LAZARO PASCO and LAURO G.R. No. 165554
The SPA authorized
PASCO,
Petitioners, Present:
- versus - CORONA, C. J.,
Chairperson,
VELASCO, JR.,
HEIRS OF FILOMENA DE LEONARDO-DE CASTRO,
GUZMAN, represented by DEL CASTILLO, and
CRESENCIA DE GUZMAN- PEREZ, JJ.
PRINCIPE,
Respondents. Promulgated:
July 26, 2010
x----------------------------------- --- -x
DECISION
DEL CASTILLO, J.:
No court should shield a party from compliance with valid
obligations based on wholly unsubstantiated claims of
mistake or fraud. Having refused to abide by a compromise
agreement, the aggrieved party may either enforce it or
regard it as rescinded and insist upon the original demand.
This Petition for Review on Certiorari[1] assails the May 13,
2004 Decision[2] of the Court of Appeals (CA) and its October
5, 2004 Resolution[3] in CA-G.R. SP No. 81464 which
dismissed petitioners appeal and affirmed the validity of the
parties Compromise Agreement.
Factual Antecedents
The present petition began with a Complaint for Sum of
Money and Damages[4] filed on December 13, 2000 by
respondents, the heirs of Filomena de Guzman (Filomena),
represented by Cresencia de Guzman-Principe (Cresencia),
against petitioners Lauro Pasco (Lauro) and Lazaro Pasco
(Lazaro). The case was filed before the Municipal Trial Court
(MTC) of Bocaue, Bulacan, and docketed as Civil Case No.
MM-3191.[5]
In their Complaint,[6] herein respondents alleged that on
February 7, 1997, petitioners obtained a loan in the amount
of P140,000.00 from Filomena (now deceased). To secure the
petitioners loan, Lauro executed a chattel mortgage on his
Isuzu Jeep in favor of Filomena. Upon her death, her heirs
sought to collect from the petitioners, to no avail. Despite
numerous demands, petitioners refused to either pay the
balance of the loan or surrender the Isuzu Jeep to the
respondents. Thus, respondents were constrained to file the
collection case to compel the petitioners to pay the principal
amount of P140,000.00 plus damages in the amount of 5%
monthly interest from February 7, 1997, 25% attorneys fees,
exemplary damages, and expenses of litigation.
Filomenas heirs, consisting of Avelina de Guzman-Cumplido,
Cecilia de Guzman, Rosita de Guzman, Natividad de Guzman,
and Cresencia de Guzman-Principe, authorized Cresencia to
act as their attorney-in-fact through a Special Power of
Attorney[7] (SPA) dated April 6, 1999.
Cresencia to do the following on behalf of the co-heirs:
1) To represent us on all matters concerning the
intestate estate of our deceased sister, Filomena de Guzman;
2) To file cases for collection of all accounts due said
Filomena de Guzman or her estate, including the power to file
petition for foreclosure of mortgaged properties;
3) To do and perform all other acts necessary to carry
out the powers hereinabove conferred.
During the pre-trial of the case on February 15, 2002, the
parties verbally agreed to settle the case. On February 21,
2002, the parties jointly filed a Compromise
Agreement[8] that was signed by the parties and their
respective counsel. Said Compromise Agreement, approved
by the MTC in an Order[9] dated April 4, 2002, contained the
following salient provisions:
1. That [petitioners] admit their principal loan and obligation
to the [respondents] in the sum of One Hundred Forty
Thousand Pesos (P140,000.00) Philippine currency; in
addition to the incidental and other miscellaneous expenses
that they have incurred in the pursuit of this case, in the
further sum of P18,700.00;
2. That, [petitioners] undertake to pay to the [respondents]
their aforementioned obligations, together with attorneys
fees equivalent to ten percentum (10%) of the total sum
thereof, directly at the BULACAN OFFICE of the [respondents]
counsel, located at No. 24 Hornbill Street, St. Francis
Subdivision, Bo. Pandayan, Meycauayan, Bulacan, WITHOUT
NEED OF FURTHER DEMAND in the following specific manner,
to wit:
P60,000.00 to be paid on or before May 15, 2002
P10,000.00 monthly payments thereafter, starting June 15,
2002 up to and until the aforementioned obligations shall
have been fully paid;
3. That, provided that [petitioners] shall truely [sic] comply
with the foregoing specifically agreed manner of payments,
[respondents] shall forego and waive all the interests charges
of 5% monthly from February 7, 1998 and the 25% attorneys
fees provided for in Annex AA of the Complaint;
4. In the event of failure on the part of the [petitioners] to
comply with any of the specific provisions of this Compromise
Agreement, the [respondents] shall be entitled to the
issuance of a Writ of Execution to enforce the satisfaction of
[petitioners] obligations, as mentioned in paragraph 1,
together with the 5% monthly interests charges and
attorneys fees mentioned in paragraph 3 thereof.[10]
Ruling of the Municipal Trial Court
Unfortunately, this was not the end of litigation. On May 2,
2002, petitioners filed a verified Motion to Set Aside
Decision[11] alleging that the Agreement was written in a
language not understood by them, and the terms and
conditions thereof were not fully explained to
them. Petitioners further questioned the MTCs jurisdiction,
arguing that the total amount allegedly covered by the
Compromise Agreement amounted to P588,500.00, which
exceeded the MTCs P200,000.00 jurisdictional limit. In an
Order[12] dated June 28, 2002, the MTC denied the motion;
it also granted Cresencias prayer for the issuance of a writ of
execution. The writ of execution[13] was subsequently issued
on July 3, 2002. Petitioners Motion for Reconsideration and
to Quash Writ/Order of Execution[14] dated August 1, 2002
was denied by the MTC in an Order[15] dated September 5,
2002.
Undeterred, on October 10, 2002, petitioners filed a Petition
for Certiorari and Prohibition with Application for Temporary
Restraining Order/Preliminary Injunction[16] before the
Regional Trial Court (RTC) of Bocaue. The case was raffled to
Branch 82,[17] and docketed as Civil Case No. 764-M-2002. In
their petition, petitioners argued that the MTC gravely
abused its discretion in approving the Compromise
Agreement because (1) the amount involved was beyond the
jurisdiction of the MTC; (2) the MTC failed to ascertain that
the parties fully understood the contents of the Agreement;
(3) Crescencia had no authority to represent her co-heirs
because Filomenas estate had a personality of its own; and
(4) the Compromise Agreement was void for failure of the
judge and Cresencia to explain the terms and conditions to
the petitioners.
In their Comment[18] dated October 29, 2002, respondents
argued that (1) the principal claim of P140,000.00 was within
the MTCs jurisdiction; and (2) the records reveal that it was
the petitioners themselves, assisted by their counsel, who
proposed the terms of the settlement, which offer of
compromise was accepted in open court by the
respondents. Thus, the Compromise Agreement merely
reduced the parties agreement into writing.
Ruling of the Regional Trial Court
The RTC initially granted petitioners prayer for the issuance of
a Temporary Restraining Order (TRO)[19] on November 18,
2002, and later issued a preliminary injunction in an
Order[20] dated December 10, 2002, primarily on the ground
that the SPA did not specifically authorize Cresencia to settle
the case. However, Presiding Judge Herminia V. Pasamba
later inhibited herself,[21] so the case was re-raffled to
Branch 6, presided over by Judge Manuel D.J.
Siayngo.[22] The grant of the preliminary injunction was thus
reconsidered and set aside in an Order[23] dated May 15,
2003. In the same Order, the RTC dismissed the petition and
held that (1) the MTC had jurisdiction over the subject
matter; (2) Cresencia was authorized to institute the action
and enter into a Compromise Agreement on behalf of her co-
heirs; and (3) the MTCs approval of the Compromise
Agreement was not done in a capricious, whimsical, or
arbitrary manner; thus, petitioners resort to certiorari under
Rule 65 was improper. Petitioners Motion for
Reconsideration[24] was denied,[25] hence they sought
recourse before the CA.
Ruling of the Court of Appeals
In its Decision[26] dated May 13,
2004 and Resolution[27] dated October 5,
2004, the CA dismissed petitioners appeal, and held that:
1) the MTC had jurisdiction, since the principal amount
of the loan only amounted to P140,000.00;
2) Cresencia was duly authorized by her co-heirs to
enter into the Compromise Agreement;
3) Petitioners improperly sought recourse before the
RTC through a Petition for Certiorari under Rule 65, when the
proper remedy was a Petition for Relief from Judgment under
Rule 38.
Issues
Before us, petitioners claim that, first, they correctly resorted
to the remedy of certiorari under Rule 65; second, the RTC
gravely erred in dismissing their Petition for Certiorari and
Prohibition, when the matter under consideration was merely
the propriety of the grant of the preliminary injunction;
and third, that the SPA did not validly authorize Cresencia to
enter into the Compromise Agreement on behalf of her co-
heirs.
Our Ruling
We deny the petition.
The MTC had jurisdiction over the case.
It bears stressing that the question of the MTCs jurisdiction
has not been raised before this Court; hence, petitioners
appear to have admitted that the MTC had jurisdiction to
approve the Compromise Agreement. In any event, it is
beyond dispute that the Judiciary Reorganization Act of 1980,
or Batas Pambansa (BP) Blg. 129,[28] as amended by Republic
Act No. 7691,[29]fixes the MTCs jurisdiction over cases where
the demand does not exceed Two hundred thousand pesos
(P200,000.00) exclusive of interest, damages of whatever
kind, attorney's fees, litigation expenses, and costs.[30] Thus,
respondents initiatory complaint, covering the principal
amount of P140,000.00, falls squarely within the MTCs
jurisdiction.
Petitioners properly resorted to the special civil action of
certiorari.
On the first question, the CA held that the proper remedy
from the MTCs Order approving the Compromise Agreement
was a Petition for Relief from Judgment under Rule 38 and
not a Petition for Certiorari under Rule 65. We recall that
petitioners filed a verified Motion to Set Aside Decision on
May 2, 2002,[31] which was denied by the MTC on June 28,
2002. This Order of denial was properly the subject of a
petition for certiorari, pursuant to Rule 41, Section 1, of the
Rules of Court:
Section 1. Subject of Appeal An appeal may be taken from a
judgment or final order that completely disposes of the case,
or of a particular matter therein when declared by these
Rules to be appealable.
No appeal may be taken from:
xxxx
(e) an order denying a motion to set aside a judgment by
consent, confession or compromise on the ground of fraud,
mistake or duress, or any other ground vitiating consent.
xxxx
In all the above instances where the judgment or final order
is not appealable, the aggrieved party may file an appropriate
special civil action under Rule 65.
From the express language of Rule 41, therefore, the MTCs
denial of petitioners Motion to Set Aside Decision could not
have been appealed. Indeed, a decision based on a
compromise agreement is immediately final and executory
and cannot be the subject of appeal,[32] for when parties
enter into a compromise agreement and request a court to
render a decision on the basis of their agreement, it is
presumed that such action constitutes a waiver of the right to
appeal said decision.[33] While there may have been other
remedies available to assail the decision,[34]petitioners were
well within their rights to institute a special civil action under
Rule 65.
The Regional Trial Court rightly dismissed the petition for
certiorari.
On the second issue, petitioners argue that the RTC, in
reconsidering the order granting the application for writ of
preliminary injunction, should not have gone so far as
dismissing the main case filed by the petitioners. They claim
that the issue in their application for writ of preliminary
injunction was different from the issues in the main case
for certiorari, and that the dissolution of the preliminary
injunction should have been without prejudice to the conduct
of further proceedings in the main case. They also claim that
the RTC did not have the power to dismiss the case without
requiring the parties to file memoranda.
These assertions are belied, however, by petitioners own sub
missions.
Their arguments were exactly the same, whether relating to
the preliminary or permanent injunction. Identical matters
were at issue the MTCs jurisdiction, petitioners alleged
vitiated consent, and the propriety of enforcing the
Compromise Agreement. The reliefs sought, too, were the
same, that is, the grant of an injunction against the
enforcement of the compromise:[35]
WHEREFORE, it is most respectfully prayed that:
1) A Temporary Restraining Order and/or Preliminary
Injunction issue ex parte directing the respondents to cease
and desist from enforcing, executing, or implementing in any
manner the Decision dated April 4, 2002 and acting in Civil
Case No. MM-3191 until further orders from this Honorable
Court.
2) After hearing, the temporary restraining order/ex
parte injunction be replaced by a writ of preliminary
injunction.
3) After hearing on the merits, judgment be rendered:
a. Making the injunction permanent.
Since the RTC found at the preliminary injunction phase that
petitioners were not entitled to an injunction (whether
preliminary or permanent), that petitioners arguments were
insufficient to support the relief sought, and that the MTCs
approval of the Compromise Agreement was not done in a
capricious, whimsical, or arbitary manner, the RTC was not
required to engage in unnecessary duplication of
proceedings. As such, it rightly dismissed the petition.
In addition, nothing in the Rules of Court commands the RTC
to require the parties to file Memoranda. Indeed, Rule 65,
Sec. 8 is explicit in that the court may dismiss the petition if it
finds the same to be patently without merit, prosecuted
manifestly for delay, or that the questions raised therein are
too unsubstantial to require consideration.[36]
Cresencia was authorized to enter into the Compromise
Agreement.
As regards the third issue, petitioners maintain that the SPA
was fatally defective because Cresencia was not specifically
authorized to enter into a compromise agreement. Here, we
fully concur with the findings of the CA that:
x x x It is undisputed that Cresencias co-heirs executed a
Special Power of Attorney, dated 6 April 1999, designating
the former as their attorney-in-fact and empowering her to
file cases for collection of all the accounts due to Filomena or
her estate. Consequently, Cresencia entered into the subject
Compromise Agreement in order to collect the overdue loan
obtained by Pasco from Filomena. In so doing, Cresencia was
merely performing her duty as attorney-in-fact of her co-heirs
pursuant to the Special Power of Attorney given to her.[37]
Our ruling in Trinidad v. Court of Appeals[38] is
illuminating. In Trinidad, the heirs of Vicente Trinidad
executed a SPA in favor of Nenita Trinidad (Nenita) to be their
representative in litigation involving the sale of real property
covered by the decedents estate. As here, there was no
specific authority to enter into a Compromise
Agreement. When a compromise agreement was finally
reached, the heirs later sought to invalidate it, claiming that
Nenita was not specifically authorized to enter into the
compromise agreement. We held then, as we do now, that
the SPA necessarily included the power of the attorney-in-
fact to compromise the case, and that Nenitas co-heirs could
not belatedly disavow their original authorization.[39] This
ruling is even more significant here, where the co-heirs have
not taken any action to invalidate the Compromise
Agreement or assail their SPA.
Moreover, we note that petitioners never assailed the validity
of the SPA
during the pre-trial stage prior to entering the Compromise
Agreement. This matter was never even raised as a ground in
petitioners Motion to Set Aside the compromise, or in the
initial Petition before the RTC. It was only months later, in
December 2002, that petitioners rather self-servingly -
claimed that the SPA was insufficient.
The stated interest rate should be reduced.
Although the petition is unmeritorious, we find the 5%
monthly interest rate stipulated in Clause 4 of the
Compromise Agreement to be iniquitous and unconscionable.
Accordingly, the legal interest of 12% per annum must be
imposed in lieu of the excessive interest stipulated in the
agreement. As we held in Castro v. Tan:[40]
In several cases, we have ruled that stipulations authorizing
iniquitous or unconscionable interests are contrary to morals,
if not against the law. In Medel v. Court of Appeals, we
annulled a stipulated 5.5% per month or 66% per
annum interest on a P500,000.00 loan and a 6% per month or
72% per annum interest on a P60,000.00 loan, respectively,
for being excessive, iniquitous, unconscionable and
exorbitant. In Ruiz v. Court of Appeals, we declared a 3%
monthly interest imposed on four separate loans to be
excessive. In both cases, the interest rates were reduced to
12% per annum.
In this case, the 5% monthly interest rate, or 60% per annum,
compounded monthly, stipulated in the Kasulatan is even
higher than the 3% monthly interest rate imposed in
the Ruiz case. Thus, we similarly hold the 5% monthly interest
to be excessive, iniquitous, unconscionable and exorbitant,
contrary to morals, and the law. It is therefore void ab
initio for being violative of Article 1306 of the Civil Code. x x
x (citations omitted)
The proceeds of the loan should be released to Filomenas
heirs only upon settlement of her estate.
Finally, it is true that Filomenas estate has a different juridical
personality than that of the heirs. Nonetheless, her heirs
certainly have an interest in the preservation of the estate
and the recovery of its properties,[41] for at the moment of
Filomenas death, the heirs start to own the property, subject
to the decedent's liabilities. In this connection, Article 777 of
the Civil Code states that [t]he rights to the succession are
transmitted from the moment of the death of the
decedent.[42]
Unfortunately, the records before us do not show the status
of the proceedings for the settlement of the estate of
Filomena, if any. But to allow the release of the funds directly
to the heirs would amount to a distribution of the estate;
which distribution and delivery should be made only after,
not before, the payment of all debts, charges, expenses, and
taxes of the estate have been paid.[43] We thus decree that
respondent Cresencia should deposit the amounts received
from the petitioners with the MTC of Bocaue, Bulacan and in
turn, the MTC of Bocaue, Bulacan should hold in abeyance
the release of the amounts to Filomenas heirs until after a
showing that the proper procedure for the settlement of
Filomenas estate has been followed.
WHEREFORE, the petition is DENIED. The May 13, 2004
Decision of the Court of Appeals and its October 5, 2004
Resolution are AFFIRMED with MODIFICATIONS that the
interest rate of 5% per month (60% per annum) is ordered
reduced to 12 % per annum. Respondent Cresencia De
Guzman-Principe is DIRECTED to deposit with the Municipal
Trial Court of Bocaue, Bulacan the amounts received from the
petitioners. The Municipal Trial Court of Bocaue, Bulacan is
likewise DIRECTED to hold in abeyance the release of any
amounts recovered from the petitioners until after a showing
that the procedure for settlement of estates of Filomena de
Guzmans estate has been followed, and after all charges on
the estate have been fully satisfied.
SO ORDERED
 G.R. No. 125835. July 30, 1998]
NATALIA CARPENA OPULENCIA, petitioner, vs. COURT OF
APPEALS, ALADIN SIMUNDAC and MIGUEL
OLIVAN, respondents.
DECISION
PANGANIBAN, J.
Is a contract to sell a real property involved in testate
proceedings valid and binding without the approval of the
probate court?
Statement of the Case
This is the main question raised in this petition for review
before us, assailing the Decision[1] of the Court of
Appeals[2] in CA-GR CV No. 41994 promulgated on February
6, 1996 and its Resolution[3] dated July 19, 1996. The
challenged Decision disposed as follows:
WHEREFORE, premises considered, the order of the lower
court dismissing the complaint is SET ASIDE and judgment is
hereby rendered declaring the CONTRACT TO SELL
executed by appellee in favor of appellants as valid and
binding, subject to the result of the administration
proceedings of the testate Estate of Demetrio Carpena.
SO ORDERED. [4]
Petitioners Motion for Reconsideration was denied in the
challenged Resolution.[5]
The Facts
The antecedent facts, as succinctly narrated by Respondent
Court of Appeals are:
In a complaint for specific performance filed with the court a
quo [herein private respondents] Aladin Simundac and
Miguel Oliven alleged that [herein petitioner] Natalia Carpena
Opulencia executed in their favor a CONTRACT TO SELL Lot
2125 of the Sta. Rosa Estate, consisting of 23,766 square
meters located in Sta. Rosa, Laguna at P150.00 per square
meter; that plaintiffs paid a downpayment of P300,000.00
but defendant, despite demands, failed to comply with her
obligations under the contract. [Private respondents]
therefore prayed that [petitioner] be ordered to perform her
contractual obligations and to further pay damages, attorneys
fee and litigation expenses.
In her traverse, [petitioner] admitted the execution of the
contract in favor of plaintiffs and receipt of P300,000.00 as
downpayment. However, she put forward the following
affirmative defenses: that the property subject of the
contract formed part of the Estate of Demetrio Carpena
(petitioners father), in respect of which a petition for probate
was filed with the Regional Trial Court, Branch 24, Bian,
Laguna; that at the time the contract was executed, the
parties were aware of the pendency of the probate
proceeding; that the contract to sell was not approved by the
probate court; that realizing the nullity of the contract
[petitioner] had offered to return the downpayment received
from [private respondents], but the latter refused to accept
it; that [private respondents] further failed to provide funds
for the tenant who demanded P150,00.00 in payment of his
tenancy rights on the land; that [petitioner] had chosen to
rescind the contract.
At the pre-trial conference the parties stipulated on [sic] the
following facts:
1. That on February 3, 1989, [private respondents] and
[petitioner] entered into a contract to sell involving a parcel
of land situated in Sta. Rosa, Laguna, otherwise known as Lot
No. 2125 of the Sta. Rosa Estate.
2. That the price or consideration of the said sell [sic]
is P150.00 per square meters;
3. That the amount of P300,000.00 had already been received
by [petitioner];
4. That the parties have knowledge that the property subject
of the contract to sell is subject of the probate proceedings;
5. That [as] of this time, the probate Court has not yet issued
an order either approving or denying the said sale. (p. 3,
appealed Order of September 15, 1992, pp. 109-112, record).
[Private respondents] submitted their evidence in support of
the material allegations of the complaint. In addition to
testimonies of witnesses, [private respondents] presented
the following documentary evidences: (1) Contract to Sell
(Exh A); (2) machine copy of the last will and testament of
Demetrio Carpena (defendants father) to show that the
property sold by defendant was one of those devised to her
in said will (Exh B); (3) receipts signed by defendant for the
downpayment in the total amount of P300,000.00 (Exhs C, D
& E); and (4) demand letters sent to defendant (Exhs F & G).
It appears that [petitioner], instead of submitting her
evidence, filed a Demurrer to Evidence. In essence, defendant
maintained that the contract to sell was null and void for
want of approval by the probate court. She further argued
that the contract was subject to a suspensive condition,
which was the probate of the will of defendants father
Demetrio Carpena. An Opposition was filed by [private
respondents]. It appears further that in an Order dated
December 15, 1992 the court a quo granted the demurrer to
evidence and dismissed the complaint. It justified its action in
dismissing the complaint in the following manner:
It is noteworthy that when the contract to sell was
consummated, no petition was filed in the Court with notice
to the heirs of the time and place of hearing, to show that the
sale is necessary and beneficial. A sale of properties of an
estate as beneficial to the interested parties must comply
with the requisites provided by law, (Sec. 7, Rule 89, Rules of
Court) which are mandatory, and without them, the authority
to sell, the sale itself, and the order approving it, would be
null and void ab initio. (Arcilla vs. David, 77 Phil. 718, Gabriel,
et al., vs. Encarnacion, et al., L-6736, May 4, 1954; Bonaga vs.
Soler, 2 Phil. 755)Besides, it is axiomatic that where the
estate of a deceased person is already the subject of a testate
or intestate proceeding, the administrator cannot enter into
any transaction involving it without prior approval of the
probate Court. (Estate of Obave, vs. Reyes, 123 SCRA 767).
As held by the Supreme Court, a decedents representative
(administrator) is not estopped from questioning the validity
of his own void deed purporting to convey land. (Bona vs.
Soler, 2 Phil, 755). In the case at bar, the [petitioner,] realizing
the illegality of the transaction[,] has interposed the nullity of
the contract as her defense, there being no approval from the
probate Court, and, in good faith offers to return the money
she received from the [private respondents]. Certainly, the
administratrix is not estop[ped] from doing so and the action
to declare the inexistence of contracts do not prescribe. This
is what precipitated the filing of [petitioners] demurrer to
evidence.[6]
The trial courts order of dismissal was elevated to the Court
of Appeals by private respondents who alleged:
1. The lower court erred in concluding that the contract to
sell is null and void, there being no approval of the probate
court.
2. The lower court erred in concluding that [petitioner] in
good faith offers to return the money to [private
respondents].
3. The lower court erred in concluding that [petitioner] is not
under estoppel to question the validity of the contract to sell.
4. The lower court erred in not ruling on the consideration of
the contract to sell which is tantamount to plain unjust
enrichment of [petitioner] at the expense of [private
respondents].[7]
Public Respondents Ruling
Declaring the Contract to Sell valid, subject to the outcome of
the testate proceedings on Demetrio Carpenas estate, the
appellate court set aside the trial courts dismissal of the
complaint and correctly ruled as follows:
It is apparent from the appealed order that the lower court
treated the contract to sell executed by appellee as one made
by the administratrix of the Estate of Demetrio Carpena for
the benefit of the estate.Hence, its main reason for voiding
the contract in question was the absence of the probate
courts approval. Presumably, what the lower court had in
mind was the sale of the estate or part thereof made by the
administrator for the benefit of the estate, as authorized
under Rule 89 of the Revised Rules of Court, which requires
the approval of the probate court upon application therefor
with notice to the heirs, devisees and legatees.
However, as adverted to by appellants in their brief, the
contract to sell in question is not covered by Rule 89 of the
Revised Rules of Court since it was made by appellee in her
capacity as an heir, of a property that was devised to her
under the will sought to be probated. Thus, while the
document inadvertently stated that appellee executed the
contract in her capacity as executrix and administratrix of the
estate, a cursory reading of the entire text of the contract
would unerringly show that what she undertook to sell to
appellants was one of the other properties given to her by
her late father, and more importantly, it was not made for
the benefit of the estate but for her own needs. To illustrate
this point, it is apropos to refer to the preambular or
preliminary portion of the document, which reads:
WHEREAS, the SELLER is the lawful owner of a certain parcel
of land, which is more particularly described as follows:
xxxxxxxxx
xxxxxxxxx
xxxxxxxxx
WHEREAS, the SELLER suffers difficulties in her living and has
forced to offer the sale of the above-described property,
which property was only one among the other properties
given to her by her late father, to anyone who can wait for
complete clearance of the court on the Last Will Testament of
her father.
WHEREAS, the SELLER in order to meet her need of cash, has
offered for sale the said property at ONE HUNDRED FIFTY
PESOS (150.00) Philippine Currency, per square meter unto
the BUYERS, and with this offer, the latter has accepted to
buy and/or purchase the same, less the area for the road and
other easements indicated at the back of Transfer Certificate
of Title No. 2125 duly confirmed after the survey to be
conducted by the BUYERs Licensed Geodetic Engineer, and
whatever area [is] left. (Emphasis added).
To emphasize, it is evident from the foregoing clauses of the
contract that appellee sold Lot 2125 not in her capacity as
executrix of the will or administratrix of the estate of her
father, but as an heir and more importantly as owner of said
lot which, along with other properties, was devised to her
under the will sought to be probated. That being so, the
requisites stipulated in Rule 89 of the Revised Rules of Court
which refer to a sale made by the administrator for the
benefit of the estate do not apply.
xxxxxxxxx
It is noteworthy that in a Manifestation filed with this court
by appellants, which is not controverted by appellee, it is
mentioned that the last will and testament of Demetrio
Carpena was approved in a final judgment rendered in Special
Proceeding No. B-979 by the Regional Trial Court, Branch 24
Binan, Laguna. But of course such approval does not
terminate the proceeding[s] since the settlement of the
estate will ensue. Such proceedings will consist, among
others, in the issuance by the court of a notice to creditors
(Rule 86), hearing of money claims and payment of taxes and
estate debts (Rule 88) and distribution of the residue to the
heirs or persons entitled thereto (Rule 90). In effect, the final
execution of the deed of sale itself upon appellants payment
of the balance of the purchase price will have to wait for the
settlement or termination of the administration proceedings
of the Estate of Demetrio Carpena. Under the foregoing
premises, what the trial court should have done with the
complaint was not to dismiss it but to simply put on hold
further proceedings until such time that the estate or its
residue will be distributed in accordance with the approved
will.
The rule is that when a demurrer to the evidence is granted
by the trial court but reversed on appeal, defendant loses the
right to adduce his evidence. In such a case, the appellate
court will decide the controversy on the basis of plaintiffs
evidence. In the case at bench, while we find the contract to
sell valid and binding between the parties, we cannot as yet
order appellee to perform her obligations under the contract
because the result of the administration proceedings of the
testate Estate of Demetrio Carpena has to be awaited. Hence,
we shall confine our adjudication to merely declaring the
validity of the questioned Contract to Sell.
Hence, this appeal.[8]
The Issue
Petitioner raises only one issue:
Whether or not the Contract to Sell dated 03 February 1989
executed by the [p]etitioner and [p]rivate [r]espondent[s]
without the requisite probate court approval is valid.
The Courts Ruling
The petition has no merit.
Contract to Sell Valid
In a nutshell, petitioner contends that where the estate of the
deceased person is already the subject of a testate or
intestate proceeding, the administrator cannot enter into any
transaction involving it without prior approval of the Probate
Court.[9] She maintains that the Contract to Sell is void
because it was not approved by the probate court, as
required by Section 7, Rule 89 of the Rules of Court:
SEC. 7. Regulations for granting authority to sell, mortgage, or
otherwise encumber estate. The court having jurisdiction of
the estate of the deceased may authorize the executor or
administrator to sell, mortgage, or otherwise encumber real
estate, in cases provided by these rules and when it appears
necessary or beneficial, under the following regulations:
xxx
Insisting that the above rule should apply to this case,
petitioner argues that the stipulations in the Contract to Sell
require her to act in her capacity as an executrix or
administratrix. She avers that her obligation to eject tenants
pertains to the administratrix or executrix, the estate being
the landlord of the said tenants.[10] Likewise demonstrating
that she entered into the contract in her capacity as executor
is the stipulation that she must effect the conversion of
subject land from irrigated rice land to residential land and
secure the necessary clearances from government
offices. Petitioner alleges that these obligations can be
undertaken only by an executor or administrator of an estate,
and not by an heir.[11]
The Court is not persuaded. As correctly ruled by the Court of
Appeals, Section 7 of Rule 89 of the Rules of Court is not
applicable, because petitioner entered into the Contract to
Sell in her capacity as an heiress, not as an executrix or
administratrix of the estate. In the contract, she represented
herself as the lawful owner and seller of the subject parcel of
land.[12] She also explained the reason for the sale to be
difficulties in her living conditions and consequent need of
cash.[13] These representations clearly evince that she was
not acting on behalf of the estate under probate when she
entered into the Contract to Sell. Accordingly, the
jurisprudence cited by petitioner has no application to the
instant case.
We emphasize that hereditary rights are vested in the heir or
heirs from the moment of the decedents
death.[14] Petitioner, therefore, became the owner of her
hereditary share the moment her father died. Thus, the lack
of judicial approval does not invalidate the Contract to Sell,
because the petitioner has the substantive right to sell the
whole or a part of her share in the estate of her late
father.[15] Thus, in Jakosalem vs. Rafols,[16] the Court
resolved an identical issue under the old Civil Code and held:
Article 440 of the Civil Code provides that the possession of
hereditary property is deemed to be transmitted to the heir
without interruption from the instant of the death of the
decedent, in case the inheritance be accepted. And Manresa
with reason states that upon the death of a person, each of
his heirs becomes the undivided owner of the whole estate
left with respect to the part or portion which might be
adjudicated to him, a community of ownership being thus
formed among the coowners of the estate while it remains WHEREFORE, the petition is hereby DENIED and the assailed
undivided. xxx And according to article 399 of the Civil Code, Decision of the Court of Appeals AFFIRMED. Costs against
every part owner may assign or mortgage his part in the petitioner.
common property, and the effect of such assignment or
mortgage shall be limited to the portion which may be SO ORDERED.
allotted him in the partition upon the dissolution of the
community. Hence, where some of the heirs, without the
concurrence of the others, sold a property left by their
deceased father, this Court, speaking thru its then Chief
Justice Cayetano Arellano, said that the sale was valid, but
that the effect thereof was limited to the share which may be
allotted to the vendors upon the partition of the estate.

