TOPIC: I. IN GENERAL CASE #1: ROMBE V. ASIA TRUST Feb. 13, 2008; J. Velasco, Jr.

NATURE: Petition for Review on Certiorari of a decision of CA FACTS: Rombe is a corp. organized and existing under Philippine laws with its main office in Mandaluyong. It owns real properties in Malolos, Bulacan. It is represented by the spouses Romeo and Marrionette Peralta. In 2002, Rombe filed a Petition for the Declaration of a State of Suspension of Payments with Approval of Proposed Rehab. Plan with RTC. On May 3, 2002, RTC issued a Stay Order in accordance with Interim Rules of Procedure on Corp Rehab (IRPCR), Rule 4, Section 6. SEC, BPI, Asiatrust opposed the petition. RTC dismissed the case on September 24, 2002, due to 1.) Rombe misrepresented materially its true financial status
a.) b.) c.) d.) e.) f.) g.) h.) Did not submit audited f/s Made it appear that it had sufficient assets to pay its outstanding obligations, but when examined were registered with other persons and only 2 were unencumbered Mis-declared the value of its assets Gave only general references to the location of the properties without mention of the book values nor condition of the properties in its Inventory of Assets Did not attach evidence of title or ownership to the properties enumerated Did not attach nor provide a Schedule of A/R, indicating amount of each, maturity dates, degree of collectivity, Had not complied with its reportorial duty to file Gen. Info Sheet and F/S from 1992-1995 and 2002, which its F/S 1999-2000 were filed late B/S claimed it had receivables but did not indicate nature, basis and other information

2.) Did not have a feasible Rehab Plan 3.) Was Insolvent. Rombe did not appeal. Instead, anticipating the foreclosure, it filed a Complaint for Annulment of Documents and Damages with Prayer for a TRO and Injunction against Asiatrust and the Sheriff, which was granted. CA reversed, lifting the preliminary injunction, ground: the Order of Dismissal in the Rehab Proceedings.

ISSUES/ HELD: 1. WON the rehabilitation case is distinct and dissimilar from the annulment of the foreclosure case (Nature, Purpose, Reliefs Sought)? Yes 2. WON the injunctive writ issued in the annulment of foreclosure interfered with the Sept. 24, 2002 Order in the rehab case? No, it did not.

RATIO: Rehab special proceeding summary and non-adversarial in nature defn. Rule 1 Section 3 (c.) one that seeks to establish the status of a party or a particular fact the status or fact sought to be established is the inability of the corp debtor to pay its debts when they fall due so that a rehab plan, containing the formula for the successful recovery of the corporation, may be approved in the end. No COA. Governed by special rules, in this case A.M. No. 00-8-10-SC Sept. 4, 2001 IRPCR Annulment of Foreclosure civil action defn. Rule 1 S3. (a.) One by which a party sues another for the enforcement or protection of a wrong.

right or the prevention or rederess of a

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 1

The COA in this case is the act of Asiatrust in foreclosing the mortgage on Rombes properties by which the latters right to the properties was allegedly violated; Also to annul the unilateral increase in interest rate by Asiatrust Rule 2 Section 2. Cause of Action act or omission by which a party violates a right of another. Governed by regular rules of procedure under 1997 Rules of Civil Procedure

Furthermore, upon the Annulment of Foreclosure Proceedings, there was no rehab case pending before any court to speak of, being dismissed already.

DISPOSITION: CA REVERSED & SET ASIDE. RTC to conduct further proceedings in the civil case with dispatch.

NOTES:

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 2

TOPIC: II. UNDER RULES OF COURT A. SETTLEMENT OF ESTATES 1. VENUE & JURISDICTION CASE #2: GARCIA FULE V. CA Nov. 29, 1976; J. Martin NATURE: Petitions for review of the decision of the CA FACTS: On April 26, 1973 Amado G. Garcia died, he owned property in Calamba, Laguna. On May 2, 1973, Virginia G. Fule field with CFI Laguna a petition for letters of administration and ex parte appointment as s pecial administratix over the estate. Motion was granted. (there was an allegation that the wife was Carolina Carpio) Preciosa B. Garcia, wife of deceased, and in behalf of their child: Agustina B. Garcia opposed, which was denied by CFI. (Preciosa alleged that Fule was a creditor of the estate, and as a mere illegitimate sister of the deceased is not entitled to succeed from 1 him ) CA reversed and annulled the appointment of Fule. Preciosa became special administratrix upon a bond of P30k. ISSUES: a.) Venue v. jurisdiction b.) What does the word resides in Revised Rules of Court Rule 73 Section 1 Mean? c.) Who is entitled? HELD/RATIO: a.) RULE 73 SECTION 1. if the decedent is an inhabitant of the Philippines at the time of his death, whether a citizen or an alien, his will shall be proved, or letters of administration granted, and his estate settled at the CFI in the province in which he resides at the time of his death, And if he is an inhabitant of a foreign country, the CFI of any province in which he had estate. The court 1 taking cognizance of the settlement of the estate of a decedent shall exercise jurisdiction to the exclusion of all other courts. The jurisdiction assumed by a court, so far as it depends on the place of residence of the decedent, or of the location of his estate, shall not be contested in a suit or proceedings, except in an appeal from that court, in the original case, or when the want of jurisdiction appears on the record. Fules own submitted Death Certificate shows that the deceased resided in QC at the time of his death, therefore the venue of Laguna was improper. Venue is subject to waiver (RULE 4 SECTION 4), but Preciosa did not waive it, merely requested for alternative remedy to assert her rights as surviving spouse. However, venue is distinct from jurisdiction which is conferred by Judiciary Act of 1948, as amended to be with CFIs independently from the place of residence of the deceased. RULE 79 SECTION 2, demands that the petition should show the existence of jurisdiction to make the appointment sought, and should allege all the necessary facts such as death, name, last residence, existence, situs of assets, intestacy, right of person who seeks administration as next of kin, creditor or otherwise to be appointed. b.) Resides ex vi termini actual residence Elastic and should be interpreted in the light of the object or purpose of the statute or rule in which it is employed.
1

st

NCC Art. 992. An illegitimate child has no right to inherit ab intestado from the legitimate children and relatives of his father or mother; nor shall such children or relatives inherit in the same manner from the illegitimate child.

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 3

Same meaning as inhabitant. Popular sense the personal, actual or physical habitation of a person, actual residence or place of abode Must be more than temporary

Distinguished from legal residence or domicile requires bodily presence and an intention to make it ones domicile.

c.) Preciosa is prima facie entitled to the appointment of special administratrix. The New Rules RULE 80 SECTION 1 broadened the basis for appointment of special administrator (temporarily) to take possession and charge of the estates of the deceased until the questions causing the delay are decided and (regular) executors or administrators appointed. Old rules basis ay: appeal of allowance of disallowance of a will; New: added - xxx delay in granting letters testamentary or of administration by any cause (includes parties cannot agree among themselves) including an appeal of allowance of disallowance of a will, the court may appoint a xxx The discretion to appoint a special administrator or not is with the probate court, the paramount consideration is the beneficial interest of the appointee in the estate of the decedent. In re: Fule, it is not required that the administratrix be entitled to share in the estate of the decedent only that one is entitled to the administration; but the preference of Preciosa is with sufficient reason the widow would have the right of succession over a portion of the exclusive property of the decedent, besides her share in the conjugal partnership. For such reason, she would have as such, if not more, interest in administering the entire estate correctly than any other next of kin. DISPOSITION: Fules petition DENIED.

