Succession - General Provisions

8/13/2019 Succession - General Provisions

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SECOND DIVISION

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

UNION BANK OF THE PHILIPPINES, pet i t ioner, vs . EDMUND SANTIBAÑEZ and FLORENCE SANTIBAÑEZARIOLA, 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 theDecision[1] of the Court of Appeals dated May 30, 2001 in CA-G.R. CV No. 48831 affirming the dismissa l[2] of the petitioner‘scomplaint in Civil Case No. 18909 by the Regional Trial Court (RTC) of Makati City, Branch 63.

The antecedent facts are as follows:

On May 31, 1980, the First Countryside Credit Corporation (FCCC) and Efraim M. Santibañez entered into a loanagreement[3] in the amount of P128,000.00. The amount was intended for the payment of the purchase price of one (1) unit Ford6600 Agricultural All-Purpose Diesel Tractor. In view thereof, Efraim and his son, Edmund, executed a promissory note in favor ofthe FCCC, the principal sum payable in five equal annual amortizations of P43,745.96 due on May 31, 1981 and every May31st 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, withaccessories, 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] forthe loan dated December 13, 1980.

Sometime in February 1981, Efraim died, leaving a holographic will .[6] Subsequently in March 1981, testate proceedingscommenced before the RTC of Iloilo City, Branch 7, docketed as Special Proceedings No. 2706. On April 9, 1981, Edmund, as oneof the heirs, was appointed as the special administrator of the estate of the decedent.[7] During the pendency of the testateproceedings, the surviving heirs, Edmund and his sister Florence Santibañez Ariola, executed a Joint Agreemen t [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 forEdmund and one (1) tractor for Florence. Each of them was to assume the indebtedness of their late father to FCCC, correspondingto 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 UnionSavings and Mortgage Bank, wherein the FCCC as the assignor, among others, assigned all its assets and liabilities to UnionSavings and Mortgage Bank.

Demand letter s[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 Complain t [11] for sum of

money against the heirs of Efraim Santibañez, Edmund and Florence, before the RTC of Makati City, Branch 150, docketed as CivilCase No. 18909. Summonses were issued against both, but the one intended for Edmund was not served since he was in theUnited States and there was no information on his address or the date of his return to the Philippines.[12] Accordingly, the complaintwas 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 hersince she was not a party thereto. Considering that the joint agreement signed by her and her brother Edmund was not approved bythe 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 onthe merits ensued and a decision was subsequently rendered by the court dismissing the complaint for lack of merit. The decretalportion 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 Santibañez was pending, as the sum of money being claimed was an obligation incurred by the saiddecedent. 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 notbeen approved by the probate court, and that there can be no valid partition until after the will has been probated. The trial courtfurther declared that petitioner failed to prove that it was the now defunct Union Savings and Mortgage Bank to which the FCCC hadassigned its assets and liabilities. The court also agreed to the contention of respondent Florence S. Ariola that the list of assetsand liabilities of the FCCC assigned to Union Savings and Mortgage Bank did not clearly refer to the decedent‘s account. Ruling thatthe joint agreement executed by the heirs was null and void, the trial court held that the petitioner‘s cause of action again strespondent 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 aserrors of the trial court:

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

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

3. THE COURT A QUO ERRED IN NOT FINDING THAT THE DEFENDANT HAD WAIVED HER RIGHT TO HAVETHE 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, inthis case, Edmund and Florence; the unconditional signing of the joint agreement marked as Exhibit ―A‖ estopped respondentFlorence S. Ariola, and that she cannot deny her liability under the said document; as the agreement had been signed by both heirsin their personal capacity, it was no longer necessary to present the same before the probate court for approval; the propertypartitioned in the agreement was not one of those enumerated in the holographic will made by the deceased; and the activeparticipation of the heirs, particularly respondent Florence S. Ariola, in the present ordinary civil action was tantamount to a waiver tore-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 beenpresented 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 theprobate court as provided under Sections 1 and 5, Rule 86 of the Rules of Court. It further held that the partition made in theagreement 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 themas ―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 BYTHE PROBATE COURT.

II.

THE COURT OF APPEALS ERRED IN FINDING THAT THERE CAN BE NO VALID PARTITION AMONG THE HEIRS OF THE

LATE EFRAIM SANTIBAÑEZ UNTIL AFTER THE WILL HAS BEEN PROBATED.

III.

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

IV.

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

V.

THE PROMISSORY NOTES DATED MAY 31, 1980 IN THE SUM OF P128,000.00 AND DECEMBER 13, 1980 IN THE AMOUNTOF P123,000.00 CATEGORICALLY ESTABLISHED THE FACT THAT THE RESPONDENTS BOUND THEMSELVES JOINTLY

AND SEVERALLY LIABLE WITH THE LATE DEBTOR EFRAIM SANTIBAÑEZ IN FAVOR OF PETITIONER UNION BANK.[19]

The petitioner claims that the obligations of the deceased were transmitted to the heirs as provided in Article 774 of the CivilCode; there was thus no need for the probate court to approve the joint agreement where the heirs partitioned the tractors owned bythe deceased and assumed the obligations related thereto. Since respondent Florence S. Ariola signed the joint agreement withoutany condition, she is now estopped from asserting any position contrary thereto. The petitioner also points out that the holographicwill of the deceased did not include nor mention any of the tractors subject of the complaint, and, as such was beyond the ambit ofthe said will. The active participation and resistance of respondent Florence S. Ariola in the ordinary civil action against thepetitioner‘s claim amounts to a waiver of the right to have the claim presented in the probate proceedings, and to allow any one ofthe heirs who executed the joint agreement to escape liability to pay the value of the tractors under consideration would beequivalent to allowing the said heirs to enrich themselves to the damage and prejudice of the petitioner.

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The petitioner, likewise, avers that the decisions of both the trial and appellate courts failed to consider the fact thatrespondent Florence S. Ariola and her brother Edmund executed loan documents, all establishing the vinculum juris or the legalbond between the late Efraim Santibañez and his heirs to be in the nature of a solidary obligation. Furthermore, the PromissoryNotes dated May 31, 1980 and December 13, 1980 executed by the late Efraim Santibañez, together with his heirs, Edmund andrespondent 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 namedrespondents, the latter must be held liable jointly and severally liable thereon. Thus, there was no need for the petitioner to file itsmoney claim before the probate court. Finally, the petitioner stresses that both surviving heirs are being sued in their respective

personal capacities, not as heirs of the deceased.In her comment to the petition, respondent Florence S. Ariola maintains that the petitioner is trying to recover a sum of money

from the deceased Efraim Santibañez; thus the claim should have been filed with the probate court. She points out that at the timeof 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 toexecute 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. Sheasserts that even if the agreement was voluntarily executed by her and her brother Edmund, it should still have been subjected tothe approval of the court as it may prejudice the estate, the heirs or third parties. Furthermore, she had not waived any rights, as sheeven stated in her answer in the court a quo that the claim should be filed with the probate court. Thus, the petitioner could notinvoke 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 anydocument 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 isvalid; b) whether or not the heirs‘ assumption of the indebtedness of the deceased is valid; and c) whether the petitioner can holdthe 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, todetermine whether they should or should not be included in the inventory or list of properties to be administered.[20] The said court isprimarily 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 theprobate of a will and the public requires it, because unless a will is probated and notice thereof given to the whole world, the right ofa person to dispose of his property by will may be rendered nugatory. The authentication of a will decides no other question thansuch as touch upon the capacity of the testator and the compliance with those requirements or solemnities which the law prescribesfor 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 thepresent case, the deceased, Efraim Santibañez, left a holographic will[24] which contained, inter alia, the provision which reads asfollows:

