Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-19060 May 29, 1964

IGNACIO GERONA, MARIA CONCEPCION GERONA, FRANCISCO GERONA and DELFIN GERONA, petitioners, vs. CARMEN DE GUZMAN, JOSE DE GUZMAN, CLEMENTE DE GUZMAN, FRANCISCO DE GUZMAN, RUSTICA DE GUZMAN, PACITA DE GUZMAN and VICTORIA DE GUZMANrespondents. Manuel J. Serapio for petitioners. D. F. Castro and Associates for respondents. CONCEPCION, J.: Appeal by certiorari from a decision of the Court of Appeals, affirming that of the Court of First Instance of Bulacan. In the complaint, filed with the latter court on September 4, 1958, petitioners herein, namely, Ignacio, Maria Concepcion, Francisco and Delfin, all surnamed Gerona, alleged that they are the legitimate children of Domingo Gerona and Placida de Guzman; that the latter, who died on August 9, 1941 was a legitimate daughter of Marcelo de Guzman and his first wife, Teodora de la Cruz; that after the death of his first wife, Marcelo de Guzman married Camila Ramos, who begot him several children, namely, respondents Carmen, Jose, Clemente, Francisco, Rustica, Pacita and Victoria, all surnamed De Guzman; that Marcelo de Guzman died on September 11, 1945; that subsequently, or on May 6, 1948, respondents executed a deed of "extra-judicial settlement of the estate of the deceased Marcelo de Guzman", fraudulently misrepresenting therein that they were the only surviving heirs of the deceased Marcelo de Guzman, although they well knew that petitioners were, also, his forced heirs; that respondents had thereby succeeded fraudulently in causing the transfer certificates of title to seven (7) parcels of land, issued in the name of said deceased, to be

cancelled and new transfer certificates of title to be issued in their own name, in the proportion of 1/7th individual interest for each; that such fraud was discovered by the petitioners only the year before the institution of the case; that petitioners forthwith demanded from respondents their (petitioners) share in said properties, to the extent of 1/8th interest thereon; and that the respondents refused to heed said demand, thereby causing damages to the petitioners. Accordingly, the latter prayed that judgment be rendered nullifying said deed of extrajudicial settlement, insofar as it deprives them of their participation of 1/18th of the properties in litigation; ordering the respondents to reconvey to petitioners their aforementioned share in said properties; ordering the register of deeds to cancel the transfer certificates of title secured by respondents as above stated and to issue new certificates of title in the name of both the petitioners and the respondents in the proportion of 1/8th for the former and 7/8th for the latter; ordering the respondents to render accounts of the income of said properties and to deliver to petitioners their lawful share therein; and sentencing respondents to pay damages and attorney's fees. In their answer, respondents maintained that petitioners' mother, the deceased Placida de Guzman, was not entitled to share in the estate of Marcelo de Guzman, she being merely a spurious child of the latter, and that petitioners' action is barred by the statute of limitations. After appropriate proceedings, the trial court rendered a decision finding that petitioners' mother was a legitimate child, by first marriage, of Marcelo de Guzman; that the properties described in the complaint belonged to the conjugal partnership of Marcelo de Guzman and his second wife, Camila Ramos; and that petitioners' action has already prescribed, and, accordingly, dismissing the complaint without costs. On appeal taken by the petitioners, this decision as affirmed by the Court of Appeals, with costs against them. Petitioners maintain that since they and respondents are co-heirs of the deceased Marcelo de Guzman, the present action for partition of the latter's estate is not subject to the statute of limitations of action; that, if affected by said statute, the period of four (4) years therein prescribed did not begin to run until actual discovery of the fraud perpetrated by respondents, which, it is claimed, took place in 1956 or 1957; and that accordingly, said period had not expired when the present action was commenced on November 4, 1958.

Petitioners' contention is untenable. Although, as a general rule, an action for partition among co-heirs does not prescribe, this is true only as long as the defendants do not hold the property in question under an adverse title (Cordova vs. Cordova, L-9936, January 14, 1948). The statute of limitations operates as in other cases, from the moment such adverse title is asserted by the possessor of the property (Ramos vs. Ramos, 45 Phil. 362; Bargayo v. Camumot, 40 Phil. 857; Castro v. Echarri, 20 Phil. 23). When respondents executed the aforementioned deed of extra-judicial settlement stating therein that they are the sole heirs of the late Marcelo de Guzman, and secured new transfer certificates of title in their own name, they thereby excluded the petitioners from the estate of the deceased, and, consequently, set up a title adverse to them. And this is why petitioners have brought this action for the annulment of said deed upon the ground that the same is tainted with fraud. 1wph1.t Although, there are some decisions to the contrary (Jacinto v. Mendoza, L-12540, February 28, 1959; Cuison v. Fernandez, L-11764, January 31, 1959; Maribiles v. Quinto, L-10408, October 18, 1956; and Sevilla v. De los Angeles, L-7745, November 18, 1955), it is already settled in this jurisdiction that an action for reconveyance of real property based upon a constructive or implied trust, resulting from fraud, may be barred by the statute of limitations (Candelaria v. Romero, L-12149, September 30, 1960; Alzona v. Capunita, L-10220, February 28, 1962). Inasmuch as petitioners seek to annul the aforementioned deed of "extra-judicial settlement" upon the ground of fraud in the execution thereof, the action therefor may be filed within four (4) years from the discovery of the fraud (Mauricio v. Villanueva, L-11072, September 24, 1959). Such discovery is deemed to have taken place, in the case at bar, on June 25, 1948, when said instrument was filed with the Register of Deeds and new certificates of title were issued in the name of respondents exclusively, for the registration of the deed of extra-judicial settlement constitute constructive notice to the whole world (Diaz v. Gorricho, L-11229, March 29, 1958; Avecilla v. Yatco, L-11578, May 14, 1958; J.M. Tuason & Co., Inc. v. Magdangal, L-15539, January 30, 1962; Lopez v. Gonzaga, L-18788, January 31, 1964). As correctly stated in the decision of the trial court:

In the light of the foregoing it must, therefore, be held that plaintiffs learned at least constructively, of the alleged fraud committed against them by defendants on 25 June 1948 when the deed of extra-judicial settlement of the estate of the deceased Marcelo de Guzman was registered in the registry of deeds of Bulacan, Plaintiffs' complaint in this case was not filed until 4 November 1958, or more than 10 years thereafter. Plaintiff Ignacio Gerona became of age on 3 March 1948. He is deemed to have discovered defendants' fraud on 25 June 1948 and had, therefore, only 4 years from the said date within which to file this action. Plaintiff Maria Concepcion Gerona became of age on 8 December 1949 or after the registration of the deed of extra-judicial settlement. She also had only the remainder of the period of 4 years from December 1949 within which to commence her action. Plaintiff Francisco Gerona became of age only on 9 January 1952 so that he was still a minor when he gained knowledge (even if only constructive) of the deed of extra-judicial settlement on 25 June 1948. Likewise, plaintiff Delfin Gerona became of legal age on 5 August 1954, so that he was also still a minor at the time he gained knowledge (although constructive) of the deed of extra-judicial settlement on 25 June 1948. Francisco Gerona and Delfin Gerona had, therefore, two years after the removal of their disability within which to commence their action (Section 45, paragraph 3, in relation to Section 43, Act 190), that is, January 29, 1952, with respect to Francisco, and 5 August 1954, with respect to Delfin. WHEREFORE, the decision of the Court of Appeals is hereby affirmed, with costs against petitioners herein. It is so ordered. Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Barredo, Paredes, Regala and Makalintal, JJ., concur. Padilla, Labrador and Dizon, JJ., took no part.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