NOTES: RULE 80 SECTION 2. Powers and Duties of Special Administrator

CASE # 3: JAO V. CA May 29, 2002; J. Ynares-Santiago NATURE: Petition for Review on Certiorari of a decision of CA FACTS: Spouses Ignacio Jao Tayag and Andrea V. Jao, decedents, had 2 sons: Rodolfo and Perico Jao. Perico Jao instituted a petition for issuance of letters of administration with request for appointment of special administrator before RTC QC, alleging that his brother is dissipating the assets of the estate. Rodolfo opposed claiming that their parents resided at Angeles, Pampanga, that their staying with him due to their medical treatments and hospitalization were transitory. Rodolfo cited Eusebio V. Eusebio, et. al. (1956), wherein the decedent was from San Fernando, Pampanga, suffering from a heart ailment, and purchased a house in QC to be nearer to his doctor, died and the Court held that the situs of the settlement proceedings was at his domicile; and differentiated between: Venue in ordinary civil actions RULE 4

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 4

SECTION 2. Venue of Personal Actions. All other actions may be commenced and tried where the plaintiff or any of the principal plaintiffs reside, or where the defendant or any of the principal defendants resides, or in the case of a non-resident defendant, where he may be found, at the election of the plaintiff. V. Venue in Special Proceedings RULE 73 SECTION 1. that domicile is where the records of the properties are kept and where most of the properties of the decedents are located; Death Certificate entry by Rodolfo was that the spouses last resided with him in QC. RTC designated J. Carlos L. Sundiam as special administrator of the estate. CA dismissed Rodolfos petition for certiorari. ISSUES: Where should the settlement proceedings be had? HELD: QC

RATIO: RULE 73 SECTION 1. Clearly provides where the decedent resides at the time of his death. Eusebio is not applicable in the case at bar, because there, he was in the process of transferring his personal belongings to his new QC house and died before he could move therein. Here their parents lived with Rodolfo for 3-4 years before they died. Plus Ignacio died a year before Andrea, but Rodolfo did not correct the entry in their mothers death certificate either. In Raymond V CA (1988) and Bejer V CA (1989), SC held that venue for ordinary civil actions and for special proceedings have one and the same meaning. The contention is non-sequitur. Death certificates are admissible in evidence and were properly considered and presumed to be correct by the court a quo. SC cited Garcia-Fule V. CA as to the term resides. Factual findings substantiated by evidence are conclusive and binding. DISPOSITION: Petition DENIED. CA AFFIRMED. NOTES:

CASE # 4: LEE V. CA Dec. 28, 1973; J. Teehankee NATURE: Petition for Review on Certiorari of a decision of CA FACTS: Andres Tabar died and his estate was left to 3 heirs. Alberto Tabar Tabada, one of the heirs before the partition of the estate sold all his rights and interests over the estate 1 to his cond heirs; and 2 to the spouses Salvador & Dolores Saldana. The co-heirs filed a petition for the annulment of the Deed of Sale to the spouses.
st

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 5

CFI upheld the validity of the 1 sale, and declared the nullity of the 2 CA affirmed. SC dismissed petition for certiorari. Judgment became final and was executed.

st

nd

sale.

After the Special Proceedings was terminated, the heirs discovered some more real properties belonging to the estate of the deceased, and without reopening the Spec Pro executed an extra-judicial partition of said real properties. Again, Alberto Tabar Tabada sold his share twice 1 to his co-heirs; 2
st nd

to the spouses Salvador & Dolores Saldana.

This time the spouses Saldana sold it to Cesar T. Villareal and Epitasia Tan. The co-heirs filed a petition to quiet their title over the 3 lots conveyed by Alberto Tabar Tabaada. CFI issued an Order to Archive the Case in the meantime, saying that the parties are required to reopen the Special Intestate Estate Proceedings and there settle the distribution of the newly discovered properties. CA denied MFR, affirming CFI. HELD: CA gravely erred in upholding CFIs order to archive the petitioners action to quiet title and requiring the parties to reopen the intestate estate.
rd

RATIO: The intestate estate has long been closed, and none of the 3 heirs nor any affected 3 judicial partition of the more recent discovered real properties. The probate court had already lost jurisdiction over the estate.

party has ever questioned the extra-

There is no longer any property of the estate to administer or distribute and settle among the recognized 3 heirs who have no claims whatsoever for the probate court to adjudicate. The issue in the case to quiet title is simply a question of conflicting claims of ownership. This is the proper subject matter of the action to quiet title and is beyond the jurisdiction of the probate court to determine. The probate court has no authority to decide in the estate proceedings whether property disputed belongs to one or the other, but such question of ownership has to be resolved in an appropriate separate action. (see also RULE 87, SEC 2 & SEC 6)

DISPOSITION: CA Order SET ASIDE. CFI Order to Archive is also SET ASIDE. CFI directed to proceed with the hearing and determination of the action to quiet title on its merits. NOTES:

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 6

CASE # 5: VALERA V. INSERTO May 7, 1987; J. Narvasa NATURE: Petition to Review the judgment of CFI & CA FACTS: Rafael Valera was granted leasehold rights over an 18 hectare fishpond in Iloilo by the government to last during his lifetime. He transferred it by fictitious sale to his daughter Teresa to support her children with the agreement that when the children finishes schooling, the fishpond will be returned to him. Valera and his spouse Consolacion Sarosa and their child Teresa died. The heirs of Teresa her husband Jose Garin and their children bought the fishpond from the government, acquiring title thereto. Rafael Valera - - - - - - - - - - - Consolacion Sarosa

Teresa - - - - - - Jose Garin children The administrators of the spouses claim that the fishpond should be returned to the spouses estates. Probate Court (Judge Adil): there has been an implied trust created, therefore the fishpond should be restored to the estate of the spouses.

NCC Art. 1451. When land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner. Art. 1453. When property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefit is contemplated. Pursuant thereto, he directed the sheriff to enforce reconveyance of the fishpond to the estate.

The fishpond was leased by the Garin Heirs to Fabiana, who although willingly surrendered it to the sheriff filed a complaint in intervention, which when dismissed, then instituted a separate action for injunction and damages. Court of Appeals reversed (fishpond to be returned to Garin Heirs and their lessee Fabiana) saying that a.) Probate Court had no jurisdiction b.) that the Title of the Garin Heirs is a stronger claim that rebuts the presumption that the estate owns the fishpond c.) that assuming the Probate Court had competence to resolve ownership, a separate action has to be filed. ISSUE: WON Probate Court had authority to order reconveyance of the fishpond? HELD: No RATIO: The Probate Court exercises limited jurisdiction and has no power to take cognizance of and determine the issue of title to property rd claimed by a 3 person adversely to the decedent, unless *issue is procedural:* The claimant and all the other parties having legal interest in the property consent, expressly or impliedly, to the submission of the question to the Probate Court for adjudgement, rd Or the interests of 3 persons are not thereby prejudiced. The cognizance of the Probate Court as to the title over the fishpond was not definite, permanent nor writing a finis thereto, but merely to determine whether or not it should be included in the inventory of the estate of the spouses. It is merely provisional in character. The fishpond cannot be subject of execution. Presumption of conclusiveness of the title, especially if the holder is in possession. The same norm governs the situation contemplated in Section 6, Rule 87 of the Rules of Court, expressly invoked by the Probate Court in justification of its holding a hearing on the issue arising from the parties' conflicting claims over the fishpond.