(e) All other properties, real or personal, which I own and may be discovered later after my demise, shall be distributed in theproportion 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 bythe decedent which might have escaped his mind at that time he was making his will, and other properties he may acquirethereafter. Included therein are the three (3) subject tractors. This being so, any partition involving the said tractors among the heirsis 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 fo r the probate of their late father‘sholographic will covering the said tractors.

It must be stressed that the probate proceeding had already acquired jurisdiction over all the properties of the deceased,

including the three (3) tractors. To dispose of them in any way without the probate court‘s approval is tantamount to divesting it with jurisdiction which the Court cannot allow.[26] Every act intended to put an end to indivision among co-heirs and legatees or deviseesis deemed to be a partition, although it should purport to be a sale, an exchange, a compromise, or any other transaction.[27] Thus, inexecuting any joint agreement which appears to be in the nature of an extra-judicial partition, as in the case at bar, court approval isimperative, 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 thatthe signatories in the joint agreement were the only heirs of the decedent. When it was executed, the probate of the will was stillpending before the court and the latter had yet to determine who the heirs of the decedent were. Thus, for Edmund and respondentFlorence S. Ariola to adjudicate unto themselves the three (3) tractors was a premature act, and prejudicial to the other possibleheirs 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 rulein the negative. Perusing the joint agreement, it provides that the heirs as parties thereto ― have agreed to divide betweenthemselves and take possession and use the above-described chattel and each of them to assume the indebtedness correspondingto the chattel taken as herein after stated which is in favor of First Countryside Credit Corp.‖

[29] The assumption of liability wasconditioned upon the happening of an event, that is, that each heir shall take possession and use of their respective share under the

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agreement. It was made dependent on the validity of the partition, and that they were to assume the indebtedness corresponding tothe chattel that they were each to receive. The partition being invalid as earlier discussed, the heirs in effect did not receive anysuch 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 EfraimSantibañez, should have thus filed its money claim with the probate court in accordance with Section 5, Rule 86 of the RevisedRules 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 thelast 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 administratormay bring against the claimants. Where an executor or administrator commences an action, or prosecutes an action alreadycommenced by the deceased in his lifetime, the debtor may set forth by answer the claims he has against the decedent, instead ofpresenting 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 againstthe estate, as though the claim had been presented directly before the court in the administration proceedings. Claims not yet due,or contingent, may be approved at their present value.

The filing of a money claim against the decedent‘s estate in the probate court is mandatory.[30] As we held in the vintage case

of Py Eng Chong v. Herrera:[31]

… This requirement is for the purpose of protecting the estate of the deceased by informing the executor or administrator of theclaims against it, thus enabling him to examine each claim and to determine whether it is a proper one which should be allowed. Theplain and obvious design of the rule is the speedy settlement of the affairs of the deceased and the early delivery of the property tothe distributees, legatees, or heirs. ̀ The law strictly requires the prompt presentation and disposition of the claims against thedecedent'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 liabilityincurred by her late father. The documentary evidence presented, particularly the promissory notes and the continuing guarantyagreement, were executed and signed only by the late Efraim Santibañez and his son Edmund. As the petitioner failed to file itsmoney claim with the probate court, at most, it may only go after Edmund as co-maker of the decedent under the said promissorynotes and continuing guaranty, of course, subject to any defenses Edmund may have as against the petitioner. As the court had notacquired 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 ofthe Union Savings and Mortgage Bank to which the FCCC assigned its assets and liabilities . [33] The petitioner in its complaintalleged that ―by virtue of the Deed of Assignment dated August 20, 1981 executed by and between First Countryside CreditCorporation and Union Bank of the Philippines…‖

[34] However, the documentary evidence[35] clearly reflects that the parties in thedeed of assignment with assumption of liabilities were the FCCC, and the Union Savings and Mortgage Bank, with the conformity ofBancom Philippine Holdings, Inc. Nowhere can the petitioner‘s participation therein as a party be found. Furthermore, nodocumentary 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 thatUnion 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 everyreasonable doubt upon the subject should be promptly resolved in the negative.‖ (Republic vs. Court of Appeals, 107 SCRA 504).[36]

This being the case, the petitioner‘s personality to file the complaint is wanting. Consequently, it failed to establish its cause ofaction. 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.

http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn30http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn30http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn30http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn36http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn36http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn36http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn36http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/149926.htm#_ftn30


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Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. L-68053 May 7, 1990

LAURA ALVAREZ, FLORA ALVAREZ and RAYMUNDO ALVAREZ, petitioners,vs.THE HONORABLE INTERMEDIATE APELLATE COURT and JESUS YANES, ESTELITA YANES, ANTONIO YANES, ROSARIO

YANES, and ILUMINADO YANES, respondents.

FERNAN, C.J.:

This is a petition for review on certiorari seeking the reversal of: (a) the decision of the Fourth Civil Cases Division of theIntermediate Appellate Court dated August 31, 1983 in AC-G.R. CV No. 56626 entitled "Jesus Yanes et al. v. Dr. Rodolfo Siason etal." affirming the decision dated July 8, 1974 of the Court of First Instance of Negros Occidental insofar as it ordered the petitionersto pay jointly and severally the private respondents the sum of P20,000.00 representing the actual value of Lots Nos. 773-A and773-B of the cadastral survey of Murcia, Negros Occidental and reversing the subject decision insofar as it awarded the sums of

P2,000.00, P5,000.00 and P2,000.00 as actual damages, moral damages and attorney's fees, respectively and (b) the resolution ofsaid appellate court dated May 30, 1984, denying the motion for reconsideration of its decision.

The real properties involved are two parcels of land identified as Lot 773-A and Lot 773-B which were originally known as Lot 773 ofthe cadastral survey of Murcia, Negros Occidental. Lot 773, with an area of 156,549 square meters, was registered in the name ofthe heirs of Aniceto Yanes under Original Certificate of Title No. RO-4858 (8804) issued on October 9, 1917 by the Register ofDeeds of Occidental Negros (Exh. A).

Aniceto Yanes was survived by his children, Rufino, Felipe and Teodora. Herein private respondents, Estelita, Iluminado and Jesus,are the children of Rufino who died in 1962 while the other private respondents, Antonio and Rosario Yanes, are children of Felipe.Teodora was survived by her child, Jovita (Jovito) Alib. 1 It is not clear why the latter is not included as a party in this case.

