Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 1 of 25
Republic of the Philippines disputed property, but the petitioner still refused to surrender possession of the same to them. Respondents
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 168970 January 15, 2010
CELESTINO BALUS, Petitioner,
vs.
SATURNINO BALUS and LEONARDA BALUS VDA. DE CALUNOD, Respondents.
DECISION
PERALTA, J.:
Assailed in the present petition for review on certiorari under Rule 45 of the Rules of Court is the Decision1 of
the Court of Appeals (CA) dated May 31, 2005 in CA-G.R. CV No. 58041 which set aside the February 7, 1997
Decision of the Regional Trial Court (RTC) of Lanao del Norte, Branch 4 in Civil Case No. 3263.
The facts of the case are as follows:
Herein petitioner and respondents are the children of the spouses Rufo and Sebastiana Balus. Sebastiana
died on September 6, 1978, while Rufo died on July 6, 1984.
On January 3, 1979, Rufo mortgaged a parcel of land, which he owns, as security for a loan he obtained from
the Rural Bank of Maigo, Lanao del Norte (Bank). The said property was originally covered by Original
Certificate of Title No. P-439(788) and more particularly described as follows:
A parcel of land with all the improvements thereon, containing an area of 3.0740 hectares, more or less,
situated in the Barrio of Lagundang, Bunawan, Iligan City, and bounded as follows: Bounded on the NE., along
line 1-2, by Lot 5122, Csd-292; along line 2-12, by Dodiongan River; along line 12-13 by Lot 4649, Csd-292;
and along line 12-1, by Lot 4661, Csd-292. x x x 2
Rufo failed to pay his loan. As a result, the mortgaged property was foreclosed and was subsequently sold to
the Bank as the sole bidder at a public auction held for that purpose. On November 20, 1981, a Certificate of
Sale3was executed by the sheriff in favor of the Bank. The property was not redeemed within the period
allowed by law. More than two years after the auction, or on January 25, 1984, the sheriff executed a Definite
Deed of Sale4 in the Bank's favor. Thereafter, a new title was issued in the name of the Bank.
On October 10, 1989, herein petitioner and respondents executed an Extrajudicial Settlement of
Estate5adjudicating to each of them a specific one-third portion of the subject property consisting of 10,246
square meters. The Extrajudicial Settlement also contained provisions wherein the parties admitted knowledge
of the fact that their father mortgaged the subject property to the Bank and that they intended to redeem the
same at the soonest possible time.
Three years after the execution of the Extrajudicial Settlement, herein respondents bought the subject property
from the Bank. On October 12, 1992, a Deed of Sale of Registered Land6 was executed by the Bank in favor of
respondents. Subsequently, Transfer Certificate of Title (TCT) No. T-39,484(a.f.)7 was issued in the name of
respondents. Meanwhile, petitioner continued possession of the subject lot.
8
On June 27, 1995, respondents filed a Complaint for Recovery of Possession and Damages against
petitioner, contending that they had already informed petitioner of the fact that they were the new owners of the
claimed that they had exhausted all remedies for the amicable settlement of the case, but to no avail.
On February 7, 1997, the RTC rendered a Decision9 disposing as follows:
WHEREFORE, judgment is hereby rendered, ordering the plaintiffs to execute a Deed of Sale in favor of the
defendant, the one-third share of the property in question, presently possessed by him, and described in the
deed of partition, as follows:
A one-third portion of Transfer Certificate of Title No. T-39,484 (a.f.), formerly Original Certificate of Title No. P-
788, now in the name of Saturnino Balus and Leonarda B. Vda. de Calunod, situated at Lagundang, Bunawan,
Iligan City, bounded on the North by Lot 5122; East by shares of Saturnino Balus and Leonarda Balus-
Calunod; South by Lot 4649, Dodiongan River; West by Lot 4661, consisting of 10,246 square meters,
including improvements thereon.
and dismissing all other claims of the parties.
The amount of P6,733.33 consigned by the defendant with the Clerk of Court is hereby ordered delivered to
the plaintiffs, as purchase price of the one-third portion of the land in question.
Plaintiffs are ordered to pay the costs.SO ORDERED.10
The RTC held that the right of petitioner to purchase from the respondents his share in the disputed property
was recognized by the provisions of the Extrajudicial Settlement of Estate, which the parties had executed
before the respondents bought the subject lot from the Bank.
Aggrieved by the Decision of the RTC, herein respondents filed an appeal with the CA.
On May 31, 2005, the CA promulgated the presently assailed Decision, reversing and setting aside the
Decision of the RTC and ordering petitioner to immediately surrender possession of the subject property to the
respondents. The CA ruled that when petitioner and respondents did not redeem the subject property within
the redemption period and allowed the consolidation of ownership and the issuance of a new title in the name
of the Bank, their co-ownership was extinguished.
Hence, the instant petition raising a sole issue, to wit:
WHETHER OR NOT CO-OWNERSHIP AMONG THE PETITIONER AND THE RESPONDENTS OVER THE
PROPERTY PERSISTED/CONTINUED TO EXIST (EVEN AFTER THE TRANSFER OF TITLE TO THE
BANK) BY VIRTUE OF THE PARTIES' AGREEMENT PRIOR TO THE REPURCHASE THEREOF BY THE
RESPONDENTS; THUS, WARRANTING THE PETITIONER'S ACT OF ENFORCING THE AGREEMENT BY
REIMBURSING THE RESPONDENTS OF HIS (PETITIONER'S) JUST SHARE OF THE REPURCHASE
PRICE.11
The main issue raised by petitioner is whether co-ownership by him and respondents over the subject property
persisted even after the lot was purchased by the Bank and title thereto transferred to its name, and even after
it was eventually bought back by the respondents from the Bank.

Petitioner insists that despite respondents' full knowledge of the fact that the title over the disputed property
was already in the name of the Bank, they still proceeded to execute the subject Extrajudicial Settlement,
having in mind the intention of purchasing back the property together with petitioner and of continuing their co-
ownership thereof.
Petitioner posits that the subject Extrajudicial Settlement is, in and by itself, a contract between him and
respondents, because it contains a provision whereby the parties agreed to continue their co-ownership of the
subject property by "redeeming" or "repurchasing" the same from the Bank. This agreement, petitioner
contends, is the law between the parties and, as such, binds the respondents. As a result, petitioner asserts
that respondents' act of buying the disputed property from the Bank without notifying 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 Sale13 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.1avvphi1
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.
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 2 of 25
Article 1306 of the same Code also provides that the contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided these are not contrary to law, morals,
good customs, public order or public policy.
In the present case, however, there is nothing in the subject Extrajudicial Settlement to indicate any express
stipulation for petitioner and respondents to continue with their supposed co-ownership of the contested lot.
On the contrary, a plain reading of the provisions of the Extrajudicial Settlement would not, in any way, support
petitioner's contention that it was his and his sibling's intention to buy the subject property from the Bank and
continue what they believed to be co-ownership thereof. It is a cardinal rule in the interpretation of contracts
that the intention of the parties shall be accorded primordial consideration. 16 It is the duty of the courts to place
a practical and realistic construction upon it, giving due consideration to the context in which it is negotiated
and the purpose which it is intended to serve.17 Such intention is determined from the express terms of their
agreement, as well as their contemporaneous and subsequent acts. 18 Absurd and illogical interpretations
should also be avoided.19
For petitioner to claim that the Extrajudicial Settlement is an agreement between him and his siblings to
continue what they thought was their ownership of the subject property, even after the same had been bought
by the Bank, is stretching the interpretation of the said Extrajudicial Settlement too far.
In the first place, as earlier discussed, there is no co-ownership to talk about and no property to partition, as
the disputed lot never formed part of the estate of their deceased father.
Moreover, petitioner's asseveration of his and respondents' intention of continuing with their supposed co-
ownership is negated by no less than his assertions in the present petition that on several occasions he had
the chance to purchase the subject property back, but he refused to do so. In fact, he claims that after the
Bank acquired the disputed lot, it offered to re-sell the same to him but he ignored such offer. How then can
petitioner now claim that it was also his intention to purchase the subject property from the Bank, when he
admitted that he refused the Bank's offer to re-sell the subject property to him?
In addition, it appears from the recitals in the Extrajudicial Settlement that, at the time of the execution thereof,
the parties were not yet aware that the subject property was already exclusively owned by the Bank.
Nonetheless, the lack of knowledge on the part of petitioner and respondents that the mortgage was already
foreclosed and title to the property was already transferred to the Bank does not give them the right or the
authority to unilaterally declare themselves as co-owners of the disputed property; otherwise, the disposition of
the case would be made to depend on the belief and conviction of the party-litigants and not on the evidence
adduced and the law and jurisprudence applicable thereto.
Furthermore, petitioner's contention that he and his siblings intended to continue their supposed co-ownership
of the subject property contradicts the provisions of the subject Extrajudicial Settlement where they clearly
manifested their intention of having the subject property divided or partitioned by assigning to each of the
petitioner and respondents a specific 1/3 portion of the same. Partition calls for the segregation and
conveyance of a determinate portion of the property owned in common. It seeks a severance of the individual
interests of each co-owner, vesting in each of them a sole estate in a specific property and giving each one a
right to enjoy his estate without supervision or interference from the other. 20 In other words, the purpose of
partition is to put an end to co-ownership,21 an objective which negates petitioner's claims in the present case.
WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals, dated May 31,
2005 in CA-G.R. CV No. 58041, is AFFIRMED.SO ORDERED

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-770 April 27, 1948
ANGEL T. LIMJOCO, petitioner,
vs.
INTESTATE ESTATE OF PEDRO O. FRAGRANTE, deceased, respondent.
Angel Limjoco, Jr. and Delfin L. Gonzales for petitioner.
Bienvenido A. Tan for respondent.
HILADO, J.:
Under date of May 21, 1946, the Public Service Commission, through Deputy Commissioner Fidel Ibañez,
rendered its decision in case No. 4572 of Pedro O. Fragante, as applicant for a certificate of public
convenience to install, maintain and operate an ice plant in San Juan, Rizal, whereby said commission held
that the evidence therein showed that the public interest and convenience will be promoted in a proper and
suitable manner "by authorizing the operation and maintenance of another ice plant of two and one-half (2-½)
tons in the municipality of San Juan; that the original applicant Pedro O. Fragante was a Filipino Citizen at the
time of his death; and that his intestate estate is financially capable of maintaining the proposed service". The
commission, therefore, overruled the opposition filed in the case and ordered "that under the provisions of
section 15 of Commonwealth Act No. 146, as amended a certificate of public convenience be issued to the
Intestate Estate of the deceased Pedro Fragante, authorizing said Intestate Estate through its Special or
Judicial Administrator, appointed by the proper court of competent jurisdiction, to maintain and operate an ice
plant with a daily productive capacity of two and one-half (2-1/2) tons in the Municipality of San Juan and to
sell the ice produced from said plant in the said Municipality of San Juan and in the Municipality of
Mandaluyong, Rizal, and in Quezon City", subject to the conditions therein set forth in detail (petitioner's brief,
pp. 33-34).
Petitioner makes four assignments of error in his brief as follows:
1. The decision of the Public Service Commission is not in accordance with law.
2. The decision of the Public Service Commission is not reasonably supported by evidence.
3. The Public Service Commission erred in not giving petitioner and the Ice and Cold Storage
Industries of the Philippines, Inc., as existing operators, a reasonable opportunity to meet the
increased demand.
4. The decision of the Public Service Commission is an unwarranted departure from its announced
policy with respect to the establishment and operation of ice plant. (Pp. 1-2, petitioner's brief.)
In his argument petitioner contends that it was error on the part of the commission to allow the substitution of
the legal representative of the estate of Pedro O. Fragante for the latter as party applicant in the case then
pending before the commission, and in subsequently granting to said estate the certificate applied for, which is
said to be in contravention of law.
If Pedro O. Fragante had not died, there can be no question that he would have had the right to prosecute his
application before the commission to its final conclusion. No one would have denied him that right. As declared
by the commission in its decision, he had invested in the ice plant in question P 35,000, and from what the
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 3 of 25
commission said regarding his other properties and business, he would certainly have been financially able to
maintain and operate said plant had he not died. His transportation business alone was netting him about
P1,440 a month. He was a Filipino citizen and continued to be such till his demise. The commission declared
in its decision, in view of the evidence before it, that his estate was financially able to maintain and operate the
ice plant. The aforesaid right of Pedro O. Fragante to prosecute said application to its conclusion was one
which by its nature did not lapse through his death. Hence, it constitutes a part of the assets of his estate, for
which a right was property despite the possibility that in the end the commission might have denied application,
although under the facts of the case, the commission granted the application in view of the financial ability of
the estate to maintain and operate the ice plant. Petitioner, in his memorandum of March 19, 1947, admits
(page 3) that the certificate of public convenience once granted "as a rule, should descend to his estate as an
asset". Such certificate would certainly be property, and the right to acquire such a certificate, by complying
with the requisites of the law, belonged to the decedent in his lifetime, and survived to his estate and judicial
administrator after his death.
If Pedro O. Fragrante had in his lifetime secured an option to buy a piece of land and during the life of the
option he died, if the option had been given him in the ordinary course of business and not out of special
consideration for his person, there would be no doubt that said option and the right to exercise it would have
survived to his estate and legal representatives. In such a case there would also be the possibility of failure to
acquire the property should he or his estate or legal representative fail to comply with the conditions of the
option. In the case at bar Pedro O. Fragrante's undoubted right to apply for and acquire the desired certificate
of public convenience — the evidence established that the public needed the ice plant — was under the law
conditioned only upon the requisite citizenship and economic ability to maintain and operate the service. Of
course, such right to acquire or obtain such certificate of public convenience was subject to failure to secure its
objective through nonfulfillment of the legal conditions, but the situation here is no different from the legal
standpoint from that of the option in the illustration just given.
Rule 88, section 2, provides that the executor or administrator may bring or defend actions, among other
cases, for the protection of the property or rights of the deceased which survive, and it says that such actions
may be brought or defended "in the right of the deceased".
Rule 82, section 1, paragraph (a), mentions among the duties of the executor or administrator, the making of
an inventory of all goods, chattels, rights, credits, and estate of the deceased which shall come to his
possession or knowledge, or to the possession of any other person for him.
In his commentaries on the Rules of Court (Volume II, 2nd ed., pages 366, 367) the present chief Justice of
this Court draws the following conclusion from the decisions cited by him:
Therefore, unless otherwise expressly provided by law, any action affecting the property
or rights (emphasis supplied) of a deceased person which may be brought by or against him if he
were alive, may likewise be instituted and prosecuted by or against the administrator, unless the
action is for recovery of money, debt or interest thereon, or unless, by its very nature, it cannot
survive, because death extinguishes the right . . . .
It is true that a proceeding upon the application for a certificate of public convenience before the Public Service
Commission is not an "action". But the foregoing provisions and citations go to prove that the decedent's rights
which by their nature are not extinguished by death go to make up a part and parcel of the assets of his estate
which, being placed under the control and management of the executor or administrator, can not be exercised
but by him in representation of the estate for the benefit of the creditors, devisees or legatees, if any, and the
heirs of the decedent. And if the right involved happens to consist in the prosecution of an unfinished
proceeding upon an application for a certificate of public convenience of the deceased before the Public

