercing the veil of corporate fiction and even if public respondent court was not merely acting in a limited capacity as a probate court, private respondent nonetheless failed to adjudge competent evidence that would have

justified the court to impale the veil of corporate fiction because to disregard the separate jurisdictional personality of a corporation, the wrongdoing must be clearly and convincingly established since it cannot be presumed.14

On November 15, 2002, the CA denied the motion for reconsideration of Teresita, et al.15

Issue

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

Ruling of the Court

The appeal is meritorious.

I

Was certiorari the proper recourseto assail the questioned orders of the RTC?

The first issue to be resolved is procedural. Thelma contends that the resort to the special civil action for certiorari to assail the orders of the RTC by Teresita and her co–respondents was not proper.

Thelma’s contention cannot be sustained.

The propriety of the special civil action for certiorari as a remedy depended on whether the assailed orders of the RTC were final or interlocutory in nature. In Pahila–Garrido v. Tortogo,16 the Court distinguished between final and interlocutory orders as follows:

The distinction between a final order and an interlocutory order is well known. The first disposes of the subject matter in its entirety or terminates a particular proceeding or action, leaving nothing more to be done except to enforce by execution what the court has determined, but the latter does not completely dispose of the case but leaves something else to be decided upon.  An interlocutory order deals with preliminary matters and the trial on the merits is yet to be held and the judgment rendered. The test to ascertain whether or not an order or a judgment is interlocutory or final is: does the order or judgment leave something to be done in the trial court with respect to the merits of the case? If it does, the order or judgment is interlocutory; otherwise, it is final.

The order dated November 12, 2002, which granted the application for the writ of preliminary injunction, was an interlocutory, not a final, order, and should not be the subject of an appeal. The reason for disallowing an appeal from an interlocutory order is to avoid multiplicity of appeals in a single action, which necessarily suspends the hearing and decision on the merits of the action during the pendency of the appeals. Permitting multiple appeals will necessarily delay the trial on the merits of the case for a considerable length of time, and will compel the adverse party to incur unnecessary expenses, for one of the parties may interpose as many appeals as there are incidental questions raised by him and as there are interlocutory orders rendered or issued by the lower court. An interlocutory order may be the subject of an appeal, but only after a judgment has been rendered, with the ground for appealing the order being included in the appeal of the judgment itself.

The remedy against an interlocutory order not subject of an appeal is an appropriate special civil action under Rule 65, provided that the interlocutory order is rendered without or in excess of jurisdiction or with grave abuse of discretion. Then is certiorariunder Rule 65 allowed to be resorted to.

The assailed order of March 14, 2001 denying Teresita’s motion for the approval of the inventory and the order dated May 18, 2001 denying her motion for reconsideration were interlocutory. This is because the inclusion of the properties in the inventory was not yet a final determination of their ownership.  Hence, the approval of the inventory and the concomitant determination of the ownership as basis for inclusion or exclusion from the inventory were provisional and subject to revision at anytime during the course of the administration proceedings.

In Valero Vda. De Rodriguez v. Court of Appeals,17 the Court, in affirming the decision of the CA to the effect that the order of the intestate court excluding certain real properties from the inventory was interlocutory and could be

changed or modified at anytime during the course of the administration proceedings, held that the order of exclusion was not a final but an interlocutory order “in the sense that it did not settle once and for all the title to the San Lorenzo Village lots.” The Court observed there that:

The prevailing rule is that for the purpose of determining whether a certain property should or should not be included in the inventory, the probate court may pass upon the title thereto but such determination is not conclusive and is subject to the final decision in a separate action regarding ownership which may be instituted by the parties (3 Moran’s Comments on the Rules of Court, 1970 Edition, pages 448–9 and 473; Lachenal vs. Salas, L–42257, June 14, 1976, 71 SCRA 262, 266).18 (Bold emphasis supplied)

To the same effect was De Leon v. Court of Appeals,19 where the Court declared that a “probate court, whether in a testate or intestate proceeding, can only pass upon questions of title provisionally,” and reminded, citing Jimenez v. Court of Appeals, that the “patent reason is the probate court’s limited jurisdiction and the principle that questions of title or ownership, which result in inclusion or exclusion from the inventory of the property, can only be settled in a separate action.” Indeed, in the cited case of Jimenez v. Court of Appeals,20 the Court pointed out:

All that the said court could do as regards the said properties is determine whether they should or should not be included in the inventory or list of properties to be administered by the administrator. If there is a dispute as to the ownership, then the opposing parties and the administrator have to resort to an ordinary action for a final determination of the conflicting claims of title because the probate court cannot do so.  (Bold emphasis supplied)

On the other hand, an appeal would not be the correct recourse for Teresita, et al. to take against the assailed orders. The final judgment rule embodied in the first paragraph of Section 1, Rule 41, Rules of Court,21 which also governs appeals in special proceedings, stipulates that only the judgments, final orders (and resolutions) of a court of law “that completely disposes of the case, or of a particular matter therein when declared by these Rules to be appealable” may be the subject of an appeal in due course. The same rule states that an interlocutory order or resolution (interlocutory because it deals with preliminary matters, or that the trial on the merits is yet to be held and the judgment rendered) is expressly made non–appealable.

Multiple appeals are permitted in special proceedings as a practical recognition of the possibility that material issues may be finally determined at various stages of the special proceedings. Section 1, Rule 109 of the Rules of Court enumerates the specific instances in which multiple appeals may be resorted to in special proceedings, viz:

Section 1. Orders or judgments from which appeals may be taken. – An interested person may appeal in special proceedings from an order or judgment rendered by a Court of First Instance or a Juvenile and Domestic Relations Court, where such order or judgment:

(a) Allows or disallows a will;

(b) Determines who are the lawful heirs of a deceased person, or the distributive share of the estate to which such person is entitled;

(c) Allows or disallows, in whole or in part, any claim against the estate of a deceased person, or any claim presented on behalf of the estate in offset to a claim against it;

(d) Settles the account of an executor, administrator, trustee or guardian;

(e) Constitutes, in proceedings relating to the settlement of the estate of a deceased person, or the administration of a trustee or guardian, a final determination in the lower court of the rights of the party appealing, except that no appeal shall be allowed from the appointment of a special administrator; and

(f) Is the final order or judgment rendered in the case, and affects the substantial rights of the person appealing, unless it be an order granting or denying a motion for a new trial or for reconsideration.

Clearly, the assailed orders of the RTC, being interlocutory, did not come under any of the instances in which multiple appeals are permitted.

IIDid the RTC commit grave abuse of discretion

in directing the inclusion of the propertiesin the estate of the decedent?

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

Was the CA correct in its conclusion?

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

Under Section 6(a), Rule 78 of the Rules of Court, the letters of administration may be granted at the discretion of the court to the surviving spouse, who is competent and willing to serve when the person dies intestate. Upon issuing the letters of administration to the surviving spouse, the RTC becomes duty–bound to direct the preparation and submission of the inventory of the properties of the estate, and the surviving spouse, as the administrator, has the duty and responsibility to submit the inventory within three months from the issuance of letters of administration pursuant to Rule 83 of the Rules of Court, viz:

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

The usage of the word all in Section 1, supra, demands the inclusion of all the real and personal properties of the decedent in the inventory.22 However, the word all is qualified by the phrase which has come into his possession or knowledge, which signifies that the properties must be known to the administrator to belong to the decedent or are in her possession as the administrator. Section 1 allows no exception, for the phrase true inventory implies that no properties appearing to belong to the decedent can be excluded from the inventory, regardless of their being in the possession of another person or entity.

The objective of the Rules of Court in requiring the inventory and appraisal of the estate of the decedent is “to aid the court in revising the accounts and determining the liabilities of the executor or the administrator, and in making a final and equitable distribution (partition) of the estate and otherwise to facilitate the administration of the estate.”23 Hence, the RTC that presides over the administration of an estate is vested with wide discretion on the question of what properties should be included in the inventory. According to Peralta v. Peralta,24 the CA cannot impose its judgment in order to supplant that of the RTC on the issue of which properties are to be included or excluded from the inventory in the absence of “positive abuse of discretion,” for in the administration of the estates of deceased persons, “the judges enjoy ample discretionary powers and the appellate courts should not interfere with or attempt to replace the action taken by them, unless it be shown that there has been a positive abuse of discretion.”25 As long as the RTC commits no patently grave abuse of discretion, its orders must be respected as part of the regular performance of its judicial duty.

There is no dispute that the jurisdiction of the trial court as an intestate court is special and limited. The trial court cannot adjudicate title to properties claimed to be a part of the estate but are claimed to belong to third parties by title adverse to that of the decedent and the estate, not by virtue of any right of inheritance from the decedent. All that the trial court can do regarding said properties is to determine whether or not they should be included in the inventory of properties to be administered by the administrator. Such determination is provisional and may be still revised. As the Court said inAgtarap v. Agtarap:26

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

jurisdiction for a final determination of the conflicting claims of title.

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

First, the probate court may provisionally pass upon in an intestate or a testate proceeding the question of inclusion in, or exclusion from, the inventory of a piece of property without prejudice to final determination of ownership in a separate action. Second, if the interested parties are all heirs to the estate, or the question is one of collation or advancement, or the parties consent to the assumption of jurisdiction by the probate court and the rights of third parties are not impaired, then the probate court is competent to resolve issues on ownership. Verily, its jurisdiction extends to matters incidental or collateral to the settlement and distribution of the estate, such as the determination of the status of each heir and whether the property in the inventory is conjugal or exclusive property of the deceased spouse.27 (Italics in the original; bold emphasis supplied)

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

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

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

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

In the fourth place, it has been established during the hearing in this case that Lot No. 3353 of Pls–657–D located in Badian, Cebu containing an area of 53,301 square meters as described in and covered by Transfer Certificate of Title No. 3252 of the Registry of Deeds for the Province of Cebu is still registered in the name of Emigdio S. Mercado until now. When it was the subject of Civil Case No. CEB–12690 which was decided on October 19, 1995, it was the estate of the late Emigdio Mercado which claimed to be the owner thereof. Mervir Realty Corporation never intervened in the said case in order to be the owner thereof. This fact was admitted by Richard Mercado himself when he testified in Court. x x x So the said property located in Badian, Cebu should be included in the inventory in this case.

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

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

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

Secondly, with Emigdio and Teresita having been married prior to the effectivity of the Family Code in August 3, 1988, their property regime was the conjugal partnership of gains.29 For purposes of the settlement of Emigdio’s estate, it was unavoidable for Teresita to include his shares in the conjugal partnership of gains. The party asserting that specific property acquired during that property regime did not pertain to the conjugal partnership of gains carried the burden of proof, and that party must prove the exclusive ownership by one of them by clear, categorical, and convincing evidence.30 In the absence of or pending the presentation of such proof, the conjugal partnership of Emigdio and Teresita must be provisionally liquidated to establish who the real owners of the affected properties were,31 and which of the properties should form part of the estate of Emigdio. The portions that pertained to the estate of Emigdio must be included in the inventory.

Moreover, although the title over Lot 3353 was already registered in the name of Mervir Realty, the RTC made findings that put that title in dispute. Civil Case No. CEB–12692, a dispute that had involved the ownership of Lot 3353, was resolved in favor of the estate of Emigdio, and Transfer Certificate of Title No. 3252 covering Lot 3353 was still in Emigdio’s name. Indeed, the RTC noted in the order of March 14, 2001, or ten years after his death, that Lot 3353 had remained registered in the name of Emigdio.

Interestingly, Mervir Realty did not intervene at all in Civil Case No. CEB–12692. Such lack of interest in Civil Case No. CEB–12692 was susceptible of various interpretations, including one to the effect that the heirs of Emigdio could have already threshed out their differences with the assistance of the trial court. This interpretation was probable considering that Mervir Realty, whose business was managed by respondent Richard, was headed by Teresita herself as its President. In other words, Mervir Realty appeared to be a family corporation.

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

x x x. Though the notarization of the deed of sale in question vests in its favor the presumption of regularity, it is not the intention nor the function of the notary public to validate and make binding an instrument never, in the first place, intended to have any binding legal effect upon the parties thereto. The intention of the parties still and always is the primary consideration in determining the true nature of a contract.(Bold emphasis supplied)

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

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

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

Assuming that only seven titled lots were the subject of the deed of assignment of January 10, 1991, such lots should still be included in the inventory to enable the parties, by themselves, and with the assistance of the RTC itself, to test and resolve the issue on the validity of the assignment. The limited jurisdiction of the RTC as an intestate court might have constricted the determination of the rights to the properties arising from that deed,36 but it does not prevent the RTC as intestate court from ordering the inclusion in the inventory of the properties subject of that deed. This is because the RTC as intestate court, albeit vested only with special and limited jurisdiction, was still “deemed to have

all the necessary powers to exercise such jurisdiction to make it effective.”37

Lastly, the inventory of the estate of Emigdio must be prepared and submitted for the important purpose of resolving the difficult issues of collation and advancement to the heirs. Article 1061 of theCivil Code required every compulsory heir and the surviving spouse, herein Teresita herself, to “bring into the mass of the estate any property or right which he (or she) may have received from the decedent, during the lifetime of the latter, by way of donation, or any other gratuitous title, in order that it may be computed in the determination of the legitime of each heir, and in the account of the partition.” Section 2, Rule 90 of the Rules of Court also provided that any advancement by the decedent on the legitime of an heir “may be heard and determined by the court having jurisdiction of the estate proceedings, and the final order of the court thereon shall be binding on the person raising the questions and on the heir.” Rule 90 thereby expanded the special and limited jurisdiction of the RTC as an intestate court about the matters relating to the inventory of the estate of the decedent by authorizing it to direct the inclusion of properties donated or bestowed by gratuitous title to any compulsory heir by the decedent.38

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

In light of the foregoing, the CA’s conclusion of grave abuse of discretion on the part of the RTC was unwarranted and erroneous.