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 7

The examination provided in the cited section is intended merely to elicit evidence relevant to property of the decedent from persons suspected of having possession or knowledge thereof, or of having concealed, embezzled, or conveyed away the same. Of course, if the latter lays no claim to the property and manifests willingness to tum it over to the estate, no difficulty arises; the Probate Court simply issues the appropriate direction for the delivery of the property to the estate. On the other hand, if the third person asserts a right to the property contrary to the decedent's, the Probate Court would have no authority to resolve the issue; a separate action must be instituted by the administrator to recover the property. DISPOSITION: CA Affirmed. NOTES:

CASE #6: COCA V. BORROMEO Jan. 31, 1978; J. Aquino NATURE: Petition for Review on Certiorari of a decision of CA FACTS: Juan Pangilinan (married)-- Teresa Magtuba they had 3 children: Concepcion Yamuta Maria Eusebio Apolinar Guadalupe Pizarras Prima Francisco

Francis Agerian

Benjamin Perla Francisco Helen Jr.

Roseller

Desmothenes

Eliza

CFI ordered - partitioned the properties: Giving attys fees to Crispin Borromeo Without taking into consideration ownership of a 12-ha land claimed by the heirs of Francisco Pangilinan, of a 6 ha land claimed by Crispin Borromeo and: a) Debt to Concepcions estate b) If Prima sold her share to Francisco Note: WON Prima was excluded as an heir

CFI ordered that a separate ordinary action is needed to determine ownership of the land in dispute. Later on, they approved the project of partition but excluded the 12 ha and did not bother to decide how the remainder should be partitioned and WON Prima had a share in that remainder. CA sustained CFI.

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 8

ISSUES: WON separate proceedings should be filed to determine ownership? HELD: No, the case is an exception.

RATIO: The probate court may provisionally pass upon the question of inclusion in, or exclusion from, the inventory of a piece of property without prejudice to its final determination in a separate action. GR: Probate Ct. may not pass upon ownership Except: If the interested parties are all heirs, (case at bar) or if the question is one of collation or advancement, rd or the parties consent to the assumption of jurisdiction by the probate court, and the rights of 3 parties are not impaired, then the probate court is competent to decide the question of ownership. The appellees belong to the poor stratum of society. They should not be forced to incur additional expenses by bringing a separate action to determine ownership of the 12 hectare portion. DISPOSITION: The lower courts Order excluding the 12 hectares and the 2 orders regarding the claim of Guadalupe Pizarras and her children are REVERSED & SET ASIDE. A new trial should be held on those matters. Case remanded to CFI for further proceedings in accordance with the guidelines set forth here. NOTES:

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 9

TOPIC: II. UNDER RULES OF COURT A. SETTLEMENT OF ESTATES 2. SUMMARY SETTLEMENT OF ESTATES

CASE # 7: PEREIRA V. CA J. Gancayco; June 20, 1989 NATURE: Petition for Review on Certiorari of a decision of CA FACTS: Andres de Guzman Pereira left only 2 heirs a) Wife of 10 months b) Sister sister filed petition for issuance of administration in her favor wife opposed: a) property 1: death benefits she is only beneficiary b) savings deposit: used for burial expenses c) only real property house in Rizal ISSUES: Should there be judicial proceedings? HELD: No. Summary Settlement Only RATIO: action for partition lang ang kelangan. Estate not substantial Simple case, No administrator need be assigned DISPOSITION: Letters of Administration issued by RTC to sister Rita Pereira Nagac are hereby revoked and the administration proceedings dismissed w/o prejudice to her right to commence an action for partition of the property left by decedent. NOTES:

CASE # 8: PORTUGAL V. PORTUGAL - BELTRAN J. Carpio Morales Aug 16, 2005 NATURE: Petition for Review on Certiorari of a decision of CA FACTS: Jose Q. Portugal (RIP 1985) Married both: Paz Lazaro (in 1942) Leonila Perpetua Aleli Portugal Isabel dela Puerta (in 1948) Jose Douglas Portugal, Jr.

Only has 1 property: a lot in Caloocan Aleli believing sole heir adjudicated everything to herself by Rule 74 sec.1 nd The son by bigamous marriage and his mother (2 wife) in 1996 [not extrajudicial settlement] filed claim to annul title issued to Aleli, claiming they are the legal heirs RTC dismissed: Grounds: probate court has jurisdiction 2: because determination of staus as heirs is SPEC PRO [RULE 1, SEC. 3 (C)] Not civil procedure Enforce rights CA affirmed: Main issue is annulment of title to property Contending parties status and rights not establish in proper proceedings V. In Carino: the main issue is which of the 2 marriages is valid? Who the rightful heir is between the two wives is only secondary.

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 10

ISSUES: do petitioners have to institute special proceedings to establish their status as heirs before they can pursue case for annulment of Alelis affidavit of adjudication and TCT? HELD: no RATIO: GENERAL RULE: when a peson dies, his estate is judicially administered - Rule 78 EXCEPTION: Rule 74, sec.1 when only 1 heir or when heirs are all of legal age Only property need not be burdened with burdensome superfluous expensive long proceedings when RTC could have easily determined the issues In the cases: Litam Solivio Guilas There was a need to file one but if putative heir Lost the right to spec pro (my thought example by prescription) Or spec pro was instituted & has ended then ORD. CIV. ACTIONS can be filed and RTC can pass upon those issues (heirship, legitimacy, validity of marriage, etc.) so long as they are essential as to the determination of the case. (citing Cario)

DISPOSITION: remanded to RTC, RTC to proceed with the case NOTES:

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 11

TOPIC: II. UNDER RULES OF COURT A. SETTLEMENT OF ESTATES 3. PROBATE OF WILLS RULES CASE # 9: BALANAY, JR. V. MARTINEZ June 27, 1975; J. Aquino NATURE: Petition for Certiorari of an Order of CFI FACTS: Felix Balanay Sr ----- Leodegaria Julian Six children Felix Jr. Avelina Beatriz Carolina Delia Emilia

Leodegaria excuted a will with some void provisions: a) b) Declaring she owns southern half of 9 conjugal lots Although she was a co-owner, her share was inchoate and pro-indiviso NCC ART. 143. Disposing of her husbands share as well NCC ART. 930. The legacy or device of a thing belonging to another person is void, if the testator erroneously believed that the thing pertained to him. But if the thing bequeathed, though not belonging to the testator when he made the will, afterwards becomes his, by whatever title, the disposition shall take effect. Husband was preterited Succession class: There is no preterition of the husband. Preterition can only be in the ascending or descending line. Different from Nuguid case because there, parents were preterited in favor of siblings Here, his preterition did not produce intestacy. NCC ART 854 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. more children heirs, and providing that the

c) -

d) Non division of estate, without assigning the whole estate to any single or legitimes be paid in cash from fruits of the land -

