Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 109373 March 20, 1995

PACIFIC BANKING
CORPORATION EMPLOYEES
ORGANIZATION, PAULA S. PAUG,
and its officers and
members, petitioners,
vs.
THE HONORABLE COURT OF
APPEALS and VITALIANO N.
NAÑAGAS II, as Liquidator of
Pacific Banking
Corporation, respondents.
G.R. No. 112991 March 20, 1995
THE PRESIDENT OF THE
PHILIPPINE DEPOSIT INSURANCE
CORPORATION, as Liquidator of
the Pacific Banking Corporation
, petitioner,
vs.
COURT OF APPEALS, HON.
JUDGE REGINO T. VERIDIANO II,
DEPUTY SHERIFF RAMON
ENRIQUEZ and ANG ENG JOO,
ANG KEONG LAN and E.J ANG
INT'L. LTD., represented by their
Attorney-in-fact, GONZALO C. SY,
respondents.

MENDOZA, J.:
These cases have been consolidated
because the principal question
involved is the same: whether a
petition for liquidation under §29 of
Rep. Act No. 265, otherwise known
as the Central Bank Act, is a special
proceeding or an ordinary civil action.
The Fifth and the Fourteenth
Divisions of the Court of Appeals
reached opposite results on this
question and consequently applied
different periods for appealing.
The facts are as follows:
I.
Proceedings in the CB and the RTC
On July 5, 1985, the Pacific Banking
Corporation (PaBC) was placed
under receivership by the Central
Bank of the Philippines pursuant to
Resolution No. 699 of its Monetary
Board. A few months later, it was
placed under liquidation1 and a
Liquidator was appointed.2
On April 7, 1986, the Central Bank
filed with the Regional Trial Court of
Manila Branch 31, a petition entitled
"Petition for Assistance in the
Liquidation of Pacific Banking
Corporation." 3 The petition was
approved, after which creditors filed
their claims with the court.
On May 17, 1991, a new Liquidator,
Vitaliano N. Nañagas,4 President of
the Philippine Deposit Insurance
Corporation (PDIC), was appointed
by the Central Bank.
On March 13, 1989 the Pacific
Banking Corporation Employees
Organization (Union for short),
petitioner in G.R. No. 109373, filed a
complaint-in-intervention seeking
payment of holiday pay, 13th month
pay differential, salary increase
differential, Christmas bonus, and
cash equivalent of Sick Leave Benefit
due its members as employees of
PaBC. In its order dated September
13, 1991, the trial court ordered
payment of the principal claims of the
Union.5
The Liquidator received a copy of the
order on September 16, 1991. On
October 16, 1991, he filed a Motion
for Reconsideration and Clarification
of the order. In his order of December
6, 1991, the judge modified his
September 13, 19916 but in effect
denied the Liquidator's motion for
reconsideration. This order was
received by the Liquidator on
December 9, 1991. The following
day, December 10, 1991, he filed a
Notice of Appeal and a Motion for
Additional Time to Submit Record on
Appeal. On December 23, 1991,
another Notice of Appeal was filed by
the Office of the Solicitor General in
behalf of Nañagas.
In his order of February 10, 1992,
respondent judge disallowed the
Liquidator's Notice of Appeal on the
ground that it was late, i.e., more
than 15 days after receipt of the
decision. The judge declared his
September 13, 1991 order and
subsequent orders to be final and
executory and denied
reconsideration. On March 27, 1992,
he granted the Union's Motion for
issuance of a writ of Execution.
Ang Keong Lan and E.J. Ang Int'l.,
private respondents in G.R. No.
112991, likewise filed claims for the
payment of investment in the PaBC
allegedly in the form of shares of
stocks amounting to
US$2,531,632.18. The shares of
stocks, consisting of 154,462
common shares, constituted 11% of
the total subscribed capital stock of
the PaBC. They alleged that their
claim constituted foreign exchange
capital investment entitled to
preference in payment under the
Foreign Investments Law.
In his order dated September 11,
1992, respondent judge of the RTC
directed the Liquidator to pay private
respondents the total amount of their
claim as preferred creditors.7
The Liquidator received the order on
September 16, 1992. On September
30, 1992 he moved for
reconsideration, but his motion was
denied by the court on October 2,
1992. He received the order denying
his Motion for Reconsideration on
October 5, 1992. On October 14,
1992 he filed a Notice of Appeal from
the orders of September 16, 1992
and October 2, 1992. As in the case
of the Union, however, the judge
ordered the Notice of Appeal stricken
off the record on the ground that it
had been filed without authority of the
Central Bank and beyond 15 days. In
his order of October 28, 1992, the
judge directed the execution of his
September 11, 1992 order granting
the Stockholders/ Investors' claim.