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS ASIDEthe decision promulgated on May 15, 2002; REINSTATES the orders issued on March 14, 2001 and May 18, 2001 by the Regional Trial Court in Cebu; DIRECTS the Regional Trial Court in Cebu to proceed with dispatch in Special Proceedings No. 3094–CEB entitled Intestate Estate of the late Emigdio Mercado, Thelma Aranas, petitioner, and to resolve the case; and ORDERS the respondents to pay the costs of suit.ChanRoblesVirtualawlibrary

SO ORDERED.

[G.R. No. 149926. February 23, 2005]

UNION BANK OF THE PHILIPPINES, petitioner, vs. EDMUND SANTIBAEZ and FLORENCE SANTIBAEZ ARIOLA, respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court which seeks the reversal of the Decision[1] of the Court of Appeals dated May 30, 2001 in CA-G.R. CV No. 48831 affirming the dismissal[2] of the petitioners complaint in Civil Case No. 18909 by the Regional Trial Court (RTC) of Makati City, Branch 63.

The antecedent facts are as follows:

On May 31, 1980, the First Countryside Credit Corporation (FCCC) and Efraim M. Santibaez entered into a loan agreement[3] in the amount of P128,000.00. The amount was intended for the payment of the purchase price of one (1) unit Ford 6600 Agricultural All-Purpose Diesel Tractor. In view thereof, Efraim and his son, Edmund, executed a promissory note in favor of the FCCC, the principal sum payable in five equal annual amortizations of P43,745.96 due on May 31, 1981 and every May 31st thereafter up to May 31, 1985.

On December 13, 1980, the FCCC and Efraim entered into another loan agreement,[4] this time in the amount of P123,156.00. It was intended to pay the balance of the purchase price of another unit of Ford 6600 Agricultural All-Purpose Diesel Tractor, with accessories, and one (1) unit Howard Rotamotor Model AR 60K. Again, Efraim and his son, Edmund, executed a promissory note for the said amount in favor of the FCCC. Aside from such promissory note, they also signed a Continuing Guaranty Agreement[5] for the loan dated December 13, 1980.

Sometime in February 1981, Efraim died, leaving a holographic will.[6] Subsequently in March 1981, testate proceedings commenced before the RTC of Iloilo City, Branch 7, docketed as Special Proceedings No. 2706. On April 9, 1981, Edmund, as one of the heirs, was appointed as the special administrator of the estate of the decedent.[7] During the pendency of the testate proceedings, the surviving heirs, Edmund and his sister Florence Santibaez Ariola, executed a Joint Agreement[8] dated July 22, 1981, wherein they agreed to divide between themselves and take possession of the three (3) tractors; that is, two (2) tractors for Edmund and one (1) tractor for Florence. Each of them was to assume the indebtedness of their late father to FCCC, corresponding to the tractor respectively taken by them.

On August 20, 1981, a Deed of Assignment with Assumption of Liabilities[9] was executed by and between FCCC and Union Savings and Mortgage Bank, wherein the FCCC as the assignor, among others, assigned all its assets and liabilities to Union Savings and Mortgage Bank.

Demand letters[10] for the settlement of his account were sent by petitioner Union Bank of the Philippines (UBP) to Edmund, but the latter failed to heed the same and refused to pay. Thus, on February 5, 1988, the petitioner filed a Complaint[11] for sum of money against the heirs of Efraim Santibaez, Edmund and Florence, before the RTC of Makati City, Branch 150, docketed as Civil Case No. 18909. Summonses were issued against both, but the one intended for Edmund was not served since he was in the United States and there was no information on his address or the date of his return to the Philippines.[12] Accordingly, the complaint was narrowed down to respondent Florence S. Ariola.

On December 7, 1988, respondent Florence S. Ariola filed her Answer [13] and alleged that the loan documents did not bind her since she was not a party thereto. Considering that the joint agreement signed by her and her brother Edmund was not approved by the probate court, it was null and void; hence, she was not liable to the petitioner under the joint agreement.

On January 29, 1990, the case was unloaded and re-raffled to the RTC of Makati City, Branch 63.[14] Consequently, trial on the merits ensued and a decision was subsequently rendered by the court dismissing the complaint for lack of merit. The decretal portion of the RTC decision reads:

WHEREFORE, judgment is hereby rendered DISMISSING the complaint for lack of merit.[15]

The trial court found that the claim of the petitioner should have been filed with the probate court before which the testate estate of the late Efraim Santibaez was pending, as the sum of money being claimed was an obligation incurred by the said decedent. The trial court also found that the Joint Agreement apparently executed by his heirs, Edmund and Florence, on July 22, 1981, was, in effect, a partition of the estate of the decedent. However, the said agreement was void, considering that it had not been approved by the probate court, and that there can be no valid partition until after the will has been probated. The trial court further declared that petitioner failed to prove that it was the now defunct Union Savings and Mortgage Bank to which the FCCC had assigned its assets and liabilities. The court also agreed to the contention of respondent Florence S. Ariola that the list of assets and liabilities of the FCCC assigned to Union Savings and Mortgage Bank did not clearly refer to the decedents account. Ruling that the joint agreement executed by the heirs was null and void, the trial court held that the petitioners cause of action against respondent Florence S. Ariola must necessarily fail.

The petitioner appealed from the RTC decision and elevated its case to the Court of Appeals (CA), assigning the following as errors of the trial court:

1. THE COURT A QUO ERRED IN FINDING THAT THE JOINT AGREEMENT (EXHIBIT A) SHOULD BE APPROVED BY THE PROBATE COURT.

2. THE COURT A QUO ERRED IN FINDING THAT THERE CAN BE NO VALID PARTITION AMONG THE HEIRS UNTIL AFTER THE WILL HAS BEEN PROBATED.

3. THE COURT A QUO ERRED IN NOT FINDING THAT THE DEFENDANT HAD WAIVED HER RIGHT TO HAVE THE CLAIM RE-LITIGATED IN THE ESTATE PROCEEDING.[16]

The petitioner asserted before the CA that the obligation of the deceased had passed to his legitimate children and heirs, in this case, Edmund and Florence; the unconditional signing of the joint agreement marked as Exhibit A estopped respondent Florence S. Ariola, and that she cannot deny her liability under the said document; as the agreement had been signed by both heirs in their personal capacity, it was no longer necessary to present the same before the probate court for approval; the property partitioned in the agreement was not one of those enumerated in the holographic will made by the deceased; and the active participation of the heirs, particularly respondent Florence S. Ariola, in the present ordinary civil action was tantamount to a waiver to re-litigate the claim in the estate proceedings.

On the other hand, respondent Florence S. Ariola maintained that the money claim of the petitioner should have been presented before the probate court.[17]

The appellate court found that the appeal was not meritorious and held that the petitioner should have filed its claim with the probate court as provided under Sections 1 and 5, Rule 86 of the Rules of Court. It further held that the partition made in the agreement was null and void, since no valid partition may be had until after the will has been probated. According to the CA, page 2, paragraph (e) of the holographic will covered the subject properties (tractors) in generic terms when the deceased referred to them as all other properties. Moreover, the active participation of respondent Florence S. Ariola in the case did not amount to a waiver. Thus, the CA affirmed the RTC decision, viz.:

WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court of Makati City, Branch 63, is hereby AFFIRMED in toto.

SO ORDERED.[18]

In the present recourse, the petitioner ascribes the following errors to the CA:

I.

THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE JOINT AGREEMENT SHOULD BE APPROVED BY THE PROBATE COURT.

II.

THE COURT OF APPEALS ERRED IN FINDING THAT THERE CAN BE NO VALID PARTITION AMONG THE HEIRS OF THE LATE EFRAIM SANTIBAEZ UNTIL AFTER THE WILL HAS BEEN PROBATED.

III.

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE RESPONDENT HAD WAIVED HER RIGHT TO HAVE THE CLAIM RE-LITIGATED IN THE ESTATE PROCEEDING.

IV.

RESPONDENTS CAN, IN FACT, BE HELD JOINTLY AND SEVERALLY LIABLE WITH THE PRINCIPAL DEBTOR THE LATE EFRAIM SANTIBAEZ ON THE STRENGTH OF THE CONTINUING GUARANTY AGREEMENT EXECUTED IN FAVOR OF PETITIONER-APPELLANT UNION BANK.

V.

THE PROMISSORY NOTES DATED MAY 31, 1980 IN THE SUM OF P128,000.00 AND DECEMBER 13, 1980 IN THE AMOUNT OF P123,000.00 CATEGORICALLY ESTABLISHED THE FACT THAT THE RESPONDENTS BOUND THEMSELVES JOINTLY AND SEVERALLY LIABLE WITH THE LATE DEBTOR EFRAIM SANTIBAEZ IN FAVOR OF PETITIONER UNION BANK.[19]

The petitioner claims that the obligations of the deceased were transmitted to the heirs as provided in Article 774 of the Civil Code; there was thus no need for the probate court to approve the joint agreement where the heirs partitioned the tractors owned by the deceased and assumed the obligations related thereto. Since respondent Florence S. Ariola signed the joint agreement without any condition, she is now estopped from asserting any position contrary thereto. The petitioner also points out that the holographic will of the deceased did not include nor mention any of the tractors subject of the complaint, and, as such was beyond the ambit of the said will. The active participation and resistance of respondent Florence S. Ariola in the ordinary civil action against the petitioners claim amounts to a waiver of the right to have the claim presented in the probate proceedings, and to allow any one of the heirs who executed the joint agreement to escape liability to pay the value of the tractors under consideration would be equivalent to allowing the said heirs to enrich themselves to the damage and prejudice of the petitioner.

The petitioner, likewise, avers that the decisions of both the trial and appellate courts failed to consider the fact that respondent Florence S. Ariola and her brother Edmund executed loan documents, all establishing the vinculum juris or the legal bond between the late Efraim Santibaez and his heirs to be in the nature of a solidary obligation. Furthermore, the Promissory Notes dated May 31, 1980 and December 13, 1980 executed by the late Efraim Santibaez, together with his heirs, Edmund and respondent Florence, made the obligation solidary as far as the said heirs are concerned. The petitioner also proffers that, considering the express provisions of the continuing guaranty agreement and the promissory notes executed by the named respondents, the latter must be held liable jointly and severally liable thereon. Thus, there was no need for the petitioner to file its money claim before the probate court. Finally, the petitioner stresses that both surviving heirs are being sued in their respective personal capacities, not as heirs of the deceased.

In her comment to the petition, respondent Florence S. Ariola maintains that the petitioner is trying to recover a sum of money from the deceased Efraim Santibaez; thus the claim should have been filed with the probate court. She points out that at the time of the execution of the joint agreement there was already an existing probate proceedings of which the petitioner knew about. However, to avoid a claim in the probate court which might delay payment of the obligation, the petitioner opted to require them to execute the said agreement.

According to the respondent, the trial court and the CA did not err in declaring that the agreement was null and void. She asserts that even if the agreement was voluntarily executed by her and her brother Edmund, it should still have been subjected to the approval of the court as it may prejudice the estate, the heirs or third parties. Furthermore, she had not waived any rights, as she even stated in her answer in the court a quo that the claim should be filed with the probate court. Thus, the petitioner could not invoke or claim that she is in estoppel.

Respondent Florence S. Ariola further asserts that she had not signed any continuing guaranty agreement, nor was there any document presented as evidence to show that she had caused herself to be bound by the obligation of her late father.

The petition is bereft of merit.

The Court is posed to resolve the following issues: a) whether or not the partition in the Agreement executed by the heirs is valid; b) whether or not the heirs assumption of the indebtedness of the deceased is valid; and c) whether the petitioner can hold the heirs liable on the obligation of the deceased.

At the outset, well-settled is the rule that a probate court has the jurisdiction to determine all the properties of the deceased, to determine whether they should or should not be included in the inventory or list of properties to be administered.[20] The said court is primarily concerned with the administration, liquidation and distribution of the estate.[21]

In our jurisdiction, the rule is that there can be no valid partition among the heirs until after the will has been probated:

In testate succession, there can be no valid partition among the heirs until after the will has been probated. The law enjoins the probate of a will and the public requires it, because unless a will is probated and notice thereof given to the whole world, the right of a person to dispose of his property by will may be rendered nugatory. The authentication of a will decides no other question than such as touch upon the capacity of the testator and the compliance with those requirements or solemnities which the law prescribes for the validity of a will.[22]

This, of course, presupposes that the properties to be partitioned are the same properties embraced in the will.[23] In the present case, the deceased, Efraim Santibaez, left a holographic will[24] which contained, inter alia, the provision which reads as follows:

(e) All other properties, real or personal, which I own and may be discovered later after my demise, shall be distributed in the proportion indicated in the immediately preceding paragraph in favor of Edmund and Florence, my children.

We agree with the appellate court that the above-quoted is an all-encompassing provision embracing all the properties left by the decedent which might have escaped his mind at that time he was making his will, and other properties he may acquire thereafter. Included therein are the three (3) subject tractors. This being so, any partition involving the said tractors among the heirs is not valid. The joint agreement[25] executed by Edmund and Florence, partitioning the tractors among themselves, is invalid, specially so since at the time of its execution, there was already a pending proceeding for the probate of their late fathers holographic will covering the said tractors.

It must be stressed that the probate proceeding had already acquired jurisdiction over all the properties of the deceased, including the three (3) tractors. To dispose of them in any way without the probate courts approval is tantamount to divesting it with jurisdiction which the Court cannot allow. [26] Every act intended to put an end to indivision among co-heirs and legatees or devisees is deemed to be a partition, although it should purport to be a sale, an exchange, a compromise, or any other transaction.[27] Thus, in executing any joint agreement which appears to be in the nature of an extra-judicial partition, as in the case at bar, court approval is imperative, and the heirs cannot just divest the court of its jurisdiction over that part of the estate. Moreover, it is within the jurisdiction of the probate court to determine the identity of the heirs of the decedent. [28] In the instant case, there is no showing that the signatories in the joint agreement were the only heirs of the decedent. When it was executed, the probate of the will was still pending before the court and the latter had yet to determine who the heirs of the decedent were. Thus, for Edmund and respondent Florence S. Ariola to adjudicate unto themselves the three (3) tractors was a premature act, and prejudicial to the other possible heirs and creditors who may have a valid claim against the estate of the deceased.

