1.

G.R. No. 189776 December 15, 2010

AMELIA P. ARELLANO, represented by her duly appointed guardians,
AGNES P. ARELLANO and NONA P. ARELLANO, Petitioner,
vs.
FRANCISCO PASCUAL and MIGUEL PASCUAL, Respondents.
D E C I S I O N
CARPIO MORALES, J.:
Angel N. Pascual Jr. died intestate on January 2, 1999 leaving as heirs his
siblings, namely: petitioner Amelia P. Arellano who is represented by her
daughters
1
Agnes P. Arellano (Agnes) and Nona P. Arellano, and respondents
Francisco Pascual and Miguel N. Pascual.
2

In a petition for "Judicial Settlement of Intestate Estate and Issuance of Letters of
Administration," docketed as Special Proceeding Case No. M-5034, filed by
respondents on April 28, 2000 before the Regional Trial Court (RTC) of Makati,
respondents alleged, inter alia, that a parcel of land (the donated property)
located in Teresa Village, Makati, which was, by Deed of Donation, transferred
by the decedent to petitioner the validity of which donation respondents
assailed, "may be considered as an advance legitime" of petitioner.
Respondents nephew Victor was, as they prayed for, appointed as
Administrator of the estate by Branch 135 of the Makati RTC.
3

Respecting the donated property, now covered in the name of petitioner by
Transfer Certificate of Title No. 181889 of the Register of Deeds of Makati, which
respondents assailed but which they, in any event, posited that it "may be
considered as an advance legitime" to petitioner, the trial court, acting as
probate court, held that it was precluded from determining the validity of the
donation.
Provisionally passing, however, upon the question of title to the donated
property only for the purpose of determining whether it formed part of the
decedents estate,
4
the probate court found the Deed of Donation valid in light
of the presumption of validity of notarized documents. It thus went on to hold
that it is subject to collation following Article 1061 of the New Civil Code which
reads:
5

Every compulsory heir, who succeeds with other compulsory heirs, must bring
into the mass of the estate any property or right which he may have received
from the decedent, during the lifetime of the latter, by way of donation, or any
other gratuitous title in order that it may be computed in the determination of
the legitime of each heir, and in the account of the partition.
The probate court thereafter partitioned the properties of the intestate estate.
Thus it disposed:
WHEREFORE, premises considered, judgment is hereby rendered declaring
that:
1. The property covered by TCT No. 181889 of the Register of Deeds of
Makati as part of the estate of Angel N. Pascual;
2. The property covered by TCT No. 181889 to be subject to collation;
3. 1/3 of the rental receivables due on the property at the mezzanine
and the 3rd floor of Unit 1110 Tanay St., Makati City form part of the
estate of Angel N. Pascual;
4. The following properties form part of the estate of Angel N. Pascual:
a. 1/3 share in the House and Lot at 1110 Tanay St., Rizal
Village Makati TCT No. 348341 and 1/3 share in the rental
income thereon;
b. 1/3 share in the Vacant Lot with an area of 271 square meters
located at Tanay St., Rizal Village, Makati City, TCT No. 119063;
c. Agricultural land with an area of 3.8 hectares located at
Puerta Galera Mindoro covered by OCT No. P-2159;
d. Shares of stocks in San Miguel Corporation covered by the
following Certificate Numbers: A0011036, A006144, A082906,
A006087, A065796, A11979, A049521, C86950, C63096, C55316,
C54824, C120328, A011026, C12865, A10439, A021401, A007218,
A0371, S29239, S40128, S58308, S69309;
e. Shares of stocks in Paper Industries Corp. covered by the
following Certificate Numbers: S29239, S40128, S58308, S69309,
A006708, 07680, A020786, S18539, S14649;
f. share in Eduardo Pascuals shares in Baguio Gold Mining
Co.;
g. Cash in Banco De Oro Savings Account No. 2 014 12292 4 in
the name of Nona Arellano;
i. Property previously covered by TCT No. 119053 now covered
by TCT No. 181889, Register of Deeds of Makati City;
j. Rental receivables from Raul Arellano per Order issued by
Branch 64 of the Court on November 17, 1995.
5. AND the properties are partitioned as follows:
a. To heir Amelia P. Arellano-the property covered by TCT No.
181889;
b. To heirs Francisco N. Pascual and Miguel N. Pascual-the real
properties covered by TCT Nos. 348341 and 119063 of the
Register of Deeds of Makati City and the property covered by
OCT No. 2159, to be divided equally between them up to the
extent that each of their share have been equalized with the
actual value of the property in 5(a) at the time of donation, the
value of which shall be determined by an independent
appraiser to be designated by Amelia P. Arellano, Miguel N.
Pascual and Francisco N. Pascual. If the real properties are not
sufficient to equalize the shares, then Franciscos and Miguels
shares may be satisfied from either in cash property or shares of
stocks, at the rate of quotation. The remaining properties shall
be divided equally among Francisco, Miguel and Amelia.
(emphasis and underscoring supplied)
Before the Court of Appeals, petitioner faulted the trial court in holding that
I
. . . THE PROPERTY DONATED TO APPELLANT AMELIA PASCUAL
ARELLANO IS PART OF THE ESTATE OF ANGEL PASCUAL, JR.
II
. . . THE PROPERTY DONATED TO APPELLANT IS SUBJECT TO
COLLATION UNDER ARTICLE 1061 OF THE NEW CIVIL CODE.
III
. . . APPELLEES WHO ARE MERELY COLLATERAL RELATIVES OF
DECEASED ANGEL N. PASCUAL JR. AS HIS COMPULSORY
HEIRS ENTITLED TO LEGITIMES.
x x x x
and
V
. . . IN NOT PARTITIONING THE ESTATE OF ANGEL N. PASCUAL
JR. EQUALLY AMONG HIS LEGAL OR INTESTATE HEIRS.
6
(underscoring
supplied)
By Decision
7
of July 20, 2009, the Court of Appeals found petitioners appeal
"partly meritorious." It sustained the probate courts ruling that the property
donated to petitioner is subject to collation in this wise:
Bearing in mind that in intestate succession, what governs is the rule on equality
of division, We hold that theproperty subject of donation inter vivos in favor of
Amelia is subject to collation. Amelia cannot be considered a creditor of the
decedent and we believe that under the circumstances, the value of such
immovable though not strictly in the concept of advance legitime, should be
deducted from her share in the net hereditary estate. The trial court therefore
committed no reversible error when it included the said property as forming
part of the estate of Angel N. Pascual.
8
(citation omitted; emphasis and
underscoring supplied)1avvph!1
The appellate court, however, held that, contrary to the ruling of the probate
court, herein petitioner "was able to submit prima facie evidence of shares of
stocks owned by the [decedent] which have not been included in the inventory
submitted by the administrator."
Thus, the appellate court disposed, quoted verbatim:
WHEREFORE, premises considered, the present appeal is hereby PARTLY
GRANTED. The Decision dated January 29, 2008 of the Regional Trial Court of
Makati City, Branch 135 in Special Proceeding Case No. M-5034 is
hereby REVERSED and SET ASIDE insofar as the order of inclusion of
properties of the Intestate Estate of Angel N. Pascual, Jr. as well as the partition
and distribution of the same to the co-heirs are concerned.
The case is hereby REMANDED to the said court for further proceedings in
accordance with the disquisitions herein.
9
(underscoring supplied)
Petitioners Partial Motion for Reconsideration
10
having been denied by the
appellate court by Resolution
11
of October 7, 2009, the present petition for
review on certiorari was filed, ascribing as errors of the appellate court its ruling
I
. . . THAT THE PROPERTY DONATED BY ANGEL N. PASCUAL, JR. TO
PETITIONER AMELIA PASCUAL ARELLANO IS PART OF HIS ESTATE AT
THE TIME OF HIS DEATH.
II
. . . THAT THE PROPERTY DONATED TO PETITIONER IS SUBJECT TO
COLLATION UNDER ARTICLE 1061 OF THE NEW CIVIL CODE.
III
. . . THAT RESPONDENTS ARE COMPULSORY HEIRS OF THEIR DECEASED
BROTHER ANGEL N. PASCUAL JR. AND ARE ENTITLED TO LEGITIMES.
IV
. . . IN NOT PARTITIONING THE ESTATE OF ANGEL N. PASCUAL,
JR. EQUALLY AMONG PETITIONER AND RESPONDENTS, AS HIS LEGAL
OR INTESTATE HEIRS.
12
(underscoring supplied)
Petitioners thus raise the issues of whether the property donated to petitioner is
subject to collation; and whether the property of the estate should have been
ordered equally distributed among the parties.
On the first issue:
The term collation has two distinct concepts: first, it is a mere mathematical
operation by the addition of the value of donations made by the testator to the
value of the hereditary estate; and second, it is the return to the hereditary estate
of property disposed of by lucrative title by the testator during his lifetime.
13

The purposes of collation are to secure equality among the compulsory heirs in
so far as is possible, and to determine the free portion, after finding the legitime,
so that inofficious donations may be reduced.
14

Collation takes place when there are compulsory heirs, one of its purposes being
to determine the legitime and the free portion. If there is no compulsory heir,
there is no legitime to be safeguarded.
15

The records do not show that the decedent left any primary, secondary, or
concurring compulsory heirs. He was only survived by his siblings, who are his
collateral relatives and, therefore, are not entitled to any legitime that part of
the testators property which he cannot dispose of because the law has reserved
it for compulsory heirs.
16

The compulsory heirs may be classified into (1) primary, (2) secondary, and (3)
concurring. The primary compulsory heirs are those who have precedence over
and exclude other compulsory heirs; legitimate children and descendants are
primary compulsory heirs. The secondary compulsory heirs are those who
succeed only in the absence of the primary heirs; the legitimate parents and
ascendants are secondary compulsory heirs. The concurring compulsory heirs
are those who succeed together with the primary or the secondary compulsory
heirs; the illegitimate children, and the surviving spouse are concurring
compulsory heirs.
17

The decedent not having left any compulsory heir who is entitled to any
legitime, he was at liberty to donate all his properties, even if nothing was left
for his siblings-collateral relatives to inherit. His donation to petitioner,
assuming that it was valid,
18
is deemed as donation made to a "stranger,"
chargeable against the free portion of the estate.
19
There being no compulsory
heir, however, the donated property is not subject to collation.
On the second issue:
The decedents remaining estate should thus be partitioned equally among his
heirs-siblings-collateral relatives, herein petitioner and respondents, pursuant to
the provisions of the Civil Code, viz:
Art. 1003. If there are no descendants, ascendants, illegitimate children, or a
surviving spouse, the collateral relatives shall succeed to the entire estate of the
deceased in accordance with the following articles. (underscoring supplied)
Art. 1004. Should the only survivors be brothers and sisters of the full blood,
they shall inherit in equal shares. (emphasis and underscoring supplied)
WHEREFORE, the petition is GRANTED. The Court of Appeals Decision
ordering the collation of the property donated to petitioner, Amelia N. Arellano,
to the estate of the deceased Angel N. Pascual, Jr. is set aside.
Let the records of the case be REMANDED to the court of origin, Branch 135 of
the Makati Regional Trial Court, which is ordered to conduct further
proceedings in the case for the purpose of determining what finally forms part
of the estate, and thereafter to divide whatever remains of it equally among the
parties.
SO ORDERED.














2. Donation inter vivos
SECOND DIVISION
JARABINI G. DEL ROSARIO, G.R. No. 187056
Petitioner,
Present:

CARPIO, J., Chairperson,
- versus - PERALTA,
BERSAMIN,
*

ABAD, and
PEREZ,
**
JJ.
ASUNCION G. FERRER, substituted
by her heirs, VICENTE, PILAR,
ANGELITO, FELIXBERTO, JR.,
all surnamed G. FERRER, and Promulgated:
MIGUELA FERRER ALTEZA,
Respondents. September 20, 2010

DECISION

ABAD, J.:


This case pertains to a gift, otherwise denominated as a donation mortis
causa, which in reality is a donation inter vivos made effective upon its
execution by the donors and acceptance thereof by the donees, and
immediately transmitting ownership of the donated property to the latter,
thus precluding a subsequent assignment thereof by one of the donors.


The Facts and the Case

On August 27, 1968 the spouses Leopoldo and Guadalupe Gonzales executed
a document entitled Donation Mortis Causa
[1]
in favor of their two children,
Asuncion and Emiliano, and their granddaughter, Jarabini (daughter of their
predeceased son, Zoilo) covering the spouses 126-square meter lot and the
house on it in Pandacan, Manila
[2]
in equal shares. The deed of donation
reads:

It is our will that this Donation Mortis Causa shall be irrevocable and shall be
respected by the surviving spouse.

It is our will that Jarabini Gonzales-del Rosario and Emiliano Gonzales will
continue to occupy the portions now occupied by them.

It is further our will that this DONATION MORTIS CAUSA shall not in any
way affect any other distribution of other properties belonging to any of us
donors whether testate or intestate and where ever situated.

It is our further will that any one surviving spouse reserves the right,
ownership, possession and administration of this property herein donated
and accepted and this Disposition and Donation shall be operative and
effective upon the death of the DONORS.
[3]


Although denominated as a donation mortis causa, which in law is the
equivalent of a will, the deed had no attestation clause and was witnessed by
only two persons. The named donees, however, signified their acceptance of
the donation on the face of the document.

Guadalupe, the donor wife, died in September 1968. A few months later or on
December 19, 1968, Leopoldo, the donor husband, executed a deed of
assignment of his rights and interests in subject property to their
daughter Asuncion. Leopoldo died in June 1972.

In 1998 Jarabini filed a petition for the probate of the August 27, 1968 deed of
donation mortis causa before the Regional Trial Court (RTC) of Manila in
Sp. Proc. 98-90589.
[4]
Asuncion opposed the petition, invoking his father
Leopoldos assignment of his rights and interests in the property to her.

After trial, the RTC rendered a decision dated June 20, 2003,
[5]
finding that the
donation was in fact one made inter vivos, the donors intention being to
transfer title over the property to the donees during the donors lifetime,
given its irrevocability. Consequently, said the RTC, Leopoldos subsequent
assignment of his rights and interest in the property was void since he had
nothing to assign. The RTC thus directed the registration of the property in
the name of the donees in equal shares.
[6]


On Asuncions appeal to the Court of Appeals (CA), the latter rendered a
decision on December 23, 2008,
[7]
reversing that of the RTC. The CA held that
Jarabini cannot, through her petition for the probate of the deed of
donation mortis causa, collaterally attack Leopoldos deed of assignment
in Asuncions favor. The CA further held that, since no proceeding exists for
the allowance of what Jarabini claimed was actually a donation inter vivos,
the RTC erred in deciding the case the way it did. Finally, the CA held that
the donation, being one given mortis causa, did not comply with the
requirements of a notarial will,
[8]
rendering the same void. Following the
CAs denial of Jarabinis motion for reconsideration,
[9]
she filed the present
petition with this Court.

Issue Presented

The key issue in this case is whether or not the spouses Leopoldo and
Guadalupes donation to Asuncion, Emiliano, and Jarabini was a
donation mortis causa, as it was denominated, or in fact a donation inter
vivos.

The Courts Ruling

That the document in question in this case was captioned Donation Mortis
Causa is not controlling. This Court has held that, if a donation by its terms
isinter vivos, this character is not altered by the fact that the donor styles
it mortis causa.
[10]


In Austria-Magat v. Court of Appeals,
[11]
the Court held that irrevocability is
a quality absolutely incompatible with the idea of conveyances mortis causa,
where revocability is precisely the essence of the act. A donation mortis
causa has the following characteristics:

1. It conveys no title or ownership to the transferee before the death of
the transferor; or, what amounts to the same thing, that the transferor should
retain the ow.nership (full or naked) and control of the property while alive;

2. That before his death, the transfer should be revocable by the
transferor at will, ad nutum; but revocability may be provided for indirectly
by means of a reserved power in the donor to dispose of the properties
conveyed; and

3. That the transfer should be void if the transferor should survive the
transferee.
[12]
(Underscoring supplied)

The Court thus said in Austria-Magat that the express irrevocability of the
donation is the distinctive standard that identifies the document as a
donationinter vivos. Here, the donors plainly said that it is our will that
this Donation Mortis Causa shall be irrevocable and shall be respected by the
surviving spouse. The intent to make the donation irrevocable becomes even
clearer by the proviso that a surviving donor shall respect the irrevocability of
the donation. Consequently, the donation was in reality a donation inter
vivos.

The donors in this case of course reserved the right, ownership, possession,
and administration of the property and made the donation operative upon
their death. But this Court has consistently held that such reservation
(reddendum) in the context of an irrevocable donation simply means that the
donors parted with their naked title, maintaining only beneficial ownership
of the donated property while they lived.
[13]


Notably, the three donees signed their acceptance of the donation, which
acceptance the deed required.
[14]
This Court has held that an acceptance
clause indicates that the donation is inter vivos, since acceptance is a
requirement only for such kind of donations. Donations mortis causa, being
in the form of a will, need not be accepted by the donee during the donors
lifetime.
[15]


Finally, as Justice J. B. L. Reyes said in Puig v. Peaflorida,
[16]
in case of doubt,
the conveyance should be deemed a donation inter vivos rather than mortis
causa, in order to avoid uncertainty as to the ownership of the property
subject of the deed.

Since the donation in this case was one made inter vivos, it was immediately
operative and final. The reason is that such kind of donation is deemed
perfected from the moment the donor learned of the donees acceptance of the
donation. The acceptance makes the donee the absolute owner of the
property donated.
[17]


Given that the donation in this case was irrevocable or one given inter vivos,
Leopoldos subsequent assignment of his rights and interests in the property
toAsuncion should be regarded as void for, by then, he had no more rights to
assign. He could not give what he no longer had. Nemo dat quod non
habet.
[18]


The trial court cannot be faulted for passing upon, in a petition for probate of
what was initially supposed to be a donation mortis causa, the validity of the
document as a donation inter vivos and the nullity of one of the donors
subsequent assignment of his rights and interests in the property. The Court
has held before that the rule on probate is not inflexible and
absolute.
[19]
Moreover, in opposing the petition for probate and in putting the
validity of the deed of assignment squarely in issue, Asuncion or those who
substituted her may not now claim that the trial court improperly allowed a
collateral attack on such assignment.

WHEREFORE, the Court GRANTS the petition, SETS ASIDE the assailed
December 23, 2008 Decision and March 6, 2009 Resolution of the Court of
Appeals in CA-G.R. CV 80549, and REINSTATES in toto the June 20, 2003
Decision of the Regional Trial Court of Manila, Branch 19, in Sp. Proc. 98-
90589.


SO ORDERED.

*
Designated as additional member in lieu of Associate Justice Jose Catral
Mendoza, per Special Order 886 dated September 1, 2010.
**
Designated as additional member in lieu of Associate Justice Antonio
Eduardo B. Nachura, per Special Order 894 dated September 20, 2010.
[1]
Rollo, p. 101.
[2]
Covered by Transfer Certificate of Title (TCT) 101873.
[3]
Supra note 1.
[4]
In the Matter of the Petition for the Allowance of the Donation Mortis
Causa of Leopoldo Gonzales. Jarabini del Rosario, Petitioner.
[5]
Rollo, pp. 125-128.
[6]
Id. at 128.
[7]
Id. at 54-64; penned by Associate Justice Apolinario D. Bruselas, Jr. with
the concurrence of Associate Justices Bienvenido L. Reyes and Mariflor P.
Punzalan Castillo.
[8]
Art. 728. Donations which are to take effect upon the death of the donor
partake of the nature of testamentary provisions, and shall be governed by the
rules established in the Title on Succession.
Art. 805. Every will, other than a holographic will, must be subscribed at the
end thereof by the testator himself or by the testator's name written by some
other person in his presence, and by his express direction, and attested and
subscribed by three or more credible witnesses in the presence of the testator
and of one another.
The testator or the person requested by him to write his name and the
instrumental witnesses of the will, shall also sign, as aforesaid, each and
every page thereof, except the last, on the left margin, and all the pages shall
be numbered correlatively in letters placed on the upper part of each page.
The attestation shall state the number of pages used upon which the will is
written, and the fact that the testator signed the will and every page thereof,
or caused some other person to write his name, under his express direction, in
the presence of the instrumental witnesses, and that the latter witnessed and
signed the will and all the pages thereof in the presence of the testator and of
one another.
If the attestation clause is in a language not known to the witnesses, it shall
be interpreted to them.
[9]
Rollo, p. 66.
[10]
Concepcion v. Concepcion, 91 Phil. 823, 828 (1952).
[11]
426 Phil. 263 (2002).
[12]
Aluad v. Aluad, G.R. No. 176943, October 17, 2008, 569 SCRA 697, 705-706.
[13]
Austria-Magat v. Court of Appeals, supra note 11, at 274; Spouses Gestopa
v. Court of Appeals, 396 Phil. 262, 271 (2000); Alejandro v. Judge Geraldez, 168
Phil. 404, 420-421 (1977); Cuevas v. Cuevas, 98 Phil. 68, 71 (1955);Bonsato v.
Court of Appeals, 95 Phil. 481, 488 (1954).
[14]
Rollo, p. 101.
[15]
Austria-Magat v. Court of Appeals, supra note 11, at 276-277.
[16]
122 Phil. 665, 672 (1965).
[17]
Heirs of Sevilla v. Sevilla, 450 Phil. 598, 613 (2003).
[18]
Gochan & Sons Realty Corp. v. Heirs of Raymundo Baba, 456 Phil. 569, 579
(2003).
[19]
Reyes v. Court of Appeals, 346 Phil. 266, 273 (1997).