NCC ART. 1080 envisages that 1 or more children are assigned the whole estate, thats why the rest of the children are to be paid their legitimes in cash NCC ART. 1083 only allows a deceaseds estate to remain undivided for a period of 20years. Compromise future legitimes

e)

Felix Sr. conformed to his wifes will and renounced his share in favor of their children Felix Jr., Beatriz, Carolina, Emilia Pro will Avelina, Delia Anti-probate Claimed that the renunciation of Felix Sr. was not valid. RTC dismissed petition for probate; will was void. :. Intestate proceedings

ISSUES/HELD: a) b) c) d) Validity of RTC order to disallow will from probate? No

WON RTC assignment of clerk of court as special administrator proper? No WON notice to creditors proper? No Yes

WON Felix, Sr.s conformity to his wifes will was valid?

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 12

RATIO: a.) Generally the probate of a will is mandatory. The rule is that the invalidity of one of several dispositions contained in a will does not result in the invalidity of the other dispositions, st unless it is presumed that the testator would not have made such other dispositions if the 1 invalid disposition had not been made. (NCC ART. 792) The will is intrinsically valid, and the partition therein may be given effect if it does not prejudice the creditors and impair the legitimes. Testacy is preferred over intestacy. An interpretation that will render a testamentary disposition operative takes precedence over a construction that will nullify a provision of the will (NCC ART. 788 & 791). The expressed desire of the testator must be followed. Any disposition in his will is better than that which the law can make. NCC ART 794 provides that property acquired after the making of a will shall only pass thereby, as if the testator had possessed it at the time of making the will, should it expressly appear by the will that such was his intention.

b.) It is not a salutary practice because it might engender the suspicion that the probate judge and his clerk of court are in cahoots in milking the decedents estate. Should the clerk of court commit any abuse or devastavit in the course of his administration, the probate judge might find it difficult to hold him to a strict accountability. A court employee should devote his official time to his official duties and should not have as a sideline, the administration of a decedents estate.

c.) A notice to creditors is not in order if only a special administrator has been appointed. RULE 86 SECTION 1 immediately after granting letters of testamentary or of administration, the court shall issue a notice requiring all persons having money claims against the decedent to file them in the office of the clerk of said court Clearly contemplates the appointment of an executor or regular administrator and not that of a special administrator. RULE 86 SECTION 10 & RULE 88 SECTION 1 It is the executor or regular administrator who is supposed to oppose the claims against the estate and to pay such claims when duly allowed.

d.) He could validly do so, but insofar as said renunciation partakes of a donation, it should be subject to the limitations in NCC ART 750 & 752. A portion of the estate should be adjudicated to the widower for his support and maintenance. Or at least his legitime should be respected.

DISPOSITION: CFI decision SET ASIDE. Its Order setting for hearing the petition for probate is AFFIRMED. CFI directed to conduct further proceedings in consonance with this opinion. NOTES:

CASE # 10: NEPOMUCENO V. CA J. Gutierrez, Jr.; Oct. 9, 1985 NATURE: Petition for Review on Certiorari of a decision of CA

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 13

FACTS: Martin Jugo died on July 16, 1974 in Malabon, Rizal. He left behind a will, not signed by the witnesses on the margin of page 3 (out of 4 pages, the rest compliant with statute). The will contained that he has been estranged from his wife with whom he had 2 legitimate children: Oscar and Carmelita and is living with Sofia J. Nepomuceno. Nepomuceno filed a petition for the probate of the deceased and asked for issuance of letters testamentary. The legal wife Rufina Gomez opposed the petition. CFI denied probate because on the face of the will, the invalidity of the intrinsic provisions is evident. CA reversed and set aside the CFI decision, declaring the Will to be valid except the devise in favor of Nepomuceno as being null and 2 3 void pursuant to NCC ART 739 in relation with ART 1028 .

ISSUES: WON the CA has jurisdiction to declare the provision in favor of Nepomuceno as null and void? HELD: Yes it has. RATIO: GR: in probate proceedings, the courts area of inquiry is limited to an examination and resolution of the extrinsic validity of the Will. One of the Exceptions: the probate of a will might become an idle ceremony if on its face the will appears to be intrinsically void. Where practical considerations demand that the intrinsic validity of the will be passed upon, even before it is probated, the court should meet the issue. (Nuguid V. Nuguid) In addition, Nepomuceno is not innocent nor in good faith.

DISPOSITION: petition DISMISSED. IAC AFFIRMED. NOTES:

CASE # 11: RAMOS V. CA Jan. 31, 1978; J. Guerrero NATURE: Appeal by way of Certiorari of a decision of CA FACTS: Eugenia Danila died on May 21, 1966. On June 2, 1966, Adelaida Nista filed a petition for the probate of the alleged will and testament and codicil dated April 18, 1963 of the deceased. Buenaventura and Marcelina (Martina) Guerra filed an opposition alleging that they are the legally adopted son and daughter of the spouses Florentino Guerra and Eugenia Danila; and that their adoptive mother already made a will in 1951 which was probated in her lifetime and never withdrawn. The parties entered into a compromise agreement: 1. Inter vivos, Eugenia Danila already sold, donated or disposed of all her properties, some of which to Marcelina Guerra; 2. And a parcel of land to Adelaida Nista; 3. That therefore the deceased has no more estate left
2

The following donations shall be void: (1) Those made between persons who were guilty of adultery or concubinage at the time of the donation; (2) Those made between persons found guilty of the same criminal offense, in consideration thereof; (3) Those made to a public officer or his wife, descendants and ascendants, by reason of his office. In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or done; and the guild of the donor and done may be proved by preponderance of evidence in the same action.
3

The prohibitions mentioned in ART 739, concerning donations inter vivos shall apply to testamentary provisions.

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 14

4. 5. 6. 7.

The 1963 will and codicil are considered abrogated and set aside; That the deceased owed P6,800 to creditors which was assumed by Marcelina Guerra but Adelaida Nista shall contribute P3,400; That any other property of the deceased which may be discovered later, shall belong to her adopted children, and the other signatories waive such in favor of Buenaventura and Marcelina Guerra. That the parties waive and renounce further claims against each other

Rosario de Ramos, Miguel Danila, Felix Danila, Miguel Gavino, Amor Danila, Consolacion Santos, Miguel Danila son of late Fortunato Danila, filed a motion for leave to intervene as co-petitioners alleging that they are heirs of the late Eugenia Danila. (PRO nd 2 - WILL) They allege that the adopted children: 1. Repudiated their institution as heirs and executors when they failed to cause the recording of the 1951 will 2. committed acts of ingratitude when they abandoned the testatrix and denied her support after they managed, through fraud and undue influence, to secure the schedule of partition dated Jan. 15, 1962. 2 out of 3 witnesses did not see the testatrix sign the will. In view hereof, the CFI disapproved the compromise agreement and allowed the probate of the 2
nd

will.