The question that now comes to fore is whether the heirs assumption of the indebtedness of the decedent is binding. We rule in the negative. Perusing the joint agreement, it provides that the heirs as parties thereto  have agreed to divide between themselves and take possession and use the above-described chattel and each of them to assume the indebtedness corresponding to the chattel taken as herein after stated which is in favor of First Countryside Credit Corp.[29] The assumption of liability was conditioned upon the happening of an event, that is, that each heir shall take possession and use of their respective share under the agreement. It was made dependent on the validity of the partition, and that they were to assume the indebtedness corresponding to the chattel that they were each to receive. The partition being invalid as earlier discussed, the heirs in effect did not receive any such tractor. It follows then that the assumption of liability cannot be given any force and effect.

The Court notes that the loan was contracted by the decedent. The petitioner, purportedly a creditor of the late Efraim Santibaez, should have thus filed its money claim with the probate court in accordance with Section 5, Rule 86 of the Revised Rules of Court, which provides:

Section 5. Claims which must be filed under the notice. If not filed barred; exceptions. All claims for money against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise they are barred forever, except that they may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants. Where an executor or administrator commences an action, or prosecutes an action already commenced by the deceased in his lifetime, the debtor may set forth by answer the claims he has against the decedent, instead of presenting them independently to the court as herein provided, and mutual claims may be set off against each other in such action; and if final judgment is rendered in favor of the defendant, the amount so determined shall be considered the true balance against the estate, as though the claim had been presented directly before the court in the administration proceedings. Claims not yet due, or contingent, may be approved at their present value.

The filing of a money claim against the decedents estate in the probate court is mandatory. [30] As we held in the vintage case of Py Eng Chong v. Herrera:[31]

This requirement is for the purpose of protecting the estate of the deceased by informing the executor or administrator of the claims against it, thus enabling him to examine each claim and to determine whether it is a proper one which should be allowed. The plain and obvious design of the rule is the speedy settlement of the affairs of the deceased and the early delivery of the property to the distributees, legatees, or heirs. `The law strictly requires the prompt presentation and disposition of the claims against the decedent's estate in order to settle the affairs of the estate as soon as possible, pay off its debts and distribute the residue.[32]

Perusing the records of the case, nothing therein could hold private respondent Florence S. Ariola accountable for any liability incurred by her late father. The documentary evidence presented, particularly the promissory notes and the continuing guaranty agreement, were executed and signed only by the late Efraim Santibaez and his son Edmund. As the petitioner failed to file its money claim with the probate court, at most, it may only go after Edmund as co-maker of the decedent under the said promissory notes and continuing guaranty, of course, subject to any defenses Edmund may have as against the petitioner. As the court had not acquired jurisdiction over the person of Edmund, we find it unnecessary to delve into the matter further.

We agree with the finding of the trial court that the petitioner had not sufficiently shown that it is the successor-in-interest of the Union Savings and Mortgage Bank to which the FCCC assigned its assets and liabilities. [33] The petitioner in its complaint alleged that by virtue of the Deed of Assignment dated August 20, 1981 executed by and between First Countryside Credit Corporation and Union Bank of the Philippines [34] However, the documentary evidence[35] clearly reflects that the parties in the deed of assignment with assumption of liabilities were the FCCC, and the Union Savings and Mortgage Bank, with the conformity of Bancom Philippine Holdings, Inc. Nowhere can the petitioners participation therein as a party be found. Furthermore, no documentary or testimonial evidence was presented during trial to show that Union Savings and Mortgage Bank is now, in fact, petitioner Union Bank of the Philippines. As the trial court declared in its decision:

[T]he court also finds merit to the contention of defendant that plaintiff failed to prove or did not present evidence to prove that Union Savings and Mortgage Bank is now the Union Bank of the Philippines. Judicial notice does not apply here. The power to take judicial notice is to [be] exercised by the courts with caution; care must be taken that the requisite notoriety exists; and every reasonable doubt upon the subject should be promptly resolved in the negative. (Republic vs. Court of Appeals, 107 SCRA 504).[36]

This being the case, the petitioners personality to file the complaint is wanting. Consequently, it failed to establish its cause of action. Thus, the trial court did not err in dismissing the complaint, and the CA in affirming the same.

IN LIGHT OF ALL THE FOREGOING, the petition is hereby DENIED. The assailed Court of Appeals Decision is AFFIRMED. No costs.

SO ORDERED.

G.R. No. 121597      June 29, 2001

PHILIPPINE NATIONAL BANK, petitioner, vs.

HON. COURT OF APPEALS, ALLAN M. CHUA as Special Administrator of the Intestate Estate of the late ANTONIO M. CHUA and Mrs. ASUNCION M. CHUA, respondents.

QUISUMBING, J.:

This petition assails the decision1 of the Court of Appeals dated July 25, 1995 in CA-G.R. CV No. 36546, affirming the decision dated September 4, 1991 of the Regional Trial Court of Balayan, Batangas, Branch 10 in Civil Case No. 1988.

The facts, as found by the trial court and by the Court of Appeals, are not disputed.

The spouses Antonio M. Chua and Asuncion M. Chua were the owners of a parcel of land covered by Transfer Certificate of Title No. P-142 and registered in their names. Upon Antonio’s death, the probate court appointed his son, private respondent Allan M. Chua, special administrator of Antonio’s intestate estate. The court also authorized Allan to obtain a loan accommodation of five hundred fifty thousand (P550,000.00) pesos from petitioner Philippine National Bank to be secured by a real estate mortgage over the above-mentioned parcel of land.

On June 29, 1989, Allan obtained a loan of P450,000.00 from petitioner PNB evidenced by a promissory note, payable on June 29, 1990, with interest at 18.8 percent per annum. To secure the loan, Allan executed a deed of real estate mortgage on the aforesaid parcel of land.

On December 27, 1990, for failure to pay the loan in full, the bank extrajudicially foreclosed the real estate mortgage, through the Ex-Officio Sheriff, who conducted a public auction of the mortgaged property pursuant to the authority provided for in the deed of real estate mortgage. During the auction, PNB was the highest bidder with a bid price P306,360.00. Since PNB’s total claim as of the date of the auction sale was P679,185.63, the loan had a payable balance of P372,825.63. To claim this deficiency, PNB instituted an action with the RTC, Balayan, Batangas, Branch 10, docketed as Civil Case No. 1988, against both Mrs. Asuncion M. Chua and Allan Chua in his capacity as special administrator of his father’s intestate estate.

Despite summons duly served, private respondents did not answer the complaint. The trial court declared them in default and received evidence ex parte.

On September 4, 1991, the RTC rendered its decision, ordering the dismissal of PNB’s complaint.2

On appeal, the Court of Appeals affirmed the RTC decision by dismissing PNB’s appeal for lack of merit.3

Hence, the present petition for review on certiorari under Rule 45 of the Rules of Court. Petitioner cites two grounds:

I

THE CA ERRED IN HOLDING THAT PNB CAN NO LONGER PURSUE ITS DEFICIENCY CLAIM AGAINST THE ESTATE OF DECEASED ANTONIO M. CHUA, HAVING ELECTED ONE OF ITS ALTERNATIVE RIGHT PURSUANT TO SECTION 7 RULE 86 OF THE RULES OF COURT DESPITE A

SPECIAL ENACTMENT (ACT. NO. 3135) COVERING EXTRAJUDICIAL FORECLOSURE SALE ALLOWING RECOURSE FOR A DEFICIENCY CLAIM AS SUPPORTED BY CONTEMPORARY JURISPRUDENCE.

II

THE CA ERRED IN HOLDING THAT ALLAN M. CHUA, AS SPECIAL ADMINISTRATOR OF THE INTESTATE ESTATE OF HIS DECEASED FATHER ANTONIO M. CHUA ON ONE HAND, AND HIM AND HIS MOTHER ASUNCION CHUA AS HEIRS ON THE OTHER HAND ARE NO LONGER LIABLE FOR THE DEBTS OF THE ESTATE.4

The primary issue posed before us is whether or not it was error for the Court of Appeals to rule that petitioner may no longer pursue by civil action the recovery of the balance of indebtedness after having foreclosed the property securing the same. A resolution of this issue will also resolve the secondary issue concerning any further liability of respondents and of the decedent’s estate.

Petitioner contends that under prevailing jurisprudence, when the proceeds of the sale are insufficient to pay the debt, the mortgagee has the right to recover the deficiency from the debtor.5 It also contends that Act 3135, otherwise known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages," is the law applicable to this case of foreclosure sale and not Section 7 of Rule 86 of the Revised Rules of Court6 as held by the Court of Appeals.7

Private respondents argue that having chosen the remedy of extrajudicial foreclosure of the mortgaged property of the deceased, petitioner is precluded from pursuing its deficiency claim against the estate of Antonio M. Chua. This they say is pursuant to Section 7, Rule 86 of the Rules of Court, which states that:

Sec. 7. Rule 86. Mortgage debt due from estate. — A creditor holding a claim against the deceased secured by mortgage or other collateral security, may abandon the security and prosecute his claim in the manner provided in this rule, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by action in court, making the executor or administrator a party defendant, and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged, in the foreclosure or other proceeding to realize upon the security, he may claim his deficiency judgment in the manner provided in the preceding section; or he may rely upon his mortgage or other security alone and foreclose the same at any time within the period of the statute of limitations, and  in that event he shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate; but nothing herein contained shall prohibit the executor or administrator from redeeming the property mortgaged or pledged by paying the debt for which it is hold as security, under the direction of the court if the court shall adjudge it to be for the interest of the estate that such redemption shall be made.

Pertinent to the issue at bar, according to petitioner, are our decisions he cited.8 Prudential Bank v. Martinez, 189 SCRA 612, 615 (1990), is particularly cited by petitioner as precedent for holding that in extrajudicial foreclosure of mortgage, when the proceeds of the sale are insufficient to pay the debt, the mortgagee has the right to recover the deficiency from the mortgagor.

However, it must be pointed out that petitioner’s cited cases involve ordinary debts secured by a mortgage. The case at bar, we must stress, involves a foreclosure of mortgage arising out of a settlement of estate, wherein the administrator mortgaged a property belonging to the estate of the decedent, pursuant to an authority given by the probate court. As the Court of Appeals correctly stated, the Rules of Court on Special Proceedings comes into play decisively.

To begin with, it is clear from the text of Section 7, Rule 89, that once the deed of real estate mortgage is recorded in the proper Registry of Deeds, together with the corresponding court order authorizing the administrator to mortgage the property, said deed shall be valid as if it has been executed by the deceased himself. Section 7 provides in part:

Sec. 7. Rule 89. 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 personal estate, or to sell, mortgage, or otherwise encumber real estate, in cases provided by these rules when it appears necessary or beneficial under the following regulations:

x x x

(f) There shall be recorded in the registry of deeds of the province in which the real estate thus sold, mortgaged, or otherwise encumbered is situated, a certified copy of the order of the court, together with the deed of the executor or administrator for such real estate, which shall be valid as if the deed had been executed by the deceased in his lifetime.

In the present case, it is undisputed that the conditions under the aforecited rule have been complied with. It follows that we must consider Sec. 7 of Rule 86, appropriately applicable to the controversy at hand.

Case law now holds that this rule grants to the mortgagee three distinct, independent and mutually exclusive remedies that can be alternatively pursued by the mortgage creditor for the satisfaction of his credit in case the mortgagor dies, among them:

(1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim;

(2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and

(3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescriptionwithout right to file a claim for any deficiency.9

In Perez v. Philippine National Bank,10 reversing Pasno vs. Ravina,11 we held:

The ruling in Pasno vs. Ravina not having been reiterated in any other case, we have carefully reexamined the same, and after mature deliberation have reached the conclusion that the dissenting opinion is more in conformity with reason and law. Of the three alternative courses that section 7, Rule 87 (now Rule 86), offers the mortgage creditor, to wit, (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2) foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription, without right to file a claim for any deficiency, the majority opinion in Pasno vs. Ravina, in requiring a judicial foreclosure, virtually wipes out the third alternative conceded by the Rules to the mortgage creditor, and which would precisely include extra-judicial foreclosures by contrast with the second alternative.

The plain result of adopting the last mode of foreclosure is that the creditor waives his right to recover any deficiency from the estate.12 Following the Perez ruling that the third mode includes extrajudicial foreclosure sales, the result of extrajudicial foreclosure is that the creditor waives any further deficiency claim. The dissent inPasno, as adopted in Perez, supports this conclusion, thus:

When account is further taken of the fact that a creditor who elects to foreclose by extrajudicial sale waives all right to recover against the estate of the deceased debtor for any deficiency remaining unpaid after the sale it will be readily seen that the decision in this case (referring to the majority opinion) will impose a burden upon the estates of deceased persons who have mortgaged real property for the security of debts, without any compensatory advantage.

Clearly, in our view, petitioner herein has chosen the mortgage-creditor’s option of extrajudicially foreclosing the mortgaged property of the Chuas. This choice now bars any subsequent deficiency claim against the estate of the deceased, Antonio M. Chua. Petitioner may no longer avail of the complaint for the recovery of the balance of indebtedness against said estate, after petitioner foreclosed the property securing the mortgage in its favor. It follows that in this case no further liability remains on the part of respondents and the late Antonio M. Chua’s estate.

WHEREFORE, finding no reversible error committed by respondent Court of Appeals, the instant petition is hereby DENIED. The assailed decision of the Court of Appeals in CA-G.R. CV No. 36546 is AFFIRMED. Costs against petitioner.1âwphi1.nêt

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.

D E C I S I O N

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 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 hearingmay 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. L-2360          December 29, 1949

GAVINO ALDAMIZ, as administrator of the estate of the deceased Santiago Rementeria y Aldamizcogeascoa, petitioner, 

vs.THE JUDGE OF THE COURT OF FIRST INSTANCE OF MINDORO, THE PROVINCIAL SHERIFF OF MINDORO

and JUAN L. LUNA, respondents.