Service Commission, it is but logical that the legal representative be empowered and entitled in behalf of the
estate to make the right effective in that proceeding.
Manresa (Vol. III, 6th ed., p. 11) says that No. 10 of article 334 and article 336 of the Civil Code, respectively,
consider as immovable and movable things rights which are not material. The same eminent commentator
says in the cited volume (p. 45) that article 336 of the Civil Code has been deficiently drafted in that it is not
sufficiently expressive of all incorporeal rights which are also property for juridical purposes.
Corpus Juris (Vol. 50, p. 737) states that in the broad sense of the term, property includes, among other things,
"an option", and "the certificate of the railroad commission permitting the operation of a bus line", and on page
748 of the same volume we read:
However, these terms (real property, as estate or interest) have also been declared to include every
species of title, inchoate or complete, and embrace rights which lie in contract, whether executory or
executed. (Emphasis supplied.)
Another important question raised by petitioner is whether the estate of Pedro O. Fragrante is a "person" within
the meaning of the Public Service Act.
Words and Phrases, First Series, (Vol. 6, p, 5325), states the following doctrine in the jurisdiction of the State
of Indiana:
As the estate of the decedent is in law regarded as a person, a forgery committed after the death of
the man whose name purports to be signed to the instrument may be prosecuted as with the intent
to defraud the estate. Billings vs. State, 107 Ind., 54, 55, 6 N. E. 914, 7 N. E. 763, 57 Am. Rep. 77.
The Supreme Court of Indiana in the decision cited above had before it a case of forgery committed after the
death of one Morgan for the purpose of defrauding his estate. The objection was urged that the information did
not aver that the forgery was committed with the intent to defraud any person. The Court, per Elliott, J.,
disposed of this objection as follows:
. . . The reason advanced in support of this proposition is that the law does not regard the estate of a
decedent as a person. This intention (contention) cannot prevail. The estate of the decedent is a
person in legal contemplation. "The word "person" says Mr. Abbot, "in its legal signification, is a
generic term, and includes artificial as well as natural persons," 2 Abb. Dict. 271; Douglas vs. Pacific,
etc. Co., 4 Cal. 304; Planters', etc., Bank vs. Andrews, 8 Port. (Ala.) 404. It said in another work that
'persons are of two kinds: natural and artificial. A natural person is a human being. Artificial persons
include (1) a collection or succession of natural persons forming a corporation; (2) a collection of
property to which the law attributes the capacity of having rights and duties. The latter class of
artificial persons is recognized only to a limited extent in our law. "Examples are the estate of a
bankrupt or deceased person." 2 Rapalje & L. Law Dict. 954. Our own cases inferentially recognize
the correctness of the definition given by the authors from whom we have quoted, for they declare
that it is sufficient, in pleading a claim against a decedent's estate, to designate the defendant as the
estate of the deceased person, naming him. Ginn vs. Collins, 43 Ind. 271. Unless we accept this
definition as correct, there would be a failure of justice in cases where, as here, the forgery is
committed after the death of a person whose name is forged; and this is a result to be avoided if it
can be done consistent with principle. We perceive no difficulty in avoiding such a result; for, to our
minds, it seems reasonable that the estate of a decedent should be regarded as an artificial person.
It is the creation of law for the purpose of enabling a disposition of the assets to be properly made,
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 4 of 25
and, although natural persons as heirs, devises, or creditors, have an interest in the property, the
artificial creature is a distinct legal entity. The interest which natural persons have in it is not
complete until there has been a due administration; and one who forges the name of the decedent to
an instrument purporting to be a promissory note must be regarded as having intended to defraud
the estate of the decedent, and not the natural persons having diverse interests in it, since ha cannot
be presumed to have known who those persons were, or what was the nature of their respective
interest. The fraudulent intent is against the artificial person, — the estate — and not the natural
persons who have direct or contingent interest in it. (107 Ind. 54, 55, 6 N.E. 914-915.)
In the instant case there would also be a failure of justice unless the estate of Pedro O. Fragrante is
considered a "person", for quashing of the proceedings for no other reason than his death would entail
prejudicial results to his investment amounting to P35,000.00 as found by the commission, not counting the
expenses and disbursements which the proceeding can be presumed to have occasioned him during his
lifetime, let alone those defrayed by the estate thereafter. In this jurisdiction there are ample precedents to
show that the estate of a deceased person is also considered as having legal personality independent of their
heirs. Among the most recent cases may be mentioned that of "Estate of Mota vs. Concepcion, 56 Phil., 712,
717, wherein the principal plaintiff was the estate of the deceased Lazaro Mota, and this Court gave judgment
in favor of said estate along with the other plaintiffs in these words:
. . . the judgment appealed from must be affirmed so far as it holds that defendants Concepcion and
Whitaker are indebted to he plaintiffs in the amount of P245,804.69 . . . .
Under the regime of the Civil Code and before the enactment of the Code of Civil Procedure, the heirs of a
deceased person were considered in contemplation of law as the continuation of his personality by virtue of the
provision of article 661 of the first Code that the heirs succeed to all the rights and obligations of the decedent
by the mere fact of his death. It was so held by this Court in Barrios vs. Dolor, 2 Phil., 44, 46. However, after
the enactment of the Code of Civil Procedure, article 661 of the Civil Code was abrogated, as held in Suiliong
& Co. vs. Chio-Taysan, 12 Phil., 13, 22. In that case, as well as in many others decided by this Court after the
innovations introduced by the Code of Civil Procedure in the matter of estates of deceased persons, it has
been the constant doctrine that it is the estate or the mass of property, rights and assets left by the decedent,
instead of the heirs directly, that becomes vested and charged with his rights and obligations which survive
after his demise.
The heirs were formerly considered as the continuation of the decedent's personality simply by legal fiction, for
they might not have been flesh and blood — the reason was one in the nature of a legal exigency derived from
the principle that the heirs succeeded to the rights and obligations of the decedent. Under the present legal
system, such rights and obligations as survive after death have to be exercised and fulfilled only by the estate
of the deceased. And if the same legal fiction were not indulged, there would be no juridical basis for the
estate, represented by the executor or administrator, to exercise those rights and to fulfill those obligations of
the deceased. The reason and purpose for indulging the fiction is identical and the same in both cases. This is
why according to the Supreme Court of Indiana in Billings vs. State, supra, citing 2 Rapalje & L. Dictionary,
954, among the artificial persons recognized by law figures "a collection of property to which the law attributes
the capacity of having rights and duties", as for instance, the estate of a bankrupt or deceased person.
Petitioner raises the decisive question of whether or not the estate of Pedro O. Fragrante can be considered a
"citizen of the Philippines" within the meaning of section 16 of the Public Service Act, as amended, particularly
the proviso thereof expressly and categorically limiting the power of the commission to issue certificates of
public convenience or certificates of public convenience and necessity "only to citizens of the Philippines or of
the United States or to corporations, copartnerships, associations, or joint-stock companies constituted and

organized under the laws of the Philippines", and the further proviso that sixty per centum of the stock or paid-
up capital of such entities must belong entirely to citizens of the Philippines or of the United States.
Within the Philosophy of the present legal system, the underlying reason for the legal fiction by which, for
certain purposes, the estate of the deceased person is considered a "person" is the avoidance of injustice or
prejudice resulting from the impossibility of exercising such legal rights and fulfilling such legal obligations of
the decedent as survived after his death unless the fiction is indulged. Substantially the same reason is
assigned to support the same rule in the jurisdiction of the State of Indiana, as announced in Billings vs.
State, supra, when the Supreme Court of said State said:
. . . It seems reasonable that the estate of a decedent should be regarded as an artificial person. it is
the creation of law for the purpose of enabling a disposition of the assets to be properly made . . . .
Within the framework and principles of the constitution itself, to cite just one example, under the bill of rights it
seems clear that while the civil rights guaranteed therein in the majority of cases relate to natural persons, the
term "person" used in section 1 (1) and (2) must be deemed to include artificial or juridical persons, for
otherwise these latter would be without the constitutional guarantee against being deprived of property without
due process of law, or the immunity from unreasonable searches and seizures. We take it that it was the
intendment of the framers to include artificial or juridical, no less than natural, persons in these constitutional
immunities and in others of similar nature. Among these artificial or juridical persons figure estates of deceased
persons. Hence, we hold that within the framework of the Constitution, the estate of Pedro O. Fragrante should
be considered an artificial or juridical person for the purposes of the settlement and distribution of his estate
which, of course, include the exercise during the judicial administration thereof of those rights and the
fulfillment of those obligations of his which survived after his death. One of those rights was the one involved in
his pending application before the Public Service Commission in the instant case, consisting in the prosecution
of said application to its final conclusion. As stated above, an injustice would ensue from the opposite course.
How about the point of citizenship? If by legal fiction his personality is considered extended so that any debts
or obligations left by, and surviving, him may be paid, and any surviving rights may be exercised for the benefit
of his creditors and heirs, respectively, we find no sound and cogent reason for denying the application of the
same fiction to his citizenship, and for not considering it as likewise extended for the purposes of the aforesaid
unfinished proceeding before the Public Service Commission. The outcome of said proceeding, if successful,
would in the end inure to the benefit of the same creditors and the heirs. Even in that event petitioner could not
allege any prejudice in the legal sense, any more than he could have done if Fragrante had lived longer and
obtained the desired certificate. The fiction of such extension of his citizenship is grounded upon the same
principle, and motivated by the same reason, as the fiction of the extension of personality. The fiction is made
necessary to avoid the injustice of subjecting his estate, creditors and heirs, solely by reason of his death to
the loss of the investment amounting to P35,000, which he has already made in the ice plant, not counting the
other expenses occasioned by the instant proceeding, from the Public Service Commission of this Court.
We can perceive no valid reason for holding that within the intent of the constitution (Article IV), its provisions
on Philippine citizenship exclude the legal principle of extension above adverted to. If for reasons already
stated our law indulges the fiction of extension of personality, if for such reasons the estate of Pedro O.
Fragrante should be considered an artificial or juridical person herein, we can find no justification for refusing to
declare a like fiction as to the extension of his citizenship for the purposes of this proceeding.
Pedro O. Fragrante was a Filipino citizen, and as such, if he had lived, in view of the evidence of record, he
would have obtained from the commission the certificate for which he was applying. The situation has suffered
but one change, and that is, his death. His estate was that of a Filipino citizen. And its economic ability to
appropriately and adequately operate and maintain the service of an ice plant was the same that it received
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 5 of 25
from the decedent himself. In the absence of a contrary showing, which does not exist here, his heirs may be
assumed to be also Filipino citizens; and if they are not, there is the simple expedient of revoking the certificate
or enjoining them from inheriting it.
Upon the whole, we are of the opinion that for the purposes of the prosecution of said case No. 4572 of the
Public Service Commission to its final conclusion, both the personality and citizenship of Pedro O. Fragrante
must be deemed extended, within the meaning and intent of the Public Service Act, as amended, in harmony
with the constitution: it is so adjudged and decreed.
Decision affirmed, without costs. So ordered.
Moran, C.J., Pablo, Bengzon, Briones, Padilla and Tuason, JJ., concur.
Paras, J., I hereby certify that Mr. Justice Feria voted with the majority.
Separate Opinions
PERFECTO, J., dissenting:
Commonwealth Act No. 146 reserves to Filipino citizens the right to obtain a certificate of public convenience
to operate an ice plant in San Juan, Rizal. The limitation is in accordance with section 8 of Article XIV of the
Constitution which provides
No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or other entities organized under the
laws of the Philippines, sixty per centum of the capital of which is owned by citizens of the
Philippines, nor such franchise, certificate or authorization be exclusive in character or for a longer
period than fifty years. No franchise granted to any individual, firm or corporation, except under the
condition that it shall be subject to amendment, alteration, or repeal by Congress when the public
interest so requires.
The main question in this case is whether the estate of Pedro O. Fragrante fulfills the citizenship requirement.
To our mind, the question can be restated by asking whether the heirs of Pedro O. Fragrante fulfill the
citizenship requirement of the law.
The estate is an abstract entity. As such, its legal value depends on what it represents. It is a device by which
the law gives a kind of personality and unity to undetermined tangible persons, the heirs. They inherit and
replace the deceased at the very moment of his death. As there are procedural requisites for their identification
and determination that need time for their compliance, a legal fiction has been devised to represent them. That
legal fiction is the estate, a liquid condition in process of solidification.
The estate, therefore, has only a representative value. What the law calls estate is, a matter of fact, intended to
designate the heirs of the deceased. The question, therefore, in this case, boils down to the citizenship of the
heirs of Fragrante.
There is nothing in the record to show conclusively the citizenship of the heirs of Fragrante. If they are Filipino
citizens, the action taken by the Public Service Commission should be affirmed. If they are not, it should be
reversed.
 Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 6 of 25

Petitioner alleges that the estate is just a front or dummy for aliens to go around the citizenship constitutional lots in question to the administrator of the estate of the deceased Cecilio Joya, in order that he might proceed
provision. It is alleged that Gaw Suy, the special administrator of the estate, is an alien. to the liquidation and distribution of the latter's estate in accordance with the law and its judgment; (5) the
lower court erred in not passing upon petition contained in the complaint to the effect that defendant, Florentino
Joya, who was appointed administrator of the estate of the deceased Cecilio Joya in case No. 1241, be
We are of the opinion that the citizenship of the heirs of Fragrante should be determined by the Commission
relieved from such duty; (6) the lower court erred in denying plaintiff's motion for a new trial.
upon evidence that the party should be present. It should also determine the dummy question raised by the
petitioner.
The defendants-appellants, in turn, assign the following alleged errors as committed by the trial court in its
decision, to wit: (1) The trial court erred in annulling the clauses and provisions of the decedent Cecilio Joya's
We are of opinion and so vote that the decision of the Public Service Commission of May 21, 1946, be set
will, Exhibit Y, with respect to one-half of the property left by said decedent; (2) the trial court erred in holding
aside and that the Commission be instructed to receive evidence of the above factual questions and render a
the certificate of sale of lot No. 1058, exhibit 9, executed by the deceased Cecilio Joya in favor of defendant
new decision accordingly.
Florentino Joya, to be null and void; (3) the trial court erred in finding that when plaintiff signed the agreement
of partition, Exhibit 7, she was unaware of the contents of the same, and that said agreement of partition has
Republic of the Philippines not become legally effective as against the plaintiff; (4) the trial court erred in holding it to be a fact admitted by
SUPREME COURT both parties that lots 1153 and 2352 were not donated by Pedro Tiongco to Cecilio Joya, the corresponding
Manila certificates of transfer by donation, Exhibits F and G, notwithstanding; (5) the trial court erred in giving more
EN BANC credit to the testimony of the plaintiff Basilia Arayata than to that of the defendant Florentino Joya; (6) the trial
G.R. No. L-28067 March 10, 1928 court erred in admitting plaintiff's Exhibits J, M, N and N-1; (7) the trial court erred in ordering each and every
BASILIA ARAYATA, plaintiff-appellant, one of the defendants, Florentino, Feliciano and Pablo Joya, Asuncion Bobadilla Delfin and Feliciana
vs. Blancaflor to deliver lots Nos. 1031, 1038, 1086, 1153 and 2352 to the administrator of the estate of the
FLORENTINO JOYA, ET AL., defendants-appellants. deceased Cecilio Joya in order that he might proceed with the liquidation, partition, and distribution of the said
Emiliano T. Tirona and Andres R. Faustino for plaintiff-appellant. deceased's estate in accordance with the decision rendered in this case by said trial court; (8) the trial court
Fidel Ibanez for defendants-appellants. erred in holding plaintiff to be sole and exclusive owner of the lots question, or such portions thereof, or their
VILLA-REAL, J.: value as may be due her as a result of said liquidation.

In this instance both parties have appealed from the judgment of the Court of First Instance of Cavite, the
The following are the pertinent and controverted facts necessary for the decision of this case:
dispositive part of which, as amended, is as follows;

Cecilio Joya, during his lifetime, inherited from his deceased parents the right of lease to six lots of the friar
Wherefore, the testamentary clauses and dispositions made by the late Cecilio Joya concerning
lands at Santa Crus de Malabon, municipality of Tanza, Province of Cavite. On June 4, 1906, Cecilio Joya
one-half of the property left by the deceased and pertaining to the plaintiff, are hereby declared void
married the herein plaintiff, Basilia Arayata. When the Insular Government acquired the said land, Cecilio Joya
in so far as they infringe upon said plaintiff's right, as being contrary to law; the certificate of sale of
continued his lease in accordance with the provisions of the Act of Congress of July 1, 1902 and Act No. 1120
lot No. 1058, Exhibit 9, executed by the deceased in favor of defendant Florentino Joya is null and
of the Philippine Commission. While married to the herein plaintiff-appellant, Cecilio Joya purchase the lots he
void, and the plaintiff is hereby declared the sole and exclusive owner of said lots, or such portions
had been leasing, on installments, from the Government, under said Act No. 1120, which were designated as
thereof or their value, as the plaintiff may be entitled to as a result of the liquidation of the
lots Nos. 1031 (Exhibit C), 1058 (Exhibit D), 1086 (Exhibit E), 1153 (Exhibit F), 2352 (Exhibit G) and 547
testamentary estate; and each and every one of the defendants, Florentino and Pablo Joya,
(Exhibit H). as the number of lots which a purchaser could acquire under the law was limited, lots Nos. 1153
Asuncion Bobadilla, and Delfin and Felicisima Blancaflor, are hereby ordered to deliver lots Nos.
and 2352 were excluded and put up for sale. In order not to lose them, Cecilio Joya had Pedro Tiongco buy
1031, 1058, 1086, 1153, and 2352 to the administrator of the estate of the deceased in order that he
them, supplying him with the necessary funds. Subsequently, Pedro Tiongco transferred his right to said lots to
may proceed to the liquidation, partition and distribution of the latter's estate in accordance with the
Cecilio Joya by donation, as appears from Exhibits F and G. These transfers were approved by the Director of
law and this judgment, as soon as it becomes final and executory, the Director of Lands being
Lands and noted in the proper registry book. On April 24 1919, Cecilio Joya conveyed his right to lot No. 1058
hereby ordered to cancel the certificates of transfer of said lots Nos. 1031, 1058, 1086, 1153 and
to Florentino Joya consideration of the sum of P2,000 said conveyance having been approved by the Director
2352 registered in the name of said defendants, Florentino Joya on his own behalf and that of Pablo
of Lands and registered in the proper registry book (Exhibit 9). On May 11, 1919, Cecilio Joya conveyed his
Joya, Felicisimo Joya, Asuncion Bobadilla, Delfin and Felicisima Blancaflor, with the costs of the
right to lot No. 547 to Marcelina Joya and Francisco Joya in consideration of the sum of P450, conveyance
action against the defendants. So ordered.
having been approved by the Director of Lands and registered in the proper registry book (Exhibit 10). On April
27, 1919, Cecilio Joya executed a will devising lot No. 1058 to Florentino Joya, lot No. 1086 to Pablo Joya, lot
In support of her appeal, plaintiff-appellant assigns the following alleged errors as committed by the trial court No. 1031 to Delfin and Felicisima Blancaflor, lot No. 1153 to the brothers Agustin and Pedro Joya, lot No. 2352
in its decision, to wit: (1) The lower court erred in declaring the plaintiff owner of only one-half of lots Nos. to Feliciano and Asuncion Bobadilla, and lot No. 547 (Exhibit Y) to Marcelina and Francisca Joya. At the time
1031, 1058, 1086, 1153, and 2352, as conjugal property possessed with the deceased Cecilio Joya, instead of of his death, Cecilio Joya had not yet completed the payment of the price of the lots mentioned above to the
holding her to be the absolute and exclusive owner of said lots, in accordance with section 16 of Act No. 1120; Insular Government. All the lots in question except lot No. 547, are in the possession of the defendants, who
(2) the lower court erred in not holding the document of sale of lot No. 547, Exhibit 10, fraudulent, (3) the lower enjoy their products. On May 10, 1920 lots Nos. 2352, 1086, 1153 and 1031, were transferred to Florentino
court erred in amending its judgment of December 17, 1926, thereby exempting the defendants from the Joya as administrator of the estate of the deceased Cecilio Joya. (Exhibits 3, 4, 5 and 6.)
obligation to pay plaintiff the products of the lots in question, from the year 1920 until their restitution; (4) the
lower court erred in amending its judgment rendered on December 17, 1926, ordering the delivery of all the