II.
Proceedings in the Court of Appeals
The Liquidator filed separate
Petitions for Certiorari, Prohibition
and Mandamus in the Court of
Appeals to set aside the orders of the
trial court denying his appeal from the
orders granting the claims of Union
and of the Stockholders/Investors.
The two Divisions of the Court of
Appeals, to which the cases were
separately raffled, rendered
conflicting rulings.
In its decision of November 17, 1992
in CA-G.R. SP No. 27751 (now G.R.
No. 09373) the Fifth Division8 held in
the case of the Union that the
proceeding before the trial court was
a special proceeding and, therefore,
the period for appealing from any
decision or final order rendered
therein is 30 days. Since the notice of
appeal of the Liquidator was filed on
the 30th day of his receipt of the
decision granting the Union's claims,
the appeal was brought on time. The
Fifth Division, therefore, set aside the
orders of the lower court and directed
the latter to give due course to the
appeal of the Liquidator and set the
Record on Appeal he had filed for
hearing.
On the other hand, on December 16,
1993, the Fourteenth Division9 ruled
in CA-G.R. SP No. 29351 (now G.R.
No. 112991) in the case of the
Stockholders/Investors that a
liquidation proceeding is an ordinary
action. Therefore, the period for
appealing from any decision or final
order rendered therein is 15 days and
that since the Liquidator's appeal
notice was filed on the 23rd day of
his receipt of the order appealed
from, deducting the period during
which his motion for reconsideration
was pending, the notice of appeal
was filed late. Accordingly, the
Fourteenth Division dismissed the
Liquidator's petition.
III.
Present Proceedings
The Union and the Liquidator then
separately filed petitions before this
Court.
In G.R. No. 109373 the Union
contends that:
1. The Court of Appeals acted
without jurisdiction over the
subject matter or nature of the
suit.
2. The Court of Appeals gravely
erred in taking cognizance of
the petition for certiorari filed by
Nañagas who was without any
legal authority to file it.
3. The Court of Appeals erred
in concluding that the case is a
special proceeding governed by
Rules 72 to 109 of the Revised
Rules of Court.
4. The Court of Appeals erred
seriously in concluding that the
notice of appeal filed by
Nañagas was filed on time.
5. The Court of Appeals erred
seriously in declaring that the
second notice of appeal filed on
December 23, 1991 by the
Solicitor General is a
superfluity.
On the other hand, in G.R. No.
112991 the Liquidator contends that:
1. The Petition for Assistance in
the Liquidation of the Pacific
Banking Corporation s a
Special Proceeding case and/or
one which allows multiple
appeals, in which case the
period of appeal is 30 days and
not 15 days from receipt of the
order/judgment appealed from.
2. Private respondents are not
creditors of PaBC but are plain
stockholders whose right to
receive payment as such would
accrue only after all the
creditors of the insolvent bank
have been paid.
 3. The claim of private
respondents in the amount of
US$22,531,632.18 is not in the
nature of foreign investment as
it is understood in law.
4. The claim of private
respondents has not been
clearly established and proved.
5. The issuance of a writ of
execution against the assets of
PaBC was made with grave
abuse of discretion.
The petitions in these cases must be
dismissed.
First. As stated in the beginning, the
principal question in these cases is
whether a petition for liquidation
under §29 of Rep. Act No. 265 is in
the nature of a special proceeding. If
it is, then the period of appeal is 30
days and the party appealing must, in
addition to a notice of appeal, file with
the trial court a record on appeal in
order to perfect his appeal.
Otherwise, if a liquidation proceeding
is an ordinary action, the period of
appeal is 15 days from notice of the
decision or final order appealed from.
BP Blg. 129 provides:
§39. Appeals. — The period for
appeal from final orders,
resolutions, awards, judgments,
or decisions of any court in all
cases shall be fifteen (15) days
counted from the notice of the
final order, resolution, award,
judgment or decision appealed
from: Provided, however, that
in habeas corpus cases the
period for appeal shall be forty-
eight (48) hours from the notice
of the judgment appealed from.