Administration of the Estate Not Prejudiced by the Contract

to Sell

Petitioner further contends that [t]o sanction the sale at this

stage would bring about a partial distribution of the
decedents estate pending the final termination of the testate
proceedings.[17] This becomes all the more significant in the
light of the trial courts finding, as stated in its Order dated
August 20, 1997, that the legitime of one of the heirs has
been impaired.[18]

Petitioners contention is not convincing. The Contract to Sell

stipulates that petitioners offer to sell is contingent on the
complete clearance of the court on the Last Will Testament of
her father.[19] Consequently, although the Contract to Sell
was perfected between the petitioner and private
respondents during the pendency of the probate
proceedings, the consummation of the sale or the transfer of
ownership over the parcel of land to the private respondents
is subject to the full payment of the purchase price and to the
termination and outcome of the testate
proceedings. Therefore, there is no basis for petitioners
apprehension that the Contract to Sell may result in a
premature partition and distribution of the properties of the
estate. Indeed, it is settled that the sale made by an heir of
his share in an inheritance, subject to the pending
administration, in no wise stands in the way of such
administration.[20]

Estoppel

Finally, petitioner is estopped from backing out of her

representations in her valid Contract to Sell with private
respondents, from whom she had already received P300,000
as initial payment of the purchase price. Petitioner may not
renege on her own acts and representations, to the prejudice
of the private respondents who have relied on
them.[21] Jurisprudence teaches us that neither the law nor
the courts will extricate a party from an unwise or
undesirable contract he or she entered into with all the
required formalities and with full awareness of its
consequences.[22]

[G.R. No. 146006. February 23, 2004]
JOSE C. LEE AND ALMA AGGABAO, in their capacities as
President and Corporate Secretary, respectively, of
Philippines Internationl Life Insurance Company, and
FILIPINO LOAN ASSISTANCE GROUP, petitioners,
vs.
REGIONAL TRIAL COURT OF QUEZON CITY BRANCH 85
presided by JUDGE PEDRO M. AREOLA, BRANCH CLERK OF
COURT JANICE Y. ANTERO, DEPUTY SHERIFFS ADENAUER G.
RIVERA and PEDRO L. BORJA, all of the Regional Trial Court
of Quezon City Branch 85, MA. DIVINA ENDERES claiming to
be Special Administratrix, and other persons/ public officers
acting for and in their behalf, respondents.
DECISION
CORONA, J.:
This is a petition for review under Rule 45 of the Rules of
Court seeking to reverse and set aside the decision[1] of the
Court of Appeals, First Division, dated July 26, 2000, in CA
G.R. 59736, which dismissed the petition for certiorari filed by
petitioners Jose C. Lee and Alma Aggabao (in their capacities
as president and secretary, respectively, of Philippine
International Life Insurance Company) and Filipino Loan
Assistance Group.
The antecedent facts follow.
Dr. Juvencio P. Ortaez incorporated the Philippine
International Life Insurance Company, Inc. on July 6, 1956. At
the time of the companys incorporation, Dr. Ortaez owned
ninety percent (90%) of the subscribed capital stock.
On July 21, 1980, Dr. Ortaez died. He left behind a wife
(Juliana Salgado Ortaez), three legitimate children (Rafael,
Jose and Antonio Ortaez) and five illegitimate children by
Ligaya Novicio (herein private respondent Ma. Divina Ortaez-
Enderes and her siblings Jose, Romeo, Enrico Manuel and
Cesar, all surnamed Ortaez).[2]
On September 24, 1980, Rafael Ortaez filed before the Court
of First Instance of Rizal, Quezon City Branch (now Regional
Trial Court of Quezon City) a petition for letters of
administration of the intestate estate of Dr. Ortaez, docketed
as SP Proc. Q-30884 (which petition to date remains pending
at Branch 85 thereof).
Private respondent Ma. Divina Ortaez-Enderes and her
siblings filed an opposition to the petition for letters of
administration and, in a subsequent urgent motion, prayed
that the intestate court appoint a special administrator.
On March 10, 1982, Judge Ernani Cruz Pao, then presiding
judge of Branch 85, appointed Rafael and Jose Ortaez joint
special administrators of their fathers estate. Hearings
continued for the appointment of a regular administrator (up
to now no regular administrator has been appointed).
As ordered by the intestate court, special administrators
Rafael and Jose Ortaez submitted an inventory of the estate
of their father which included, among other properties,
2,029[3]shares of stock in Philippine International Life
Insurance Company (hereafter Philinterlife), representing
50.725% of the companys outstanding capital stock.
On April 15, 1989, the decedents wife, Juliana S. Ortaez,
claiming that she owned 1,014[4] Philinterlife shares of stock
as her conjugal share in the estate, sold said shares with right
to repurchase in favor of herein petitioner Filipino Loan
Assistance Group (FLAG), represented by its president, herein
petitioner Jose C. Lee. Juliana Ortaez failed to repurchase the
shares of stock within the stipulated period, thus ownership
thereof was consolidated by petitioner FLAG in its name.
On October 30, 1991, Special Administrator Jose Ortaez,
acting in his personal capacity and claiming that he owned
the remaining 1,011[5] Philinterlife shares of stocks as his
inheritance share in the estate, sold said shares with right to
repurchase also in favor of herein petitioner FLAG,
represented by its president, herein petitioner Jose C. Lee.
After one year, petitioner FLAG consolidated in its name the
ownership of the Philinterlife shares of stock when Jose
Ortaez failed to repurchase the same.
It appears that several years before (but already during the
pendency of the intestate proceedings at the Regional Trial
Court of Quezon City, Branch 85), Juliana Ortaez and her two
children, Special Administrators Rafael and Jose Ortaez,
entered into a memorandum of agreement dated March 4,
1982 for the extrajudicial settlement of the estate of Dr.
Juvencio Ortaez, partitioning the estate (including the
Philinterlife shares of stock) among themselves. This was the
basis of the number of shares separately sold by Juliana
Ortaez on April 15, 1989 (1,014 shares) and by Jose Ortaez on
October 30, 1991 (1,011 shares) in favor of herein petitioner
FLAG.
On July 12, 1995, herein private respondent Ma. Divina
OrtaezEnderes and her siblings (hereafter referred to as
private respondents Enderes et al.) filed a motion for
appointment of special administrator of Philinterlife shares of
stock. This move was opposed by Special Administrator Jose
Ortaez.
On November 8, 1995, the intestate court granted the motion
of private respondents Enderes et al. and appointed private
respondent Enderes special administratrix of the Philinterlife
shares of stock.
On December 20, 1995, Special Administratrix Enderes filed
an urgent motion to declare void ab initio the memorandum
of agreement dated March 4, 1982. On January 9, 1996, she
filed a motion to declare the partial nullity of the extrajudicial
settlement of the decedents estate. These motions were
opposed by Special Administrator Jose Ortaez.
On March 22, 1996, Special Administratrix Enderes filed an
urgent motion to declare void ab initio the deeds of sale of
Philinterlife shares of stock, which move was again opposed
by Special Administrator Jose Ortaez.
On February 4, 1997, Jose Ortaez filed an omnibus motion for
(1) the approval of the deeds of sale of the Philinterlife shares
of stock and (2) the release of Ma. Divina Ortaez-Enderes as
special administratrix of the Philinterlife shares of stock on
the ground that there were no longer any shares of stock for
her to administer.
On August 11, 1997, the intestate court denied the omnibus
motion of Special Administrator Jose Ortaez for the approval
of the deeds of sale for the reason that:
Under the Godoy case, supra, it was held in substance that a
sale of a property of the estate without an Order of the
probate court is void and passes no title to the purchaser.
Since the sales in question were entered into by Juliana S.
Ortaez and Jose S. Ortaez in their personal capacity without
prior approval of the Court, the same is not binding upon the
Estate.
WHEREFORE, the OMNIBUS MOTION for the approval of the
sale of Philinterlife shares of stock and release of Ma. Divina
Ortaez-Enderes as Special Administratrix is hereby denied.[6]
On August 29, 1997, the intestate court issued another order
granting the motion of Special Administratrix Enderes for the
annulment of the March 4, 1982 memorandum of agreement
or extrajudicial partition of estate. The court reasoned that:
In consonance with the Order of this Court dated August 11,
1997 DENYING the approval of the sale of Philinterlife shares
of stocks and release of Ma. Divina Ortaez-Enderes as Special
Administratrix, the Urgent Motion to Declare Void Ab
Initio Memorandum of Agreement dated December 19, 1995.
. . is hereby impliedly partially resolved insofar as the
transfer/waiver/renunciation of the Philinterlife shares of
stock are concerned, in particular, No. 5, 9(c), 10(b) and
11(d)(ii) of the Memorandum of Agreement.
WHEREFORE, this Court hereby declares the Memorandum of
Agreement dated March 4, 1982 executed by Juliana S.
Ortaez, Rafael S. Ortaez and Jose S. Ortaez as partially void ab
initio insofar as the transfer/waiver/renunciation of the
Philinterlife shares of stocks are concerned.[7]
Aggrieved by the above-stated orders of the intestate court,
Jose Ortaez filed, on December 22, 1997, a petition for
certiorari in the Court of Appeals. The appellate court denied
his petition, however, ruling that there was no legal
justification whatsoever for the extrajudicial partition of the
estate by Jose Ortaez, his brother Rafael Ortaez and mother
Juliana Ortaez during the pendency of the settlement of the
estate of Dr. Ortaez, without the requisite approval of the
intestate court, when it was clear that there were other heirs
to the estate who stood to be prejudiced thereby.
Consequently, the sale made by Jose Ortaez and his mother
Juliana Ortaez to FLAG of the shares of stock they invalidly
appropriated for themselves, without approval of the
intestate court, was void.[8]
Special Administrator Jose Ortaez filed a motion for
reconsideration of the Court of Appeals decision but it was
denied. He elevated the case to the Supreme Court via
petition for review under Rule 45 which the Supreme Court
dismissed on October 5, 1998, on a technicality. His motion
for reconsideration was denied with finality on January 13,
1999. On February 23, 1999, the resolution of the Supreme
Court dismissing the petition of Special Administrator Jose
Ortaez became final and was subsequently recorded in the
book of entries of judgments.
Meanwhile, herein petitioners Jose Lee and Alma Aggabao,
with the rest of the FLAG-controlled board of directors,
increased the authorized capital stock of Philinterlife, diluting
in the process the 50.725% controlling interest of the
decedent, Dr. Juvencio Ortaez, in the insurance
company.[9] This became the subject of a separate action at
the Securities and Exchange Commission filed by private
respondent-Special Administratrix Enderes against petitioner
Jose Lee and other members of the FLAG-controlled board of
Philinterlife on November 7, 1994. Thereafter, various cases
were filed by Jose Lee as president of Philinterlife and Juliana
Ortaez and her sons against private respondent-Special
Administratrix Enderes in the SEC and civil
courts.[10] Somehow, all these cases were connected to the
core dispute on the legality of the sale of decedent Dr.
Ortaezs Philinterlife shares of stock to petitioner FLAG,
represented by its president, herein petitioner Jose Lee who
later became the president of Philinterlife after the
controversial sale.
On May 2, 2000, private respondent-Special Administratrix
Enderes and her siblings filed a motion for execution of the
Orders of the intestate court dated August 11 and August 29,
1997 because the orders of the intestate court nullifying the
sale (upheld by the Court of Appeals and the Supreme Court)
had long became final. Respondent-Special Administratrix
Enderes served a copy of the motion to petitioners Jose Lee
and Alma Aggabao as president and secretary, respectively,
of Philinterlife,[11] but petitioners ignored the same.
On July 6, 2000, the intestate court granted the motion for
execution, the dispositive portion of which read:
WHEREFORE, premises considered, let a writ of execution
issue as follows:
1. Confirming the nullity of the sale of the 2,029 Philinterlife
shares in the name of the Estate of Dr. Juvencio Ortaez to
Filipino Loan Assistance Group (FLAG);
2. Commanding the President and the Corporate Secretary of
Philinterlife to reinstate in the stock and transfer book of
Philinterlife the 2,029 Philinterlife shares of stock in the name
of the Estate of Dr. Juvencio P. Ortaez as the owner thereof
without prejudice to other claims for violation of pre-emptive
rights pertaining to the said 2,029 Philinterlife shares;
3. Directing the President and the Corporate Secretary of
Philinterlife to issue stock certificates of Philinterlife for 2,029
shares in the name of the Estate of Dr. Juvencio P. Ortaez as
the owner thereof without prejudice to other claims for
violations of pre-emptive rights pertaining to the said 2,029
Philinterlife shares and,
4. Confirming that only the Special Administratrix, Ma. Divina
Ortaez-Enderes, has the power to exercise all the rights
appurtenant to the said shares, including the right to vote
and to receive dividends.
5. Directing Philinterlife and/or any other person or persons
claiming to represent it or otherwise, to acknowledge and
allow the said Special Administratrix to exercise all the
aforesaid rights on the said shares and to refrain from
resorting to any action which may tend directly or indirectly
to impede, obstruct or bar the free exercise thereof under
pain of contempt.
6. The President, Corporate Secretary, any responsible
officer/s of Philinterlife, or any other person or persons
claiming to represent it or otherwise, are hereby directed to
comply with this order within three (3) days from receipt
hereof under pain of contempt.
7. The Deputy Sheriffs Adenauer Rivera and Pedro Borja are
hereby directed to implement the writ of execution with
dispatch to forestall any and/or further damage to the Estate.
SO ORDERED.[12]
We are constrained to DISMISS OUTRIGHT the present
petition for certiorari and prohibition with prayer for a
temporary restraining order and/or writ of preliminary
injunction in the light of the following considerations:
1. The assailed Order dated August 11, 1997 of the
respondent judge had long become final and executory;
2. The certification on non-forum shopping is signed by only
one (1) of the three (3) petitioners in violation of the Rules;
and
3. Except for the assailed orders and writ of execution, deed
of sale with right to repurchase, deed of sale of shares of
stocks and omnibus motion, the petition is not accompanied
by such pleadings, documents and other material portions of
the record as would support the allegations therein in
violation of the second paragraph, Rule 65 of the 1997 Rules
of Civil Procedure, as amended.
Petition is DISMISSED.
SO ORDERED.[14]
The motion for reconsideration filed by petitioners Lee and
Aggabao of the above decision was denied by the Court of
Appeals on October 30, 2000:
This resolves the urgent motion for reconsideration filed by
the petitioners of our resolution of July 26, 2000 dismissing
outrightly the above-entitled petition for the reason, among
others, that the assailed Order dated August 11, 1997 of the
respondent Judge had long become final and executory.
Dura lex, sed lex.
WHEREFORE, the urgent motion for reconsideration is hereby
DENIED, for lack of merit.