The CA affirmed the disapproval of the compromise agreement but disallowed the probate of the will on the ground that evidence failed to establish that the testatrix signed her will in the presence of instrumental witnesses in accordance with NCC ART 805.

ISSUE: WON the last testament and its accompanying codicil were executed in accordance with the formalities of the law? HELD: Yes. Probate of 2
nd

will allowed.

RATIO: Substantial Evidence of due execution. Presumption of regularity - that the lawyers who drafted the will uphold the lofty purposes of the law; no evidence to show that the lawyers were motivated by any material interest to take sides or that his statement is truth perverted of the acknowledgement before a Notary Public A negative testimony does not enjoy equal standing with a positive assertion, especially faced with the convincing appearance of the will. (plus their negative testimony is self-serving, & half-hearted, did not know what they signed daw) The Attestation Clause was signed by all 3 witnesses. That there was photographs of witness signing and none of the testatrix signing pictures are worthy only of what they show and prove and NOT OF WHAT THEY DO NOT SPEAK OF including the events they FAIL TO CAPTURE. The Probate of a Will is a Special Proceeding not embued with adversary character, wherein courts should relax the rules on evidence to the end that nothing less than the best evidence of which the matter is susceptible should be presented to the court before a purported will may be probated or denied probate. DISPOSITION: CA reversed insofar as to allow the probate of the 2 NOTES: CASE # 12: RODELAS V. ARANZA Dec. 7, 1982; J. Relova NATURE: Petition for Review the order of CA FACTS: On Jan. 11, 1977, appellant filed a petition for the probate of the holographic will of Ricardo B. Bonilla and the issuance of letters testamentary in her favor. There were oppositors. ISSUE: Whether a holographic will which was lost or cannot be found can be proven by means of a photostatic copy? HELD: Yes
nd

will.

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 15

RATIO: NCC Art. 811. In the probate of a holographic will, it shall be necessary that at least one witness who knows the handwriting and signature of the testator explicitly declare that the will and the signature are in the handwriting of the testator. If the will is contested, at least three of such witnesses shall be required. In the absence of any competent witness referred to in the preceding paragraph, and if the court deem it necessary, expert te stimony may be resorted to. (619a) Probate of holographic wills is the allowance of the will by the court after its due execution has been proved. The probate may be uncontested or not. If uncontested, at least 1 identifying witness is required and, if no witness is available, experts may be resorted to. If contested, at least 3 identifying witnesses are required. However, if the holographic will has been lost or destroyed and no other copy is available, the will can not be probated because the best and only evidence is the handwriting of the testator in said will. It is necessary that there be a comparison between sample handwritten statements of the testator and the handwritten will. A photostatic copy of the holographic will may be allowed because comparison can be made with the standard writings of the testator. The authenticity of the handwriting of the deceased can be determined by the probate court. Gan V. Yap, its footnote 8, was cited. DISPOSITION: CA Order denying MFR, dismissal of CFI of petition to approve the will SET ASIDE. NOTES:

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 16

TOPIC: II. UNDER RULES OF COURT A. SETTLEMENT OF ESTATES 4. EXECUTORS & ADMINISTRATORS RULES 78-85 CASE # 13: PCIB V. ESCOLIN March 29, 1974; J. Barredo Discussed in SUCCESSION already NATURE: Petition for Review on Certiorari of a decision of CA FACTS: Linnie Jane Hodges died on May 23, 1957. 5 and a half years later, her husband, Charles Newton Hodges died as well. Both of them left wills with the clause I give, devise and bequeath all of the rest, residue and remainder, of my estate, both real and personal, wherever situated or located, to my beloved spouse to have to hold unto (him/her) during (his/her) natural lifetime, subject to the condition that upon the death of whoever of them survived the other, the remainder of what he or she would inherit from the other is given, devised and bequeathed to the brothers and sisters of the latter. The brothers and sisters of Linnie Jane alleged that Charles Newton Hodges made statements and ratifications that he had renounced his inheritance from his wife in favor of her other heirs. Magno administratrix of Mrs. Hodges estate Claims that naked ownership passed to siblings, Only lifetime usufruct was given to Mr. Hodges Claims that under Texas law, spouse has no legitime PCIB administrator of Mr. Hodges estate Claims that what was passed to Mr. Hodges was not only usufruct but also ownership with right to dispose of the properties Said that under Texas law, brothers & sisters only had as legitime HELD: 1. No final distribution and adjudication can be made yet. At best, RULE 109 SECTION 2 allowed Hodges to dispose of portions of his inheritance in advance of final adjudication, there being no possible rd prejudice to 3 parties, inasmuch as Mrs. Hodges had no creditors and all pertinent taxes have been paid. 2. On the assumption that Hodges purported renunciation should not be upheld, the estate of Mrs. Hodges inherited by her siblings consists of 1/4 of the community estate of the spouses at the time of her death, minus whatever Hodges had gratuitously disposed of therefrom during the period from her death to his death. Those disposed with remunerations still belong to his wifes estate.

3.

Mrs. Hodges simultaneously instituted her brothers & sisters as co-heirs with her husband, with the condition that, Her husband would have complete rights of dominion over the whole estate during his lifetime, with no obligation to preserve anything for them and what would go to the brothers & sisters would be only the remainder of Mrs. Hodges estate, left at the time of Mr. Hodges death. This is only a simple case of conditional simultaneous institution of heirs, whereby the institution of Hodges is subject to a partial resolutory condition, the operative contingency of which is coincidental with that of the suspensive condition of the institution of his brothers and sisters in law, which manner of institution is not prohibited by law.

4.

The estate of Mrs. Hodges inherited by her brothers & sisters could be more than just stated but is dependent on: (1) Whether upon the proper application of the principle of renvoi in relation to NCC Article 16, and the pertinent laws of Texas, it will appear that Hodges had no legitime as contended by Magno (2) WON Hodges had legally and effectively renounced his inheritance from his wife

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 17

5.

There is an estate of Mrs. Hodges to be distributed. How much is not yet ascertained. As to the contracts to sell executed by Hodges after the death of his wife, the proceeds belong to the estate of Mrs. Hodges.

6.

DISPOSITION: Petition DISMISSED. Lower Courts AFFIRMED. Probate Courts to proceed with the proceedings, and determine: 1. The manner of applying NCC Article 16 to the situation and 2. Factual and legal issue as to WON Charles Newton Hodges had effectively and legally renounced his inheritance under the will of his wife 3. Liquidation of the estates

NOTES:

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 18

TOPIC: III. CORPORATIONS B. INSOLVENCY 2. INSOLVENCY & LIQUIDATION CASE #56: STATE INVESTMENT HOUSE V. CITIBANK OCT. 17, 1991; J. Narvasa NATURE: Petition for review on certiorari on Rule 45 of a decision & resolution of CA FACTS: CMI obtained loans from: 1. Bank of America NT & SA

amounts: P15,296,367.67 US $ 4, 175, 831.88 US $ 4, 920, 548.85 P

2. Citibank N.A.

3. Hongkong and Shanghai Banking Corporation (HSBC) 6,233,969.24 US $ 5, 389, 434.12 In November 1981, State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI) had separately instituted actions for collection of sums of money and damages in the CFI of Rizal against CMI.