No record on appeal shall be
required to take an appeal. In
lieu thereof, the entire record
shall be transmitted with all the
pages prominently numbered
consecutively, together with an
index of the contents thereof.
This section shall not apply in
appeals in special proceedings
and in other cases wherein
multiple appeals are allowed
under applicable provisions of
the Rules of Court.
The Interim Rules and Guidelines to
implement BP Blg. 129 provides:
19. Period of Appeals. —
(a) All appeals, except
in habeas corpus cases
and in the cases referred
to in paragraph (b)
hereof, must be taken
within fifteen (15) days
from notice of the
judgment, order,
resolution or award
appealed from.
(b) In appeals in special
proceedings in
accordance with Rule 109
of the Rules of Court and
other cases wherein
 multiple appeals are
allowed, the period of
appeals shall be thirty
(30) days, a record on
appeal being required.
The Fourteenth Division of the Court
of Appeals held that the proceeding
is an ordinary action similar to an
action for interpleader under Rule
63. 10 The Fourteenth Division stated:
The petition filed is akin to an
interpleader under Rule 63 of
the Rules of Court where there
are conflicting claimants or
several claims upon the same
subject matter, a person who
claims no interest thereon may
file an action for interpleader to
compel the claimants to
"interplead" and litigate their
several claims among
themselves. (Section I Rule
63).
An interpleader is in the
category of a special civil action
under Rule 62 which, like an
ordinary action, may be
appealed only within fifteen (15)
days from notice of the
judgment or order appealed
from. Under Rule 62, the
preceding rules covering
ordinary civil actions which are
not inconsistent with or may
serve to supplement the
provisions of the rule relating to
such civil actions are applicable
to special civil actions. This
embraces Rule 41 covering
appeals from the regional trial
court to the Court of Appeals.
xxx xxx xxx
Thus, under Section 1 Rule 2 of
the Rules of Court, an action is
defined as "an ordinary suit in a
court of justice by which one
party prosecutes another for
the enforcement or protection
of a right or the prevention or
redress of a wrong." On the
other hand, Section 2 of the
same Rule states that "every
other remedy including one to
establish the status or right of a
party or a particular fact shall
be by special proceeding."
To our mind, from the
aforequoted definitions of an
action and a special
proceeding, the petition for
assistance of the court in the
liquidation of an asset of a bank
is not "one to establish the
status or right of a party or a
particular fact." Contrary to the
submission of the petitioner, the
petition is not intended to
establish the fact of insolvency
of the bank. The insolvency of
the bank had already been
previously determined by the
Central Bank in accordance
with Section 9 of the CB Act
before the petition was filed. All
that needs to be done is to
liquidate the assets of the bank
 and thus the assistance of the
respondent court is sought for
that purpose.
It should be pointed out that
this petition filed is not among
the cases categorized as a
special proceeding under
Section 1, Rule 72 of the Rules
of Court, nor among the special
proceedings that may be
appealed under Section 1, Rule
109 of the Rules.
We disagree with the foregoing view
of the Fourteenth Division. Rule 2 of
the Rules of Court provide:
§1. Action defined. — Action
means an ordinary suit in a
court of justice, by which the
 party prosecutes another for
the enforcement or protection
of a right, or the prevention or
redress of a wrong.
§2. Special Proceeding
Distinguished. — Every other
remedy, including one to
establish the status or right of a
party or a particular fact, shall
be by special proceeding.
Elucidating the crucial distinction
between an ordinary action and a
special proceeding, Chief Justice
Moran states:" 11
Action is the act by which one
sues another in a court of
justice for the enforcement or
protection of a right, or the
prevention or redress of a
wrong while special proceeding
is the act by which one seeks to
establish the status or right of a
party, or a particular fact.
Hence, action is distinguished
from special proceeding in that
the former is a formal demand
of a right by one against
another, while the latter is but a
petition for a declaration of a
status, right or fact. Where a
party litigant seeks to recover
property from another, his
remedy is to file an action.
Where his purpose is to seek
the appointment of a guardian
for an insane, his remedy is a
special proceeding to establish
the fact or status of insanity
 calling for an appointment of
guardianship.