(3) herein spouses-appellees to pay the equivalent of five per centum (5%) of the total amount due as attorney's fees. Costs against appellees. SO ORDERED. 2 The instant petition stems from the complaint for damages with preliminary injunction filed by petitioners against private respondent Republic Planters Bank before the Court of First Instance of Pasig, Rizal, Branch XXV. There is no dispute in the findings of fact made by the Court of Appeals, which We quote as follows: On January 1963, Salustiano Oca executed a general loan and collateral agreement which constitutes a "continuing agreement, applying to any and all future as well as existing transactions" of plaintiffs-appellees with the defendant-appellant bank pursuant to which "as security for any and all loans, advances, credits, etc." the plaintiffs gave a lien on property of any kind, which may come to the possession or custody of the Bank (Exhibit 1-A, p. 144, Records). On February 12, 1963, plaintiffs-appellees spouses Oca executed a mortgage in favor of appellant Bank over two (2) parcels of lands covered by T.C.T. 66428 (Manila) and TCT 106211 (Rizal) as security for a loan in the amount of P200,000.00 as principal and "those that the mortgagee may extend to the mortgagors, including interest and expenses or other obligations owing to the mortgagee" as well as "the credit accommodations obtained from the mortgagee by S.R. Oca Logging Industry, Inc." (Exhibit A, pp. 3945, Records). On April 27, 1966, a resolution was passed by the Board of Directors of Salustiano R. Oca Logging Industry, Inc. authorizing Salustiano R. Oca to consolidate all credit accommodations extended by the Bank to Salustiano Oca and/or Salustiano R. Oca Logging Industry, Inc., and/or Oca Electric Co., Inc. into one (1) promissory note in favor the Bank (Exh. 2. 115, Original Records).

G.R. No. L-84841 October 30, 1992 SPS. SALUSTIANO OCA and FLORA O. OCA, petitioner, vs. COURT OF APPEALS, REPUBLIC PLANTERS BANK (formerly Republic Bank) and the PROVINCIAL SHERIFF OF RIZAL, respondents.

NOCON, J.: This is a petition for review on certiorari by Spouses Salustiano R. Oca and Flora O. Oca from the decision 1 dated June 30, 1988 of the Court of Appeals in CA-G.R. No. 11445, the dispositive of which reads, as follows: WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE and a new one entered authorizing: (1) the Republic Planters Bank and the Provincial Sheriff of Rizal, or their agents and/or representative to proceed with the sale on foreclosure of the property described in Exhibit F; (2) the spouses Salustiano R. Oca and Flora O. Oca to jointly and severally pay the appellant's counterclaim in the amount of P7,924,844.32 plus 12% interests [sic] per annum from August 11, 1978 until fully paid but deducting therefrom whatever amount the appellant Bank may mortgaged property; and

On May 11, 1966, a promissory note in the sum of P3,017,721.66 was signed by Salustiano Oca in his capacity as President of S.R. Oca Logging Industry, Inc. and in his own behalf, together with his wife Flora O. Oca in her own behalf. Said promissory note is payable on or before May 11, 1967 (Exh. 3, p. 116, Ibid.). The corporation's and the personal undertaking of the spouses Oca's obligation covered by the promissory note was transferred into a time loan designated as time loan No. 043. Subsequent to the execution of said promissory note, Salustiano R. Oca Logging Industry, Inc., obtained other credit accommodations, in the form of letters of credit from the Bank as follows: (1) In 1969, LC-6910108 D in the amount of P50,000.00 as principal, with 12% interest thereon per annum plus trust commission; LC6910106 D in the amount of P76,655.81 as principal, with interests thereon at the rate of 12% per annum plus trust commission (Exhibit 9B, p. 124, Ibid.). (2) In 1972, another letter of credit was opened in the amount of P66,600.00 with 12% interest per annum plus trust commission (Original Records). On August 12, 1971, the Bank sent a demand letter for the payment of time loan No. 043 in the sum of P4,830,478.95 as of July 31, 1971 to S.R. Oca Logging Industry, Inc. (Exhibit, 9-B, p. 124, Ibid.). On July 13, 1977, the Bank sent a demand letter to "Mr. Salustiano R. Oca, President and General Manager of North Mindanao Bay Woods Exports" for the payment of the promissory note dated May 11, 1966 in the amount of 7,889,269.29 computed as of June 8, 1977 (Exhibit 5, p. 118, Ibid.). On August 4, 1977, Salustiano R. Oca as President of North Mindanao Bay Woods Exports sent a letter to the bank acknowledging receipt of the Bank's July 13, 1977 letter and at the same time requesting for an extension of 45 days within which its accounts will be settled (Exhibit 6, 0. 119,Ibid.).

In May of 1978, the property located in Manila covered by TCT 103316 was foreclosed and sold at public auction for the sum of P195,000.00 with the Bank as the highest bidder (p. 4, Brief for Plaintiffs-Appellees, p. 53, Rollo; p. 7, Brief of the Defendant-Appellant, p. 48, Rollo, and, Exhibit B, p. 46, Original Records). Subsequent to the above auction sale, the Bank applied for extrajudicial foreclosure of the lot covered by TCT 106211 (Rizal). The Deputy Sheriff of Rizal scheduled the sale for July 28, 1978 at 10:00 A.M. Said foreclosure sale was restrained by the lower court upon commencement of the legal action for damages with preliminary injunction filed by the Oca spouses. 3 After trial on the merits, the trial court ruled in favor of the petitioners and held that the real estate mortgage was constituted to secure only the personal obligations of the petitioners, and that respondent Bank is barred from foreclosing the real estate mortgage over T.C.T. No. 106211. Not satisfied with the decision, respondent Bank appealed the decision to the Court of Appeals, alleging, among others, that the trial court erred (1) in holding that its action to foreclosure the mortgage is barred by prescription; and (2) in not holding the mortgage as a continuing security for all credit accommodations extended to petitioners and/or S.R. Oca Logging Industry, Inc. The Court of Appeals found the appeal meritorious and reversed and set aside the decision of the trial court. After their motion for reconsideration was denied, petitioners filed the instant petition, arguing that the Court of Appeals erred (1) in holding that the real estate mortgage is a continuing security not only for loans extended by respondent Bank to them but also to those extended to S.R. Oca Logging Industry, Inc.; (2) in holding that the additional conditions found on the dorsal portion of the real estate mortgage is binding upon them; (3) in not ruling that the right of respondent Bank to extrajudicially foreclosure the mortgage had prescribed; and (4) in reversing the decision of the trial court.

We find the petition unmeritorious. In support of their first two assigned errors, petitioners argued that the real estate mortgage was executed to secure a loan in the amount of P200,000.00 obtained by the spouses from respondent Bank, as well as other loans the spouses may obtain in their personal capacity. Petitioners further argue that the additional condition found at the back of the real estate mortgage (also known as the Addendum) does not bind them since these conditions were not embodied in the document proper itself, nor was there any reference made to said conditions in deed. Moreover, the additional conditions did not have the prior conformity of the petitioners. We are unimpressed by petitioners' arguments. While it may be true that at the time the mortgage was constituted, it was intended to secure a loan obtained by petitioners in their personal capacities from respondent Bank, subsequent events show that the same was converted into a continuing security for credit accommodations extended by respondent Bank to S.R. Oca Logging Industry, Inc. The most significant of these events was the resolution adopted by the Board of Directors of S.R. Oca Logging Industry, Inc. during its special meeting held on April 27, 1966, which resolution states, to wit: RESOLVED, that the President of the corporation [petitioner Salustiano R. Ocal], shall have the power and authority to enter into negotiations with the Republic Bank, to borrow and negotiate for loans, to execute promissory notes or any evidences of indebtedness, and in connection therewith, to consolidated all credit accommodations granted in the names of Salustiano R. Oca and/or S.R. Oca Logging Industry, Inc. by the said bank into one promissory note in favor of said Republic Bank, the same to be executed in the name of the corporation by its President and Vice President. 4 Shortly thereafter, on May 11, 1966, petitioners signed a promissory note 5 wherein they and S.R. Oca Logging Industry, Inc. jointly and severally promised to pay respondent Bank the sum of P3,017,721.66 on or before May 11, 1967.