Aniceto left his children Lots 773 and 823. Teodora cultivated only three hectares of Lot 823 as she could not attend to the otherportions of the two lots which had a total area of around twenty-four hectares. The record does not show whether the children ofFelipe also cultivated some portions of the lots but it is established that Rufino and his children left the province to settle in other

places as a result of the outbreak of World War II. According to Estelita, from the "Japanese time up to peace time", they did not visitthe parcels of land in question but "after liberation", when her brother went there to get their share of the sugar produced therein, hewas informed that Fortunato Santiago, Fuentebella (Puentevella) and Alvarez were in possession of Lot 773. 2

It is on record that on May 19, 1938, Fortunato D. Santiago was issued Transfer Certificate of Title No. RF 2694 (29797) coveringLot 773-A with an area of 37,818 square meters. 3 TCT No. RF 2694 describes Lot 773-A as a portion of Lot 773 of the cadastralsurvey of Murcia and as originally registered under OCT No. 8804.

The bigger portion of Lot 773 with an area of 118,831 square meters was also registered in the name of Fortunato D. Santiago onSeptember 6, 1938 Under TCT No. RT-2695 (28192 ). 4 Said transfer certificate of title also contains a certification to the effect thatLot 773-B was originally registered under OCT No. 8804.

On May 30, 1955, Santiago sold Lots 773-A and 773-B to Monico B. Fuentebella, Jr. in consideration of the sum ofP7,000.00. 5 Consequently, on February 20, 1956, TCT Nos. T-19291 and T-19292 were issued in Fuentebella's name. 6

After Fuentebella's death and during the settlement of his estate, the administratrix thereof (Arsenia R. Vda. de Fuentebella, hiswife) filed in Special Proceedings No. 4373 in the Court of First Instance of Negros Occidental, a motion requesting authority to sellLots 773-A and 773-B. 7 By virtue of a court order granting said motion, 8 on March 24, 1958, Arsenia Vda. de Fuentebella sold saidlots for P6,000.00 to Rosendo Alvarez. 9 Hence, on April 1, 1958 TCT Nos. T-23165 and T-23166 covering Lots 773-A and 773-Bwere respectively issued to Rosendo Alvarez. 10

Two years later or on May 26, 1960, Teodora Yanes and the children of her brother Rufino, namely, Estelita, Iluminado and Jesus,filed in the Court of First Instance of Negros Occidental a complaint against Fortunato Santiago, Arsenia Vda. de Fuentebella,

Alvarez and the Register of Deeds of Negros Occidental for the "return" of the ownership and possession of Lots 773 and 823. Theyalso prayed that an accounting of the produce of the land from 1944 up to the filing of the complaint be made by the defendants, thatafter court approval of said accounting, the share or money equivalent due the plaintiffs be delivered to them, and that defendantsbe ordered to pay plaintiffs P500.00 as damages in the form of attorney's fees. 11


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During the pendency in court of said case or on November 13, 1961, Alvarez sold Lots 773-A, 773-B and another lot for P25,000.00to Dr. Rodolfo Siason. 12 Accordingly, TCT Nos. 30919 and 30920 were issued to Siason, 13who thereafter, declared the two lots inhis name for assessment purposes. 14

Meanwhile, on November 6, 1962, Jesus Yanes, in his own behalf and in behalf of the other plaintiffs, and assisted by their counsel,filed a manifestation in Civil Case No. 5022 stating that the therein plaintiffs "renounce, forfeit and quitclaims (sic ) any claim,monetary or otherwise, against the defendant Arsenia Vda. de Fuentebella in connection with the above-entitled case." 15

On October 11, 1963, a decision was rendered by the Court of First Instance of Negros Occidental in Civil Case No. 5022, thedispositive portion of which reads:

WHEREFORE, judgment is rendered, ordering the defendant Rosendo Alvarez to reconvey to the plaintiffs lotsNos. 773 and 823 of the Cadastral Survey of Murcia, Negros Occidental, now covered by Transfer Certificatesof Title Nos. T-23165 and T-23166 in the name of said defendant, and thereafter to deliver the possession ofsaid lots to the plaintiffs. No special pronouncement as to costs.

SO ORDERED. 16

It will be noted that the above-mentioned manifestation of Jesus Yanes was not mentioned in the aforesaid decision.

However, execution of said decision proved unsuccessful with respect to Lot 773. In his return of service dated October 20, 1965,the sheriff stated that he discovered that Lot 773 had been subdivided into Lots 773-A and 773-B; that they were "in the name" of

Rodolfo Siason who had purchased them from Alvarez, and that Lot 773 could not be delivered to the plaintiffs as Siason was "not aparty per writ of execution." 17

The execution of the decision in Civil Case No. 5022 having met a hindrance, herein private respondents (the Yaneses) filed on July31, 1965, in the Court of First Instance of Negros Occidental a petition for the issuance of a new certificate of title and for adeclaration of nullity of TCT Nos. T-23165 and T-23166 issued to Rosendo Alvarez. 18 Thereafter, the court required Rodolfo Siasonto produce the certificates of title covering Lots 773 and 823.

Expectedly, Siason filed a manifestation stating that he purchased Lots 773-A, 773-B and 658, not Lots 773 and 823, "in good faithand for a valuable consideration without any knowledge of any lien or encumbrances against said properties"; that the decision inthe cadastral proceeding 19 could not be enforced against him as he was not a party thereto; and that the decision in Civil Case No.5022 could neither be enforced against him not only because he was not a party-litigant therein but also because it had longbecome final and executory. 20 Finding said manifestation to be well-founded, the cadastral court, in its order of September 4, 1965,nullified its previous order requiring Siason to surrender the certificates of title mentioned therein. 21

In 1968, the Yaneses filed an ex-parte motion for the issuance of an alias writ of execution in Civil Case No. 5022. Siason opposedit. 22 In its order of September 28, 1968 in Civil Case No. 5022, the lower court, noting that the Yaneses had instituted another actionfor the recovery of the land in question, ruled that at the judgment therein could not be enforced against Siason as he was not aparty in the case. 23

The action filed by the Yaneses on February 21, 1968 was for recovery of real property with damages. 24 Named defendants thereinwere Dr. Rodolfo Siason, Laura Alvarez, Flora Alvarez, Raymundo Alvarez and the Register of Deeds of Negros Occidental. TheYaneses prayed for the cancellation of TCT Nos. T-19291 and 19292 issued to Siason (sic ) for being null and void; the issuance ofa new certificate of title in the name of the Yaneses "in accordance with the sheriffs return of service dated October 20, 1965;"Siason's delivery of possession of Lot 773 to the Yaneses; and if, delivery thereof could not be effected, or, if the issuance of a newtitle could not be made, that the Alvarez and Siason jointly and severally pay the Yaneses the sum of P45,000.00. They also prayedthat Siason render an accounting of the fruits of Lot 773 from November 13, 1961 until the filing of the complaint; and that thedefendants jointly and severally pay the Yaneses moral damages of P20,000.00 and exemplary damages of P10,000.00 plusattorney's fees of P4, 000.00. 25