Considering this distinction, a petition
for liquidation of an insolvent
corporation should be classified a
special proceeding and not an
ordinary action. Such petition does
not seek the enforcement or
protection of a right nor the
prevention or redress of a wrong
against a party. It does not pray for
affirmative relief for injury arising from
a party's wrongful act or omission nor
state a cause of action that can be
enforced against any person.
What it seeks is merely a declaration
by the trial court of the corporation's
insolvency so that its creditors may
be able to file their claims in the
settlement of the corporation's debts
and obligations. Put in another way,
the petition only seeks a declaration
of the corporation's debts and
obligations. Put in another way, the
petition only seeks a declaration of
the corporation's state of insolvency
and the concomitant right of creditors
and the order of payment of their
claims in the disposition of the
corporation's assets.
Contrary to the rulings of the
Fourteenth Division, liquidation
proceedings do not resemble
petitions for interpleader. For one, an
action for interpleader involves claims
on a subject matter against a person
who has no interest therein. 12 This is
not the case in a liquidation
proceeding where the Liquidator, as
representative of the corporation,
takes charge of its assets and
liabilities for the benefit of the
creditors.13 He is thus charged with
insuring that the assets of the
corporation are paid only to rightful
claimants and in the order of
payment provided by law.
Rather, a liquidation proceeding
resembles the proceeding for the
settlement of state of deceased
persons under Rules 73 to 91 of the
Rules of Court. The two have a
common purpose: the determination
of all the assets and the payment of
all the debts and liabilities of the
insolvent corporation or the estate.
The Liquidator and the administrator
or executor are both charged with the
assets for the benefit of the
claimants. In both instances, the
liability of the corporation and the
estate is not disputed. The court's
concern is with the declaration of
creditors and their rights and the
determination of their order of
payment.
Furthermore, as in the settlement of
estates, multiple appeals are allowed
in proceedings for liquidation of an
insolvent corporation. As the Fifth
Division of the Court of Appeals,
quoting the Liquidator, correctly
noted:
A liquidation proceeding is a
single proceeding which
consists of a number of cases
properly classified as "claims."
It is basically a two-phased
proceeding. The first phase is
concerned with the approval
and disapproval of claims.
Upon the approval of the
petition seeking the assistance
of the proper court in the
liquidation of a close entity, all
money claims against the bank
are required to be filed with the
liquidation court. This phase
may end with the declaration by
the liquidation court that the
claim is not proper or without
basis. On the other hand, it
may also end with the
liquidation court allowing the
claim. In the latter case, the
claim shall be classified
whether it is ordinary or
preferred, and thereafter
included Liquidator. In either
case, the order allowing or
disallowing a particular claim is
final order, and may be
appealed by the party
aggrieved thereby.
The second phase involves the
approval by the Court of the
distribution plan prepared by
the duly appointed liquidator.
The distribution plan specifies
in detail the total amount
available for distribution to
creditors whose claim were
earlier allowed. The Order
finally disposes of the issue of
how much property is available
for disposal. Moreover, it
ushers in the final phase of the
liquidation proceeding —
payment of all allowed claims in
accordance with the order of
legal priority and the approved
distribution plan.
Verily, the import of the final
character of an Order of
allowance or disallowance of a
particular claim cannot be
overemphasized. It is the
operative fact that constitutes a
liquidation proceeding a "case
where multiple appeals are
allowed by law." The issuance
of an Order which, by its
nature, affects only the
particular claims involved, and
which may assume finality if no
appeal is made therefrom, ipso
factocreates a situation where
multiple appeals are allowed.
A liquidation proceeding is
commenced by the filing of a
single petition by the Solicitor
General with a court of
competent jurisdiction entitled,
"Petition for Assistance in the
Liquidation of e.g., Pacific
Banking Corporation. All claims
against the insolvent are
required to be filed with the
liquidation court. Although the
claims are litigated in the same
proceeding, the treatment is
individual. Each claim is heard
separately. And the Order
issued relative to a particular
claim applies only to said claim,
leaving the other claims
unaffected, as each claim is
considered separate and
distinct from the others.
Obviously, in the event that an
appeal from an Order allowing
or disallowing a particular claim
is made, only said claim is
affected, leaving the others to
proceed with their ordinary
course. In such case, the
original records of the
proceeding are not elevated to
the appellate court. They
remain with the liquidation
court. In lieu of the original
record, a record of appeal is
instead required to be prepared
 and transmitted to the appellate
court.