In the several occasions that the sheriff went to the office of

SO ORDERED.[15]
petitioners to execute the writ of execution, he was barred by
the security guard upon petitioners instructions. Thus, private
On December 4, 2000, petitioners elevated the case to the
respondent-Special Administratrix Enderes filed a motion to
Supreme Court through a petition for review under Rule 45
cite herein petitioners Jose Lee and Alma Aggabao (president
but on December 13, 2000, we denied the petition because
and secretary, respectively, of Philinterlife) in contempt.[13]
there was no showing that the Court of Appeals in CA G.R. SP
No. 59736 committed any reversible error to warrant the
Petitioners Lee and Aggabao subsequently filed before the
exercise by the Supreme Court of its discretionary appellate
Court of Appeals a petition for certiorari, docketed as CA G.R.
jurisdiction.[16]
SP No. 59736. Petitioners alleged that the intestate court
gravely abused its discretion in (1) declaring that the
However, upon motion for reconsideration filed by
ownership of FLAG over the Philinterlife shares of stock was
petitioners Lee and Aggabao, the Supreme Court granted the
null and void; (2) ordering the execution of its order declaring
motion and reinstated their petition on September 5, 2001.
such nullity and (3) depriving the petitioners of their right to
The parties were then required to submit their respective
due process.
memoranda.
On July 26, 2000, the Court of Appeals dismissed the petition
Meanwhile, private respondent-Special Administratrix
outright:
Enderes, on July 19, 2000, filed a motion to direct the branch
clerk of court in lieu of herein petitioners Lee and Aggabao to
reinstate the name of Dr. Ortaez in the stock and transfer
book of Philinterlife and issue the corresponding stock
certificate pursuant to Section 10, Rule 39 of the Rules of
Court which provides that the court may direct the act to be
done at the cost of the disobedient party by some other
person appointed by the court and the act when so done
shall have the effect as if done by the party. Petitioners Lee
and Aggabao opposed the motion on the ground that the
intestate court should refrain from acting on the motion
because the issues raised therein were directly related to the
issues raised by them in their petition for certiorari at the
Court of Appeals docketed as CA-G.R. SP No. 59736. On
October 30, 2000, the intestate court granted the motion,
ruling that there was no prohibition for the intestate court to
execute its orders inasmuch as the appellate court did not
issue any TRO or writ of preliminary injunction.
On December 3, 2000, petitioners Lee and Aggabao filed a
petition for certiorari in the Court of Appeals, docketed as CA-
G.R. SP No. 62461, questioning this time the October 30,
2000 order of the intestate court directing the branch clerk of
court to issue the stock certificates. They also questioned in
the Court of Appeals the order of the intestate court
nullifying the sale made in their favor by Juliana Ortaez and
Jose Ortaez. On November 20, 2002, the Court of Appeals
denied their petition and upheld the power of the intestate
court to execute its order. Petitioners Lee and Aggabao then
filed motion for reconsideration which at present is still
pending resolution by the Court of Appeals.
Petitioners Jose Lee and Alma Aggabao (president and
secretary, respectively, of Philinterlife) and FLAG now raise
the following errors for our consideration:
THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
ERROR:
A. IN FAILING TO RECONSIDER ITS PREVIOUS RESOLUTION
DENYING THE PETITION DESPITE THE FACT THAT THE
APPELLATE COURTS MISTAKE IN APPREHENDING THE FACTS
HAD BECOME PATENT AND EVIDENT FROM THE MOTION FOR
RECONSIDERATION AND THE COMMENT OF RESPONDENT
ENDERES WHICH HAD ADMITTED THE FACTUAL ALLEGATIONS
OF PETITIONERS IN THE PETITION AS WELL AS IN THE
MOTION FOR RECONSIDERATION. MOREOVER, THE
RESOLUTION OF THE APPELLATE COURT DENYING THE
MOTION FOR RECONSIDERATION WAS CONTAINED IN ONLY
ONE PAGE WITHOUT EVEN TOUCHING ON THE SUBSTANTIVE
MERITS OF THE EXHAUSTIVE DISCUSSION OF FACTS AND
SUPPORTING LAW IN THE MOTION FOR RECONSIDERATION
IN VIOLATION OF THE RULE ON ADMINISTRATIVE DUE
PROCESS;
B. IN FAILING TO SET ASIDE THE VOID ORDERS OF THE
INTESTATE COURT ON THE ERRONEOUS GROUND THAT THE
ORDERS WERE FINAL AND EXECUTORY WITH REGARD TO
PETITIONERS EVEN AS THE LATTER WERE NEVER NOTIFIED OF
THE PROCEEDINGS OR ORDER CANCELING ITS OWNERSHIP;
C. IN NOT FINDING THAT THE INTESTATE COURT COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF
JURISDICTION (1) WHEN IT ISSUED THE OMNIBUS ORDER
NULLIFYING THE OWNERSHIP OF PETITIONER FLAG OVER
SHARES OF STOCK WHICH WERE ALLEGED TO BE PART OF THE
ESTATE AND (2) WHEN IT ISSUED A VOID WRIT OF EXECUTION
AGAINST PETITIONER FLAG AS PRESENT OWNER TO
IMPLEMENT MERELY PROVISIONAL ORDERS, THEREBY
VIOLATING FLAGS CONSTITUTIONAL RIGHT AGAINST
DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS;
D. IN FAILING TO DECLARE NULL AND VOID THE ORDERS OF
THE INTESTATE COURT WHICH NULLIFIED THE SALE OF
SHARES OF STOCK BETWEEN THE LEGITIMATE HEIR JOSE S.
ORTAEZ AND PETITIONER FLAG BECAUSE OF SETTLED LAW
AND JURISPRUDENCE, I.E., THAT AN HEIR HAS THE RIGHT TO
DISPOSE OF THE DECEDENTS PROPERTY EVEN IF THE SAME IS
UNDER ADMINISTRATION PURSUANT TO CIVIL CODE
PROVISION THAT POSSESSION OF HEREDITARY PROPERTY IS
TRANSMITTED TO THE HEIR THE MOMENT OF DEATH OF THE
DECEDENT (ACEDEBO VS. ABESAMIS, 217 SCRA 194);
E. IN DISREGARDING THE FINAL DECISION OF THE SUPREME
COURT IN G.R. NO. 128525 DATED DECEMBER 17, 1999
INVOLVING SUBSTANTIALLY THE SAME PARTIES, TO WIT,
PETITIONERS JOSE C. LEE AND ALMA AGGABAO WERE
RESPONDENTS IN THAT CASE WHILE RESPONDENT MA.
DIVINA ENDERES WAS THE PETITIONER THEREIN. THAT
DECISION, WHICH CAN BE CONSIDERED LAW OF THE CASE,
RULED THAT PETITIONERS CANNOT BE ENJOINED BY
RESPONDENT ENDERES FROM EXERCISING THEIR POWER AS
DIRECTORS AND OFFICERS OF PHILINTERLIFE AND THAT THE
INTESTATE COURT IN CHARGE OF THE INTESTATE
PROCEEDINGS CANNOT ADJUDICATE TITLE TO PROPERTIES
CLAIMED TO BE PART OF THE ESTATE AND WHICH ARE
EQUALLY CLAIMED BY PETITIONER FLAG.[17]
The petition has no merit.
Petitioners Jose Lee and Alma Aggabao, representing
Philinterlife and FLAG, assail before us not only the validity of
the writ of execution issued by the intestate court dated July
7, 2000 but also the validity of the August 11, 1997 order of
the intestate court nullifying the sale of the 2,029 Philinterlife
shares of stock made by Juliana Ortaez and Jose Ortaez, in
their personal capacities and without court approval, in favor
of petitioner FLAG.
We cannot allow petitioners to reopen the issue of nullity of
the sale of the Philinterlife shares of stock in their favor
because this was already settled a long time ago by the Court
of Appeals in its decision dated June 23, 1998 in CA-G.R. SP
No. 46342. This decision was effectively upheld by us in our
resolution dated October 9, 1998 in G.R. No. 135177
dismissing the petition for review on a technicality and
thereafter denying the motion for reconsideration on January
13, 1999 on the ground that there was no compelling reason
to reconsider said denial.[18] Our decision became final on
February 23, 1999 and was accordingly entered in the book of
entry of judgments. For all intents and purposes therefore,
the nullity of the sale of the Philinterlife shares of stock made
by Juliana Ortaez and Jose Ortaez in favor of petitioner FLAG
is already a closed case. To reopen said issue would set a bad
precedent, opening the door wide open for dissatisfied
parties to relitigate unfavorable decisions no end. This is
completely inimical to the orderly and efficient
administration of justice.
The said decision of the Court of Appeals in CA-G.R. SP No.
46342 affirming the nullity of the sale made by Jose Ortaez
and his mother Juliana Ortaez of the Philinterlife shares of
stock read:
Petitioners asseverations relative to said [memorandum]
agreement were scuttled during the hearing before this Court
thus:
JUSTICE AQUINO:
Counsel for petitioner, when the Memorandum of Agreement
was executed, did the children of Juliana Salgado know
already that there was a claim for share in the inheritance of
the children of Novicio?
ATTY. CALIMAG:
Your Honor please, at that time, Your Honor, it is already
known to them.
JUSTICE AQUINO:
What can be your legal justification for extrajudicial
settlement of a property subject of intestate proceedings
when there is an adverse claim of another set of heirs,
alleged heirs? What would be the legal justification for extra-
judicially settling a property under administration without the
approval of the intestate court?
ATTY. CALIMAG:
Well, Your Honor please, in that extra-judicial settlement
there is an approval of the honorable court as to the
propertys partition x x x. There were as mentioned by the
respondents counsel, Your Honor.
ATTY. BUYCO:
No
JUSTICE AQUINO:
The point is, there can be no adjudication of a property under
intestate proceedings without the approval of the court. That
is basic unless you can present justification on that. In fact,
there are two steps: first, you ask leave and then execute the
document and then ask for approval of the document
executed. Now, is there any legal justification to exclude this
particular transaction from those steps?
ATTY. CALIMAG:
None, Your Honor.
ATTY BUYCO:
With that admission that there is no legal justification, Your
Honor, we rest the case for the private respondent. How can
the lower court be accused of abusing its discretion? (pages
33-35, TSN of January 29, 1998).
Thus, We find merit in the following postulation by private
respondent:
What we have here is a situation where some of the heirs of
the decedent without securing court approval have
appropriated as their own personal property the properties
of [the] Estate, to the exclusion and the extreme prejudice of
the other claimant/heirs. In other words, these heirs, without
court approval, have distributed the asset of the estate
among themselves and proceeded to dispose the same to
third parties even in the absence of an order of distribution
by the Estate Court. As admitted by petitioners counsel, there
was absolutely no legal justification for this action by the
heirs. There being no legal justification, petitioner has no
basis for demanding that public respondent [the intestate
court] approve the sale of the Philinterlife shares of the
Estate by Juliana and Jose Ortaez in favor of the Filipino Loan
Assistance Group.
It is an undisputed fact that the parties to the Memorandum
of Agreement dated March 4, 1982 (see Annex 7 of the
Comment). . . are not the only heirs claiming an interest in
the estate left by Dr. Juvencio P. Ortaez. The records of this
case. . . clearly show that as early as March 3, 1981 an
Opposition to the Application for Issuance of Letters of
Administration was filed by the acknowledged natural
children of Dr. Juvencio P. Ortaez with Ligaya Novicio. . . This
claim by the acknowledged natural children of Dr. Juvencio P.
Ortaez is admittedly known to the parties to the
Memorandum of Agreement before they executed the same.
This much was admitted by petitioners counsel during the
oral argument. xxx
Given the foregoing facts, and the applicable jurisprudence,
public respondent can never be faulted for not approving. . .
the subsequent sale by the petitioner [Jose Ortaez] and his
mother [Juliana Ortaez] of the Philinterlife shares belonging
to the Estate of Dr. Juvencio P. Ortaez. (pages 3-4 of Private
Respondents Memorandum; pages 243-244 of the Rollo)
Amidst the foregoing, We found no grave abuse of discretion
amounting to excess or want of jurisdiction committed by
respondent judge.[19]
From the above decision, it is clear that Juliana Ortaez, and
her three sons, Jose, Rafael and Antonio, all surnamed
Ortaez, invalidly entered into a memorandum of agreement
extrajudicially partitioning the intestate estate among
themselves, despite their knowledge that there were other
heirs or claimants to the estate and before final settlement of
the estate by the intestate court. Since the appropriation of
the estate properties by Juliana Ortaez and her children (Jose,
Rafael and Antonio Ortaez) was invalid, the subsequent sale
thereof by Juliana and Jose to a third party (FLAG), without
court approval, was likewise void.
An heir can sell his right, interest, or participation in the
property under administration under Art. 533 of the Civil
Code which provides that possession of hereditary property is
deemed transmitted to the heir without interruption from
the moment of death of the decedent.[20] However, an heir
can only alienate such portion of the estate that may be
allotted to him in the division of the estate by the probate or
intestate court after final adjudication, that is, after all
debtors shall have been paid or the devisees or legatees shall
have been given their shares.[21]This means that an heir may
only sell his ideal or undivided share in the estate, not any
specific property therein. In the present case, Juliana Ortaez
and Jose Ortaez sold specific properties of the estate (1,014
and 1,011 shares of stock in Philinterlife) in favor of petitioner
FLAG. This they could not lawfully do pending the final
adjudication of the estate by the intestate court because of
the undue prejudice it would cause the other claimants to the
estate, as what happened in the present case.
Juliana Ortaez and Jose Ortaez sold specific properties of the
estate, without court approval. It is well-settled that court
approval is necessary for the validity of any disposition of the
decedents estate. In the early case of Godoy vs.
Orellano,[22] we laid down the rule that the sale of the
property of the estate by an administrator without the order
of the probate court is void and passes no title to the
purchaser. And in the case of Dillena vs. Court of
Appeals,[23] we ruled that:
[I]t must be emphasized that the questioned properties
(fishpond) were included in the inventory of properties of the
estate submitted by then Administratrix Fausta Carreon
Herrera on November 14, 1974. Private respondent was
appointed as administratrix of the estate on March 3, 1976 in
lieu of Fausta Carreon Herrera. On November 1, 1978, the
questioned deed of sale of the fishponds was executed
between petitioner and private respondent without notice
and approval of the probate court. Even after the sale,
administratrix Aurora Carreon still included the three
fishponds as among the real properties of the estate in her
inventory submitted on August 13, 1981. In fact, as stated by
the Court of Appeals, petitioner, at the time of the sale of the
fishponds in question, knew that the same were part of the
estate under administration.
xxxxxxxxx
The subject properties therefore are under the jurisdiction of
the probate court which according to our settled
jurisprudence has the authority to approve any disposition
regarding properties under administration. . . More emphatic
is the declaration We made in Estate of Olave vs. Reyes (123
SCRA 767) where We stated that when the estate of the
deceased person is already the subject of a testate or
intestate proceeding, the administrator cannot enter into any
transaction involving it without prior approval of the probate
court.
Only recently, in Manotok Realty, Inc. vs. Court of Appeals
(149 SCRA 174), We held that the sale of an immovable
property belonging to the estate of a decedent, in a special
proceedings, needs court approval. . . This pronouncement
finds support in the previous case of Dolores Vda. De Gil vs.
Agustin Cancio (14 SCRA 797) wherein We emphasized that it
is within the jurisdiction of a probate court to approve the
sale of properties of a deceased person by his prospective
heirs before final adjudication. x x x
It being settled that property under administration needs the
approval of the probate court before it can be disposed of,
any unauthorized disposition does not bind the estate and is
null and void. As early as 1921 in the case of Godoy vs.
Orellano (42 Phil 347), We laid down the rule that a sale by an
administrator of property of the deceased, which is not
authorized by the probate court is null and void and title does
not pass to the purchaser.
There is hardly any doubt that the probate court can declare
null and void the disposition of the property under
administration, made by private respondent, the same having
been effected without authority from said court. It is the
probate court that has the power to authorize and/or
approve the sale (Section 4 and 7, Rule 89), hence, a fortiori,
it is said court that can declare it null and void for as long as
the proceedings had not been closed or terminated. To
uphold petitioners contention that the probate court cannot
annul the unauthorized sale, would render meaningless the
power pertaining to the said court. (Bonga vs. Soler, 2 SCRA
755). (emphasis ours)
Our jurisprudence is therefore clear that (1) any disposition of
estate property by an administrator or prospective heir
pending final adjudication requires court approval and (2) any
unauthorized disposition of estate property can be annulled
by the probate court, there being no need for a separate
action to annul the unauthorized disposition.
The question now is: can the intestate or probate court
execute its order nullifying the invalid sale?
We see no reason why it cannot. The intestate court has the
power to execute its order with regard to the nullity of an
unauthorized sale of estate property, otherwise its power to
annul the unauthorized or fraudulent disposition of estate
property would be meaningless. In other words, enforcement
is a necessary adjunct of the intestate or probate courts
power to annul unauthorized or fraudulent transactions to
prevent the dissipation of estate property before final
adjudication.
Moreover, in this case, the order of the intestate court
nullifying the sale was affirmed by the appellate courts (the
Court of Appeals in CA-G.R. SP No. 46342 dated June 23, 1998
and subsequently by the Supreme Court in G.R. No. 135177
dated October 9, 1998). The finality of the decision of the
Supreme Court was entered in the book of entry of
judgments on February 23, 1999. Considering the finality of
the order of the intestate court nullifying the sale, as affirmed
by the appellate courts, it was correct for private respondent-
Special Administratrix Enderes to thereafter move for a writ
of execution and for the intestate court to grant it.
Petitioners Jose Lee, Alma Aggabao and FLAG, however,
contend that the probate court could not issue a writ of
execution with regard to its order nullifying the sale because
said order was merely provisional:
The only authority given by law is for respondent judge to
determine provisionally whether said shares are included or
excluded in the inventory In ordering the execution of the
orders, respondent judge acted in excess of his jurisdiction
and grossly violated settled law and jurisprudence, i.e., that
the determination by a probate or intestate court of whether
a property is included or excluded in the inventory of the
estate being provisional in nature, cannot be the subject of
execution.[24] (emphasis ours)
Petitioners argument is misplaced. There is no question,
based on the facts of this case, that the Philinterlife shares of
stock were part of the estate of Dr. Juvencio Ortaez from the
very start as in fact these shares were included in the
inventory of the properties of the estate submitted by Rafael
Ortaez after he and his brother, Jose Ortaez, were appointed
special administrators by the intestate court.[25]
The controversy here actually started when, during the
pendency of the settlement of the estate of Dr. Ortaez, his
wife Juliana Ortaez sold the 1,014 Philinterlife shares of stock
in favor petitioner FLAG without the approval of the intestate
court. Her son Jose Ortaez later sold the remaining 1,011
Philinterlife shares also in favor of FLAG without the approval
of the intestate court.
We are not dealing here with the issue of inclusion or
exclusion of properties in the inventory of the estate because
there is no question that, from the very start, the Philinterlife
shares of stock were owned by the decedent, Dr. Juvencio
Ortaez. Rather, we are concerned here with the effect of the
sale made by the decedents heirs, Juliana Ortaez and Jose
Ortaez, without the required approval of the intestate
court. This being so, the contention of petitioners that the
determination of the intestate court was merely provisional
and should have been threshed out in a separate proceeding
is incorrect.
The petitioners Jose Lee and Alma Aggabao next contend that
the writ of execution should not be executed against them
because they were not notified, nor they were aware, of the
proceedings nullifying the sale of the shares of stock.
We are not persuaded. The title of the purchaser like herein
petitioner FLAG can be struck down by the intestate court
after a clear showing of the nullity of the alienation. This is
the logical consequence of our ruling in Godoy and in several
subsequent cases.[26] The sale of any property of the estate
by an administrator or prospective heir without order of the
probate or intestate court is void and passes no title to the
purchaser. Thus, in Juan Lao et al. vs. Hon. Melencio Geneto,
G.R. No. 56451, June 19, 1985, we ordered the probate court
to cancel the transfer certificate of title issued to the vendees
at the instance of the administrator after finding that the sale
of real property under probate proceedings was made
without the prior approval of the court. The dispositive
portion of our decision read:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the assailed
Order dated February 18, 1981 of the respondent Judge
approving the questioned Amicable Settlement is declared
NULL and VOID and hereby SET ASIDE. Consequently, the sale
in favor of Sotero Dioniosio III and by the latter to William Go
is likewise declared NULL and VOID. The Transfer Certificate
of Title issued to the latter is hereby ordered cancelled.
It goes without saying that the increase in Philinterlifes
authorized capital stock, approved on the vote of petitioners
non-existent shareholdings and obviously calculated to make
it difficult for Dr. Ortaezs estate to reassume its controlling
interest in Philinterlife, was likewise void ab initio.
Petitioners next argue that they were denied due process.
We do not think so.
The facts show that petitioners, for reasons known only to
them, did not appeal the decision of the intestate court
nullifying the sale of shares of stock in their favor. Only the
vendor, Jose Ortaez, appealed the case. A careful review of
the records shows that petitioners had actual knowledge of
the estate settlement proceedings and that they knew private
respondent Enderes was questioning therein the sale to them
of the Philinterlife shares of stock.
It must be noted that private respondent-Special
Administratrix Enderes filed before the intestate court (RTC of
Quezon City, Branch 85) a Motion to Declare Void Ab
Initio Deeds of Sale of Philinterlife Shares of Stock on March
22, 1996. But as early as 1994, petitioners already knew of
the pending settlement proceedings and that the shares they
bought were under the administration by the intestate court
because private respondent Ma. Divina Ortaez-Enderes and
her mother Ligaya Novicio had filed a case against them at
the Securities and Exchange Commission on November 7,
1994, docketed as SEC No. 11-94-4909, for annulment of
transfer of shares of stock, annulment of sale of corporate
properties, annulment of subscriptions on increased capital
stocks, accounting, inspection of corporate books and records
and damages with prayer for a writ of preliminary injunction
and/or temporary restraining order.[27] In said case, Enderes
and her mother questioned the sale of the aforesaid shares of
stock to petitioners. The SEC hearing officer in fact, in his
resolution dated March 24, 1995, deferred to the jurisdiction
of the intestate court to rule on the validity of the sale of
shares of stock sold to petitioners by Jose Ortaez and Juliana
Ortaez:
Petitioners also averred that. . . the Philinterlife shares of Dr.
Juvencio Ortaez who died, in 1980, are part of his estate
which is presently the subject matter of an intestate
proceeding of the RTC of Quezon City, Branch 85. Although,
private respondents [Jose Lee et al.] presented the
documents of partition whereby the foregoing share of stocks
were allegedly partitioned and conveyed to Jose S. Ortaez
who allegedly assigned the same to the other private
respondents, approval of the Court was not presented. Thus,
the assignments to the private respondents [Jose Lee et al.]
of the subject shares of stocks are void.
xxxxxxxxx
With respect to the alleged extrajudicial partition of the
shares of stock owned by the late Dr. Juvencio Ortaez, we
rule that the matter properly belongs to the jurisdiction of
the regular court where the intestate proceedings are
currently pending.[28]
With this resolution of the SEC hearing officer dated as early
as March 24, 1995 recognizing the jurisdiction of the intestate
court to determine the validity of the extrajudicial partition of
the estate of Dr. Ortaez and the subsequent sale by the heirs
of the decedent of the Philinterlife shares of stock to
petitioners, how can petitioners claim that they were not
aware of the intestate proceedings?
Futhermore, when the resolution of the SEC hearing officer
reached the Supreme Court in 1996 (docketed as G.R.
128525), herein petitioners who were respondents therein
filed their answer which contained statements showing that
they knew of the pending intestate proceedings:
[T]he subject matter of the complaint is not within the
jurisdiction of the SEC but with the Regional Trial Court;
Ligaya Novicio and children represented themselves to be the
common law wife and illegitimate children of the late Ortaez;
that on March 4, 1982, the surviving spouse Juliana Ortaez,
on her behalf and for her minor son Antonio, executed a
Memorandum of Agreement with her other sons Rafael and
Jose, both surnamed Ortaez, dividing the estate of the
deceased composed of his one-half (1/2) share in the
conjugal properties; that in the said Memorandum of
Agreement, Jose S. Ortaez acquired as his share of the estate
the 1,329 shares of stock in Philinterlife; that on March 4,
1982, Juliana and Rafael assigned their respective shares of
stock in Philinterlife to Jose; that contrary to the contentions
of petitioners, private respondents Jose Lee, Carlos Lee,
Benjamin Lee and Alma Aggabao became stockholders of
Philinterlife on March 23, 1983 when Jose S. Ortaez, the
principal stockholder at that time, executed a deed of sale of
his shares of stock to private respondents; and that the right
of petitioners to question the Memorandum of Agreement
and the acquisition of shares of stock of private respondent is
barred by prescription.[29]
Also, private respondent-Special Administratrix Enderes
offered additional proof of actual knowledge of the
settlement proceedings by petitioners which petitioners
never denied: (1) that petitioners were represented by Atty.
Ricardo Calimag previously hired by the mother of private
respondent Enderes to initiate cases against petitioners Jose
Lee and Alma Aggaboa for the nullification of the sale of the
shares of stock but said counsel made a conflicting turn-
around and appeared instead as counsel of petitioners, and
(2) that the deeds of sale executed between petitioners and
the heirs of the decedent (vendors Juliana Ortaez and Jose
Ortaez) were acknowledged before Atty. Ramon Carpio who,
during the pendency of the settlement proceedings, filed a
motion for the approval of the sale of Philinterlife shares of
stock to the Knights of Columbus Fraternal Association, Inc.
(which motion was, however, later abandoned).[30] All this
sufficiently proves that petitioners, through their counsels,
knew of the pending settlement proceedings.
Finally, petitioners filed several criminal cases such as libel
(Criminal Case No. 97-7179-81), grave coercion (Criminal Case
No. 84624) and robbery (Criminal Case No. Q-96-67919)
against private respondents mother Ligaya Novicio who was a
director of Philinterlife,[31] all of which criminal cases were
related to the questionable sale to petitioners of the
Philinterlife shares of stock.
Considering these circumstances, we cannot accept
petitioners claim of denial of due process. The essence of due
process is the reasonable opportunity to be heard. Where the
opportunity to be heard has been accorded, there is no denial
of due process.[32] In this case, petitioners knew of the
pending instestate proceedings for the settlement of Dr.
Juvencio Ortaezs estate but for reasons they alone knew,
they never intervened. When the court declared the nullity of
the sale, they did not bother to appeal. And when they were
notified of the motion for execution of the Orders of the
intestate court, they ignored the same. Clearly, petitioners
alone should bear the blame.