MORAN, C.J.:

This is a petition for certiorari filed by Gavino Aldamiz, administrator of the testate of the deceased Santiago Rementeria y Aldamizcogeascoa, to set aside the order of the Court of First Instance of Mindoro issued in the said testate estate proceedings, fixing the amount of fees for respondent Juan L. Luna, as attorney for said administrator.

The facts material to the issues raised in the petition are as follows:

Santiago Rementeria y Aldamizcogeascoa, the decedent was a Spaniard and member of the commercial partnership "Aldamiz y Rementeria." The other members were the brothers, Gavino and Jose, surnamed Aldamiz. Santiago Rementeria died in Spain in 1937, and probate proceeding No. 705 was instituted in the same year in the Court of First Instance of Mindoro by Gavino Aldamiz represented by Atty. Juan L. Luna. Gavino Aldamiz was appointed administrator and as such was represented by respondent Atty. Juan Luna up to January 21, 1947, when the order complained for was issued. In that order it is said that "said attorney is the one who instituted this testate proceeding ten years ago and has from its incipiency to the present stage of the proceedings actively intervened in the same."lawphi1.net

On January 15, 1947, After ten years from the date of his appointment, Gavino Aldamiz, as administrator, through his attorney, Juan L. Luna, submitted his accounts for the years 1944, 1945 and 1946 and also a project of partition with a view to closing the proceedings. On said date, the court approved the accounts by refused to approve the project of partition unless all debts including attorney's fees be first paid. In the project of partition, it was expressly stated that attorney's fees, debts and incidental expenses would be proportionately paid by the beneficiaries after the closure of the testate proceedings, but the court refused to sanction this clause of the project. It is for this reason that right then and there, Attorney Luna, to comply with the wishes of the court, without previously preparing and filing a written petition to have his professional fees fixed, and without previous notice to all the interested parties, submitted evidence of his services and professional standing so that the court might fix the amount of his compensation and the administrator may make payment thereof. This failure to file a written claim and to notify the interested parties thereof was not due to bad faith or fraudulent purpose but to an honest belief on the part of the respondent attorney that such requirements were not necessary under the circumstance.

In this connection, it must be stated, in justice to Attorney Luna, that during the ten years he served as attorney for the administrator and during the 25 years as legal consultants to Santiago Rementeria, Gavino Aldamiz and Jose Aldamiz individually and as commercial partnership under the firm name "Aldamiz y Rementeria," he never took the trouble of charging them for his professional services, thus showing disinterested and extreme liberality on his part due to friendship and other personal considerations toward his clients. And it is to be observed further that even after ten years of active work in the testate proceedings, when he wanted to close the same and it was then time for him to demand payment for his services, he showed no interest in demanding preferring to leave the matter to the future negotiation or understanding with the interested parties. And when the amount of his fees was fixed by the court and Gavino Aldamiz asked him for a substantial reduction, he answered that it was not he who had fixed the amount but the court, and advised his client to file a motion for reconsideration, with the assurance that he would offer no

objection to any reduction in amount and to any extension of the time for paying what might be granted by the court. And again, when Gavino Aldamiz paid him P5,000 on account, respondent attorney told him that he would be satisfied with any additional amount that Gavino might later desire to pay him. Only subsequent occurrences which proved distasteful to the parties, led them to take steps which culminated in the filing of the instant civil action.

At the time respondent's evidence was submitted to the court, the interested parties who were residing in the Philippines were Gavino Aldamiz and his brother Jose Aldamiz. The others were then residing in Spain. No written claim had ever been filed for respondent's fees, and the interested parties had not been notified thereof nor of the hearing, not even Gavino Aldamiz who did not know when he was called to testify that he would testify in connection with respondent's fees. The Court, after considering the whole evidence presented, issued its order of January 21, 1947, awarding respondent Attorney Luna, in payment of his professional services, an aggregate sum of P28,000 in the following manner:

1. For the institution, preparation of the pleadings in the voluminous probate case, allowance of the will, project of partition and the final closing of this proceeding, — P15,000;

2. For the registration of a parcel of land of seventy-eight hectares in favor of the testate, — P5,000;

3. For three naturalization cases at the rate of P1,000 each, — P3,000; and

4. For services rendered in the deduction of inheritance tax from P28,000 to P433.40 — P5,000.

The Court ordered payment of these amounts within thirty days. Petitioner Gavino Aldamiz received copy of this order on February 21,1948. Out of the total amount of P28,000, petitioner was able to pay P5,000 only, and upon his failure to pay the balance of P23,000 after several demands made upon him by respondent attorney, the latter on April 17, 1948, filed an ex-parte motion for execution which was granted by the respondent Court on April 19,1948. Pursuant to the order of execution on two parcels of land belonging, not to the testate estate of Santiago Rementeria y Aldamizcogeascoa, but to the commercial partnership "Aldamiz y Rementeria" with a total area of three hundred fifty seven(357) hectares, more or less, assessed at one hundred eighty-two thousand, three hundred and sixty pesos (P182,360), which was sold at a public auction on July 20,1948, in favor of respondent attorney for only twenty thousand pesos(P20,000). This sale was made after preliminary injunction had been issued by this court in the instant case.

We believe and so hold that the order of the respondent court issued on January 21,1948, fixing the amount of respondent attorney's fees is null and void. The correct procedure for the collection of attorney's fees, is for the counsel to request the administrator to make payment and file an actin against him in his personal capacity and not as an administrator should he fail to pay (Palileo vs. Mendoza, G.R. No. 47106, 40 Off. Gaz. [8th Supp.], 132.) 1 If the judgment is rendered against the administrator and he pays, he may include the fees so paid in his account to the court. (Uy Tioco vs. Imperial, 53 Phil., 802.) The attorney also may, instead of bringing such an action, file a [petition in the testate or intestate proceeding "asking that the court, after notice to all persons interested, allow his claim and direct the administrator to pay it as an expense of administration." (Emphasis ours.) (Escueta vs. Sy Juilliong, 5 Phil., 405.)

In the instance case, as above stated, no written petition for the payment of attorney's fees has ever been filed by the respondent attorney and the interested parties had not been previously notified thereof nor of the hearing held by the court. Consequently, the order issued by the respondent court on January 21, 1947, and all subsequent orders implementing it, are null and void, as having been issued an excess of jurisdiction.

We also hold that the order of execution issued on April 19,1948, is null and void, not only because it was intended to implement the order of January 21, 1947, which in itself was null and void, but because a writ of execution is not the proper procedure allowed by the Rules of the Court for the payment of debts and expenses of administration. The proper procedure is for the court to order the sale of personal estate or the sale of mortgaged of real property of the deceased and all debts or expenses of administration should be paid out of the proceeds of the sale or mortgage. The order for the sale or mortgage should be issued upon motion of the administrator and with the written notice to all the heirs, legatees and devisees residing in the Philippines, according to Rule 89, section 3, and Rule 90, section 2. And when sale or mortgage of real estate is to be made, the regulations contained in Rule 90, section 7, should be complied with.

Execution may issue only where the devisees, legatees or heirs have entered into possession of their respective portions in the estate prior to settlement and payment of the debts and expenses of administration and it is later ascertained that there are such debts and expenses to be paid, in which case "the court having jurisdiction of the estate may, by order for that purpose, after hearing, settle the amount of their several liabilities, and order how much and in what manner each person shall contribute, and may issue execution if circumstances require" (Rule 89, section 6; see also Rule 74, section 4; Emphasis ours). And this is not the instant case.

It is alleged by respondent that petitioner is guilty of laches. True that petitioner failed to appeal from the order of January 21, 1947, within the time provided by the Rules and the instant petition for certiorari was filed one (1) year, four (4) months and fourteen (14) days after petitioner had received a copy of said order. And we have held in Prifeta vs. David, 40 Off. Gaz., 14th Supp., p. 152, 2 that orders issued without previous notice to parties will be deemed cured if said parties fail to appeal within time provided by the rules and their appeal is lost due to their own negligence. But here, aside from petitioner, there are interested parties who have never been notified of the order complained of, and as to them, said order has not become final and executory . And with respect to petitioner, he has not lost his appeal through his own negligence. When he received the notice of the order of the Court fixing respondent's fees in the amount of P28,000, he immediately wrote his lawyer a letter asking for a substantial reduction and extension of time to pay. The lawyer answered advising him to file his motion for reconsideration within thirty days, but he received his lawyer's letter after said period had expired. And petitioner had no other attorney to advice him except respondent who was his adversary on the matter now in dispute. After receiving said letter, he again sought equitable compromise with respondent attorney and later paid him P5,000, and respondent then told him that he would be satisfied with whatever additional amount petitioner might desire to pay him. And petitioner would perhaps have taken no action were it not because without previous notice to him, the respondent attorney asked authority from the court to sell two parcels of land totalling 13 hectares, for the payment of said professional fees and later, on July 26, 1947, respondent attorney, again without previous notice to petitioner, filed a motion for execution for the same purpose. Both motions were, however, abandoned. But a second motion for execution was filed by respondent without petitioner's knowledge, which was granted by the Court on April 19, 1948. Respondent Sheriff levied on two parcels of land belonging to the partnership "Aldamiz y Rementeria" with a total area of 357 hectares and assessed at P182,360 and the sale was announced by the sheriff for July 20, 1948. Two motions for consideration were filed by petitioner, one on June 16,1948, and the other on June 28, 1948, asking that the order of January 21, 1947, and the order of execution of April 19,1948 be set aside, but both motions were denied and the last order of denial is dated July 1,1948. The petition in the instant case was filed on July 17, 1948. We hold that under the circumstances, particularly the fiduciary relation between petitioner and respondent attorney, the former is not guilty of laches.

Respondents maintain that the case for the petitioner is one of pure technicality, premised upon a supposed failure of the respondent attorney to follow a supposed procedure. It is said that the amount of P28,000 fixed and allowed by the respondent court as professional fees of the respondent attorney is not unconscionable or unreasonable because the entire estate was worth P315,112 and now it is worth about half a million pesos because of many improvements existing thereon. It appears, however, that due to lack of notice upon the interested parties mistakes have been committed by but the court which could have been avoided. For instance, the court awarded fees for services rendered not to the estate but to the other persons, such as the supposed services in connection with the petitions for naturalization filed in behalf of Gavino Aldamiz and Jose Aldamiz and the application for registration of a parcel of land of 78 hectares filed not in favor of the testate estate but of the partnership "Aldamiz y Rementeria." These services evidently could not be charged against the estate of Santiago Rementeria. And furthermore, due to lack of preparation on the part of respondent attorney, it appears that while he was testifying to his professional services he was apparently not sure of being able to recite them all for at the end of his testimony he said: "Son los servicios que me acuerdo ahora. . . ." Had he been afforded ample time to recollect the nature and details of his long and continuos services, considering his high professional standing as recited by the respondent court in its disputed order and the increased value of the estate then, perhaps, a more reasonable compensation would have been fixed, or at least, the court could have rendered a decision with full knowledge of all the facts and with justice to all the parties concerned.

For all the foregoing, the order of the respondent court of January 21,1947, and all the subsequent orders implementing it, particularly the order of execution issued by the court on April 19, 1948, and the sale made by the sheriff on July 20,1948, in favor of respondent attorney, are null and void and are hereby set aside, with costs against respondents. It is so ordered.

[G.R. No. 156403. March 31, 2005]

JOSEPHINE PAHAMOTANG and ELEANOR PAHAMOTANG-BASA, petitioners, vs. THE PHILIPPINE NATIONAL BANK (PNB) and the HEIRS OF ARTURO ARGUNA, respondents.

D E C I S I O N

GARCIA, J.:

Assailed and sought to be set aside in this appeal by way of a petition for review on certiorari under Rule 45 of the Rules of Court are the following issuances of the Court of Appeals inCA-G.R. CV No. 65290, to wit:

1. Decision dated March 20, 2002,[1] granting the appeal and reversing the appealed August 7, 1998 decision of the Regional Trial Court at Davao City; and

2. Resolution dated November 20, 2002, denying herein petitioners' motion for reconsideration.[2]

The factual background:

On July 1, 1972, Melitona Pahamotang died. She was survived by her husband Agustin Pahamotang, and their eight (8) children, namely: Ana, Genoveva, Isabelita, Corazon, Susana, Concepcion and herein petitioners Josephine and Eleonor, all surnamed Pahamotang.

On September 15, 1972, Agustin filed with the then Court of First Instance of Davao City a petition for issuance of letters administration over the estate of his deceased wife. The petition, docketed as Special Case No. 1792, was raffled to Branch VI of said court, hereinafter referred to as the intestate court.

In his petition, Agustin identified petitioners Josephine and Eleonor as among the heirs of his deceased spouse. It appears that Agustin was appointed petitioners' judicial guardian in an earlier case - Special Civil Case No. 1785 also of the CFI of Davao City, Branch VI.

On December 7, 1972, the intestate court issued an order granting Agustins petition.

On July 6, 1973, respondent Philippine National Bank (PNB) and Agustin executed an Amendment of Real and Chattel Mortgages with Assumption of Obligation. It appears that earlier, or on December 14, 1972, the intestate court approved the mortgage to PNB of certain assets of the estate to secure an obligation in the amount of P570,000.00. Agustin signed the document in behalf of (1) the estate of Melitona; (2) daughters Ana and Corazon; and (3) a logging company named Pahamotang Logging Enterprises, Inc. (PLEI) which appeared to have an interest in the properties of the estate. Offered as securities are twelve (12) parcels of registered land, ten (10) of which are covered by transfer certificates of title (TCT) No. 2431, 7443, 8035, 11465, 21132, 4038, 24327, 24326, 31226 and 37786, all of the Registry of Deeds of Davao City, while the remaining two (2) parcels by TCTs No. (3918) 1081 and (T-2947) 562 of the Registry of Deeds of Davao del Norte and Davao del Sur, respectively.

On July 16, 1973, Agustin filed with the intestate court a Petition for Authority To Increase Mortgage on the above mentioned properties of the estate.

In an Order dated July 18, 1973, the intestate court granted said petition.