Writs of Preliminary Injunction were issued and executed on the Royalty/ profit sharing payments due CMI from Benguet Consolidated Mining, Inc.

On Dec. 11, 1981, the banks jointly filed a petition for involuntary insolvency of Consolidated Mines, Inc. (CMI). The petition was opposed by CMI, SIHI and SFCI: 1.) That CMI is not insolvent, and had paid them P10.8M a few days earlier to the petition; (note: SC said this is immaterial kasi 4.4% of the total loan lang yung nabayaran. Qoq ) 2.) That Court had no jurisdiction because the 3 banks are not resident creditors of CMI in the contemplation of the Insolvency Law; RTC dismissed based on not resident creditors. CA reversed, saying that: 1. The purpose of the Insolvency law is to convert the assets of the bankrupt in cash for distribution among the creditors and to relieve the honest debtor from the weight of oppressive indebtedness and permit him to start life anew, free from the obligations and responsibilities consequent upon business misfortunes, and it was crystal clear that the law was designed not only for the benefit of the creditors but more importantly for the benefit of the debtor himself 2. That the RTC placed a very strained and restrictive interpretation of the term resident as to exclude foreign banks which have been operating in this country since the early part of the century, and the better approach would have been to harmonize Insolvency Law with succeeding laws such as Corporation Code, General Banking Act, Offshore Banking Law, National Internal Revenue Code. That the terms domicile and residence are different. That the banks complied with laws, rules and regulations for doing business in the country. That to deprive them of their right to proceed against their debtors through insolvency proceedings would contravene basic standards of equity and fair play, would discourage their operations in economic development projects that create not only jobs for our people but also opportunities for advancement as a nation. Therefore that the 3 banks are residents of the Philippines for purposes of doing business in the Philippines and even for tax matters. ISSUES: WON foreign banks licensed to do business in the Philippines, may be considered residents of the Philippine Islands within the meaning of Section 20 of the Insolvency Law (Act No. 1956, as amended, effective May 20, 1909)

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 19

Reading in part as follows: An adjudication of insolvency may be made on the petition of 3 or more creditors, residents of the Philippine Islands, whose credits or demands accrued in the Philippine Islands, and the amount of which credits or demands are in the aggregate not less than once thousand pesos. Provided, that none of said creditors has become a creditor by assignment, however made, within 30 days prior to the filing of said petition. Such filing must be filed in the CFI of

HELD: The 3 banks are resident banks.

RATIO: The locality of existence is the necessary element in the signification of the term resident corporation. Corporation Code, in Section 123, defines foreign corporation to be one formed, organized or existing under laws other than those of the Philippines, but does not define whether they are residents or not. National Internal Revenue Code declares that a resident foreign corporation applies to a foreign corporation engaged in trade or business within the Philippines, as distinguished from a non-resident foreign corporation which is one not engaged in trade or business within the Philippines, PD 1934: Offshore Banking Law, in Section 1 (e) states: that branches, subsidiaries, affiliation, extension offices or any other units of corporation or juridical person organized under the laws of any foreign country operating in the Philippine shall be considered residents of the Philippines. RA 337: General Banking Act, in Section 2, places, branches and agencies in the Philippines of foreign banks xx (which are) called Philippine branches, in the same category as commercial banks, savings associations, mortgage banks, development banks, rural banks, stock savings and loan associations (domestic), making no distinction between the former and the latter in so far as the terms banking institution and bank are used in the Act. And in Section 18, that all matters not specifically covered by special provisions applicable only to foreign banks, or their branches and agencies in the Philippines, said foreign banks or their branches and agencies lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic banking corporations of the same class, except such laws, rules and regulations as provided for the creation, formation, organization, or dissolution of corporations or as fix the relation, liabilities, responsibilities, or duties of members, stockholders or officers of corporation. In Claude Neon Lights V. Philippine Advertising Corp., the foreign corporations were assimilated to the status of domestic corporations, the basis is their being found and operating, hence residing, in our country. American law recognizes the same principle that the residence of a corporation, is necessarily where it exercises corporate functions xx; that it is considered dwelling in the place where its business is done xx, as being located where its franchises are exercised xx, and as being present where it is engaged in the prosecution of the corporate enterprise; that a foreign corporation licensed to do business in a state is a resident of any country where it maintains an office or agent for transaction While there is no substantive law granting foreign banks the power to petition for the adjudication of a Philippine corporation as bankrupt, this is inconsequential as neither is there any legal provision granting domestic banks the same power, yet their capacity to petition for insolvency can scarcely be disputed. There is no requirement in the Insolvency Act that the laws of the State under which a foreign corporation has been formed or organized should grant reciprocal rights to Philippine citizens to apply for involuntary insolvency of a resident or citizen thereof. Corp Code Section 123 only requires that the foreign corps country allows Filipino corps to do business there. This point of CMI, SIHI and SFCI is not well taken and need not be elaborated. The law is not lacking in sanctions against foreign banks. The motives of the banks is not looked into apart from the desire to share in the assets of the insolvent in satisfying its credits. Corp Code Section 68 provides for 3 options for foreign companies: 1. Incorporate its branch or branches into a new bank in accordance with Philippine laws;

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 20

2.

Assign capital permanently to the local branch with the concurrent maintenance of a net due to head office account which shall include all net amounts due to other branches outside the Philippines in an amount which when added to the assigned capital shall at all times be not less than the minimum amount of capital accounts required for domestic commercial banks under section 22 of this Act; or Maintain a net due to head office account which shall include all net amounts due to other branches outside the Philippines , in an amount which shall not be less than the minimum amount of capital accounts required for domestic commercial banks under section 22 of this Act.

3.

The banks have complied with the laws, rules and regulations necessary.

DISPOSITION: Petition DENIED. CA AFFIRMED. NOTES:

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 21

CASE # 57: RADIOLA TOSHIBA PHILS., INC. V. IAC JULY 18, 1991; J. Bidin NATURE: Petition for review on certiorari on Rule 45 of a decision & resolution of CA FACTS: On Feb. 15, 1980, Radiola-Toshiba filed a case for collection of sum of money for P721,825.91 plus 14% interest per annum plus P20,000 attorneys fees and cost of suit against Carlos and Teresita Gatmaytan. CFI issued a levy on attachment on 2 parcels of land owned by the debtors on March 4, 1980. Judgment was rendered on December 10, 1980 and became final and executory. On March 18, 1981 a Writ of Execution was issued, the lands were sold at auction on May 4, 1981. Radiola-Toshiba was the highest bidder. The properties were not redeemed. -------------------------------------------------------On July 2, 1980, 3 creditors filed a petition for the involuntary insolvency of Carlos and Teresita Gatmaytan. CFI (now RTC) issued an Order:
xxx forbids the payment of any debts, and the delivery of any property owing and belonging to said respondents-debtors from other persons, or, to any other persons for the use and benefit of the same respondents-debtors and/or the transfer of any property by and for the said respondents-debtors to another, upon petitioners putting up a bond by way of certified and reputable sureties.