Petitioners next contend that we are bound by our ruling in

G.R. No. 128525 entitled Ma. Divina Ortaez-Enderes vs. Court
of Appeals, dated December 17, 1999, where we allegedly
ruled that the intestate court may not pass upon the title to a
certain property for the purpose of determining whether the
same should or should not be included in the inventory but
such determination is not conclusive and is subject to final
decision in a separate action regarding ownership which may
be constituted by the parties.

We are not unaware of our decision in G.R. No. 128525. The

issue therein was whether the Court of Appeals erred in
affirming the resolution of the SEC that Enderes et al. were
not entitled to the issuance of the writ of preliminary
injunction. We ruled that the Court of Appeals was correct in
affirming the resolution of the SEC denying the issuance of
the writ of preliminary injunction because injunction is not
designed to protect contingent rights. Said case did not rule
on the issue of the validity of the sale of shares of stock
belonging to the decedents estate without court approval nor
of the validity of the writ of execution issued by the intestate
court. G.R. No. 128525 clearly involved a different issue and it
does not therefore apply to the present case.

Petitioners and all parties claiming rights under them are

hereby warned not to further delay the execution of the
Orders of the intestate court dated August 11 and August 29,
1997.

WHEREFORE, the petition is hereby DENIED. The decision of

the Court of Appeals in CA-G.R. S.P. No. 59736 dated July 26,
2000, dismissing petitioners petition for certiorari and
affirming the July 6, 2000 order of the trial court which
ordered the execution of its (trial courts) August 11 and 29,
1997 orders, is hereby AFFIRMED.

SO ORDERED.
CELESTINO BALUS, G.R. No. 168970 line 12-13 by Lot 4649, Csd-292; and along line 12-1, by Lot
4661, Csd-292. x x x [2]
Petitioner,
Rufo failed to pay his loan. As a result, the mortgaged
Present: property was foreclosed and was subsequently sold to the
Bank as the sole bidder at a public auction held for that
purpose. On November 20, 1981, a Certificate of Sale[3] was
executed by the sheriff in favor of the Bank. The property was
CORONA, J., not redeemed within the period allowed by law. More than
Chairperson, two years after the auction, or on January 25, 1984, the
- versus - sheriff executed a Definite Deed of Sale[4] in the Bank's favor.
VELASCO, JR., Thereafter, a new title was issued in the name of the Bank.

NACHURA, On October 10, 1989, herein petitioner and respondents

executed an Extrajudicial Settlement of Estate[5] adjudicating
PERALTA, and to each of them a specific one-third portion of the subject
property consisting of 10,246 square meters. The Extrajudicial
MENDOZA, JJ. Settlement also contained provisions wherein the parties
SATURNINO BALUS andLEONARDA admitted knowledge of the fact that their father mortgaged
BALUS VDA. DE CALUNOD, the subject property to the Bank and that they intended to
redeem the same at the soonest possible time.
Respondents. Promulgated:
Three years after the execution of the Extrajudicial
Settlement, herein respondents bought the subject property
from the Bank. On October 12, 1992, a Deed of Sale of
January 15, 2010 Registered Land[6] was executed by the Bank in favor of
respondents. Subsequently, Transfer Certificate of Title (TCT)
x-------------------------------------------------------------------------x No. T-39,484(a.f.)[7] was issued in the name of
respondents.Meanwhile, petitioner continued possession of
the subject lot.

DECISION On June 27, 1995, respondents filed a Complaint[8] for

Recovery of Possession and Damages against petitioner,
contending that they had already informed petitioner of the
PERALTA, J.: fact that they were the new owners of the disputed property,
but the petitioner still refused to surrender possession of the
Assailed in the present petition for review on certiorari under same to them. Respondents claimed that they had exhausted
Rule 45 of the Rules of Court is the Decision[1] of the Court of all remedies for the amicable settlement of the case, but to
Appeals (CA) dated May 31, 2005 in CA-G.R. CV No. no avail.
58041 which set aside the February 7, 1997 Decision of the
Regional Trial Court (RTC) of Lanao del Norte, Branch 4 in Civil On February 7, 1997, the RTC rendered a
Case No. 3263. Decision[9] disposing as follows:

The facts of the case are as follows:
Herein petitioner and respondents are the children of the
spouses Rufo and Sebastiana Balus. Sebastiana died
on September 6, 1978, while Rufo died on July 6, 1984.
On January 3, 1979, Rufo mortgaged a parcel of land, which
he owns, as security for a loan he obtained from the Rural
Bank of Maigo, Lanao del Norte (Bank). The said property was
originally covered by Original Certificate of Title No. P-
439(788) and more particularly described as follows:
A parcel of land with all the improvements thereon,
containing an area of 3.0740 hectares, more or less, situated
in the Barrio of Lagundang, Bunawan, Iligan City, and
bounded as follows: Bounded on the NE., along line 1-2, by
Lot 5122, Csd-292; along line 2-12, by Dodiongan River; along
WHEREFORE, judgment is hereby rendered, ordering the
plaintiffs to execute a Deed of Sale in favor of the defendant,
the one-third share of the property in question, presently
possessed by him, and described in the deed of partition, as
follows:
A one-third portion of Transfer Certificate of Title No. T-
39,484 (a.f.), formerly Original Certificate of Title No. P-788,
now in the name of Saturnino Balus and Leonarda B. Vda. de
Calunod, situated at Lagundang, Bunawan, Iligan City,
bounded on the North by Lot 5122; East by shares of
Saturnino Balus and Leonarda Balus-Calunod; South by Lot
4649, Dodiongan River; West by Lot 4661, consisting of
10,246 square meters, including improvements thereon.
and dismissing all other claims of the parties.
The amount of P6,733.33 consigned by the defendant with
the Clerk of Court is hereby ordered delivered to the
plaintiffs, as purchase price of the one-third portion of the
land in question.
Plaintiffs are ordered to pay the costs.
SO ORDERED.[10]
The RTC held that the right of petitioner to purchase from the
respondents his share in the disputed property was
recognized by the provisions of the Extrajudicial Settlement
of Estate, which the parties had executed before the
respondents bought the subject lot from the Bank.
Aggrieved by the Decision of the RTC, herein respondents
filed an appeal with the CA.
On May 31, 2005, the CA promulgated the presently assailed
Decision, reversing and setting aside the Decision of the RTC
and ordering petitioner to immediately surrender possession
of the subject property to the respondents. The CA ruled that
when petitioner and respondents did not redeem the subject
property within the redemption period and allowed the
consolidation of ownership and the issuance of a new title in
the name of the Bank, their co-ownership was extinguished.
Hence, the instant petition raising a sole issue, to wit:
WHETHER OR NOT CO-OWNERSHIP AMONG THE PETITIONER
AND THE RESPONDENTS OVER THE PROPERTY
PERSISTED/CONTINUED TO EXIST (EVEN AFTER THE
TRANSFER OF TITLE TO THE BANK) BY VIRTUE OF THE
PARTIES' AGREEMENT PRIOR TO THE REPURCHASE THEREOF
BY THE RESPONDENTS; THUS, WARRANTING THE
PETITIONER'S ACT OF ENFORCING THE AGREEMENT BY
REIMBURSING THE RESPONDENTS OF HIS (PETITIONER'S)
JUST SHARE OF THE REPURCHASE PRICE.[11]
The main issue raised by petitioner is whether co-ownership
by him and respondents over the subject property persisted
even after the lot was purchased by the Bank and title
thereto transferred to its name, and even after it was
eventually bought back by the respondents from the Bank.
Petitioner insists that despite respondents' full knowledge of
the fact that the title over the disputed property was already
in the name of the Bank, they still proceeded to execute the
subject Extrajudicial Settlement, having in mind the intention
of purchasing back the property together with petitioner and
of continuing their co-ownership thereof.
Petitioner posits that the subject Extrajudicial Settlement is,
in and by itself, a contract between him and respondents,
because it contains a provision whereby the parties agreed to
continue their co-ownership of the subject property by
redeeming or repurchasing the same from the Bank. This
agreement, petitioner contends, is the law between the
parties and, as such, binds the respondents. As a result,
petitioner asserts that respondents' act of buying the
disputed property from the Bank without notifying him inures
to his benefit as to give him the right to claim his rightful
portion of the property, comprising 1/3 thereof, by
reimbursing respondents the equivalent 1/3 of the sum they
paid to the Bank.
The Court is not persuaded.
Petitioner and respondents are arguing on the wrong premise
that, at the time of the execution of the Extrajudicial
Settlement, the subject property formed part of the estate of
their deceased father to which they may lay claim as his heirs.
At the outset, it bears to emphasize that there is no dispute
with respect to the fact that the subject property was
exclusively owned by petitioner and respondents' father,
Rufo, at the time that it was mortgaged in 1979. This was
stipulated by the parties during the hearing conducted by the
trial court on October 28, 1996.[12] Evidence shows that a
Definite Deed of Sale[13] was issued in favor of the Bank
on January 25, 1984, after the period of redemption
expired. There is neither any dispute that a new title was
issued in the Bank's name before Rufo died on July 6,
1984. Hence, there is no question that the Bank acquired
exclusive ownership of the contested lot during the lifetime
of Rufo.
The rights to a person's succession are transmitted from the
moment of his death.[14] In addition, the inheritance of a
person consists of the property and transmissible rights and
obligations existing at the time of his death, as well as those
which have accrued thereto since the opening of the
succession.[15] In the present case, since Rufo lost ownership
of the subject property during his lifetime, it only follows that
at the time of his death, the disputed parcel of land no longer
formed part of his estate to which his heirs may lay claim.
Stated differently, petitioner and respondents never inherited
the subject lot from their father.
Petitioner and respondents, therefore, were wrong in
assuming that they became co-owners of the subject lot.
Thus, any issue arising from the supposed right of petitioner
as co-owner of the contested parcel of land is negated by the
fact that, in the eyes of the law, the disputed lot did not pass
into the hands of petitioner and respondents as compulsory
heirs of Rufo at any given point in time.
The foregoing notwithstanding, the Court finds a necessity for
a complete determination of the issues raised in the instant
case to look into petitioner's argument that the Extrajudicial
Settlement is an independent contract which gives him the
right to enforce his right to claim a portion of the disputed lot
bought by respondents.
It is true that under Article 1315 of the Civil Code of the
Philippines, contracts are perfected by mere consent; and
from that moment, the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may
be in keeping with good faith, usage and law.
Article 1306 of the same Code also provides that the
contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided
these are not contrary to law, morals, good customs, public
order or public policy.
In addition, it appears from the recitals in the Extrajudicial
Settlement that, at the time of the execution thereof, the
parties were not yet aware that the subject property was
already exclusively owned by the Bank. Nonetheless, the lack
of knowledge on the part of petitioner and respondents that
the mortgage was already foreclosed and title to the property
was already transferred to the Bank does not give them the
right or the authority to unilaterally declare themselves as co-
owners of the disputed property; otherwise, the disposition
of the case would be made to depend on the belief and
conviction of the party-litigants and not on the evidence
adduced and the law and jurisprudence applicable thereto.