On October 5, 1974, Agustin again filed with the intestate court another petition, Petition for Declaration of Heirs And For Authority To Increase Indebtedness, whereunder he alleged the necessity for an additional loan from PNB to capitalize the business of the estate, the additional loan to be secured by additional collateral in the form of a parcel of land covered by Original Certificate of Title (OCT) No. P-7131 registered in the name of Heirs of Melitona Pahamotang. In the same petition, Agustin prayed the intestate court to declare him and Ana, Genoveva, Isabelita, Corazon, Susana, Concepcion and herein petitioners Josephine and Eleonor as the only heirs of Melitona.

In an Order of October 19, 1974, the intestate court granted Agustin authority to seek additional loan from PNB in an amount not exceeding P5,000,000.00 to be secured by the land covered by OCT No. P-7131 of the Registry of Deeds of Davao Oriental, but denied Agustins prayer for declaration of heirs for being premature.

On October 22, 1974, a real estate mortgage contract for P4,500,000.00 was executed by PNB and Agustin in his several capacities as: (1) administrator of the estate of his late wife; (2) general manager of PLEI; (3) attorney-in-fact of spouses Isabelita Pahamotang and Orlando Ruiz, and spouses Susana Pahamotang and Octavio Zamora; and (4) guardian of daughters Concepcion and Genoveva and petitioners Josephine and Eleonor. Offered as securities for the additional loan are three (3) parcels of registered land covered by TCTs No. T-21132, 37786 and 43264.

On February 19, 1980, Agustin filed with the intestate court a Petition (Request for Judicial Authority To Sell Certain Properties of the Estate), therein praying for authority to sell to Arturo Arguna the properties of the estate covered by TCTs No. 7443, 8035, 11465, 24326 and 31226 of the Registry of Deeds of Davao City, and also TCT No. (T-3918) T-1081 of the Registry of Deeds of Davao del Norte.

On February 27, 1980, Agustin yet filed with the intestate court another petition, this time a Petition To Sell the Properties of the Estate, more specifically referring to the property covered by OCT No. P-7131, in favor of PLEI.

In separate Orders both dated February 25, 1980, the intestate court granted Agustin authority to sell estate properties, in which orders the court also required all the heirs of Melitona to give their express conformity to the disposal of the subject properties of the estate and to sign the deed of sale to be submitted to the same court. Strangely, the two (2) orders were dated two (2) days earlier than February 27, 1980, the day Agustin supposedly filed his petition.

In a motion for reconsideration, Agustin prayed the intestate court for the amendment of one of its February 25, 1980 Orders by canceling the requirement of express conformity of the heirs as a condition for the disposal of the aforesaid properties.

In its Order of January 7, 1981, the intestate court granted Agustins prayer.

Hence, on March 4, 1981, estate properties covered by TCTs No. 7443,11465, 24326, 31226, 8035, (T-2947) 662 and (T-3918) T-1081, were sold to respondent Arturo Arguna, while the property covered by OCT No. P-7131 was sold to PLEI. Consequent to such sales, vendees Arguna and PLEI filed witt the intestate court a motion for the approval of the corresponding deeds of sale in their favor. And, in an Order dated March 9, 1981, the intestate court granted the motion.

Thereafter, three (3) daughters of Agustin, namely, Ana, Isabelita and Corazon petitioned the intestate court for the payment of their respective shares from the sales of estate properties, which was granted by the intestate court.

Meanwhile, the obligation secured by mortgages on the subject properties of the estate was never satisfied. Hence, on the basis of the real estate mortgage contracts dated July 6, 1973 and October 22, 1974, mortgagor PNB filed a petition for the extrajudicial foreclosure of the mortgage.

Petitioner Josephine filed a motion with the intestate court for the issuance of an order restraining PNB from extrajudicially foreclosing the mortgage. In its Order dated August 19, 1983, the intestate court denied Josephines motion. Hence, PNB was able to foreclose the mortgage in its favor.

Petitioners Josephine and Eleanor, together with their sister Susana Pahamatong-Zamora, filed motions with the intestate court to set aside its Orders of December 14, 1972 [Note: the order dated July 18, 1973 contained reference to an order dated December 14, 1972 approving the mortgage to PNB of certain properties of the estate], July 18, 1973, October 19, 1974 and February 25, 1980.

In an Order dated September 5, 1983, the intestate court denied the motions, explaining:

"Carefully analyzing the aforesaid motions and the grounds relied upon, as well as the opposition thereto, the Court holds that the supposed defects and/or irregularities complained of are mainly formal or procedural and not substantial, for which reason, the Court is not persuaded to still disturb all the orders, especially that interests of the

parties to the various contracts already authorized or approved by the Orders sought to be set aside will be adversely affected.[3]

Such was the state of things when, on March 20, 1984, in the Regional Trial Court at Davao City, petitioners Josephine and Eleanor, together with their sister Susana, filed their complaint for Nullification of Mortgage Contracts and Foreclosure Proceedings and Damages against Agustin, PNB, Arturo Arguna, PLEI, the Provincial Sheriff of Mati, Davao Oriental, the Provincial Sheriff of Tagum, Davao del Norte and the City Sheriff of Davao City. In their complaint, docketed as Civil Case No. 16,802 which was raffled to Branch 12 of the court, the sisters Josephine, Eleanor and Susana prayed for the following reliefs:

"1.) The real estate mortgage contracts of July 6, 1973 and that of October 2, 1974, executed by and between defendants PNB AND PLEI be declared null and void ab initio;

2.) Declaring the foreclosure proceedings conducted by defendants-sheriffs, insofar as they pertain to the assets of the estate of Melitona L. Pahamotang, including the auction sales thereto, and any and all proceedings taken thereunder, as null and void ab initio;

3.) Declaring the Deed of Absolute Sale, Doc. No. 473; Page No.96; Book No.VIII, Series of 1981 of the Notarial Registry of Paquito G. Balasabas of Davao City evidencing the sale/transfer of the real properties described therein to defendant Arturo S. Arguna, as null and void ab initio;

4.) Declaring the Deed of Absolute Sale, Doc. No. 474; Page No. 96, Book No. VIII, series of 1981 of the Notarial Registry of Paquito G. Balasabas of Davao City, evidencing the sale/transfer of real properties to PLEI as null and void ab initio;

5.) For defendants to pay plaintiffs moral damages in such sums as may be found to be just and equitable under the premises;

6.) For defendants to pay plaintiffs, jointly and severally, the expenses incurred in connection with this litigation;

7.) For defendants to pay plaintiffs, jointly and severally attorney's fees in an amount to be proven during the trial;

8.) For defendants to pay the costs of the suit.[4]

PNB moved to dismiss the complaint, which the trial court granted in its Order of January 11, 1985.

However, upon motion of the plaintiffs, the trial court reversed itself and ordered defendant PNB to file its answer.

Defendant PNB did file its answer with counterclaim, accompanied by a cross-claim against co-defendants Agustin and PLEI.

During the ensuing pre-trial conference, the parties submitted the following issues for the resolution of the trial court, to wit:

"1. Whether or not the Real Estate Mortgage contracts executed on July 6, 1973 and October 2, 1974 (sic) by and between defendants Pahamotang Logging Enterprises, Inc. and the Philippine National Bank are null and void?

2. Whether or not the foreclosure proceedings conducted by defendants-Sheriffs, insofar as they affect the assets of the Estate of Melitona Pahamotang, including the public auction sales thereof, are null and void?

3. Whether or not the Deed of Absolute Sale in favor of defendant Arturo Arguna entered as Doc. No. 473; Page No. 96; Book No. VIII, series of 1981 of the Notarial Register of Notary Public Paquito Balasabas is null and void?

4. Whether or not the Deed of Absolute Sale in favor of defendant Pahamotang Logging Enterprises, Inc. entered as Doc. No. 474; Page No. 96; Book No. VIII, series of 1981 of the Notarial Register of Notary Public Paquito Balasabas is null and void?

5. On defendant PNB's cross-claim, in the event the mortgage contracts and the foreclosure proceedings are declared null and void, whether or not defendant Pahamotang Logging Enterprises, Inc. is liable to the PNB?

6. Whether or not the defendants are liable to the plaintiffs for damages?

7. Whether or not the plaintiffs are liable to the defendants for damages?[5]

With defendant Arturo Argunas death on October 31, 1990, the trial court ordered his substitution by his heirs: Heirs of Arturo Alguna.

In a Decision dated August 7, 1998, the trial court in effect rendered judgment for the plaintiffs. We quote the decisions dispositive portion:

"WHEREFORE, in view of all the foregoing, judgment is hereby rendered as follows:

1. Declaring the Mortgage Contracts of July 6, 1973 and October 22, 1974, as well as the foreclosure proceedings, void insofar as it affects the share, interests and property rights of the plaintiffs in the assets of the estate of Melitona Pahamotang, but valid with respect to the other parties;

2. Declaring the deeds of sale in favor of defendants Pahamotang Logging Enterprises, Inc. and Arturo Arguna as void insofar as it affects the shares, interests and property rights of herein plaintiffs in the assets of the estate of Melitona Pahamotang but valid with respect to the other parties to the said deeds of sale.

3. Denying all the other claims of the parties for lack of strong, convincing and competent evidence.

No pronouncement as to costs.

SO ORDERED.[6]

From the aforementioned decision of the trial court, PNB, PLEI and the Heirs of Arturo Arguna went on appeal to the Court of Appeals in CA-G.R. CV No. 65290. While the appeal was pending, the CA granted the motion of Susana Pahamatong-Zamora to withdraw from the case.

As stated at the threshold hereof, the Court of Appeals, in its Decision dated March 20, 2002,[7] reversed the appealed decision of the trial court and dismissed the petitioners complaint in Civil Case No. 16,802, thus:

WHEREFORE, the appeal is hereby GRANTED. The assailed August 07, 1998 Decision rendered by the Regional Trial Court of Davao City, Branch 12, is hereby REVERSED and SET ASIDE and a new one is entered DISMISSING the complaint filed in Civil Case No. 16,802.

SO ORDERED.

The appellate court ruled that petitioners, while ostensibly questioning the validity of the contracts of mortgage and sale entered into by their father Agustin, were essentially attacking collaterally the validity of the four (4) orders of the intestate court in Special Case No. 1792, namely:

1. Order dated July 18, 1973, granting Agustins Petition for Authority to Increase Mortgage;

2. Order dated October 19, 1974, denying Agustins petition for declaration of heirs but giving him authority to seek additional loan from PNB;

3. Order dated February 25, 1980, giving Agustin permission to sell properties of the estate to Arturo Arguna and PLEI; and

4. Order dated January 7, 1981, canceling the requirement of express conformity by the heirs as a condition for the disposal of estate properties.

To the appellate court, petitioners committed a fatal error of mounting a collateral attack on the foregoing orders instead of initiating a direct action to annul them. Explains the Court of Appeals:

"A null and void judgment is susceptible to direct as well as collateral attack. A direct attack against a judgment is made through an action or proceeding the main object of which is to annul, set aside, or enjoin the enforcement of such judgment, if not carried into effect; or if the property has been disposed of, the aggrieved party may sue for recovery. A collateral attack is made when, in another action to obtain a different relief, an attack on the judgment is made as an incident in said action. This is proper only when the judgment, on its fact, is null and void, as where it is patent that the court which rendered such judgment has no jurisdiction. A judgment void on its face may also be attacked directly.

xxx xxx xxx

Perusing the above arguments and comparing them with the settled ruling, the plaintiffs-appellees [now petitioners], we believe had availed themselves of the wrong remedy before the trial court. It is clear that they are collaterally attacking the various orders of the intestate court in an action for the nullification of the subject mortgages, and foreclosure proceedings in favor of PNB, and the deeds of sale in favor of Arguna. Most of their arguments stemmed from their allegations that the various orders of the intestate court were issued without a notification given to them. An examination, however, of the July 18, 1973 order shows that the heirs of Melitona have knowledge of the petition to increase mortgage filed by Agustin, thus:

`The petitioner testified that all his children including those who are of age have no objection to this petition and, as matter of fact, Ana Pahamotang, one of the heirs of Melitona Pahamotang, who is the vice-president of the logging corporation, is the one at present negotiating for the increase of mortgage with the Philippine National Bank.'

The presumption arising from those statements of the intestate court is that the heirs were notified of the petition for the increase of mortgage.

The same can be seen in the October 19, 1974 order:

`The records show that all the known heirs, namely Ana, Isabelita, Corazon, Susana, including the incompetent Genoveva, and the minors Josephine, Eleanor and Concepcion all surnamed were notified of the hearing of the petition.'

On the other hand, the February 25, 1980 order required Agustin to obtain first express conformity from the heirs before the subject property be sold to Arguna. The fact that this was reconsidered by the intestate court in its January 07, 1981 is of no moment. The questioned orders are valid having been issued in accordance with law and procedure. The problem with the plaintiffs-appellees is that, in trying to nullify the subject mortgages and the foreclosure proceedings in favor of PNB and the deeds of sale in favor of Arguna, they are assailing the aforesaid orders of the intestate court and in attacking the said orders, they attached documents that they believe would warrant the conclusion that the assailed orders are null and void. This is a clear collateral attack of the orders of the intestate court which is not void on its face and which cannot be allowed in the present action. The defects alleged by the plaintiff-appellees are not apparent on the face of the assailed orders. Their recourse is to ask for the declaration of nullity of the said orders, not in a collateral manner, but a direct action to annul the same.[8]

The same court added that petitioners failure to assail said orders at the most opportune time constitutes laches:

"In their complaint below, plaintiffs, appellees are assailing in their present action, four orders of the intestate court namely: July 18, 1973, October 19, 1974, February 25, 1980 and January 07, 1981 orders which were then issued by Judge Martinez. It should be recalled that except for the January 07, 1981 order, Judge Jacinto, upon taking over Sp. No. 1792, denied the motion of the plaintiffs-appellees to set aside the aforesaid orders. Aside from their motion before Judge Jacinto, nothing on the records would show that the plaintiffs-appellees availed of other remedies to set

aside the questioned orders. Further, the records would not show that the plaintiffs-appellees appealed the order of Judge Jacinto. If an interval of two years, seven months and ninety nine days were barred by laches, with more reason should the same doctrine apply to the present case, considering that the plaintiffs-appellees did not avail of the remedies provided by law in impugning the various orders of the intestate court. Thus, the questioned orders of the intestate court, by operation of law became final. It is a fundamental principle of public policy in every jural system that at the risk of occasional errors, judgments of courts should become final at some definite time fixed by law (interest rei publicae ut finis sit litum). The very object of which the courts were constituted was to put an end to controversies. Once a judgment or an order of a court has become final, the issues raised therein should be laid to rest. To date, except as to the present action which we will later discuss as improper, the plaintiff-appellees have not availed themselves of other avenues to have the orders issued by Judge Martinez and Judge Jacinto annulled and set aside. In the present case, when Judge Jacinto denied the motion of the plaintiffs-appellees, the latter had remedies provided by the rules to assail such order. The ruling by Judge Jacinto denying plaintiffs-appellees motion to set aside the questioned orders of Judge Martinez has long acquired finality. It is well embedded in our jurisprudence, that judgment properly rendered by a court vested with jurisdiction, like the RTC, and which has acquired finality becomes immutable and unalterable, hence, may no longer be modified in any respect except only to correct clerical errors or mistakes. Litigation must have and always has an end. If not, judicial function will lose its relevance.