In his answer to the complaint, Siason alleged that the validity of his titles to Lots 773-A and 773-B, having been passed upon by thecourt in its order of September 4, 1965, had become res judicata and the Yaneses were estopped from questioning said order. 26 Ontheir part, the Alvarez stated in their answer that the Yaneses' cause of action had been "barred by res judicata, statute of limitationand estoppel." 27

In its decision of July 8, 1974, the lower court found that Rodolfo Siason, who purchased the properties in question thru an agent ashe was then in Mexico pursuing further medical studies, was a buyer in good faith for a valuable consideration. Although theYaneses were negligent in their failure to place a notice of lis pendens "before the Register of Deeds of Negros Occidental in orderto protect their rights over the property in question" in Civil Case No. 5022, equity demanded that they recover the actual value ofthe land because the sale thereof executed between Alvarez and Siason was without court approval. 28 The dispositive portion ofthe decision states:

IN VIEW OF THE FOREGOING CONSIDERATION, judgment is hereby rendered in the following manner:

A. The case against the defendant Dr. Rodolfo Siason and the Register of Deeds are (sic ) hereby dismmissed,


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B. The defendants, Laura, Flora and Raymundo, all surnamed Alvarez being the legitimate children of thedeceased Rosendo Alvarez are hereby ordered to pay jointly and severally the plaintiffs the sum of P20,000.00representing the actual value of Lots Nos. 773-A and 773-B of Murcia Cadastre, Negros Occidental; the sum ofP2,000.00 as actual damages suffered by the plaintiff; the sum of P5,000.00 representing moral damages andthe sum of P2.000 as attorney's fees, all with legal rate of interest from date of the filing of this complaint up tofinal payment.

C. The cross-claim filed by the defendant Dr. Rodolfo Siason against the defendants, Laura, Flora and

Raymundo, all surnamed Alvarez is hereby dismissed.

D. Defendants, Laura, Flora and Raymundo, all surnamed Alvarez are hereby ordered to pay the costs of thissuit.

SO ORDERED. 29

The Alvarez appealed to the then Intermediate Appellate Court which in its decision of August 31, 1983 30 affirmed the lower court'sdecision "insofar as it ordered defendants-appellants to pay jointly and severally the plaintiffs-appellees the sum of P20,000.00representing the actual value of Lots Nos. 773-A and 773-B of the cadastral survey of Murcia, Negros Occidental, and is reversedinsofar as it awarded the sums of P2,000.00, P5,000.00 and P2,000.00 as actual damages, moral damages and attorney's fees,respectively." 31 The dispositive portion of said decision reads:

WHEREFORE, the decision appealed from is affirmed insofar as it ordered defendants-appellants to pay jointly

and severally the plaintiffs- appellees the sum of P20,000.00 representing the actual value of Lots Nos. 773-Aand 773-B of the cadastral survey of Murcia, Negros Occidental, and is reversed insofar as it awarded the sumsof P2,000.00, P5,000.00 and P2,000.00 as actual damages, moral damages and attorney's fees, respectively.No costs.

SO ORDERED. 32

Finding no cogent reason to grant appellants motion for reconsideration, said appellate court denied the same.

Hence, the instant petition. ln their memorandum petitioners raised the following issues:

1. Whethere or not the defense of prescription and estoppel had been timely and properly invoked and raisedby the petitioners in the lower court.

2. Whether or not the cause and/or causes of action of the private respondents, if ever there are any, as allegedin their complaint dated February 21, 1968 which has been docketed in the trial court as Civil Case No.8474 supra, are forever barred by statute of limitation and/or prescription of action and estoppel.

3. Whether or not the late Rosendo Alvarez, a defendant in Civil Case No. 5022, supra and father of thepetitioners become a privy and/or party to the waiver (Exhibit 4-defendant Siason) in Civil Case No.8474, supra where the private respondents had unqualifiedly and absolutely waived, renounced and quitclaimedall their alleged rights and interests, if ever there is any, on Lots Nos. 773-A and 773-B of Murcia Cadastre asappearing in their written manifestation dated November 6, 1962 (Exhibits "4" Siason) which had not beencontroverted or even impliedly or indirectly denied by them.

4. Whether or not the liability or liabilities of Rosendo Alvarez arising from the sale of Lots Nos. 773-A and 773-B of Murcia Cadastre to Dr. Rodolfo Siason, if ever there is any, could be legally passed or transmitted byoperations (sic ) of law to the petitioners without violation of law and due process . 33

The petition is devoid of merit.

As correctly ruled by the Court of Appeals, it is powerless and for that matter so is the Supreme Court, to review the decision in CivilCase No. 5022 ordering Alvarez to reconvey the lots in dispute to herein private respondents. Said decision had long become f inaland executory and with the possible exception of Dr. Siason, who was not a party to said case, the decision in Civil Case No. 5022is the law of the case between the parties thereto. It ended when Alvarez or his heirs failed to appeal the decision against them. 34

Thus, it is axiomatic that when a right or fact has been judicially tried and determined by a court of competent jurisdiction, so long asit remains unreversed, it should be conclusive upon the parties and those in privity with them in law or estate. 35 As consistentlyruled by this Court, every litigation must come to an end. Access to the court is guaranteed. But there must be a limit to it. Once alitigant's right has been adjudicated in a valid final judgment of a competent court, he should not be granted an unbridled license toreturn for another try. The prevailing party should not be harassed by subsequent suits. For, if endless litigation were to be allowed,unscrupulous litigations will multiply in number to the detriment of the administration of justice. 36


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It must, however, be made clear that petitioners are liable only to the extent of the value of their inheritance. With this clarificationand considering petitioners' admission that there are other properties left by the deceased which are sufficient to cover the amountadjudged in favor of private respondents, we see no cogent reason to disturb the findings and conclusions of the Court of Appeals.

WHEREFORE, subject to the clarification herein above stated, the assailed decision of the Court of Appeals is hereby AFFIRMED.Costs against petitioners.

SO ORDERED.


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EN BANC

[G.R. No. L-8437. November 28, 1956.]

ESTATE OF K. H. HEMADY, deceased, vs. LUZON SURETY CO., INC., claimant-Appel lant .

D E C I S I O N

REYES, J. B. L., J. : Appeal by Luzon Surety Co., Inc., from an order of the Court of First Instance of Rizal, presided by Judge Hermogenes Caluag,dismissing its claim against the Estate of K. H. Hemady (Special Proceeding No. Q-293) for failure to state a cause of action.