On May 26, 1919, Cecilio Joya died, and on June 9, 1919, his executor, the herein defendant Florentino Joya,
presented said will for probate to the Court of First Instance of Cavite, which was probated after the proper
proceedings. In March, 1920, in the course of the testamentary proceedings, the executor Florentino Joya
presented an alleged agreement of partition by the legatees, which agreement was disapproved by the court in
view of the herein plaintiff's opposition, who alleged that her signature had been obtained by fraud.
The questions to be determined in this appeal are purely legal, and, briefly,, are as follows: (1) Were Cecilio
Joya's conveyances of his interest in lot No. 1958 to Florentino Joya and in No. 547 to the sisters Marcelina
and Francisca Joya fraudulent? (2) Were Cecilio Joya's legacies of lots Nos. 1031, 1086, 1153 and 2352 to the
other defendants null and void? (3) Has the plaintiff-appellant, as the surviving spouse, exclusive right to all the
lots in question? (4) In case she has, is she entitled to the possession and products thereof?
As to the first question, the pertinent part of section 16 of Act No. 1120 says the following:
SEC. 16. . . . In case the holder of the certificate shall have his interest in the land before having
complied with all the conditions thereof, the purchaser from the holder of the certificate shall be
entitled to all the rights of the holder of the certificate upon presenting his assignment to the Chief of
the Bureau of Public Lands for registration.
It will be seen that the holder of a certificate off sale of friar has a right to sell his interest therein, even before
having fully paid the purchase price and upon presentation of the certificate of transfer to the Chief of the
Bureau of Public Lands for registration, he is subrogated to all the rights of the holder of the certificate.
The evidence shows that during his lifetime Cecilio Joya conveyed his interest in lot No. 1058 to Florentino
Joya for the sum of P2,000, said conveyance having been approved by the Director of Lands, and registered in
the proper register book of said office. (Exhibit 9.) His right to lot No. 547 was also conveyed by Cecilio Joya to
Marcelina and Francisca Joya during his lifetime, said transfer having been approved by the Director of Lands,
and registered in the proper book in the Bureau of Public Lands. (Exhibit 10.) Said conveyance having been
made in accordance with the provisions of the law, Florentino Joya on the one hand, and Marcelina and
Francisca Joya on the other, were subrogated to all of Cecilio Joya's rights to said lots, and there is nothing in
the record to show conclusively that said conveyances were fraudulently obtained. The fact that the testator
included said lots in his will and disposed of them in the form of legacies in favor of said persons, does not in
itself show the existence of any fraud. At most, it may be held as an act of ratification.
In regard to the second and third questions, that is, whether or not the legacies are null and void, and the
plaintiff-appellant, as the surviving spouse, is entitled exclusively to the lots in question, the pertinent part of
said section 16 of Act No. 1120 provides as follows:
SEC. 16. In the event of the death of a holder of a certificate the issuance of which is provided for in
section twelve hereof, prior to the execution of a deed by the Government to any purchaser, his
widow shall be entitled to receive a deed of the land stated in the certificate upon showing that she
has complied with the requirements of law for the purchase of the same.
In the case of Jocson vs. Soriano, as administrator of the intestate estate of Silvestre Estacion (45 Phil., 375),
this court, interpreting the above-quoted legal provision, laid down the following doctrine:
FRIAR ESTATE LANDS; RIGHTS OF THE WIDOW OF THE PURCHASER AFTER THE DEATH
OF THE LATTER. — Under the provisions of section 16 of Act No. 1120, the widow of a purchaser
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 7 of 25
of a parcel of land belonging to the Friar Estate, purchased by the Government, after the death of
her husband (the purchaser), is entitled to have a patent issued to her of the lands purchased, upon
a proper showing that she has completed the payment of the purchase price. The right granted to
the original settlers of the friar estate lands to purchase the parcel occupied by them at the time of
the purchase by the Government, is a right conceded by the Government, analogous to the
homestead laws. A homestead privilege does not terminate on the husband's death, but is
transferred to his widow and his family. A homestead selected by the husband in his lifetime vests
absolute in his surviving wife, and her rights are governed by the law in force at the time of the death
of her husband. Neither does she lose said right by a second marriage upon the death of her
husband, the purchaser. She may continue to occupy the whole of the homestead.
We have seen, in discussing and solving the first question, that the holder of a certificate of sale of friar lands,
who has not fully paid the purchase price may transfer and convey his rights, but that the transferee or grantee
is not subrogated to all the transferor's right until the transfer has been approved by the Director of Lands and
registered in the registry book in the Bureau of Public Lands. In other words, in order that a transfer of the
rights of a holder of a certificate of sale of friar lands may be legally effective, it is necessary that a formal
certificate of transfer be drawn up and submitted to the Chief of the Bureau of Public Lands for his approval
and registration. The law authorizes no other way of transferring the rights of a holder of a certificate of sale of
friar lands. It provides, however, that in case of the death of said holder, the surviving spouse shall be entitled
to receive the title to the land, upon compliance with the requirements of the law. If, as it was held in the
aforecited case of Jocson vs. Soriano, the right conferred by Act No. 1120 on the holder of a certificate of sale
of friar lands in similar to that conferred on the holder of a "homestead," and if the latter has no right to dispose
of said certificate by will to the prejudice of his surviving spouse and for his children (29 C. J., 930, par. 342),
then by analogy, the holder of a certificate of sale of friar lands cannot dispose of his rights to said lands by will
to the prejudice of his widow and children.
The provisions of the Civil Code referring to conjugal property cannot be applied in this case, as was done by
the trial court, because the law regulating the acquisition, disposition, and transmission of rights to the friar
lands acquired by the Insular Government, lays down rules in conflict with the aforesaid provisions of the Civil
Code; and as the said Code is of a general character, while Act No. 1120 is a special law, the latter should
prevail.
With respect to the fourth question raised, namely, whether or not the herein plaintiff-appellant is entitled to the
possession and the products of the friar lands acquired by the Insular Government, which, by virtue of the law,
pass exclusively to the surviving spouse upon compliance of the legal requirements, the answer must be in the
affirmative. The defendants, who are in possession of the said lands, cannot invoke the provisions of the Civil
Code relative to possession in good faith, inasmuch as the principle on which the right of a holder in good faith
is based is the belief that his possession is with just title under claim of ownership.
While a deceased heirs or legatees acquire the ownership of the property given them in the will and may taken
possession of their respective portions upon the death of their predecessor, yet upon the appointment of an
administrator, the latter, by virtue of his appointment, acquires a right to the possession of the property of
estate, subject to the orders of the court, unless he consents to the heirs continuing in possession thereof. But
such consent does not, however, relieve the administrator of all responsibility for the management of the same
and its fruits; because until the judicial partition is made, said property continues to belong to the testamentary
estate. (Pimentel vs. Palanca, 5 Phil., 436; Fernandez vs. Tria, 22 Phil., 603.)
Being a matter of law, the defendants-appellants cannot plead ignorance of the fact that until a judicial partition
of the property left by Cecilio Joya is made, said property belongs to the lather's estate and it together with its
products, is subject to the payment of the testator's debts, if any. Only after judicial partition has been made do

they acquire the title to their respective legacies, if the latter are valid. (Santos vs. Roman Catholic Bishop of
Nueva Caceres, 45 Phil., 895.)
We have seen that the legacies given by Cecilio Joya to the defendants were void. If the lands, which are the
subject matter of said legacies and which are in the possession of the defendants, still belong to Cecilio Joya's
estate, because no judicial partition has as yet been made of the property he left, which is subject, together
with its fruits, to the payment of his debts, said defendants cannot invoke the provisions of the Civil Code with
respect to possession in good faith insofar as the fruits are concerned; because even when the legacies are
valid they acquired only when the latter judicially assigned to them in the final partition, and because, while
said lands are under administration, the administrator is obliged to render an account of his management of
the same and the products thereof.
In conclusion, them we hold that the defendants are not entitled to the possession of the lands in question or
their products, and they are bound to return them to the herein plaintiff-appellant, after deducting the
necessary expenses for cultivation and preservation. (Art 453, Civil Code.)
Summarizing all that has been said above, we find:
1. That Cecilio Joya's transfers during his lifetime of lot No. 1058 to Florentino Joya and lot No. 547
to the sisters Marcelina and Francisca Joya, with the approval of the Director of Lands, are bona
fide, and therefore legal and valid.
2. That Cecilio Joya's legacies in his will of lot No. 1031 to Delfin and Felicisima Blancaflor, lot No.
1086 to Pablo Joya, lot No. 1152 to the brothers Agustin and Pedro Joya, and lot No. 2352 to
Feliciano and Asuncion Bobadilla are null and void, being contrary to the provisions of section 16 of
Act No. 1120 which grants his widow, the herein plaintiff-appellant the ownership of the lands
purchased and not transferred by him during his lifetime, provided that she complies with the legal
requirements for the purchase of the same.
3. The plaintiff-appellant is entitled to the exclusive ownership and possession of the aforementioned
lots Nos. 1031, 1086, 1153, and 2352 and to their fruits, after deducting the necessary expenses of
preservation, cultivation and production.
For the foregoing, the judgment appealed from is modified, and it is ordered that Feliciano and Pablo Joya,
Asuncion Bobadilla, Delfin and Felicisima Blancaflor return lots Nos. 1031, 1086, 1153, and 2352 to the
plaintiff-appellant, Basilia Arayata, together with their products, or the latter's equivalent in cash from the year
1920 until their restitution, deducting the necessary expenses of cultivation, preservation, and production.
Without any special pronouncement as to costs, it is so ordered.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-68053 May 7, 1990
LAURA ALVAREZ, FLORA ALVAREZ and RAYMUNDO ALVAREZ, petitioners,
vs.
THE HONORABLE INTERMEDIATE APELLATE COURT and JESUS YANES, ESTELITA YANES,
ANTONIO YANES, ROSARIO YANES, and ILUMINADO YANES, respondents.
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 8 of 25
Francisco G. Banzon for petitioner.
Renecio R. Espiritu for private respondents.
FERNAN, C.J.:
This is a petition for review on certiorari seeking the reversal of: (a) the decision of the Fourth Civil Cases
Division of the Intermediate Appellate Court dated August 31, 1983 in AC-G.R. CV No. 56626 entitled "Jesus
Yanes et al. v. Dr. Rodolfo Siason et al." affirming the decision dated July 8, 1974 of the Court of First Instance
of Negros Occidental insofar as it ordered the petitioners to pay jointly and severally the private respondents
the sum of P20,000.00 representing the actual value of Lots Nos. 773-A and 773-B of the cadastral survey of
Murcia, Negros Occidental and reversing the subject decision insofar as it awarded the sums of P2,000.00,
P5,000.00 and P2,000.00 as actual damages, moral damages and attorney's fees, respectively and (b) the
resolution of said appellate court dated May 30, 1984, denying the motion for reconsideration of its decision.
The real properties involved are two parcels of land identified as Lot 773-A and Lot 773-B which were originally
known as Lot 773 of the cadastral survey of Murcia, Negros Occidental. Lot 773, with an area of 156,549
square meters, was registered in the name of the heirs of Aniceto Yanes under Original Certificate of Title No.
RO-4858 (8804) issued on October 9, 1917 by the Register of Deeds of Occidental Negros (Exh. A).
Aniceto Yanes was survived by his children, Rufino, Felipe and Teodora. Herein private respondents, Estelita,
Iluminado and Jesus, are the children of Rufino who died in 1962 while the other private respondents, Antonio
and Rosario Yanes, are children of Felipe. Teodora was survived by her child, Jovita (Jovito) Alib. 1 It is not
clear why the latter is not included as a party in this case.
Aniceto left his children Lots 773 and 823. Teodora cultivated only three hectares of Lot 823 as she could not
attend to the other portions of the two lots which had a total area of around twenty-four hectares. The record
does not show whether the children of Felipe also cultivated some portions of the lots but it is established that
Rufino and his children left the province to settle in other places as a result of the outbreak of World War II.
According to Estelita, from the "Japanese time up to peace time", they did not visit the parcels of land in
question but "after liberation", when her brother went there to get their share of the sugar produced therein, he
was informed that Fortunato Santiago, Fuentebella (Puentevella) and Alvarez were in possession of Lot 773. 2
It is on record that on May 19, 1938, Fortunato D. Santiago was issued Transfer Certificate of Title No. RF
2694 (29797) covering Lot 773-A with an area of 37,818 square meters. 3 TCT No. RF 2694 describes Lot 773-
A as a portion of Lot 773 of the cadastral survey of Murcia and as originally registered under OCT No. 8804.
The bigger portion of Lot 773 with an area of 118,831 square meters was also registered in the name of
Fortunato D. Santiago on September 6, 1938 Under TCT No. RT-2695 (28192 ). 4 Said transfer certificate of
title also contains a certification to the effect that Lot 773-B was originally registered under OCT No. 8804.
On May 30, 1955, Santiago sold Lots 773-A and 773-B to Monico B. Fuentebella, Jr. in consideration of the
sum of P7,000.00. 5 Consequently, on February 20, 1956, TCT Nos. T-19291 and T-19292 were issued in
Fuentebella's name. 6
After Fuentebella's death and during the settlement of his estate, the administratrix thereof (Arsenia R. Vda. de
Fuentebella, his wife) filed in Special Proceedings No. 4373 in the Court of First Instance of Negros
Occidental, a motion requesting authority to sell Lots 773-A and 773-B. 7 By virtue of a court order granting
said motion, 8 on March 24, 1958, Arsenia Vda. de Fuentebella sold said lots for P6,000.00 to Rosendo