Inevitably, multiple appeals are
allowed in liquidation
proceedings. Consequently, a
record on appeal is necessary
in each and every appeal
made. Hence, the period to
appeal therefrom should be
thirty (30) days, a record on
appeal being required. (Record
pp. 162-164).
In G.R. No. 112991 (the case of the
Stockholders/Investors), the
Liquidator's notice of appeal was filed
on time, having been filed on the
23rd day of receipt of the order
granting the claims of the
Stockholders/Investors. However, the
Liquidator did not file a record on
appeal with the result that he failed to
perfect his appeal. As already stated
a record on appeal is required under
the Interim Rules and Guidelines in
special proceedings and for cases
where multiple appeals are allowed.
The reason for this is that the several
claims are actually separate ones
and a decision or final order with
respect to any claim can be
appealed. Necessarily the original
record on appeal must remain in the
trial court where other claims may still
be pending.
Because of the Liquidator's failure to
perfect his appeal, the order granting
the claims of the
Stockholders/Investors became final.
Consequently. the Fourteenth
Division's decision dismissing the
Liquidator's Petition
for Certiorari,Prohibition
and Mandamus must be affirmed
albeit for a different reason.
On the other hand, in G.R. No.
109373 (case of the Labor Union),
we find that the Fifth Division
correctly granted the Liquidator's
Petition for Certiorari. Prohibition
and Mandamus. As already noted,
the Liquidator filed a notice of appeal
and a motion for extension to file a
record on appeal on December 10,
1991, i.e., within 30 days of his
receipt of the order granting the
Union's claim. Without waiting for the
resolution of his motion for extension,
he filed on December 20, 1991 within
the extension sought a record on
appeal. Respondent judge thus erred
in disallowing the notice on appeal
and denying the Liquidator's motion
for extension to file a record on
appeal.
The Fifth Division of the Court of
Appeals correctly granted the
Liquidator's Petition for Certiorari,
Prohibition and Mandamus and its
decision should, therefore, be
affirmed.
Second. In G.R. No. 109373, The
Union claims that under §29 of Rep.
Act No. 265, the court
merely assists in adjudicating the
claims of creditors, preserves the
assets of the institution,
and implements the liquidation plan
approved by the Monetary Board and
that, therefore, as representative of
the Monetary Board, the Liquidator
cannot question the order of the court
or appeal from it. It contends that
since the Monetary Board had
previously admitted PaBC's liability to
the laborers by in fact setting aside
the amount of P112,234,292.44 for
the payment of their claims, there
was nothing else for the Liquidator to
do except to comply with the order of
the court.
The Union's contention is untenable.
In liquidation proceedings, the
function of the trial court is not limited
to assisting in the implementation of
the orders of the Monetary Board.
Under the same section (§29) of the
law invoked by the Union, the court
has authority to set aside the
decision of the Monetary Board "if
there is a convincing proof that the
action is plainly arbitrary and made in
bad faith." 14 As this Court held
in Rural Bank of Buhi, Inc. v. Court of
Appeals: 15
There is no question, that the
action of the monetary Board in
this regard may be subject to
judicial review. Thus, it has
been held that the Court's may
interfere with the Central Bank's
exercise of discretion in
determining whether or not a
distressed bank shall be
supported or liquidated.
 Discretion has its limits and has
never been held to include
arbitrariness, discrimination or
bad faith (Ramos v. Central
Bank of the Philippines, 41
SCRA 567 [1971]).
In truth, the Liquidator is the
representative not only of the Central
Bank but also of the insolvent bank.
Under §§28A-29 of Rep. Act No. 265
he acts in behalf of the bank
"personally or through counsel as he
may retain, in all actions or
proceedings or against the
corporation" and he has authority "to
do whatever may be necessary for
these purposes." This authority
includes the power to appeal from the
decisions or final orders of the court
which he believes to be contrary to
the interest of the bank.
Finally the Union contends that the
notice of appeal and motion for
extension of time to file the record on
appeal filed in behalf of the Central
Bank was not filed by the office of the
Solicitor General as counsel for the
Central Bank. This contention has no
merit. On October 22, 1992, as
Assistant Solicitor General Cecilio O.