The Luzon Surety Co. had filed a claim against the Estate based on twenty different indemnity agreements, or counter bonds, eachsubscribed by a distinct principal and by the deceased K. H. Hemady, a surety solidary guarantor) in all of them, in consideration ofthe Luzon Surety Co.‘s of having guaranteed, the various principals in favor of different creditors. The twenty counterbonds, orindemnity agreements, all contained the following stipulations:chanroblesvirtuallawlibrary

―Premiums. — As consideration for this suretyship, the undersigned jointly and severally, agree to pay the COMPANY the sum of ________________ (P______) pesos, Philippines Currency, in advance as premium there of for every __________ months orfractions thereof, this ________ or any renewal or substitution thereof is in effect.

Indemnity. — The undersigned, jointly and severally, agree at all times to indemnify the COMPANY and keep it indemnified and holdand save it harmless from and against any and all damages, losses, costs, stamps, taxes, penalties, charges, and expenses ofwhatsoever kind and nature which the COMPANY shall or may, at any time sustain or incur in consequence of having becomesurety upon this bond or any extension, renewal, substitution or alteration thereof made at the instance of the undersigned or any of

them or any order executed on behalf of the undersigned or any of them; chan roblesvirtualawlibraryand to pay, reimburse andmake good to the COMPANY, its successors and assigns, all sums and amount of money which it or its representatives shall pay orcause to be paid, or become liable to pay, on account of the undersigned or any of them, of whatsoever kind and nature, including15% of the amount involved in the litigation or other matters growing out of or connected therewith for counsel or attorney‘s fees, butin no case less than P25. It is hereby further agreed that in case of extension or renewal of this ________ we equally bind ourselvesfor the payment thereof under the same terms and conditions as above mentioned without the necessity of executing anotherindemnity agreement for the purpose and that we hereby equally waive our right to be notified of any renewal or extension of this

________ which may be granted under this indemnity agreement.

Interest on amount paid by the Company. — Any and all sums of money so paid by the company shall bear interest at the rate of12% per annum which interest, if not paid, will be accummulated and added to the capital quarterly order to earn the same interestsas the capital and the total sum thereof, the capital and interest, shall be paid to the COMPANY as soon as the COMPANY shallhave become liable therefore, whether it shall have paid out such sums of money or any part thereof or not.

x x x x x x x x x

Waiver. — It is hereby agreed upon by and between the undersigned that any question which may arise between them by reason ofthis document and which has to be submitted for decision to Courts of Justice shall be brought before the Court of competent

jurisdiction in the City of Manila, waiving for this purpose any other venue. Our right to be notified of the acceptance and approval ofthis indemnity agreement is hereby likewise waived.

x x x x x x x x x

Our Liability Hereunder. — It shall not be necessary for the COMPANY to bring suit against the principal upon his default, or toexhaust the property of the principal, but the liability hereunder of the undersigned indemnitor shall be jointly and severally, aprimary one, the same as that of the principal, and shall be exigible immediately upon the occurrence of such default.‖ (Rec. App.pp. 98- 102.)

The Luzon Surety Co., prayed for allowance, as a contingent claim, of the value of the twenty bonds it had executed in considerationof the counterbonds, and further asked for judgment for the unpaid premiums and documentary stamps affixed to the bonds, with 12per cent interest thereon.

Before answer was filed, and upon motion of the administratrix of Hemady‘s estate, the lower court, by order of September 23, 1953, dismissed the claims of Luzon Surety Co., on two grounds:chanroblesvirtuallawlibrary (1) that the premiums due and cost ofdocumentary stamps were not contemplated under the indemnity agreements to be a part of the undertaking of the guarantor(Hemady), since they were not liabilities incurred after the execution of the counterbonds; chan roblesvirtualawlibraryand (2) that―whatever losses may occur after Hemady‘s death, are not chargeable to his estate, because upon his death he ceased to beguarantor.‖

Taking up the latter point first, since it is the one more far reaching in effects, the reasoning of the court below ran asfollows:chanroblesvirtuallawlibrary

―The administratrix further contends that upon the death of Hemady , his liability as a guarantor terminated, and therefore, in theabsence of a showing that a loss or damage was suffered, the claim cannot be considered contingent. This Court believes that thereis merit in this contention and finds support in Article 2046 of the new Civil Code. It should be noted that a new requirement hasbeen added for a person to qualify as a guarantor, that is:chanroblesvirtuallawlibrary integrity. As correctly pointed out by the

Administratrix, integrity is something purely personal and is not transmissible. Upon the death of Hemady, his integrity was nottransmitted to his estate or successors. Whatever loss therefore, may occur after Hemady‘s death, are not chargeable to his estatebecause upon his death he ceased to be a guarantor.

Another clear and strong indication that the surety company has exclusively relied on the personality, character, honesty andintegrity of the now deceased K. H. Hemady, was the fact that in the printed form of the indemnity agreement there is a paragraph


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entitled ‗Security by way of first mortgage, which was expressly waived and renounced by the security company. The securitycompany has not demanded from K. H. Hemady to comply with this requirement of giving security by way of first mortgage. In thesupporting papers of the claim presented by Luzon Surety Company, no real property was mentioned in the list of propertiesmortgaged which appears at the back of the indemnity agreement.‖ (Rec. App., pp. 407-408).

We find this reasoning untenable. Under the present Civil Code (Article 1311), as well as under the Civil Code of 1889 (Article1257), the rule is that —

―Contracts take effect only as between the parties, their assigns and heirs, except in the case where the rights and obligati ons

arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.‖ While in our successional system the responsibility of the heirs for the debts of their decedent cannot exceed the value of theinheritance they receive from him, the principle remains intact that these heirs succeed not only to the rights of the deceased butalso to his obligations. Articles 774 and 776 of the New Civil Code (and Articles 659 and 661 of the preceding one) expressly soprovide, thereby confirming Article 1311 already quoted.

―ART. 774. — Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value ofthe inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law.‖

―ART. 776. — The inheritance includes all the property, rights and obligations of a person which are not extinguished by his death.‖

In Mojica vs. Fernandez, 9 Phil. 403, this Supreme Court ruled:chanroblesvirtuallawlibrary

―Under the Civil Code the heirs, by virtue of the rights of succession are subrogated to all the rights and obligations of the deceased(Article 661) and cannot be regarded as third parties with respect to a contract to which the deceased was a party, touching theestate of the deceased (Barrios vs. Dolor, 2 Phil. 44).

x x x x x x x x x

―The principle on which these decisions rest is not affected by the provisions of the new Code of Civil Procedure, and, in accordancewith that principle, the heirs of a deceased person cannot be held to be ―third persons‖ in relation to any contracts touching the realestate of their decedent which comes in to their hands by right of inheritance; chan roblesvirtualawlibrarythey take such propertysubject to all the obligations resting thereon in the hands of him from whom they derive their rights.‖

(See also Galasinao vs. Austria, 51 Off. Gaz. (No. 6) p. 2874 and de Guzman vs. Salak, 91 Phil., 265).

The binding effect of contracts upon the heirs of the deceased party is not altered by the provision in our Rules of Court that moneydebts of a deceased must be liquidated and paid from his estate before the residue is distributed among said heirs (Rule 89). Thereason is that whatever payment is thus made from the estate is ultimately a payment by the heirs and distributees, since theamount of the paid claim in fact diminishes or reduces the shares that the heirs would have been entitled to receive.