3. Donation Mortis Causal
G.R. No. 131953 June 5, 2002
MA. ESTELA MAGLASANG, NICOLAS CABATINGAN and MERLY S.
CABATINGAN, petitioners,
vs.
THE HEIRS OF CORAZON CABATINGAN
Posed for resolution before the Court in this petition for review on certiorari filed
under Rule 45 of the Rules of Court is the sole issue of whether the donations
made by the late Conchita Cabatingan are donations inter vivos ormortis causa.
The facts of the case are as follows:
On February 17, 1992, Conchita Cabatingan executed in favor of her brother,
petitioner Nicolas Cabatingan, a "Deed of Conditional of Donation (sic) Inter
Vivos for House and Lot" covering one-half () portion of the former's house
and lot located at Cot-cot, Liloan, Cebu.
1
Four (4) other deeds of donation were
subsequently executed by Conchita Cabatingan on January 14, 1995, bestowing
upon: (a) petitioner Estela C. Maglasang, two (2) parcels of land - one located in
Cogon, Cebu (307 sq. m.) and the other, a portion of a parcel of land in Masbate
(50,232 sq. m.); (b) petitioner Nicolas Cabatingan, a portion of a parcel of land
located in Masbate (80,000 sq. m.); and (c) petitioner Merly S. Cabatingan, a
portion of the Masbate property (80,000 sq. m.).
2
These deeds of donation
contain similar provisions, to wit:
"That for and in consideration of the love and affection of the DONOR
for the DONEE, x x x the DONOR does hereby, by these presents,
transfer, convey, by way of donation, unto the DONEE the above-
described property, together with the buildings and all improvements
existing thereon, to become effective upon the death of the
DONOR; PROVIDED, HOWEVER, that in the event that the DONEE
should die before the DONOR, the present donation shall be deemed
automatically rescinded and of no further force and effect; x x
x"
3
(Emphasis Ours)
On May 9, 1995, Conchita Cabatingan died.
Upon learning of the existence of the foregoing donations, respondents filed
with the Regional Trial Court of Mandaue, Branch 55, an action for Annulment
And/Or Declaration of Nullity of Deeds of Donations and Accounting,
docketed as Civil Case No. MAN-2599, seeking the annulment of said four (4)
deeds of donation executed on January 14, 1995. Respondents allege, inter alia,
that petitioners, through their sinister machinations and strategies and taking
advantage of Conchita Cabatingan's fragile condition, caused the execution of
the deeds of donation, and, that the documents are void for failing to comply
with the provisions of the Civil Code regarding formalities of wills and
testaments, considering that these are donations mortis causa.
4
Respondents
prayed that a receiver be appointed in order to preserve the disputed properties,
and, that they be declared as co-owners of the properties in equal shares,
together with petitioner Nicolas Cabatingan.
5

Petitioners in their Amended Answer, deny respondents' allegations contending
that Conchita Cabatingan freely, knowingly and voluntarily caused the
preparation of the instruments.
6

On respondents' motion, the court a quo rendered a partial judgment on the
pleadings on December 2, 1997 in favor of respondents, with the following
dispositive portion:
"WHEREREFORE, and in consideration of all the foregoing, judgment is
hereby rendered in favor of the plaintiffs and against the defendant and
unwilling co-plaintiff with regards (sic) to the four Deeds of Donation
Annexes "A", "A-1", "B" and Annex "C" which is the subject of this
partial decision by:
Declaring the four Deeds of Donation as null and void ab initio for
being a donation Mortis Causa and for failure to comply with formal
and solemn requisite under Art. 806 of the New Civil Code;
b) To declare the plaintiffs and defendants as well as unwilling co-
plaintiff as the heirs of the deceased Conchita Cabatingan and therefore
hereditary co-owners of the properties subject of this partial decision,
as mandated under Art. 777 of the New Civil Code;
SO ORDERED."
7

The court a quo ruled that the donations are donations mortis causa and therefore
the four (4) deeds in question executed on January 14, 1995 are null and void for
failure to comply with the requisites of Article 806 of the Civil Code on
solemnities of wills and testaments.
8

Raising questions of law, petitioners elevated the court a quo's decision to this
Court,
9
alleging that:
"THE LOWER COURT PALPABLY DISREGARDED THE LONG-AND-
WELL-ESTABLISHED RULINGS OF THIS HONORABLE SUPREME
COURT ON THE CHARACTERIZATION OF DONATIONS AS INTER
VIVOSOR MORTIS CAUSA AND, INSTEAD, PROCEEDED TO
INTERPRET THE DONATIONS IN QUESTION IN A MANNER
CONTRARY THERETO."
10

Petitioners insist that the donations are inter vivos donations as these were made
by the late Conchita Cabatingan "in consideration of the love and affection of the
donor" for the donee, and there is nothing in the deeds which indicate that the
donations were made in consideration of Cabatingan's death.
11
In addition,
petitioners contend that the stipulation on rescission in case petitioners die
ahead of Cabatingan is a resolutory condition that confirms the nature of the
donation as inter vivos.
Petitioners' arguments are bereft of merit.
In a donation mortis causa, "the right of disposition is not transferred to the
donee while the donor is still alive."
12
In determining whether a donation is one
of mortis causa, the following characteristics must be taken into account:
(1) It conveys no title or ownership to the transferee before the death of
the transferor; or what amounts to the same thing, that the transferor
should retain the ownership (full or naked) and control of the property
while alive;
(2) That before his death, the transfer should be revocable by the
transferor at will, ad nutum; but revocability may be provided for
indirectly by means of a reserved power in the donor to dispose of the
properties conveyed;
and
(3) That the transfer should be void if the transferor should survive the
transferee.
13

In the present case, the nature of the donations as mortis causa is confirmed by
the fact that the donations do not contain any clear provision that intends to
pass proprietary rights to petitioners prior to Cabatingan's death.
14
The phrase
"to become effective upon the death of the DONOR" admits of no other
interpretation but that Cabatingan did not intend to transfer the ownership of
the properties to petitioners during her lifetime. Petitioners themselves
expressly confirmed the donations as mortis causa in the following Acceptance
and Attestation clauses, uniformly found in the subject deeds of donation, to
wit:
"That the DONEE does hereby accept the foregoing donation mortis
causa under the terms and conditions set forth therein, and avail herself
of this occasion to express her profound gratitude for the kindness and
generosity of the DONOR."
x x x
"SIGNED by the above-named DONOR and DONEE at the foot of this
Deed of Donation mortis causa, which consists of two (2) pages x x x."
15

That the donations were made "in consideration of the love and affection of the
donor" does not qualify the donations as inter vivos because transfers mortis
causa may also be made for the same reason.
16

Well in point is National Treasurer of the Phils. v. Vda. de Meimban.
17
In said
case, the questioned donation contained the provision:
"That for and in consideration of the love and affection which the
DONOR has for the DONEE, the said Donor by these presents does
hereby give, transfer, and convey unto the DONEE, her heirs and
assigns a portion of ONE HUNDRED THOUSAND (100,000) SQUARE
METERS, on the southeastern part Pro-indiviso of the above described
property. (The portion herein donated is within Lot 2-B of the proposed
amendment Plan Subdivision of Lots Nos. 1 and 2, Psu-109393), with all
the buildings and improvements thereon, to become effective upon the
death of the DONOR. (italics supplied.)"
18

Notably, the foregoing provision is similar to that contained in the donation
executed by Cabatingan. We held in Meimban case that the donation is a mortis
causa donation, and that the above quoted provision establishes the donor's
intention to transfer the ownership and possession of the donated property to
the donee only after the former's death. Further:
"As the donation is in the nature of a mortis causa disposition, the
formalities of a will should have been complied with under Article 728
of the Civil Code, otherwise, the donation is void and would produce
no effect. As we have held in Alejandro v. Geraldez (78 SCRA 245,253),
"If the donation is made in contemplation of the donor's death, meaning
that the full or naked ownership of the donated properties will pass to
the donee because of the donor's death, then it is at that time that the
donation takes effect, and it is a donation mortis causa which should be
embodied in a last will and testament. (Citing Bonsato v. Court of
Appeals, 95 Phil. 481)."
19

We apply the above rulings to the present case. The herein subject deeds
expressly provide that the donation shall be rescinded in case petitioners
predecease Conchita Cabatingan. As stated in Reyes v. Mosqueda,
20
one of the
decisive characteristics of a donation mortis causa is that the transfer should be
considered void if the donor should survive the donee. This is exactly what
Cabatingan provided for in her donations. If she really intended that the
donation should take effect during her lifetime and that the ownership of the
properties donated be transferred to the donee or independently of, and not by
reason of her death, she would have not expressed such proviso in the subject
deeds.1wphi1.nt
Considering that the disputed donations are donations mortis causa, the same
partake of the nature of testamentary provisions
21
and as such, said deeds must
be executed in accordance with the requisites on solemnities of wills and
testaments under Articles 805 and 806 of the Civil Code, to wit:
"ART. 805. Every will, other than a holographic will, must be subscribed
at the end thereof by the testator himself or by the testator's name
written by some other person in his presence, and by his express
direction, and attested and subscribed by three or more credible
witnesses in the presence of the testator and of one another.
The testator or the person requested by him to write his name and the
instrumental witnesses of the will, shall also sign, as aforesaid, each and
every page thereof, except the last, on the left margin, and all the pages
shall be numbered correlatively in letters placed on the upper part of
each page.
The attestation shall state the number of pages used upon which the
will is written , and the fact that the testator signed the will and every
page thereof, or caused some other person to write his name, under his
express direction, in the presence of the instrumental witnesses, and
that the latter witnessed and signed the will and all the pages thereof in
the presence of the testator and of one another.
If the attestation clause is in a language not known to the witnesses, it
shall be interpreted to them. (n)
ART. 806. Every will must be acknowledged before a notary public by
the testator and the witnesses. The notary public shall not be required to
retain a copy of the will, or file another with the office of the Clerk of
Court. (n)"
The deeds in question although acknowledged before a notary public of the
donor and the donee, the documents were not executed in the manner provided
for under the above-quoted provisions of law.
Thus, the trial court did not commit any reversible error in declaring the subject
deeds of donation null and void.
WHEREFORE, the petition is hereby DENIED for lack of merit.
SO ORDERED.
G.R. No. 106755 February 1, 2002















































4.

APOLINARIA AUSTRIA-MAGAT, petitioner,
vs.
HON. COURT OF APPEALS and FLORENTINO LUMUBOS, DOMINGO
COMIA, TEODORA CARAMPOT, ERNESTO APOLO, SEGUNDA
SUMPELO, MAMERTO SUMPELO and RICARDO SUMPELO, respondents.
D E C I S I O N
DE LEON, JR., J.:
Before us is a petition for review of the Decision
1
of the Court of Appeals,
2
dated
June 30, 1989 reversing the Decision,
3
dated August 15, 1986 of the Regional
Trial Court (RTC) of Cavite, Branch 17. The Decision of the RTC dismissed Civil
Case No. 4426 which is an action for annulment of title, reconveyance and
damages.
The facts of the case are as follows:
Basilisa Comerciante is a mother of five (5) children, namely, Rosario Austria,
Consolacion Austria, herein petitioner Apolinaria Austria-Magat, Leonardo, and
one of herein respondents, Florentino Lumubos. Leonardo died in a Japanese
concentration camp at Tarlac during World War II.
In 1953, Basilisa bought a parcel of residential land together with the
improvement thereon covered and described in Transfer Certificate of Title No.
RT-4036 (T-3268) and known as Lot 1, Block 1, Cavite Beach Subdivision, with
an area of 150 square meters, located in Bagong Pook, San Antonio, Cavite City.
On December 17, 1975, Basilisa executed a document designated as "Kasulatan
sa Kaloobpala (Donation)". The said document which was notarized by Atty.
Carlos Viniegra, reads as follows:
KASULATANG SA KALOOBPALA
(DONATION)
TALASTASIN NG LAHAT AT SINUMAN:
Na ako, si BASELISA COMERCIANTE, may sapat na gulang, Filipina, balo, at
naninirahan sa blg. 809 L. Javier Bagong Pook, San Antonio, Lungsod ng Kabite,
Filipinas, sa pamamagitan ng kasulatang itoy
NAGSASALAYSAY
Na alang-alang sa mabuting paglilingkod at pagtingin na iniukol sa akin ng
apat kong mga tunay na anak na sila:
ROSARIO AUSTRIA, Filipina, may sapat na gulang, balo, naninirahan sa 809 L.
Javier, Bagong Pook, San Antonio, Lungsod ng Kabite;
CONSOLACION AUSTRIA, Filipina, may sapat na gulang, balo naninirahan sa
809 L. Javier, Bagong Pook, San Antonio, Lungsod ng Kabite;
APOLINARIA AUSTRIA, Filipina, may sapat na gulang, may asawa,
naninirahan sa Pasong Kawayan, Hen. Trias, Kabite;
FLORENTINO LUMUBOS, Filipino, may sapat na gulang, asawa ni
Encarnacion Magsino, at naninirahan din sa 809 L. Javier, Bagong Pook, San
Antonio, Lungsod ng Kabite; ay
Kusang loob na ibinibigay ko at ipinagkakaloob ng ganap at hindi na mababawi
sa naulit ng apat na anak ko at sa kanilang mga tagamagmana (sic), ang aking
isang lupang residential o tirahan sampu ng aking bahay nahan ng nakatirik
doon na nasa Bagong Pook din, San Antonio, Lungsod ng Kabite, at nakikilala
bilang Lote no. 7, Block no.1, of Subdivision Plan Psd-12247; known as Cavite
Beach Subdivision, being a portion of Lot No. 1055, of the Cadastral survey of
Cavite, GLRO Cadastral Rec. no. 9539; may sukat na 150 metros cuadrados, at
nakatala sa pangalan ko sa Titulo Torrens bilang TCT-T-3268 (RT-4036) ng
Lungsod ng Kabite;
Na ang Kaloob palang ito ay magkakabisa lamang simula sa araw na akoy
pumanaw sa mundo, at sa ilalim ng kondision na:
Magbubuhat o babawasin sa halaga ng nasabing lupa at bahay ang anumang
magugul o gastos sa aking libing at nicho at ang anumang matitira ay hahatiin
ng APAT na parte, parepareho isang parte sa bawat anak kong nasasabi sa itaas
nito upang maliwanang (sic) at walang makakalamang sinoman sa kanila;
At kaming apat na anak na nakalagda o nakadiit sa kasulatang ito ay
TINATANGGAP NAMIN ang kaloob-palang ito ng aming magulang na si
Basilisa Comerciante, at tuloy pinasasalamatan namin siya ng taos sa (sic) puso
dahil sa kagandahan look (sic) niyang ito sa amin.
SA KATUNAYAN, ay nilagdaan o diniitan namin ito sa Nobeleta, Kabite,
ngayong ika-17 ng Disyembre taong 1975.
(Sgd.)FLORENTINO LUMUBOS
Tagatanggap-pala
(Acknowledgment signed by Notary Public C.T. Viniegra is omitted).
4

Basilisa and her said children likewise executed another notarized document
denominated as "Kasulatan" which is attached to the deed of donation. The said
document states that:
KASULATAN
TALASTASIN NG MADLA:
Na kaming mga nakalagda o nakadiit sa labak nito sila Basilisa Comerciante at
ang kanyang mga anak na sila:
Rosario Austria, Consolacion Austria, Apolonio Austria, at Florentino Lumubos,
pawang may mga sapat na gulang, na lumagda o dumiit sa kasulatang kaloob
pala, na sinangayunan namin sa harap ng Notario Publico, Carlos T. Viniegra,
ay nagpapahayag ng sumusunod:
Na ang titulo numero TCT-T-2260 (RT-4036) ng Lungsod ng Kabite, bahay sa
loteng tirahan ng Bagong Pook na nababanggit sa nasabing kasulatan, ay
mananatili sa poder o possession ng Ina, na si Basilisa Comerciante habang siya
ay nabubuhay at
Gayon din ang nasabing Titulo ay hindi mapapasangla o maipagbibili ang lupa
habang maybuhay ang nasabing Basilisa Comerciante.
Sa katunayan ang nagsilagda kaming lahat sa labak nito sa harap ng abogado
Carlos T. Viniegra at dalawang saksi.
Nobeleta, Kabite. Ika-17 ng Disyembre, 1975.
5

On February 6, 1979, Basilisa executed a Deed of Absolute Sale of the subject
house and lot in favor of herein petitioner Apolinaria Austria-Magat for Five
Thousand Pesos (P5,000.00). As the result of the registration of that sale,
Transfer Certificate of Title (TCT for brevity) No. RT-4036 in the name of the
donor was cancelled and in lieu thereof TCT No. T-10434 was issued by the
Register of Deeds of Cavite City in favor of petitioner Apolinaria Austria-Magat
on February 8, 1979.
On September 21, 1983, herein respondents Teodora Carampot, Domingo
Comia, and Ernesto Apolo (representing their deceased mother Consolacion
Austria), Ricardo, Mamerto and Segunda, all surnamed Sumpelo (representing
their deceased mother Rosario Austria) and Florentino Lumubos filed before the
Regional Trial Court of Cavite an action, docketed as Civil Case No. 4426
against the petitioner for annulment of TCT No. T-10434 and other relevant
documents, and for reconveyance and damages.
On August 15,1986, the trial court dismissed Civil Case No. 4426 per its
Decision, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, this Court hereby renders judgment for
defendant dismissing this case and ordering plaintiffs to pay the amount
of P3,000.00 as attorneys fees and the costs of suit.
SO ORDERED.
6

According to the trial court, the donation is a donation mortis causa pursuant to
Article 728 of the New Civil Code inasmuch as the same expressly provides that
it would take effect upon the death of the donor; that the provision stating that
the donor reserved the right to revoke the donation is a feature of a
donation mortis causa which must comply with the formalities of a will; and that
inasmuch as the donation did not follow the formalities pertaining to wills, the
same is void and produced no effect whatsoever. Hence, the sale by the donor of
the said property was valid since she remained to be the absolute owner thereof
during the time of the said transaction.
On appeal, the decision of the trial court was reversed by the Court of Appeals
in its subject decision, the dispositive portion of which reads, to wit:
WHEREFORE, in view of the foregoing, the appealed decision is hereby SET
ASIDE and a new one rendered:
1. declaring null and void the Deed of Sale of Registered Land (Annex
B) and Transfer Certificate of Title No. T-10434 of the Registry of Deeds
of Cavite City (Annex E) and ordering the cancellation thereof; and
2. declaring appellants and appellee co-owners of the house and lot in
question in accordance with the deed of donation executed by Basilisa
Comerciante on December 17, 1975.
No pronouncement as to costs.
SO ORDERED.
7

The appellate court declared in its decision that:
In the case at bar, the decisive proof that the deed is a donation inter vivos is in
the provision that :
Ibinibigay ko at ipinagkakaloob ng ganap at hindi mababawi sa naulit na apat
na anak ko at sa kanilang mga tagapagmana, ang aking lupang residential o
tirahan sampu ng aking bahay nakatirik doon xxx. (emphasis supplied)
This is a clear expression of the irrevocability of the conveyance. The
irrevocability of the donation is a characteristic of a donation inter vivos. By the
words "hindi mababawi", the donor expressly renounced the right to freely
dispose of the house and lot in question. The right to dispose of a property is a
right essential to full ownership. Hence, ownership of the house and lot was
already with the donees even during the donors lifetime. xxx
x x x x x x x x x
In the attached document to the deed of donation, the donor and her children
stipulated that:
Gayon din ang nasabing titulo ay hindi mapapasangla o maipagbibili ang lupa
habang may buhay ang nasabing Basilisa Comerciante."
The stipulation is a reiteration of the irrevocability of the dispossession on the
part of the donor. On the other hand, the prohibition to encumber, alienate or
sell the property during the lifetime of the donor is a recognition of the
ownership over the house and lot in issue of the donees for only in the concept
of an owner can one encumber or dispose a property.
8

Hence this appeal grounded on the following assignment of errors:
I
THE RESPONDENT COURT OF APPEALS, WITH DUE RESPECT, IGNORED
THE RULES OF INTERPRETATION OF CONTRACTS WHEN IT
CONSIDERED THE DONATION IN QUESTION ASINTER VIVOS.
II
THE RESPONDENT COURT OF APPEALS, AGAIN WITH DUE RESPECT,
ERRED IN NOT HOLDING THAT THE PRESENT ACTION HAS PRESCRIBED
UNDER THE STATUTE OF LIMITATIONS.
9