Alvarez. 9 Hence, on April 1, 1958 TCT Nos. T-23165 and T-23166 covering Lots 773-A and 773-B were
respectively issued to Rosendo Alvarez. 10
Two years later or on May 26, 1960, Teodora Yanes and the children of her brother Rufino, namely, Estelita,
Iluminado and Jesus, filed in the Court of First Instance of Negros Occidental a complaint against Fortunato
Santiago, Arsenia Vda. de Fuentebella, Alvarez and the Register of Deeds of Negros Occidental for the
"return" of the ownership and possession of Lots 773 and 823. They also prayed that an accounting of the
produce of the land from 1944 up to the filing of the complaint be made by the defendants, that after court
approval of said accounting, the share or money equivalent due the plaintiffs be delivered to them, and that
defendants be ordered to pay plaintiffs P500.00 as damages in the form of attorney's fees. 11
During the pendency in court of said case or on November 13, 1961, Alvarez sold Lots 773-A, 773-B and
another lot for P25,000.00 to Dr. Rodolfo Siason. 12 Accordingly, TCT Nos. 30919 and 30920 were issued to
Siason, 13 who thereafter, declared the two lots in his name for assessment purposes. 14
Meanwhile, on November 6, 1962, Jesus Yanes, in his own behalf and in behalf of the other plaintiffs, and
assisted by their counsel, filed a manifestation in Civil Case No. 5022 stating that the therein plaintiffs
"renounce, forfeit and quitclaims (sic) any claim, monetary or otherwise, against the defendant Arsenia Vda. de
Fuentebella in connection with the above-entitled case." 15
On October 11, 1963, a decision was rendered by the Court of First Instance of Negros Occidental in Civil
Case No. 5022, the dispositive portion of which reads:
WHEREFORE, judgment is rendered, ordering the defendant Rosendo Alvarez to reconvey to the
plaintiffs lots Nos. 773 and 823 of the Cadastral Survey of Murcia, Negros Occidental, now covered
by Transfer Certificates of Title Nos. T-23165 and T-23166 in the name of said defendant, and
thereafter to deliver the possession of said lots to the plaintiffs. No special pronouncement as to
costs.SO ORDERED. 16
It will be noted that the above-mentioned manifestation of Jesus Yanes was not mentioned in the aforesaid
decision.
However, execution of said decision proved unsuccessful with respect to Lot 773. In his return of service dated
October 20, 1965, the sheriff stated that he discovered that Lot 773 had been subdivided into Lots 773-A and
773-B; that they were "in the name" of Rodolfo Siason who had purchased them from Alvarez, and that Lot
773 could not be delivered to the plaintiffs as Siason was "not a party per writ of execution." 17
The execution of the decision in Civil Case No. 5022 having met a hindrance, herein private respondents (the
Yaneses) filed on July 31, 1965, in the Court of First Instance of Negros Occidental a petition for the issuance
of a new certificate of title and for a declaration of nullity of TCT Nos. T-23165 and T-23166 issued to Rosendo
Alvarez. 18 Thereafter, the court required Rodolfo Siason to produce the certificates of title covering Lots 773
and 823.
Expectedly, Siason filed a manifestation stating that he purchased Lots 773-A, 773-B and 658, not Lots 773
and 823, "in good faith and for a valuable consideration without any knowledge of any lien or encumbrances
against said properties"; that the decision in the cadastral proceeding 19 could not be enforced against him as
he was not a party thereto; and that the decision in Civil Case No. 5022 could neither be enforced against him
not only because he was not a party-litigant therein but also because it had long become final and
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 9 of 25
executory. 20 Finding said manifestation to be well-founded, the cadastral court, in its order of September 4,
1965, nullified its previous order requiring Siason to surrender the certificates of title mentioned therein. 21
In 1968, the Yaneses filed an ex-parte motion for the issuance of an alias writ of execution in Civil Case No.
5022. Siason opposed it. 22 In its order of September 28, 1968 in Civil Case No. 5022, the lower court, noting
that the Yaneses had instituted another action for the recovery of the land in question, ruled that at the
judgment therein could not be enforced against Siason as he was not a party in the case. 23
The action filed by the Yaneses on February 21, 1968 was for recovery of real property with
damages. 24 Named defendants therein were Dr. Rodolfo Siason, Laura Alvarez, Flora Alvarez, Raymundo
Alvarez and the Register of Deeds of Negros Occidental. The Yaneses prayed for the cancellation of TCT Nos.
T-19291 and 19292 issued to Siason (sic) for being null and void; the issuance of a new certificate of title in the
name of the Yaneses "in accordance with the sheriffs return of service dated October 20, 1965;" Siason's
delivery of possession of Lot 773 to the Yaneses; and if, delivery thereof could not be effected, or, if the
issuance of a new title could not be made, that the Alvarez and Siason jointly and severally pay the Yaneses
the sum of P45,000.00. They also prayed that Siason render an accounting of the fruits of Lot 773 from
November 13, 1961 until the filing of the complaint; and that the defendants jointly and severally pay the
Yaneses moral damages of P20,000.00 and exemplary damages of P10,000.00 plus attorney's fees of P4,
000.00. 25
In his answer to the complaint, Siason alleged that the validity of his titles to Lots 773-A and 773-B, having
been passed upon by the court in its order of September 4, 1965, had become res judicata and the Yaneses
were estopped from questioning said order. 26 On their part, the Alvarez stated in their answer that the
Yaneses' cause of action had been "barred by res judicata, statute of limitation and estoppel." 27
In its decision of July 8, 1974, the lower court found that Rodolfo Siason, who purchased the properties in
question thru an agent as he was then in Mexico pursuing further medical studies, was a buyer in good faith for
a valuable consideration. Although the Yaneses were negligent in their failure to place a notice of lis
pendens"before the Register of Deeds of Negros Occidental in order to protect their rights over the property in
question" in Civil Case No. 5022, equity demanded that they recover the actual value of the land because the
sale thereof executed between Alvarez and Siason was without court approval. 28 The dispositive portion of the
decision states:
IN VIEW OF THE FOREGOING CONSIDERATION, judgment is hereby rendered in the following
manner:
A. The case against the defendant Dr. Rodolfo Siason and the Register of Deeds are (sic) hereby
dismmissed,
B. The defendants, Laura, Flora and Raymundo, all surnamed Alvarez being the legitimate children
of the deceased Rosendo Alvarez are hereby ordered to pay jointly and severally the plaintiffs the
sum of P20,000.00 representing the actual value of Lots Nos. 773-A and 773-B of Murcia Cadastre,
Negros Occidental; the sum of P2,000.00 as actual damages suffered by the plaintiff; the sum of
P5,000.00 representing moral damages and the sum of P2.000 as attorney's fees, all with legal rate
of interest from date of the filing of this complaint up to final payment.
C. The cross-claim filed by the defendant Dr. Rodolfo Siason against the defendants, Laura, Flora
and Raymundo, all surnamed Alvarez is hereby dismissed.

D. Defendants, Laura, Flora and Raymundo, all surnamed Alvarez are hereby ordered to pay the
costs of this suit.SO ORDERED. 29
The Alvarez appealed to the then Intermediate Appellate Court which in its decision of August 31,
1983 30 affirmed the lower court's decision "insofar as it ordered defendants-appellants to pay jointly and
severally the plaintiffs-appellees the sum of P20,000.00 representing the actual value of Lots Nos. 773-A and
773-B of the cadastral survey of Murcia, Negros Occidental, and is reversed insofar as it awarded the sums of
P2,000.00, P5,000.00 and P2,000.00 as actual damages, moral damages and attorney's fees,
respectively." 31 The dispositive portion of said decision reads:
WHEREFORE, the decision appealed from is affirmed insofar as it ordered defendants-appellants to
pay jointly and severally the plaintiffs- appellees the sum of P20,000.00 representing the actual
value of Lots Nos. 773-A and 773-B of the cadastral survey of Murcia, Negros Occidental, and is
reversed insofar as it awarded the sums of P2,000.00, P5,000.00 and P2,000.00 as actual damages,
moral damages and attorney's fees, respectively. No costs.SO ORDERED. 32
Finding no cogent reason to grant appellants motion for reconsideration, said appellate court denied the same.
Hence, the instant petition. ln their memorandum petitioners raised the following issues:
1. Whethere or not the defense of prescription and estoppel had been timely and properly invoked
and raised by the petitioners in the lower court.
2. Whether or not the cause and/or causes of action of the private respondents, if ever there are any,
as alleged in their complaint dated February 21, 1968 which has been docketed in the trial court as
Civil Case No. 8474 supra, are forever barred by statute of limitation and/or prescription of action
and estoppel.
3. Whether or not the late Rosendo Alvarez, a defendant in Civil Case No. 5022, supra and father of
the petitioners become a privy and/or party to the waiver (Exhibit 4-defendant Siason) in Civil Case
No. 8474, supra where the private respondents had unqualifiedly and absolutely waived, renounced
and quitclaimed all their alleged rights and interests, if ever there is any, on Lots Nos. 773-A and
773-B of Murcia Cadastre as appearing in their written manifestation dated November 6, 1962
(Exhibits "4" Siason) which had not been controverted or even impliedly or indirectly denied by them.
4. Whether or not the liability or liabilities of Rosendo Alvarez arising from the sale of Lots Nos. 773-
A and 773-B of Murcia Cadastre to Dr. Rodolfo Siason, if ever there is any, could be legally passed
or transmitted by operations (sic) of law to the petitioners without violation of law and due process
. 33
The petition is devoid of merit.
As correctly ruled by the Court of Appeals, it is powerless and for that matter so is the Supreme Court, to
review the decision in Civil Case No. 5022 ordering Alvarez to reconvey the lots in dispute to herein private
respondents. Said decision had long become final and executory and with the possible exception of Dr.
Siason, who was not a party to said case, the decision in Civil Case No. 5022 is the law of the case between
the parties thereto. It ended when Alvarez or his heirs failed to appeal the decision against them. 34
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 10 of 25
Thus, it is axiomatic that when a right or fact has been judicially tried and determined by a court of competent
jurisdiction, so long as it remains unreversed, it should be conclusive upon the parties and those in privity with
them in law or estate. 35 As consistently ruled by this Court, every litigation must come to an end. Access to the
court is guaranteed. But there must be a limit to it. Once a litigant's right has been adjudicated in a valid final
judgment of a competent court, he should not be granted an unbridled license to return for another try. The
prevailing party should not be harassed by subsequent suits. For, if endless litigation were to be allowed,
unscrupulous litigations will multiply in number to the detriment of the administration of justice. 36
There is no dispute that the rights of the Yaneses to the properties in question have been finally adjudicated in
Civil Case No. 5022. As found by the lower court, from the uncontroverted evidence presented, the Yaneses
have been illegally deprived of ownership and possession of the lots in question. 37 In fact, Civil Case No. 8474
now under review, arose from the failure to execute Civil Case No. 5022, as subject lots can no longer be
reconveyed to private respondents Yaneses, the same having been sold during the pendency of the case by
the petitioners' father to Dr. Siason who did not know about the controversy, there being no lis pendens
annotated on the titles. Hence, it was also settled beyond question that Dr. Siason is a purchaser in good faith.
Under the circumstances, the trial court did not annul the sale executed by Alvarez in favor of Dr. Siason on
November 11, 1961 but in fact sustained it. The trial court ordered the heirs of Rosendo Alvarez who lost in
Civil Case No. 5022 to pay the plaintiffs (private respondents herein) the amount of P20,000.00 representing
the actual value of the subdivided lots in dispute. It did not order defendant Siason to pay said amount. 38
As to the propriety of the present case, it has long been established that the sole remedy of the landowner
whose property has been wrongfully or erroneously registered in another's name is to bring an ordinary action
in the ordinary court of justice for reconveyance or, if the property has passed into the hands of an innocent
purchaser for value, for damages. 39 "It is one thing to protect an innocent third party; it is entirely a different
matter and one devoid of justification if deceit would be rewarded by allowing the perpetrator to enjoy the fruits
of his nefarious decided As clearly revealed by the undeviating line of decisions coming from this Court, such
an undesirable eventuality is precisely sought to be guarded against." 40
The issue on the right to the properties in litigation having been finally adjudicated in Civil Case No. 5022 in
favor of private respondents, it cannot now be reopened in the instant case on the pretext that the defenses of
prescription and estoppel have not been properly considered by the lower court. Petitioners could have
appealed in the former case but they did not. They have therefore foreclosed their rights, if any, and they
cannot now be heard to complain in another case in order to defeat the enforcement of a judgment which has
longing become final and executory.
Petitioners further contend that the liability arising from the sale of Lots No. 773-A and 773-B made by
Rosendo Alvarez to Dr. Rodolfo Siason should be the sole liability of the late Rosendo Alvarez or of his estate,
after his death.
Such contention is untenable for it overlooks the doctrine obtaining in this jurisdiction on the general
transmissibility of the rights and obligations of the deceased to his legitimate children and heirs. Thus, the
pertinent provisions of the Civil Code state:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations
to the extent of the value of the inheritance, of a person are transmitted through his death to another
or others either by his will or by operation of law.
 Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 11 of 25

Art. 776. The inheritance includes all the property, rights and obligations of a person which are not
extinguished by his death.
Art. 1311. Contract stake effect only between the parties, their assigns and heirs except in case
where the rights and obligations arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law. The heir is not liable beyond the value of the property received
from the decedent.
As explained by this Court through Associate Justice J.B.L. Reyes in the case of Estate of Hemady vs. Luzon
Surety Co., Inc. 41
The binding effect of contracts upon the heirs of the deceased party is not altered by the provision of
our Rules of Court that money debts of a deceased must be liquidated and paid from his estate
before the residue is distributed among said heirs (Rule 89). The reason is that whatever payment is
thus made from the state is ultimately a payment by the heirs or distributees, since the amount of the
paid claim in fact diminishes or reduces the shares that the heirs would have been entitled to
receive.
G.R. No. 124715 January 24, 2000
RUFINA LUY LIM, petitioner,
vs.
COURT OF APPEALS, AUTO TRUCK TBA CORPORATION, SPEED DISTRIBUTING, INC., ACTIVE
DISTRIBUTORS, ALLIANCE MARKETING CORPORATION, ACTION COMPANY, INC. respondents.
BUENA, J.:
May a corporation, in its universality, be the proper subject of and be included in the inventory of the estate of
a deceased person?
Petitioner disputes before us through the instant petition for review on certiorari, the decision1 of the Court of
Appeals promulgated on 18 April 1996, in CA-GR SP No. 38617, which nullified and set aside the orders dated
04 July 19952, 12 September 19953 and 15 September 19954 of the Regional Trial Court of Quezon City,
Branch 93, sitting as a probate court.
Petitioner Rufina Luy Lim is the surviving spouse of late Pastor Y. Lim whose estate is the subject of probate
proceedings in Special Proceedings Q-95-23334, entitled, "In Re: Intestate Estate of Pastor Y. Lim Rufina Luy
Lim, represented by George Luy, Petitioner".1âwphi1.nêt

Under our law, therefore. the general rule is that a party's contractual rights and obligations are
Private respondents Auto Truck Corporation, Alliance Marketing Corporation, Speed Distributing, Inc., Active
transmissible to the successors.
Distributing, Inc. and Action Company are corporations formed, organized and existing under Philippine laws
and which owned real properties covered under the Torrens system.
The rule is a consequence of the progressive "depersonalization" of patrimonial rights and duties
that, as observed by Victorio Polacco has characterized the history of these institutions. From the
On 11 June 1994, Pastor Y. Lim died intestate. Herein petitioner, as surviving spouse and duly represented by
Roman concept of a relation from person to person, the obligation has evolved into a relation from
her nephew George Luy, fried on 17 March 1995, a joint petition5 for the administration of the estate of Pastor
patrimony to patrimony with the persons occupying only a representative position, barring those rare
Y. Lim before the Regional Trial Court of Quezon City.
cases where the obligation is strictly personal, i.e., is contracted intuitu personae, in consideration of
its performance by a specific person and by no other.
Private respondent corporations, whose properties were included in the inventory of the estate of Pastor Y.
Lim, then filed a motion6 for the lifting of lis pendens and motion7 for exclusion of certain properties from the
xxx xxx xxx
estate of the decedent.

Petitioners being the heirs of the late Rosendo Alvarez, they cannot escape the legal consequences of their
In an order8 dated 08 June 1995, the Regional Trial Court of Quezon City, Branch 93, sitting as a probate
father's transaction, which gave rise to the present claim for damages. That petitioners did not inherit the
court, granted the private respondents' twin motions, in this wise:
property involved herein is of no moment because by legal fiction, the monetary equivalent thereof devolved
into the mass of their father's hereditary estate, and we have ruled that the hereditary assets are always liable
in their totality for the payment of the debts of the estate. 42 Wherefore, the Register of Deeds of Quezon City is hereby ordered to lift, expunge or delete the
annotation of lis pendens on Transfer Certificates of Title Nos. 116716, 116717, 116718, 116719
and 5182 and it is hereby further ordered that the properties covered by the same titles as well as
It must, however, be made clear that petitioners are liable only to the extent of the value of their inheritance.
those properties by (sic) Transfer Certificate of Title Nos. 613494, 363123, 236236 and 263236 are
With this clarification and considering petitioners' admission that there are other properties left by the
excluded from these proceedings.SO ORDERED.
deceased which are sufficient to cover the amount adjudged in favor of private respondents, we see no cogent
reason to disturb the findings and conclusions of the Court of Appeals.
Subsequently, Rufina Luy Lim filed a verified amended petition9 which contained the following averments:
WHEREFORE, subject to the clarification herein above stated, the assailed decision of the Court of Appeals is
hereby AFFIRMED. Costs against petitioners.SO ORDERED 3. The late Pastor Y. Lim personally owned during his lifetime the following business entities, to wit:

Republic of the Philippines

SUPREME COURT Business
Address:
Manila Entity
SECOND DIVISION
 Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 12 of 25

xxx xxx xxx Corporation Cainta, Rizal

Alliance Block 3, Lot 6, Dacca BF Homes, q. Alliance Marketing TCT No. 27896 Prance, Metro Manila
Marketing, Inc. Parañaque, Metro Manila.

xxx xxx xxx Copies of the above-mentioned Transfer Certificate of Title and/or Tax Declarations are hereto
attached as Annexes "C" to "W".
Speed 910 Barrio Niog, Aguinaldo Highway,
Distributing Inc. Bacoor, Cavite. xxx xxx xxx

xxx xxx xxx

7. The aforementioned properties and/or real interests left by the late Pastor Y. Lim, are all conjugal
in nature, having been acquired by him during the existence of his marriage with petitioner.
Auto Truck TBA
2251 Roosevelt Avenue, Quezon City.
Corp.
8. There are other real and personal properties owned by Pastor Y. Lim which petitioner could not as
xxx xxx xxx yet identify. Petitioner, however will submit to this Honorable Court the identities thereof and the
necessary documents covering the same as soon as possible.
Active
Block 3, Lot 6, Dacca BF Homes,
Distributors, On 04 July 1995, the Regional Trial Court acting on petitioner's motion issued an order10, thus:
Parañaque, Metro Manila.
Inc.
Wherefore, the order dated 08 June 1995 is hereby set aside and the Registry of Deeds of Quezon
xxx xxx xxx City is hereby directed to reinstate the annotation of lis pendens in case said annotation had already
been deleted and/or cancelled said TCT Nos. 116716, 116717, 116718, 116719 and 51282.
Action 100 20th Avenue Murphy, Quezon City
Company or 92-D Mc-Arthur Highway Valenzuela Further more (sic), said properties covered by TCT Nos. 613494, 365123, 236256 and 236237 by
Bulacan. virtue of the petitioner are included in the instant petition.SO ORDERED.