Under our law, therefore, the general rule is that a party‘s contractual rights and obligations are transmissible to the successors. Therule is a consequence of the progressive ―depersonalization‖ of patrimonial rights and duties that, as observed by Victorio P olacco,has characterized the history of these institutions. From the Roman concept of a relation from person to person, the obligation hasevolved into a relation from patrimony to patrimony, with the persons occupying only a representative position, barring those rarecases where the obligation is strictly personal, i.e., is contracted intuitu personae, in consideration of its performance by a specificperson and by no other. The transition is marked by the disappearance of the imprisonment for debt.

Of the three exceptions fixed by Article 1311, the nature of the obligation of the surety or guarantor does not warrant the conclusionthat his peculiar individual qualities are contemplated as a principal inducement for the contract. What did the creditor Luzon SuretyCo. expect of K. H. Hemady when it accepted the latter as surety in the counterbonds? Nothing but the reimbursement of themoneys that the Luzon Surety Co. might have to disburse on account of the obligations of the principal debtors. This reimbursementis a payment of a sum of money, resulting from an obligation to give; chan roblesvirtualawlibraryand to the Luzon Surety Co., it wasindifferent that the reimbursement should be made by Hemady himself or by some one else in his behalf, so long as the money waspaid to it.

The second exception of Article 1311, p. 1, is intransmissibility by stipulation of the parties. Being exceptional and contrary to thegeneral rule, this intransmissibility should not be easily implied, but must be expressly established, or at the very least, clearlyinferable from the provisions of the contract itself, and the text of the agreements sued upon nowhere indicate that they are non-transferable.

―(b) Intransmisibilidad por pacto. — Lo general es la transmisibilidad de darechos y obligaciones; chan roblesvirtualawlibraryleexcepcion, la intransmisibilidad. Mientras nada se diga en contrario impera el principio de la transmision, como elemento natural a

toda relacion juridica, salvo las personalisimas. Asi, para la no transmision, es menester el pacto expreso, porque si no, loconvenido entre partes trasciende a sus herederos.

Siendo estos los continuadores de la personalidad del causante, sobre ellos recaen los efectos de los vinculos juridicos creados porsus antecesores, y para evitarlo, si asi se quiere, es indespensable convension terminante en tal sentido.

Por su esencia, el derecho y la obligacion tienden a ir más allá de las personas que les dieron vida, y a ejercer presion sobre lossucesores de esa persona; chan roblesvirtualawlibrarycuando no se quiera esto, se impone una estipulacion limitativaexpresamente de la transmisibilidad o de cuyos tirminos claramente se deduzca la concresion del concreto a las mismas personasque lo otorgon.‖ (Scaevola, Codigo Civil, Tomo XX, p. 541-542) (Emphasis supplied.)

Because under the law (Article 1311), a person who enters into a contract is deemed to have contracted for himself and his heirsand assigns, it is unnecessary for him to expressly stipulate to that effect; chan roblesvirtualawlibraryhence, his failure to do so is nosign that he intended his bargain to terminate upon his death. Similarly, that the Luzon Surety Co., did not require bondsmanHemady to execute a mortgage indicates nothing more than the company‘s faith and confidence in the financial stabilit y of thesurety, but not that his obligation was strictly personal.


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The third exception to the transmissibility of obligations under Article 1311 exists when they are ―not transmissible by oper ation oflaw‖. The provision makes reference to those cases where the law expresses that the rights or obligations are extinguished bydeath, as is the case in legal support (Article 300), parental authority (Article 327), usufruct (Article 603), contracts for a piece ofwork (Article 1726), partnership (Article 1830 and agency (Article 1919). By contract, the articles of the Civil Code that regulateguaranty or suretyship (Articles 2047 to 2084) contain no provision that the guaranty is extinguished upon the death of the guarantoror the surety.

The lower court sought to infer such a limitation from Art. 2056, to the effect that ―one who is obliged to furnish a guarantor mustpresent a person who possesses integrity, capacity to bind himself, and sufficient property to answer for the obligation which heguarantees‖. It will be noted, however, that the law requires these qualities to be present only at the time of the perfection of thecontract of guaranty. It is self-evident that once the contract has become perfected and binding, the supervening incapacity of theguarantor would not operate to exonerate him of the eventual liability he has contracted; chan roblesvirtualawlibraryand if that betrue of his capacity to bind himself, it should also be true of his integrity, which is a quality mentioned in the article alongside thecapacity.

The foregoing concept is confirmed by the next Article 2057, that runs as follows:chanroblesvirtuallawlibrary

―ART. 2057. — If the guarantor should be convicted in first instance of a crime involving dishonesty or should become insolvent, thecreditor may demand another who has all the qualifications required in the preceding article. The case is excepted where thecreditor has required and stipulated that a specified person should be guarantor.‖

From this article it should be immediately apparent that the supervening dishonesty of the guarantor (that is to say, thedisappearance of his integrity after he has become bound) does not terminate the contract but merely entitles the creditor todemand a replacement of the guarantor. But the step remains optional in the creditor:chanroblesvirtuallawlibrary it is his right, nothis duty; chan roblesvirtualawlibraryhe may waive it if he chooses, and hold the guarantor to his bargain. Hence Article 2057 of thepresent Civil Code is incompatible with the trial court‘s stand that the requirement of integrity in the guarantor or surety makes the

latter‘s undertaking strictly personal, so linked to his individuality that the guaranty automatically terminates upon his death.The contracts of suretyship entered into by K. H. Hemady in favor of Luzon Surety Co. not being rendered intransmissible due to thenature of the undertaking, nor by the stipulations of the contracts themselves, nor by provision of law, his eventual liabilitythereunder necessarily passed upon his death to his heirs. The contracts, therefore, give rise to contingent claims provable againsthis estate under section 5, Rule 87 (2 Moran, 1952 ed., p. 437; chan roblesvirtualawlibraryGaskell & Co. vs. Tan Sit, 43 Phil. 810,814).

―The most common example of the contigent claim is that which arises when a person is bound as surety or guarantor for a principalwho is insolvent or dead. Under the ordinary contract of suretyship the surety has no claim whatever against his principal until hehimself pays something by way of satisfaction upon the obligation which is secured. When he does this, there instantly arises infavor of the surety the right to compel the principal to exonerate the surety. But until the surety has contributed something to thepayment of the debt, or has performed the secured obligation in whole or in part, he has no right of action against anybody — noclaim that could be reduced to judgment. (May vs. Vann, 15 Pla., 553; chan roblesvirtualawlibraryGibson vs. Mithell, 16 Pla.,519; chan roblesvirtualawlibraryMaxey vs. Carter, 10 Yarg. [Tenn.], 521 Reeves vs. Pulliam, 7 Baxt. [Tenn.], 119; chanroblesvirtualawlibraryErnst vs. Nou, 63 Wis., 134.)‖

For Defendant administratrix it is averred that the above doctrine refers to a case where the surety files claims against the estate of

the principal debtor; chan roblesvirtualawlibraryand it is urged that the rule does not apply to the case before us, where the lateHemady was a surety, not a principal debtor. The argument evinces a superficial view of the relations between parties. If under theGaskell ruling, the Luzon Surety Co., as guarantor, could file a contingent claim against the estate of the principal debtors if thelatter should die, there is absolutely no reason why it could not file such a claim against the estate of Hemady, since Hemady is asolidary co-debtor of his principals. What the Luzon Surety Co. may claim from the estate of a principal debtor it may equally claimfrom the estate of Hemady, since, in view of the existing solidarity, the latter does not even enjoy the benefit of exhaustion of theassets of the principal debtor.