In time, petitioners moved for a reconsideration but their motion was denied by the appellate court in its Resolution of November 20, 2002.

Hence, petitioners present recourse, basically praying for the reversal of the CA decision and the reinstatement of that of the trial court.

We find merit in the petition.

It is petitioners posture that the mortgage contracts dated July 6, 1973 and October 22, 1974 entered into by Agustin with respondent PNB, as well as his subsequent sale of estate properties to PLEI and Arguna on March 4, 1981, are void because they [petitioners] never consented thereto. They assert that as heirs of their mother Melitona, they are entitled to notice of Agustin's several petitions in the intestate court seeking authority to mortgage and sell estate properties. Without such notice, so they maintain, the four orders of the intestate court dated July 18, 1973, October 19, 1974, February 25, 1980 and January 7, 1981, which allowed Agustin to mortgage and sell estate properties, are void on account of Agustins non-compliance with the mandatory requirements of Rule 89 of the Rules of Court.

Prescinding from their premise that said orders are completely void and hence, could not attain finality, petitioners maintain that the same could be attacked directly or collaterally, anytime and anywhere.

For its part, respondent PNB asserts that petitioners cannot raise as issue in this proceedings the validity of the subject orders in their desire to invalidate the contracts of mortgage entered into by Agustin. To PNB, the validity of the subject orders of the intestate court can only be challenged in a direct action for such purpose and not in an action to annul contracts, as the petitioners have done. This respondent adds that the mortgage on the subject properties is valid because the same was made with the approval of the intestate court and with the knowledge of the heirs of Melitona, petitioners included.[9]

Upon the other hand, respondent Heirs of Arturo Arguna likewise claim that petitioners knew of the filing with the intestate court by Agustin of petitions to mortgage and sell the estate properties. They reecho the CAs ruling that petitioners are barred by laches in filing Civil Case No. 16,802.[10]

As we see it, the determinative question is whether or not petitioners can obtain relief from the effects of contracts of sale and mortgage entered into by Agustin without first initiating a direct action against the orders of the intestate court authorizing the challenged contracts.

We answer the question in the affirmative.

It bears emphasizing that the action filed by the petitioners before the trial court in Civil Case No. 16,802 is for the annulment of several contracts entered into by Agustin for and in behalf of the estate of Melitona, namely: (a) contract of mortgage in favor of respondent PNB, (b) contract of sale in favor of Arguna involving seven (7) parcels of land; and (c) contract of sale of a parcel of land in favor of PLEI.

The trial court acquired jurisdiction over the subject matter of the case upon the allegations in the complaint that said contracts were entered into despite lack of notices to the heirs of the petition for the approval of those contracts by the intestate court.

Contrary to the view of the Court of Appeals, the action which petitioners lodged with the trial court in Civil Case No. 16,802 is not an action to annul the orders of the intestate court, which, according to CA, cannot be done collaterally. It is the validity of the contracts of mortgage and sale which is directly attacked in the action.

And, in the exercise of its jurisdiction, the trial court made a factual finding in its decision of August 7, 1998 that petitioners were, in fact, not notified by their father Agustin of the filing of his petitions for permission to mortgage/sell the estate properties. The trial court made the correct conclusion of law that the challenged orders of the intestate court granting Agustins petitions were null and void for lack of compliance with the mandatory requirements of Rule 89 of the Rules of Court, particularly Sections 2, 4, 7 thereof, which respectively read:

Sec. 2. When court may authorize sale, mortgage, or other encumbrance of realty to pay debts and legacies through personalty not exhausted. - When the personal estate of the deceased is not sufficient to pay the debts, expenses of administration, and legacies, or where the sale of such personal estate may injure the business or other interests of those interested in the estate, and where a testator has not otherwise made sufficient provision for the payment of such debts, expenses, and legacies, the court, on the application of the executor or administrator and on written notice to the heirs, devisees, and legatees residing in the Philippines, may authorize the executor or administrator to sell, mortgage, or otherwise encumber so much as may be necessary of the real estate, in lieu of personal estate, for the purpose of paying such debts, expenses, and legacies, if it clearly appears that such sale, mortgage, or encumbrance would be beneficial to the persons interested; and if a part cannot be sold, mortgaged, or otherwise encumbered without injury to those interested in the remainder, the authority may be for the sale, mortgage, or other encumbrance of the whole of such real estate, or so much thereof as is necessary or beneficial under the circumstances.

Sec. 4. When court may authorize sale of estate as beneficial to interested persons. Disposal of proceeds. - When it appears that the sale of the whole or a part of the real or personal estate, will be beneficial to the heirs, devisees, legatees, and other interested persons, the court may, upon application of the executor or administrator and on written notice to the heirs, devisees and legatees who are interested in the estate to be sold, authorize the executor or administrator to sell the whole or a part of said estate, although not necessary to pay debts, legacies, or expenses of administration; but such authority shall not be granted if inconsistent with the provisions of a will. In case of such sale, the proceeds shall be assigned to the persons entitled to the estate in the proper proportions.

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 personal estate, or 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:

(a) The executor or administrator shall file a written petition setting forth the debts due from the deceased, the expenses of administration, the legacies, the value of the personal estate, the situation of the estate to be sold, mortgaged, or otherwise encumbered, and such other facts as show that the sale, mortgage, or other encumbrance is necessary or beneficial;

(b) The court shall thereupon fix a time and place for hearing such petition, and cause notice stating the nature of the petition, the reason for the same, and the time and place of hearing, to be given personally or by mail to the persons interested, and may cause such further notice to be given, by publication or otherwise, as it shall deem proper; (Emphasis supplied).

xxx xxx xxx

Settled is the rule in this jurisdiction that when an order authorizing the sale or encumbrance of real property was issued by the testate or intestate court without previous notice to the heirs, devisees and legatees as required by the Rules, it is not only the contract itself which is null and void but also the order of the court authorizing the same.[11]

Thus, in Maneclang vs. Baun,[12] the previous administrator of the estate filed a petition with the intestate court seeking authority to sell portion of the estate, which the court granted despite lack of notice of hearing to the heirs of the decedent. The new administrator of the estate filed with the Regional Trial Court an action for the annulment of the sales made by the previous administrator. After trial, the trial court held that the order of the intestate court granting authority to sell, as well as the deed of sale, were void. On appeal directly to this Court, We held that without compliance with Sections 2, 4 and 7 of Rule 89 of the Rules of Court, the authority to sell, the sale itself and the order approving it would be null and void ab initio.

In Liu vs. Loy, Jr.,[13] while the decedent was still living, his son and attorney-in-fact sold in behalf of the alleged decedent certain parcels of land to Frank Liu. After the decedent died, the son sold the same properties to two persons. Upon an ex parte motion filed by the 2nd set of buyers of estate properties, the probate court approved the sale to them of said properties. Consequently, certificates of title covering the estate properties were cancelled and new titles issued to the 2nd set of buyers. Frank Liu filed a complaint for reconveyance/ annulment of title with the Regional Trial Court. The trial court dismissed the complaint and the Court of Appeals affirmed the dismissal. When the case was appealed to us, we set aside the decision of the appellate court and declared the probate court's approval of the sale as completely void due to the failure of the 2nd set of buyers to notify the heir-administratrix of the motion and hearing for the sale of estate property.

Clearly, the requirements of Rule 89 of the Rules of Court are mandatory and failure to give notice to the heirs would invalidate the authority granted by the intestate/probate court to mortgage or sell estate assets.

Here, it appears that petitioners were never notified of the several petitions filed by Agustin with the intestate court to mortgage and sell the estate properties of his wife.

According to the trial court, the [P]etition for Authority to Increase Mortgage and [P]etition for Declaration of Heirs and for Authority to Increase Indebtedness, filed by Agustin on July 16, 1973 and October 5, 1974, respectively, do not contain information that petitioners were furnished with copies of said petitions. Also, notices of hearings of those petitions were not sent to the petitioners.[14] The trial court also found in Civil Case No. 16,802 that Agustin did not notify petitioners of the filing of his petitions for judicial authority to sell estate properties to Arturo Arguna and PLEI.[15]

As it were, the appellate court offered little explanation on why it did not believe the trial court in its finding that petitioners were ignorant of Agustins scheme to mortgage and sell the estate properties.

Aside from merely quoting the orders of July 18, 1973 and October 19, 1974 of the intestate court, the Court of Appeals leaves us in the dark on its reason for disbelieving the trial court. The appellate court did not publicize its appraisal of the evidence presented by the parties before the trial court in the matter regarding the knowledge, or absence thereof, by the petitioners of Agustins petitions. The appellate court cannot casually set aside the findings of the trial court without stating clearly the reasons therefor. Findings of the trial court are entitled to great weight, and absent any indication to believe otherwise, we simply cannot adopt the conclusion reached by the Court of Appeals.

Laches is negligence or omission to assert a right within a reasonable time, warranting the presumption that the party entitled to assert it has either abandoned or declined the right.[16]The essential elements of laches are: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made and for which the complaint seeks a remedy; (2) delay in asserting the complainant's rights, the complainant having had knowledge or notice of the defendant's conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred.[17]

In the present case, the appellate court erred in appreciating laches against petitioners. The element of delay in questioning the subject orders of the intestate court is sorely lacking. Petitioners were totally unaware of the plan of Agustin to mortgage and sell the estate properties. There is no indication that mortgagor PNB and vendee Arguna had notified petitioners of the contracts they had executed with Agustin. Although petitioners finally obtained knowledge of the subject petitions filed by their father, and eventually challenged the July 18, 1973, October 19, 1974, February 25, 1980 and January 7, 1981 orders of the intestate court, it is not clear from the challenged decision of the appellate court when they (petitioners) actually learned of the existence of said orders of the intestate court. Absent any indication of the point in time when petitioners acquired knowledge of those orders, their alleged delay in impugning the validity thereof certainly cannot be established. And the Court of Appeals cannot simply impute laches against them.

WHEREFORE, the assailed issuances of the Court of Appeals are hereby REVERSED and SET ASIDE and the decision dated August 7, 1998 of the trial court in its Civil Case No. 16,802 REINSTATED.

SO ORDERED.

EMILIA FIGURACION-GERILLA, G.R. No. 154322Petitioner,

Present:PUNO, J., Chairperson,

SANDOVAL-GUTIERREZ,- v e r s u s - CORONA,

AZCUNA andGARCIA, JJ. 

CAROLINA VDA. DE FIGURACION,*

ELENA FIGURACION-ANCHETA,*

HILARIA A. FIGURACION, FELIPAFIGURACION-MANUEL, QUINTINFIGURACION andMARY FIGURACION-GINEZ,Respondents. Promulgated:

 August 22, 2006

 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x  D E C I S I O N 

CORONA, J.:

 

In this petition for review on certiorari,[1] petitioner Emilia Figuracion-Gerilla challenges the decision[2] and

resolution[3] of the Court of Appeals (CA) affirming the decision of the Regional Trial Court (RTC)

of Urdaneta City, Pangasinan, Branch 49, which dismissed her complaint for partition. The properties involved are

two parcels of land which belonged to her late father, Leandro Figuracion.

 

The facts of the case follow.[4]

 

Spouses Leandro and respondent Carolina Figuracion (now both deceased) had six children: petitioner and

respondents Elena Figuracion-Ancheta (now deceased), HilariaFiguracion, Felipa Figuracion-

Manuel, Quintin Figuracion and Mary Figuracion-Ginez.

 

On August 23, 1955, Leandro executed a deed of quitclaim over his real properties in favor of his six

children. When he died in 1958, he left behind two parcels of land: (1) Lot 2299 of the Cadastral Survey

of Urdaneta consisting of 7,547 square meters with Transfer Certificate of Title (TCT) No. 4221-P in the name

of Leandro Figuracion, married to Carolina Adviento and (2) Lot 705 of the Cadastral Survey of Urdaneta with an area

of 2,900 sq. m. with TCT No. 4220-P also in the name of Leandro Figuracion, married to

Carolina Adviento. Leandro had inherited both lots from his deceased parents,[5] as evidenced by Original Certificate

of Title (OCT) Nos. 16731 and 16610, respectively, issued by the Register of Deeds of the Province of Pangasinan.

 

Leandro sold a portion of Lot 2299 to Lazaro Adviento, as a result of which TCT No. 4221-P was cancelled

and TCT No. 101331 was issued to Lazaro Adviento, married to Rosenda Sagueped as owner of the 162 sq. m.

and Leandro Figuracion, married to Carolina Adviento as owner of 7,385 sq. m. This lot continued to be in the name

of Leandroin Tax Declaration No. 616 for the year 1985.