Thus, it can be seen from the two events that petitioners intended to make their properties as securities for whatever credit accommodations respondents Bank might extend to S.R. Oca Logging Industry, Inc. Even if this Court were to agree with petitioner's contentions that the real estate mortgage they executed in 1963 was only to answer for their personal obligations to respondents Bank and their assertion that the Addendum found at the dorsal portion of the real estate mortgage did not bind them, the fact remains that petitioners signed the promissory note of May 11, 1966 (also known as Time Loan No. 43) as joint and solidary debtors along with S.R. Oca Logging Industry, Inc. We quote the promissory note in full: P3,017,721,66 Manila, May 11, 1966 On or before May 11, 1967, for value received, I/we, jointly and severally, promise to pay the REPUBLIC BANK, or order, at its office at 227 Escolta, Manila, Philippines, the sum of THREE MILLION SEVENTEEN THOUSAND SEVEN TWENTY ONE & 66/100 PESOS (P3,017,721,66). Philippines Currency, with interest at the rate of twelve per centum (12%) per annum. Before the date of maturity, I/we hereby bind myself/ourselves to make partial payments, the first payment to be made on June 11, 1966, and the subsequent payments on the 11th day of every month thereafter, and each of all such payments shall be THIRTY THOUSAND PESOS (P30,000.00), or an amount equivalent to Forty per centum (40%) of the proceeds from our exports/local sales, whichever amount is higher, which shall cover amortization on the principal and interest at the above mentioned rate. All unpaid amortizations shall bear interest at the rate of Twelve per centum (12%) per annum, as liquidated damages. In is to be understood that we shall pay whatever unpaid balance remains on the due date of this note. In case of non-payment of the amount of this note or any portion of it on demand, when due, or any other amount or amounts due on the account of this note, the entire obligation shall become due and demandable and if, for enforcement of the payment thereof the

REPUBLIC BANK is constrained to entrust the case to its attorneys, I/we, jointly and severally, bind myself/ourselves to pay for attorneys fees, as provided for in the mortgage contract, in addition to the legal fees and other incidental expenses. In the S.R. OCA LOGGING, Presence of: INDUSTRY, INC. (Unintelligible) by: (sgd.) (Unintelligible) SALUSTIANO R. OCA President (sgd.) SALUSTIANO R. OCA In his own behalf (sgd.) FLORA O. OCA In her own behalf 6 This gave effect to the portion of the real estate mortgage which estates: That for and in consideration of certain loans, overdrafts and other credit accommodations obtained, from the Mortgagee, and to secure the payment of the same and those that may hereafter obtained, the principals of all of which is hereby fixed at TWO HUNDRED THOUSAND PESOS (P200,000.00), Philippine currency, as well as those that the Mortgagee may extend to the Mortgagor, including interest and expenses or any other obligation owing to the Mortgagee, whether direct or indirect, principal or secondary, as appears in the accounts, books and records of the Mortgagee . . . . 7 The question that now remains to be settled is whether the right of respondent Bank to foreclose the mortgage had already prescribed. Under the terms found therein. Time Loan No. 43 matured on May 12, 1967. The tolling of the prescriptive period within which respondent Bank had to file the foreclosure action began to run on said date, when petitioners failed to fully pay the time loan.

On August 12, 1971, respondent Bank made an extrajudicial demand upon S.R. Oca Logging Industry, Inc. to settle the time loan, 8 a copy of which was furnished petitioner Salustiano R. Oca by registered mail. 9 Two other demand letters were sent by respondent Bank: one dated March 13, 1973 addressed to S.R. Oca Logging Industry, Inc., 10 and another dated July 13, 1977 addressed to petitioner Salustiano R. Oca as President and General Manager of North Mindanao Bay Woods Exports. 11 These letters sent by respondent Bank to petitioners and/or S.R. Oca Logging Industry, Inc. effectively stopped the tolling of the prescriptive period. As correctly observed by the Court of Appeals: It is true that the mortgage actions prescribe after ten (10) years (Article 1142, New Civil Code). However, its running has effectively been interrupted by written demands from the Bank as well as the written acknowledgment issued by Salustiano Oca himself. Article 1155 of the new Civil Code provides: Art. 1155. The prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor. (1973a). 12 Thus, the institution of extrajudicial foreclosure proceedings by respondent Bank in 1977 was not yet barred by prescription. Given Our foregoing discussion of the merits of the case, We hold that the Court of Appeals committed no error in reversing the decision of the trial court. WHEREFORE, the decision appealed from is hereby affirmed in toto. Costs against petitioners. SO ORDERED. Nocon, Regalado, Feliciano and Campos Jr., JJ., concur. Navasa, C.J., is on leave.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 78252 April 12, 1989 PALUWAGAN NG BAYAN SAVINGS BANK, petitioner, vs. ANGELO KING, KEN SUY WAT JOSE FERRER, JR., QUINTIN CALDERON, FE SARINO and DOMINGO K. LI,respondents. Cruz, Durian, Agabin, Atienza, Alday and Tuason for petitioner. Simeon C. Sato for respondent Domingo K Li. Syquia Law Offices for respondents King, Ken Suy Wat, Calderon and Ferrer, Jr.

It is only when the defendant cannot be served personally within a reasonable time that substituted service maybe resorted to. The impossibility of prompt service should be shown by stating the efforts made to find the defendant personally and the fact that such efforts failed. This statement should be made in the proof of service. This is necessary because substituted service is in derogation of the usual method of service. It has been held that this method of service is "in derogation of the common law; it is a method extraordinary in character, and hence may be used only as prescribed and in the circumstances authorized by statute." Thus, under the controlling decisions, the statutory requirements of substituted service must be followed strictly, faithfully and fully, and any substituted service other than that authorized by the statute is considered ineffective. 3 The application of the foregoing rules is the issue in this petition for review by certiorari of a decision of the Court of Appeals in G.R. CV No. 03386 entitled "Paluwagan ng Bayan Savings Bank vs. Mercantile Financing Corporation, et al." dated January 27, 1987, and its resolution dated April 22, 1987. 4 The facts are undisputed. Petitioner sued Mercantile Financing Corporation MFC, and private respondents, as directors and officers of MFC, for the recovery of money market placements through certain promissory notes. They were charged jointly and solidarily in accordance with Section 31 of the Corporation Code 5 which provides as follows: Section 31. Liability of Directors, Trustees, Officers.Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. Summons and copies of the complaints were served upon MFC and private respondents at the 4th Floor, LTA Building, No. 118 Perea Street, Makati, Metro Manila, which is the stated office address of MFC in the complaint, through its Assistant Manager Mr. Nasario S. Najomot Jr. who acknowledged receipt thereof for and in behalf of MFC and the