On April 12, 1983, the petitioner-creditors filed a 2 urgent motion for issuance of insolvency order and resolution of the case, because despite the prohibition from disposing personal and real properties of the insolvent debtors, they found out of the real properties transferred to Radiola-Toshiba Phil. Inc. which has already shut down. On April 22, 1983, judgment was rendered declaring the insolvency. Radiola-Toshiba filed an opposition. Grounds: 1. The levy in their favor 4 months prior is not dissolved; 2. The property was never under the jurisdiction of the Insolvency Court; RTC granted that a final deed of sale be issued over the 2 parcels of land acquired by Radiola-Toshiba, but due to opposition by the other creditors were denied and directed to participate in the meeting of all creditors/claimants presided by the duly elected assignee. IAC denied petition for certiorari and mandamus.

nd

ISSUE: WON the levy on attachment in favor of Radiola-Toshiba is dissolved by the insolvency proceedings against respondent spouses commenced 4 months after said attachment? HELD: No.

RATIO: CFI Rizal committed grave abuse of discretion amounting to want of jurisdiction, correctible by certiorari by freezing the properties which were not within its jurisdiction. Radiola-Toshiba was correct that the properties in question were never under the jurisdiction of the insolvency court so as to be made available for the payment of claim filed against the Gatmaytans in the insolvency proceedings. ACT NO. 1956. INSOLVENCY LAW
Sec. 32. As soon as an assignee is elected or appointed and qualified, the clerk of the court shall, by an instrument under his hand and seal of the court, assign and convey to the assignee all the real and personal property, estate, and effects of the debtor with all his deeds, books and papers relating thereto,

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 22

and such assignment shall relate back to the commencement of the proceedings in insolvency, and shall relate back to the acts upon the adjudication was founded, and by operation of law shall vest the title to all such property, estate, and effects in the assignee, although he same is then attached on mesne process, as the property of the debtor. Such assignment shall operate to vest in the assignee all of the estate of the insolvent debtor not exempt by law from execution. It shall dissolve any attachment levied within one month next preceding the commencement of the insolvency proceedings and vacate and set aside any judgment entered in any action commenced within 30 days immediately prior to the commencement of the insolvency proceedings and shall set aside any judgment entered by default or consent of the debtor within 30 days immediately prior to the commencement of the insolvency proceedings.

The law is very clear: a.) attachments dissolved are those levied within 1 month next preceding the commencement of the insolvency proceedings and; b.) judgments vacated and set aside are judgments entered in any action, including judgment entered by default or consent of the debtor, where the action was filed within 30 days immediately prior to the commencement of the insolvency proceedings. There are cut-off periods provided: a.) 1 month in attachments cases; b.) 30 days in judgments entered in actions commenced prior to insolvency

proceedings.

Private respondents alleged violation of Section 70 & 79:

Sec. 79. When an attachment has been made and is not dissolved before the commencement of proceedings in insolvency, or is dissolved by an undertaking given by the defendant, if the claim upon which the attachment suit was commenced is proved against the estate of the debtor, the plaintiff may prove the legal costs and disbursements of the suit, and of the keeping of the property, and the amount thereof shall be a preferred debt.

But they are in error because Sec. 79 provides for the right of the plaintiff if the attachment is not dissolved before the commencement of proceedings in insolvency, or is dissolved by an undertaking given by the defendant, if the claim upon which the attachment suit was commenced is proved against the estate of the debtor. Even granting that there exists a conflict between Sec. 32 and Sec. 79, the rules of construction provides ut maqis valeat quam pereat construction is to be sought which gives effect to the whole of the statute- its every word. The court should adopt such reasonable and beneficial construction as will render the provision thereof operative and effective and harmonious with each other (Javellana V. Tayo (1962); Agpalo, Ruben. Statutory Construction. p. 182).

There is no violation of the Insolvency Law, Section 70 contemplates acts and transactions occurring within the 30 day period. DISPOSITION: IAC REVERSED & SET ASIDE. The attachment and execution sale are given due course and Radiola-Toshibas ownership of subject properties is ordered consolidated.

NOTES:

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 23

CASE # 58: GREAT ASIAN SALES CENTER CORP. V. CA APRIL 25, 2002; J. Carpio NATURE: Petition for review on certiorari on Rule 45 of a decision & resolution of CA FACTS: Great Asian is engaged in the business of buying and selling general merchandise, in particular household appliances. On March 17, 1981, the BOD approved a resolution authorizing its Treasurer and GM Arsenio Lim Piat, Jr. to secure a loan from Bancasia not to exceed P1M. On Feb. 10, 1982, the BOD again approved a 2 resolution authorizing Great Asian through the same person to secure a discounting line with Bancasia in an amount not to exceed P2M. On March 4, 1981, Tan Chong Lin, President of Great Asian signed a Surety Agreement in favor of Bancasia to guarantee, solidarily, the debts of Great Asian. On January 29, 1982, Tan Chong Lin signed a Comprehensive and Continuing Surety Agreement in favor of Bancasia to guarantee, solidarily, the debts of Great Asian. Great Asian, through its treasurer and GM Assigned its Receivables postdated checks from customers to Bancasia. The checks were dishonored. On March 16, 1982, Bancasia through counsel, Atty. Eladia Reyes, sent a demand letter via registered mail and by personal delivery to the surety. On May 21, 1982, Great Asian filed with CFI a Petition for Insolvency, verified under oath by its Corporate Secretary, Mario Tan. This contains a schedule of its liability, admitting that it owes Bancasia P1,243,632. Great Asian subsequently withdrew the petition. On June 23, 1982, Bancasia filed a complaint for collection of a sum of money against Great Asian and Tan Chong Lin. Bancasias basis is Breach of Contract under the Deeds of Assignment which uniformly stipulate:
if for any reason the receivables or any part thereof cannot be paid by the obligor/s the ASSIGNOR unconditionally and irrevocably agrees to pay the same, assuming the liability to pay, by way of penalty 3% of the total amount unpaid, for the period of delay until the same is fully paid. In case of any litigation which the ASSIGNEE may institute to enforce the terms of this agreement, the ASSIGNOR shall be liable for all the costs, plus attorneys fees equivalent to 25% of the total amount due. Further thereto, the ASSIGNOR agrees that any and all actions which may be instituted relative hereto shall be filed before the proper courts of the City of Manila, all other appropriate venues being hereby waived.
nd

The last DOA contained the ff. additional stipulation:

xxx Likewise, it is hereby understood that the warranties which the ASSIGNOR hereby made are deemed part of the consideration for this transaction, such that any violation of any one, some, or all of said warranties shall be deemed as deliberate misrepresentation on the part of the ASSIGNOR. In such event, the monetary obligation herein conveyed unto the ASSIGNEE shall be conclusively deemed defaulted, giving rise to the immediate responsibility on the part of the ASSIGNOR to make good said obligation, and making the ASSIGNOR liable to pay the penalty stipulated hereinabove as if the original obligor/s of the receivables actually defaulted.