Estoesta informed the trial court in
March 27, 1992, the OSG had
previously authorized lawyers of the
PDIC to prepare and sign pleadings
in the case. 16 Conformably thereto
the Notice of Appeal and the Motion
for Additional Time to submit Record
on Appeal filed were jointly signed by
Solicitor Reynaldo I. Saludares in
behalf of the OSG and by lawyers of
the PDIC. 17
WHEREFORE, in G.R. No. 109373
and G.R. No 112991, the decisions
appealed from are AFFIRMED.
SO ORDERED.
Narvasa, C.J., Bidin, Regalado and
Puno, JJ. concur.
G.R. No. 133000 October 2,
2001
PATRICIA NATCHER, petitioner,
vs.
HON. COURT OFAPPEALS AND
THE HEIR OF GRACIANO DEL
ROSARIO – LETICIA DEL
ROSARIO, EMILIA DEL RESORIO –
MANANGAN, ROSALINDA
FUENTES LLANA, RODOLFO
FUENTES, ALBERTO FUENTES,
EVELYN DEL ROSARIO, and
EDUARDO DEL
ROSARIO, respondent..
BUENA, J.:
May a Regional Trial Court, acting as
a court of general jurisdiction in an
action for reconveyance annulment of
title with damages, adjudicate
matters relating to the settlement of
the estate of a deceased person
particularly on questions as to
advancement of property made by
the decedent to any of the heirs?
Sought to be reversed in this petition
for review on certiorari under Rule 45
is the decision1 of public respondent
Court of Appeals, the decretal portion
of which declares:
"Wherefore in view of the foregoing
considerations, judgment appealed
from is reversed and set aside and
another one entered annulling the
Deed of Sale executed by Graciano
Del Rosario in favor of defendant-
appellee Patricia Natcher, and
ordering the Register of Deeds to
Cancel TCT No. 186059 and
reinstate TCT No. 107443 without
prejudice to the filing of a special
proceeding for the settlement of the
estate of Graciano Del Rosario in a
proper court. No costs.
"So ordered."
Spouses Graciano del Rosario and
Graciana Esguerra were registered
owners of a parcel of land with an
area of 9,322 square meters located
in Manila and covered by Transfer
Certificate of Title No. 11889. Upon
the death of Graciana in 1951,
Graciano, together with his six
children, namely: Bayani, Ricardo,
Rafael, Leticia, Emiliana and Nieves,
entered into an extrajudicial
settlement of Graciana's estate on 09
February 1954 adjudicating and
dividing among themselves the real
property subject of TCT No. 11889.
Under the agreement, Graciano
received 8/14 share while each of the
six children received 1/14 share of
the said property. Accordingly, TCT
No. 11889 was cancelled, and in
lieu thereof, TCT No. 35980 was
issued in the name of Graciano and
the Six children.1âwphi1.nêt
Further, on 09 February 1954, said
heirs executed and forged an
"Agreement of Consolidation-
Subdivision of Real Property with
Waiver of Rights" where they
subdivided among themselves the
parcel of land covered by TCT No.
35980 into several lots. Graciano
then donated to his children, share
and share alike, a portion of his
interest in the land amounting to
4,849.38 square meters leaving only
447.60 square meters registered
under Graciano's name, as covered
by TCT No. 35988. Subsequently,
the land subject of TCT No. 35988
was further subdivided into two
separate lots where the first lot with a
land area of 80.90 square meter was
registered under TCT No. 107442
and the second lot with a land area of
396.70 square meters was registered
under TCT No. 107443. Eventually,
Graciano sold the first lot2 to a third
person but retained ownership over
the second lot.3
On 20 March 1980, Graciano married
herein petitioner Patricia Natcher.
During their marriage, Graciano sold
the land covered by TCT No. 107443
to his wife Patricia as a result of
which TCT No. 1860594 was issued
in the latter's name. On 07 October
1985,Graciano died leaving his
second wife Patricia and his six
children by his first marriage, as
heirs.
In a complaint5 filed in Civil Case No.
71075 before the Regional Trial
Court of Manila, Branch 55, herein
private respondents alleged that
upon Graciano's death, petitioner
Natcher, through the employment of
fraud, misrepresentation and forgery,
acquired TCT No. 107443, by making
it appear that Graciano executed a
Deed of Sale dated 25 June 19876 in
favor herein petitioner resulting in the
cancellation of TCT No. 107443 and
the issuance of TCT no. 186059 in
the name of Patricia Natcher.
Similarly, herein private respondents
alleged in said complaint that as a
consequence of such fraudulent sale,
their legitimes have been impaired.