GANCAYCO, J.: The rule on service of summons in this jurisdiction is too well-known. In civil cases, the service of summons on a defendant is made by handing a copy thereof to the defendant in person, or if he refuses to receive it, by tendering it to him. 1 Such service of summons may be made at the defendant's dwelling house or residence or at his office or regular place of business. The essence of personal service is the handing or tendering of a copy of the summons to the defendant himself. However, when the defendant cannot be served personally within a reasonable time, substituted service may be effected (a) by leaving copies of the summons at the defendant's dwelling house or residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at defendant's office or regular place of business with some competent person in charge thereof. 2

private respondents. This is so recited in the certification of deputy sheriff Bernardo San Juan dated May 11, 1983. On May 24, 1983, the law firm of Guillermo E. Aragones and Associates filed a motion for extension of time to file a responsible pleading and/or motion to dismiss. The said motion was signed by Atty. Guillermo E. Aragones as counsel for the defendants. The motion was granted in an order dated May 26, 1983 giving the defendants an extension of twenty (20) days from the expiration of the reglementary period within which to file the responsive pleading and/or motion to dismiss. On June 13, 1983, said counsel for defendants filed a motion asking for a suspension of the action for a period of sixty (60) days on the ground that there was an ongoing negotiation for an amicable settlement of the case between the parties. The motion was denied. On June 27, 1983, counsel for plaintiff filed a motion to declare defendants in default for failure to file an answer. This motion was granted in an order dated June 29, 1983. On July 14, 1983, the parties, assisted by their counsel, submitted a compromise Agreement for the approval of the court. It reads as follows: 1. The defendants propose to pay, jointly and severally, then account with the plaintiff as of June 15, 1983, in the sum of P707,500.01 with 20% interest per annum as follows: P100,000.00-on or before July 18, 1983 100,000.00-on or before August 30, 1983 100,000.00-on or before September 30, 1983 100,000.00-on or before October 30, 1983 100,000.00-on or before November 30, 1983 100,000.00--on or before December 30, 1983 100,000.00-on or before January 30, 1984. 2. Except those mentioned above, the plaintiff has no more claim against the defendants.

3. The plaintiff agrees to the proposal of settlement offered by the defendants provided that in case the latter fail to pay, jointly and severally, two or more successive monthly installments, the plaintiff is entitled to secure from the Court a writ of execution for the collection of the unpaid account of the defendants. 6 On July 18, 1983, a decision was rendered by the trial court approving the said Compromise Agreement and enjoining the parties to comply with the terms and conditions embodied therein. Partial payments were made under the compromise judgment. Upon failure of private respondent to make the other payments, petitioner filed a motion for the issuance of a writ of execution of judgment. The trial court granted the motion on December 16, 1983. On January 16,1984, counsel for defendants filed a pleading entitled "Clarification" thereby seeking a correction of the compromise judgment on the ground that he erroneously filed the Compromise Agreement in behalf of all the defendants when in fact he was the counsel for MFC only. On January 17, 1984, said counsel filed a "Motion To Correct Compromise Agreement" attaching thereto a copy of the resolution of the Board of Directors of MFC of July 6,1983 showing that he was the attorney-in-fact of MFC only, and praying for the correction of the judgment, accordingly. The motion for clarification was denied on January 20,1984. On January 24, 1984, the Syquia Law Offices, in behalf of private respondents Angelo King, Keng Suy Wat, Quintin Calderon and Jose J. Ferrer, Jr., filed a motion to set aside the decision dated July 18,1983, the Compromise Agreement and the writ of execution dated December 21, 1983 on the ground that there was no service of summons upon each of them as the corporate address of the corporation was not their address as they were no longer connected therewith; that Atty. Aragones had no authority to represent them in the action and compromise agreement; that they were not served copies of the decision of the court; that they learned about the same only when it was being executed; and that they did not participate as directors or officers of MFC in the subject transaction. On January 26,1984, private respondent Domingo F. Li filed a petition for relief from judgment with a prayer for the issuance of a writ of preliminary injunction alleging therein that there was no service of

summons upon him and that Atty. Aragones was not authorized to represent him or to enter into the Compromise Agreement. After an opposition to said motion was filed by the petitioner, the lower court denied the same in its order dated April 6, 1984. Separate motions for reconsideration filed by the private respondents were also denied on May 4,1984. Thus, private respondents appealed to the respondent Court of Appeals, reiterating that there was no service of summons upon each of them as service of summons was made at the address of the firm with which they had severed connections; that the counsel of record of MFC has no authority to represent them in the case and in the Compromise Agreement; that they have not ratified the same by a partial payment of the compromise judgment; and that they were no longer connected with MFC at the time they were sued. In due time, a decision was rendered by the appellate court on January 27, 1987, the dispositive part of which reads as follows: In view of the foregoing, the other errors assigned by the appellants need not be resolved: Wherefore: (1) the decision dated July 18, 1983 approving the compromise agreement rendered by the lower court as well as the writ of execution issued pursuant thereto as against appellants Angelo King, Keng Suy Wat, Quintin Calderon, Jose Ferrer, Jr., and Domingo Li are hereby SET ASIDE; and (2) the case is remanded to the court of origin which is hereby ordered to direct proper service of summons on the aforesaid individual appellants at their respective correct addresses and thereafter to proceed in accordance with law. SO ORDERED. 7 A motion for reconsideration of the said decision filed by petitioner was denied by the appellate court on April 22, 1987. Hence, the instant petition predicated on the following grounds:

(A) THAT THE CASE AT BAR (a) PERTAINS TO (AN) APPEAL FROM ORDER OF TRIAL COURT DATED APRIL 6,1984, DENYING (i) PRIVATE RESPONDENT DOMINGO K LI'S 'PETITION FOR RELIEF FROM JUDGMENT' FILED JANUARY 25, 1984, AND (ii) MOTION TO SET ASIDE DECISION, COMPROMISE AGREEMENT AND QUASH EXECUTION FILED JANUARY 14,1984 BY PRIVATE RESPONDENTS ANGELO KING, KING SUY WAT, QUINTIN CALDERON and JOSE FERRER, JR. and (b) DOES NOT INVOLVE ANY APPEAL FROM TRIAL COURT'S DECISION DATED JULY 19,1983 APPROVING THE COMPROMISE AGREEMENT WHICH HAS LONG BECOME FINAL AND EXECUTORY. (B) THAT RESPONDENT COURT OF APPEALS COMPLETELY IGNORED THE BASIC QUESTION OF WHETHER (a) PRIVATE RESPONDENT DOMINGO K. LI'S 'PETITION FOR RELIEF FROM JUDGMENT FILED JANUARY 25,1984, and (b)'THE MOTION TO SET ASIDE DECISION, COMPROMISE AGREEMENT AND QUASH EXECUTION' FILED JANUARY 14,1984 BY PRIVATE RESPONDENTS ANGELO KING, KENG SUY WAT, QUINTIN CALDERON AND JOSE FERRER, JR., WERE FILED OUT OF TIME. (C) THAT PRIVATE RESPONDENTS WHO WERE SUED AS DIRECTORS AND OFFICERS OF MFC WERE PROPERLY SERVED WITH SUMMONS. The petition is devoid of merit. Although private respondents were sued in their capacity as directors and officers of MFC, they are, nevertheless, being held personally liable for the obligation subject of the litigation under the complaint filed by petitioner. Hence, the rule on personal service of summons must be observed in that summons must be served personally on private respondents or, if they refuse to receive the same, by tendering it to them. The proof of service prepared by the sheriff does not show that such personal service of summons was effected. The office address of the