3.1 Although the above business entities dealt and engaged in business with the public as
corporations, all their capital, assets and equity were however, personally owned by the late Pastor
Y Lim. Hence the alleged stockholders and officers appearing in the respective articles of
incorporation of the above business entities were mere dummies of Pastor Y. Lim, and they were
listed therein only for purposes of registration with the Securities and Exchange Commission.
4. Pastor Lim, likewise, had Time, Savings and Current Deposits with the following banks: (a)
Metrobank, Grace Park, Caloocan City and Quezon Avenue, Quezon City Branches and (b) First
Intestate Bank (formerly Producers Bank), Rizal Commercial Banking Corporation and in other
banks whose identities are yet to be determined.
5. That the following real properties, although registered in the name of the above entities, were
actually acquired by Pastor Y. Lim during his marriage with petitioner, to wit:
On 04 September 1995, the probate court appointed Rufina Lim as special administrator11 and Miguel Lim and
Lawyer Donald Lee, as co-special administrators of the estate of Pastor Y. Lim, after which letters of
administration were accordingly issued.
In an order12 dated 12 September 1995, the probate court denied anew private respondents' motion for
exclusion, in this wise:
The issue precisely raised by the petitioner in her petition is whether the corporations are the mere
alter egos or instrumentalities of Pastor Lim, Otherwise (sic) stated, the issue involves the piercing of
the corporate veil, a matter that is clearly within the jurisdiction of this Honorable Court and not the
Securities and Exchange Commission. Thus, in the case of Cease vs. Court of Appeals, 93 SCRA
483, the crucial issue decided by the regular court was whether the corporation involved therein was
the mere extension of the decedent. After finding in the affirmative, the Court ruled that the assets of
the corporation are also assets of the estate.

Corporation Title Location A reading of P.D. 902, the law relied upon by oppositors, shows that the SEC's exclusive (sic)
applies only to intra-corporate controversy. It is simply a suit to settle the intestate estate of a
xxx xxx xxx deceased person who, during his lifetime, acquired several properties and put up corporations as his
instrumentalities.SO ORDERED.
k. Auto Truck TCT No. 617726 Sto. Domingo TBA
 Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 13 of 25

On 15 September 1995, the probate court acting on an ex parte motion filed by petitioner, issued an Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization
order13 the dispositive portion of which reads: Act of 1980", is hereby amended to read as follows:

Wherefore, the parties and the following banks concerned herein under enumerated are hereby Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive jurisdiction:
ordered to comply strictly with this order and to produce and submit to the special administrators,
through this Honorable Court within (5) five days from receipt of this order their respective records of
xxx xxx xxx
the savings/current accounts/time deposits and other deposits in the names of Pastor Lim and/or
corporations above-mentioned, showing all the transactions made or done concerning
savings/current accounts from January 1994 up to their receipt of this court order. (4) In all matters of probate, both testate and intestate, where the gross value of the estate exceeds
One Hundred Thousand Pesos (P100,000) or, in probate matters in Metro Manila, where such gross
value exceeds Two Hundred Thousand Pesos (P200,000);
xxx xxx x x xSO ORDERED.

xxx xxx xxx

Private respondent filed a special civil action for certiorari14, with an urgent prayer for a restraining order or writ
of preliminary injunction, before the Court of Appeals questioning the orders of the Regional Trial Court, sitting
as a probate court. Sec. 3. Section 33 of the same law is hereby amended to read as follows:

On 18 April 1996, the Court of Appeals, finding in favor of herein private respondents, rendered the assailed Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
decision15, the decretal portion of which declares: Courts in Civil Cases. — Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts shall exercise:
Wherefore, premises considered, the instant special civil action for certiorari is hereby granted, The
impugned orders issued by respondent court on July 4, 1995 and September 12, 1995 are hereby 1. Exclusive original jurisdiction over civil actions and probate proceedings, testate and intestate,
nullified and set aside. The impugned order issued by respondent on September 15, 1995 is nullified including the grant of provisional remedies in proper cases, where the value of the personal
insofar as petitioner corporations" bank accounts and records are concerned.SO ORDERED. property, estate or amount of the demand does not exceed One Hundred Thousand Pesos
(P100,000) or, in Metro Manila where such personal property, estate or amount of the demand does
not exceed Two Hundred Thousand Pesos (P200,000), exclusive of interest, damages of whatever
Through the expediency of Rule 45 of the Rules of Court, herein petitioner Rufina Luy Lim now comes before
kind, attorney's fees, litigation expenses and costs, the amount of which must be specifically
us with a lone assignment of
alleged, Provided, that interest, damages of whatever kind, attorney's, litigation expenses and costs
error16:
shall be included in the determination of the filing fees, Provided further, that where there are several
claims or causes of actions between the same or different parties, embodied in the same complaint,
The respondent Court of Appeals erred in reversing the orders of the lower court which merely the amount of the demand shall be the totality of the claims in all the causes of action, irrespective of
allowed the preliminary or provisional inclusion of the private respondents as part of the estate of the whether the causes of action arose out of the same or different transactions;
late deceased (sic) Pastor Y. Lim with the respondent Court of Appeals arrogating unto itself the
power to repeal, to disobey or to ignore the clear and explicit provisions of Rules 81,83,84 and 87 of
xxx xxx xxx
the Rules of Court and thereby preventing the petitioner, from performing her duty as special
administrator of the estate as expressly provided in the said Rules.
Simply put, the determination of which court exercises jurisdiction over matters of probate depends upon the
gross value of the estate of the decedent.
Petitioner's contentions tread on perilous grounds.

As to the power and authority of the probate court, petitioner relies heavily on the principle that a probate court
In the instant petition for review, petitioner prays that we affirm the orders issued by the probate court which
may pass upon title to certain properties, albeit provisionally, for the purpose of determining whether a certain
were subsequently set aside by the Court of Appeals.
property should or should not be included in the inventory.

Yet, before we delve into the merits of the case, a review of the rules on jurisdiction over probate proceedings
In a litany of cases, We defined the parameters by which the court may extend its probing arms in the
is indeed in order.
determination of the question of title in probate proceedings.

The provisions of Republic Act 769117, which introduced amendments to Batas Pambansa Blg. 129, are
This Court, in PASTOR, JR. vs. COURT OF APPEALS,18 held:
pertinent:
 Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 14 of 25

. . . As a rule, the question of ownership is an extraneous matter which the probate court cannot
resolve with finality. Thus, for the purpose of determining whether a certain property should or
should not be included in the inventory of estate properties, the Probate Court may pass upon the
title thereto, but such determination is provisional, not conclusive, and is subject to the final decision
in a separate action to resolve title.
We reiterated the rule in PEREIRA vs. COURT OF APPEALS19:
. . . The function of resolving whether or not a certain property should be included in the inventory or
list of properties to be administered by the administrator is one clearly within the competence of the
probate court. However, the court's determination is only provisional in character, not conclusive,
and is subject to the final decision in a separate action which may be instituted by the parties.
Further, in MORALES vs. CFI OF CAVITE20 citing CUIZON vs. RAMOLETE21, We made an exposition on the
probate court's limited jurisdiction:
Yet, under the peculiar circumstances, where the parcels of land are registered in the name of private
respondent corporations, the jurisprudence pronounced in BOLISAY vs., ALCID 24 is of great essence and
finds applicability, thus:
It does not matter that respondent-administratrix has evidence purporting to support her claim of
ownership, for, on the other hand, petitioners have a Torrens title in their favor, which under the law
is endowed with incontestability until after it has been set aside in the manner indicated in the law
itself, which of course, does not include, bringing up the matter as a mere incident in special
proceedings for the settlement of the estate of deceased persons. . . .
. . . . In regard to such incident of inclusion or exclusion, We hold that if a property covered by
Torrens title is involved, the presumptive conclusiveness of such title should be given due weight,
and in the absence of strong compelling evidence to the contrary, the holder thereof should be
considered as the owner of the property in controversy until his title is nullified or modified in an
appropriate ordinary action, particularly, when as in the case at bar, possession of the property itself
is in the persons named in the title. . . .

It is a well-settled rule that a probate court or one in charge of proceedings whether testate or
A perusal of the records would reveal that no strong compelling evidence was ever presented by petitioner to
intestate cannot adjudicate or determine title to properties claimed to be a part of the estate and
bolster her bare assertions as to the title of the deceased Pastor Y. Lim over the properties. Even so, P.D.
which are equally claimed to belong to outside parties. All that the said court could do as regards
1529, otherwise known as, "The Property Registration Decree", proscribes collateral attack on Torrens Title,
said properties is to determine whether they should or should not be included in the inventory or list
hence:
of properties to be administered by the administrator. If there is no dispute, well and good; but if
there is, then the parties, the administrator and the opposing parties have to resort to an ordinary
action for a final determination of the conflicting claims of title because the probate court cannot do xxx xxx xxx
so.
Sec. 48. Certificate not subject to collateral attack. — A certificate of title shall not be subject to
Again, in VALERA vs. INSERTO22, We had occasion to elucidate, through Mr. Justice Andres Narvasa23: collateral attack. It cannot be altered, modified or cancelled except in a direct proceeding in
accordance with law.
Settled is the rule that a Court of First Instance (now Regional Trial Court), acting as a probate court,
exercises but limited jurisdiction, and thus has no power to take cognizance of and determine the In CUIZON vs. RAMOLETE, where similarly as in the case at bar, the property subject of the controversy was
issue of title to property claimed by a third person adversely to the decedent, unless the claimant duly registered under the Torrens system, We categorically stated:
and all other parties having legal interest in the property consent, expressly or impliedly, to the
submission of the question to the probate court for adjudgment, or the interests of third persons are
. . . Having been apprised of the fact that the property in question was in the possession of third
not thereby prejudiced, the reason for the exception being that the question of whether or not a
parties and more important, covered by a transfer certificate of title issued in the name of such third
particular matter should be resolved by the court in the exercise of its general jurisdiction or of its
parties, the respondent court should have denied the motion of the respondent administrator and
limited jurisdiction as a special court (e.g. probate, land registration, etc.), is in reality not a
excluded the property in question from the inventory of the property of the estate. It had no authority
jurisdictional but in essence of procedural one, involving a mode of practice which may be waived. . .
to deprive such third persons of their possession and ownership of the property. . . .
.

Inasmuch as the real properties included in the inventory of the estate of the Late Pastor Y. Lim are in the
. . . . These considerations assume greater cogency where, as here, the Torrens title is not in the
possession of and are registered in the name of private respondent corporations, which under the law possess
decedent's name but in others, a situation on which this Court has already had occasion to rule . . . .
a personality separate and distinct from their stockholders, and in the absence of any cogency to shred the veil
(emphasis Ours)
of corporate fiction, the presumption of conclusiveness of said titles in favor of private respondents should
stand undisturbed.
Petitioner, in the present case, argues that the parcels of land covered under the Torrens system and
registered in the name of private respondent corporations should be included in the inventory of the estate of
Accordingly, the probate court was remiss in denying private respondents' motion for exclusion. While it may
the decedent Pastor Y. Lim, alleging that after all the determination by the probate court of whether these
be true that the Regional Trial Court, acting in a restricted capacity and exercising limited jurisdiction as a
properties should be included or not is merely provisional in nature, thus, not conclusive and subject to a final
probate court, is competent to issue orders involving inclusion or exclusion of certain properties in the
determination in a separate action brought for the purpose of adjudging once and for all the issue of title.
inventory of the estate of the decedent, and to adjudge, albeit, provisionally the question of title over