 

What gave rise to the complaint for partition, however, was a dispute between petitioner and her sister,

respondent Mary, over the eastern half of Lot 707 of the Cadastral Survey of Urdaneta with an area of 3,164 sq. m.

 

Lot 707 belonged to Eulalio Adviento, as evidenced by OCT No. 15867 issued on February 9,

1916. When Adviento died, his two daughters, Agripina Adviento (his daughter by his first wife) and respondent

Carolina (his daughter by his second wife), succeeded him to it. On November 28, 1961, Agripina executed a

quitclaim in favor of petitioner over the one-half eastern portion of Lot 707. Agripina died on July 28, 1963, single and

without any issue. Before her half-sisters death, however, respondent Carolina adjudicated unto herself, via affidavit

under Rule 74 of the Rules of Court, the entire Lot 707 which she later sold to respondents Felipa and Hilaria. The

latter two immediately had OCT No. 15867 cancelled, on December 11, 1962. A new title, TCT No. 42244, was then

issued in the names of Felipa and Hilaria for Lot 707.

 

In February 1971, petitioner and her family went to the United States where they stayed for ten

years. Returning in 1981,[6] she built a house made of strong materials on the eastern half-portion of Lot 707. She

continued paying her share of the realty taxes thereon.

It was sometime later that this dispute erupted. Petitioner sought the extrajudicial partition of all properties

held in common by her and respondents. On May 23, 1994, petitioner filed a complaint in the RTC of Urdaneta City,

Branch 49, for partition, annulment of documents, reconveyance, quieting of title and damages against respondents,

praying, among others, for: (1) the partition of Lots 2299 and 705; (2) the nullification of the affidavit of self-

adjudication executed by respondent Carolina over Lot 707, the deed of absolute sale in favor of

respondents Felipa and Hilaria, and TCT No. 42244; (3) a declaration that petitioner was the owner of one-half of Lot

707 and (4) damages. The case was docketed as Civil Case No. U-5826.

 

On the other hand, respondents took the position that Leandros estate should first undergo settlement

proceedings before partition among the heirs could take place. And they claimed that an accounting of expenses

chargeable to the estate was necessary for such settlement.

 

On June 26, 1997,[7] the RTC[8] rendered judgment nullifying Carolinas affidavit of self-adjudication and deed

of absolute sale of Lot 707. It also declared Lots 2299 and 705 as exclusive properties of Leandro Figuracion and

therefore part of his estate. The RTC, however, dismissed the complaint for partition, reconveyance and damages on

the ground that it could not grant the reliefs prayed for by petitioner without any (prior) settlement proceedings

wherein the transfer of title of the properties should first be effected.

On appeal, the CA upheld the dismissal of petitioners action for partition for being premature. The CA

reversed the decision, however, with respect to the nullification of the self-adjudication and the deed of

sale. Upholding the validity of the affidavit of self-adjudication and deed of sale as to Carolinas one-half  pro-

indiviso share, it instead partitioned Lot 707. Dissatisfied, respondents elevated the CA decision to this Court in G.R.

No. 151334, entitled Carolina vda. de Figuracion, et al. v. Emilia Figuracion-Gerilla.[9]

 

The issue for our consideration is whether or not there needs to be a prior settlement of Leandros intestate estate

(that is, an accounting of the income of Lots 2299 and 705, the payment of expenses, liabilities and taxes, plus

compliance with other legal requirements, etc.) before the properties can be partitioned or distributed.

 

Respondents claim that: (1) the properties constituting Leandros estate cannot be partitioned before his estate is

settled and (2) there should be an accounting before anything else, considering that they (respondents) had to spend

for the maintenance of the deceased Leandro Figuracion and his wife in their final years, which support was

supposed to come from the income of the properties. Among other things, respondents apparently wanted petitioner

to share in the expenses incurred for the care of their parents during the ten years she stayed in the United States,

before she could get her part of the estate while petitioner apparently wanted her gross share, without first

contributing to the expenses.

 

In any event, there appears to be a complication with respect to the partition of Lot 705. The records refer to

a case entitled Figuracion, et al. v. Alejo currently pending in the CA. The records, however, give no clue or

information regarding what exactly this case is all about. Whatever the issues may be, suffice it to say that partition is

premature when ownership of the lot is still in dispute.[10]

 

Petitioner faces a different problem with respect to Lot 2299. Section 1, Rule 69 of the Rules of Court

provides: 

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

 

The right to an inheritance is transmitted immediately to the heirs by operation of law, at the moment of

death of the decedent. There is no doubt that, as one of the heirs ofLeandro Figuracion, petitioner has a legal interest

in Lot 2299. But can she compel partition at this stage?

There are two ways by which partition can take place under Rule 69: by agreement under Section 2 [11] and

through commissioners when such agreement cannot be reached, under Sections 3 to 6.[12]

 

Neither method specifies a procedure for determining expenses chargeable to the decedents estate. While

Section 8 of Rule 69 provides that there shall be an accounting of the real propertys income (rentals and profits) in

the course of an action for partition,[13] there is no provision for the accounting of expenses for which property

belonging to the decedents estate may be answerable, such as funeral expenses, inheritance taxes and similar

expenses enumerated under Section 1, Rule 90 of the Rules of Court.

In a situation where there remains an issue as to the expenses chargeable to the estate, partition is

inappropriate. While petitioner points out that the estate is allegedly without any debt and she and respondents

are Leandro Figuracions only legal heirs, she does not dispute the finding of the CA that certain expenses including

those related to her fathers final illness and burial have not been properly settled. [14] Thus, the heirs (petitioner and

respondents) have to submit their fathers estate to settlement because the determination of these expenses cannot

be done in an action for partition. 

In estate settlement proceedings, there is a proper procedure for the accounting of all expenses for which

the estate must answer. If it is any consolation at all to petitioner, the heirs or distributees of the properties may take

possession thereof even before the settlement of accounts, as long as they first file a bond conditioned on the

payment of the estates obligations.[15]

 

WHEREFORE, the petition is hereby DENIED. The Court of Appeals decision and resolution in CA-G.R. CV

No. 58290 are AFFIRMED in so far as the issue of the partition of Lots 2299 and 705 is concerned.

But with respect to Lot 707, we make no ruling on the validity of Carolina vda. de Figuracions affidavit of self-

adjudication and deed of sale in favor of Felipa and HilariaFiguracion in view of the fact

that Carolina vda. de Figuracion, et al. v. Emilia Figuracion-Gerilla (G.R. No. 151334) is still pending in this Division. Costs against petitioner. 

SO ORDERED.

 

G.R. No. 143483            January 31, 2002

REPUBLIC OF THE PHILIPPINES represented by the REGISTER OF DEEDS OF PASAY CITY, petitioner, vs.COURT OF APPEALS (SPECIAL FORMER 3RD DIVISION) AND AMADA H. SOLANO, assisted by her husband ROMEO SOLANO, respondents.

BELLOSILLO , J.:

This petition for certiorari seeks to nullify two (2) Resolutions of the Court of Appeals dated 12 November 1998 and 4 May 2000 giving due course to the petition for annulment of judgment filed by private respondent Amada H. Solano on 3 February 1997 and denying petitioner's motion for reconsideration.

For more than three (3) decades (from 1952 to 1985) private respondent Amada Solano served as the all-around personal domestic helper of the late Elizabeth Hankins, a widow and a French national. During Ms. Hankins' lifetime and most especially during the waning years of her life, respondent Solano was her faithful girl Friday and a constant companion since no close relative was available to tend to her needs.

In recognition of Solano's faithful and dedicated service, Ms. Hankins executed in her favor two (2) deeds of donation involving two (2) parcels of land covered by TCT Nos. 7807 and 7808 of the Registry of Deeds. Private respondent alleged that she misplaced the deeds of donation and were nowhere to be found.

While the deeds of donation were missing, the Republic filed a petition for the escheat of the estate of Elizabeth Hankins before the Regional Trial Court of Pasay City.1 During the proceedings, a motion for intervention was filed by Romeo Solano, spouse of private respondent, and one Gaudencio Regosa, but on 24 June 1987 the motion was denied by the trial court for the reason that "they miserably failed to show valid claim or right to the properties in question."2 Since it was established that there were no known heirs and persons entitled to the properties of decedent Hankins, the lower court escheated the estate of the decedent in favor of petitioner Republic of the Philippines.

By virtue of the decision of the trial court, the Registry of Deeds of Pasay City cancelled TCT Nos. 7807 and 7808 and issued new ones, TCT Nos. 129551 and 129552, both in the name of Pasay City.

In the meantime, private respondent claimed that she accidentally found the deeds of donation she had been looking for a long time. In view of this development, respondent Amada Solano filed on 28 January 1997 a petition before the Court of Appeals for the annulment of the lower court's decision alleging, among other, that3 -

13.1. The deceased Elizabeth Hankins having donated the subject properties to the petitioner in 1983 (for TCT No. 7807) and 1984 (for TCT No. 7808), these properties did not and could not form part of her estate when she died on September 20, 1985. Consequently, they could not validly be escheated to the Pasay City Government;

13.2. Even assuming arguendo that the properties could be subject of escheat proceedings, the decision is still legally infirm for escheating the properties to an entity, the Pasay City Government, which is not authorized by law to be the recipient thereof. The property should have been escheated in favor of the Republic of the Philippines under Rule 91, Section 1 of the New Rules of Court x x x x

On 17 March 1997 the Office of the Solicitor General representing public respondents RTC and the Register of Deeds (herein petitioner) filed an answer setting forth their affirmative defenses, to wit: (a) lack of jurisdiction over the nature of the action; and, (b) the cause of action was barred by the statute of limitations.

Finding no cogent reason to justify the dismissal of the petition for annulment, the Court of Appeals issued on 12 November 1998 the first of its assailed Resolutions giving due course to the petition for annulment of judgment and setting the date for trial on the merits. In upholding the theory of respondent Solano, the Appeals Court ruled that -

Herein petitioner invokes lack of jurisdiction over the subject matter on the part of respondent RTC to entertain the escheat proceedings x x x because the parcels of land have been earlier donated to herein petitioner in 1983 and 1984 prior to the death of said Hankins; and therefore, respondent court could not have ordered the escheat of said properties in favor of the Republic of the Philippines, assign them to respondent Pasay City government, order the cancellation of the old titles in the name of Hankins and order the properties registered in the name of respondent Pasay City x x x x The 1997 Rules of Civil Procedure specifically laid down the grounds of annulment filed before this Court, to wit: extrinsic fraud and lack of jurisdiction. Jurisdiction over the subject matter is conferred by law and this jurisdiction is determined by the allegations of the complaint. It is axiomatic that the averments of the complaint determine the nature of the action and consequently the jurisdiction of the courts. Thus whether or not the properties in question are no longer part of the estate of the deceased Hankins at the time of her death; and, whether or not the alleged donations are valid are issues in the present petition for annulment which can be resolved only after a full blown trial x x x x

It is for the same reason that respondent’s espousal of the statute of limitations against herein petition for annulment cannot prosper at this stage of the proceedings. Indeed, Section 4, Rule 91 of the Revised Rules of Court expressly provides that a person entitled to the estate must file his claim with the court a quo within five (5) years from the date of said judgment. However, it is clear to this Court that herein petitioner is not claiming anything from the estate of the deceased at the time of her death on September 20, 1985; rather she is claiming that the subject parcels of land should not have been included as part of the estate of the said decedent as she is the owner thereof by virtue of the deeds of donation in her favor.

In effect, herein petitioner, who alleges to be in possession of the premises in question, is claiming ownership of the properties in question and the consequent reconveyance thereof in her favor which cause of action prescribes ten (10) years after the issuance of title in favor of respondent Pasay City on August 7, 1990. Herein petition was seasonably filed on February 3, 1997 under Article 1144, to wit:

Art. 1144. The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment.

And Article 1456, to wit:

Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.4

In its Resolution of 4 May 2000 the Court of Appeals denied the motion for reconsideration filed by public respondents Register of Deeds of Pasay City and the Presiding judge of the lower court and set the trial on the merits for June 15 and 16, 2000.

In its effort to nullify the Resolutions herein before mentioned, petitioner points out that the Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction (a) in denying petitioner's affirmative defenses set forth in its answer and motion for reconsideration, and in setting the case for trial and reception of evidence; and, (b) in giving due course to private respondent's petition for annulment of decision despite the palpable setting-in of the 5-year statute of limitations within which to file claims before the court a quoset forth in Rule 91 of the Revised Rules of Court and Art. 1014 of the Civil Code.

Petitioner argues that the lower court had jurisdiction when it escheated the properties in question in favor of the city government and the filing of a petition for annulment of judgment on the ground of subsequent discovery of the deeds of donation did not divest the lower court of its jurisdiction on the matter. It further contends that Rule 47 of the 1997 Rules of Civil Procedure only provides for two (2) grounds for the annulment of judgment, namely: extrinsic fraud and

lack of jurisdiction. As such the discovery of the deeds of donation seven (7) years after the finality of the escheat proceedings is an extraneous matter which is clearly not an instance of extrinsic fraud nor a ground to oust the lower court of its jurisdiction.

Petitioner also insists that notwithstanding the execution of the deeds of donation in favor of private respondent, the 5-year statute of limitations within which to file claims before the court a quo as set forth in Rule 91 of the Revised Rules of Court has set in.

The present controversy revolves around the nature of the parcels of land purportedly donated to private respondent which will ultimately determine whether the lower court had jurisdiction to declare the same escheated in favor of the state.

We rule for the petitioner. Escheat is a proceeding, unlike that of succession or assignment, whereby the state, by virtue of its sovereignty, steps in and claims the real or personal property of a person who dies intestate leaving no heir. In the absence of a lawful owner, a property is claimed by the state to forestall an open "invitation to self-service by the first comers."5 Since escheat is one of the incidents of sovereignty, the state may, and usually does, prescribe the conditions and limits the time within which a claim to such property may be made. The procedure by which the escheated property may be recovered is generally prescribed by statue, and a time limit is imposed within which such action must be brought.