In her answer7 dated 19 August 1994,
herein petitioner Natcher averred that
she was legally married to Graciano
in 20 March 1980 and thus, under the
law, she was likewise considered a
compulsory heir of the latter.
Petitioner further alleged that during
Graciano's lifetime, Graciano already
distributed, in advance, properties to
his children, hence, herein private
respondents may not anymore claim
against Graciano's estate or against
herein petitioner's property.
After trial, the Regional Trial Court of
Manila, Branch 55, rendered a
decision dated 26 January 1996
holding:8
"1) The deed of sale executed by the
late Graciano del Rosario in favor of
Patricia Natcher is prohibited by law
and thus a complete nullity. There
being no evidence that a separation
of property was agreed upon in the
marriage settlements or that there
has been decreed a judicial
separation of property between them,
the spouses are prohibited from
entering (into) a contract of sale;
"2) The deed as sale cannot be
likewise regarded as a valid donation
as it was equally prohibited by law
under Article 133 of the New Civil
Code;
"3) Although the deed of sale cannot
be regarded as such or as a
donation, it may however be
regarded as an extension of advance
inheritance of Patricia Natcher being
a compulsory heir of the deceased."
On appeal, the Court of Appeals
reversed and set aside the lower
court's decision ratiocinating, inter
alia:
"It is the probate court that has
exclusive jurisdiction to make a just
and legal distribution of the estate.
The court a quo, trying an ordinary
action for reconveyance / annulment
of title, went beyond its jurisdiction
when it performed the acts proper
only in a special proceeding for the
settlement of estate of a deceased
person. XXX
"X X X Thus the court a quo erred in
regarding the subject property as
advance inheritance. What the court
should have done was merely to rule
on the validity of (the) sale and leave
the issue on advancement to be
resolved in a separate proceeding
instituted for that purpose. XXX"
Aggrieved, herein petitioner seeks
refuge under our protective mantle
through the expediency of Rule 45 of
the Rules of Court and assails the
appellate court's decision "for being
contrary to law and the facts of the
case."
We concur with the Court of Appeals
and find no merit in the instant
petition.
Section 3, Rule 1 of the 1997 Rules
of Civil Procedure defines civil action
and special proceedings, in this wise:
"XXX a) A civil action is one by which
a party sues another for the
enforcement or protection of a right,
or the prevention or redress of a
wrong.
"A civil action may either be ordinary
or special. Both are government by
the rules for ordinary civil actions,
subject to specific rules prescribed
for a special civil action.
"XXX
"c) A special proceeding is a remedy
by which a party seeks to establish a
status, a right or a particular fact."
As could be gleaned from the
foregoing, there lies a marked
distinction between an action and a
special proceeding. An action is a
formal demand of one's right in a
court of justice in the manner
prescribed by the court or by the law.
It is the method of applying legal
remedies according to definite
established rules. The term "special
proceeding" may be defined as an
application or proceeding to establish
the status or right of a party, or a
particular fact. Usually, in special
proceedings, no formal pleadings are
required unless the statute expressly
so provides. In special proceedings,
the remedy is granted generally upon
an application or motion."9
Citing American Jurisprudence, a
noted authority in Remedial Law
expounds further:
"It may accordingly be stated
generally that actions include those
proceedings which are instituted and
prosecuted according to the ordinary
rules and provisions relating to
actions at law or suits in equity, and
that special proceedings include
those proceedings which are not
ordinary in this sense, but is instituted
and prosecuted according to some
special mode as in the case of
proceedings commenced without
summons and prosecuted without
regular pleadings, which are
characteristics of ordinary actions.
XXX A special proceeding must
therefore be in the nature of a distinct
and independent proceeding for
particular relief, such as may be
instituted independently of a pending
action, by petition or motion upon
notice."10
Applying these principles, an action
for reconveyance and annulment of
title with damages is a civil action,
whereas matters relating to
settlement of the estate of a
deceased person such as
advancement of property made by
the decedent, partake of the nature of
a special proceeding, which
concomitantly requires the
application of specific rules as
provided for in the Rules of Court.
Clearly, matters which involve
settlement and distribution of the
estate of the decedent fall within the
exclusive province of the probate
court in the exercise of its limited
jurisdiction.