properties, it is no less true that such authority conferred upon by law and reinforced by jurisprudence, should
be exercised judiciously, with due regard and caution to the peculiar circumstances of each individual case.
Notwithstanding that the real properties were duly registered under the Torrens system in the name of private
respondents, and as such were to be afforded the presumptive conclusiveness of title, the probate court
obviously opted to shut its eyes to this gleamy fact and still proceeded to issue the impugned orders.
By its denial of the motion for exclusion, the probate court in effect acted in utter disregard of the presumption
of conclusiveness of title in favor of private respondents. Certainly, the probate court through such brazen act
transgressed the clear provisions of law and infringed settled jurisprudence on this matter.
Moreover, petitioner urges that not only the properties of private respondent corporations are properly part of
the decedent's estate but also the private respondent corporations themselves. To rivet such flimsy contention,
petitioner cited that the late Pastor Y. Lim during his lifetime, organized and wholly-owned the five
corporations, which are the private respondents in the instant case. 25 Petitioner thus attached as Annexes
"F"26 and "G"27 of the petition for review affidavits executed by Teresa Lim and Lani Wenceslao which among
others, contained averments that the incorporators of Uniwide Distributing, Inc. included on the list had no
actual and participation in the organization and incorporation of the said corporation. The affiants added that
the persons whose names appeared on the articles of incorporation of Uniwide Distributing, Inc., as
incorporators thereof, are mere dummies since they have not actually contributed any amount to the capital
stock of the corporation and have been merely asked by the late Pastor Y. Lim to affix their respective
signatures thereon.
It is settled that a corporation is clothed with personality separate and distinct from that of the persons
composing it. It may not generally be held liable for that of the persons composing it. It may not be held liable
for the personal indebtedness of its stockholders or those of the entities connected with it. 28
Rudimentary is the rule that a corporation is invested by law with a personality distinct and separate from its
stockholders or members. In the same vein, a corporation by legal fiction and convenience is an entity shielded
by a protective mantle and imbued by law with a character alien to the persons comprising it.
Nonetheless, the shield is not at all times invincible. Thus, in FIRST PHILIPPINE INTERNATIONAL BANK
vs.COURT OF APPEALS29, We enunciated:
. . . When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for
the evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of
a monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and
isolates the corporation from the members or stockholders who compose it will be lifted to allow for
its consideration merely as an aggregation of individuals. . . .
Piercing the veil of corporate entity requires the court to see through the protective shroud which exempts its
stockholders from liabilities that ordinarily, they could be subject to, or distinguishes one corporation from a
seemingly separate one, were it not for the existing corporate fiction.30
The corporate mask may be lifted and the corporate veil may be pierced when a corporation is just but the alter
ego of a person or of another corporation. Where badges of fraud exist, where public convenience is defeated;
where a wrong is sought to be justified thereby, the corporate fiction or the notion of legal entity should come to
naught.31
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 15 of 25
Further, the test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as
follows: 1) Control, not mere majority or complete stock control, but complete domination, not only of finances
but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own; (2) Such control must have been
used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive
legal duty, or dishonest and unjust act in contravention of plaintiffs legal right; and (3) The aforesaid control
and breach of duty must proximately cause the injury or unjust loss complained of. The absence of any of
these elements prevent "piercing the corporate veil".32
Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a
corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities.33
Moreover, to disregard the separate juridical personality of a corporation, the wrong-doing must be clearly and
convincingly established. It cannot be presumed.34
Granting arguendo that the Regional Trial Court in this case was not merely acting in a limited capacity as a
probate court, petitioner nonetheless failed to adduce competent evidence that would have justified the court to
impale the veil of corporate fiction. Truly, the reliance reposed by petitioner on the affidavits executed by
Teresa Lim and Lani Wenceslao is unavailing considering that the aforementioned documents possess no
weighty probative value pursuant to the hearsay rule. Besides it is imperative for us to stress that such
affidavits are inadmissible in evidence inasmuch as the affiants were not at all presented during the course of
the proceedings in the lower court. To put it differently, for this Court to uphold the admissibility of said
documents would be to relegate from Our duty to apply such basic rule of evidence in a manner consistent
with the law and jurisprudence.
Our pronouncement in PEOPLE BANK AND TRUST COMPANY vs. LEONIDAS35 finds pertinence:
Affidavits are classified as hearsay evidence since they are not generally prepared by the affiant but
by another who uses his own language in writing the affiant's statements, which may thus be either
omitted or misunderstood by the one writing them. Moreover, the adverse party is deprived of the
opportunity to cross-examine the affiants. For this reason, affidavits are generally rejected for being
hearsay, unless the affiant themselves are placed on the witness stand to testify thereon.
As to the order36 of the lower court, dated 15 September 1995, the Court of Appeals correctly observed that
the Regional Trial Court, Branch 93 acted without jurisdiction in issuing said order; The probate court had no
authority to demand the production of bank accounts in the name of the private respondent corporations.
WHEREFORE, in view of the foregoing disquisitions, the instant petition is hereby DISMISSED for lack of merit
and the decision of the Court of Appeals which nullified and set aside the orders issued by the Regional Trial
Court, Branch 93, acting as a probate court, dated 04 July 1995 and 12 September 1995 is
AFFIRMED.1âwphi1.nêtSO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 145736 March 4, 2009
ESTATE OF ORLANDO LLENADO and WENIFREDA T. LLENADO, in her capacity as (a) Administratrix
of the Estate of Orlando A. Llenado and (b) Judicial Guardian of the Minor children of Orlando A.
Llenado, and (c) in her Own behalf as the Surviving Spouse and Legal Heir of Orlando A.
Llenado, Petitioners,
vs.
EDUARDO LLENADO, JORGE LLENADO, FELIZA GALLARDO VDA. DE LLENADO and REGISTER OF
DEEDS of Valenzuela City, Metro Manila, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the May 30, 2000 Decision1 of the Court of Appeals in CA-G.R. CV
No. 58911 which reversed the May 5, 1997 Decision2 of the Regional Trial Court of Valenzuela City, Branch 75
in Civil Case No. 4248-V-93, and the October 6, 2000 Resolution3 which denied the motion for reconsideration.
The appellate court dismissed for lack of merit the complaint for annulment of deed of conveyance, title and
damages filed by petitioner against herein respondents.
The subject of this controversy is a parcel of land denominated as Lot 249-D-1 (subject lot) consisting of 1,554
square meters located in Barrio Malinta, Valenzuela, Metro Manila and registered in the names of Eduardo
Llenado (Eduardo) and Jorge Llenado (Jorge) under Transfer of Certificate of Title (TCT) No. V-1689.4 The
subject lot once formed part of Lot 249-D owned by and registered in the name of their father, Cornelio
Llenado (Cornelio), under TCT No. T-16810.
On December 2, 1975, Cornelio leased Lot 249-D-1 to his nephew, Romeo Llenado (Romeo), for a period of
five years, renewable for another five years at the option of Cornelio. On March 31, 1978, Cornelio, Romeo
and the latter’s cousin Orlando Llenado (Orlando) executed an Agreement 5 whereby Romeo assigned all his
rights to Orlando over the unexpired portion of the aforesaid lease contract. The parties further agreed that
Orlando shall have the option to renew the lease contract for another three years commencing from December
3, 1980, up to December 2, 1983, renewable for another four years or up to December 2, 1987, and that
"during the period that [this agreement] is enforced, the x x x property cannot be sold, transferred, alienated or
conveyed in whatever manner to any third party."
Shortly thereafter or on June 24, 1978, Cornelio and Orlando entered into a Supplementary
Agreement6 amending the March 31, 1978 Agreement. Under the Supplementary Agreement, Orlando was
given an additional option to renew the lease contract for an aggregate period of 10 years at five-year intervals,
that is, from December 3, 1987 to December 2, 1992 and from December 3, 1992 to December 2, 1997. The
said provision was inserted in order to comply with the requirements of Mobil Philippines, Inc. for the operation
of a gasoline station which was subsequently built on the subject lot.
Upon the death of Orlando on November 7, 1983, his wife, Wenifreda Llenado (Wenifreda), took over the
operation of the gasoline station. Meanwhile, on January 29, 1987, Cornelio sold Lot 249-D to his children,
namely, Eduardo, Jorge, Virginia and Cornelio, Jr., through a deed of sale, denominated as "Kasulatan sa
Ganap Na Bilihan,"7 for the sum of P160,000.00. As stated earlier, the subject lot, which forms part of Lot 249-
D, was sold to Eduardo and Jorge, and titled in their names under TCT No. V-1689. Several months thereafter
or on September 7, 1987, Cornelio passed away.
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 16 of 25
Sometime in 1993, Eduardo informed Wenifreda of his desire to take over the subject lot. However, the latter
refused to vacate the premises despite repeated demands. Thus, on September 24, 1993, Eduardo filed a
complaint for unlawful detainer before the Metropolitan Trial Court of Valenzuela, Metro Manila against
Wenifreda, which was docketed as Civil Civil Case No. 6074.
On July 22, 1996, the Metropolitan Trial Court rendered its Decision in favor of Eduardo and ordered
Wenifreda to: (1) vacate the leased premises; (2) pay Eduardo reasonable compensation for the use and
occupation of the premises plus attorney’s fees, and (3) pay the costs of the suit.
Wenifreda appealed to the Regional Trial Court of Valenzuela, Metro Manila, which reversed the decision of
the court a quo. Thus, Eduardo appealed to the Court of Appeals which rendered a Decision 8 on March 31,
1998 reversing the decision of the Regional Trial Court and reinstating the decision of the Metropolitan Trial
Court. It also increased the amount of reasonable compensation awarded to Eduardo for the use of the leased
premises. Wenifreda’s appeal to this Court, docketed as G.R. No. 135001, was dismissed in a
Resolution9 dated December 2, 1998. Accordingly, an Entry of Judgment 10 was made in due course on July 8,
1999.
Previously, after Eduardo instituted the aforesaid unlawful detainer case on September 24, 1993, herein
petitioner Wenifreda, in her capacity as administratrix of the estate of Orlando Llenado, judicial guardian of
their minor children, and surviving spouse and legal heir of Orlando, commenced the subject Complaint, 11 later
amended, on November 10, 1993 for annulment of deed of conveyance, title and damages against herein
respondents Eduardo, Jorge, Feliza Llenado (mother of the Llenado brothers), and the Register of Deeds of
Valenzuela, Metro Manila. The case was docketed as Civil Case No. 4248-V-93 and raffled to Branch 75 of the
Regional Trial Court of Valenzuela, Metro Manila.
Petitioner alleged that the transfer and conveyance of the subject lot by Cornelio in favor of respondents
Eduardo and Jorge, was fraudulent and in bad faith considering that the March 31, 1978 Agreement provided
that while the lease is in force, the subject lot cannot be sold, transferred or conveyed to any third party; that
the period of the lease was until December 3, 1987 with the option to renew granted to Orlando; that the
subject lot was transferred and conveyed to respondents Eduardo and Jorge on January 29, 1987 when the
lease was in full force and effect making the sale null and void; that Cornelio verbally promised Orlando that in
case he (Cornelio) decides to sell the subject lot, Orlando or his heirs shall have first priority or option to buy
the subject lot so as not to prejudice Orlando’s business and because Orlando is the owner of the property
adjacent to the subject lot; and that this promise was wantonly disregarded when Cornelio sold the said lot to
respondents Jorge and Eduardo.
In their Answer,12 respondents Eduardo and Jorge claimed that they bought the subject lot from their father,
Cornelio, for value and in good faith; that the lease agreement and its supplement were not annotated at the
back of the mother title of the subject lot and do not bind them; that said agreements are personal only to
Cornelio and Orlando; that the lease expired upon the death of Orlando on November 7, 1983; that they were
not aware of any verbal promise to sell the subject lot granted by Cornelio to Orlando and, even if there was,
said option to buy is unenforceable under the statute of frauds.
After the parties presented their respective evidence, the Regional Trial Court rendered judgment on May 5,
1997 in favor of petitioner, viz:
WHEREFORE, PREMISES CONSIDERED, this Court finds the [petitioner’s] civil action duly established by
preponderance of evidence, renders judgment (adjudicates) in favor of the [petitioner], Estate of Orlando

Llenado represented by Wenifreda Llenado, and against [respondents] e.g. Jorge, Eduardo, Felisa Gallardo,
all surnamed Llenado, and the Register of Deeds of Valenzuela, Metro Manila, as follows:
1) It hereby judicially declare as non-existence (sic) and null and void, the following:
a) The Kasulatan Sa Ganap na Kasunduan or Deed of Sale;
b) TCT- Transfer Certificate of Title No. V-9440, in the name of [respondent] Eduardo Llenado, TCT-
Transfer Certificate of Title No. V-1689, in the name of Jorge Llenado, and Eduardo Llenado, and all
deeds, documents or proceedings leading to the issuance of said title, and all subsequent title
issued therefrom and likewise whatever deeds, documents or proceedings leading to the issuance of
said subsequent titles;
2) It hereby orders the reconveyance of the said properties embraced in the said TCTs-Transfer
Certificate of Title Nos. V-9440 and V-1689 to the [petitioner] for the same consideration, or
purchase price, paid by [respondents] Eduardo Llenado and Jorge Llenado for the same properties;
3) It hereby orders [respondent], Register of Deeds of Valenzuela, Metro Manila, to cause the
issuance of new transfer certificates of title over the said property in the name of the [petitioner];
4) And, because this Court is not only a court of law, but of equity, it hereby rendered the following
damages to be paid by the [respondents], as the [respondents] litigated under bonafide assertions
that they have meritorious defense, viz:
a) P400,000.00 as moral damages;
b) 10,000.00 as nominal damages;
c) 10,000.00 as temperate damages;
d) 10,000.00 as exemplary damages;
e) 10,000.00 attorney’s fees on the basis of quantum merit; and
f) costs of suit.SO ORDERED.13
The Regional Trial Court found that upon the death of Orlando on November 7, 1983, his rights under the
lease contract were transmitted to his heirs; that since the lease was in full force and effect at the time the
subject lot was sold by Cornelio to his sons, the sale violated the prohibitory clause in the said lease contract.
Further, Cornelio’s promise to sell the subject lot to Orlando may be established by parole evidence since an
option to buy is not covered by the statute of frauds. Hence, the same is binding on Cornelio and his heirs.
Respondents appealed before the Court of Appeals which rendered the assailed May 30, 2000 Decision
reversing the judgment of the Regional Trial Court and dismissing the Complaint. The appellate court held that
the death of Orlando did not extinguish the lease agreement and had the effect of transmitting his lease rights
to his heirs. However, the breach of the non-alienation clause of the said agreement did not nullify the sale
between Cornelio and his sons because the heirs of Orlando are mere lessees on the subject lot and can
never claim a superior right of ownership over said lot as against the registered owners thereof. It further ruled
that petitioner failed to establish by a preponderance of evidence that Cornelio made a verbal promise to
Orlando granting the latter the right of first refusal if and when the subject lot was sold.
Upon the denial of its motion for reconsideration, petitioner is now before this Court on the following
assignment of errors:
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 17 of 25
[T]he Court of Appeals erred:
1.- In finding and concluding that there is no legal basis to annul the deed of conveyance involved in
the case and in not applying R.A. No. 3516, further amending R.A. No. 1162; and
2.- In not finding and holding as null and void the subject deed of conveyance, the same having
been executed in direct violation of an expressed covenant in said deed and in total disregard of the
pre-emptive, or preferential rights of the herein petitioners to buy the property subject of their lease
contract under said R.A. No. 3516, further amending R.A. No. 1162.14
The petition lacks merit.
Petitioner contends that the heirs of Orlando are entitled to the rights of a tenant under Republic Act (R.A.) No.
1162,15 as amended by R.A. No. 3516.16 The right of first refusal or preferential right to buy the leased
premises is invoked pursuant to Section 517 of said law and this Court’s ruling in Mataas Na Lupa Tenants
Association, Inc. v. Dimayuga.18
This issue is being raised for the first time on appeal. True, in Mataas Na Lupa Tenants Association, Inc., the
Court explained that Section 1 of R.A. No. 1162, as amended by R.A. No. 3516, authorizes the expropriation of
any piece of land in the City of Manila, Quezon City and suburbs which have been and are actually being
leased to tenants for at least 10 years, provided said lands have at least 40 families of tenants thereon.19 Prior
to and pending the expropriation, the tenant shall have a right of first refusal or preferential right to buy the
leased premises should the landowner sell the same. However, compliance with the conditions for the
application of the aforesaid law as well as the qualifications of the heirs of Orlando to be beneficiaries
thereunder were never raised before the trial court, or even the Court of Appeals, because petitioner solely
anchored its claim of ownership over the subject lot on the alleged violation of the prohibitory clause in the
lease contract between Cornelio and Orlando, and the alleged non-performance of the right of first refusal
given by Cornelio to Orlando. The rule is settled, impelled by basic requirements of due process, that points of
law, theories, issues and arguments not adequately brought to the attention of the lower court will not be
ordinarily considered by a reviewing court as they cannot be raised for the first time on appeal. 20 As the issue
of the applicability of R.A. No. 1162, as amended, was neither averred in the pleadings nor raised during the
trial below, the same cannot be raised for the first time on appeal.
At any rate, the allegations in the Complaint and the evidence presented during the trial below do not establish
that Orlando or his heirs are covered by R.A. No. 1162, as amended. It was not alleged nor shown that the
subject lot is part of the landed estate or haciendas in the City of Manila which were authorized to be
expropriated under said law; that the Solicitor General has instituted the requisite expropriation proceedings
pursuant to Section 221 thereof; that the subject lot has been actually leased for a period of at least ten (10)
years; and that the subject lot has at least forty (40) families of tenants thereon. Instead, what was merely
established during the trial is that the subject lot was leased by Cornelio to Orlando for the operation of a
gasoline station, thus, negating petitioner’s claim that the subject lot is covered by the aforesaid law. In Mataas
Na Lupa Tenants Association, Inc., the Court further explained that R.A. No. 1162, as amended, has been
superseded by Presidential Decree (P.D.) No. 151722 entitled "Proclaiming Urban Land Reform in the
Philippines and Providing for the Implementing Machinery Thereof."23 However, as held in Tagbilaran
Integrated Settlers Association Incorporated v. Court of Appeals, 24 P.D. No. 1517 is applicable only in specific
areas declared, through presidential proclamation,25 to be located within the so-called urban zones.26 Further,
only legitimate tenants who have resided on the land for ten years or more who have built their homes on the
land and residents who have legally occupied the lands by contract, continuously for the last ten years, are
given the right of first refusal to purchase the land within a reasonable time. 27 Consequently, those lease
contracts entered into for commercial use are not covered by said law. 28 Thus, considering that petitioner failed
 Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 18 of 25

to prove that a proclamation has been issued by the President declaring the subject lot as within the urban
land reform zone and considering further that the subject lot was leased for the commercial purpose of
operating a gasoline station, P.D. No. 1517 cannot be applied to this case.
In fine, the only issue for our determination is whether the sale of the subject lot by Cornelio to his sons,
respondents Eduardo and Jorge, is invalid for (1) violating the prohibitory clause in the lease agreement
between Cornelio, as lessor-owner, and Orlando, as lessee; and (2) contravening the right of first refusal of
Orlando over the subject lot.
It is not disputed that the lease agreement contained an option to renew and a prohibition on the sale of the
subject lot in favor of third persons while the lease is in force. Petitioner claims that when Cornelio sold the
subject lot to respondents Eduardo and Jorge the lease was in full force and effect, thus, the sale violated the
prohibitory clause rendering it invalid. In resolving this issue, it is necessary to determine whether the lease
agreement was in force at the time of the subject sale and, if it was in force, whether the violation of the
prohibitory clause invalidated the sale.
Under Article 1311 of the Civil Code, the heirs are bound by the contracts entered into by their predecessors-
in-interest except when the rights and obligations therein are not transmissible by their nature, by stipulation or
by provision of law. A contract of lease is, therefore, generally transmissible to the heirs of the lessor or lessee.
It involves a property right and, as such, the death of a party does not excuse non-performance of the
contract.29The rights and obligations pass to the heirs of the deceased and the heir of the deceased lessor is
bound to respect the period of the lease.30 The same principle applies to the option to renew the lease. As a
general rule, covenants to renew a lease are not personal but will run with the land. 31 Consequently, the
successors-in-interest of the lessee are entitled to the benefits, while that of the lessor are burdened with the
duties and obligations, which said covenants conferred and imposed on the original parties.
thereof before, or at least at the time of the expiration of his original term, unless there is a waiver or special
circumstances warranting equitable relief.1avvphi1.zw+
There is no dispute that in the instant case, the lessees (private respondents) were granted the option to renew
the lease for another five (5) years after the termination of the original period of fifteen years. Yet, there was
never any positive act on the part of private respondents before or after the termination of the original period to
show their exercise of such option. The silence of the lessees after the termination of the original period cannot
be taken to mean that they opted to renew the contract by virtue of the promise by the lessor, as stated in the
original contract of lease, to allow them to renew. Neither can the exercise of the option to renew be inferred
from their persistence to remain in the premises despite petitioners’ demand for them to vacate. x x x.35
Similarly, the election of the option to renew the lease in this case cannot be inferred from petitioner
Wenifreda’s continued possession of the subject lot and operation of the gasoline station even after the death
of Orlando on November 7, 1983 and the expiration of the lease contract on December 3, 1983. In the unlawful
detainer case against petitioner Wenifreda and in the subject complaint for annulment of conveyance,
respondents consistently maintained that after the death of Orlando, the lease was terminated and that they
permitted petitioner Wenifreda and her children to remain in possession of the subject property out of tolerance
and respect for the close blood relationship between Cornelio and Orlando. It was incumbent, therefore, upon
petitioner as the plaintiff with the burden of proof during the trial below to establish by some positive act that
Orlando or his heirs exercised the option to renew the lease. After going over the records of this case, we find
no evidence, testimonial or documentary, of such nature was presented before the trial court to prove that
Orlando or his heirs exercised the option to renew prior to or at the time of the expiration of the lease on
December 3, 1983. In particular, the testimony of petitioner Wenifreda is wanting in detail as to the events
surrounding the implementation of the subject lease agreement after the death of Orlando and any overt acts
to establish the renewal of said lease.