Anent the first assignment of error, the petitioner argues that the Court of
Appeals erred in ruling that the donation was a donation inter vivos. She claims
that in interpreting a document, the other relevant provisions therein must be
read in conjunction with the rest. While the document indeed stated that the
donation was irrevocable, that must be interpreted in the light of the provisions
providing that the donation cannot be encumbered, alienated or sold by anyone,
that the property donated shall remain in the possession of the donor while she
is alive, and that the donation shall take effect only when she dies. Also, the
petitioner claims that the donation is mortis causa for the reason that the
contemporaneous and subsequent acts of the donor, Basilisa Comerciante,
showed such intention. Petitioner cites the testimony of Atty. Viniegra, who
notarized the deed of donation, that it was the intent of the donor to maintain
control over the property while she was alive; that such intent was shown when
she actually sold the lot to herein petitioner.
We affirm the appellate courts decision.
The provisions in the subject deed of donation that are crucial for the
determination of the class to which the donation belongs are, as follows:
x x x x x x x x x
xxx(I)binibigay ko at ipinagkakaloob ng ganap at hindi mababawi sa naulit na
apat na anak ko at sa kanilang mga tagapagmana, ang aking lupang residential
o tirahan sampu ng aking bahay nakatirik doon na nasa Bagong Pook din, San
Antonio, Lungsod ng Kabite
x x x x x x x x x
Na ang Kaloob palang ito ay magkakabisa lamang simula sa araw na akoy
pumanaw sa mundo, xxx.
x x x x x x x x x
Na ang titulo numero TCT-T-2260 (RT-4036) ng Lungsod ng Kabite, bahay sa
loteng tirahan ng Bagong Pook na nababanggit sa nasabing kasulatan, ay
mananatili sa poder o possesion ng Ina, na si Basilisa Comerciante habang siya
ay nabubuhay at
Gayon din ang nasabing Titulo ay hindi mapapasangla o maipagbibili ang lupa
habang maybuhay ang nasabing Basilisa Comerciante xxx.
It has been held that whether the donation is inter vivos or mortis causa depends
on whether the donor intended to transfer ownership over the properties upon
the execution of the deed.
10
In Bonsato v. Court of Appeals,
11
this Court
enumerated the characteristics of a donation mortis causa, to wit:
(1) It conveys no title or ownership to the transferee before the death of
the transferor; or, what amounts to the same thing, that the transferor
should retain the ownership (full or naked) and control of the property
while alive;
(2) That before his death, the transfer should be revocable by the
transferor at will, ad nutum; but revocability may be provided for
indirectly by means of a reserved power in the donor to dispose of the
properties conveyed;
(3) That the transfer should be void if the transferor should survive the
transferee.
Significant to the resolution of this issue is the irrevocable character of the
donation in the case at bar. In Cuevas v. Cuevas,
12
we ruled that when the deed of
donation provides that the donor will not dispose or take away the property
donated (thus making the donation irrevocable), he in effect is making a
donation inter vivos. He parts away with his naked title but maintains beneficial
ownership while he lives. It remains to be a donation inter vivosdespite an
express provision that the donor continues to be in possession and enjoyment of
the donated property while he is alive. In the Bonsato case, we held that:
(W)hat is most significant [in determining the type of donation] is the absence of
stipulation that the donor could revoke the donations; on the contrary, the
deeds expressly declare them to be "irrevocable", a quality absolutely
incompatible with the idea of conveyances mortis causa where revocability is of
the essence of the act, to the extent that a testator can not lawfully waive or
restrict his right of revocation (Old Civil Code, Art.737; New Civil Code, Art.
828).
13

Construing together the provisions of the deed of donation, we find and so hold
that in the case at bar the donation is inter vivos. The express irrevocability of the
same ("hindi na mababawi") is the distinctive standard that identifies that
document as a donation inter vivos. The other provisions therein which
seemingly make the donationmortis causa do not go against the irrevocable
character of the subject donation. According to the petitioner, the provisions
which state that the same will only take effect upon the death of the donor and
that there is a prohibition to alienate, encumber, dispose, or sell the same, are
proofs that the donation is mortis causa. We disagree. The said provisions should
be harmonized with its express irrevocability. In Bonsato where the donation per
the deed of donation would also take effect upon the death of the donor with
reservation for the donor to enjoy the fruits of the land, the Court held that the
said statements only mean that "after the donors death, the donation will take
effect so as to make the donees the absolute owners of the donated property,
free from all liens and encumbrances; for it must be remembered that the donor
reserved for himself a share of the fruits of the land donated."
14

In Gestopa v. Court of Appeals,
15
this Court held that the prohibition to alienate
does not necessarily defeat theinter vivos character of the donation. It even
highlights the fact that what remains with the donor is the right of usufruct and
not anymore the naked title of ownership over the property donated. In the case
at bar, the provision in the deed of donation that the donated property will
remain in the possession of the donor just goes to show that the donor has given
up his naked title of ownership thereto and has maintained only the right to use
(jus utendi) and possess (jus possidendi) the subject donated property.
Thus, we arrive at no other conclusion in that the petitioners cited provisions
are only necessary assurances that during the donors lifetime, the latter would
still enjoy the right of possession over the property; but, his naked title of
ownership has been passed on to the donees; and that upon the donors death,
the donees would get all the rights of ownership over the same including the
right to use and possess the same.
Furthermore, it also appeared that the provision in the deed of donation
regarding the prohibition to alienate the subject property is couched in general
terms such that even the donor is deemed included in the said prohibition
("Gayon din ang nasabing Titulo ay hindi mapapasangla o maipagbibili ang
lupa habang maybuhay ang nasabing Basilisa Comerciante"). Both the donor
and the donees were prohibited from alienating and encumbering the property
during the lifetime of the donor. If the donor intended to maintain full
ownership over the said property until her death, she could have expressly
stated therein a reservation of her right to dispose of the same. The prohibition
on the donor to alienate the said property during her lifetime is proof that naked
ownership over the property has been transferred to the donees. It also supports
the irrevocable nature of the donation considering that the donor has already
divested herself of the right to dispose of the donated property. On the other
hand, the prohibition on the donees only meant that they may not mortgage or
dispose the donated property while the donor enjoys and possesses the property
during her lifetime. However, it is clear that the donees were already the owners
of the subject property due to the irrevocable character of the donation.
The petitioner argues that the subsequent and contemporaneous acts of the
donor would show that her intention was to maintain control over her
properties while she was still living. We disagree. Respondent Domingo Comia
testified that sometime in 1977 or prior to the sale of the subject house and lot,
his grandmother, the donor in the case at bar, delivered the title of the said
property to him; and that the act of the donor was a manifestation that she was
acknowledging the ownership of the donees over the property
donated.
16
Moreover, Atty. Viniegra testified that when the donor sold the lot to
the petitioner herein, she was not doing so in accordance with the agreement
and intent of the parties in the deed of donation; that she was disregarding the
provision in the deed of donation prohibiting the alienation of the subject
property; and that she knew that the prohibition covers her as well as the
donees.
17

Another indication in the deed of donation that the donation is inter vivos is the
acceptance clause therein of the donees. We have ruled that an acceptance
clause is a mark that the donation is inter vivos. Acceptance is a requirement for
donations inter vivos. On the other hand, donations mortis causa, being in the
form of a will, are not required to be accepted by the donees during the donors
lifetime.
18

We now rule on whether the donor validly revoked the donation when one of
her daughters and donees, Consolacion Austria, violated the prohibition to
encumber the property. When Consolacion Austria mortgaged the subject
property to a certain Baby Santos, the donor, Basilisa Comerciante, asked one of
the respondents herein, Domingo Comia, to redeem the property, which the
latter did. After the petitioner in turn redeemed the property from respondent
Domingo, the donor, Basilisa, sold the property to the petitioner who is one of
the donees.
The act of selling the subject property to the petitioner herein cannot be
considered as a valid act of revocation of the deed of donation for the reason
that a formal case to revoke the donation must be filed pursuant to Article 764 of
the Civil Code
19
which speaks of an action that has a prescriptive period of four
(4) years from non-compliance with the condition stated in the deed of donation.
The rule that there can be automatic revocation without benefit of a court action
does not apply to the case at bar for the reason that the subject deed of donation
is devoid of any provision providing for automatic revocation in event of non-
compliance with the any of the conditions set forth therein. Thus, a court action
is necessary to be filed within four (4) years from the non-compliance of the
condition violated. As regards the ground of estoppel, the donor, Basilisa,
cannot invoke the violation of the provision on the prohibition to encumber the
subject property as a basis to revoke the donation thereof inasmuch as she
acknowledged the validity of the mortgage executed by the donee, Consolacion
Austria, when the said donor asked respondent Domingo Comia to redeem the
same. Thereafter, the donor, Basilisa likewise asked respondent Florentino
Lumubos and the petitioner herein to redeem the same.
20
Those acts implied
that the donees have the right of control and naked title of ownership over the
property considering that the donor, Basilisa condoned and acknowledged the
validity of the mortgage executed by one of the donees, Consolacion Austria.
Anent the second issue, the petitioner asserts that the action, against the
petitioner, for annulment of TCT No. T-10434 and other relevant documents, for
reconveyance and damages, filed by the respondents on September 21, 1983 on
the ground of fraud and/or implied trust has already prescribed. The sale
happened on February 6, 1979 and its registration was made on February 8, 1979
when TCT No. RT-4036 in the name of the donor was cancelled and in lieu
thereof TCT No. T-10434 in the name of the petitioner was issued.1wphi1 Thus,
more than four (4) years have passed since the sale of the subject real estate
property was registered and the said new title thereto was issued to the
petitioner. The petitioner contends that an action for reconveyance of property
on the ground of alleged fraud must be filed within four (4) years from the
discovery of fraud which is from the date of registration of the deed of sale on
February 8, 1979; and that the same prescriptive period also applies to a suit
predicated on a trust relationship that is rooted on fraud of breach of trust.
When ones property is registered in anothers name without the formers
consent, an implied trust is created by law in favor of the true owner. Article
1144 of the New Civil Code provides:
Art. 1144. The following actions must be brought within ten years from the time
the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment. (n)
Thus, an action for reconveyance of the title to the rightful owner prescribes in
ten (10) years from the issuance of the title.
21
It is only when fraud has been
committed that the action will be barred after four (4) years.
22

However, the four-year prescriptive period is not applicable to the case at bar
for the reason that there is no fraud in this case. The findings of fact of the
appellate court which are entitled to great respect, are devoid of any finding of
fraud. The records do not show that the donor, Basilisa, and the petitioner ever
intended to defraud the respondents herein with respect to the sale and
ownership of the said property. On the other hand, the sale was grounded upon
their honest but erroneous interpretation of the deed of donation that it is mortis
causa, not inter vivos; and that the donor still had the rights to sell or dispose of
the donated property and to revoke the donation.
There being no fraud in the trust relationship between the donor and the donees
including the herein petitioner, the action for reconveyance prescribes in ten (10)
years. Considering that TCT No. T-10434 in the name of the petitioner and
covering the subject property was issued only on February 8, 1979, the filing of
the complaint in the case at bar in 1983 was well within the ten-year prescriptive
period.
The Court of Appeals, therefore, committed no reversible error in its appealed
Decision.1wphi1
WHEREFORE, the appealed Decision dated June 30, 1989 of the Court of
Appeals is hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.

5.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
July 30, 1954
G.R. No. L-6600
HEIRS OF JUAN BONSATO and FELIPE
BONSATO, petitioners,
vs.
COURT OF APPEALS and JOSEFA UTEA, ET
AL., respondents.
Benedict C. Balderrama for petitioners.
Inocencio Rosete for respondents.
REYES, J.B.L., J .:
This is a petition for review of a decision of the Court of Appeals
holding two deeds of donation executed on the first day of
December, 1939 by the late Domingo Bonsato in favor of his
brother Juan Bonsato and of his nephew Felipe Bonsato, to be
void for being donations mortis causa accomplished without the
formalities required by law for testamentary dispositions.
The case was initiated in the Court of First Instance of
Pangasinan (Case No. 8892) on June 27, 1945, by respondents
Josefa Utea and other heirs of Domingo Bonsato and his wife
Andrea Nacario, both deceased. Their complaint (for annulment
and damages) charged that on the first day of December, 1949,
Domingo Bonsato, then already a widower, had been induced and
deceived into signing two notarial deeds of donations (Exhibits 1
and 2) in favor of his brother Juan Bonsato and of his nephew
Felipe Bonsato, respectively, transferring to them several parcels
of land covered by Tax Declaration Nos. 5652, 12049, and
12052, situated in the municipalities of Mabini and Burgos,
Province of Pangasinan, both donations having been duly
accepted in the same act and documents. Plaintiffs likewise
charged that the donations were mortis causaand void for lack of
the requisite formalities. The defendants, Juan Bonsato and
Felipe Bonsato, answered averring that the donations made in
their favor were voluntarily executed in consideration of past
services rendered by them to the late Domingo Bonsato; that the
same were executed freely without the use of force and violence,
misrepresentation or intimidation; and prayed for the dismissal of
the case and for damages in the sum of P2,000.
After trial, the Court of First Instance rendered its decision on
November 13, 1949, finding that the deeds of donation were
executed by the donor while the latter was of sound mind,
without pressure or intimidation; that the deeds were of
donation inter vivos without any condition making their validity
or efficacy dependent upon the death of the donor; but as the
properties donated were presumptively conjugal, having been
acquired during the coverture of Domingo Bonsato and his wife
Andrea Nacario, the donations were only valid as to an undivided
one-half share in the three parcels of land described therein.
Thereupon the plaintiffs duly appealed to the Court of Appeals,
assigning as primary error the holding of the court below that the
donations are inter vivos; appellants contending that they
were mortis causa donations, and invalid because they had not
been executed with the formalities required for testamentary
disposition.
A division of five of the Court of Appeals took the case under
consideration, and on January 12, 1953, the majority rendered
judgment holding the aforesaid donations to be null and void,
because they were donations mortis causa and were executed
without the testamentary formalities prescribed by law, and
ordered the defendants-appellees Bonsato to surrender the
possession of the properties in litigation to the plaintiffs-
appellants. Two Justices dissented, claiming that the said
donations should be considered as donations inter vivos and
voted for the affirmance of the decision of the Court of First
Instance. The donees then sought a review by this Court.
The sole issue submitted to this Court, therefore, is the juridical
nature of the donations in question. Both deeds (Exhs. 1 and 2)
are couched in identical terms, with the exception of the names of
the donees and the number and description of the properties
donated. The principal provisions are the following.
ESCRITURA DE DONATION
Yo, Domingo Bonsato, viudo de Andrea Nacario, mayor de edad,
vencino y residente del municipio de Agno, Pangasinan, I.F., por
la presente declaro lo siguiente:
Que mi osbrino Felipe Bonsato, casado, tambien mayor de edad,
vecino de Agno, Pangasinan, I.F., en consideracion de su largo
servicio a Domingo Bonsato, por la presente hagor y otorgo una
donacion perfecta e irrevocable consumada a favor del citado
Felipe Bonsato de dos parcelas de terreno palayero como se
describe mas abajo.
(Description omitted)
Que durante su menor de edad de mi citado sobrino Felipe
Bonsato hasta en estos dias, siempre me ha apreciado y estimado
como uno de mis hijos y siempre ha cumplido todas mis ordenes,
y por esta razon bajo su pobriza sea movido mi sentimiento para
dar una recompensa de sus trabajos y aprecios a mi favor.
Que en este de 1939 el donante Domingo Bonsato ha entregado a
Felipe Bonsato dichos terrenos donados y arriba citados pero de
los productos mientras vive el donante tomara la parte que
corresponde como dueo y la parte como inquilino tomara Felipe
Bonsato.
Que en vista de la vejez del donante, el donatorio Felipe Bonsato
tomara posesion inmediatamente de dichos terrenos a su favor.
Que despues de la muerte del donante entrara en vigor dicha
donancion y el donatario Felipe Bonsato tendra todos los
derechos de dichos terrenos en concepto de dueo absoluto de la
propiedad libre de toda responsibilidad y gravamen y pueda
ejercitar su derecho que crea conveniente.
En Testimonio de todo lo Cual, signo la presente en Agno,
Pangasinan, I.F., hoy dia 1.0 de Diciembre, 1939.
Domingo (His thumbmark) Bonsato
Yo, Felipe Bonsato, mayor de edad, casado, Vecino de Mabini,
Pangasinan, I.F., declaro por la presente que acepto la donacion
anterior otorgado por Domingo Bonsato a mi favor.
(Sgd.) Felipe Bonsato
SIGNADO Y FIRMADO EN PRESENCIA DE:
(Sgd.) Illegible (Sgd.) Illegible
The majority of the special divisions of five of the Court of
Appeals that took cognizance of this case relied primarily on the
last paragraph, stressing the passage:
Que despues de la muerte del donante entrara en vigor dicha
donacion . .
while the minority opinion lay emphasis on the second paragraph,
wherein the donor states that he makes "perfect, irrevocable, and
consummated donation" of the properties to the respective
donees, petitioners herein.
Strictly speaking, the issue is whether the documents in question
embody valid donations, or else legacies void for failure to
observe the formalities of wills (testaments). Despite the
widespread use of the term "donations mortis causa," it is well-
established at present that the Civil Code of 1889, in its Art. 620,
broke away from the Roman Law tradition, and followed the
French doctrine that no one may both donate and retain ("donner
at retenir ne vaut"), by merging the erstwhile donationsmortis
causa with the testamentary dispositions, thus suppressing said
donations as an independent legal concept.
ART. 620. Donations which are to become effective upon the
death of the donor partake of the nature of disposals of property
by will and shall be governed by the rules established for
testamentary successions.
Commenting on this article, Mucius Scaevola (Codigo Civl, Vol.
XI, 2 parte, pp. 573, 575 says:
No ha mucho formulabamos esta pregunta: Subsisten las
donaciones mortis causacomo institucion independiente, con
propia autonomia y propio compo jurisdiccional? La respuesta
debe ser negativa.
x x x x x x x x x
Las donaciones mortis causa se consevan en el Codigo como se
conserva un cuerpo fosil en las vitrinas de un Museo. La
asimilacion entre las donaciones por causa de muerte y las
transmissiones por testamento es perfecta.
Manresa, in his Commentaries (5th ed.), Vol. V. p. 83, expresses
the same opinion:
"La disposicion del articulo 620 significa, por lo tanto: 1..o, que
han desaparecido las llamas antes donaciones mortis causa por lo
que el Codigo no se ocupa de ellas en absoluto; 2.o, que toda
disposicion de bienes para despues de la muerte sigue las reglas
establecidas para la sucesion testamentaria.
And Castan, in his Derecho Civil, Vol. IV (7th Ed., 1953), p. 176,
reiterates:
(b) Subsisten hoy en nuestro derecho las donaciones mortis
causa? De lo que acabamos de decir se desprende que las
donaciones mortis causa han perdido en el Codigo Civil su
caracter distintivo y su naturaleza y hay que considerarlos hoy
como una institucion suprimida, refundida en el legado ... . Las
tesis de la desaparcion de las donaciones mortis causa en nuestro
Codigo Civil, acusada ya precedentemente por el pryecto de 1851
puede decirse que constituye una communis opinion entre
nuestros expositores, incluso los mas recientes.
We have insisted on this phase of the legal theory in order to
emphasize that the term "donations mortis causa" as commonly
employed is merely a convenient name to designate those
dispositions of property that are void when made in the form of
donations.
Did the late Domingo Bonsato make donations inter vivos or
dispositions post mortemin favor of the petitioners herein? If the
latter, then the documents should reveal any or all of the
following characteristics:
(1) Convey no title or ownership to the transferee before the
death of the transferor; or, what amounts to the same thing, that
the transferor should retain the ownership (full or naked) and
control of the property while alive (Vidal vs. Posadas, 58 Phil.,
108;Guzman vs. Ibea, 67 Phil., 633);
(2) That before his death, the transfer should be revocable by the
transferor at will, ad nutum; but revocability may be provided for
indirectly by means of a reserved power in the donor to dispose
of the properties conveyed (Bautista vs. Sabiniano, G. R.
L-4326, November 18, 1952);
(3) That the transfer should be void if the transferor should
survive the transferee.
None of these characteristics is discernible in the deeds of
donation, Exhibits 1 and 2, executed by the late Domingo
Bonsato. The donor only reserved for himself, during his lifetime,
the owner's share of the fruits or produce ("de los productos
mientras viva el donante tomara la parte que corresponde como
dueo"), a reservation that would be unnecessary if the ownership
of the donated property remained with the donor. Most
significant is the absence of stipulation that the donor could
revoke the donations; on the contrary, the deeds expressly declare
them to be "irrevocable", a quality absolutely incompatible with
the idea of conveyances mortis causa where revocability is of the
essence of the act, to the extent that a testator can not lawfully
waive or restrict his right of revocation (Old Civil Code, Art.
737; New Civil Code, Art. 828).
It is true that the last paragraph in each donation contains the
phrase "that after the death of the donor the aforesaid donation
shall become effective" (que despues de la muerte del donante
entrara en vigor dicha donacion"). However, said expression must
be construed together with the rest of the paragraph, and thus
taken, its meaning clearly appears to be that after the donor's
death, the donation will take effect so as to make the donees the
absolute owners of the donated property, free from all liens and
encumbrances; for it must be remembered that the donor reserved
for himself a share of the fruits of the land donated. Such
reservation constituted a charge or encumbrance that would
disappear upon the donor's death, when full title would become
vested in the donees.
Que despues de la muerte del donante entrara en vigor dicha
donacion y el donatario Felipe Bonsato tendra todos derechos de
dichos terrenos en concepto de dueo absoluto de la propiedad
libre de toda responsibilidad y gravamen y puede ejercitar su
derecho que crea conveniente.
Any other interpretation of this paragraph would cause it to
conflict with the irrevocability of the donation and its
consummated character, as expressed in the first part of the deeds
of donation, a conflict that should be avoided (Civ. Code of 1889,
Art. 1285; New Civil Code, Art. 1374; Rule 123, sec. 59, Rules
of Court).
Que mi sobrino FILIPINO BONSATO, casado, tambien mayor
de edad, vecino de Agno, Pangasinan, I. F., en consideracion de
su largo servicio a Domingo Bonsato, por la presente hago y
otorgo una donacion perfecta e irrevocable consumada a favor
del citado Felipe Bonsato de dos parcelas de terreno palayero
como se describe mas abajo.
In the cases held by this Court to be transfers mortis causa and
declared invalid for not having been executed with the formalities
of testaments, the circumstances clearly indicated the transferor's
intention to defer the passing of title until after his death. Thus,
in Cario vs. Abaya, 70 Phil., 182, not only were the properties
not to be given until thirty days after the death of the last of the
donors, but the deed also referred to the donees as "those who
had been mentioned to inherit from us", the verb "to inherit"
clearly implying the acquisition of property only from and after
the death of the alleged donors. In Bautista vs. Sabiniano, 49 Off.
Gaz., 549; 92 Phil., 244, the alleged donor expressly reserved the
right to dispose of the properties conveyed at any time before his
death, and limited the donation "to whatever property or
properties left undisposed by me during my lifetime", thus clearly
retaining their ownership until his death. While in David vs.
Sison, 42 Off. Gaz. (Dec, 1946) 3155, the donor not only
reserved for herself all the fruits of the property allegedly
conveyed, but what is even more important, specially provided
that "without the knowledge and consent of the donor, the
donated properties could not be disposed of in any way", thereby
denying to the transferees the most essential attribute of
ownership, the power to dispose of the properties. No similar
restrictions are found in the deeds of donation involved in this
appeal.
That the conveyance was due to the affection of the donor for the
donees and the services rendered by the latter, is of no particular
significance in determining whether the deeds Exhibits 1 and 2
constitute transfers inter vivos or not, because a legacy may have
identical motivation. Nevertheless, the existence of such
consideration corroborates the express irrevocability of the
transfers and the absence of any reservation by the donor of title
to, or control over, the properties donated, and reinforces the
conclusion that the act was inter vivos. Hence, it was error for the
Court of Appeals to declare that Exhibits 1 and 2 were invalid
because the formalities of testaments were not observed. Being
donations inter vivos, the solemnities required for them were
those prescribed by Article 633 of the Civil Code of 1889
(reproduced in Art. 749 of the new Code, and it is undisputed that
these were duly complied with. As the properties involved were
conjugal, the Court of First Instance correctly decided that the
donations could not affect the half interest inherited by the
respondents Josefa Utea, et al. from the predeceased wife of the
donor.
The decision of the Court of Appeals is reversed, and that of the
Court of First Instance is revived and given effect. Costs against
respondents.
Paras, C.J., Pablo, Bengzon, Padilla, Montemayor, Reyes, A.,
Jugo, Bautista Angelo, and Concepcion, JJ., concur.











