corporation as indicated in the complaint does not appear to be the office address of private respondents as they were no longer connected with the corporation then. Personal service of summons should have been made on them at their residences as shown in the records of the Securities and Exchange Commission and the Central Bank. Instead, the sheriff effected substituted service by leaving copies of the summons with the Assistant Manager of MFC at the place of business of said corporation with which as above stated private respondents were no longer connected. Such substituted service is not valid. There was no compliance with the requirements of the rule that there must be a previous personal service and a failure to effect the same before substituted service could be resorted to. As the private respondents have not been duly served with summons, the trial court never acquired jurisdiction over their persons. It is true that Atty. Aragones, who entered his appearance in behalf of MFC and private respondents, sought an extension of time to file an answer or a responsive pleading, and a suspension of the proceedings pending a possible settlement of the case; that thereafter, he signed a Compromise Agreement in behalf of MFC and private respondents which was submitted to the court on the basis of which a compromise judgment was rendered; that said judgment was partially complied with but upon default in the payment of the balance, a writ of execution was sought from and granted by the trial court; and that it was only then that Atty. Aragones informed the court that he committed an oversight in having filed the Compromise Agreement in behalf of private respondents when it was only MFC which hired his services. If Atty. Aragones was duly authorized to appear in behalf of the defendants, his voluntary appearance in their behalf by the filing of the aforementioned pleadings and the Compromise Agreement would constitute a waiver of the defect in the service of summons. However, the lack of authority of Atty. Aragones was revealed when he produced the resolution of the Board of Directors of MFC to the effect that the authority of said counsel was in behalf of said corporation only and not in behalf of the private respondents. Since the Compromise Agreement was signed by Atty. Aragones in behalf of the private respondents without their authority, the same is null and void in so far as they are concerned. By the same token, the compromise judgment is also null and void as to private respondents. The ruling of the lower court that the motion to set aside the judgment and the petition for relief from judgment were filed beyond the

reglementary period is untenable. An action to declare the nullity of a void judgment does not prescribe. 8 One last word, Atty. Aragones' appears to be remiss in his duties and reckless in the performance of his responsibility as counsel of record in said case. He represented himself to be the counsel for the defendants including the private respondents not only in the motions he filed but also in the Compromise Agreement he submitted. It was only after the writ of execution of the compromise judgment was being enforced that he perked up by saying that he committed an oversight and that he was not authorized by the private respondents to represent them as counsel, much less in the Compromise Agreement. Candor towards the courts is a cardinal requirement of the practicing lawyer. To say one thing today and another tomorrow is a transgression of this imperative. Counsel should be made to account before his peers. WHEREFORE, the petition is DENIED. Let a copy of this decision be furnished the Integrated Bar of the Philippines for an appropriate administrative investigation, report and recommendation on Atty. Guillermo E. Aragones who holds office at the 9th Floor of the Finasia Building, 6774 Ayala Avenue, Makati, Metro Manila. No costs. This decision is immediately executory. SO ORDERED. Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

SECOND DIVISION [G.R. No. 141882. March 11, 2005] J.L.T. AGRO, INC., represented by its Manager, JULIAN L. TEVES, petitioner, vs. ANTONIO BALANSAG and HILARIA CADAYDAY, respondents. DECISION TINGA, J.: Once again, the Court is faced with the perennial conflict of property claims between two sets of heirs, a conflict ironically made grievous by the fact that the decedent in this case had resorted to great lengths to allocate which properties should go to which set of heirs. This is a Rule 45 petition assailing the Decision[1] dated 30 September 1999 of the Court of Appeals which reversed the Decision[2] dated 7 May 1993 of the Regional Trial Court (RTC), Branch 45, of Bais City, Negros Oriental. The factual antecedents follow. Don Julian L. Teves (Don Julian) contracted two marriages, first with Antonia Baena (Antonia), and after her death, with Milagros Donio Teves (Milagros Donio). Don Julian had two children with Antonia, namely: Josefa Teves Escao (Josefa) and Emilio Teves (Emilio). He had also four (4) children with Milagros Donio, namely: Maria Evelyn Donio Teves (Maria Evelyn), Jose Catalino Donio Teves (Jose Catalino), Milagros Reyes Teves (Milagros Reyes) and Pedro Reyes Teves (Pedro).[3] The present controversy involves a parcel of land covering nine hundred and fifty-four (954) square meters, known as Lot No. 63 of the Bais Cadastre, which was originally registered in the name of the conjugal partnership of Don Julian and Antonia under Original Certificate of Title (OCT) No. 5203 of the Registry of Deeds of Bais City. When Antonia died, the land was among the properties involved in an action for partition and damages docketed as Civil Case No. 3443 entitled Josefa Teves Escao v. Julian Teves, Emilio B. Teves, et al.[4] Milagros Donio, the second wife of Don Julian, participated as an intervenor. Thereafter, the parties to the case entered into a Compromise Agreement[5] which embodied the partition of all the properties of Don Julian.

On the basis of the compromise agreement and approving the same, the Court of First Instance (CFI) of Negros Oriental, 12th Judicial District, rendered a Decision[6] dated 31 January 1964. The CFI decision declared a tract of land known as Hacienda Medalla Milagrosa as property owned in common by Don Julian and his two (2) children of the first marriage. The property was to remain undivided during the lifetime of Don Julian.[7] Josefa and Emilio likewise were given other properties at Bais, including the electric plant, the movie property, the commercial areas, and the house where Don Julian was living. The remainder of the properties was retained by Don Julian, including Lot No. 63. Paragraph 13 of the Compromise Agreement, at the heart of the present dispute, lays down the effect of the eventual death of Don Julian vis-vis his heirs: 13. That in the event of death of Julian L. Teves, the properties hereinafter adjudicated to Josefa Teves Escao and Emilio B. Teves, (excluding the properties comprised as Hacienda Medalla Milagrosa together with all its accessories and accessions) shall be understood as including not only their one-half share which they inherited from their mother but also the legitimes and other successional rights which would correspond to them of the other half belonging to their father, Julian L. Teves. In other words, the properties now selected and adjudicated to Julian L. Teves (not including his share in the Hacienda Medalla Milagrosa) shall exclusively be adjudicated to the wife in second marriage of Julian L. Teves and his four minor children, namely, Milagros Donio Teves, his two acknowledged natural children Milagros Reyes Teves and Pedro Reyes Teves and his two legitimated children Maria Evelyn Donio Teves and Jose Catalino Donio Teves. (Emphasis supplied) On 16 November 1972, Don Julian, Emilio and Josefa executed a Deed of Assignment of Assets with Assumption of Liabilities[8] in favor of J.L.T. Agro, Inc. (petitioner). Less than a year later, Don Julian, Josefa and Emilio also executed an instrument entitled Supplemental to the Deed of Assignment of Assets with the Assumption of Liabilities (Supplemental Deed)[9] dated 31 July 1973. This instrument which constitutes a supplement to the earlier deed of assignment transferred ownership over Lot No. 63, among other properties, in favor of petitioner.[10] On 14 April 1974, Don Julian died intestate.