Great Asian contends that the Assignment of the Checks were not Loan Accomodations but Purchase and Sale of the Receivables; and thus that it is not liable, and their customers drawers of the checks are.

Tan Chong Lin contends that the following warranties enlarge or increase his risks and releases him from liability:
The ASSIGNOR warrants: 1. The soundness of the receivables herein assigned; 2. That said receivables are duly noted in its books and are supported by appropriate documents; 3. That said receivables are genuine, valid and subsisting; 4. That said receivables represent bona fide sale of goods, merchandise, and/or services rendered in the ordinary course of its business transactions; 5. That the obligors of the receivables herein assigned are solvent; 6. That it has valid and genuine title to and indefeasible right to dispose of said accounts; 7. That said receivables are free from all liens and encumbrances;

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 24

8.

That the said receivables are freely and legally transferable, and that the obligor/s therein will not interpose any objection to this assignment, and has in fact given his/ their consent hereto.

RTC held for Bancasia. CA affirmed. ISSUES/HELD: 1. WON Great Asian is liable? Yes Great Asian also contends that Arsenio is liable in his personal capacity NO. He was acting as an Agent.

Sub-issue as to basis of liabilityBancasia has the option to choose between: a.) Negotiable Instruments Law and separately and distinctly, b.) Breach of Contract under New Civil Code, which it chose.

3 sub-issue lack of consideration daw according to Great Asian Evidence showed they received less than 24% discounted amount of the face value of the checks.

rd

2.

WON the Surety is liable? Yes

RATIO: 1. The 4 Deeds of Assignment entered into by Arsenio were the very transactions envisioned in the 2 board resolutions of Great Asian to raise funds for its business. Even if Great Asian was correct that the assignment of the checks is a sale, more properly a discounting, Great Asian sold the postdated checks with recourse basis against itself, making them liable. ST 1 SUB-ISSUE: CORPORATION CODE Section 23. The Board of Directors or Trustees. Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled by the board of directors or trustees xxx. In the ordinary course of business, a corp. may borrow funds or dispose of assets of the corporation only on authority of the BOD. The BOD normally designates one or more corporate officers to sign loan documents or deeds of assignments for the corporation. Great Asian correctly issued 2 board resolutions (valid, binding and effective until revoked) to authorize Arsenio to represent it in applying for: 1 a loan accommodation or credit line; and nd 2 a discounting line, with Bancasia. The Deeds of Assignment were clear: The ASSIGNOR, Great Asian Sales Center, a domestic corporation xxx herein represented by its Treasurer Arsenio Lim Piat, Jr. xxx for valuable consideration received, does hereby SELL, TRANSFER, CONVEY and ASSIGN, unto the ASSIGNEE, BANCASIA FINANCE & INVESTMENT CORP., a domestic corporation xxx, the following ACCOUNTS RECEIVABLES due and payable to it, having an aggregate face value of xxx. -------------------------------------------------------st

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 25

ND

SUB-ISSUE:

NEW CIVIL CODE Article 1157. Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-Contracts; (4) Acts or Ommissions punished by law; and (5) Quasi-Delicts. Article 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. The failure of the drawers to pay the checks is a suspensive condition , the happening of which gives rise to Bancasias right to demand payment from Great Asian. There is no law prohibiting with recourse stipulations. The purpose of endorsements is not to make the assignee finance company a holder in due course because of policy considerations consumers who purchase appliances which later turn out to be defective, cannot go against finance companies. Thus finance companies usually require an assignor, in a separate and distinct contract, to pay the finance company in the event of dishonor of the notes or checks.
4

--------------------------------------------------------

2.

Tan Chong Lin explicitly and unconditionally bound himself to pay Bancasia, solidarily with Great Asian, if the drawers of the checks fail to pay on due date.

The condition on which Tan Chong Lins obligation hinged had happened. The warranties he cites are the usual warranties made by one who discounts receivables with a financing company or bank and do not increase or enlarge the risks of Tan Chong Lin under the Surety Agreements. Tan Chong Lin cannot feign ignorance of Great Asians business activities or discounting transactions with Bancasia. New Civil Code Article 1215, what releases a solidary debtor is a novation, compensation, confusion or remission of the debt made by the c reditor with any of the solidary debtors. None of which is present. New Civil Code Article 1207 provides xxx there is a solidary liability only when the obligation expressly so states, or when the law or nature of the obligation requires solidarity. The Suretyship agreements he signed are sufficiently broad to encompass the 15 dishonored checks. DISPOSITION: CA AFFIRMED with MODICATION Great Asian and Tan Chong Lin are ordered to pay, solidarily, Bancasia the following amounts: a.) Loan plus 3% penalty clause
4

Due to silence as to period (monthly, annual), deemed as one-time penalty

NCC Article 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired shall depend upon the happening of the event which constitutes the condition.

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 26

b.) 12% interest per annum on the total amount Due to DOA did not provide for interest, legal rate applied and only from the time Bancasia filed the complaint because no evidence of prior written demand to Great Asian (principal debtor), pursuant to Eastern Shipping Lines, Inc. V CA (1993). total amount + 12% interest

c.) Attorneys fees of 25% of:

Not only pursuant to the stipulation in the DOA, but also because Great Asian and Tan Chong Lin acted in gross and evident bad faith in refusing to pay Bancasias plainly valid, just and demandable claim.

d.) Costs of suit

NOTES: Obiter: When it is a discounting the applicable law is the Financing Company Act. If the A/R are used as collateral for the loan, the transaction is only a simple loan. Discounting line means a credit facility with a financing company or bank, which allows a business entity to sell, on a continuing basis, its accounts receivable at a discount. - Purpose: to enable a business entity to generate cash out of its receivables which are still to mature at future dates. The financing company or bank which buys the receivables makes its profit out of the difference between the face value of the receivable and the discounted price. Discount means the sale of a receivable at less than its face value. Financing Company Act of 1998 Section 3 (a) Financing Companies are corporations xxx primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial or agricultural enterprises by discounting or factoring commercial papers or accounts receivable, or by buying and selling contracts, leases, chattel mortgages, or other evidences of indebtedness, or by financial leasing of movable as well as immovable property. (this definition substantially the same in RA 5980, the old Financing Company Act, Section 3(a)) New Rules and Regulations Implementing Financing Company Act of 1998, adopted by SEC Section 1 rd (h) Discounting a type of receivable financing whereby evidences of indebtedness of a 3 party, such as installment contracts, promissory notes and similar instruments are purchased by, or assigned to, a financing company in an amount or for a consideration less than their face value. -------------------------------------------------------Great Asians remedy is to proceed against the drawers. Negotiable Instruments Law Section 114. When notice need not be given to drawer. Notice of dishonor is not required to be given to the drawer in either of the following cases: (a) xxx; (d) Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument; (examples: account closed, account under garnishment, insufficiency of funds) (e) Where the drawer has countermanded payment. (i.e. payment stopped)

SPEC PRO - - - - - 2nd SEM SY 2008-2009 - - - - PROF. SAN PEDRO

MARY ANN JOY R. LEE 27