6.
EN BANC
[G.R. No. L-8669. May 25, 1956.]
VICENTA REYES, ET AL., Petitioners, vs. GUARDALINO C. MOSQUEDA and THE
COURT OF APPEALS, Respondents.

D E C I S I O N
MONTEMAYOR, J.:
On February 18, 1949, Guardalino C. Mosqueda sold to Jose Marquez Lim his
parcel of land in the City of Iloilo, containing 9,460 square meters, covered by
Transfer Certificate of Title No. T-2794 issued by the Register of Deeds of the
province of Iloilo, for the sum of P65,605. Claiming that Mosqueda had previously
contracted her services to sell the same land with a commission of 5 per cent on
the sales price, and that thru her efforts she could bring together Mosqueda and
Lim who finally agreed upon and consummated the sale of the land, and because
Mosqueda refused to pay her commission of 5 per cent she commenced this
action in the Court of First Instance of Iloilo to recover from Mosqueda the sum
of P3,280.25 representing 5 per cent of the sales price with interest from the date
of the filing of the complaint. After hearing, the trial court rendered judgment in
her favor ordering Defendant Mosqueda to pay to her P3,280.25 with interest of
6 per cent from March 7, 1949, with costs. On appeal to the Court of Appeals,
said Tribunal reversed the appealed decision and dismissed the complaint
without costs. Plaintiff Reyes is now petitioning for the revision of said decision of
the Court of Appeals.
The Court of Appeals thru Justice Dionisio de Leon states the position taken and
the evidence presented by both parties in support of their respective claims as
follows:chanroblesvirtuallawlibrary
Plaintiff Vicente Reyes alleges that on February 16, 1949, she was contracted
by DefendantGuardalino Mosqueda to sell the land of the latter, with an area of
9,460 square meters, situated in Iloilo City, and covered by transfer certificate of
title No. 2794, for the sum of P7.50 per square meter, at a commission of 5 per
cent on the total purchase price (Exhibits A and D). She offered the sale of the
land to Jose Marquez Lim who, after an ocular inspection of the premises, said
that the price of P7.50 per square meter was high as the land was covered with
water, but he was willing to buy the land for a lower price. Reyes went back to
Mosqueda and informed him about what her buyer had told her about the land.
Mosqueda reduced the price to P7.30 per square meter. On this occasion, Reyes
told Mosqueda that inasmuch as the purchase price has already been settled, she
was now free to disclose, as she did that her buyer was Jose Marquez Lim who
would see Mosqueda personally about the consummation of the sale.
Appellant Mosqueda said that on February 16, 1949, he went to see Jose
Marquez Lim, Manager of the Philippine-American Insurance Co. in Iloilo City,
about a loan offering his land covered by transfer certificate of title 2794 as
security, as he was in urgent need of money to pay his debt with a bank which
was due on February 18, 1949. Lim informed Mosqueda that only the Manila
office of the Company could grant loans. Lim, however, offered to buy
Mosquedas land as it adjoined his own land. Mosqueda replied that he was
willing to sell his land to him at P8 per square meter. Lim asked for time to think
it over as Mosquedas price was high. Anxious to buy the land, Lim requested
Vicente Reyes, who, together with her husband, were employees in his office, to
approach Mosqueda on his behalf and exact from him the last price he could
offer for his land. Reyes went to see Dr. Mosqueda and told him that she had a
buyer for his land without divulging the identity of her said buyer, resulting in the
execution of Exhibits A and D. Also on that same day, Vicenta Reyes informed Lim
that the price on Mosqueda was now P7.50 per square meter. Lim still considered
this as high, so that he again sent Vicenta Reyes to ask for a lower price from
Mosqueda. Mosqueda reduced it to P7.30. Reyes told Lim about Mosquedas last
quotation. Apparently, Lim was still not agreeable to the price of P7.30 per
square meter, so that he told Vicenta Reyes to desist from further contracting
Mosqueda on his behalf as he, himself, would deal directly with Mosqueda as he
had initially done earlier on the same day. Lim offered to pay P500 to Reyes for
her efforts, but the latter demanded P1,000, after which she left Lims office
evidently in an angry mood. Reyes went back to Mosqueda and told him that her
buyer was not willing to buy his land at P7.30 per square meter, and that she
would not sell any more the land because of the disagreement between her and
her buyer, whom she disclosed for the first time to be Jose Marquez Lim.
Mosqueda wanted to withdraw the authority which he had given Vicenta Reyes,
but the latter pleaded that she be given until the afternoon of the following days,
February 17, within which to find another buyer. The following day, due to the
failure of Reyes to find another buyer for his land, Mosqueda informed Reyes
that he was definitely canceling her authority to find a buyer for his land. The
following day, February 18, Lim went personally to the clinic of Dr. Mosqueda,
resulting in the execution of the deed of sale (Exhibit 1 or F).
Then said Court makes the following findings or observations:chanroblesvirtuallawlibrary
We have gone carefully over the evidence of record, and we have arrived at the
conclusion that the same fairly preponderates in favor of the Appellant. Jose
Marquez Lim and Alejandro Santiago companion of the Appellant when the latter
went to see Lim about a loan, corroborated the claim of the Appellant that Lim
had offered to buy the Appellants land. Vicenta Reyes did not testify how she
came to learn that Mosqueda was looking for a buyer of his land. Perhaps, when
she was requested by him to intercede in his behalf with respect to the sale of
Mosquedas land, Vicenta Reyes grabbed this opportunity to make spare money
as a sideline. It must also be noted that while Reyes said Lim was willing to buy
the land for a price less than P7.50 per square meter, she did not testify that Lim
was willing to buy the property for P7.30, or that Lim authorized her to close the
deal with Mosqueda at any price lower than P7.50 per square meter.
There is no dispute that the Appellee was contracted by the Appellant to find a
buyer for his land, with a commission of 5 per cent. Mosqueda reduced his
original price of P8 to P7.80 per square meter through the intervention of Vicenta
Reyes. The question, however, is whether it was also through the efforts of
the Appellee that the sale (Exhibit 1 or F) was finally effected at the price of
P65,605, or less than P7 per square meter, on February 18, 1949.
Vicente Reyes was hired as a broker, not as commercial agent cralaw . At the time the
contract of sale (Exhibit 1 or F) was signed by the parties on February 18, 1949,
the authority of Reyes as a broker for Mosqueda has already been withdrawn by
the latter cralaw At the time the authority of the Appelleewas withdrawn, there was still
no meeting of the minds between Mosqueda and Lim with respect to the price
and terms of the sale. Again, the land was sold at price and terms arrived at by
the contracting parties without the Appellees intervention and Lim bought the
property independently of the efforts of Reyes. Vicenta Reyes was told by Lim to
leave him alone in the transaction. We have every reason to believe Lims
testimony as this action for recovery of a sum of money is not directed against
him, and he has nothing to lose or gain by telling the truth.
Accepting, as we have to, the findings of the Court of Appeals, we find its
judgment of reversal to be supported by the facts and the law. If as found by the
Court of Appeals Plaintiff Reyes was engaged only as a broker, then in order to
earn her commission, it was not sufficient for her to find a prospective buyer but
to find one who will actually buy the property on the terms and conditions
imposed by the owner. In the case of Danon vs. Brimo & Co., 42 Phil., 133, we
said:chanrobl esvirtuallawlibrary
The broker must be the efficient agent or the procuring cause of the sale. The
means employed by him and his efforts must result in the sale. He must find the
purchaser, and the sale must proceed from his efforts acting as a broker. (Cases
cited.)
Besides, according to the findings of the Court of Appeals, the actual sale was
perfected and consummated without the intervention of Plaintiff Reyes, and
what is more, before that, her authority to sell the property had been withdrawn,
at a time when there was still no meeting of the minds of buyer and seller.
We realize that there are times when the owner of a property for sale may not
legally cancel or revoke the authority given by him to a broker when the
negotiations through the brokers efforts have reached such a stage that it would
be unfair to deny the commission earned, especially when the property owner
acts in bad faith and cancels the authority only to evade the payment of said
commission. Such was our holding in the same case of Danon vs. Brimo & Co.,
supra:chanroblesvirtuallawlibrary
cralaw the right of the principal to terminate his authority is absolute and
unrestricted, except only that he may not do it in bad faith, and as a mere device
to escape the payment of the brokers commissions. Thus, if in the midst of
negotiations instituted by the broker, and which were plainly and evidently
approaching success, the seller should revoke the authority of the broker, with
the view of concluding the bargain without his aid, and avoiding the payment of
commission about to be earned, it might be well said that the due performance
of his obligation by the broker was purposely prevented by the principal. But if
the latter acts in good faith, not seeking to escape the payment of commissions,
but moved fairly by a view of his own interest, he has the absolute right before a
bargain is made while negotiations remain unsuccessful, before commissions are
earned, to revoke the brokers authority, and the latter cannot thereafter claim
compensation for a sale made by the principal even though it be to a customer
with whom the broker unsuccessfully negotiated, and even though, to some
extent, the seller might justly be said to have availed himself of the fruits of the
brokers labor. (Danon vs. Brimo, 42 Phil., 133, 141-142, citing Sibbald vs.
Bethlehem Iron Co., 83 N.Y. 378, 38 Am. Rep. 441, 444-446.)
In the present case, there is nothing to show that bad faith was involved in the
cancellation of the authority of Plaintiff Reyes before the consummation of the
sale. Not only this, but the actuations of Plaintiff Reyes are not entirely above
suspicion. As observed by the Court of Appeals she did not explain how she came
to know that Defendant Mosqueda was interested in selling his land and was
looking for a buyer thereof. It is highly possible that after Reyes was
commissioned by her employer Lim to approached Mosqueda with a view to
reducing the price of P8 per square meter, it was then and only then that Reyes
came to know about the desire of Mosqueda to sell his land to cover his
obligations with the bank inasmuch as he failed to secure a loan from the
Insurance Company, and as said by the Court of Appeals
cralaw Perhaps, when she was requested by Lim to intercede in his behalf with respect
to the sale of Mosquedas land, Vicenta Reyes grabbed this opportunity to make
spare money as a sideline.
In view of the foregoing, the decision of the Court of Appeals appealed from is
hereby affirmed, with costs in both instances.
Paras, C.J., Bengzon, Reyes, A., Jugo, Bautista Angelo, Labrador, Concepcion,
Reyes, J.B.L., and Endencia, JJ.,
7.
G.R. No. 162784 June 22, 2007
NATIONAL HOUSING AUTHORITY, petitioner,
vs.
SEGUNDA ALMEIDA, COURT OF APPEALS, and RTC of SAN PEDRO,
LAGUNA, BR. 31, respondents.
D E C I S I O N
PUNO, C.J.:
This is a Petition for Review on Certiorari under Rule 45 filed by the National
Housing Authority (NHA) against the Court of Appeals, the Regional Trial
Court of San Pedro Laguna, Branch 31, and private respondent Segunda
Almeida.
On June 28, 1959, the Land Tenure Administration (LTA) awarded to Margarita
Herrera several portions of land which are part of the Tunasan Estate in San
Pedro, Laguna. The award is evidenced by an Agreement to Sell No. 3787.
1
By
virtue of Republic Act No. 3488, the LTA was succeeded by the Department of
Agrarian Reform (DAR). On July 31, 1975, the DAR was succeeded by the NHA
by virtue of Presidential Decree No. 757.
2
NHA as the successor agency of LTA
is the petitioner in this case.
The records show that Margarita Herrera had two children: Beatriz Herrera-
Mercado (the mother of private respondent) and Francisca Herrera. Beatriz
Herrera-Mercado predeceased her mother and left heirs.
Margarita Herrera passed away on October 27, 1971.
3

On August 22, 1974, Francisca Herrera, the remaining child of the late Margarita
Herrera executed a Deed of Self-Adjudication claiming that she is the only
remaining relative, being the sole surviving daughter of the deceased. She also
claimed to be the exclusive legal heir of the late Margarita Herrera.
The Deed of Self-Adjudication was based on a Sinumpaang Salaysay dated
October 7, 1960, allegedly executed by Margarita Herrera. The pertinent
portions of which are as follows:
SINUMPAANG SALAYSAY
SA SINO MAN KINAUUKULAN;
Akong si MARGARITA HERRERA, Filipina, may 83 taong gulang, balo,
kasalukuyang naninirahan at tumatanggap ng sulat sa Nayon ng San
Vicente, San Pedro Laguna, sa ilalim ng panunumpa ay malaya at
kusang loob kong isinasaysay at pinagtitibay itong mga sumusunod:
1. Na ako ay may tinatangkilik na isang lagay na lupang tirikan
(SOLAR), tumatayo sa Nayon ng San Vicente, San Pedro, Laguna,
mayroong PITONG DAAN AT PITUMPU'T ISANG (771) METRONG
PARISUKAT ang laki, humigit kumulang, at makikilala sa tawag na
Lote 17, Bloke 55, at pag-aari ng Land Tenure Administration;
2. Na ang nasabing lote ay aking binibile, sa pamamagitan ng
paghuhulog sa Land Tenure Administration, at noong ika 30 ng Julio,
1959, ang Kasunduang sa Pagbibile (AGREEMENT TO SELL No. 3787)
ay ginawa at pinagtibay sa Lungsod ng Maynila, sa harap ng Notario
Publico na si G. Jose C. Tolosa, at lumalabas sa kaniyang Libro Notarial
bilang Documento No. 13, Pagina No. 4; Libro No. IV, Serie ng 1959;
3. Na dahilan sa ako'y matanda na at walang ano mang hanap buhay,
ako ay nakatira at pinagsisilbihan nang aking anak na si Francisca
Herrera, at ang tinitirikan o solar na nasasabi sa unahan ay binabayaran
ng kaniyang sariling cuarta sa Land Tenure Administration;
4. Na alang-alang sa nasasaysay sa unahan nito, sakaling ako'y bawian
na ng Dios ng aking buhay, ang lupang nasasabi sa unahan ay aking
ipinagkakaloob sa nasabi kong anak na FRANCISCA HERRERA,
Filipina, nasa katamtamang gulang, kasal kay Macario Berroya,
kasalukuyang naninirahan at tumatanggap ng sulat sa Nayong ng San
Vicente, San Pedro Laguna, o sa kaniyang mga tagapagmana at;
5. Na HINIHILING KO sa sino man kinauukulan, na sakaling ako nga
ay bawian na ng Dios ng aking buhay ay KILALANIN, IGALANG at
PAGTIBAYIN ang nilalaman sa pangalan ng aking anak na si Francisca
Herrera ang loteng nasasabi sa unahan.
SA KATUNAYAN NG LAHAT, ako ay nag-didiit ng hinlalaki ng kanan
kong kamay sa ibaba nito at sa kaliwang gilid ng unang dahon, dito sa
Lungsod ng Maynila, ngayong ika 7 ng Octubre, 1960.
4

The said document was signed by two witnesses and notarized. The witnesses
signed at the left-hand side of both pages of the document with the said
document having 2 pages in total. Margarita Herrera placed her
thumbmark
5
above her name in the second page and at the left-hand margin of
the first page of the document.
The surviving heirs of Beatriz Herrera-Mercado filed a case for annulment of the
Deed of Self-Adjudication before the then Court of First Instance of Laguna,
Branch 1 in Binan, Laguna (now, Regional Trial Court Branch 25). The case for
annulment was docketed as Civil Case No. B-1263.
6

On December 29, 1980, a Decision in Civil Case No. B-1263 (questioning the
Deed of Self-Adjudication) was rendered and the deed was declared null and
void.
7

During trial on the merits of the case assailing the Deed of Self-Adjudication,
Francisca Herrera filed an application with the NHA to purchase the same lots
submitting therewith a copy of the "Sinumpaang Salaysay" executed by her
mother. Private respondent Almeida, as heir of Beatriz Herrera-Mercado,
protested the application.
In a Resolution
8
dated February 5, 1986, the NHA granted the application made
by Francisca Herrera, holding that:
From the evidence of the parties and the records of the lots in question,
we gathered the following facts: the lots in question are portions of the
lot awarded and sold to the late Margarita Herrera on July 28, 1959 by
the defunct Land Tenure Administration; protestant is the daughter of
the late Beatriz Herrera Mercado who was the sister of the protestee;
protestee and Beatriz are children of the late Margarita Herrera; Beatriz
was the transferee from Margarita of Lot Nos. 45, 46, 47, 48 and 49,
Block 50; one of the lots transferred to Beatriz, e.g. Lot 47, with an area
of 148 square meters is in the name of the protestant; protestant
occupied the lots in question with the permission of the protestee;
protestee is a resident of the Tunasan Homesite since birth; protestee
was born on the lots in question; protestee left the place only after
marriage but resided in a lot situated in the same Tunasan Homesite;
her (protestee) son Roberto Herrera has been occupying the lots in
question; he has been there even before the death of the late Margarita
Herrera; on October 7, 1960, Margarita Herrera executed a
"Sinumpaang Salaysay" whereby she waived or transferred all her
rights and interest over the lots in question in favor of the protestee;
and protestee had paid the lots in question in full on March 8, 1966 with
the defunct Land Tenure Administration.
This Office finds that protestee has a better preferential right to purchase the lots
in question.
9

Private respondent Almeida appealed to the Office of the President.
10
The NHA
Resolution was affirmed by the Office of the President in a Decision dated
January 23, 1987.
11

On February 1, 1987, Francisca Herrera died. Her heirs executed an extrajudicial
settlement of her estate which they submitted to the NHA. Said transfer of
rights was approved by the NHA.
12
The NHA executed several deeds of sale in
favor of the heirs of Francisca Herrera and titles were issued in their
favor.
13
Thereafter, the heirs of Francisca Herrera directed Segunda Mercado-
Almeida to leave the premises that she was occupying.
Feeling aggrieved by the decision of the Office of the President and the
resolution of the NHA, private respondent Segunda Mercado-Almeida sought
the cancellation of the titles issued in favor of the heirs of Francisca. She filed a
Complaint on February 8, 1988, for "Nullification of Government Lot's Award,"
with the Regional Trial Court of San Pedro, Laguna, Branch 31.
In her complaint, private respondent Almeida invoked her forty-year
occupation of the disputed properties, and re-raised the fact that Francisca
Herrera's declaration of self-adjudication has been adjudged as a nullity because
the other heirs were disregarded. The defendant heirs of Francisca Herrera
alleged that the complaint was barred by laches and that the decision of the
Office of the President was already final and executory.
14
They also contended
that the transfer of purchase of the subject lots is perfectly valid as the same was
supported by a consideration and that Francisca Herrera paid for the property
with the use of her own money.
15
Further, they argued that plaintiff's
occupation of the property was by mere tolerance and that they had been
paying taxes thereon.
16