On the strength of the Supplemental Deed in its favor, petitioner sought the registration of the subject lot in its name. A court, so it appeared, issued an order[11] cancelling OCT No. 5203 in the name of spouses Don Julian and Antonia on 12 November 1979, and on the same date TCT No. T-375 was issued in the name of petitioner.[12] Since then, petitioner has been paying taxes assessed on the subject lot.[13] Meanwhile, Milagros Donio and her children had immediately taken possession over the subject lot after the execution of the Compromise Agreement. In 1974, they entered into a yearly lease agreement with spouses Antonio Balansag and Hilaria Cadayday, respondents herein. [14] On Lot No. 63, respondents temporarily established their home and constructed a lumber yard. Subsequently, Milagros Donio and her children executed a Deed of Extrajudicial Partition of Real Estate[15] dated 18 March 1980. In the deed of partition, Lot No. 63 was allotted to Milagros Donio and her two (2) children, Maria Evelyn and Jose Catalino. Unaware that the subject lot was already registered in the name of petitioner in 1979, respondents bought Lot No. 63 from Milagros Donio as evidenced by the Deed of Absolute Sale of Real Estate[16] dated 9 November 1983. At the Register of Deeds while trying to register the deed of absolute sale, respondents discovered that the lot was already titled in the name of petitioner. Thus, they failed to register the deed.[17] Respondents, as vendees of Lot No. 63, filed a complaint before the RTC Branch 45 of Bais City, seeking the declaration of nullity and cancellation of TCT No. T-375 in the name of petitioner and the transfer of the title to Lot No. 63 in their names, plus damages.[18] After hearing, the trial court dismissed the complaint filed by respondents. The dispositive portion of the decision reads: WHEREFORE, premises considered, by preponderance of evidence, this Court finds judgment in favor of the defendant and against the plaintiff, and thus hereby orders: (1) That complaint be dismissed;

Finding no basis on the counterclaim by defendant, the same is hereby ordered dismissed.[19] The trial court ruled that the resolution of the case specifically hinged on the interpretation of paragraph 13 of the Compromise Agreement.[20] It added that the direct adjudication of the properties listed in the Compromise Agreement was only in favor of Don Julian and his two children by the first marriage, Josefa and Emilio.[21] Paragraph 13 served only as an amplification of the terms of the adjudication in favor of Don Julian and his two children by the first marriage. According to the trial court, the properties adjudicated in favor of Josefa and Emilio comprised their shares in the estate of their deceased mother Antonia, as well as their potential share in the estate of Don Julian upon the latters death. Thus, upon Don Julians death, Josefa and Emilio could not claim any share in his estate, except their proper share in the Hacienda Medalla Milagrosa which was adjudicated in favor of Don Julian in the Compromise Agreement. As such, the properties adjudicated in favor of Don Julian, except Hacienda Medalla Milagrosa, were free from the forced legitimary rights of Josefa and Emilio, and Don Julian was under no impediment to allocate the subject lot, among his other properties, to Milagros Donio and her four (4) children.[22] The trial court further stressed that with the use of the words shall be, the adjudication in favor of Milagros Donio and her four (4) children was not final and operative, as the lot was still subject to future disposition by Don Julian during his lifetime.[23] It cited paragraph 14[24] of the Compromise Agreement in support of his conclusion.[25] With Lot No. 63 being the conjugal property of Don Julian and Antonia, the trial court also declared that Milagros Donio and her children had no hereditary rights thereto except as to the conjugal share of Don Julian, which they could claim only upon the death of the latter.[26] The trial court ruled that at the time of Don Julians death on 14 April 1974, Lot No. 63 was no longer a part of his estate since he had earlier assigned it to petitioner on 31 July 1973. Consequently, the lot could not be a proper subject of extrajudicial partition by Milagros Donio and her children, and not being the owners they could not have sold it. Had respondents exercised prudence before buying the subject lot by investigating the registration of the same with the Registry of Deeds, they would have discovered that five (5) years earlier, OCT No. 5203

(2) That plaintiffs vacate the subject land, particularly identified as Lot No. 63 registered under Transfer Certificate of Title No. T-375; (3) That plaintiffs pay costs.

had already been cancelled and replaced by TCT No. T-375 in the name of petitioner, the trial court added.[27] The Court of Appeals, however, reversed the trial courts decision. The decretal part of the appellate decision reads: WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and SET ASIDE and a new one is entered declaring the Transfer Certificate of Title No. T-375 registered in the name of J.L.T. Agro, Inc. as null and void. With costs against defendant J.L.T. Agro, Inc. represented by its Manager, Julian L. Teves. SO ORDERED.[28] Per the appellate court, the Compromise Agreement incorporated in CFI decision dated 31 January 1964, particularly paragraph 13 thereof, determined, adjudicated and reserved to Don Julians two sets of heirs their future legitimes in his estate except as regards his (Don Julians) share in Hacienda Medalla Milagrosa.[29] The two sets of heirs acquired full ownership and possession of the properties respectively adjudicated to them in the CFI decision and Don Julian himself could no longer dispose of the same, including Lot No. 63. The disposition in the CFI decision constitutes res judicata.[30] Don Julian could have disposed of only his conjugal share in the Hacienda Medalla Milagrosa.[31] The appellate court likewise emphasized that nobody in his right judgment would preterit his legal heirs by simply executing a document like the Supplemental Deed which practically covers all properties which Don Julian had reserved in favor of his heirs from the second marriage. It also found out that the blanks reserved for the Book No. and Page No. at the upper right corner of TCT No. T-375, to identify the exact location where the said title was registered or transferred, were not filled up, thereby indicating that the TCT is spurious and of dubious origin.[32] Aggrieved by the appellate courts decision, petitioner elevated it to this Court via a petition for review on certiorari, raising pure questions of law. Before this Court, petitioner assigns as errors the following rulings of the appellate court, to wit: (a) that future legitime can be determined, adjudicated and reserved prior to the death of Don Julian; (b) that Don Julian had no right to dispose of or assign Lot No. 63 to petitioner

because he reserved the same for his heirs from the second marriage pursuant to the Compromise Agreement; (c) that the Supplemental Deed was tantamount to a preterition of his heirs from the second marriage; and (d) that TCT No. T-375 in the name of petitioner is spurious for not containing entries on the Book No. and Page No.[33] While most of petitioners legal arguments have merit, the application of the appropriate provisions of law to the facts borne out by the evidence on record nonetheless warrants the affirmance of the result reached by the Court of Appeals in favor of respondents. Being the key adjudicative provision, paragraph 13 of the Compromise Agreement has to be quoted again: 13. That in the event of death of Julian L. Teves, the properties herein adjudicated to Josefa Teves Escao and Emilio B. Teves, (excluding the properties comprised as Hacienda Medalla Milagrosa together with all its accessories and accessions) shall be understood as including not only their one-half share which they inherited from their mother but also the legitimes and other successional rights which would correspond to them of the other half belonging to their father, Julian L.Teves. In other words, the properties now selected and adjudicated to Julian L. Teves (not including his share in the Hacienda Medalla Milagrosa) shall exclusively be adjudicated to the wife in second marriage of Julian L. Teves and his four minor children, namely, Milagros Donio Teves, his two acknowledged natural children Milagros Reyes Teves and Pedro Reyes Teves and his two legitimated children Maria Evelyn Donio Teves and Jose Catalino Donio Teves. (Emphasis supplied) With the quoted paragraph as basis, the Court of Appeals ruled that the adjudication in favor of the heirs of Don Julian from the second marriage became automatically operative upon the approval of the Compromise Agreement, thereby vesting on them the right to validly dispose of Lot No. 63 in favor of respondents. Petitioner argues that the appellate court erred in holding that future legitime can be determined, adjudicated and reserved prior to the death of Don Julian. The Court agrees. Our declaration in Blas v. Santos[34] is relevant, where we defined future inheritance as any property or right not in existence or capable of determination at the time of the contract, that a person may in the future acquire by succession. Article 1347 of the New Civil Code explicitly provides:

ART. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. Well-entrenched is the rule that all things, even future ones, which are not outside the commerce of man may be the object of a contract. The exception is that no contract may be entered into with respect to future inheritance, and the exception to the exception is the partition inter vivos referred to in Article 1080.[35] For the inheritance to be considered future, the succession must not have been opened at the time of the contract.[36] A contract may be classified as a contract upon future inheritance, prohibited under the second paragraph of Article 1347, where the following requisites concur: (1) That the succession has not yet been opened; (2) That the object of the contract forms part of the inheritance; and (3) That the promissor has, with respect to the object, an expectancy of a right which is purely hereditary in nature.[37] The first paragraph of Article 1080, which provides the exception to the exception and therefore aligns with the general rule on future things, reads: ART. 1080. Should a person make a partition of his estate by an act inter vivos, or by will, such partition shall be respected, insofar as it does not prejudice the legitime of the compulsory heirs. .... In interpreting this provision, Justice Edgardo Paras advanced the opinion that if the partition is made by an act inter vivos, no formalities are prescribed by the Article.[38] The partition will of course be effective only after death. It does not necessarily require the formalities of a will for after all it is not the partition that is the mode of acquiring ownership. Neither will the formalities of a donation be required since donation will

not be the mode of acquiring the ownership here after death; since no will has been made it follows that the mode will be succession (intestate succession). Besides, the partition here is merely the physical determination of the part to be given to each heir.[39] The historical antecedent of Article 1080 of the New Civil Code is Article 1056[40] of the old Civil Code. The only change in the provision is that Article 1080 now permits any person (not a testator, as under the old law) to partition his estate by act inter vivos. This was intended to abrogate the then prevailing doctrine that for a testator to partition his estate by an act inter vivos, he must first make a will with all the formalities provided by law.[41] Article 1056 of the old Civil Code (now Article 1080) authorizes a testator to partition inter vivos his property, and distribute them among his heirs, and this partition is neither a donation nor a testament, but an instrument of a special character, sui generis, which is revocable at any time by the causante during his lifetime, and does not operate as a conveyance of title until his death. It derives its binding force on the heirs from the respect due to the will of the owner of the property, limited only by his creditors and the intangibility of the legitime of the forced heirs.[42] The partition inter vivos of the properties of Don Julian is undoubtedly valid pursuant to Article 1347. However, considering that it would become legally operative only upon the death of Don Julian, the right of his heirs from the second marriage to the properties adjudicated to him under the compromise agreement was but a mere expectancy. It was a bare hope of succession to the property of their father. Being the prospect of a future acquisition, the interest by its nature was inchoate. It had no attribute of property, and the interest to which it related was at the time nonexistent and might never exist.[43] Evidently, at the time of the execution of the deed of assignment covering Lot No. 63 in favor of petitioner, Don Julian remained the owner of the property since ownership over the subject lot would only pass to his heirs from the second marriage at the time of his death. Thus, as the owner of the subject lot, Don Julian retained the absolute right to dispose of it during his lifetime. His right cannot be challenged by Milagros Donio and her children on the ground that it had already been adjudicated to them by virtue of the compromise agreement.

Emerging as the crucial question in this case is whether Don Julian had validly transferred ownership of the subject lot during his lifetime. The lower court ruled that he had done so through the Supplemental Deed. The appellate court disagreed, holding that the Supplemental Deed is not valid, containing as it does a prohibited preterition of Don Julians heirs from the second marriage. Petitioner contends that the ruling of the Court of Appeals is erroneous. The contention is well-founded. Article 854 provides that the preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious. Manresa defines preterition as the omission of the heir in the will, either by not naming him at all or, while mentioning him as father, son, etc., by not instituting him as heir without disinheriting him expressly, nor assigning to him some part of the properties.[44] It is the total omission of a compulsory heir in the direct line from inheritance.[45] It consists in the silence of the testator with regard to a compulsory heir, omitting him in the testament, either by not mentioning him at all, or by not giving him anything in the hereditary property but without expressly disinheriting him, even if he is mentioned in the will in the latter case.[46] But there is no preterition where the testator allotted to a descendant a share less than the legitime, since there was no total omission of a forced heir.[47] In the case at bar, Don Julian did not execute a will since what he resorted to was a partition inter vivos of his properties, as evidenced by the court approved Compromise Agreement. Thus, it is premature if not irrelevant to speak of preterition prior to the death of Don Julian in the absence of a will depriving a legal heir of his legitime. Besides, there are other properties which the heirs from the second marriage could inherit from Don Julian upon his death. A couple of provisions in the Compromise Agreement are indicative of Don Julians desire along this line.[48] Hence, the total omission from inheritance of Don Julians heirs from the second marriage, a requirement for preterition to exist, is hardly imaginable as it is unfounded. Despite the debunking of respondents argument on preterition, still the petition would ultimately rise or fall on whether there was a valid transfer effected by Don Julian to petitioner. Notably, Don Julian was also the president and director of petitioner, and his daughter from the first marriage, Josefa, was the treasurer thereof. There is of course no legal prohibition against such a transfer to a family corporation. Yet close

scrutiny is in order, especially considering that such transfer would remove Lot No. 63 from the estate from which Milagros and her children could inherit. Both the alleged transfer deed and the title which necessarily must have emanated from it have to be subjected to incisive and detailed examination. Well-settled, of course, is the rule that a certificate of title serves as evidence of an indefeasible title to the property in favor of the person whose name appears therein.[49] A certificate of title accumulates in one document a precise and correct statement of the exact status of the fee held by its owner. The certificate, in the absence of fraud, is the evidence of title and shows exactly the real interest of its owner.[50] To successfully assail the juristic value of what a Torrens title establishes, a sufficient and convincing quantum of evidence on the defect of the title must be adduced to overcome the predisposition in law in favor of a holder of a Torrens title. Thus, contrary to the appellate courts ruling, the appearance of a mere thumbmark of Don Julian instead of his signature in the Supplemental Deed would not affect the validity of petitioners title for this Court has ruled that a thumbmark is a recognized mode of signature.[51] The truth, however, is that the replacement of OCT No. 5203 in the name of Julian by T.C.T. No. T-375 is marred by a grave irregularity which is also an illegality, as it contravenes the orthodox, conventional and normal process established by law. And, worse still, the illegality is reflected on the face of both titles. Where, as in this case, the transferee relies on a voluntary instrument to secure the issuance of a new title in his name such instrument has to be presented to the Registry of Deeds. This is evident from Sections 53 and 57 of Presidential Decree (P.D.) No. 1529 or the Property Registration Decree. The sections read, thus: SEC. 53. Presentation of owners duplicate upon entry of new certificate. No voluntary instrument shall be registered by the Register of Deeds unless the owners duplicate certificate is presented with such instrument, except in cases expressly provided for in this Decree or upon order of the court, for cause shown. (Emphasis supplied) .... SEC. 57. Procedure in registration of conveyances. An owner desiring to convey his registered land in fee simple shall execute and register a

deed of conveyance in a form sufficient in law. The Register of Deeds shall thereafter make out in the registration book a new certificate of title to the grantee and shall prepare and deliver to him an owners duplicate certificate. The Register of Deeds shall note upon the original and duplicate certificate the date of transfer, the volume and page of the registration book in which the new certificate is registered and a reference by number to the last preceding certificate. The original and the owners duplicate of the grantors certificate shall be stamped cancelled. The deed of conveyance shall be filed and endorsed with the number and the place of registration of the certificate of title of the land conveyed. (Emphasis supplied) As petitioner bases its right to the subject lot on the Supplemental Deed, it should have presented it to the Register of Deeds to secure the transfer of the title in its name. Apparently, it had not done so. There is nothing on OCT No. 5203 or on the succeeding TCT No. T-375 either which shows that it had presented the Supplemental Deed. In fact, there is absolutely no mention of a reference to said document in the original and transfer certificates of title. It is in this regard that the finding of the Court of Appeals concerning the absence of entries on the blanks intended for the Book No. and Page No. gains significant relevance. Indeed, this aspect fortifies the conclusion that the cancellation of OCT No. 5203 and the consequent issuance of TCT No. T-375 in its place are not predicated on a valid transaction. What appears instead on OCT No. 5203 is the following pertinent entry: Entry No. 1374: Kind: Order: Executed in favor of J.L.T. AGRO, INC. CONDITIONS: Lost owners duplicate is hereby cancelled, and null and void and a new Certificate of Title No. 375 is issued per Order of the Court of First Instance on file in this office. Date of Instrument: November 12, 1979 Date of Inscription: Nov. 12, 1979 4:00 P.M.