Given the foregoing, it becomes unnecessary to resolve the issue on whether the violation of the prohibitory
The foregoing principles apply with greater force in this case because the parties expressly stipulated in the
clause invalidated the sale and conferred ownership over the subject lot to Orlando’s heirs, who are mere
March 31, 1978 Agreement that Romeo, as lessee, shall transfer all his rights and interests under the lease
lessees, considering that at the time of said sale on January 29, 1987 the lease agreement had long been
contract with option to renew "in favor of the party of the Third Part (Orlando), the latter’s heirs, successors and
terminated for failure of Orlando or his heirs to validly renew the same. As a result, there was no obstacle to
assigns"32indicating the clear intent to allow the transmissibility of all the rights and interests of Orlando under
the sale of the subject lot by Cornelio to respondents Eduardo and Jorge as the prohibitory clause under the
the lease contract unto his heirs, successors or assigns. Accordingly, the rights and obligations under the
lease contract was no longer in force.
lease contract with option to renew were transmitted from Orlando to his heirs upon his death on November 7,
1983.
Petitioner also anchors its claim over the subject lot on the alleged verbal promise of Cornelio to Orlando that
should he (Cornelio) sell the same, Orlando would be given the first opportunity to purchase said property.
It does not follow, however, that the lease subsisted at the time of the sale of the subject lot on January 29,
According to petitioner, this amounted to a right of first refusal in favor of Orlando which may be proved by
1987. When Orlando died on November 7, 1983, the lease contract was set to expire 26 days later or on
parole evidence because it is not one of the contracts covered by the statute of frauds. Considering that
December 3, 1983, unless renewed by Orlando’s heirs for another four years. While the option to renew is an
Cornelio sold the subject lot to respondents Eduardo and Jorge without first offering the same to Orlando’s
enforceable right, it must necessarily be first exercised to be given effect. 33 As the Court explained in Dioquino
heirs, petitioner argues that the sale is in violation of the latter’s right of first refusal and is, thus, rescissible.
v. Intermediate Appellate Court:34

The question as to whether a right of first refusal may be proved by parole evidence has been answered in the
A clause found in an agreement relative to the renewal of the lease agreement at the option of the lessee gives
affirmative by this Court in Rosencor Development Corporation v. Inquing:36
the latter an enforceable right to renew the contract in which the clause is found for such time as provided for.
The agreement is understood as being in favor of the lessee, and the latter is authorized to renew the contract
and to continue to occupy the leased property after notifying the lessor to that effect. A lessor’s covenant or We have previously held that not all agreements "affecting land" must be put into writing to attain
agreement to renew gives a privilege to the tenant, but is nevertheless an executory contract, and until the enforceability. Thus, we have held that the setting up of boundaries, the oral partition of real property, and an
tenant has exercised the privilege by way of some affirmative act, he cannot be held for the additional term. In agreement creating a right of way are not covered by the provisions of the statute of frauds. The reason simply
the absence of a stipulation in the lease requiring notice of the exercise of an option or an election to renew to is that these agreements are not among those enumerated in Article 1403 of the New Civil Code.
be given within a certain time before the expiration of the lease, which of course, the lessee must comply with,
the general rule is that a lessee must exercise an option or election to renew his lease and notify the lessor

A right of first refusal is not among those listed as unenforceable under the statute of frauds. Furthermore, the
application of Article 1403, par. 2(e) of the New Civil Code presupposes the existence of a perfected, albeit
unwritten, contract of sale. A right of first refusal, such as the one involved in the instant case, is not by any
means a perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of the real
property involved, but of the right of first refusal over the property sought to be sold.
It is thus evident that the statute of frauds does not contemplate cases involving a right of first refusal. As such,
a right of first refusal need not be written to be enforceable and may be proven by oral evidence. 37
In the instant case, the Regional Trial Court ruled that the right of first refusal was proved by oral evidence
while the Court of Appeals disagreed by ruling that petitioner merely relied on the allegations in its Complaint
to establish said right. We have reviewed the records and find that no testimonial evidence was presented to
prove the existence of said right. The testimony of petitioner Wenifreda made no mention of the alleged verbal
promise given by Cornelio to Orlando. The two remaining witnesses for the plaintiff, Michael Goco and Renato
Malindog, were representatives from the Register of Deeds of Caloocan City who naturally were not privy to
this alleged promise. Neither was it established that respondents Eduardo and Jorge were aware of said
promise prior to or at the time of the sale of the subject lot. On the contrary, in their answer to the Complaint,
respondents denied the existence of said promise for lack of knowledge thereof. 38 Within these parameters,
petitioner’s allegations in its Complaint cannot substitute for competent proof on such a crucial factual issue.
Necessarily, petitioner’s claims based on this alleged right of first refusal cannot be sustained for its existence
has not been duly established.
WHEREFORE, the petition is DENIED. The May 30, 2000 Decision of the Court of Appeals in CA-G.R. CV No.
58911 dismissing the complaint for annulment of deed of conveyance, title and damages, and the October 6,
2000 Resolution denying the motion for reconsideration, are AFFIRMED.Costs against petitioner.SO
ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 118248 April 5, 2000
DKC HOLDINGS CORPORATION,petitioner,
vs.
COURT OF APPEALS, VICTOR U. BARTOLOME and REGISTER OF DEEDS FOR METRO MANILA,
DISTRICT III, respondents.
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari seeking the reversal of the December 5, 1994 Decision of the Court of
Appeals in CA-G.R. CV No. 40849 entitled "DKC Holdings Corporation vs. Victor U. Bartolome, et
al.",1 affirmingin toto the January 4, 1993 Decision of the Regional Trial Court of Valenzuela, Branch
172,2 which dismissed Civil Case No. 3337-V-90 and ordered petitioner to pay P30,000.00 as attorney's fees.
The subject of the controversy is a 14,021 square meter parcel of land located in Malinta, Valenzuela, Metro
Manila which was originally owned by private respondent Victor U. Bartolome's deceased mother, Encarnacion
Bartolome, under Transfer Certificate of Title No. B-37615 of the Register of Deeds of Metro Manila, District III.
This lot was in front of one of the textile plants of petitioner and, as such, was seen by the latter as a potential
warehouse site.
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 19 of 25
On March 16, 1988, petitioner entered into a Contract of Lease with Option to Buy with Encarnacion
Bartolome, whereby petitioner was given the option to lease or lease with purchase the subject land, which
option must be exercised within a period of two years counted from the signing of the Contract. In turn,
petitioner undertook to pay P3,000.00 a month as consideration for the reservation of its option. Within the two-
year period, petitioner shall serve formal written notice upon the lessor Encarnacion Bartolome of its desire to
exercise its option. The contract also provided that in case petitioner chose to lease the property, it may take
actual possession of the premises. In such an event, the lease shall be for a period of six years, renewable for
another six years, and the monthly rental fee shall be P15,000.00 for the first six years and P18,000.00 for the
next six years, in case of renewal.
Petitioner regularly paid the monthly P3,000.00 provided for by the Contract to Encarnacion until her death in
January 1990. Thereafter, petitioner coursed its payment to private respondent Victor Bartolome, being the
sole heir of Encarnacion. Victor, however, refused to accept these payments.
Meanwhile, on January 10, 1990, Victor executed an Affidavit of Self-Adjudication over all the properties of
Encarnacion, including the subject lot. Accordingly, respondent Register of Deeds cancelled Transfer
Certificate of Title No. B-37615 and issued Transfer Certificate of Title No. V-14249 in the name of Victor
Bartolome.
On March 14, 1990, petitioner served upon Victor, via registered mail, notice that it was exercising its option to
lease the property, tendering the amount of P15,000.00 as rent for the month of March. Again, Victor refused
to accept the tendered rental fee and to surrender possession of the property to petitioner.
Petitioner thus opened Savings Account No. 1-04-02558-I-1 with the China Banking Corporation, Cubao
Branch, in the name of Victor Bartolome and deposited therein the P15,000.00 rental fee for March as well as
P6,000.00 reservation fees for the months of February and March.
Petitioner also tried to register and annotate the Contract on the title of Victor to the property. Although
respondent Register of Deeds accepted the required fees, he nevertheless refused to register or annotate the
same or even enter it in the day book or primary register.1âwphi1.nêt
Thus, on April 23, 1990, petitioner filed a complaint for specific performance and damages against Victor and
the Register of Deeds,3 docketed as Civil Case No. 3337-V-90 which was raffled off to Branch 171 of the
Regional Trial Court of Valenzuela. Petitioner prayed for the surrender and delivery of possession of the
subject land in accordance with the Contract terms; the surrender of title for registration and annotation
thereon of the Contract; and the payment of P500,000.00 as actual damages, P500,000.00 as moral damages,
P500,000.00 as exemplary damages and P300,000.00 as attorney's fees.
Meanwhile, on May 8, 1990, a Motion for Intervention with Motion to Dismiss 4 was filed by one Andres Lanozo,
who claimed that he was and has been a tenant-tiller of the subject property, which was agricultural riceland,
for forty-five years. He questioned the jurisdiction of the lower court over the property and invoked the
Comprehensive Agrarian Reform Law to protect his rights that would be affected by the dispute between the
original parties to the case.
On May 18, 1990, the lower court issued an Order5 referring the case to the Department of Agrarian Reform for
preliminary determination and certification as to whether it was proper for trial by said court.

On July 4, 1990, the lower court issued another Order6 referring the case to Branch 172 of the RTC of
Valenzuela which was designated to hear cases involving agrarian land, after the Department of Agrarian
Reform issued a letter-certification stating that referral to it for preliminary determination is no longer required.
On July 16, 1990, the lower court issued an Order denying the Motion to Intervene, 7 holding that Lanozo's
rights may well be ventilated in another proceeding in due time.
After trial on the merits, the RTC of Valenzuela, Branch 172 rendered its Decision on January 4, 1993,
dismissing the Complaint and ordering petitioner to pay Victor P30,000.00 as attorney's fees. On appeal to the
CA, the Decision was affirmed in toto.
Hence, the instant Petition assigning the following errors:
(A)
FIRST ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE PROVISION ON THE
NOTICE TO EXERCISE OPTION WAS NOT TRANSMISSIBLE.
(B)
SECOND ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE NOTICE OF OPTION
MUST BE SERVED BY DKC UPON ENCARNACION BARTOLOME PERSONALLY.
(C)
THIRD ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE CONTRACT WAS ONE-
SIDED AND ONEROUS IN FAVOR OF DKC.
(D)
FOURTH ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE EXISTENCE OF A
REGISTERED TENANCY WAS FATAL TO THE VALIDITY OF THE CONTRACT.
(E)
FIFTH ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT PLAINTIFF-APPELLANT
WAS LIABLE TO DEFENDANT-APPELLEE FOR ATTORNEY'S FEES.8
The issue to be resolved in this case is whether or not the Contract of Lease with Option to Buy entered into by
the late Encarnacion Bartolome with petitioner was terminated upon her death or whether it binds her sole heir,
Victor, even after her demise.
Both the lower court and the Court of Appeals held that the said contract was terminated upon the death of
Encarnacion Bartolome and did not bind Victor because he was not a party thereto.
Art. 1311 of the Civil Code provides, as follows —
Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case
where the rights and obligations arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law. The heir is not liable beyond the value of the property he received
from the decedent.
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 20 of 25
xxx xxx xxx
The general rule, therefore, is that heirs are bound by contracts entered into by their predecessors-in-interest
except when the rights and obligations arising therefrom are not transmissible by (1) their nature, (2) stipulation
or (3) provision of law.
In the case at bar, there is neither contractual stipulation nor legal provision making the rights and obligations
under the contract intransmissible. More importantly, the nature of the rights and obligations therein are, by
their nature, transmissible.
The nature of intransmissible rights as explained by Arturo Tolentino, an eminent civilist, is as follows:
Among contracts which are intransmissible are those which are purely personal, either by provision
of law, such as in cases of partnerships and agency, or by the very nature of the obligations arising
therefrom, such as those requiring special personal qualifications of the obligor. It may also be
stated that contracts for the payment of money debts are not transmitted to the heirs of a party, but
constitute a charge against his estate. Thus, where the client in a contract for professional services
of a lawyer died, leaving minor heirs, and the lawyer, instead of presenting his claim for professional
services under the contract to the probate court, substituted the minors as parties for his client, it
was held that the contract could not be enforced against the minors; the lawyer was limited to a
recovery on the basis of quantum meruit.9
In American jurisprudence, "(W)here acts stipulated in a contract require the exercise of special knowledge,
genius, skill, taste, ability, experience, judgment, discretion, integrity, or other personal qualification of one or
both parties, the agreement is of a personal nature, and terminates on the death of the party who is required to
render such service." 10
It has also been held that a good measure for determining whether a contract terminates upon the death of
one of the parties is whether it is of such a character that it may be performed by the promissor's personal
representative. Contracts to perform personal acts which cannot be as well performed by others are
discharged by the death of the promissor. Conversely, where the service or act is of such a character that it
may as well be performed by another, or where the contract, by its terms, shows that performance by others
was contemplated, death does not terminate the contract or excuse nonperformance. 11
In the case at bar, there is no personal act required from the late Encarnacion Bartolome. Rather, the
obligation of Encarnacion in the contract to deliver possession of the subject property to petitioner upon the
exercise by the latter of its option to lease the same may very well be performed by her heir Victor.
As early as 1903, it was held that "(H)e who contracts does so for himself and his heirs." 12 In 1952, it was
ruled that if the predecessor was duty-bound to reconvey land to another, and at his death the reconveyance
had not been made, the heirs can be compelled to execute the proper deed for reconveyance. This was
grounded upon the principle that heirs cannot escape the legal consequence of a transaction entered into by
their predecessor-in-interest because they have inherited the property subject to the liability affecting their
common ancestor. 13
It is futile for Victor to insist that he is not a party to the contract because of the clear provision of Article 1311
of the Civil Code. Indeed, being an heir of Encarnacion, there is privity of interest between him and his
deceased mother. He only succeeds to what rights his mother had and what is valid and binding against her is
 Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 21 of 25

also valid and binding as against him. 14 This is clear from Parañaque Kings Enterprises vs. Court of Bartolome, 19 for the months of March to July 30, 1990, or a total of five (5) months, despite the refusal of
Appeals, 15 where this Court rejected a similar defense — Victor to turn over the subject property. 20

With respect to the contention of respondent Raymundo that he is not privy to the lease contract, not Likewise, petitioner complied with its duty to inform the other party of its intention to exercise its option to lease
being the lessor nor the lessee referred to therein, he could thus not have violated its provisions, but through its letter dated Match 12, 1990, 21 well within the two-year period for it to exercise its option.
he is nevertheless a proper party. Clearly, he stepped into the shoes of the owner-lessor of the land Considering that at that time Encarnacion Bartolome had already passed away, it was legitimate for petitioner
as, by virtue of his purchase, he assumed all the obligations of the lessor under the lease contract. to have addressed its letter to her heir.1âwphi1
Moreover, he received benefits in the form of rental payments. Furthermore, the complaint, as well
as the petition, prayed for the annulment of the sale of the properties to him. Both pleadings also
It appears, therefore, that the exercise by petitioner of its option to lease the subject property was made in
alleged collusion between him and respondent Santos which defeated the exercise by petitioner of
accordance with the contractual provisions. Concomitantly, private respondent Victor Bartolome has the
its right of first refusal.
obligation to surrender possession of and lease the premises to petitioner for a period of six (6) years,
pursuant to the Contract of Lease with Option to Buy.
In order then to accord complete relief to petitioner, respondent Raymundo was a necessary, if not
indispensable, party to the case. A favorable judgment for the petitioner will necessarily affect the
Coming now to the issue of tenancy, we find that this is not for this Court to pass upon in the present petition.
rights of respondent Raymundo as the buyer of the property over which petitioner would like to
We note that the Motion to Intervene and to Dismiss of the alleged tenant, Andres Lanozo, was denied by the
assert its right of first option to buy.
lower court and that such denial was never made the subject of an appeal. As the lower court stated in its
Order, the alleged right of the tenant may well be ventilated in another proceeding in due time.
In the case at bar, the subject matter of the contract is likewise a lease, which is a property right. The death of
a party does not excuse nonperformance of a contract which involves a property right, and the rights and
WHEREFORE, in view of the foregoing, the instant Petition for Review is GRANTED. The Decision of the
obligations thereunder pass to the personal representatives of the deceased. Similarly, nonperformance is not
Court of Appeals in CA-G.R. CV No. 40849 and that of the Regional Trial Court of Valenzuela in Civil Case No.
excused by the death of the party when the other party has a property interest in the subject matter of the
3337-V-90 are both SET ASIDE and a new one rendered ordering private respondent Victor Bartolome to:
contract. 16

(a) surrender and deliver possession of that parcel of land covered by Transfer Certificate of Title
Under both Article 1311 of the Civil Code and jurisprudence, therefore, Victor is bound by the subject Contract
No. V-14249 by way of lease to petitioner and to perform all obligations of his predecessor-in-
of Lease with Option to Buy.
interest, Encarnacion Bartolome, under the subject Contract of Lease with Option to Buy;

That being resolved, we now rule on the issue of whether petitioner had complied with its obligations under the
(b) surrender and deliver his copy of Transfer Certificate of Title No. V-14249 to respondent Register
contract and with the requisites to exercise its option. The payment by petitioner of the reservation fees during
of Deeds for registration and annotation thereon of the subject Contract of Lease with Option to Buy;
the two-year period within which it had the option to lease or purchase the property is not disputed. In fact, the
payment of such reservation fees, except those for February and March, 1990 were admitted by Victor. 17 This
is clear from the transcripts, to wit — (c) pay costs of suit.