The Regional Trial Court issued an Order dated June 14, 1988 dismissing the
case for lack of jurisdiction.
17
The Court of Appeals in a Decision dated June 26,
1989 reversed and held that the Regional Trial Court had jurisdiction to hear
and decide the case involving "title and possession to real property within its
jurisdiction."
18
The case was then remanded for further proceedings on the
merits.
A pre-trial was set after which trial ensued.
On March 9, 1998, the Regional Trial Court rendered a Decision setting aside the
resolution of the NHA and the decision of the Office of the President awarding
the subject lots in favor of Francisca Herrera. It declared the deeds of sale
executed by NHA in favor of Herrera's heirs null and void. The Register of
Deeds of Laguna, Calamba Branch was ordered to cancel the Transfer Certificate
of Title issued. Attorney's fees were also awarded to private respondent.
The Regional Trial Court ruled that the "Sinumpaang Salaysay" was not an
assignment of rights but a disposition of property which shall take effect upon
death. It then held that the said document must first be submitted to probate
before it can transfer property.
Both the NHA and the heirs of Francisca Herrera filed their respective motions
for reconsideration which were both denied on July 21, 1998 for lack of merit.
They both appealed to the Court of Appeals. The brief for the heirs of Francisca
Herrera was denied admission by the appellate court in a Resolution dated June
14, 2002 for being a "carbon copy" of the brief submitted by the NHA and for
being filed seventy-nine (79) days late.
On August 28, 2003, the Court of Appeals affirmed the decision of the Regional
Trial Court, viz:
There is no dispute that the right to repurchase the subject lots was
awarded to Margarita Herrera in 1959. There is also no dispute that
Margarita executed a "Sinumpaang Salaysay" on October 7, 1960.
Defendant NHA claims that the "Sinumpaang Salaysay" is, in effect, a
waiver or transfer of rights and interest over the subject lots in favor of
Francisca Herrera. This Court is disposed to believe otherwise. After a
perusal of the "Sinumpaang Salaysay" of Margarita Herrera, it can be
ascertained from its wordings taken in their ordinary and grammatical
sense that the document is a simple disposition of her estate to take
effect after her death. Clearly the Court finds that the "Sinumpaang
Salaysay" is a will of Margarita Herrera. Evidently, if the intention of
Margarita Herrera was to merely assign her right over the lots to her
daughter Francisca Herrera, she should have given her "Sinumpaang
Salaysay" to the defendant NHA or to Francisca Herrera for submission
to the defendant NHA after the full payment of the purchase price of
the lots or even prior thereto but she did not. Hence it is apparent that
she intended the "Sinumpaang Salaysay" to be her last will and not an
assignment of rights as what the NHA in its resolution would want to
make it appear. The intention of Margarita Herrera was shared no less
by Francisca Herrera who after the former's demise executed on August
22, 1974 a Deed of Self-Adjudication claiming that she is her sole and
legal heir. It was only when said deed was questioned in court by the
surviving heirs of Margarita Herrera's other daughter, Beatriz Mercado,
that Francisca Herrera filed an application to purchase the subject lots
and presented the "Sinumpaang Salaysay" stating that it is a deed of
assignment of rights.
19

The Court of Appeals ruled that the NHA acted arbitrarily in awarding the lots
to the heirs of Francisca Herrera. It upheld the trial court ruling that the
"Sinumpaang Salaysay" was not an assignment of rights but one that involved
disposition of property which shall take effect upon death. The issue of whether
it was a valid will must first be determined by probate.
Petitioner NHA elevated the case to this Court.
Petitioner NHA raised the following issues:
A. WHETHER OR NOT THE RESOLUTION OF THE NHA AND THE
DECISION OF THE OFFICE OF THE PRESIDENT HAVE ATTAINED
FINALITY, AND IF SO, WHETHER OR NOT THE PRINCIPLE OF
ADMINISTRATIVE RES JUDICATA BARS THE COURT FROM
FURTHER DETERMINING WHO BETWEEN THE PARTIES HAS
PREFERENTIAL RIGHTS FOR AWARD OVER THE SUBJECT LOTS;
B. WHETHER OR NOT THE COURT HAS JURISDICTION TO MAKE
THE AWARD ON THE SUBJECT LOTS; AND
C. WHETHER OR NOT THE AWARD OF THE SUBJECT LOTS BY
THE NHA IS ARBITRARY.
We rule for the respondents.
Res judicata is a concept applied in review of lower court decisions in accordance
with the hierarchy of courts. But jurisprudence has also recognized the rule of
administrative res judicata: "the rule which forbids the reopening of a matter
once judicially determined by competent authority applies as well to the judicial
and quasi-judicial facts of public, executive or administrative officers and
boards acting within their jurisdiction as to the judgments of courts having
general judicial powers . . . It has been declared that whenever final adjudication
of persons invested with power to decide on the property and rights of the
citizen is examinable by the Supreme Court, upon a writ of error or a certiorari,
such final adjudication may be pleaded as res judicata."
20
To be sure, early
jurisprudence were already mindful that the doctrine of res judicata cannot be
said to apply exclusively to decisions rendered by what are usually understood
as courts without unreasonably circumscribing the scope thereof and that the
more equitable attitude is to allow extension of the defense to decisions of
bodies upon whom judicial powers have been conferred.
In Ipekdjian Merchandising Co., Inc. v. Court of Tax Appeals,
21
the Court held
that the rule prescribing that "administrative orders cannot be enforced in the
courts in the absence of an express statutory provision for that purpose" was
relaxed in favor of quasi-judicial agencies.
In fine, it should be remembered that quasi-judicial powers will always be
subject to true judicial powerthat which is held by the courts. Quasi-judicial
power is defined as that power of adjudication of an administrative agency for
the "formulation of a final order."
22
This function applies to the actions,
discretion and similar acts of public administrative officers or bodies who are
required to investigate facts, or ascertain the existence of facts, hold hearings,
and draw conclusions from them, as a basis for their official action and to
exercise discretion of a judicial nature.
23
However, administrative agencies are
not considered courts, in their strict sense. The doctrine of separation of powers
reposes the three great powers into its three (3) branchesthe legislative, the
executive, and the judiciary. Each department is co-equal and coordinate, and
supreme in its own sphere. Accordingly, the executive department may not, by
its own fiat, impose the judgment of one of its agencies, upon the judiciary.
Indeed, under the expanded jurisdiction of the Supreme Court, it is empowered
to "determine whether or not there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government."
24
Courts have an expanded role under the
1987 Constitution in the resolution of societal conflicts under the grave abuse
clause of Article VIII which includes that duty to check whether the other
branches of government committed an act that falls under the category of grave
abuse of discretion amounting to lack or excess of jurisdiction.
25

Next, petitioner cites Batas Pambansa Blg. 129 or the Judiciary Reorganization
Act of 1980
26
where it is therein provided that the Intermediate Appellate Court
(now, Court of Appeals) shall exercise the "exclusive appellate jurisdiction over
all final judgments, decisions, resolutions, orders or awards, of the Regional
Trial Courts and Quasi-Judicial agencies, instrumentalities, boards or
commissions, except those falling within the jurisdiction of the Supreme Court
in accordance with the Constitution"
27
and contends that the Regional Trial
Court has no jurisdiction to rule over awards made by the NHA.
Well-within its jurisdiction, the Court of Appeals, in its decision of August 28,
2003, already ruled that the issue of the trial court's authority to hear and decide
the instant case has already been settled in the decision of the Court of Appeals
dated June 26, 1989 (which has become final and executory on August 20, 1989
as per entry of judgment dated October 10, 1989).
28
We find no reason to disturb
this ruling. Courts are duty-bound to put an end to controversies. The system of
judicial review should not be misused and abused to evade the operation of a
final and executory judgment.
29
The appellate court's decision becomes the law
of the case which must be adhered to by the parties by reason of policy.
30

Next, petitioner NHA contends that its resolution was grounded on meritorious
grounds when it considered the application for the purchase of lots. Petitioner
argues that it was the daughter Francisca Herrera who filed her application on
the subject lot; that it considered the respective application and inquired
whether she had all the qualifications and none of the disqualifications of a
possible awardee. It is the position of the petitioner that private respondent
possessed all the qualifications and none of the disqualifications for lot award
and hence the award was not done arbitrarily.
The petitioner further argues that assuming that the "Sinumpaang Salaysay"
was a will, it could not bind the NHA.
31
That, "insofar as [the] NHA is
concerned, it is an evidence that the subject lots were indeed transferred by
Margarita Herrera, the original awardee, to Francisca Herrera was then
applying to purchase the same before it."
32

We are not impressed. When the petitioner received the "Sinumpaang Salaysay,"
it should have noted that the effectivity of the said document commences at the
time of death of the author of the instrument; in her words "sakaling ako'y bawian
na ng Dios ng aking buhay" Hence, in such period, all the interests of the person
should cease to be hers and shall be in the possession of her estate until they are
transferred to her heirs by virtue of Article 774 of the Civil Code which provides
that:
Art. 774. Succession is a mode of acquisition by virtue of which the
property, rights and obligations to the extent of the value of the
inheritance, of a person are transmitted through his death to another
or others either by his will or by operation of law.
33

By considering the document, petitioner NHA should have noted that the
original applicant has already passed away. Margarita Herrera passed away on
October 27, 1971.
34
The NHA issued its resolution
35
on February 5, 1986. The
NHA gave due course to the application made by Francisca Herrera without
considering that the initial applicant's death would transfer all her property,
rights and obligations to the estate including whatever interest she has or may
have had over the disputed properties. To the extent of the interest that the
original owner had over the property, the same should go to her estate.
Margarita Herrera had an interest in the property and that interest should go to
her estate upon her demise so as to be able to properly distribute them later to
her heirsin accordance with a will or by operation of law.
The death of Margarita Herrera does not extinguish her interest over the
property. Margarita Herrera had an existing Contract to Sell
36
with NHA as the
seller. Upon Margarita Herrera's demise, this Contract to Sell was neither
nullified nor revoked. This Contract to Sell was an obligation on both parties
Margarita Herrera and NHA. Obligations are transmissible.
37
Margarita
Herrera's obligation to pay became transmissible at the time of her death
either by will or by operation of law.
If we sustain the position of the NHA that this document is not a will, then the
interests of the decedent should transfer by virtue of an operation of law and
not by virtue of a resolution by the NHA. For as it stands, NHA cannot make
another contract to sell to other parties of a property already initially paid for by
the decedent. Such would be an act contrary to the law on succession and the
law on sales and obligations.
38

When the original buyer died, the NHA should have considered the estate of
the decedent as the next "person"
39
likely to stand in to fulfill the obligation to
pay the rest of the purchase price. The opposition of other heirs to the
repurchase by Francisca Herrera should have put the NHA on guard as to the
award of the lots. Further, the Decision in the said Civil Case No. B-1263
(questioning the Deed of Self-Adjudication) which rendered the deed therein
null and void
40
should have alerted the NHA that there are other heirs to the
interests and properties of the decedent who may claim the property after a
testate or intestate proceeding is concluded. The NHA therefore acted arbitrarily
in the award of the lots.
We need not delve into the validity of the will. The issue is for the probate court
to determine. We affirm the Court of Appeals and the Regional Trial Court
which noted that it has an element of testamentary disposition where (1) it
devolved and transferred property; (2) the effect of which shall transpire upon
the death of the instrument maker.
41

IN VIEW WHEREOF, the petition of the National Housing Authority is
DENIED. The decision of the Court of Appeals in CA-G.R. No. 68370 dated
August 28, 2003, affirming the decision of the Regional Trial Court of San Pedro,
Laguna in Civil Case No. B-2780 dated March 9, 1998, is hereby AFFIRMED.
No cost.
SO ORDERED.

8.
G.R. Nos. 154391-92 September 30, 2004
Spouses ISMAEL and TERESITA MACASAET, petitioners,
vs.
Spouses VICENTE and ROSARIO MACASAET, respondents.
D E C I S I O N
PANGANIBAN, J.:
The present case involves a dispute between parents and children. The children
were invited by the parents to occupy the latters two lots, out of parental love
and a desire to foster family solidarity. Unfortunately, an unresolved conflict
terminated this situation. Out of pique, the parents asked them to vacate the
premises. Thus, the children lost their right to remain on the property. They
have the right, however, to be indemnified for the useful improvements that
they constructed thereon in good faith and with the consent of the parents. In
short, Article 448 of the Civil Code applies.
The Case
Before us is a Petition for Review
1
under Rule 45 of the Rules of Court, assailing
the March 22, 2002 Decision
2
and the June 26, 2002 Resolution
3
of the Court of
Appeals (CA) in CA-GR SP Nos. 56205 & 56467. The challenged Decision
disposed as follows:
"WHEREFORE, the assailed Decision is AFFIRMED with the following
MODIFICATIONS:
1. Vicente and Rosario should reimburse Ismael and Teresita
one-half of the value of the useful improvements introduced in
the premises prior to demand, which is equivalent
to P475,000.00. In case the former refuse to reimburse the said
amount, the latter may remove the improvements, even though
the land may suffer damage thereby. They shall not, however,
cause any more impairment upon the property leased than is
necessary.
2. The award of attorneys fees is DELETED.
3. The records of these consolidated cases are REMANDED to
the Court of origin for further proceedings to determine the
option to be taken by Vicente and Rosario and to implement the
same with dispatch."
4

The assailed Resolution denied petitioners Motion for Reconsideration.
The Facts
Petitioners Ismael and Teresita
5
Macasaet and Respondents Vicente and Rosario
Macasaet are first-degree relatives. Ismael is the son of respondents, and
Teresita is his wife.
6

On December 10, 1997, the parents filed with the Municipal Trial Court in Cities
(MTCC) of Lipa City an ejectment suit against the children.
7
Respondents
alleged that they were the owners of two (2) parcels of land covered by Transfer
Certificate of Title (TCT) Nos. T-78521 and T-103141, situated at Banay-banay,
Lipa City; that by way of a verbal lease agreement, Ismael and Teresita occupied
these lots in March 1992 and used them as their residence and the situs of their
construction business; and that despite repeated demands, petitioners failed to
pay the agreed rental of P500 per week.
8

Ismael and Teresita denied the existence of any verbal lease agreement. They
claimed that respondents had invited them to construct their residence and
business on the subject lots in order that they could all live near one other,
employ Marivic (the sister of Ismael), and help in resolving the problems of the
family.
9
They added that it was the policy of respondents to allot the land they
owned as an advance grant of inheritance in favor of their children. Thus, they
contended that the lot covered by TCT No. T-103141 had been allotted to Ismael
as advance inheritance. On the other hand, the lot covered by TCT No. T-78521
was allegedly given to petitioners as payment for construction materials used in
the renovation of respondents house.
10

The MTCC
11
ruled in favor of respondents and ordered petitioners to vacate the
premises. It opined that Ismael and Teresita had occupied the lots, not by virtue
of a verbal lease agreement, but by tolerance of Vicente and Rosario.
12
As their
stay was by mere tolerance, petitioners were necessarily bound by an implied
promise to vacate the lots upon demand.
13
The MTCC dismissed their
contention that one lot had been allotted as an advance inheritance, on the
ground that successional rights were inchoate. Moreover, it disbelieved
petitioners allegation that the other parcel had been given as payment for
construction materials.
14

On appeal, the regional trial court
15
(RTC) upheld the findings of the MTCC.
However, the RTC allowed respondents to appropriate the building and other
improvements introduced by petitioners, after payment of the indemnity
provided for by Article 448 in relation to Articles 546 and 548 of the Civil
Code.
16
It added that respondents could oblige petitioners to purchase the land,
unless its value was considerably more than the building. In the latter situation,
petitioners should pay rent if respondents would not choose to appropriate the
building.
17

Upon denial of their individual Motions for Reconsideration, the parties filed
with the CA separate Petitions for Review, which were later consolidated.
18

Ruling of the Court of Appeals
The CA sustained the finding of the two lower courts that Ismael and Teresita
had been occupying the subject lots only by the tolerance of Vicente and
Rosario.
19
Thus, possession of the subject lots by petitioners became illegal upon
their receipt of respondents letter to vacate it.
20

Citing Calubayan v. Pascual,
21
the CA further ruled that petitioners status was
analogous to that of a lessee or a tenant whose term of lease had expired, but
whose occupancy continued by tolerance of the owner.
22
Consequently, in
ascertaining the right of petitioners to be reimbursed for the improvements they
had introduced on respondents properties,
23
the appellate court applied the
Civil Codes provisions on lease. The CA modified the RTC Decision by
declaring that Article 448 of the Civil Code was inapplicable. The CA opined
that under Article 1678 of the same Code, Ismael and Teresita had the right to be
reimbursed for one half of the value of the improvements made.
24

Not satisfied with the CAs ruling, petitioners brought this recourse to this
Court.
25

The Issues
Petitioners raise the following issues for our consideration:
"1. a) Whether or not Section 17[,] Rule 70 of the Rules of Court on
Judgment should apply in the rendition of the decision in this case;
b) Whether or not the Complaint should have been dismissed;
c) Whether or not damages including attorneys fees should
have been awarded to herein petitioners;
"2. a) Whether or not the rule on appearance of parties during the
Pretrial should apply on appearance of parties during Preliminary
Conference in an unlawful detainer suit;
b) Whether or not the case of Philippine Pryce Assurance
Corporation vs. Court of Appeals (230 SCRA 164) is applicable
to appearance of parties in an unlawful detainer suit;
"3. Whether or not Article 1678 of the Civil Code should apply to the
case on the matters of improvements, or is it Article 447 of the Civil
Code in relation to the Article 453 and 454 thereof that should apply, if
ever to apply the Civil Code;
"4. Whether or not the [D]ecision of the Court of Appeals is supported
by evidence, appropriate laws, rules and jurisprudence;
"5. Whether or not Assisting Judge Norberto Mercado of the MTCC Lipa
City should be held accountable in rendering the MTCC [D]ecision;
"6. Whether or not Atty. Glenn Mendoza and Atty. Andrew Linatoc of
the same [l]aw office should be held accountable for pursuing the
[e]jectment case[.]"
26

The Courts Ruling
The Petition is partly meritorious.
First Issue:
Ejectment
Who is entitled to the physical or material possession of the premises? At the
outset, we stress that this is the main issue in ejectment proceedings.
27
In the
present case, petitioners failed to justify their right to retain possession of the
subject lots, which respondents own. Since possession is one of the attributes of
ownership,
28
respondents clearly are entitled to physical or material possession.
Allegations of the Complaint
Petitioners allege that they cannot be ejected from the lots, because respondents
based their Complaint regarding the nonpayment of rentals on a verbal lease
agreement, which the latter failed to prove.
29
Petitioners contend that the lower
courts erred in using another ground (tolerance of possession) to eject them.
In actions for unlawful detainer, possession that was originally lawful becomes
unlawful upon the expiration or termination of the defendants right to possess,
arising from an express or implied contract.
30
In other words, the plaintiffs
cause of action comes from the expiration or termination of the defendants right
to continue possession.
31
The case resulting therefrom must be filed within one
year from the date of the last demand.
To show a cause of action in an unlawful detainer, an allegation that the
defendant is illegally withholding possession from the plaintiff is sufficient. The
complaint may lie even if it does not employ the terminology of the law,
provided the said pleading is couched in a language adequately stating that the
withholding of possession or the refusal to vacate has become unlawful.
32
It is
equally settled that the jurisdiction of the court, as well as the nature of the
action, is determined from the averments of the complaint.
33

In the present case, the Complaint alleged that despite demands, petitioners
"refused to pay the accrued rentals and [to] vacate the leased premises."
34
It
prayed that judgment be rendered "[o]rdering [petitioners] and all those
claiming rights under them to vacate the properties x x x and remove the
structures x x x constructed thereon."
35
Effectively then, respondents averred that
petitioners original lawful occupation of the subject lots had become unlawful.
The MTCC found sufficient cause to eject petitioners. While it disbelieved the
existence of a verbal lease agreement, it nevertheless concluded that petitioners
occupation of the subject lots was by mere tolerance of respondents. Basing its
conclusion on the fact that the parties were close relatives, the MTCC ruled thus:
"x x x [T]he parties herein are first degree relatives. Because of this
relationship, this Court takes judicial notice of the love, care, concern
and protection imbued upon the parents towards their [children], i.e., in
the instant case, the love, care, concern and protection of the
[respondents] to the [petitioners]. With this in mind, this Court is
inclined to believe the position of the [petitioners] that there was no
such verbal lease agreement between the parties herein that took place
in 1992. x x x.
"From the allegations of the [petitioners], this Court is convinced that
their stay and occupancy of the subject premises was by mere tolerance
of the [respondents], and not by virtue of a verbal lease agreement
between them."
36