In the present case, however, there is nothing in the subject
Extrajudicial Settlement to indicate any express stipulation
for petitioner and respondents to continue with their
supposed co-ownership of the contested lot.
On the contrary, a plain reading of the provisions of the
Extrajudicial Settlement would not, in any way, support
petitioner's contention that it was his and his sibling's
intention to buy the subject property from the Bank and
continue what they believed to be co-ownership thereof. It is
a cardinal rule in the interpretation of contracts that the
intention of the parties shall be accorded primordial
consideration.[16] It is the duty of the courts to place a
practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and the
purpose which it is intended to serve.[17] Such intention is
determined from the express terms of their agreement, as
well as their contemporaneous and subsequent
acts.[18] Absurd and illogical interpretations should also be
avoided.[19]
For petitioner to claim that the Extrajudicial Settlement is an
agreement between him and his siblings to continue what
they thought was their ownership of the subject property,
even after the same had been bought by the Bank, is
stretching the interpretation of the said Extrajudicial
Settlement too far.
Furthermore, petitioner's contention that he and his siblings
intended to continue their supposed co-ownership of the
subject property contradicts the provisions of the subject
Extrajudicial Settlement where they clearly manifested their
intention of having the subject property divided or
partitioned by assigning to each of the petitioner and
respondents a specific 1/3 portion of the same. Partition calls
for the segregation and conveyance of a determinate portion
of the property owned in common. It seeks a severance of
the individual interests of each co-owner, vesting in each of
them a sole estate in a specific property and giving each one
a right to enjoy his estate without supervision or interference
from the other.[20] In other words, the purpose of partition is
to put an end to co-ownership,[21] an objective which
negates petitioner's claims in the present case.
WHEREFORE, the instant petition is DENIED. The assailed
Decision of the Court of Appeals, dated May 31, 2005 in CA-
G.R. CV No. 58041, is AFFIRMED.
SO ORDERED.

In the first place, as earlier discussed, there is no co-

ownership to talk about and no property to partition, as the
disputed lot never formed part of the estate of their
deceased father.

Moreover, petitioner's asseveration of his and respondents'