ATTY. MOJADO: Respondent Register of Deeds is, accordingly, ordered to register and annotate the subject Contract of Lease
One request, Your Honor. The last payment which was allegedly made in January 1990 just indicate with Option to Buy at the back of Transfer Certificate of Title No. V-14249 upon submission by petitioner of a
in that stipulation that it was issued November of 1989 and postdated January 1990 and then we will copy thereof to his office.SO ORDERED.1âwphi1.nêt
admit all.
COURT:
All reservation fee? Republic of the Philippines
SUPREME COURT
ATTY. MOJADO:
Manila
Yes, Your Honor.
COURT: SECOND DIVISION
G.R. No. 121940 December 4, 2001
All as part of the lease?
JESUS SAN AGUSTIN, petitioner,
ATTY. MOJADO:
vs.
HON. COURT OF APPEALS and MAXIMO MENEZ, JR., respondents.
18
Reservation fee, Your Honor. There was no payment with respect to payment of rentals. QUISUMBING, J.:

This petition for review on certiorari seeks the reversal of the decision 1 of the Court of Appeals dated May 19,
Petitioner also paid the P15,000.00 monthly rental fee on the subject property by depositing the same in China
1995, affirming that of the Regional Trial Court in LRC Case No. R-4659.
Bank Savings Account No. 1-04-02558-I-1, in the name of Victor as the sole heir of Encarnacion
 Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 22 of 25

The relevant facts, as summarized by the CA, are as follows:
On February 11, 1974, the Government Service Insurance System (GSIS) sold to a certain Macaria Vda. de
Caiquep, a parcel of residential land with an area of 168 square meters located in Rosario, Pasig City and
denominated as Lot 13, Block 7, Pcs-5816 of the Government Service and Insurance System Low Cost
Housing Project (GSIS-LCHP). The sale is evidenced by a Deed of Absolute Sale. 2 On February 19, 1974,
the Register of Deeds of Rizal issued in the name of Macaria Vda. de Caiquep. Transfer Certificate of Title
(TCT) No. 436465 with the following encumbrance annotated at the back of the title:
This Deed of Absolute Sale is subject to the conditions enumerated below which shall be permanent
encumbrances on the property, the violation of any of which shall entitle the vendor to cancel x x x.
this Deed of Absolute Sale and reenter the property;
The purpose of the sale be to aid the vendee in acquiring a lot for himself/themselves and not to
provide him/them with a means for speculation or profit by a future assignment of his/their right
herein acquired or the resale of the lot through rent, lease or subletting to others of the lot and
subject of this deed, and therefore, the vendee shall not sell, convey, lease or sublease, or otherwise
encumber the property in favor of any other party within five (5) years from the dates final and
absolute ownership thereof becomes vested in the vendee, except in cases of hereditary succession
or resale in favor of the vendor:
x x x (emphasis supplied).3
During the hearing on September 3, 1992, only Menez and his counsel appeared. The Register of Deeds who
was not served notice, and the Office of the Solicitor General and the Provincial Prosecutor who were notified
did not attend.
On September 18, 1992, there being no opposition, Menez presented his evidence ex-parte. The trial court
granted his petition in its decision9 dated September 30, 1992, the dispositive portion of which reads:
WHEREFORE, the petition is hereby GRANTED and the Registry of Deeds of Pasig, Metro Manila,
is hereby directed to issue a new Owner's Duplicate Copy of Transfer Certificate of Title No. 436465
based on the original thereon filed in his office which shall contain the memorandum of
encumbrance and an additional memorandum of the fact that it was issued in place of the lost
duplicate and which shall, in all respect, be entitled to like faith and credit as the original duplicate,
for all legal intents and purposes.
Issuance of new owner's duplicate copy shall be made only after this decision shall have become
final and executory. The said lost owner's duplicate is hereby declared null and void.
Petitioner shall pay all legal fees in connection with the issuance of the new owner's copy.
Let copies of this Order be furnished the petitioner, the registered owner of his given address in the
title, in the deed of sale, and in the tax declaration; the Registry of Deeds of Pasig, the Office of the
Solicitor General; and the Provincial Fiscal of Pasig, Metro Manila.SO ORDERED. 10

A day after We issuance of TCT No. 436465, or on February 20, 1974, Macaria Vda. de Caiquep sold the
On October 13, 1992, herein petitioner, Jesus San Agustin, received a copy of the abovecited decision. He-
subject lot to private respondent, Maximo Menez, Jr., as evidenced by a Deed of Absolute Sale (Exhibit
claimed this was the first time he became aware of the case of her aunt, Macaria Vda. de Caiquep who,
"D").4 This deed was notarized but was not registered immediately upon its execution in 1974 because GSIS
according to him, died sometime in 1974. Claiming that he was the present occupant of the property and the
prohibited him from registering the same in view of the five-year prohibition to sell during the period ending in
heir of Macaria, he filed his "Motion to Reopen Reconstitution Proceedings'' 11 on October 27, 1992. On
1979.
December 3, 1992, RTC issued an order denying said motion.12

Sometime in 1979, for being suspected as a subversive, an Arrest, Search and Seizure Order (ASSO) was
Petitioner filed an appeal with the Court of Appeals, which, as earlier stated, was denied in its decision of May
issued against private respondent. Military men ransacked his house in Cainta, Rizal. Upon learning that he
19, 1995. Petitioner moved for a reconsideration, but it was denied in a resolution dated September 11, 1995. 13
was wanted by the military, he voluntarily surrendered and was detained for two (2) years. When released,
another order for his re-arrest was issued so he hid in Mindanao for another four (4) years or until March 1984.
In December of 1990, he discovered that the subject TCT was missing. He consulted a lawyer but the latter did Thus, the present petition, attributing the following errors to the court a quo:
not act immediately on the matter. Upon consulting a new counsel, an Affidavit of Loss 5 was filed with the
Register of Deeds of Pasig and a certified copy6 of TCT No. 436465 was issued. Private respondent also
A.
declared the property for tax purposes and obtained a certification thereof from the Assessor's Office. 7

Private respondent sent notices to the registered owner at her address appearing in the title and in the Deed of
Sale. And, with his counsel, he searched for the ,registered owner in Metro Manila and Rizal and as far as
Samar, Leyte, Calbayog City, Tacloban City, and in Eastern and Northern Samar. However, their search
proved futile.
THE RESPONDENT COURT GRAVELY ERRED IN HOLDING THAT LRC CASE NO. R-4659 BEING ONLY
A PETITION FOR THE ISSUANCE OF A NEW OWNER'S DUPLICATE OF TITLE, THERE IS NO NEED OF
PERSONAL NOTICE TO THE PETITIONER, THE ACTUAL POSSESSOR [WHO HAS] AND ACTUALLY
BEEN PAYING THE REAL ESTATE TAX, DESPITE PRIVATE RESPONDENT'S KNOWLEDGE OF ACTUAL
POSSESSION OF AND INTEREST OVER THE PROPERTY COVERED BY TCT NO. 436465.14

On July 8, 1992 private respondent filed a petition docketed as LRC Case No. R-4659 with the RTC, Branch
154, Pasig, Metro Manila for the issuance of owner's duplicate copy of TCT No. 436465 to replace the lost
one. To show he was the owner of the contested lot, he showed the Deed of Absolute Sale, Exhibit "D". The
petition was set for hearing and the court's order dated July 10, 1992 was published once in Malaya, a
nationally circulated newspaper in the Philippines.8
B.
RESPONDENT COURT GRAVELY ERRED IN HOLDING THAT THE SALE BETWEEN THE PRIVATE
RESPONDENT AND MACARIA VDA. DE CAIQUEP IS NOT NULL AND VOID AND UNDER ARTICLE 1409

OF THE CIVIL CODE SPECIFICALLY PARAGRAPH (7) THEREOF WHICH REFERS TO CONTRACTS
EXPRESSLY PROHIBITED OR DECLARED VOID BY LAW.15
Considering the above assignment of errors, let us resolve the corresponding issues raised by petitioner.
The first issue involves private respondent's alleged failure to send notice to petitioner who is the actual
possessor of the disputed lot. Stated briefly, is petitioner entitled to notice? Our finding is in the negative.
Presidential Decree No. 1529, otherwise known as the "Property Registration Decree" is decisive. It provides:
Sec. 109. Notice and replacement of lost duplicate certificate. — In case of loss or theft of an
owner's duplicate certificate of title, due notice under oath shall be sent by the owner or by someone
in his behalf to the Register of Deeds of the province or city where the land lies as soon as the loss
or theft is discovered. If a duplicate certificate is lost or destroyed, or cannot be produced by a
person applying for the entry of a new certificate to him or for :the registration of any instrument, a
sworn statement of the fact of such loss or destruction may be filed by the registered owner or other
person it interest and registered.
Upon the petition of the registered owner or other person in interest, the court may, after notice and
due hearing, direct the issuance of a new duplicate certificate, which shall contain a memorandum of
the fact that it is issued in place of the lost duplicate certificate, but shall in all respects be entitled to
like faith and credit as the original duplicate, and shall thereafter be regarded as such for all
purposes of this decree.
In Office of Court Administrator vs. Matas, A.M. No. RTJ-92-836, 247 SCRA 9, 16-17 (1995), we held:
In the case at bar, the respective certificate of title of the properties in question on file with the
Register of Deeds are existing, and it is the owner's copy of the certificate of title that was alleged to
have been lost or destroyed. Thus, it is Section 109 of P.D. 1529 which was approved on June 11,
1978 that becomes effective and is applicable, a reading of which shows that it is practically the
same as Section 109 of Act No. 496, governing reconstitution of a duplicate certificate of title lost or
destroyed. Consequently, it is sufficient that the notice under Section 109 is sent to the Register of
Deeds and to those persons who are known to have, or appear to have, an interest in the
property as shown in the Memorandum of encumbrances at the back of the original or transfer
certificate of title on file in the office of the Register of Deeds. From a legal standpoint, there are no
other interested parties who should be notified, except those abovementioned since they are the
only ones who may be deemed to have a claim to the property involved. A person dealing with
registered is not charged with notice of encumbrances not annotated on the back of the title.
(Emphasis supplied.)
Here, petitioner does not appear to have an interest in the property based on the memorandum of
encumbrances annotated at the back of the title. His claim, that he is an heir (nephew) of the original owner of
the lot covered by the disputed lot and the present occupant thereof is not annotated in the said memorandum
of encumbrances. Neither was his claim entered on the Certificate of Titles in the name of their original/former
owners on file with the Register of Deeds at the time of the filing or pendency of LRC Case No. R-4659.
Clearly, petitioner is not entitled to notice.
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 23 of 25
Noteworthy is the fact that there was compliance by private respondent of the RTC's order of publication of the
petition in a newspaper of general circulation. This is sufficient notice of the petition to the public at large.
Petitioner contends that as possessor or actual occupant of the lot in controversy, he is entitled under the law
to be notified. He relies on Alabang Development Corporation vs. Valenzuela, G.R. No. L-54094, 116 SCRA
261, 277 (1982)) which held that in reconstitution proceedings, courts must make sure that indispensable
parties, i.e.. the actual owners and possessors of the lands involved, are duly served with actual and personal
notice of the petition. As pointed out by the appellate court, his reliance on Alabang is misplaced because the
cause of action in that case is based on Republic Act i No. 26, entitled "An Act Providing A Special Procedure
for the Reconstitution of Torrens Certificate of Title Lost or Destroyed," while the present case is based on
Section 109 of P.D. 1529 as above explained.
Under Republic Act No. 26, reconstitution is validly made only in case the original copy of the certificate of title
with the Register of Deeds is lost or destroyed. And if no notice of the date of hearing of a reconstitution case
is served on a possessor or one having interest in the property involved, he is deprived of his day in court and
the order of reconstitution is null and void.16 The case at bar is not for reconstitution, but merely for
replacement of lost duplicate certificate.
On the second assigned error, petitioner contends that Exhibit "D" is null and void under Article 1409 of the
Civil Code, specifically paragraph (7),17 because the deed of sale was executed within the five-year prohibitory
period under Commonwealth Act No. 141, as amended, otherwise known as "The Public Land Act." 18
We find petitioner's contention less than meritorious. We agree with respondent court that the proscription
under Com. Act No. 141 on sale within the 5-year restrictive period refers to homestead lands only. Here the
lot in dispute is not a homestead land, as found by the trial and appellate courts. Said lot is owned by GSIS,
under TCT No. 10028 in its proprietary capacity.
Moreover, as far as the violation of the 5-year restrictive condition imposed by GSIS in its contract with
petitioner's predecessor-in-interest is concerned, it is the GSIS and not petitioner who had a cause of action
against private respondent. Vide the instructive case of Sarmiento vs. Salud:
The condition that the appellees Sarmiento spouses could not resell the property except to the
People's Homesite and Housing Corporation (PHHC for short) within the next 25 years after
appellees' purchasing the lot is manifestly a condition in favor of the PHHC, and not one in favor of
the Sarmiento spouses. The condition conferred no actionable right on appellees herein, since it
operated as a restriction upon their jus disponendi of the property they bought, and thus limited their
right of ownership. It follows that on the assumption that the mortgage to appellee Salud and the
foreclosure sale violated the condition in the Sarmiento contract, only the PHHC was entitled to
invoke the condition aforementioned, and not the Sarmientos. The validity or invalidity of the sheriff's
foreclosure sale to appellant Salud thus violative of its right of exclusive reacquisition; but it (PHHC)
also could waive the condition and treat the sale as good, in which event, the sale can not be
assailed for breach of the condition aforestated.19
In this case, the GSIS has not filed any action for the annulment of Exhibit "D", nor for the forfeiture of the lot in
question. In our view, the contract of sale remains valid between the parties, unless and until annulled in the
proper suit filed by the rightful party, the GSIS. For now, the said contract of sale is binding upon the heirs of
Macaria Vda. de Caiquep, including petitioner who alleges to be one of her heirs, in line with the rule that heirs
are bound by contracts entered into by their predecessors-in-interest.20

We are not unmindful of the social justice policy of R.A. 8291 otherwise known as "Government Service
Insurance Act of 1997" in granting housing assistance to the less-privileged GSIS members and their
dependents payable at an affordable payment scheme.21 This is the same policy which the 5-year restrictive
clause in the contract seeks to implement by stating in the encumbrance itself annotated at the back of TCT
No. 436465 that, "The purpose of the sale is to aid the vendee in acquiring a lot for himself/themselves and not
to provide him/them with a means for speculation or profit by a future assignment of his/their right herein
acquired or the resale of the lot through rent, lease or subletting to others of the lot and subject of this deed, . .
. within five (5) years from the date final and absolute ownership thereof becomes vested in the vendee, except
in cases of hereditary succession or resale in favor of the vendor." 22 However, absent the proper action taken
by the GSIS as the original vendor referred to, the contract between petitioner's predecessor-in-interest and
private respondent deserves to be upheld. For as pointed out by said private respondent, it is protected by the
Constitution under Section 10, Article III, of the Bill of Rights stating that, "No law impairing the obligation of
contracts shall be passed." Much as we would like to see a salutary policy triumph, that provision of the
Constitution duly calls for compliance.
More in point, however, is the fact that, following Sarmiento v. Salud,23 "Even if the transaction between the
original awardee and herein petitioner were wrongful, still, as between themselves, the purchaser and the
seller were both in pari delicto, being participes criminis as it were." As in Sarmiento, in this case both were
aware of the existence of the stipulated condition in favor of the original seller, GSIS, yet both entered into an
agreement violating said condition and nullifying its effects. Similarly, as Acting Chief Justice JBL Reyes
concluded inSarmiento, "Both parties being equally guilty, neither is entitled to complain against the other.
Having entered into the transaction with open eyes, and having benefited from it, said parties should be held in
estoppel to assail and annul their own deliberate acts."
WHEREFORE, the appeal is DENIED, and the decision of the respondent court is AFFIRMED.SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
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 Decision1 of
the Court of Appeals in CA-G.R. SP No. 42053 dated January 31, 1997, as well as its Resolution2 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
Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 24 of 25
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 Veronica5,
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
Administrationdocketed 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 Riofero10 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 Hearing13 on the aforesaid ground.
The lower court denied the motion in its Order14 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 reconsideration15 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
 Balus v Balus to Rioferio v CA (object of Succession) *Succession Set III * Page 25 of 25

The Court of Appeals rendered the assailed Decision19 dated January 31, 1997, stating that it discerned no further to see if the administrator appointed would care enough to file a suit to protect the rights and
grave abuse of discretion amounting to lack or excess of jurisdiction by the public respondent judge when he the interests of the deceased; and in the meantime do nothing while the rights and the properties of
denied petitioners’ motion to set affirmative defenses for hearing in view of its discretionary nature. the decedent are violated or dissipated.

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:
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 of31 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.

SEC. 5. Pleadings grounds as affirmative defenses.- Any of the grounds for dismissal provided for in
As the appellate court did not commit an error of law in upholding the order of the lower court, recourse to this
this rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary
Court is not warranted.
hearing may be had thereon as if a motion to dismiss had been filed.22 (Emphasis supplied.)

WHEREFORE, the petition for review is DENIED. The assailed decision and resolution of the Court of Appeals
Certainly, the incorporation of the word "may" in the provision is clearly indicative of the optional character of
are hereby AFFIRMED. No costs.SO ORDERED.
the preliminary hearing. The word denotes discretion and cannot be construed as having a mandatory
effect.23Subsequently, 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 court’s 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 8727 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