Having found a cause of action for unlawful detainer, the MTCC (as well as the
RTC and the CA) did not err in ordering the ejectment of petitioners as prayed
for by respondents. There was no violation of Section 17 of Rule 70
37
of the Rules
of Court. As earlier explained, unlawful detainer was sufficiently alleged in the
Complaint and duly proven during the trial. Significantly, the issue of whether
there was enough ground to eject petitioners was raised during the preliminary
conference.
38

Not Merely Tolerated
Possession
Petitioners dispute the lower courts finding that they occupied the subject lots
on the basis of mere tolerance. They argue that their occupation was not under
such condition, since respondents had invited, offered and persuaded them to
use those properties.
39

This Court has consistently held that those who occupy the land of another at
the latters tolerance or permission, without any contract between them, are
necessarily bound by an implied promise that the occupants will vacate the
property upon demand.
40
A summary action for ejectment is the proper remedy
to enforce this implied obligation.
41
The unlawful deprivation or withholding of
possession is to be counted from the date of the demand to vacate.
42

Toleration is defined as "the act or practice of permitting or enduring something
not wholly approved of."
43
Sarona v. Villegas
44
described what tolerated acts
means, in this language:
"Professor Arturo M. Tolentino states that acts merely tolerated are
those which by reason of neighborliness or familiarity, the owner of
property allows his neighbor or another person to do on the property;
they are generally those particular services or benefits which ones
property can give to another without material injury or prejudice to the
owner, who permits them out of friendship or courtesy. x x x. And,
Tolentino continues, even though this is continued for a long time, no
right will be acquired by prescription." x x x. Further expounding on the
concept, Tolentino writes: There is tacit consent of the possessor to the
acts which are merely tolerated. Thus, not every case of knowledge and
silence on the part of the possessor can be considered mere tolerance. By
virtue of tolerance that is considered as an authorization, permission or
license, acts of possession are realized or performed. The question
reduces itself to the existence or non-existence of the permission."
45

We hold that the facts of the present case rule out the finding of possession by
mere tolerance. Petitioners were able to establish that respondents had invited
them to occupy the subject lots in order that they could all live near one other
and help in resolving family problems.
46
By occupying those lots, petitioners
demonstrated their acceptance of the invitation. Hence, there was a meeting of
minds, and an agreement regarding possession of the lots impliedly arose
between the parties.
The occupancy of the subject lots by petitioners was not merely "something not
wholly approved of" by respondents. Neither did it arise from what Tolentino
refers to as "neighborliness or familiarity." In point of fact, their possession was
upon the invitation of and with the complete approval of respondents, who
desired that their children would occupy the premises. It arose from familial
love and a desire for family solidarity, which are basic Filipino traits.
Right to Use the Lots Terminated
That Ismael and Teresita had a right to occupy the lots is therefore clear. The
issue is the duration of possession. In the absence of a stipulation on this point,
Article 1197 of the Civil Code allows the courts to fix the duration or the period.
"Article 1197. If the obligation does not fix a period, but from its nature
and the circumstances it can be inferred that a period was intended, the
courts may fix the duration thereof.
"The courts shall also fix the duration of the period when it depends
upon the will of the debtor.
"In every case the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once
fixed by the courts, the period cannot be changed by them."
Article 1197, however, applies to a situation in which the parties intended a
period. Such qualification cannot be inferred from the facts of the present case.
To repeat, when Vicente and Rosario invited their children to use the lots, they
did so out of parental love and a desire for solidarity expected from Filipino
parents. No period was intended by the parties. Their mere failure to fix the
duration of their agreement does not necessarily justify or authorize the courts
to do so.
47

Based on respondents reasons for gratuitously allowing petitioners to use the
lots, it can be safely concluded that the agreement subsisted as long as the
parents and the children mutually benefited from the arrangement. Effectively,
there is a resolutory condition in such an agreement.
48
Thus, when a change in
the condition existing between the parties occurs -- like a change of ownership,
necessity, death of either party or unresolved conflict or animosity -- the
agreement may be deemed terminated. Having been based on parental love, the
agreement would end upon the dissipation of the affection.
When persistent conflict and animosity overtook the love and solidarity
between the parents and the children, the purpose of the agreement
ceased.
49
Thus, petitioners no longer had any cause for continued possession of
the lots. Their right to use the properties became untenable. It ceased upon their
receipt of the notice to vacate. And because they refused to heed the demand,
ejectment was the proper remedy against them. Their possession, which was
originally lawful, became unlawful when the reason therefor -- love and
solidarity -- ceased to exist between them.
No Right to Retain
Possession
Petitioners have not given this Court adequate reasons to reverse the lower
courts dismissal of their contention that Lots T-78521 and T-103141,
respectively, were allegedly allotted to them as part of their inheritance and
given in consideration for past debts.
The right of petitioners to inherit from their parents is merely inchoate and is
vested only upon the latters demise. Indisputably, rights of succession are
transmitted only from the moment of death of the decedent.
50
Assuming that
there was an "allotment" of inheritance, ownership nonetheless remained with
respondents. Moreover, an intention to confer title to certain persons in the
future is not inconsistent with the owners taking back possession in the
meantime for any reason deemed sufficient.
51
Other than their self-serving
testimonies and their affidavits, petitioners offered no credible evidence to
support their outlandish claim of inheritance "allocation."
We also agree with the lower courts that petitioners failed to prove the
allegation that, through a dation in payment, Lot T-78521 had been transferred
to the latter as payment for respondents debts.
52
The evidence presented by
petitioners related only to the alleged indebtedness of the parents arising from
the latters purported purchases and advances.
53
There was no sufficient proof
that respondents had entered into a contract of dation to settle the alleged debt.
Petitioners even stated that there was a disagreement in the accounting of the
purported debt,
54
a fact that disproves a meeting of the minds with the parents.
Petitioners also admitted that a portion of the alleged debt is the subject matter
of a collection case against respondents (Civil Case No. 0594-96).
55
Thus, the
formers allegation that the indebtedness has been paid through a dation cannot
be given credence, inconsistent as it is with their action to recover the same debt.
Despite their protestations, petitioners recognized the right of the parents to
recover the premises when they admitted in their Position Paper filed with the
MTCC that respondents had a title to the lots.
"The [respondents] want to get their property because the title is theirs,
the [petitioners] do not object but what is due the [petitioners] including
the reparation for the tarnish of their dignity and honor must be given
the [petitioners] for the benefits of their children before the premises
will be turned over."
56

As a rule, the right of ownership carries with it the right of possession.
Second Issue:
Appearance at the Preliminary Conference
Section 8 of Rule 70 of the Rules of Court requires the appearance of the plaintiff
and the defendant during the preliminary conference. On the basis of this
provision, petitioners claim that the MTCC should have dismissed the case
upon the failure of respondents to attend the conference. However, petitioners
do not dispute that an attorney-in-fact with a written authorization from
respondents appeared during the preliminary conference.
57
The issue then is
whether the rules on ejectment allow a representative to substitute for a partys
personal appearance.
Unless inconsistent with Rule 70, the provisions of Rule 18 on pretrial applies to
the preliminary conference.
58
Under Section 4 of this Rule, the nonappearance of
a party may be excused by the showing of a valid cause; or by the appearance of
a representative, who has been fully authorized in writing to enter into an
amicable settlement, to submit to alternative modes of dispute resolution, and to
enter into stipulations or admissions of facts and of documents.
59

Section 4 of Rule 18 may supplement Section 8 of Rule 70. Thus, the spirit
behind the exception to personal appearance under the rules on pretrial is
applicable to the preliminary conference. If there are valid reasons or if a
representative has a "special authority," a partys appearance may be waived. As
petitioners are challenging only the applicability of the rules on pretrial to the
rule on preliminary conference, the written authorization from respondents can
indeed be readily considered as a "special authorization."
Third Issue:
Rights of a Builder in Good Faith
As applied to the present case, accession refers to the right of the owner to
everything that is incorporated or attached to the property.
60
Accession
industrial -- building, planting and sowing on an immovable -- is governed by
Articles 445 to 456 of the Civil Code.
Articles 447 and 1678 of the
Civil Code Inapplicable
To buttress their claim of reimbursement for the improvements introduced on
the property, petitioners cite Article 447.
61
They allege that the CA erred in
applying Article 1678, since they had no lease agreement with respondents.
We clarify. Article 447 is not applicable, because it relates to the rules that apply
when the owner of the property uses the materials of another. It does not refer
to the instance when a possessor builds on the property of another, which is the
factual milieu here.
In view of the unique factual setting of the instant case, the contention of
petitioners regarding the inapplicability of Article 1678 deserves attention. The
CA applied the provisions on lease, because it found their possession by mere
tolerance comparable with that of a lessee, per the pronouncement in Calubayan
v. Pascual,
62
from which we quote:
"x x x. It has been held that a person who occupies the land of another at
the latters tolerance or permission, without any contract between them,
is necessarily bound by an implied promise that he will vacate upon
demand, failing which a summary action for ejectment is the proper
remedy against them. The status of defendant is analogous to that of a
lessee or tenant whose term of lease has expired but whose occupancy
continued by tolerance of the owner. In such a case, the unlawful
deprivation or withholding of possession is to be counted from the date
of the demand to vacate."
63
(Emphasis in the original.)
As explained earlier, Ismael and Teresitas possession of the two lots was not by
mere tolerance, a circumstance that negates the applicability of Calubayan.
Article 448 Applicable
On the other hand, when a person builds in good faith on the land of another,
the applicable provision is Article 448, which reads:
64

"Article 448. The owner of the land on which anything has been built,
sown or planted in good faith, shall have the right to appropriate as his
own the works, sowing or planting, after payment of the indemnity
provided for in Articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land
if its value is considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity. The
parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof."
This Court has ruled that this provision covers only cases in which the builders,
sowers or planters believe themselves to be owners of the land or, at least, to
have a claim of title thereto.
65
It does not apply when the interest is merely that
of a holder, such as a mere tenant, agent or usufructuary.
66
From these
pronouncements, good faith is identified by the belief that the land is owned; or
that -- by some title -- one has the right to build, plant, or sow thereon.
67

However, in some special cases, this Court has used Article 448 by recognizing
good faith beyond this limited definition. Thus, in Del Campo v. Abesia,
68
this
provision was applied to one whose house -- despite having been built at the
time he was still co-owner -- overlapped with the land of another.
69
This article
was also applied to cases wherein a builder had constructed improvements with
the consent of the owner. The Court ruled that the law deemed the builder to be
in good faith.
70
In Sarmiento v. Agana,
71
the builders were found to be in good
faith despite their reliance on the consent of another, whom they had mistakenly
believed to be the owner of the land.
72

Based on the aforecited special cases, Article 448 applies to the present factual
milieu. The established facts of this case show that respondents fully consented
to the improvements introduced by petitioners. In fact, because the children
occupied the lots upon their invitation, the parents certainly knew and
approved of the construction of the improvements introduced thereon.
73
Thus,
petitioners may be deemed to have been in good faith when they built the
structures on those lots.
The instant case is factually similar to Javier v. Javier.
74
In that case, this Court
deemed the son to be in good faith for building the improvement (the house)
with the knowledge and consent of his father, to whom belonged the land upon
which it was built. Thus, Article 448
75
was applied.
Rule on Useful Expenses
The structures built by petitioners were "useful" improvements, because they
augmented the value or income of the bare lots.
76
Thus, the indemnity to be paid
by respondents under Article 448 is provided for by Article 546, which we
quote:
"Art. 546. Necessary expenses shall be refunded to every possessor; but
only the possessor in good faith may retain the thing until he has been
reimbursed therefor.
"Useful expenses shall be refunded only to the possessor in good faith
with the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses
or of paying the increase in value which the thing may have acquired by
reason thereof."
Consequently, respondents have the right to appropriate -- as their own -- the
building and other improvements on the subject lots, but only after (1)
refunding the expenses of petitioners or (2) paying the increase in value
acquired by the properties by reason thereof. They have the option to oblige
petitioners to pay the price of the land, unless its value is considerably more
than that of the structures -- in which case, petitioners shall pay reasonable rent.
In accordance with Depra v. Dumlao,
77
this case must be remanded to the trial
court to determine matters necessary for the proper application of Article 448 in
relation to Article 546. Such matters include the option that respondents would
take and the amount of indemnity that they would pay, should they decide to
appropriate the improvements on the lots. We disagree with the CAs
computation of useful expenses, which were based only on petitioners bare
allegations in their Answer.
78

Ruling on Improvement Justified
While, ordinarily, the jurisdiction of the MTCC on ejectment proceedings is
limited to the issue of physical or material possession of the property in
question, this Court finds it necessary to abbreviate the issue on the
improvements in relation to Article 448. First, the determination of the parties
right to those improvements is intimately connected with the MTCC
proceedings in the light of the ejectment of petitioners. Second, there is no
dispute that while they constructed the improvements, respondents owned the
land. Third, both parties raised no objection when the RTC and the CA ruled
accordingly on this matter.
Equitable considerations compel us to settle this point immediately, pro hoc
vice, to avoid needless delay. Both parties have already been heard on this issue;
to dillydally or equivocate would not serve the cause of substantial justice.
Other Issues Raised
Given the foregoing rulings, it is no longer necessary to address petitioners
allegation that the MTCC judge and respondents lawyers should be
respectively held personally accountable for the Decision and for filing the
case.
79
The insinuation of petitioners that the lawyers manipulated the issuance
of a false barangay certification is unavailing.
80
Their contention that
respondents did not attend the barangay conciliation proceedings was based
solely on hearsay, which has little or no probative value.
81

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals
are AFFIRMED with the followingMODIFICATIONS:
1. The portion requiring Spouses Vicente and Rosario Macasaet to
reimburse one half of the value of the useful improvements, amounting
to P475,000, and the right of Spouses Ismael and Rosita Macasaet to
remove those improvements (if the former refuses to reimburse)
is DELETED.
2. The case is REMANDED to the court of origin for further
proceedings to determine the facts essential to the proper application of
Articles 448 and 546 of the Civil Code, specifically to the following
matters:
a. Spouses Vicente and Rosario Macasaets option to
appropriate -- as their own -- the improvements on the lots,
after paying the indemnity, as provided under Article 546 in
relation to Article 448 of the Civil Code; or in requiring Spouses
Ismael and Rosita Macasaet to pay for the value of the lots,
unless it is considerably more than that of the improvements, in
which case petitioners shall pay reasonable rent based upon the
terms provided under the Civil Code
b. The value of the useful expenses incurred by Spouses Ismael
and Rosita Macasaet in the construction of the improvements on
the lots
c. The increase in value acquired by the lots by reason of the
useful improvements
d. Spouses Vicente and Rosario Macasaets choice of type of
indemnity to be paid (whether b or c)
e. Whether the value of the lots is considerably more than that
of the improvements built thereon
No pronouncement as to costs.
SO ORDERED.

9.
G.R. No. L-24098 November 18, 1967
BUENAVENTURA BELAMALA, petitioner-appellee,
vs.
MARCELINO POLINAR, administrator, oppositor-appellant.
Juvenal D. Osorio for petitioner-appellee.
Anastacio A. Mumar for administrator, oppositor-appellant.
REYES, J.B.L., J.:
Appeal from judgment of the Court of First Instance of Bohol (Sp. Proc. No. 369)
allowing a money claim of appellee Belamala against the estate of the deceased
Mauricio Polinar, for damages caused to the claimant. Originally taken to the
Court of Appeals, the case was certified to this Court as involving only
questions of law.
Issue in the case is whether the civil liability of an accused of physical injuries
who dies before final judgment, is extinguished by his demise, to the extent of
barring any claim therefor against his estate.
There is no dispute as to the facts, which were stipulated, in the court of origin,
to be as follows (Rec. of Appeal, pp. 41-43):
STIPULATED AGREEMENT OF FACTS
xxx xxx xxx
1. That the claimant Buenaventura Belamala is the same offended party
in Criminal Case No. 1922 filed before the COURT OF FIRST
INSTANCE OF BOHOL, against the same Mauricio Polinar above
mentioned and against other accused, for Frustrated Murder;
2. That the administrator Marcelino Polinar is one of the legitimate
children of the above mentioned Mauricio Polinar now deceased;
3. That on May 24, 1954, the complaint for Frustrated Murder was filed
in the Justice of the Peace of Clarin, Bohol against said Mauricio Polinar,
et al, and when said case was remanded to the Court of First Instance of
Bohol, the Information on said Criminal Case No. 1922 was filed on
March 12, 1955;
4. That on May 28, 1966, the COURT OF FIRST INSTANCE OF BOHOL
rendered a decision thereof, convicting the said Mauricio Polinar of the
crime of serious physical injuries and sentenced him to pay to the
offended party Buenaventura Belamala, now claimant herein, the
amount of P990.00, plus the amount of P35.80 as indemnity the amount
of P1,000.00 as moral damages;
5. That on June 18, 1956, the accused (the late Mauricio Polinar)
appealed to the Court of Appeals from the decision of the Court of First
Instance of Bohol;
6. That on July 27, 1956, while the appeal of said Mauricio Polinar was
pending before the Court of Appeals, he died; and that there was no
Notice or Notification of his death has ever been filed in the said Court
of Appeals;
7. That the decision of the Court of Appeals in said Criminal Case No.
1922, has affirmed the decision of the Court of First Instance of Bohol, in
toto, and said decision of the Court of Appeals was promulgated on
March 27, 1958; but said Mauricio Polinar has already died on July 27,
1956;
8. That the late Mauricio Polinar is survived by his wife, Balbina
Bongato and his children, namely:
1. Narcisa Polinar, Davao
2. Geronimo Polinar, Pagadian
3. Mariano Polinar, Clarin, Bohol
4. Ireneo Polinar, Clarin, Bohol
5. Marcelino Polinar, Clarin, Bohol
6. Mauro Polinar, Clarin, Bohol
7. Demetrio Polinar, Clarin, Bohol
9. That the parties have reserved to present in Court evidence on facts
not agreed to herein by the parties.
It is to be observed that the reservation of additional evidence was waived by
the parties at the trial (see Decision of trial court, Rec. App. p. 54).
The Court a quo, overruling the contention of the Administrator-appellant that
the death of the accused prior to final judgment extinguished all criminal and
civil liabilities resulting from the offense, in view of Article 89, paragraph 1 of
the Revised Penal Code, admitted the claim against the estate in the amount of
P2,025.80 with legal interest from the date claim was filed (30 July 1959) until
paid. No payment was ordered pending final determination of the sum total of
claims admitted against the estate.
Not satisfied with the ruling, the Administrator has appealed, insisting on his
theory in the Court below.
We see no merit in the plea that the civil liability has been extinguished, in view
of the provisions of the Civil Code of the Philippines of 1950 (Rep. Act No. 386)
that became operative eighteen years after the Revised Penal Code. As pointed
out by the Court below, Article 33 of the Civil Code establishes a civil action for
damages on account of physical injuries, entirely separate and distinct from the
criminal action.
Art. 33. In cases of defamation, fraud, and physical injuries, a civil
action for damages, entirely separate and distinct from the criminal
action, may be brought by the injured party. Such civil action shall
proceed independently of the criminal prosecution, and shall require
only a preponderance of evidence.
Assuming that for lack of express reservation, Belamala's civil action for
damages was to be considered instituted together with the criminal action, still,
since both proceedings were terminated without final adjudication, the civil
action of the offended party under Article 33 may yet be enforced separately.
Such claim in no way contradicts Article 108, of the Penal Code, that imposes
the obligation to indemnify upon the deceased offender's heirs, because the
latter acquired their decedents obligations only to the extent of the value of the
inheritance (Civil Code, Art. 774). Hence, the obligation of the offender's heirs
under Article 108 ultimately becomes an obligation of the offender's estate.
The appellant, however, is correct in the contention that the claim should have
been prosecuted by separate action against the administrator, as permitted by
sections 1 and 2 of Revised Rule 87, since the claim is patently one "to recover
damages for an injury to person or property" (Rule 87, sec. 1). Belamala's action
can not be enforced by filing a claim against the estate under Rule 86, because
section 5 of that rule explicitly limits the claims to those for funeral expenses,
expenses for last sickness, judgments for money and "claims against the
decedent, arising from contract, express or implied;" and this last category (the
other three being inapposite) includes only "all purely personal obligations other
than those which have their source in delict or tort" (Leung Ben vs. O'Brien, 38
Phil. 182, 189-194) and Belamala's damages manifestly have a tortious origin. To
this effect was our ruling inAguas vs. Llemos, L-18107, Aug. 30, 1962.
Furthermore, it does not appear that the award of the trial Court was based on
evidence submitted to it; apparently it relied merely on the findings in the
criminal case, as embodied in decisions that never became final because the
accused died during the pendency of said case.
WHEREFORE, the decision under appeal is hereby reversed and set aside, but
without prejudice to the action of appellee Belamala against the Administrator
of the Estate of Mauricio Polinar. No costs. So ordered.

