In this jurisdiction, a claimant to an escheated property must file his claim "within five (5) years from the date of such judgment, such person shall have possession of and title to the same, or if sold, the municipality or city shall be accountable to him for the proceeds, after deducting the estate; but a claim not made shall be barred forever." 6 The 5-year period is not a device capriciously conjured by the state to defraud any claimant; on the contrary, it is decidedly prescribed to encourage would-be claimants to be punctilious in asserting their claims, otherwise they may lose them forever in a final judgment.

Incidentally, the question may be asked: Does herein private respondent, not being an heir but allegedly a donee, have the personality to be a claimant within the purview of Sec. 4, Rule 91, of the Revised Rules of Court? In this regard, we agree with the Solicitor General that the case of Municipal Council of San Pedro, Laguna v. Colegio de San Jose, Inc.,7 is applicable at least insofar as it concerns the Court's discussion on who is an "interested party" in an escheat proceeding -

In a special proceeding for escheat under sections 750 and 751 the petitioner is not the sole and exclusive interested party. Any person alleging to have a direct right or interest in the property sought to be escheated is likewise an interested party and may appear and oppose the petition for escheat. In the present case, the Colegio de San Jose, Inc. and Carlos Young appeared alleging to have a material interest in the Hacienda de San Pedro Tunasan; the former because it claims to be the exclusive owner of the hacienda, and the latter because he claims to be the lessee thereof under a contract legally entered with the former (underscoring supplied).

In the instant petition, the escheat judgment was handed down by the lower court as early as 27 June 1989 but it was only on 28 January 1997, more or less seven (7) years after, when private respondent decided to contest the escheat judgment in the guise of a petition for annulment of judgment before the Court of Appeals. Obviously, private respondent's belated assertion of her right over the escheated properties militates against recovery.

A judgment in escheat proceedings when rendered by a court of competent jurisdiction is conclusive against all persons with actual or constructive notice, but not against those who are not parties or privies thereto. As held inHamilton v. Brown,8 "a judgment of escheat was held conclusive upon persons notified by advertisement to all persons interested. Absolute lack on the part of petitioners of any dishonest intent to deprive the appellee of any right, or in any way injure him, constitutes due process of law, proper notice having been observed." With the lapse of the 5-year period therefore, private respondent has irretrievably lost her right to claim and the supposed "discovery of the deeds of donation" is not enough justification to nullify the escheat judgment which has long attained finality.

In the mind of this Court the subject properties were owned by the decedent during the time that the escheat proceedings were being conducted and the lower court was not divested of its jurisdiction to escheat them in favor of Pasay City notwithstanding an allegation that they had been previously donated. We recall that a motion for intervention was earlier denied by the escheat court for failure to show "valid claim or right to the properties in question."9 Where a person comes into an escheat proceeding as a claimant, the burden is on such intervenor to

establish his title to the property and his right to intervene. A fortiori, the certificates of title covering the subject properties were in the name of the decedent indicating that no transfer of ownership involving the disputed properties was ever made by the deceased during her lifetime. In the absence therefore of any clear and convincing proof showing that the subject lands had been conveyed by Hankins to private respondent Solano, the same still remained, at least before the escheat, part of the estate of the decedent and the lower court was right not to assume otherwise. The Court of Appeals therefore cannot perfunctorily presuppose that the subject properties were no longer part of the decedent's estate at the time the lower court handed down its decision on the strength of a belated allegation that the same had previously been disposed of by the owner. It is settled that courts decide only after a close scrutiny of every piece of evidence and analyze each case with deliberate precision and unadulterated thoroughness, the judgment not being diluted by speculations, conjectures and unsubstantiated assertions.

WHEREFORE, the petition is GRANTED. The assailed Resolution of the Court of Appeals dated 12 November 1998 giving due course to the petition for annulment of judgment, and its Resolution dated 4 May 2000 denying petitioner's motion for reconsideration, are SET ASIDE. The decision of the RTC-Br. 114, Pasay City, dated 27 June 1989, is REINSTATED.

SO ORDERED.

REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF LANDS,Petitioner,

- versus -

REGISTER OF DEEDS OF ROXASCITY, ELIZABETH LEE, and PACITA YU-LEE,Respondents.

G.R. No. 158230

Present:

PUNO, C.J., Chairperson,CARPIO,CORONA,AZCUNA, andLEONARDO-DE CASTRO, JJ.

Promulgated:

July 16, 2008 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

 

 

D E C I S I O N

 

CARPIO, J.:

 

The Case

 

This is a petition for review[1] of the Decision[2] dated 12 July 2002 and the Resolution dated 9 May 2003 of the Court

of Appeals in CA-G.R. CV No. 53890.

 

The Facts

In March 1936, Lee Liong, a Chinese citizen, bought Lot No. 398 from Vicenta Arcenas, Francisco, Carmen Ramon,

Mercedes, Concepcion, Mariano, Jose, and Manuel, all surnamed Dinglasan. Lot No. 398, with an area of 1,574

square meters, is located at the corner of Roxas Avenue and Pavia Street in Roxas City. In February 1944,

Lee Liongdied intestate and was survived by his widow Ang Chia, and his sons Lee Bing Hoo and Lee Bun

Ting. On 30 June 1947, the surviving heirs of Lee Liong extrajudicially settled the estate of the deceased and

partitioned among themselves Lot No. 398. When Lee Bing Hoo and Lee Bun Ting died, Lot No. 398 was transferred

by succession to their respective wives, Elizabeth Lee (Elizabeth) and Pacita Yu-Lee (Pacita).

 

In the 1956 case of Dinglasan v. Lee Bun Ting,[3] involving Lot No. 398, the Court held that even if the sale of the

property was null and void for violating the constitutional prohibition on the sale of land to an alien, still the doctrine

of in pari delicto barred the sellers from recovering the title to the property. Eleven years later, in the case of Lee Bun

Ting v. Judge Aligaen,[4] the Court ordered the trial court to dismiss the complaint of the Dinglasans for the recovery

of Lot No. 398. Applying the doctrine of res judicata, the Court held that the case was a mere relitigation of the same

issues previously adjudged with finality in the Dinglasan case, involving the same parties or their privies and

concerning the same subject matter.

On 7 September 1993, Elizabeth and Pacita (private respondents) filed a petition for reconstitution of title of Lot No.

398 because the records of the Register of Deeds, RoxasCity were burned during the war. On 3 October 2001, the

Court held that the trial courts order of reconstitution was void for lack of factual support because it was based merely

on the plan and technical description approved by the Land Registration Authority.[5]

 

Meanwhile, on 26 January 1995, petitioner Republic of the Philippines (petitioner), through the Office of the Solicitor

General (OSG), filed with the Regional Trial Court ofRoxas City a Complaint[6] for Reversion of Title against private

respondents and the Register of Deeds of Roxas City, praying that (1) the sale of Lot No. 398 to Lee Liong be set

aside for being null and void ab initio; and (2) Lot No. 398 be reverted to the public domain for the States disposal in

accordance with law.

In their Answer, private respondents invoked as affirmative defenses: (1) prescription; (2) private ownership of Lot

No. 398; and (3) Lee Liongs being a buyer in good faith and for value. Furthermore, private respondents claimed that

as Filipino citizens, they are qualified to acquire Lot No. 398 by succession.

The Register of Deeds of Roxas City did not file an answer.

On 7 May 1996, the trial court rendered a decision ordering the reversion of Lot No. 398 to the State.

 

On appeal, the Court of Appeals rendered its Decision[7] dated 12 July 2002, reversing the trial courts decision and

declaring private respondents as the absolute and lawful owners of Lot No. 398. Petitioner moved for reconsideration,

which the Court of Appeals denied in its Resolution[8] dated 9 May 2003.

Hence, this petition for review.

 

 

The Ruling of the Trial Court

The trial court ordered the reversion of Lot No. 398 to the State. The trial court held that private respondents could

not have acquired a valid title over Lot No. 398 because the sale of the lot to their predecessor-in-interest

Lee Liong was null and void. Being an innocent purchaser in good faith and for value did not cure

Lee Liongs disqualification as an alien who is prohibited from acquiring land under the Constitution. The trial court

further held that prescription cannot be invoked against the State as regards an action for reversion

or reconveyance of land to the State.

 

The Ruling of the Court of Appeals

 

The Court of Appeals agreed with the trial court that the State is not barred by prescription. However, the Court of

Appeals held that the trial court erred in ordering the reversion of Lot No. 398 to the State. Although the sale of Lot

No. 398 to Lee Liong violated the constitutional prohibition on aliens acquiring land, the Court of Appeals noted that

Lot No. 398 had already been acquired by private respondents through succession. The transfer of Lot No. 398 to

private respondents, who are Filipino citizens qualified to acquire lands, can no longer be impugned on the basis of

the invalidity of the initial transfer. The flaw in the original transaction is considered cured and the title of the

transferee is deemed valid considering that the objective of the constitutional proscription against alien ownership of

lands, that is to keep our lands in Filipino hands, has been achieved.

 

The Issue

Petitioner raises the lone issue that:

THE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED AND SET ASIDE THE APPEALED DECISION AND DECLARED PRIVATE RESPONDENTS THE ABSOLUTE AND LAWFUL OWNERS AND POSSESSORS OF LOT NO. 398 OF ROXAS CITY CADASTRE CONSIDERING THAT LEE LIONG, WHO IS AN ALIEN, AND THUS, CONSTITUTIONALLY PROHIBITED TO OWN REAL PROPERTY IN THE PHILIPPINES, ACQUIRED NO RIGHT OR TITLE OVER SUBJECT LOT WHICH HE COULD HAVE TRANSMITTED BY SUCCESSION TO PRIVATE RESPONDENTS PREDECESSORS-IN-INTEREST

The Ruling of the Court

 

The petition is without merit.

 

Petitioner argues that since the sale of Lot No. 398 to Lee Liong was void, Lot No. 398 never became part of the

deceased Lee Liongs estate. Hence, Lot No. 398 could not be transmitted by succession to Lee Liongs surviving

heirs and eventually to private respondents.

We do not subscribe to petitioners position. The circumstances of this case are similar to the case of De Castro

v. Teng Queen Tan,[9] wherein a residential lot was sold to a Chinese citizen. Upon the death of the alien vendee, his

heirs entered into an extrajudicial settlement of the estate of the deceased and the subject land was transferred to a

son who was a naturalized Filipino. Subsequently, the vendor of the lot filed a suit for annulment of sale for alleged

violation of the Constitution prohibiting the sale of land to aliens. Independently of the doctrine of in pari delicto, the

Court sustained the sale, holding that while the vendee was an alien at the time of the sale, the land has since

become the property of a naturalized Filipino citizen who is constitutionally qualified to own land.

 

Similarly, in this case, upon the death of the original vendee who was a Chinese citizen, his widow and two

sons extrajudicially settled his estate, including Lot No. 398. When the two sons died, Lot No. 398 was transferred by

succession to their respective spouses, herein private respondents who are Filipino citizens.

 

We now discuss whether reversion proceedings is still viable considering that Lot No. 398 has already

been transfered to Filipino citizens. In the reconstitution case of Lee v. Republic of the Philippines[10] involving Lot No.

398, this Court explained that the OSG may initiate an action for reversion or escheat of lands which were sold to

aliens disqualified from acquiring lands under the Constitution. However, in the case of Lot No. 398, the fact that it

was already transferred to Filipinos militates against escheat proceedings, thus:

 

Although ownership of the land cannot revert to the original sellers, because of the doctrine of pari delicto, the Solicitor General may initiate an action for reversion or escheat of the land to the State, subject to other defenses, as hereafter set forth.

 

In this case, subsequent circumstances militate against escheat proceedings because the land is now in the hands of Filipinos. The original vendee, Lee Liong, has since died and the land has been inherited by his heirs and subsequently their heirs, petitioners herein [Elizabeth Lee and Pacita Yu Lee]. Petitioners are Filipino citizens, a fact the Solicitor General does not dispute.

 

The constitutional proscription on alien ownership of lands of the public or private domain was intended to protect lands from falling in the hands of non-Filipinos. In this case, however, there would be no more public policy violated since the land is in the hands of Filipinos qualified to acquire and own such land. If land is invalidly transferred to an alien who subsequently becomes a citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the transferee is rendered valid. Thus, the subsequent transfer of the property to qualified Filipinos may no longer be impugned on the basis of invalidity of the initial transfer. The objective of the constitutional provision to keep our lands in Filipino hands has been achieved. [11] (Emphasis supplied)

 

In this case, the reversion proceedings was initiated only after almost 40 years from the promulgation of the case

of Dinglasan v. Lee Bun Ting,[12] where the Court held that the sale of Lot No. 398 was null and void for violating the

constitutional prohibition on the sale of land to an alien. If petitioner had commenced reversion proceedings when Lot

No. 398 was still in the hands of the original vendee who was an alien disqualified to hold title thereto, then reversion

of the land to the State would undoubtedly be allowed. However, this is not the case here. When petitioner instituted

the action for reversion of title in 1995, Lot No. 398 had already been transferred by succession to private

respondents who are Filipino citizens.

Since Lot No. 398 has already been transferred to Filipino citizens, the flaw in the original transaction is considered

cured.[13] As held in Chavez v. Public Estates Authority:[14]

 

Thus, the Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells the land to a Filipino, the invalidity of the first transfer is corrected by the subsequent sale to a citizen. Similarly, where the alien who buys the land subsequently acquires Philippine citizenship, the sale was validated since the purpose of the constitutional ban to limit land ownership to Filipinos has been achieved. In short, the law disregards the constitutional disqualification of the buyer to hold land if the land is subsequently transferred to a qualified party, or the buyer himself becomes a qualified party.[15] (Emphasis supplied)

 

Clearly, since Lot No. 398 has already been transferred to private respondents who are Filipino citizens, the prior

invalid sale to Lee Liong can no longer be assailed. Hence, reversion proceedings will no longer prosper since the

land is now in the hands of Filipino citizens.

 WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 12 July 2002 and the Resolution dated 9 May

2003 of the Court of Appeals in CA-G.R. CV No. 53890.SO ORDERED.