intention of continuing with their supposed co-ownership is
negated by no less than his assertions in the present petition
that on several occasions he had the chance to purchase the
subject property back, but he refused to do so. In fact, he
claims that after the Bank acquired the disputed lot, it offered
to re-sell the same to him but he ignored such offer. How
then can petitioner now claim that it was also his intention to
purchase the subject property from the Bank, when he
admitted that he refused the Bank's offer to re-sell the
subject property to him?
 G.R. No. 126707. February 25, 1999]
BLANQUITA E. DELA MERCED, LUISITO E. DELA MERCED,
BLANQUITA M. MACATANGAY, MA. OLIVIA M. PAREDES,
TERESITA P. RUPISAN, RUBEN M. ADRIANO, HERMINIO M.
ADRIANO, JOSELITO M. ADRIANO, ROGELIO M. ADRIANO,
WILFREDO M. ADRIANO, VICTOR M. ADRIANO, CORAZON A.
ONGOCO, JASMIN A. MENDOZA and CONSTANTINO M.
ADRIANO, petitioners,
vs.
JOSELITO P. DELA MERCED, respondent.
DECISION
PURISIMA, J.:
This is a Petition for Review on Certiorari of the Decision of
the Court of Appeals, dated October 17, 1996, in CA-G.R. CV
No. 41283, which reversed the decision, dated June 10,
1992, of the Regional Trial Court, Branch 67, Pasig City, in Civil
Case No. 59705.
The facts of the case are, as follows:
On March 23, 1987, Evarista M. dela Merced died intestate,
without issue. She left five (5) parcels of land situated in
Orambo, Pasig City.
At the time of her death, Evarista was survived by three sets
of heirs, viz: (1) Francisco M. dela Merced, her legitimate
brother ; (2) Teresita P. Rupisan, her niece who is the only
daughter of Rosa de la Merced-Platon (a sister who died in
1943) ; and (3) the legitimate children of Eugenia dela
Merced-Adriano (another sister of Evarista who died in 1965),
namely: Herminio, Ruben, Joselito, Rogelio, Wilfredo, Victor
and Constantino, all surnamed Adriano, Corazon Adriano-
Ongoco and Jasmin Adriano-Mendoza.
Almost a year later or on March 19, 1988, to be precise,
Francisco (Evaristas brother) died. He was survived by his wife
Blanquita Errea dela Merced and their three legitimate
children, namely, Luisito E. dela Merced, Blanquita M.
Macatangay and Ma. Olivia M. Paredes.
On April 20, 1989, the three sets of heirs of the decedent,
Evarista M. dela Merced, referring to (1) the abovenamed
heirs of Francisco; (2) Teresita P. Rupisan and (3) the nine [9]
legitimate children of Eugenia, executed an extrajudicial
settlement, entitled Extrajudicial Settlement of the Estate of
the Deceased Evarista M. dela Merced adjudicating the
properties of Evarista to them, each set with a share of one-
third (1/3) pro-indiviso.
On July 26 ,1990, private respondent Joselito P. Dela Merced
, illegitimate son of the late Francisco de la Merced, filed a
Petition for Annulment of the Extrajudicial Settlement of the
Estate of the Deceased Evarista M. Dela Merced with Prayer
for a Temporary Restraining Order, alleging that he was
fraudulently omitted from the said settlement made by
petitioners, who were fully aware of his relation to the late
Francisco. Claiming successional rights, private respondent
Joselito prayed that he be included as one of the
beneficiaries, to share in the one-third (1/3) pro-indiviso
share in the estate of the deceased Evarista, corresponding to
the heirs of Francisco.
On August 3, 1990, the trial court issued the temporary
restraining order prayed for by private respondent Joselito,
enjoining the sale of any of the real properties of the
deceased Evarista.
After trial, however, or on June 10, 1992, to be definite, the
trial court dismissed the petition, lifted the temporary
restraining order earlier issued, and cancelled the notice of lis
pendens on the certificates of title covering the real
properties of the deceased Evarista.
In dismissing the petition, the trial court stated:
The factual setting of the instant motion after considering the
circumstances of the entire case and the other evidentiary
facts and documents presented by the herein parties points
only to one issue which goes into the very skeleton of the
controversy, to wit: Whether or not the plaintiff may
participate in the intestate estate of the late Evarista M. Dela
Merced in his capacity as representative of his alleged father,
Francisdo Dela Merced, brother of the deceased, whose
succession is under consideration.
xxxxxxxxx
It is to be noted that Francisco Dela Merced, alleged father of
the herein plaintiff, is a legitimate child, not an
illegitimate. Plaintiff, on the other hand, is admittedly an
illegitimate child of the late FranciscoDela Merced. Hence, as
such, he cannot represent his alleged father in the succession
of the latter in the intestate estate of the late Evarista Dela
Merced, because of the barrier in Art. 992 of the New Civil
Code which states that:
An illegitimate child has no right to inherit ab intestato from
the legitimate children and relatives of his father or mother,
nor shall such children or relatives inherit in the same manner
from the illegitimate child.
The application of Art. 992 cannot be ignored in the instant
case, it is clearly worded in such a way that there can be no
room for any doubts and ambiguities. This provision of the
law imposes a barrier between the illegitimate and the
legitimate family. x x x (Rollo, p. 87-88)
Not satisfied with the dismissal of his petition, the private
respondent appealed to the Court of Appeals.
In its Decision of October 17,1996, the Court of
Appeals reversed the decision of the trial court of origin and
ordered the petitioners to execute an amendatory agreement
which shall form part of the original settlement, so as
to include private respondent Joselito as a co-heir to the
estate of Francisco, which estate includes one-third (1/3) pro
indiviso of the latters inheritance from the deceased Evarista.
The relevant and dispositive part of the Decision of the Court
of Appeals, reads:
xxxxxxxxx
It is a basic principle embodied in Article 777, New Civil Code
that the rights to the succession are transmitted from the
moment of the death of the decedent, so that Francisco dela
Merced inherited 1/3 of his sisters estate at the moment of
the latters death. Said 1/3 of Evaristas estate formed part of
Franciscos estate which was subsequently transmitted upon
his death on March 23, 1987 to his legal heirs, among whom
is appellant as his illegitimate child. Appellant became
entitled to his share in Franciscos estate from the time of the
latters death in 1987. The extrajudicial settlement therefore
is void insofar as it deprives plaintiff-appellant of his share in
the estate of Francisco M. dela Merced. As a consequence,
the cancellation of the notice of lis pendens is not in order
because the property is directly affected.Appellant has the
right to demand a partition of his fathers estate which
includes 1/3 of the property inherited from Evarista dela
Merced.
WHEREFORE, premises considered, the appealed decision is
hereby REVERSED and SET ASIDE. Defendants-appellees are
hereby ordered to execute an amendatory
agreement/settlement to include herein plaintiff-appellant
Joselito dela Merced as co-heir to the estate of Francisco dela
Merced which includes 1/3 of the estate subject of the
questioned Deed of Extrajudicial Settlement of the Estate of
Evarista M. dela Merced dated April 20, 1989. The
amendatory agreement/settlement shall form part of the
original Extrajudicial Settlement. With costs against
defendants-appellees.
SO ORDERED. (Rollo, p. 41)
In the Petition under consideration, petitioners insist that
being an illegitimate child, private respondent Joselito
is barred from inheriting from Evarista because of the
provision of Article 992 of the New Civil Code, which lays
down an impassable barrier between the legitimate and
illegitimate families.
The Petition is devoid of merit.
Article 992 of the New Civil Code is not applicable because
involved here is not a situation where an illegitimate child
would inherit ab intestato from a legitimate sister of his
father, which is prohibited by the aforesaid provision of
law. Rather, it is a scenario where an illegitimate child
inherits from his father, the latters share in or
portion of, what the latter already inherited from the
deceased sister, Evarista.
As opined by the Court of Appeals, the law in point in the
present case is Article 777 of the New Civil Code, which
provides that the rights to succession are transmitted from
the moment of death of thedecedent.
Since Evarista died ahead of her brother Francisco, the latter
inherited a portion of the estate of the former as one of her
heirs. Subsequently, when Francisco died, his heirs, namely:
his spouse, legitimate children, and the private respondent,
Joselito, an illegitimate child, inherited his (Franciscos) share
in the estate of Evarista. It bears stressing that Joselito does
not claim to be an heir of Evarista by right of representation
but participates in his own right, as an heir of the late
Francisco, in the latters share (or portion thereof) in the
estate of Evarista.
Petitioners argue that if Joselito desires to assert successional
rights to the intestate estate of his father, the proper forum
should be in the settlement of his own fathers intestate
estate, as this Court held in the case of Gutierrez vs.
Macandog (150 SCRA 422 [1987])
Petitioners reliance on the case of Gutierrez vs. Macandog
(supra) is misplaced. The said case involved a claim for
support filed by one Elpedia Gutierrez against the estate of
the decedent, Agustin Gutierrez, Sr., when she was not even
an heir to the estate in question, at the time, and the
decedent had no obligation whatsoever to give her support.
Thus, this Court ruled that Elpedia should have asked for
support pendente lite before the Juvenile and Domestic
Relations Court in which court her husband (one of the legal
heirs of the decedent) had instituted a case for legal
separation against her on the ground of an attempt against
his life. When Mauricio (her husband) died, she should have
commenced an action for the settlement of the estate of her
husband, in which case she could receive whatever allowance
the intestate court would grant her.
The present case, however, relates to the rightful and
undisputed right of an heir to the share of his late father in
the estate of the decedent Evarista, ownership of which had
been transmitted to his father upon the death of
Evarista. There is no legal obstacle for private respondent
Joselito, admittedly the son of the late Francisco, to inherit in
his own right as an heir to his fathers estate, which estate
includes a one-third (1/3) undivided share in the estate
of Evarista.
WHEREFORE, for lack of merit, the Petition is hereby DENIED
and the Appealed Decision of the Court of Appeals
AFFIRMED in toto.
SO ORDERED.
 G.R. No. 103577. October 7, 1996]
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A.
CORONEL, ANNABELLE C. GONZALES (for herself and on
behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A.
CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS
MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and
RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as
attorney-in-fact, respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for specific
performance to compel herein petitioners (except the last
named, Catalina Balais Mabanag) to consummate the sale of
a parcel of land with its improvements located along
Roosevelt Avenue in Quezon City entered into by the parties
sometime in January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by
respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo
Coronel, et. al. (hereinafter referred to as Coronels) executed
a document entitled Receipt of Down Payment (Exh. A) in
favor of plaintiff Ramona Patricia Alcaraz (hereinafter
referred to as Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
------------------------------------------
P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog,
Quezon City, the sum of Fifty Thousand Pesos purchase price
of our inherited house and lot, covered by TCT No. 119627 of
the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00.
We bind ourselves to effect the transfer in our names from
our deceased father, Constancio P. Coronel, the transfer
certificate of title immediately upon receipt of the down
payment above-stated.
On our presentation of the TCT already in or name, We will
immediately execute the deed of absolute sale of said
property and Miss Ramona Patricia Alcaraz shall immediately
pay the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the
following:
1. Ramona will make a down payment of Fifty Thousand
(P50,000.00) pesos upon execution of the document
aforestated;
2. The Coronels will cause the transfer in their names of the
title of the property registered in the name of their deceased
father upon receipt of the Fifty Thousand (P50,000.00) Pesos
down payment;
3. Upon the transfer in their names of the subject property,
the Coronels will execute the deed of absolute sale in favor of
Ramona and the latter will pay the former the whole balance
of One Million One Hundred Ninety Thousand
(P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee
Concepcion D. Alcaraz (hereinafter referred to as
Concepcion), mother of Ramona, paid the down payment of
Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the
name of the Coronels father was transferred in their names
under TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered
by TCT No. 327043 to intervenor-appellant Catalina B.
Mabanag (hereinafter referred to as Catalina) for One Million
Five Hundred Eighty Thousand (P1,580,000.00) Pesos after
the latter has paid Three Hundred Thousand (P300,000.00)
Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract
(Exh. A) with Ramona by depositing the down payment paid
by Concepcion in the bank in trust for Ramona Patricia
Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint
for a specific performance against the Coronels and caused
the annotation of a notice of lis pendens at the back of TCT
No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice
of adverse claim covering the same property with the
Registry of Deeds of Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute
Sale over the subject property in favor of Catalina (Exh. G;
Exh. 7).
On June 5, 1985, a new title over the subject property was
issued in the name of Catalina under TCT No. 351582 (Exh. H;
Exh. 8).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court
(Branch 83, RTC, Quezon City) the parties agreed to submit
the case for decision solely on the basis of documentary
exhibits.Thus, plaintiffs therein (now private respondents)
proffered their documentary evidence accordingly marked as
Exhibits A through J, inclusive of their corresponding
submarkings. Adopting these same exhibits as their own,
then defendants (now petitioners) accordingly offered and
marked them as Exhibits 1 through 10, likewise inclusive of
their corresponding submarkings.Upon motion of the parties,
the trial court gave them thirty (30) days within which to
simultaneously submit their respective memoranda, and an
additional 15 days within which to submit their
corresponding comment or reply thereto, after which, the
case would be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution
before Judge Reynaldo Roura, who was then temporarily
detailed to preside over Branch 82 of the RTC of Quezon
City. On March 1, 1989, judgment was handed down by Judge
Roura from his regular bench at Macabebe, Pampanga for
the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby
rendered ordering defendant to execute in favor of plaintiffs
a deed of absolute sale covering that parcel of land embraced
in and covered by Transfer Certificate of Title No. 327403
(now TCT No. 331582) of the Registry of Deeds for Quezon
City, together with all the improvements existing thereon free
from all liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs
and upon receipt thereof, the plaintiffs are ordered to pay
defendants the whole balance of the purchase price
amounting to P1,190,000.00 in cash. Transfer Certificate of
Title No. 331582 of the Registry of Deeds for Quezon City in
the name of intervenor is hereby canceled and declared to be
without force and effect. Defendants and intervenor and all
other persons claiming under them are hereby ordered to
vacate the subject property and deliver possession thereof to
plaintiffs. Plaintiffs claim for damages and attorneys fees, as
well as the counterclaims of defendants and intervenors are
hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before
the new presiding judge of the Quezon City RTC but the same
was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the
decision and to render anew decision by the undersigned
Presiding Judge should be denied for the following
reasons: (1) The instant case became submitted for decision
as of April 14, 1988 when the parties terminated the
presentation of their respective documentary evidence and
when the Presiding Judge at that time was Judge Reynaldo
Roura. The fact that they were allowed to file memoranda at
some future date did not change the fact that the hearing of
the case was terminated before Judge Roura and therefore
the same should be submitted to him for decision; (2) When
the defendants and intervenor did not object to the authority
of Judge Reynaldo Roura to decide the case prior to the
rendition of the decision, when they met for the first time
before the undersigned Presiding Judge at the hearing of a
pending incident in Civil Case No. Q-46145 on November 11,
1988, they were deemed to have acquiesced thereto and
they are now estopped from questioning said authority of
Judge Roura after they received the decision in question
which happens to be adverse to them; (3) While it is true that
Judge Reynaldo Roura was merely a Judge-on-detail at this
Branch of the Court, he was in all respects the Presiding Judge
with full authority to act on any pending incident submitted
before this Court during his incumbency. When he returned
to his Official Station at Macabebe, Pampanga, he did not
lose his authority to decide or resolve cases submitted to him
for decision or resolution because he continued as Judge of
the Regional Trial Court and is of co-equal rank with the
undersigned Presiding Judge. The standing rule and
supported by jurisprudence is that a Judge to whom a case is
submitted for decision has the authority to decide the case
notwithstanding his transfer to another branch or region of
the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the
Decision dated March 1, 1989 rendered in the instant case,
resolution of which now pertains to the undersigned
Presiding Judge, after a meticulous examination of the
documentary evidence presented by the parties, she is
convinced that the Decision of March 1, 1989 is supported by
evidence and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration
and/or to Annul Decision and Render Anew Decision by the
Incumbent Presiding Judge dated March 20, 1989 is hereby
DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but
on December 16, 1991, the Court of Appeals (Buena,
Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision
fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5,
1992. The last pleading, private respondents Reply
Memorandum, was filed on September 15, 1993. The case
was, however, re-raffled to undersigned ponente only
on August 28, 1996, due to the voluntary inhibition of the
Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements
in the disquisition of respondent court in the affirmance of
the trial courts decision, we definitely find the instant petition
bereft of merit.
The heart of the controversy which is the ultimate key in the
resolution of the other issues in the case at bar is the precise
determination of the legal significance of the document
entitled Receipt of Down Payment which was offered in
evidence by both parties. There is no dispute as to the fact
that the said document embodied the binding contract
between Ramona Patricia Alcaraz on the one hand, and the
heirs of Constancio P. Coronel on the other, pertaining to a
particular house and lot covered by TCT No. 119627, as
defined in Article 1305 of the Civil Code of the Philippines
which reads as follows:
Art. 1305. A contract is a meeting of minds between two
persons whereby one binds himself, with respect to the
other, to give something or to render some service.
While, it is the position of private respondents that the
Receipt of Down Payment embodied a perfected contract of
sale, which perforce, they seek to enforce by means of an
action for specific performance, petitioners on their part
insist that what the document signified was a mere executory
contract to sell, subject to certain suspensive conditions, and
because of the absence of Ramona P. Alcaraz, who left for the
United States of America, said contract could not possibly
ripen into a contract of absolute sale.
Plainly, such variance in the contending parties contention is
brought about by the way each interprets the terms and/or
conditions set forth in said private instrument. Withal, based
on whatever relevant and admissible evidence may be
available on record, this Court, as were the courts below, is
now called upon to adjudge what the real intent of the
parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a
contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be
considered as a Contract of Sale because the first essential
element is lacking. In a contract to sell, the prospective seller
explicitly reserves the transfer of title to the prospective
buyer, meaning, the prospective seller does not as yet agree
or consent to transfer ownership of the property subject of
the contract to sell until the happening of an event, which for
present purposes we shall take as the full payment of the
purchase price. What the seller agrees or obliges himself to
do is to fulfill his promise to sell the subject property when
the entire amount of the purchase price is delivered to
him. In other words the full payment of the purchase price
partakes of a suspensive condition, the non-fulfillment of
which prevents the obligation to sell from arising and thus,
ownership is retained by the prospective seller without
further remedies by the prospective buyer. In Roque vs.
Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and
the respondent was a contract to sell where the ownership or
title is retained by the seller and is not to pass until the full
payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach,
casual or serious, but simply an event that prevented the
obligation of the vendor to convey title from acquiring
binding force.
Stated positively, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, the
prospective sellers obligation to sell the subject property by
entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil
Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor of the promise is supported by a consideration
distinct from the price.
A contract to sell may thus be defined as a bilateral contract
whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to
the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase
price.
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller
may likewise reserve title to the property subject of the sale
until the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the
contract of sale is completely abated (cf. Homesite and
Housing Corp. vs. Court of Appeals, 133 SCRA 777
[1984]). However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had
already been previous delivery of the property subject of the
sale to the buyer, ownership thereto automatically transfers
to the buyer by operation of law without any further act
having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer
although the property may have been previously delivered to
him. The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute
sale.
It is essential to distinguish between a contract to sell and a
conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the
seller contracted with, but to a third person, as in the case at
bench. In a contract to sell, there being no previous sale of
the property, a third person buying such property despite the
fulfillment of the suspensive condition such as the full
payment of the purchase price, for instance, cannot be
deemed a buyer in bad faith and the prospective buyer
cannot seek the relief of reconveyance of the property. There
is no double sale in such case. Title to the property will
transfer to the buyer after registration because there is no
defect in the owner-sellers title per se, but the latter, of
course, may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the
fulfillment of the suspensive condition, the sale becomes
absolute and this will definitely affect the sellers title
thereto. In fact, if there had been previous delivery of the
subject property, the sellers ownership or title to the
property is automatically transferred to the buyer such that,
the seller will no longer have any title to transfer to any third
person. Applying Article 1544 of the Civil Code, such second
buyer of the property who may have had actual or
constructive knowledge of such defect in the sellers title, or
at least was charged with the obligation to discover such
defect, cannot be a registrant in good faith. Such second
buyer cannot defeat the first buyers title. In case a title is
issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to
the task of deciphering the real nature of the contract
entered into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words
used therein should be given their natural and ordinary
meaning unless a technical meaning was intended (Tan vs.
Court of Appeals, 212 SCRA 586 [1992]). Thus, when
petitioners declared in the said Receipt of Down Payment
that they --
Received from Miss Ramona Patricia Alcaraz of 146 Timog,
Quezon City, the sum of Fifty Thousand Pesos purchase price
of our inherited house and lot, covered by TCT No. 1199627
of the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00.
without any reservation of title until full payment of the
entire purchase price, the natural and ordinary idea conveyed
is that they sold their property.
When the Receipt of Down payment is considered in its
entirety, it becomes more manifest that there was a clear
intent on the part of petitioners to transfer title to the buyer,
but since the transfer certificate of title was still in the name
of petitioners father, they could not fully effect such transfer
although the buyer was then willing and able to immediately
pay the purchase price. Therefore, petitioners-sellers
undertook upon receipt of the down payment from private
respondent Ramona P. Alcaraz, to cause the issuance of a
new certificate of title in their names from that of their
father, after which, they promised to present said title, now
in their names, to the latter and to execute the deed of
absolute sale whereupon, the latter shall, in turn, pay the
entire balance of the purchase price.
The agreement could not have been a contract to sell
because the sellers herein made no express reservation of
ownership or title to the subject parcel of land. Furthermore,
the circumstance which prevented the parties from entering
into an absolute contract of sale pertained to the sellers
themselves (the certificate of title was not in their names)
and not the full payment of the purchase price. Under the
established facts and circumstances of the case, the Court
may safely presume that, had the certificate of title been in
the names of petitioners-sellers at that time, there would
have been no reason why an absolute contract of sale could
not have been executed and consummated right there and
then.
Moreover, unlike in a contract to sell, petitioners in the case
at bar did not merely promise to sell the property to private
respondent upon the fulfillment of the suspensive
condition. On the contrary, having already agreed to sell the
subject property, they undertook to have the certificate of
title change to their names and immediately thereafter, to
execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell
where the sellers, after compliance by the buyer with certain
terms and conditions, promised to sell the property to the
latter.What may be perceived from the respective
undertakings of the parties to the contract is that petitioners
had already agreed to sell the house and lot they inherited
from their father, completely willing to transfer ownership of
the subject house and lot to the buyer if the documents were
then in order. It just so happened, however, that the transfer
certificate of title was then still in the name of their father. It
was more expedient to first effect the change in the
certificate of title so as to bear their names. That is why they
undertook to cause the issuance of a new transfer of the
certificate of title in their names upon receipt of the down
payment in the amount of P50,000.00. As soon as the new
certificate of title is issued in their names, petitioners were
committed to immediately execute the deed of absolute
sale. Only then will the obligation of the buyer to pay the
remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is
most commonly entered into so as to protect the seller
against a buyer who intends to buy the property in
installment by withholding ownership over the property until
the buyer effects full payment therefor, in the contract
entered into in the case at bar, the sellers were the ones who
were unable to enter into a contract of absolute sale by
reason of the fact that the certificate of title to the property
was still in the name of their father. It was the sellers in this
case who, as it were, had the impediment which prevented,
so to speak, the execution of an contract of absolute sale.
What is clearly established by the plain language of the
subject document is that when the said Receipt of Down
Payment was prepared and signed by petitioners Romulo A.
Coronel, et. al., the parties had agreed to a conditional
contract of sale, consummation of which is subject only to the
successful transfer of the certificate of title from the name of
petitioners father, Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition
was, in fact, fulfilled on February 6, 1985 (Exh. D; Exh.
4). Thus, on said date, the conditional contract of sale
between petitioners and private respondent Ramona P.
Alcaraz became obligatory, the only act required for the
consummation thereof being the delivery of the property by
means of the execution of the deed of absolute sale in a
public instrument, which petitioners unequivocally
committed themselves to do as evidenced by the Receipt of
Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil
Code, plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the object
of the contract and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing
the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights,
as well as the extinguishment or loss of those already
acquired, shall depend upon the happening of the event
which constitutes the condition.
Since the condition contemplated by the parties which is the
issuance of a certificate of title in petitioners names was
fulfilled on February 6, 1985, the respective obligations of the
parties under the contract of sale became mutually
demandable, that is, petitioners, as sellers, were obliged to
present the transfer certificate of title already in their names
to private respondent Ramona P. Alcaraz, the buyer, and to
immediately execute the deed of absolute sale, while the
buyer on her part, was obliged to forthwith pay the balance
of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page
9 of their petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to effect
the transfer in our names from our deceased father
Constancio P. Coronel, the transfer certificate of title
immediately upon receipt of the downpayment above-
stated". The sale was still subject to this suspensive
condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a
contract of sale subject to a suspensive condition. Only, they
contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of
first transferring the title to the property under their names,
there could be no perfected contract of sale. (Emphasis
supplied.)
(Ibid.)
not aware that they have set their own trap for themselves,
for Article 1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is
more controlling than these mere hypothetical arguments is
the fact that the condition herein referred to was actually and
indisputably fulfilled on February 6, 1985, when a new title
was issued in the names of petitioners as evidenced by TCT
No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as
evidenced by the document denominated as Receipt of Down
Payment (Exh. A; Exh. 1), the parties entered into a contract
of sale subject to the suspensive condition that the sellers
shall effect the issuance of new certificate title from that of
their fathers name to their names and that, on February 6,
1985, this condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187
which pertinently provides -
Art. 1187. The effects of conditional obligation to give, once
the condition has been fulfilled, shall retroact to the day of
the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine,
in each case, the retroactive effect of the condition that has
been complied with.
the rights and obligations of the parties with respect to the
perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in
time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract
on January 19, 1985 because they were then not yet the
absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of
transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of
which the property, rights and obligations to the extent and
value of the inheritance of a person are transmitted through
his death to another or others by his will or by operation of
law.
Petitioners-sellers in the case at bar being the sons and
daughters of the decedent Constancio P. Coronel are
compulsory heirs who were called to succession by operation
of law.Thus, at the point their father drew his last breath,
petitioners stepped into his shoes insofar as the subject
property is concerned, such that any rights or obligations
pertaining thereto became binding and enforceable upon
them. It is expressly provided that rights to the succession are
transmitted from the moment of death of the decedent
(Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850
[1952]).
Be it also noted that petitioners claim that succession may
not be declared unless the creditors have been paid is
rendered moot by the fact that they were able to effect the
transfer of the title to the property from the decedents name
to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their
supposed lack of capacity to enter into an agreement at that
time and they cannot be allowed to now take a posture
contrary to that which they took when they entered into the
agreement with private respondent Ramona P. Alcaraz. The
Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation
is rendered conclusive upon the person making it, and cannot
be denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the
subject property at the time of sale, petitioners cannot claim
now that they were not yet the absolute owners thereof at
that time.
Petitioners also contend that although there was in fact a
perfected contract of sale between them and Ramona P.
Alcaraz, the latter breach her reciprocal obligation when she
rendered impossible the consummation thereof by going to
the United States of America, without leaving her address,
telephone number, and Special Power of Attorney
(Paragraphs 14 and 15, Answer with Compulsory
Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43),
for which reason, so petitioners conclude, they were correct
in unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid
rescission of the contract of sale in the instant case. We note
that these supposed grounds for petitioners rescission, are
mere allegations found only in their responsive pleadings,
which by express provision of the rules, are deemed
controverted even if no reply is filed by the plaintiffs (Sec. 11,
Rule 6, Revised Rules of Court). The records are absolutely
bereft of any supporting evidence to substantiate petitioners
allegations. We have stressed time and again that allegations
must be proven by sufficient evidence (Ng Cho Cio vs. Ng
Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598
[1961]). Mere allegation is not an evidence (Lagasca vs. De
Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the
United States of America on February 6, 1985, we cannot
justify petitioners-sellers act of unilaterally and extrajudicially
rescinding the contract of sale, there being no express
stipulation authorizing the sellers to extrajudicially rescind
the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988];
Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged
absence of Ramona P. Alcaraz because although the evidence
on record shows that the sale was in the name of Ramona P.
Alcaraz as the buyer, the sellers had been dealing with
Concepcion D. Alcaraz, Ramonas mother, who had acted for
and in behalf of her daughter, if not also in her own
behalf. Indeed, the down payment was made by Concepcion
D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for
and in behalf of Ramona P. Alcaraz. There is no evidence
showing that petitioners ever questioned Concepcions
authority to represent Ramona P. Alcaraz when they
accepted her personal check. Neither did they raise any
objection as regards payment being effected by a third
person. Accordingly, as far as petitioners are concerned, the
physical absence of Ramona P. Alcaraz is not a ground to
rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be
in default, insofar as her obligation to pay the full purchase
price is concerned. Petitioners who are precluded from
setting up the defense of the physical absence of Ramona P.
Alcaraz as above-explained offered no proof whatsoever to
show that they actually presented the new transfer certificate
of title in their names and signified their willingness and
readiness to execute the deed of absolute sale in accordance
with their agreement. Ramonas corresponding obligation to
pay the balance of the purchase price in the amount
of P1,190,000.00 (as buyer) never became due and
demandable and, therefore, she cannot be deemed to have
been in default.
Article 1169 of the Civil Code defines when a party in a
contract involving reciprocal obligations may be considered in
default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur
in delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment
one of the parties fulfill his obligation, delay by the other
begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the
contract of sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other
petitioner, Catalina B. Mabanag, gave rise to a case of double
sale where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall belong
to the person acquiring it who in good faith first recorded it in
the Registry of Property.
Should there be no inscription, the ownership shall pertain to
the person who in good faith was first in the possession; and,
in the absence thereof to the person who presents the oldest
title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale
dated April 25, 1985 as proof of the second contract of sale
was registered with the Registry of Deeds of Quezon City
giving rise to the issuance of a new certificate of title in the
name of Catalina B. Mabanag on June 5, 1985. Thus, the
second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or
ownership to pass to the buyer, the exceptions being: (a)
when the second buyer, in good faith, registers the sale
ahead of the first buyer, and (b) should there be no
inscription by either of the two buyers, when the second
buyer, in good faith, acquires possession of the property
ahead of the first buyer. Unless, the second buyer satisfies
these requirements, title or ownership will not transfer to
him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority
on the subject, now a distinguished member of the Court,
Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in
time, stronger in right). Knowledge by the first buyer of the
second sale cannot defeat the first buyers rights except when
the second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge
gained by the second buyer of the first sale defeats his rights
even if he is first to register, since knowledge taints his
registration with bad faith (see also Astorga vs. Court of
Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs.
Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was
held that it is essential, to merit the protection of Art. 1544,
second paragraph, that the second realty buyer must act in
good faith in registering his deed of sale (citing Carbonell vs.
Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No.
95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993
Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case
at bar was annotated on the title of the subject property only
on February 22, 1985, whereas, the second sale between
petitioners Coronels and petitioner Mabanag was supposedly
perfected prior thereto or on February 18, 1985. The idea
conveyed is that at the time petitioner Mabanag, the second
buyer, bought the property under a clean title, she was
unaware of any adverse claim or previous sale, for which
reason she is a buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality
is not whether or not the second buyer in good faith but
whether or not said second buyer registers such second sale
in good faith, that is, without knowledge of any defect in the
title of the property sold.

As clearly borne out by the evidence in this case, petitioner

Mabanag could not have in good faith, registered the sale
entered into on February 18, 1985 because as early as
February 22, 1985, a notice of lis pendens had been
annotated on the transfer certificate of title in the names of
petitioners, whereas petitioner Mabanag registered the said
sale sometime in April, 1985. At the time of registration,
therefore, petitioner Mabanag knew that the same property
had already been previously sold to private respondents, or,
at least, she was charged with knowledge that a previous
buyer is claiming title to the same property. Petitioner
Mabanag cannot close her eyes to the defect in petitioners
title to the property at the time of the registration of the
property.

This Court had occasions to rule that:

If a vendee in a double sale registers the sale after he has

acquired knowledge that there was a previous sale of the
same property to a third party or that another person claims
said property in a previous sale, the registration will
constitute a registration in bad faith and will not confer upon
him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing
Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs.
Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)

Thus, the sale of the subject parcel of land between

petitioners and Ramona P. Alcaraz, perfected on February 6,
1985, prior to that between petitioners and Catalina B.
Mabanag on February 18, 1985, was correctly upheld by both
the courts below.

Although there may be ample indications that there was in

fact an agency between Ramona as principal and Concepcion,
her mother, as agent insofar as the subject contract of sale is
concerned, the issue of whether or not Concepcion was also
acting in her own behalf as a co-buyer is not squarely raised
in the instant petition, nor in such assumption disputed
between mother and daughter. Thus, We will not touch this
issue and no longer disturb the lower courts ruling on this
point.