10.
EN BANC
G.R. No. L-770 April 27, 1948
ANGEL T. LIMJOCO, Petitioner, vs. INTESTATE
ESTATE OF PEDRO O. FRAGRANTE,
deceased, Respondent.
Angel Limjoco, Jr. and Delfin L. Gonzales for
petitioner.
Bienvenido A. Tan for respondent.
HILADO, J.:
Under date of May 21, 1946, the Public Service
Commission, through Deputy Commissioner Fidel
Ibaez, rendered its decision in case No. 4572 of
Pedro O. Fragante, as applicant for a certificate of
public convenience to install, maintain and operate
an ice plant in San Juan, Rizal, whereby said
commission held that the evidence therein showed
that the public interest and convenience will be
promoted in a proper and suitable manner "by
authorizing the operation and maintenance of
another ice plant of two and one-half (2-) tons in
the municipality of San Juan; that the original
applicant Pedro O. Fragante was a Filipino Citizen at
the time of his death; and that his intestate estate
is financially capable of maintaining the proposed
service". The commission, therefore, overruled the
opposition filed in the case and ordered "that under
the provisions of section 15 of Commonwealth Act
No. 146, as amended a certificate of public
convenience be issued to the Intestate Estate of the
deceased Pedro Fragante, authorizing said Intestate
Estate through its Special or Judicial Administrator,
appointed by the proper court of competent
jurisdiction, to maintain and operate an ice plant
with a daily productive capacity of two and one-half
(2-1/2) tons in the Municipality of San Juan and to
sell the ice produced from said plant in the said
Municipality of San Juan and in the Municipality of
Mandaluyong, Rizal, and in Quezon City", subject to
the conditions therein set forth in detail (petitioner's
brief, pp. 33-34).chanrobl esvirtualawli brary chanrobles virtual law l ibrary
Petitioner makes four assignments of error in his
brief as follows:
1. The decision of the Public Service Commission is
not in accordance with law.chanroblesvirtualawli brarychanrobles vi rtual law library
2. The decision of the Public Service Commission is
not reasonably supported by evidence.chanroblesvi rtualawlibrary chanrobles vi rtual law library
3. The Public Service Commission erred in not
giving petitioner and the Ice and Cold Storage
Industries of the Philippines, Inc., as existing
operators, a reasonable opportunity to meet the
increased demand.chanroblesvirtualawli brary chanrobles virtual law l ibrary
4. The decision of the Public Service Commission is
an unwarranted departure from its announced
policy with respect to the establishment and
operation of ice plant. (Pp. 1-2, petitioner's brief.)
In his argument petitioner contends that it was
error on the part of the commission to allow the
substitution of the legal representative of the estate
of Pedro O. Fragante for the latter as party
applicant in the case then pending before the
commission, and in subsequently granting to said
estate the certificate applied for, which is said to be
in contravention of law.chanroblesvi rtualawlibrary chanrobles vi rtual law li brary
If Pedro O. Fragante had not died, there can be no
question that he would have had the right to
prosecute his application before the commission to
its final conclusion. No one would have denied him
that right. As declared by the commission in its
decision, he had invested in the ice plant in
question P 35,000, and from what the commission
said regarding his other properties and business, he
would certainly have been financially able to
maintain and operate said plant had he not died.
His transportation business alone was netting him
about P1,440 a month. He was a Filipino citizen and
continued to be such till his demise. The
commission declared in its decision, in view of the
evidence before it, that his estate was financially
able to maintain and operate the ice plant. The
aforesaid right of Pedro O. Fragante to prosecute
said application to its conclusion was one which by
its nature did not lapse through his death. Hence, it
constitutes a part of the assets of his estate, for
which a right was property despite the possibility
that in the end the commission might have denied
application, although under the facts of the case,
the commission granted the application in view of
the financial ability of the estate to maintain and
operate the ice plant. Petitioner, in his
memorandum of March 19, 1947, admits (page 3)
that the certificate of public convenience once
granted "as a rule, should descend to his estate as
an asset". Such certificate would certainly be
property, and the right to acquire such a certificate,
by complying with the requisites of the law,
belonged to the decedent in his lifetime, and
survived to his estate and judicial administrator
after his death.chanroblesvi rtualawl ibrary chanrobles vi rtual law library
If Pedro O. Fragrante had in his lifetime secured an
option to buy a piece of land and during the life of
the option he died, if the option had been given him
in the ordinary course of business and not out of
special consideration for his person, there would be
no doubt that said option and the right to exercise
it would have survived to his estate and legal
representatives. In such a case there would also be
the possibility of failure to acquire the property
should he or his estate or legal representative fail
to comply with the conditions of the option. In the
case at bar Pedro O. Fragrante's undoubted right to
apply for and acquire the desired certificate of
public convenience - the evidence established that
the public needed the ice plant - was under the law
conditioned only upon the requisite citizenship and
economic ability to maintain and operate the
service. Of course, such right to acquire or obtain
such certificate of public convenience was subject to
failure to secure its objective through nonfulfillment
of the legal conditions, but the situation here is no
different from the legal standpoint from that of the
option in the illustration just given.chanroblesvi rtualawlibrary chanrobles vi rtual law library
Rule 88, section 2, provides that the executor or
administrator may bring or defend actions, among
other cases, for the protection of the property or
rights of the deceased which survive, and it says
that such actions may be brought or defended "in
the right of the deceased".chanroblesvi rtualawlibrary chanrobles vi rtual law library
Rule 82, section 1, paragraph (a), mentions among
the duties of the executor or administrator, the
making of an inventory of all goods,
chattels, rights, credits, and estate of the deceased
which shall come to his possession or knowledge, or
to the possession of any other person for him.chanroblesvi rtualawlibrary chanrobles vi rtual law li brary
In his commentaries on the Rules of Court (Volume
II, 2nd ed., pages 366, 367) the present chief
Justice of this Court draws the following conclusion
from the decisions cited by him:
Therefore, unless otherwise expressly provided by
law, any action affecting the property
or rights (emphasis supplied) of a deceased person
which may be brought by or against him if he were
alive, may likewise be instituted and prosecuted by
or against the administrator, unless the action is for
recovery of money, debt or interest thereon, or
unless, by its very nature, it cannot survive,
because death extinguishes the right . . . .
It is true that a proceeding upon the application for
a certificate of public convenience before the Public
Service Commission is not an "action". But the
foregoing provisions and citations go to prove that
the decedent's rights which by their nature are not
extinguished by death go to make up a part and
parcel of the assets of his estate which, being
placed under the control and management of the
executor or administrator, can not be exercised but
by him in representation of the estate for the
benefit of the creditors, devisees or legatees, if any,
and the heirs of the decedent. And if the right
involved happens to consist in the prosecution of an
unfinished proceeding upon an application for a
certificate of public convenience of the deceased
before the Public Service Commission, it is but
logical that the legal representative be empowered
and entitled in behalf of the estate to make the
right effective in that proceeding.chanroblesvi rtualawlibrary chanrobles vi rtual law library
Manresa (Vol. III, 6th ed., p. 11) says that No. 10
of article 334 and article 336 of the Civil Code,
respectively, consider as immovable and movable
things rights which are not material. The same
eminent commentator says in the cited volume (p.
45) that article 336 of the Civil Code has been
deficiently drafted in that it is not sufficiently
expressive of all incorporeal rights which are
also property for juridical purposes.chanroblesvirtualawli brary chanrobles virtual law l ibrary
Corpus Juris (Vol. 50, p. 737) states that in the
broad sense of the term, property includes, among
other things, "an option", and "the certificate of the
railroad commission permitting the operation of a
bus line", and on page 748 of the same volume we
read:
However, these terms (real property, as estate or
interest) have also been declared to include every
species of title, inchoate or complete, and
embracerights which lie in contract, whether
executory or executed. (Emphasis supplied.)
Another important question raised by petitioner is
whether the estate of Pedro O. Fragrante is a
"person" within the meaning of the Public Service
Act.chanroblesvi rtualawlibrary chanrobles vi rtual law library
Words and Phrases, First Series, (Vol. 6, p, 5325),
states the following doctrine in the jurisdiction of
the State of Indiana:
As the estate of the decedent is in law regarded as
a person, a forgery committed after the death of
the man whose name purports to be signed to the
instrument may be prosecuted as with the intent to
defraud the estate. Billingsvs. State, 107 Ind., 54,
55, 6 N. E. 914, 7 N. E. 763, 57 Am. Rep. 77.
The Supreme Court of Indiana in the decision cited
above had before it a case of forgery committed
after the death of one Morgan for the purpose of
defrauding his estate. The objection was urged that
the information did not aver that the forgery was
committed with the intent to defraud any person.
The Court, per Elliott, J., disposed of this objection
as follows:
. . . The reason advanced in support of this
proposition is that the law does not regard the
estate of a decedent as a person. This intention
(contention) cannot prevail. The estate of the
decedent is a person in legal contemplation. "The
word "person" says Mr. Abbot, "in its legal
signification, is a generic term, and includes
artificial as well as natural persons," 2 Abb. Dict.
271; Douglas vs. Pacific, etc. Co., 4 Cal. 304;
Planters', etc., Bank vs. Andrews, 8 Port. (Ala.)
404. It said in another work that 'persons are of
two kinds: natural and artificial. A natural person is
a human being. Artificial persons include (1) a
collection or succession of natural persons forming
a corporation; (2) a collection of property to which
the law attributes the capacity of having rights and
duties. The latter class of artificial persons is
recognized only to a limited extent in our law.
"Examples are the estate of a bankrupt or deceased
person." 2 Rapalje & L. Law Dict. 954. Our own
cases inferentially recognize the correctness of the
definition given by the authors from whom we have
quoted, for they declare that it is sufficient, in
pleading a claim against a decedent's estate, to
designate the defendant as the estate of the
deceased person, naming him. Ginn vs. Collins, 43
Ind. 271. Unless we accept this definition as
correct, there would be a failure of justice in cases
where, as here, the forgery is committed after the
death of a person whose name is forged; and this is
a result to be avoided if it can be done consistent
with principle. We perceive no difficulty in avoiding
such a result; for, to our minds, it seems
reasonable that the estate of a decedent should be
regarded as an artificial person. It is the creation of
law for the purpose of enabling a disposition of the
assets to be properly made, and, although natural
persons as heirs, devises, or creditors, have an
interest in the property, the artificial creature is a
distinct legal entity. The interest which natural
persons have in it is not complete until there has
been a due administration; and one who forges the
name of the decedent to an instrument purporting
to be a promissory note must be regarded as
having intended to defraud the estate of the
decedent, and not the natural persons having
diverse interests in it, since ha cannot be presumed
to have known who those persons were, or what
was the nature of their respective interest. The
fraudulent intent is against the artificial person, -
the estate - and not the natural persons who have
direct or contingent interest in it. (107 Ind. 54, 55,
6 N.E. 914-915.)
In the instant case there would also be a failure of
justice unless the estate of Pedro O. Fragrante is
considered a "person", for quashing of the
proceedings for no other reason than his death
would entail prejudicial results to his investment
amounting to P35,000.00 as found by the
commission, not counting the expenses and
disbursements which the proceeding can be
presumed to have occasioned him during his
lifetime, let alone those defrayed by the estate
thereafter. In this jurisdiction there are ample
precedents to show that the estate of a deceased
person is also considered as having legal
personality independent of their heirs. Among the
most recent cases may be mentioned that of
"Estate of Mota vs. Concepcion, 56 Phil., 712, 717,
wherein the principal plaintiff was the estate of the
deceased Lazaro Mota, and this Court gave
judgment in favor of said estate along with the
other plaintiffs in these words:
. . . the judgment appealed from must be affirmed
so far as it holds that defendants Concepcion and
Whitaker are indebted to he plaintiffs in the amount
of P245,804.69 . . . .
Under the regime of the Civil Code and before the
enactment of the Code of Civil Procedure, the heirs
of a deceased person were considered in
contemplation of law as the continuation of his
personality by virtue of the provision of article 661
of the first Code that the heirs succeed to all the
rights and obligations of the decedent by the mere
fact of his death. It was so held by this Court
in Barrios vs. Dolor, 2 Phil., 44, 46. However, after
the enactment of the Code of Civil Procedure,
article 661 of the Civil Code was abrogated, as held
in Suiliong & Co. vs. Chio-Taysan, 12 Phil., 13, 22.
In that case, as well as in many others decided by
this Court after the innovations introduced by the
Code of Civil Procedure in the matter of estates of
deceased persons, it has been the constant doctrine
that it is the estate or the mass of property, rights
and assets left by the decedent, instead of the heirs
directly, that becomes vested and charged with his
rights and obligations which survive after his
demise.chanroblesvirtualawli brary chanrobles virtual law l ibrary
The heirs were formerly considered as the
continuation of the decedent's personality simply by
legal fiction, for they might not have been flesh and
blood - the reason was one in the nature of a legal
exigency derived from the principle that the heirs
succeeded to the rights and obligations of the
decedent. Under the present legal system, such
rights and obligations as survive after death have to
be exercised and fulfilled only by the estate of the
deceased. And if the same legal fiction were not
indulged, there would be no juridical basis for the
estate, represented by the executor or
administrator, to exercise those rights and to fulfill
those obligations of the deceased. The reason and
purpose for indulging the fiction is identical and the
same in both cases. This is why according to the
Supreme Court of Indiana in Billings vs.
State, supra, citing 2 Rapalje & L. Dictionary, 954,
among the artificial persons recognized by law
figures "a collection of property to which the law
attributes the capacity of having rights and duties",
as for instance, the estate of a bankrupt or
deceased person.chanroblesvirtualawl ibrary chanrobles virtual law library
Petitioner raises the decisive question of whether or
not the estate of Pedro O. Fragrante can be
considered a "citizen of the Philippines" within the
meaning of section 16 of the Public Service Act, as
amended, particularly the proviso thereof expressly
and categorically limiting the power of the
commission to issue certificates of public
convenience or certificates of public convenience
and necessity "only to citizens of the Philippines or
of the United States or to corporations,
copartnerships, associations, or joint-stock
companies constituted and organized under the
laws of the Philippines", and the further proviso that
sixty per centum of the stock or paid-up capital of
such entities must belong entirely to citizens of the
Philippines or of the United States.chanrobl esvirtualawli brary chanrobles virtual law l ibrary
Within the Philosophy of the present legal system,
the underlying reason for the legal fiction by which,
for certain purposes, the estate of the deceased
person is considered a "person" is the avoidance of
injustice or prejudice resulting from the
impossibility of exercising such legal rights and
fulfilling such legal obligations of the decedent as
survived after his death unless the fiction is
indulged. Substantially the same reason is assigned
to support the same rule in the jurisdiction of the
State of Indiana, as announced in Billingsvs.
State, supra, when the Supreme Court of said State
said:
. . . It seems reasonable that the estate of a
decedent should be regarded as an artificial person.
it is the creation of law for the purpose of enabling
a disposition of the assets to be properly made . . .
.
Within the framework and principles of the
constitution itself, to cite just one example, under
the bill of rights it seems clear that while the civil
rights guaranteed therein in the majority of cases
relate to natural persons, the term "person" used in
section 1 (1) and (2) must be deemed to include
artificial or juridical persons, for otherwise these
latter would be without the constitutional guarantee
against being deprived of property without due
process of law, or the immunity from unreasonable
searches and seizures. We take it that it was the
intendment of the framers to include artificial or
juridical, no less than natural, persons in these
constitutional immunities and in others of similar
nature. Among these artificial or juridical persons
figure estates of deceased persons. Hence, we hold
that within the framework of the Constitution, the
estate of Pedro O. Fragrante should be considered
an artificial or juridical person for the purposes of
the settlement and distribution of his estate which,
of course, include the exercise during the judicial
administration thereof of those rights and the
fulfillment of those obligations of his which survived
after his death. One of those rights was the one
involved in his pending application before the Public
Service Commission in the instant case, consisting
in the prosecution of said application to its final
conclusion. As stated above, an injustice would
ensue from the opposite course.chanroblesvi rtualawlibrarychanrobles virtual law library
How about the point of citizenship? If by legal
fiction his personality is considered extended so
that any debts or obligations left by, and surviving,
him may be paid, and any surviving rights may be
exercised for the benefit of his creditors and heirs,
respectively, we find no sound and cogent reason
for denying the application of the same fiction to his
citizenship, and for not considering it as likewise
extended for the purposes of the aforesaid
unfinished proceeding before the Public Service
Commission. The outcome of said proceeding, if
successful, would in the end inure to the benefit of
the same creditors and the heirs. Even in that event
petitioner could not allege any prejudice in the legal
sense, any more than he could have done if
Fragrante had lived longer and obtained the desired
certificate. The fiction of such extension of his
citizenship is grounded upon the same principle,
and motivated by the same reason, as the fiction of
the extension of personality. The fiction is made
necessary to avoid the injustice of subjecting his
estate, creditors and heirs, solely by reason of his
death to the loss of the investment amounting to
P35,000, which he has already made in the ice
plant, not counting the other expenses occasioned
by the instant proceeding, from the Public Service
Commission of this Court.chanroblesvi rtualawlibrarychanrobles vi rtual law li brary
We can perceive no valid reason for holding that
within the intent of the constitution (Article IV), its
provisions on Philippine citizenship exclude the legal
principle of extension above adverted to. If for
reasons already stated our law indulges the fiction
of extension of personality, if for such reasons the
estate of Pedro O. Fragrante should be considered
an artificial or juridical person herein, we can find
no justification for refusing to declare a like fiction
as to the extension of his citizenship for the
purposes of this proceeding.chanroblesvirtualawli brary chanrobles virtual law l ibrary
Pedro O. Fragrante was a Filipino citizen, and as
such, if he had lived, in view of the evidence of
record, he would have obtained from the
commission the certificate for which he was
applying. The situation has suffered but one
change, and that is, his death. His estate was that
of a Filipino citizen. And its economic ability to
appropriately and adequately operate and maintain
the service of an ice plant was the same that it
received from the decedent himself. In the absence
of a contrary showing, which does not exist here,
his heirs may be assumed to be also Filipino
citizens; and if they are not, there is the simple
expedient of revoking the certificate or enjoining
them from inheriting it.chanroblesvi rtualawlibrary chanrobles vi rtual law li brary
Upon the whole, we are of the opinion that for the
purposes of the prosecution of said case No. 4572
of the Public Service Commission to its final
conclusion, both the personality and citizenship of
Pedro O. Fragrante must be deemed extended,
within the meaning and intent of the Public Service
Act, as amended, in harmony with the constitution:
it is so adjudged and decreed.chanroblesvirtualawl ibrary chanrobles virtual law l ibrary
Decision affirmed, without costs. So ordered.chanroblesvirtualawl ibrary chanrobles virtual law library
Moran, C.J., Pablo, Bengzon, Briones, Padilla and
Tuason, JJ., concur.
Paras, J., I hereby certify that Mr. Justice Feria
voted with the majority.

Separate Opinions chanrobles virtual law library
PERFECTO, J., dissenting:chanrobles vi rtual law li brary
Commonwealth Act No. 146 reserves to Filipino
citizens the right to obtain a certificate of public
convenience to operate an ice plant in San Juan,
Rizal. The limitation is in accordance with section 8
of Article XIV of the Constitution which provides
No franchise, certificate, or any other form of
authorization for the operation of a public utility
shall be granted except to citizens of the Philippines
or to corporations or other entities organized under
the laws of the Philippines, sixty per centum of the
capital of which is owned by citizens of the
Philippines, nor such franchise, certificate or
authorization be exclusive in character or for a
longer period than fifty years. No franchise granted
to any individual, firm or corporation, except under
the condition that it shall be subject to amendment,
alteration, or repeal by Congress when the public
interest so requires.
The main question in this case is whether the estate
of Pedro O. Fragrante fulfills the citizenship
requirement. To our mind, the question can be
restated by asking whether the heirs of Pedro O.
Fragrante fulfill the citizenship requirement of the
law.chanroblesvi rtualawl ibrary chanrobles vi rtual law library
The estate is an abstract entity. As such, its legal
value depends on what it represents. It is a device
by which the law gives a kind of personality and
unity to undetermined tangible persons, the heirs.
They inherit and replace the deceased at the very
moment of his death. As there are procedural
requisites for their identification and determination
that need time for their compliance, a legal fiction
has been devised to represent them. That legal
fiction is the estate, a liquid condition in process of
solidification.chanroblesvi rtualawlibrary chanrobles vi rtual law li brary
The estate, therefore, has only a representative
value. What the law calls estate is, a matter of fact,
intended to designate the heirs of the deceased.
The question, therefore, in this case, boils down to
the citizenship of the heirs of Fragrante.chanroblesvirtualawli brary chanrobles virtual law l ibrary
There is nothing in the record to show conclusively
the citizenship of the heirs of Fragrante. If they are
Filipino citizens, the action taken by the Public
Service Commission should be affirmed. If they are
not, it should be reversed.chanroblesvirtualawl ibrary chanrobles virtual law library
Petitioner alleges that the estate is just a front or
dummy for aliens to go around the citizenship
constitutional provision. It is alleged that Gaw Suy,
the special administrator of the estate, is an
alien.chanroblesvi rtualawl ibrary chanrobles vi rtual law library
We are of the opinion that the citizenship of the
heirs of Fragrante should be determined by the
Commission upon evidence that the party should be
present. It should also determine the dummy
question raised by the petitioner.chanroblesvirtualawl ibrary chanrobles vi rtual law library
We are of opinion and so vote that the decision of
the Public Service Commission of May 21, 1946, be
set aside and that the Commission be instructed to
receive evidence of the above factual questions and
render a new decision accordingly.

