Thus, under Section 2, Rule 90 of the
Rules of Court, questions as to
advancement made or alleged to
have been made by the deceased to
any heir may be heard and
determined by the court having
jurisdiction of the estate
proceedings; and the final order of
the court thereon shall be binding on
the person raising the questions and
on the heir.
While it may be true that the Rules
used the word "may", it is
nevertheless clear that the same
provision11contemplates a probate
court when it speaks of the "court
having jurisdiction of the estate
proceedings".
Corollarily, the Regional Trial Court in
the instant case, acting in its general
jurisdiction, is devoid of authority to
render an adjudication and resolve
the issue of advancement of the real
property in favor of herein petitioner
Natcher, inasmuch as Civil Case No.
471075 for reconveyance and
annulment of title with damages is
not, to our mind, the proper vehicle to
thresh out said question. Moreover,
under the present circumstances, the
RTC of Manila, Branch 55 was not
properly constituted as a probate
court so as to validly pass upon the
question of advancement made by
the decedent Graciano Del Rosario
to his wife, herein petitioner Natcher.
At this point, the appellate court's
disquisition is elucidating:
"Before a court can make a partition
and distribution of the estate of a
deceased, it must first settle the
estate in a special proceeding
instituted for the purpose. In the case
at hand, the court a quo determined
the respective legitimes of the
plaintiffs-appellants and assigned the
subject property owned by the estate
of the deceased to defendant-
appellee without observing the proper
proceedings provided (for) by the
Rules of Court. From the aforecited
discussions, it is clear that trial courts
trying an ordinary action cannot
resolve to perform acts pertaining to
a special proceeding because it is
subject to specific prescribed rules.
Thus, the court a quo erred in
regarding the subject property as an
advance inheritance."12
In resolving the case at bench, this
Court is not unaware of our
pronouncement in Coca vs.
Borromeo13 and Mendoza vs.
Teh14 that whether a particular matter
should be resolved by the Regional
Trial Court (then Court of First
Instance) in the exercise of its
general jurisdiction or its limited
probate jurisdiction is not a
jurisdictional issue but a mere
question of procedure. In essence, it
is procedural question involving a
mode of practice "which may be
waived".15
Notwithstanding, we do not see any
waiver on the part of herein private
respondents inasmuch as the six
children of the decedent even
assailed the authority of the trail
court, acting in its general jurisdiction,
to rule on this specific issue of
advancement made by the decedent
to petitioner.
Analogously, in a train of decisions,
this Court has consistently
enunciated the long standing
principle that although generally, a
probate court may not decide a
question of title or ownership, yet if
the interested parties are all heirs, or
the question is one of collation or
advancement, or the parties consent
to the assumption of jurisdiction by
the probate court and the rights of
third parties are not impaired, then
the probate court is competent to
decide the question of ownership.16
Similarly in Mendoza vs. Teh, we
had occasion to hold:
"In the present suit, no settlement of
estate is involved, but merely an
allegation seeking appointment as
estate administratrix which does not
necessarily involve settlement of
estate that would have invited the
exercise of the limited jurisdiction
of a probate court.17 (emphasis
supplied)
Of equal importance is that before
any conclusion about the legal share
due to a compulsory heir may be
reached, it is necessary that certain
steps be taken first.18 The net estate
of the decedent must be ascertained,
by deducting all payable obligations
and charges from the value of the
property owned by the deceased at
the time of his death; then, all
donations subject to collation would
be added to it. With the partible
estate thus determined, the legitime
of the compulsory heir or heirs can
be established; and only thereafter
can it be ascertained whether or not
a donation had prejudiced the
legitimes.19
A perusal of the records, specifically
the antecedents and proceedings in
the present case, reveals that the trial
court failed to observe established
rules of procedure governing the
settlement of the estate of Graciano
Del Rosario. This Court sees no
cogent reason to sanction the non-
observance of these well-entrenched
rules and hereby holds that under the
prevailing circumstances, a probate
court, in the exercise of its limited
jurisdiction, is indeed the best forum
to ventilate and adjudge the issue of
advancement as well as other related
matters involving the settlement of
Graciano Del Rosario's
estate.1âwphi1.nêt
WHEREFORE, premises considered,
the assailed decision of the Court of
Appeals is hereby AFFIRMED and
the instant petition is DISMISSED for
lack of merit.
SO ORDERED.
Bellosillo, Mendoza, Quisumbing, De
Leon, Jr., Davide, Jr., JJ., concur.