The foregoing ruling is of course without prejudice to the remedies of the administratrix against the principal debtors under Articles2071 and 2067 of the New Civil Code.

Our conclusion is that the solidary guarantor‘s liability is not extinguished by his death, and that in such event, the Luzon Surety Co.,had the right to file against the estate a cont ingent claim for reimbursement. It becomes unnecessary now to discuss the estate‘sliability for premiums and stamp taxes, because irrespective of the solution to this question, the Luzon Surety‘s claim did state acause of action, and its dismissal was erroneous.

Wherefore, the order appealed from is reversed, and the records are ordered remanded to the court of origin, with instructions toproceed in accordance with law. Costs against the Administratrix- Appellee. SO ORDERED.


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FIRST DIVISION

[G.R. No. 118248. April 5, 2000]

DKC HOLDINGS CORPORATION, petit ion er, vs . COURT OF APPEALS, VICTOR U. BARTOLOME and REGISTER OF DEEDSFOR METRO MANILA, DISTRICT III, respondents. francis

D E C I S I O N

YNARES_SANTIAGO, J .:

This is a petition for review on certiorari seeking the reversal of the December 5, 1994 Decision of the Court of Appeals in CA-G.R.CV No. 40849 entitled "DKC Holdings Corporation vs. Victor U. Bartolome, et al.",[1] affirming in toto the January 4, 1993 Decision ofthe Regional Trial Court of Valenzuela, Branch 172,[2] which dismissed Civil Case No. 3337-V-90 and ordered petitioner to payP30,000.00 as attorney‘s fees.

The subject of the controversy is a 14,021 square meter parcel of land located in Malinta, Valenzuela, Metro Manila which wasoriginally owned by private respondent Victor U. Bartolome‘s deceased mother, Encarnacion Bartolome, under Transfer Certificateof Title No. B-37615 of the Register of Deeds of Metro Manila, District III. This lot was in front of one of the textile plants of petitionerand, as such, was seen by the latter as a potential warehouse site.

On March 16, 1988, petitioner entered into a Contract of Lease with Option to Buy with Encarnacion Bartolome, whereby petitionerwas given the option to lease or lease with purchase the subject land, which option must be exercised within a period of two yearscounted from the signing of the Contract. In turn, petitioner undertook to pay P3,000.00 a month as consideration for the reservationof its option. Within the two-year period, petitioner shall serve formal written notice upon the lessor Encarnacion Bartolome of itsdesire to exercise its option. The contract also provided that in case petitioner chose to lease the property, it may take ac tualpossession of the premises. In such an event, the lease shall be for a period of six years, renewable for another six years, and themonthly rental fee shall be P15,000.00 for the first six years and P18,000.00 for the next six years, in case of renewal.

Petitioner regularly paid the monthly P3,000.00 provided for by the Contract to Encarnacion until her death in January 1990.Thereafter, petitioner coursed its payment to private respondent Victor Bartolome, being the sole heir of Encarnacion. Victor,however, refused to accept these payments. iska

Meanwhile, on January 10, 1990, Victor executed an Affidavit of Self-Adjudication over all the properties of Encarnacion, includingthe subject lot. Accordingly, respondent Register of Deeds cancelled Transfer Certificate of Title No. B-37615 and issued TransferCertificate of Title No. V-14249 in the name of Victor Bartolome.

On March 14, 1990, petitioner served upon Victor, via registered mail, notice that it was exercising its option to lease the property,tendering the amount of P15,000.00 as rent for the month of March. Again, Victor refused to accept the tendered rental fee and tosurrender possession of the property to petitioner.

Petitioner thus opened Savings Account No. 1-04-02558-I-1 with the China Banking Corporation, Cubao Branch, in the name ofVictor Bartolome and deposited therein the P15,000.00 rental fee for March as well as P6,000.00 reservation fees for the months ofFebruary and March.

Petitioner also tried to register and annotate the Contract on the title of Victor to the property. Although respondent Register ofDeeds accepted the required fees, he nevertheless refused to register or annotate the same or even enter it in the day book orprimary register.

Thus, on April 23, 1990, petitioner filed a complaint for specific performance and damages against Victor and the Register ofDeeds,[3] docketed as Civil Case No. 3337-V-90 which was raffled off to Branch 171 of the Regional Trial Court of Valenzuela.

Petitioner prayed for the surrender and delivery of possession of the subject land in accordance with the Contract terms; thesurrender of title for registration and annotation thereon of the Contract; and the payment of P500,000.00 as actual damages,P500,000.00 as moral damages, P500,000.00 as exemplary damages and P300,000.00 as attorney‘s fees.

Meanwhile, on May 8, 1990, a Motion for Intervention with Motion to Dismiss[4] was filed by one Andres Lanozo, who claimed that hewas and has been a tenant-tiller of the subject property, which was agricultural riceland, for forty-five years. He questioned the

jurisdiction of the lower court over the property and invoked the Comprehensive Agrarian Reform Law to protect his rights that wouldbe affected by the dispute between the original parties to the case. ella

On May 18, 1990, the lower court issued an Order [5] referring the case to the Department of Agrarian Reform for preliminarydetermination and certification as to whether it was proper for trial by said court.

On July 4, 1990, the lower court issued another Order [6] referring the case to Branch 172 of the RTC of Valenzuela which wasdesignated to hear cases involving agrarian land, after the Department of Agrarian Reform issued a letter-certification stating thatreferral to it for preliminary determination is no longer required.

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On July 16, 1990, the lower court issued an Order denying the Motion to Intervene,[7] holding that Lanozo‘s rights may well beventilated in another proceeding in due time.

After trial on the merits, the RTC of Valenzuela, branch 172 rendered its Decision on January 4, 1993, dismissing the Complaint andordering petitioner to pay Victor P30,000.00 as attorney‘s fees. On appeal to the CA, the Decision was affirmed in toto.

Hence, the instant Petition assigning the following errors:

(A)

FIRST ASSIGNMENT OF ERROR

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE PROVISION ON THE NOTICE TOEXERCISE OPTION WAS NOT TRANSMISSIBLE.

(B)

SECOND ASSIGNMENT OF ERROR

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE NOTICE OF OPTION MUST BESERVED BY DKC UPON ENCARNACION BARTOLOME PERSONALLY.