entry is to be believed, the court concerned (CFI, according to the entry) issued an order for the issuance of a new title which is TCT No. T-375 although the original of OCT No. 5203 on file with the Registry of Deeds had not been lost. Going by the legal, accepted and normal process, the reconstitution court may order the reconstitution and replacement of the lost title only, nothing else. Since what was lost is the owners copy of OCT No. 5203, only that owners copy could be ordered replaced. Thus, the Register of Deeds exceeded his authority in issuing not just a reconstituted owners copy of the original certificate of title but a new transfer certificate of title in place of the original certificate of title. But if the court order, as the entry intimates, directed the issuance of a new transfer certificate of title even designating the very number of the new transfer certificate of title itselfthe order would be patently unlawful. A court cannot legally order the cancellation and replacement of the original of the O.C.T. which has not been lost,[53] as the petition for reconstitution is premised on the loss merely of the owners duplicate of the OCT Apparently, petitioner had resorted to the court order as a convenient contrivance to effect the transfer of title to the subject lot in its name, instead of the Supplemental Deed which should be its proper course of action. It was so constrained to do because the Supplemental Deed does not constitute a deed of conveyance of the registered land in fee simple in a form sufficient in law, as required by Section 57 of P.D. No. 1529. A plain reading of the pertinent provisions of the Supplemental Deed discloses that the assignment is not supported by any consideration. The provision reads: .... WHEREAS, in the Deed of Assignment of Assets with the Assumption of Liabilities executed by Julian L. Teves, Emilio B. Teves and Josefa T. Escao at Dumaguete City on 16th day of November 1972 and ratified in the City of Dumaguete before Notary Public Lenin Victoriano, and entered in the latters notarial register as Doc. No. 367; Page No. 17; Book No. V; series of 1972, Julian L. Teves, Emilio B. Teves and Josefa T. Escao, transferred, conveyed and assigned unto J.L.T. AGRO, INC., all its assets and liabilities as reflected in the Balance Sheet of the former as of December 31, 1971.

(SGD) MANUEL C. MONTESA Acting Deputy Register of Deeds II (Emphasis supplied)[52] What the entry indicates is that the owners duplicate of OCT No. 5203 was lost, a petition for the reconstitution of the said owners duplicate was filed in court, and the court issued an order for the reconstitution of the owners duplicate and its replacement with a new one. But if the

WHEREAS, on the compromise agreement, as mentioned in the Decision made in the Court of First Instance of Negros Oriental, 12th Judicial District Branch II, on Dec. 31, 1964 pertaining to Civil Case No. 3443 the following properties were adjudicated to Don Julian L. Teves. We quote. From the properties at Bais Adjudicated to Don Julian L.Teves .... Lot No. 63, Tax Dec. No. 33, Certificate of Title No. 5203, together with all improvements. Assessed value - P2,720.00 .... WHEREAS, this Deed of Assignment is executed by the parties herein in order to effect the registration of the transfer of the above corporation. NOW, THEREFORE, for and in consideration of the above premises the ASSIGNOR hereby transfers, conveys, and assigns unto J.L.T. AGRO, INC., the above described parcel of land[s] with a fair market value of EIGHTY-FOUR THOUSAND PESOS (P84,000.00), Philippine Currency, and which transfer, conveyance and assignment shall become absolute upon signing.[54] (Emphasis supplied) The amount of P84,000.00 adverted to in the dispositive portion of the instrument does not represent the consideration for the assignment made by Don Julian. Rather, it is a mere statement of the fair market value of all the nineteen (19) properties enumerated in the instrument, of which Lot No. 63 is just one, that were transferred by Don Julian in favor of petitioner. Consequently, the testimony[55] of petitioners accountant that the assignment is supported by consideration cannot prevail over the clear provision to the contrary in the Supplemental Deed. The Court of Appeals, on the other hand, apparently considered the 1948 mortgage which is annotated on the back of the TCT No. T-375 as the consideration for the assignment.[56] However, the said annotation[57] shows that the mortgage was actually executed in favor of Rehabilitation Finance Corporation, not of petitioner.[58] Clearly, said mortgage, executed as it was in favor of the Rehabilitation Finance Corporation and there being no showing that petitioner itself paid off the

mortgate obligation, could not have been the consideration for the assignment to petitioner. Article 1318 of the New Civil Code enumerates the requisites of a valid contract, namely: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) Cause of the obligation which is established. Thus, Article 1352 declares that contracts without cause, or with unlawful cause produce no effect whatsoever. Those contracts lack an essential element and they are not only voidable but void or inexistent pursuant to Article 1409, paragraph (2).[59] The absence of the usual recital of consideration in a transaction which normally should be supported by a consideration such as the assignment made by Don Julian of all nineteen (19) lots he still had at the time, coupled with the fact that the assignee is a corporation of which Don Julian himself was also the President and Director, forecloses the application of the presumption of existence of consideration established by law.[60] Neither could the Supplemental Deed validly operate as a donation. Article 749 of the New Civil Code is clear on the point, thus: Art. 749. In order that the donation of the immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy. The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor. If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. In Sumipat, et al v. Banga, et al.,[61] this Court declared that title to immovable property does not pass from the donor to the donee by virtue of a deed of donation until and unless it has been accepted in a public instrument and the donor duly notified thereof. The acceptance may be made in the very same instrument of donation. If the acceptance does not appear in the same document, it must be made in another. Where the deed of donation fails to show the acceptance, or where the formal notice of the acceptance, made in a separate instrument, is either not

given to the donor or else not noted in the deed of donation and in the separate acceptance, the donation is null and void. In the case at bar, although the Supplemental Deed appears in a public document,[62] the absence of acceptance by the donee in the same deed or even in a separate document is a glaring violation of the requirement. One final note. From the substantive and procedural standpoints, the cardinal objectives to write finis to a protracted litigation and avoid multiplicity of suits are worth pursuing at all times.[63] Thus, this Court has ruled that appellate courts have ample authority to rule on specific matters not assigned as errors or otherwise not raised in an appeal, if these are indispensable or necessary to the just resolution of the pleaded issues.[64] Specifically, matters not assigned as errors on appeal but consideration of which are necessary in arriving at a just decision and complete resolution of the case, or to serve the interest of justice or to avoid dispensing piecemeal justice.[65] In the instant case, the correct characterization of the Supplemental Deed, i.e., whether it is valid or void, is unmistakably determinative of the underlying controversy. In other words, the issue of validity or nullity of the instrument which is at the core of the controversy is interwoven with the issues adopted by the parties and the rulings of the trial court and the appellate court.[66] Thus, this Court is also resolute in striking down the alleged deed in this case, especially as it appears on its face to be a blatant nullity. WHEREFORE, foregoing premises considered, the Decision dated 30 September 1999 of the Court of Appeals is hereby AFFIRMED. Costs against petitioner J.L.T. Agro, Inc. SO ORDERED. Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.