WHEREFORE, premises considered, the instant petition is

hereby DISMISSED and the appealed judgment AFFIRMED.
 G.R. No. 61584 November 25, 1992
DONATO S. PAULMITAN, JULIANA P. FANESA and RODOLFO
FANESA, petitioners,
vs.
COURT OF APPEALS, ALICIO PAULMITAN, ELENA
PAULMITAN, ABELINO PAULMITAN, ANITA PAULMITAN,
BAKING PAULMITAN, ADELINA PAULMITAN and ANITO
PAULMITAN, respondents.
ROMERO, J.:
This is a petition for review on certiorari seeking the reversal
of the decision 1 of the Court of Appeals, dated July 14, 1982
in CA-G.R. No. 62255-R entitled "Alicio Paulmitan, et al. v.
Donato Sagario Paulmitan, et al." which affirmed the
decision 2 of the then Court of First Instance (now RTC) of
Negros Occidental, 12th Judicial District, Branch IV, Bacolod
City, in Civil Case No. 11770.
The antecedent facts are as follows:
Agatona Sagario Paulmitan, who died sometime in
1953, 3 left the two following parcels of land located in the
Province of Negros Occidental: (1) Lot No. 757 with an area of
1,946 square meters covered by Original Certificate of Title
(OCT) No. RO-8376; and (2) Lot No. 1091 with an area of
69,080 square meters and covered by OCT No. RO-11653.
From her marriage with Ciriaco Paulmitan, who is also now
deceased, Agatona begot two legitimate children, namely:
Pascual Paulmitan, who also died in 1953, 4 apparently
shortly after his mother passed away, and Donato Paulmitan,
who is one of the petitioners. Petitioner Juliana P. Fanesa is
Donato's daughter while the third petitioner, Rodolfo Fanes,
is Juliana's husband. Pascual Paulmitan, the other son of
Agatona Sagario, is survived by the respondents, who are his
children, name: Alicio, Elena, Abelino, Adelina, Anita, Baking
and Anito, all surnamed Paulmitan.
Until 1963, the estate of Agatona Sagario Paulmitan remained
unsettled and the titles to the two lots mentioned above
remained in the name of Agatona. However, on August 11,
1963, petitioner Donato Paulmitan executed an Affidavit of
Declaration of Heirship, extrajudicially adjudicating unto
himself Lot No. 757 based on the claim that he is the only
surviving heir of Agatona Sagario. The affidavit was filed with
the Register of Deeds of Negros Occidental on August 20,
1963, cancelled OCT No. RO-8376 in the name of Agatona
Sagario and issued Transfer Certificate of Title (TCT) No.
35979 in Donato's name.
As regards Lot No. 1091, Donato executed on May 28, 1974 a
Deed of Sale over the same in favor of petitioner Juliana P.
Fanesa, his daughter. 5
In the meantime, sometime in 1952, for non-payment of
taxes, Lot No. 1091 was forfeited and sold at a public auction,
with the Provincial Government of Negros Occidental being
the buyer. A Certificate of Sale over the land was executed by
the Provincial Treasurer in favor of the Provincial Board of
Negros Occidental. 6
On May 29, 1974, Juliana P. Fanesa redeemed the property
from the Provincial Government of Negros Occidental for the
amount of P2,959.09. 7
On learning of these transactions, respondents children of
the late Pascual Paulmitan filed on January 18, 1975 with the
Court of First Instance of Negros Occidental a Complaint
against petitioners to partition the properties plus damages.
Petitioners set up the defense of prescription with respect to
Lot No. 757 as an affirmative defense, contending that the
Complaint was filed more than eleven years after the
issuance of a transfer certificate of title to Donato Paulmitan
over the land as consequence of the registration with the
Register of Deeds, of Donato's affidavit extrajudicially
adjudicating unto himself Lot No. 757. As regards Lot No.
1091, petitioner Juliana P. Fanesa claimed in her Answer to
the Complaint that she acquired exclusive ownership thereof
not only by means of a deed of sale executed in her favor by
her father, petitioner Donato Paulmitan, but also by way of
redemption from the Provincial Government of Negros
Occidental.
Acting on the petitioners' affirmative defense of prescription
with respect to Lot No. 757, the trial court issued an order
dated April 22, 1976 dismissing the complaint as to the said
property upon finding merit in petitioners' affirmative
defense. This order, which is not the object of the present
petition, has become final after respondents' failure to appeal
therefrom.
Trial proceeded with respect to Lot No. 1091. In a decision
dated May 20, 1977, the trial court decided in favor of
respondents as to Lot No. 1091. According to the trial court,
the respondents, as descendants of Agatona Sagario
Paulmitan were entitled to one-half (1/2) of Lot No. 1091, pro
indiviso. The sale by petitioner Donato Paulmitan to his
daughter, petitioner Juliana P. Fanesa, did not prejudice their
rights. And the repurchase by Juliana P. Fanesa of the land
from the Provincial Government of Negros Occidental did not
vest in Juliana exclusive ownership over the entire land but
only gave her the right to be reimbursed for the amount paid
to redeem the property. The trial court ordered the partition
of the land and directed petitioners Donato Paulmitan and
Juliana P. Fanesa to pay private respondents certain amounts
representing the latter's share in the fruits of the land. On the
other hand, respondents were directed to pay P1,479.55 to
Juliana P. Fanesa as their share in the redemption price paid
by Fanesa to the Provincial Government of Negros
Occidental. The dispositive portion of the trial court's decision
reads:
WHEREFORE, judgment is hereby rendered on the second
cause of action pleaded in the complain as follows:
1. The deed of sale (Exh. "F") dated May 28, 1974 is valid
insofar as the one-half undivided portion of Lot 1091 is
concerned as to vest ownership over said half portion in favor
of defendant Juliana Fanesa and her husband Rodolfo Fanesa,
while the remaining half shall belong to plaintiffs, pro-
indiviso;
2. Lot 1091, Cadastral Survey of Pontevedra, Province of
Negros Occidental, now covered by TCT No. RO-11653 (N.A.),
is ordered partitioned. The parties must proceed to an actual
partition by property instrument of partition, submitting the
corresponding subdivision within sixty (60) days from finality
of this decision, and should they fail to agree, commissioners
of partition may be appointed by the Court;
3. Pending the physical partition, the Register of Deeds of
Negros Occidental is ordered to cancel Original Certificate of
Title No. RO-11653 (N.A.) covering Lot 1091, Pontevedra
Cadastre, and to issue in lieu thereof a new certificate of title
in the name of plaintiffs and defendants, one-half portion
each,pro-indiviso, as indicated in paragraph 1 above;
4. Plaintiffs are ordered to pay, jointly and severally,
defendant Juliana Fanesa the amount of P1,479.55 with
interest at the legal rate from May 28, 1974 until paid;
5 Defendants Donato Sagario Paulmitan and Juliana
Paulmitan Fanesa are ordered to account to plaintiffs and to
pay them, jointly and severally, the value of the produce from
Lot 1091 representing plaintiffs' share in the amount of
P5,000.00 per year from 1966 up to the time of actual
partition of the property, and to pay them the sum of
P2,000.00 as attorney's fees as well as the costs of the suit.
xxx xxx xxx
On appeal, the Court of Appeals affirmed the trial court's
decision. Hence this petition.
To determine the rights and obligations of the parties to the
land in question, it is well to review, initially, the relatives
who survived the decedent Agatona Sagario Paulmitan. When
Agatona died in 1953, she was survived by two (2) sons,
Donato and Pascual. A few months later in the same year,
Pascual died, leaving seven children, the private respondents.
On the other had, Donato's sole offspring was petitioner
Juliana P. Fanesa.
At the time of the relevant transactions over the properties of
decedent Agatona Sagario Paulmitan, her son Pascual had
died, survived by respondents, his children. It is, thus,
tempting to apply the principles pertaining to the right of
representation as regards respondents. It must, however, be
borne in mind that Pascual did no predecease his
mother, 8 thus precluding the operation of the provisions in
the Civil Code on the right of representation 9 with respect to
his children, the respondents. When Agatona Sagario
Paulmitan died intestate in 1952, her two (2) sons Donato
and Pascual were still alive. Since it is well-settled by virtue of
Article 777 of the Civil Code that "[t]he rights to the
succession are transmitted from the moment of the death of
the decedent," 10 the right of ownership, not only of Donato
but also of Pascual, over their respective shares in the
inheritance was automatically and by operation of law vested
in them in 1953 when their mother died intestate. At that
stage, the children of Donato and Pascual did not yet have
any right over the inheritance since "[i]n every inheritance,
the relative nearest in degree excludes the more distant
ones." 11 Donato and Pascual excluded their children as to
the right to inherit from Agatona Sagario Paulmitan, their
mother.
From the time of the death of Agatona Sagario Paulmitan to
the subsequent passing away of her son Pascual in 1953, the
estate remained unpartitioned. Article 1078 of the Civil Code
provides: "Where there are two or more heirs, the whole
estate of the decedent is, before its partition, owned in
common by such heirs, subject to the payment of debts of
the deceased." 12 Donato and Pascual Paulmitan were,
therefore, co-owners of the estate left by their mother as no
partition was ever made.
When Pascual Paulmitan died intestate in 1953, his children,
the respondents, succeeded him in the co-ownership of the
disputed property. Pascual Paulmitan's right of ownership
over an undivided portion of the property passed on to his
children, who, from the time of Pascual's death, became co-
owners with their uncle Donato over the disputed decedent
estate.
Petitioner Juliana P. Fanesa claims ownership over Lot No.
1091 by virtue of two transactions, namely: (a) the sale made
in her favor by her father Donato Paulmitan; and (b) her
redemption of the land from the Provincial of Negros
Occidental after it was forfeited for non-payment of taxes.
When Donato Paulmitan sold on May 28, 1974 Lot No. 1091
to his daughter Juliana P. Fanesa, he was only a co-owner
with respondents and as such, he could only sell that portion
which may be allotted to him upon termination of the co-
ownership. 13 The sale did not prejudice the rights of
respondents to one half (1/2) undivided share of the land
which they inherited from their father. It did not vest
ownership in the entire land with the buyer but transferred
only the seller's pro-indiviso share in the property 14 and
consequently made the buyer a co-owner of the land until it
is partitioned. In Bailon-Casilao v. Court of Appeals, 15 the
Court, through Justice Irene R. Cortes, outlined the effects of
a sale by one co-owner without the consent of all the co-
owners, thus:
The rights of a co-owner of a certain property are clearly
specified in Article 493 of the Civil Code, Thus:
Art. 493. Each co-owner shall have the full ownership of his
part and of the fruits and benefits pertaining thereto, and he
may therefore alienate, assign or mortgage it and even
substitute another person its enjoyment, except when
personal rights are involved. But the effect of the alienation
or mortgage, with respect to the co-owners, shall be limited
to the portion which may be allotted to him in the division
upon the termination of the co-ownership. [Emphasis
supplied.]
As early as 1923, this Court has ruled that even if a co-owner
sells the whole property as his, the sale will affect only his
own share but not those of the other co-owners who did not
consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320
(1923)]. This is because under the aforementioned codal
provision, the sale or other disposition affects only his
undivided share and the transferee gets only what would
correspond to his grantor in the partition of the thing owned Art. 488. Each co-owner shall have a right to compel the
in common [Ramirez v. Bautista, 14 Phil. 528 (1909)]. other co-owners to contribute to the expenses of
Consequently, by virtue of the sales made by Rosalia and preservation of the thing or right owned in common and to
Gaudencio Bailon which are valid with respect to their the taxes. Any one of the latter may exempt himself from this
proportionate shares, and the subsequent transfers which obligation by renouncing so much of his undivided interest as
culminated in the sale to private respondent Celestino Afable, may be equivalent to his share of the expenses and taxes. No
the said Afable thereby became a co-owner of the disputed such waiver shall be made if it is prejudicial to the co-
parcel of land as correctly held by the lower court since the ownership.
sales produced the effect of substituting the buyers in the
The result is that the property remains to be in a condition of
enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)].
co-ownership. While a vendee a retro, under Article 1613 of
From the foregoing, it may be deduced that since a co-owner the Code, "may not be compelled to consent to a partial
is entitled to sell his undivided share, a sale of the entire redemption," the redemption by one co-heir or co-owner of
property by one co-owner without the consent of the other the property in its totality does not vest in him ownership
co-owners is not null and void. However, only the rights of over it. Failure on the part of all the co-owners to redeem it
the co-owner-seller are transferred, thereby making the entitles the vendee a retro to retain the property and
buyer a co-owner of the property. consolidate title thereto in his name (Supra, art. 1607). But
the provision does not give to the redeeming co-owner the
Applying this principle to the case at bar, the sale by
right to the entire property. It does not provide for a mode of
petitioner Donato Paulmitan of the land to his daughter,
terminating a co-ownership.
petitioner Juliana P. Fanesa, did not give to the latter
ownership over the entire land but merely transferred to her Although petitioner Fanesa did not acquire ownership over
the one half (1/2) undivided share of her father, thus making the entire lot by virtue of the redemption she made,
her the co-owner of the land in question with the nevertheless, she did acquire the right to reimbursed for half
respondents, her first cousins. of the redemption price she paid to the Provincial
Government of Negros Occidental on behalf of her co-
Petitioner Juliana P. Fanesa also claims ownership of the
owners. Until reimbursed, Fanesa hold a lien upon the subject
entire property by virtue of the fact that when the Provincial
property for the amount due her. 17
Government of Negros Occidental bought the land after it
was forfeited for non-payment of taxes, she redeemed it. Finally, petitioners dispute the order of the trial court, which
the Court of Appeals affirmed, for them to pay private
The contention is without merit.
respondents P5,000.00 per year from 1966 until the partition
The redemption of the land made by Fanesa did not of the estate which represents the share of private
terminate the co-ownership nor give her title to the entire respondents in the fruits of the land. According to petitioners,
land subject of the co-ownership. Speaking on the same issue the land is being leased for P2,000.00 per year only. This
raised by petitioners, the Court, in Adille v. Court of assigned error, however raises a factual question. The settled
Appeals, 16 resolved the same with the following rule is that only questions of law may be raised in a petition
pronouncements: for review. As a general rule, findings of fact made by the trial
court and the Court of Appeals are final and conclusive and
The petition raises a purely legal issue: May a co-owner
cannot be reviewed on appeal. 18
acquire exclusive ownership over the property held in
common? WHEREFORE, the petition is DENIED and the decision of the
Court of Appeals AFFIRMED.
Essentially, it is the petitioners' contention that the property
subject of dispute devolved upon him upon the failure of his SO ORDERED.
co-heirs to join him in its redemption within the period
required by law. He relies on the provisions of Article 1515 of
the old Civil Code, Article 1613 of the present Code, giving the
vendee a retro the right to demand redemption of the entire
property.
There is no merit in this petition.
The right of repurchase may be exercised by co-owner with
respect to his share alone (CIVIL CODE, art. 1612, CIVIL CODE
(1889), art. (1514.). While the records show that petitioner
redeemed the property in its entirety, shouldering the
expenses therefor, that did not make him the owner of all of
it. In other words, it did not put to end the existing state of
co-ownership (Supra, Art. 489). There is no doubt that
redemption of property entails a necessary expense. Under
the Civil Code:

G.R. No. 129008. January 13, 2004]
TEODORA A. RIOFERIO, VERONICA O. EVANGELISTA assisted
by her husband ZALDY EVANGELISTA, ALBERTO ORFINADA,
and ROWENA O. UNGOS, assisted by her husband BEDA
UNGOS, petitioners,
vs.
COURT OF APPEALS, ESPERANZA P. ORFINADA, LOURDES P.
ORFINADA, ALFONSO ORFINADA, NANCY P. ORFINADA,
ALFONSO JAMES P. ORFINADA, CHRISTOPHER P. ORFINADA
and ANGELO P. ORFINADA,respondents.
DECISION
TINGA, J.:
Whether the heirs may bring suit to recover property of the
estate pending the appointment of an administrator is the
issue in this case.
This Petition for Review on Certiorari, under Rule 45 of the
Rules of Court, seeks to set aside the Decision[1] of the Court
of Appeals in CA-G.R. SP No. 42053 dated January 31, 1997,
as well as its Resolution[2] dated March 26, 1997, denying
petitioners motion for reconsideration.
On May 13, 1995, Alfonso P. Orfinada, Jr. died without a will
in Angeles City leaving several personal and real properties
located in Angeles City, Dagupan City and Kalookan
City.[3] He also left a widow, respondent Esperanza P.
Orfinada, whom he married on July 11, 1960 and with whom
he had seven children who are the herein respondents,
namely: Lourdes P. Orfinada, Alfonso Clyde P. Orfinada,
Nancy P. Orfinada-Happenden, Alfonso James P. Orfinada,
Christopher P. Orfinada, Alfonso Mike P. Orfinada (deceased)
and Angelo P. Orfinada.[4]
Apart from the respondents, the demise of the decedent left
in mourning his paramour and their children. They are
petitioner Teodora Riofero, who became a part of his life
when he entered into an extra-marital relationship with her
during the subsistence of his marriage to Esperanza
sometime in 1965, and co-petitioners Veronica[5], Alberto
and Rowena.[6]
On November 14, 1995, respondents Alfonso James and
Lourdes Orfinada discovered that on June 29, 1995,
petitioner Teodora Rioferio
and her children executed an Extrajudicial Settlement of
Estate of a Deceased Person with Quitclaim involving the
properties of the estate of the decedent located in Dagupan
City and that accordingly, the Registry of Deeds in Dagupan
issued Certificates of Titles Nos. 63983, 63984 and 63985 in
favor of petitioners Teodora Rioferio, Veronica Orfinada-
Evangelista, Alberto Orfinada and Rowena Orfinada-Ungos.
Respondents also found out that petitioners were able to
obtain a loan of P700,000.00 from the Rural Bank of
Mangaldan Inc. by executing a Real Estate Mortgage over the
properties subject of the extra-judicial settlement.[7]
On December 1, 1995, respondent Alfonso Clyde P. Orfinada
III filed a Petition for Letters of Administration docketed as
S.P. Case No. 5118 before the Regional Trial Court of Angeles
City, praying that letters of administration encompassing the
estate of Alfonso P. Orfinada, Jr. be issued to him.[8]
On December 4, 1995, respondents filed a Complaint for the
Annulment/Rescission of Extra Judicial Settlement of Estate
of a Deceased Person with Quitclaim, Real Estate Mortgage
and Cancellation of Transfer Certificate of Titles with Nos.
63983, 63985 and 63984 and Other Related Documents with
Damages against petitioners, the Rural Bank of Mangaldan,
Inc. and the Register of Deeds of Dagupan City before the
Regional Trial Court, Branch 42, Dagupan City.[9]
On February 5, 1996, petitioners filed their Answer to the
aforesaid complaint interposing the defense that the
property subject of the contested deed of extra-judicial
settlement pertained to the properties originally belonging to
the parents of Teodora Riofero[10] and that the titles thereof
were delivered to her as an advance inheritance but the
decedent had managed to register them in his
name.[11] Petitioners also raised the affirmative defense that
respondents are not the real parties-in-interest but rather the
Estate of Alfonso O. Orfinada, Jr. in view of the pendency of
the administration proceedings.[12] On April 29, 1996,
petitioners filed a Motion to Set Affirmative Defenses for
Hearing[13] on the aforesaid ground.
The lower court denied the motion in its Order[14] dated
June 27, 1996, on the ground that respondents, as heirs, are
the real parties-in-interest especially in the absence of an
administrator who is yet to be appointed in S.P. Case No.
5118. Petitioners moved for its reconsideration[15] but the
motion was likewise denied.[16]
This prompted petitioners to file before the Court of Appeals
their Petition for Certiorari under Rule 65 of the Rules of
Court docketed as CA G.R. S.P. No. 42053.[17] Petitioners
averred that the RTC committed grave abuse of discretion in
issuing the assailed order which denied the dismissal of the
case on the ground that the proper party to file the complaint
for the annulment of the extrajudicial settlement of the
estate of the deceased is the estate of the decedent and not
the respondents.[18]
The Court of Appeals rendered the
assailed Decision[19] dated January 31, 1997, stating that it
discerned no grave abuse of discretion amounting to lack or
excess of jurisdiction by the public respondent judge when he
denied petitioners motion to set affirmative defenses for
hearing in view of its discretionary nature.
A Motion for Reconsideration was filed by petitioners but it
was denied.[20] Hence, the petition before this Court.
The issue presented by the petitioners before this Court is
whether the heirs have legal standing to prosecute the rights
belonging to the deceased subsequent to the
commencement of the administration proceedings.[21]
Petitioners vehemently fault the lower court for denying their
motion to set the case for preliminary hearing on their
affirmative defense that the proper party to bring the action
is the estate of the decedent and not the respondents. It
must be stressed that the holding of a preliminary hearing on
an affirmative defense lies in the discretion of the court. This
is clear from the Rules of Court, thus:
SEC. 5. Pleadings grounds as affirmative defenses.- Any of the
grounds for dismissal provided for in this rule, except
improper venue, may be pleaded as an affirmative defense,
and a preliminary hearing may be had thereon as if a motion
to dismiss had been filed.[22] (Emphasis supplied.)
Certainly, the incorporation of the word may in the provision
is clearly indicative of the optional character of the
preliminary hearing. The word denotes discretion and cannot
be construed as having a mandatory effect.[23] Subsequently,
the electivity of the proceeding was firmed up beyond cavil
by the 1997 Rules of Civil Procedure with the inclusion of the
phrase in the discretion of the Court, apart from the
retention of the word may in Section 6,[24] in Rule 16
thereof.
Just as no blame of abuse of discretion can be laid on the
lower courts doorstep for not hearing petitioners affirmative
defense, it cannot likewise be faulted for recognizing the legal
standing of the respondents as heirs to bring the suit.
Pending the filing of administration proceedings, the heirs
without doubt have legal personality to bring suit in behalf of
the estate of the decedent in accordance with the provision
of Article 777 of the New Civil Code that (t)he rights to
succession are transmitted from the moment of the death of
the decedent. The provision in turn is the foundation of the
principle that the property, rights and obligations to the
extent and value of the inheritance of a person are
transmitted through his death to another or others by his will
or by operation of law.[25]
Even if administration proceedings have already been
commenced, the heirs may still bring the suit if an
administrator has not yet been appointed. This is the proper
modality despite the total lack of advertence to the heirs in
the rules on party representation, namely Section 3, Rule
3[26] and Section 2, Rule 87[27] of the Rules of Court. In fact,
in the case of Gochan v. Young,[28] this Court recognized the
legal standing of the heirs to represent the rights and
properties of the decedent under administration pending the
appointment of an administrator. Thus:
The above-quoted rules,[29] while permitting an executor or
administrator to represent or to bring suits on behalf of the
deceased, do not prohibit the heirs from representing the
deceased. These rules are easily applicable to cases in which
an administrator has already been appointed. But no rule
categorically addresses the situation in which special
proceedings for the settlement of an estate have already
been instituted, yet no administrator has been appointed. In
such instances, the heirs cannot be expected to wait for the
appointment of an administrator; then wait further to see if
the administrator appointed would care enough to file a suit
to protect the rights and the interests of the deceased; and in
the meantime do nothing while the rights and the properties
of the decedent are violated or dissipated.
Even if there is an appointed administrator, jurisprudence
recognizes two exceptions, viz: (1) if the executor or
administrator is unwilling or refuses to bring suit;[30] and (2)
when the administrator is alleged to have participated in the
act complained of[31] and he is made a party
defendant.[32] Evidently, the necessity for the heirs to seek
judicial relief to recover property of the estate is as
compelling when there is no appointed administrator, if not
more, as where there is an appointed administrator but he is
either disinclined to bring suit or is one of the guilty parties
himself.
All told, therefore, the rule that the heirs have no legal
standing to sue for the recovery of property of the estate
during the pendency of administration proceedings has three
exceptions, the third being when there is no appointed
administrator such as in this case.
As the appellate court did not commit an error of law in
upholding the order of the lower court, recourse to this Court
is not warranted.
WHEREFORE, the petition for review is DENIED. The assailed
decision and resolution of the Court of Appeals are hereby
AFFIRMED. No costs.
SO ORDERED.
 G.R. No. 126334. November 23, 2001]
EMILIO EMNACE, petitioner,
vs.
COURT OF APPEALS, ESTATE OF VICENTE TABANAO,
SHERWIN TABANAO, VICENTE WILLIAM TABANAO, JANETTE
TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA,
ROSELA TABANAO and VINCENT TABANAO, respondents.
DECISION
YNARES-SANTIAGO, J.:
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto
Divinagracia were partners in a business concern known as
Ma. Nelma Fishing Industry. Sometime in January of 1986,
they decided to dissolve their partnership and executed an
agreement of partition and distribution of the partnership
properties among them, consequent to Jacinto Divinagracias
withdrawal from the partnership.[1] Among the assets to be
distributed were five (5) fishing boats, six (6) vehicles, two (2)
parcels of land located at Sto. Nio and Talisay, Negros
Occidental, and cash deposits in the local branches of the
Bank of the Philippine Islands and Prudential Bank.
Throughout the existence of the partnership, and even after
Vicente Tabanaos untimely demise in 1994, petitioner failed
to submit to Tabanaos heirs any statement of assets and
liabilities of the partnership, and to render an accounting of
the partnerships finances. Petitioner also reneged on his
promise to turn over to Tabanaos heirs the deceaseds 1/3
share in the total assets of the partnership, amounting to
P30,000,000.00, or the sum of P10,000,000.00, despite
formal demand for payment thereof.[2]
Consequently, Tabanaos heirs, respondents herein, filed
against petitioner an action for accounting, payment of
shares, division of assets and damages.[3] In their complaint,
respondents prayed as follows:
1. Defendant be ordered to render the proper accounting of
all the assets and liabilities of the partnership at bar; and
2. After due notice and hearing defendant be ordered to
pay/remit/deliver/surrender/yield to the plaintiffs the
following:
A. No less than One Third (1/3) of the assets, properties,
dividends, cash, land(s), fishing vessels, trucks, motor
vehicles, and other forms and substance of treasures which
belong and/or should belong, had accrued and/or must
accrue to the partnership;
B. No less than Two Hundred Thousand Pesos (P200,000.00)
as moral damages;
C. Attorneys fees equivalent to Thirty Percent (30%) of the
entire share/amount/award which the Honorable Court may
resolve the plaintiffs as entitled to plus P1,000.00 for every
appearance in court.[4]
Petitioner filed a motion to dismiss the complaint on the
grounds of improper venue, lack of jurisdiction over the
nature of the action or suit, and lack of capacity of the estate
of Tabanao to sue.[5] On August 30, 1994, the trial court
denied the motion to dismiss. It held that venue was properly
laid because, while realties were involved, the action was
directed against a particular person on the basis of his
personal liability; hence, the action is not only a personal
action but also an action in personam. As regards petitioners
argument of lack of jurisdiction over the action because the
prescribed docket fee was not paid considering the huge
amount involved in the claim, the trial court noted that a
request for accounting was made in order that the exact
value of the partnership may be ascertained and, thus, the
correct docket fee may be paid. Finally, the trial court held
that the heirs of Tabanao had a right to sue in their own
names, in view of the provision of Article 777 of the Civil
Code, which states that the rights to the succession are
transmitted from the moment of the death of the
decedent.[6]
The following day, respondents filed an amended
complaint,[7] incorporating the additional prayer that
petitioner be ordered to sell all (the partnerships) assets and
thereafter pay/remit/deliver/surrender/yield to the plaintiffs
their corresponding share in the proceeds thereof. In due
time, petitioner filed a manifestation and motion to
dismiss,[8] arguing that the trial court did not acquire
jurisdiction over the case due to the plaintiffs failure to pay
the proper docket fees. Further, in a supplement to his
motion to dismiss,[9] petitioner also raised prescription as an
additional ground warranting the outright dismissal of the
complaint.
On June 15, 1995, the trial court issued an Order,[10] denying
the motion to dismiss inasmuch as the grounds raised therein
were basically the same as the earlier motion to dismiss
which has been denied.Anent the issue of prescription, the
trial court ruled that prescription begins to run only upon the
dissolution of the partnership when the final accounting is
done. Hence, prescription has not set in the absence of a final
accounting. Moreover, an action based on a written contract
prescribes in ten years from the time the right of action
accrues.
Petitioner filed a petition for certiorari before the Court of
Appeals,[11] raising the following issues:
I. Whether or not respondent Judge acted without
jurisdiction or with grave abuse of discretion in taking
cognizance of a case despite the failure to pay the required
docket fee;
II. Whether or not respondent Judge acted without
jurisdiction or with grave abuse of discretion in insisting to try
the case which involve (sic) a parcel of land situated outside
of its territorial jurisdiction;
III. Whether or not respondent Judge acted without
jurisdiction or with grave abuse of discretion in allowing the
estate of the deceased to appear as party plaintiff, when
there is no intestate case and filed by one who was never
appointed by the court as administratrix of the estates; and
IV. Whether or not respondent Judge acted without
jurisdiction or with grave abuse of discretion in not dismissing
the case on the ground of prescription.
On August 8, 1996, the Court of Appeals rendered the
assailed decision,[12] dismissing the petition for certiorari,
upon a finding that no grave abuse of discretion amounting to
lack or excess of jurisdiction was committed by the trial court
in issuing the questioned orders denying petitioners motions
to dismiss.
Not satisfied, petitioner filed the instant petition for review,
raising the same issues resolved by the Court of Appeals,
namely:
I. Failure to pay the proper docket fee;
II. Parcel of land subject of the case pending before the trial
court is outside the said courts territorial jurisdiction;
III. Lack of capacity to sue on the part of plaintiff heirs of
Vicente Tabanao; and
IV. Prescription of the plaintiff heirs cause of action.
It can be readily seen that respondents primary and ultimate
objective in instituting the action below was to recover the
decedents 1/3 share in the partnerships assets. While they
ask for an accounting of the partnerships assets and finances,
what they are actually asking is for the trial court to compel
petitioner to pay and turn over their share, or the equivalent
value thereof, from the proceeds of the sale of the
partnership assets. They also assert that until and unless a
proper accounting is done, the exact value of the
partnerships assets, as well as their corresponding share
therein, cannot be ascertained.Consequently, they feel
justified in not having paid the commensurate docket fee as
required by the Rules of Court.
We do not agree. The trial court does not have to employ
guesswork in ascertaining the estimated value of the
partnerships assets, for respondents themselves voluntarily
pegged the worth thereof at Thirty Million Pesos
(P30,000,000.00). Hence, this case is one which is really not
beyond pecuniary estimation, but rather partakes of the
nature of a simple collection case where the value of the
subject assets or amount demanded is pecuniarily
determinable.[13] While it is true that the exact value of the
partnerships total assets cannot be shown with certainty at
the time of filing, respondents can and must ascertain,
through informed and practical estimation, the amount they
expect to collect from the partnership, particularly from
petitioner, in order to determine the proper amount of
docket and other fees.[14] It is thus imperative for
respondents to pay the corresponding docket fees in order
that the trial court may acquire jurisdiction over the
action.[15]
Nevertheless, unlike in the case of Manchester Development
Corp. v. Court of Appeals,[16] where there was clearly an
effort to defraud the government in avoiding to pay the
correct docket fees, we see no attempt to cheat the courts on
the part of respondents. In fact, the lower courts have noted
their expressed desire to remit to the court any payable
balance or lien on whatever award which the Honorable
Court may grant them in this case should there be any
deficiency in the payment of the docket fees to be computed
by the Clerk of Court.[17] There is evident willingness to pay,
and the fact that the docket fee paid so far is inadequate is
not an indication that they are trying to avoid paying the
required amount, but may simply be due to an inability to pay
at the time of filing. This consideration may have moved the
trial court and the Court of Appeals to declare that the unpaid
docket fees shall be considered a lien on the judgment award.
Petitioner, however, argues that the trial court and the Court
of Appeals erred in condoning the non-payment of the proper
legal fees and in allowing the same to become a lien on the
monetary or property judgment that may be rendered in
favor of respondents. There is merit in petitioners
assertion. The third paragraph of Section 16, Rule 141 of the
Rules of Court states that:
The legal fees shall be a lien on the monetary or property
judgment in favor of the pauper-litigant.
Respondents cannot invoke the above provision in their favor
because it specifically applies to pauper-litigants. Nowhere in
the records does it appear that respondents are litigating as
paupers, and as such are exempted from the payment of
court fees.[18]
The rule applicable to the case at bar is Section 5(a) of Rule
141 of the Rules of Court, which defines the two kinds of
claims as: (1) those which are immediately ascertainable; and
(2) those which cannot be immediately ascertained as to the
exact amount. This second class of claims, where the exact
amount still has to be finally determined by the courts based
on evidence presented, falls squarely under the third
paragraph of said Section 5(a), which provides:
In case the value of the property or estate or the sum claimed
is less or more in accordance with the appraisal of the court,
the difference of fee shall be refunded or paid as the case
may be. (Underscoring ours)
In Pilipinas Shell Petroleum Corporation v. Court of
Appeals,[19] this Court pronounced that the above-quoted
provision clearly contemplates an initial payment of the filing
fees corresponding to the estimated amount of the claim
subject to adjustment as to what later may be
proved.[20] Moreover, we reiterated therein the principle
that the payment of filing fees cannot be made contingent or
dependent on the result of the case. Thus, an initial payment
of the docket fees based on an estimated amount must be
paid simultaneous with the filing of the complaint. Otherwise,
the court would stand to lose the filing fees should the
judgment later turn out to be adverse to any claim of the
respondent heirs.
The matter of payment of docket fees is not a mere
triviality. These fees are necessary to defray court expenses in
the handling of cases. Consequently, in order to avoid
tremendous losses to the judiciary, and to the government as
well, the payment of docket fees cannot be made dependent
on the outcome of the case, except when the claimant is a
pauper-litigant.
Applied to the instant case, respondents have a specific claim
1/3 of the value of all the partnership assets but they did not
allege a specific amount. They did, however, estimate the
partnerships total assets to be worth Thirty Million Pesos
(P30,000,000.00), in a letter[21] addressed to
petitioner. Respondents cannot now say that they are unable
to make an estimate, for the said letter and the admissions
therein form part of the records of this case. They cannot
avoid paying the initial docket fees by conveniently omitting
the said amount in their amended complaint. This estimate
can be made the basis for the initial docket fees that
respondents should pay. Even if it were later established that
the amount proved was less or more than the amount alleged
or estimated, Rule 141, Section 5(a) of the Rules of Court
specifically provides that the court may refund the excess or
exact additional fees should the initial payment be
insufficient. It is clear that it is only the difference between
the amount finally awarded and the fees paid upon filing of
this complaint that is subject to adjustment and which may
be subjected to a lien.
In the oft-quoted case of Sun Insurance Office, Ltd. v. Hon.
Maximiano Asuncion,[22] this Court held that when the
specific claim has been left for the determination by the
court, the additional filing fee therefor shall constitute a lien
on the judgment and it shall be the responsibility of the Clerk
of Court or his duly authorized deputy to enforce said lien
and assess and collect the additional fee. Clearly, the rules
and jurisprudence contemplate the initial payment of filing
and docket fees based on the estimated claims of the
plaintiff, and it is only when there is a deficiency that a lien
may be constituted on the judgment award until such
additional fee is collected.
Based on the foregoing, the trial court erred in not dismissing
the complaint outright despite their failure to pay the proper
docket fees. Nevertheless, as in other procedural rules, it may
be liberally construed in certain cases if only to secure a just
and speedy disposition of an action. While the rule is that the
payment of the docket fee in the proper amount should be
adhered to, there are certain exceptions which must be
strictly construed.[23]
In recent rulings, this Court has relaxed the strict adherence
to the Manchester doctrine, allowing the plaintiff to pay the
proper docket fees within a reasonable time before the
expiration of the applicable prescriptive or reglementary
period.[24]
In the recent case of National Steel Corp. v. Court of
Appeals,[25] this Court held that:
The court acquires jurisdiction over the action if the filing of
the initiatory pleading is accompanied by the payment of the
requisite fees, or, if the fees are not paid at the time of the
filing of the pleading, as of the time of full payment of the
fees within such reasonable time as the court may grant,
unless, of course, prescription has set in the meantime.
It does not follow, however, that the trial court should have
dismissed the complaint for failure of private respondent to
pay the correct amount of docket fees. Although the payment
of the proper docket fees is a jurisdictional requirement, the
trial court may allow the plaintiff in an action to pay the same
within a reasonable time before the expiration of the
applicable prescriptive or reglementary period. If the plaintiff
fails to comply within this requirement, the defendant should
timely raise the issue of jurisdiction or else he would be
considered in estoppel. In the latter case, the balance
between the appropriate docket fees and the amount
actually paid by the plaintiff will be considered a lien or any
award he may obtain in his favor. (Underscoring ours)
Accordingly, the trial court in the case at bar should
determine the proper docket fee based on the estimated
amount that respondents seek to collect from petitioner, and
direct them to pay the same within a reasonable time,
provided the applicable prescriptive or reglementary period
has not yet expired. Failure to comply therewith, and upon
motion by petitioner, the immediate dismissal of the
complaint shall issue on jurisdictional grounds.
On the matter of improper venue, we find no error on the
part of the trial court and the Court of Appeals in holding that
the case below is a personal action which, under the Rules,
may be commenced and tried where the defendant resides or
may be found, or where the plaintiffs reside, at the election
of the latter.[26]
Petitioner, however, insists that venue was improperly laid
since the action is a real action involving a parcel of land that
is located outside the territorial jurisdiction of the court a
quo. This contention is not well-taken. The records
indubitably show that respondents are asking that the assets
of the partnership be accounted for, sold and distributed
according to the agreement of the partners. The fact that two
of the assets of the partnership are parcels of land does not
materially change the nature of the action. It is an action in
personam because it is an action against a person, namely,
petitioner, on the basis of his personal liability. It is not an
action in rem where the action is against the thing itself
instead of against the person.[27] Furthermore, there is no
showing that the parcels of land involved in this case are
being disputed. In fact, it is only incidental that part of the
assets of the partnership under liquidation happen to be
parcels of land.
The time-tested case of Claridades v. Mercader, et
al.,[28] settled this issue thus:
The fact that plaintiff prays for the sale of the assets of the
partnership, including the fishpond in question, did not
change the nature or character of the action, such sale being
merely a necessary incident of the liquidation of the
partnership, which should precede and/or is part of its
process of dissolution.
The action filed by respondents not only seeks redress against
petitioner. It also seeks the enforcement of, and petitioners
compliance with, the contract that the partners executed to
formalize the partnerships dissolution, as well as to
implement the liquidation and partition of the partnerships
assets. Clearly, it is a personal action that, in effect, claims a
debt from petitioner and seeks the performance of a personal
duty on his part.[29] In fine, respondents complaint seeking
the liquidation and partition of the assets of the partnership
with damages is a personal action which may be filed in the
proper court where any of the parties reside.[30] Besides,
venue has nothing to do with jurisdiction for venue touches
more upon the substance or merits of the case.[31] As it is,
venue in this case was properly laid and the trial court
correctly ruled so.
On the third issue, petitioner asserts that the surviving
spouse of Vicente Tabanao has no legal capacity to sue since
she was never appointed as administratrix or executrix of his
estate. Petitioners objection in this regard is misplaced. The
surviving spouse does not need to be appointed as executrix
or administratrix of the estate before she can file the
action. She and her children are complainants in their own
right as successors of Vicente Tabanao. From the very
moment of Vicente Tabanaos death, his rights insofar as the
partnership was concerned were transmitted to his heirs, for
rights to the succession are transmitted from the moment of
death of the decedent.[32]
Whatever claims and rights Vicente Tabanao had against the
partnership and petitioner were transmitted to respondents
by operation of law, more particularly by succession, which is
a mode of acquisition by virtue of which the property, rights
and obligations to the extent of the value of the inheritance
of a person are transmitted.[33] Moreover, respondents
became owners of their respective hereditary shares from
the moment Vicente Tabanao died.[34]
A prior settlement of the estate, or even the appointment of
Salvacion Tabanao as executrix or administratrix, is not
necessary for any of the heirs to acquire legal capacity to
sue. As successors who stepped into the shoes of their
decedent upon his death, they can commence any action
originally pertaining to the decedent.[35] From the moment
of his death, his rights as a partner and to demand fulfillment
of petitioners obligations as outlined in their dissolution
agreement were transmitted to respondents. They,
therefore, had the capacity to sue and seek the courts
intervention to compel petitioner to fulfill his obligations.
Finally, petitioner contends that the trial court should have
dismissed the complaint on the ground of prescription,
arguing that respondents action prescribed four (4) years
after it accrued in 1986. The trial court and the Court of
Appeals gave scant consideration to petitioners hollow
arguments, and rightly so.
The three (3) final stages of a partnership are: (1) dissolution;
(2) winding-up; and (3) termination.[36] The partnership,
although dissolved, continues to exist and its legal personality
is retained, at which time it completes the winding up of its
affairs, including the partitioning and distribution of the net
partnership assets to the partners.[37] For as long as the
partnership exists, any of the partners may demand an
accounting of the partnerships business. Prescription of the
said right starts to run only upon the dissolution of the
partnership when the final accounting is done.[38]
Contrary to petitioners protestations that respondents right
to inquire into the business affairs of the partnership accrued
in 1986, prescribing four (4) years thereafter, prescription had
not even begun to run in the absence of a final
accounting. Article 1842 of the Civil Code provides:
The right to an account of his interest shall accrue to any
partner, or his legal representative as against the winding up
partners or the surviving partners or the person or
partnership continuing the business, at the date of
dissolution, in the absence of any agreement to the contrary.
Applied in relation to Articles 1807 and 1809, which also deal
with the duty to account, the above-cited provision states
that the right to demand an accounting accrues at the date of
dissolution in the absence of any agreement to the
contrary. When a final accounting is made, it is only then that
prescription begins to run. In the case at bar, no final
accounting has been made, and that is precisely what
respondents are seeking in their action before the trial court,
since petitioner has failed or refused to render an accounting
of the partnerships business and assets. Hence, the said
action is not barred by prescription.
In fine, the trial court neither erred nor abused its discretion
when it denied petitioners motions to dismiss. Likewise, the
Court of Appeals did not commit reversible error in upholding
the trial courts orders. Precious time has been lost just to
settle this preliminary issue, with petitioner resurrecting the
very same arguments from the trial court all the way up to
the Supreme Court. The litigation of the merits and
substantial issues of this controversy is now long overdue and
must proceed without further delay.

WHEREFORE, in view of all the foregoing, the instant petition

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

Costs against petitioner.

SO ORDERED.