(C) nigel

THIRD ASSIGNMENT OF ERROR

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE CONTRACT WAS ONE-SIDED AND ONEROUS IN FAVOR OF DKC.

(D)

FOURTH ASSIGNMENT OF ERROR

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE EXISTENCE OF A REGISTERED

TENANCY WAS FATAL TO THE VALIDITY OF THE CONTRACT.

(E)

FIFTH ASSIGNMENT OF ERROR

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT PLAINTIFF-APPELLANT WAS LIABLETO DEFENDANT- APPELLEE FOR ATTORNEY‘S FEES.[8]

The issue to be resolved in this case is whether or not the Contract of Lease with Option to Buy entered into by the late EncarnacionBartolome with petitioner was terminated upon her death or whether it binds her sole heir, Victor, even after her demise.

Both the lower court and the Court of Appeals held that the said contract was terminated upon the death of Encarnacion Bartolomeand did not bind Victor because he was not a party thereto.

Article 1311 of the Civil Code provides, as follows-

"ART. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where therights and obligations arising from the contract are not transmissible by their nature, or by stipulation or byprovision of law. The heir is not liable beyond the value of the property he received from the decedent. brnado

x x x x x x x x x."

The general rule, therefore, is that heirs are bound by contracts entered into by their predecessors-in-interest except when the rightsand obligations arising therefrom are not transmissible by (1) their nature, (2) stipulation or (3) provision of law.

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In the case at bar, there is neither contractual stipulation nor legal provision making the rights and obligations under the contractintransmissible. More importantly, the nature of the rights and obligations therein are, by their nature, transmissible.

The nature of intransmissible rights as explained by Arturo Tolentino, an eminent civilist, is as follows:

"Among contracts which are intransmissible are those which are purely personal, either by provision of law,such as in cases of partnerships and agency, or by the very nature of the obligations arising therefrom, such as

those requiring special personal qualifications of the obligor. It may also be stated that contracts for thepayment of money debts are not transmitted to the heirs of a party, but constitute a charge against his estate.Thus, where the client in a contract for professional services of a lawyer died, leaving minor heirs, and thelawyer, instead of presenting his claim for professional services under the contract to the probate court,substituted the minors as parties for his client, it was held that the contract could not be enforced against theminors; the lawyer was limited to a recovery on the basis of quantum meruit ."[9]

In American jurisprudence, "(W)here acts stipulated in a contract require the exercise of special knowledge, genius, skill, taste,ability, experience, judgment, discretion, integrity, or other personal qualification of one or both parties, the agreement is of apersonal nature, and terminates on the death of the party who is required to render such service."[10] marinella

It has also been held that a good measure for determining whether a contract terminates upon the death of one of the parties iswhether it is of such a character that it may be performed by the promissor‘s personal representative. Contracts to perform personalacts which cannot be as well performed by others are discharged by the death of the promissor. Conversely, where the service oract is of such a character that it may as well be performed by another, or where the contract, by its terms, shows that performanceby others was contemplated, death does not terminate the contract or excuse nonperformance.[11]

In the case at bar, there is no personal act required from the late Encarnacion Bartolome. Rather, the obligation of Encarnacion inthe contract to deliver possession of the subject property to petitioner upon the exercise by the latter of its option to lease the samemay very well be performed by her heir Victor.

As early as 1903, it was held that "(H)e who contracts does so for himself and his heirs."[12] In 1952, it was ruled that if thepredecessor was duty-bound to reconvey land to another, and at his death the reconveyance had not been made, the heirs can becompelled to execute the proper deed for reconveyance. This was grounded upon the principle that heirs cannot escape the legalconsequence of a transaction entered into by their predecessor-in-interest because they have inherited the property subject to theliability affecting their common ancestor .[13]

It is futile for Victor to insist that he is not a party to the contract because of the clear provision of Article 1311 of the Civil Code.Indeed, being an heir of Encarnacion, there is privity of interest between him and his deceased mother. He only succeeds to whatrights his mother had and what is valid and binding against her is also valid and binding as against him.[14] This is clearfromParañaque Kings Enterprises vs. Court of Appeals,[15] where this Court rejected a similar defense-alonzo

With respect to the contention of respondent Raymundo that he is not privy to the lease contract, not being thelessor nor the lessee referred to therein, he could thus not have violated its provisions, but he is nevertheless aproper party. Clearly, he stepped into the shoes of the owner-lessor of the land as, by virtue of his purchase, heassumed all the obligations of the lessor under the lease contract. Moreover, he received benefits in the form ofrental payments. Furthermore, the complaint, as well as the petition, prayed for the annulment of the sale of theproperties to him. Both pleadings also alleged collusion between him and respondent Santos which defeatedthe exercise by petitioner of its right of first refusal.

In order then to accord complete relief to petitioner, respondent Raymundo was a necessary, if notindispensable, party to the case. A favorable judgment for the petitioner will necessarily affect the rights ofrespondent Raymundo as the buyer of the property over which petitioner would like to assert its right of firstoption to buy.

In the case at bar, the subject matter of the contract is likewise a lease, which is a property right. The death of a party does not

excuse nonperformance of a contract which involves a property right, and the rights and obligations thereunder pass to the personalrepresentatives of the deceased. Similarly, nonperformance is not excused by the death of the party when the other party has aproperty interest in the subject matter of the contract.[16]

Under both Article 1311 of the Civil Code and jurisprudence, therefore, Victor is bound by the subject Contract of Lease with Optionto Buy.

That being resolved, we now rule on the issue of whether petitioner had complied with its obligations under the contract and with therequisites to exercise its option. The payment by petitioner of the reservation fees during the two-year period within which it had theoption to lease or purchase the property is not disputed. In fact, the payment of such reservation fees, except those for Februaryand March, 1990 were admitted by Victor .[17] This is clear from the transcripts, to wit-

"ATTY. MOJADO:

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-4963 January 29, 1953

MARIA USON, plaintiff-appellee,vs.MARIA DEL ROSARIO, CONCEPCION NEBREDA, CONRADO NEBREDA, DOMINADOR NEBREDA, AND FAUSTINONEBREDA, Jr., defendants-appellants.

Priscilo Evangelista for appellee.Brigido G. Estrada for appellant.

BAUTISTA ANGELO, J. :

This is an action for recovery of the ownership and possession of five (5) parcels of land situated in the Municipality of Labrador,Province of Pangasinan, filed by Maria Uson against Maria del Rosario and her four children named Concepcion, Conrado,Dominador, and Faustino, surnamed Nebreda, who are all of minor age, before the Court of First Instance of Pangasinan.

Maria Uson was the lawful wife of Faustino Nebreda who upon his death in 1945 left the lands involved in this litigation. FaustinoNebreda left no other heir except his widow Maria Uson. However, plaintiff claims that when Faustino Nebreda died in 1945, hiscommon-law wife Maria del Rosario took possession illegally of said lands thus depriving her of their possession and enjoy

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