11.
EN BANC
G.R. No. L-28067 March 10, 1928
BASILIA ARAYATA, Plaintiff-Appellant,
vs. FLORENTINO JOYA, ET AL., Defendants-
Appellants.
Emiliano T. Tirona and Andres R. Faustino for
plaintiff-appellant.
Fidel Ibanez for defendants-appellants.
VILLA-REAL, J.:
In this instance both parties have appealed from
the judgment of the Court of First Instance of
Cavite, the dispositive part of which, as amended,
is as follows;
Wherefore, the testamentary clauses and
dispositions made by the late Cecilio Joya
concerning one-half of the property left by the
deceased and pertaining to the plaintiff, are hereby
declared void in so far as they infringe upon said
plaintiff's right, as being contrary to law; the
certificate of sale of lot No. 1058, Exhibit 9,
executed by the deceased in favor of defendant
Florentino Joya is null and void, and the plaintiff is
hereby declared the sole and exclusive owner of
said lots, or such portions thereof or their value, as
the plaintiff may be entitled to as a result of the
liquidation of the testamentary estate; and each
and every one of the defendants, Florentino and
Pablo Joya, Asuncion Bobadilla, and Delfin and
Felicisima Blancaflor, are hereby ordered to deliver
lots Nos. 1031, 1058, 1086, 1153, and 2352 to the
administrator of the estate of the deceased in order
that he may proceed to the liquidation, partition
and distribution of the latter's estate in accordance
with the law and this judgment, as soon as it
becomes final and executory, the Director of Lands
being hereby ordered to cancel the certificates of
transfer of said lots Nos. 1031, 1058, 1086, 1153
and 2352 registered in the name of said
defendants, Florentino Joya on his own behalf and
that of Pablo Joya, Felicisimo Joya, Asuncion
Bobadilla, Delfin and Felicisima Blancaflor, with the
costs of the action against the defendants. So
ordered.
In support of her appeal, plaintiff-appellant assigns
the following alleged errors as committed by the
trial court in its decision, to wit: (1) The lower court
erred in declaring the plaintiff owner of only one-
half of lots Nos. 1031, 1058, 1086, 1153, and
2352, as conjugal property possessed with the
deceased Cecilio Joya, instead of holding her to be
the absolute and exclusive owner of said lots, in
accordance with section 16 of Act No. 1120; (2) the
lower court erred in not holding the document of
sale of lot No. 547, Exhibit 10, fraudulent, (3) the
lower court erred in amending its judgment of
December 17, 1926, thereby exempting the
defendants from the obligation to pay plaintiff the
products of the lots in question, from the year 1920
until their restitution; (4) the lower court erred in
amending its judgment rendered on December 17,
1926, ordering the delivery of all the lots in
question to the administrator of the estate of the
deceased Cecilio Joya, in order that he might
proceed to the liquidation and distribution of the
latter's estate in accordance with the law and its
judgment; (5) the lower court erred in not passing
upon petition contained in the complaint to the
effect that defendant, Florentino Joya, who was
appointed administrator of the estate of the
deceased Cecilio Joya in case No. 1241, be relieved
from such duty; (6) the lower court erred in
denying plaintiff's motion for a new trial.chanroblesvirtualawli brary chanrobles virtual law l ibrary
The defendants-appellants, in turn, assign the
following alleged errors as committed by the trial
court in its decision, to wit: (1) The trial court erred
in annulling the clauses and provisions of the
decedent Cecilio Joya's will, Exhibit Y, with respect
to one-half of the property left by said decedent;
(2) the trial court erred in holding the certificate of
sale of lot No. 1058, exhibit 9, executed by the
deceased Cecilio Joya in favor of defendant
Florentino Joya, to be null and void; (3) the trial
court erred in finding that when plaintiff signed the
agreement of partition, Exhibit 7, she was unaware
of the contents of the same, and that said
agreement of partition has not become legally
effective as against the plaintiff; (4) the trial court
erred in holding it to be a fact admitted by both
parties that lots 1153 and 2352 were not donated
by Pedro Tiongco to Cecilio Joya, the corresponding
certificates of transfer by donation, Exhibits F and
G, notwithstanding; (5) the trial court erred in
giving more credit to the testimony of the plaintiff
Basilia Arayata than to that of the defendant
Florentino Joya; (6) the trial court erred in
admitting plaintiff's Exhibits J, M, N and N-1; (7)
the trial court erred in ordering each and every one
of the defendants, Florentino, Feliciano and Pablo
Joya, Asuncion Bobadilla Delfin and Feliciana
Blancaflor to deliver lots Nos. 1031, 1038, 1086,
1153 and 2352 to the administrator of the estate of
the deceased Cecilio Joya in order that he might
proceed with the liquidation, partition, and
distribution of the said deceased's estate in
accordance with the decision rendered in this case
by said trial court; (8) the trial court erred in
holding plaintiff to be sole and exclusive owner of
the lots question, or such portions thereof, or their
value as may be due her as a result of said
liquidation.chanroblesvirtualawl ibrary chanrobles virtual law l ibrary
The following are the pertinent and controverted
facts necessary for the decision of this case: chanrobles vi rtual law library
Cecilio Joya, during his lifetime, inherited from his
deceased parents the right of lease to six lots of the
friar lands at Santa Crus de Malabon, municipality
of Tanza, Province of Cavite. On June 4, 1906,
Cecilio Joya married the herein plaintiff, Basilia
Arayata. When the Insular Government acquired
the said land, Cecilio Joya continued his lease in
accordance with the provisions of the Act of
Congress of July 1, 1902 and Act No. 1120 of the
Philippine Commission. While married to the herein
plaintiff-appellant, Cecilio Joya purchase the lots he
had been leasing, on installments, from the
Government, under said Act No. 1120, which were
designated as lots Nos. 1031 (Exhibit C), 1058
(Exhibit D), 1086 (Exhibit E), 1153 (Exhibit F),
2352 (Exhibit G) and 547 (Exhibit H). as the
number of lots which a purchaser could acquire
under the law was limited, lots Nos. 1153 and 2352
were excluded and put up for sale. In order not to
lose them, Cecilio Joya had Pedro Tiongco buy
them, supplying him with the necessary funds.
Subsequently, Pedro Tiongco transferred his right to
said lots to Cecilio Joya by donation, as appears
from Exhibits F and G. These transfers were
approved by the Director of Lands and noted in the
proper registry book. On April 24 1919, Cecilio Joya
conveyed his right to lot No. 1058 to Florentino
Joya consideration of the sum of P2,000 said
conveyance having been approved by the Director
of Lands and registered in the proper registry book
(Exhibit 9). On May 11, 1919, Cecilio Joya conveyed
his right to lot No. 547 to Marcelina Joya and
Francisco Joya in consideration of the sum of P450,
conveyance having been approved by the Director
of Lands and registered in the proper registry book
(Exhibit 10). On April 27, 1919, Cecilio Joya
executed a will devising lot No. 1058 to Florentino
Joya, lot No. 1086 to Pablo Joya, lot No. 1031 to
Delfin and Felicisima Blancaflor, lot No. 1153 to the
brothers Agustin and Pedro Joya, lot No. 2352 to
Feliciano and Asuncion Bobadilla, and lot No. 547
(Exhibit Y) to Marcelina and Francisca Joya. At the
time of his death, Cecilio Joya had not yet
completed the payment of the price of the lots
mentioned above to the Insular Government. All the
lots in question except lot No. 547, are in the
possession of the defendants, who enjoy their
products. On May 10, 1920 lots Nos. 2352, 1086,
1153 and 1031, were transferred to Florentino Joya
as administrator of the estate of the deceased
Cecilio Joya. (Exhibits 3, 4, 5 and 6.) chanrobles vi rtual law library
On May 26, 1919, Cecilio Joya died, and on June 9,
1919, his executor, the herein defendant Florentino
Joya, presented said will for probate to the Court of
First Instance of Cavite, which was probated after
the proper proceedings. In March, 1920, in the
course of the testamentary proceedings, the
executor Florentino Joya presented an alleged
agreement of partition by the legatees, which
agreement was disapproved by the court in view of
the herein plaintiff's opposition, who alleged that
her signature had been obtained by fraud.chanroblesvi rtualawlibrary chanrobles vi rtual law li brary
The questions to be determined in this appeal are
purely legal, and, briefly,, are as follows: (1) Were
Cecilio Joya's conveyances of his interest in lot No.
1958 to Florentino Joya and in No. 547 to the
sisters Marcelina and Francisca Joya fraudulent? (2)
Were Cecilio Joya's legacies of lots Nos. 1031,
1086, 1153 and 2352 to the other defendants null
and void? (3) Has the plaintiff-appellant, as the
surviving spouse, exclusive right to all the lots in
question? (4) In case she has, is she entitled to the
possession and products thereof? chanrobles vi rtual law li brary
As to the first question, the pertinent part of section
16 of Act No. 1120 says the following:
SEC. 16. . . . In case the holder of the certificate
shall have his interest in the land before having
complied with all the conditions thereof, the
purchaser from the holder of the certificate shall be
entitled to all the rights of the holder of the
certificate upon presenting his assignment to the
Chief of the Bureau of Public Lands for registration.
It will be seen that the holder of a certificate off
sale of friar has a right to sell his interest therein,
even before having fully paid the purchase price
and upon presentation of the certificate of transfer
to the Chief of the Bureau of Public Lands for
registration, he is subrogated to all the rights of the
holder of the certificate.chanroblesvi rtualawlibrary chanrobles vi rtual law li brary
The evidence shows that during his lifetime Cecilio
Joya conveyed his interest in lot No. 1058 to
Florentino Joya for the sum of P2,000, said
conveyance having been approved by the Director
of Lands, and registered in the proper register book
of said office. (Exhibit 9.) His right to lot No. 547
was also conveyed by Cecilio Joya to Marcelina and
Francisca Joya during his lifetime, said transfer
having been approved by the Director of Lands, and
registered in the proper book in the Bureau of
Public Lands. (Exhibit 10.) Said conveyance having
been made in accordance with the provisions of the
law, Florentino Joya on the one hand, and Marcelina
and Francisca Joya on the other, were subrogated
to all of Cecilio Joya's rights to said lots, and there
is nothing in the record to show conclusively that
said conveyances were fraudulently obtained. The
fact that the testator included said lots in his will
and disposed of them in the form of legacies in
favor of said persons, does not in itself show the
existence of any fraud. At most, it may be held as
an act of ratification.chanroblesvirtualawl ibrary chanrobles vi rtual law library
In regard to the second and third questions, that is,
whether or not the legacies are null and void, and
the plaintiff-appellant, as the surviving spouse, is
entitled exclusively to the lots in question, the
pertinent part of said section 16 of Act No. 1120
provides as follows:
SEC. 16. In the event of the death of a holder of a
certificate the issuance of which is provided for in
section twelve hereof, prior to the execution of a
deed by the Government to any purchaser, his
widow shall be entitled to receive a deed of the land
stated in the certificate upon showing that she has
complied with the requirements of law for the
purchase of the same.
In the case of Jocson vs. Soriano, as administrator
of the intestate estate of Silvestre Estacion (45
Phil., 375), this court, interpreting the above-
quoted legal provision, laid down the following
doctrine:
FRIAR ESTATE LANDS; RIGHTS OF THE WIDOW OF
THE PURCHASER AFTER THE DEATH OF THE
LATTER. - Under the provisions of section 16 of Act
No. 1120, the widow of a purchaser of a parcel of
land belonging to the Friar Estate, purchased by the
Government, after the death of her husband (the
purchaser), is entitled to have a patent issued to
her of the lands purchased, upon a proper showing
that she has completed the payment of the
purchase price. The right granted to the original
settlers of the friar estate lands to purchase the
parcel occupied by them at the time of the
purchase by the Government, is a right conceded
by the Government, analogous to the homestead
laws. A homestead privilege does not terminate on
the husband's death, but is transferred to his widow
and his family. A homestead selected by the
husband in his lifetime vests absolute in his
surviving wife, and her rights are governed by the
law in force at the time of the death of her
husband. Neither does she lose said right by a
second marriage upon the death of her husband,
the purchaser. She may continue to occupy the
whole of the homestead.
We have seen, in discussing and solving the first
question, that the holder of a certificate of sale of
friar lands, who has not fully paid the purchase
price may transfer and convey his rights, but that
the transferee or grantee is not subrogated to all
the transferor's right until the transfer has been
approved by the Director of Lands and registered in
the registry book in the Bureau of Public Lands. In
other words, in order that a transfer of the rights of
a holder of a certificate of sale of friar lands may be
legally effective, it is necessary that a formal
certificate of transfer be drawn up and submitted to
the Chief of the Bureau of Public Lands for his
approval and registration. The law authorizes no
other way of transferring the rights of a holder of a
certificate of sale of friar lands. It provides,
however, that in case of the death of said holder,
the surviving spouse shall be entitled to receive the
title to the land, upon compliance with the
requirements of the law. If, as it was held in the
aforecited case of Jocson vs. Soriano, the right
conferred by Act No. 1120 on the holder of a
certificate of sale of friar lands in similar to that
conferred on the holder of a "homestead," and if
the latter has no right to dispose of said certificate
by will to the prejudice of his surviving spouse and
for his children (29 C. J., 930, par. 342), then by
analogy, the holder of a certificate of sale of friar
lands cannot dispose of his rights to said lands by
will to the prejudice of his widow and children.chanroblesvi rtualawlibrary chanrobles vi rtual law library
The provisions of the Civil Code referring to
conjugal property cannot be applied in this case, as
was done by the trial court, because the law
regulating the acquisition, disposition, and
transmission of rights to the friar lands acquired by
the Insular Government, lays down rules in conflict
with the aforesaid provisions of the Civil Code; and
as the said Code is of a general character, while Act
No. 1120 is a special law, the latter should
prevail.chanroblesvi rtualawlibrary chanrobles virtual law li brary
With respect to the fourth question raised, namely,
whether or not the herein plaintiff-appellant is
entitled to the possession and the products of the
friar lands acquired by the Insular Government,
which, by virtue of the law, pass exclusively to the
surviving spouse upon compliance of the legal
requirements, the answer must be in the
affirmative. The defendants, who are in possession
of the said lands, cannot invoke the provisions of
the Civil Code relative to possession in good faith,
inasmuch as the principle on which the right of a
holder in good faith is based is the belief that his
possession is with just title under claim of
ownership.chanroblesvirtualawl ibrary chanrobles virtual law library
While a deceased heirs or legatees acquire the
ownership of the property given them in the will
and may taken possession of their respective
portions upon the death of their predecessor, yet
upon the appointment of an administrator, the
latter, by virtue of his appointment, acquires a right
to the possession of the property of estate, subject
to the orders of the court, unless he consents to the
heirs continuing in possession thereof. But such
consent does not, however, relieve the
administrator of all responsibility for the
management of the same and its fruits; because
until the judicial partition is made, said property
continues to belong to the testamentary estate.
(Pimentel vs. Palanca, 5 Phil., 436;
Fernandez vs. Tria, 22 Phil., 603.) chanrobles vi rtual law library
Being a matter of law, the defendants-appellants
cannot plead ignorance of the fact that until a
judicial partition of the property left by Cecilio Joya
is made, said property belongs to the lather's estate
and it together with its products, is subject to the
payment of the testator's debts, if any. Only after
judicial partition has been made do they acquire the
title to their respective legacies, if the latter are
valid. (Santos vs. Roman Catholic Bishop of Nueva
Caceres, 45 Phil., 895.) chanrobles vi rtual law library
We have seen that the legacies given by Cecilio
Joya to the defendants were void. If the lands,
which are the subject matter of said legacies and
which are in the possession of the defendants, still
belong to Cecilio Joya's estate, because no judicial
partition has as yet been made of the property he
left, which is subject, together with its fruits, to the
payment of his debts, said defendants cannot
invoke the provisions of the Civil Code with respect
to possession in good faith insofar as the fruits are
concerned; because even when the legacies are
valid they acquired only when the latter judicially
assigned to them in the final partition, and because,
while said lands are under administration, the
administrator is obliged to render an account of his
management of the same and the products
thereof.chanroblesvirtualawl ibrary chanrobles virtual law library
In conclusion, them we hold that the defendants
are not entitled to the possession of the lands in
question or their products, and they are bound to
return them to the herein plaintiff-appellant, after
deducting the necessary expenses for cultivation
and preservation. (Art 453, Civil Code.) chanrobles vi rtual law library
Summarizing all that has been said above, we find:
1. That Cecilio Joya's transfers during his lifetime of
lot No. 1058 to Florentino Joya and lot No. 547 to
the sisters Marcelina and Francisca Joya, with the
approval of the Director of Lands, are bona fide,
and therefore legal and valid.chanroblesvirtualawl ibrarychanrobles vi rtual law library
2. That Cecilio Joya's legacies in his will of lot No.
1031 to Delfin and Felicisima Blancaflor, lot No.
1086 to Pablo Joya, lot No. 1152 to the brothers
Agustin and Pedro Joya, and lot No. 2352 to
Feliciano and Asuncion Bobadilla are null and void,
being contrary to the provisions of section 16 of Act
No. 1120 which grants his widow, the herein
plaintiff-appellant the ownership of the lands
purchased and not transferred by him during his
lifetime, provided that she complies with the legal
requirements for the purchase of the same.chanroblesvirtualawl ibrary chanrobles virtual law library
3. The plaintiff-appellant is entitled to the exclusive
ownership and possession of the aforementioned
lots Nos. 1031, 1086, 1153, and 2352 and to their
fruits, after deducting the necessary expenses of
preservation, cultivation and production.
For the foregoing, the judgment appealed from is
modified, and it is ordered that Feliciano and Pablo
Joya, Asuncion Bobadilla, Delfin and Felicisima
Blancaflor return lots Nos. 1031, 1086, 1153, and
2352 to the plaintiff-appellant, Basilia Arayata,
together with their products, or the latter's
equivalent in cash from the year 1920 until their
restitution, deducting the necessary expenses of
cultivation, preservation, and production. Without
any special pronouncement as to costs, it is so
ordered.
Johnson, Malcolm, Villamor, Ostrand, Johns and
Romualdez, JJ., concur.


































































12
THIRD DIVISION

[G.R. No. 68053. May 7, 1990.]

LAURA ALVAREZ, FLORA ALVAREZ and RAYMUNDO
ALVAREZ, Petitioners, v. THE HONORABLE
INTERMEDIATE APPELLATE COURT and JESUS
YANES, ESTELITA YANES, ANTONIO YANES,
ROSARIO YANES, and ILUMINADO
YANES, Respondents.

Francisco G. Banzon, for Petitioners.

Renecio R. Espiritu for Private Respondents.


D E C I S I O N


FERNAN, C.J.:


This is a petition for review on certiorari seeking the
reversal of: (a) the decision of the Fourth Civil Cases
Division of the Intermediate Appellate Court dated August
31, 1983 in AC-G.R. CV No. 56626 entitled "Jesus Yanes
Et. Al. v. Dr. Rodolfo Siason Et. Al." affirming the decision
dated July 8, 1974 of the Court of First Instance of Negros
Occidental insofar as it ordered the petitioners to pay
jointly and severally the private respondents the sum of
P20,000.00 representing the actual value of Lots Nos.
773-A and 773-B of the cadastral survey of Murcia,
Negros Occidental and reversing the subject decision
insofar as it awarded the sums of P2,000.00, P5,000.00
and P2,000.00 as actual damages, moral damages and
attorneys fees, respectively and (b) the resolution of said
appellate court dated May 30, 1984, denying the motion
for reconsideration of its decision.chanrobles lawlibrary :
rednad

The real properties involved are two parcels of land
identified as Lot 773-A and Lot 773-B which were
originally known as Lot 773 of the cadastral survey of
Murcia, Negros Occidental. Lot 773, with an area of
156,549 square meters, was registered in the name of the
heirs of Aniceto Yanes under Original Certificate of Title
No. RO-4858 (8804) issued on October 9, 1917 by the
Register of Deeds of Occidental Negros (Exh. A).

Aniceto Yanes was survived by his children, Rufino, Felipe
and Teodora. Herein private respondents, Estelita,
Iluminado and Jesus, are the children of Rufino who died
in 1962 while the other private respondents, Antonio and
Rosario Yanes, are children of Felipe. Teodora was
survived by her child, Jovita (Jovito) Alib. 1 It is not clear
why the latter is not included as a party in this case.

Aniceto left his children Lots 773 and 823. Teodora
cultivated only three hectares of Lot 823 as she could not
attend to the other portions of the two lots which had a
total area of around twenty-four hectares. The record
does not show whether the children of Felipe also
cultivated some portions of the lots but it is established
that Rufino and his children left the province to settle in
other places as a result of the outbreak of World War II.
According to Estelita, from the "Japanese time up to peace
time", they did not visit the parcels of land in question but
"after liberation", when her brother went there to get their
share of the sugar produced therein, he was informed that
Fortunato Santiago, Fuentebella (Puentevella) and Alvarez
were in possession of Lot 773. 2

It is on record that on May 19, 1938, Fortunato D.
Santiago was issued Transfer Certificate of Title No. RF
2694 (29797) covering Lot 773-A with an area of 37,818
square meters. 3 TCT No. RF 2694 describes Lot 773-A as
a portion of Lot 773 of the cadastral survey of Murcia and
as originally registered under OCT No. 8804.

The bigger portion of Lot 773 with an area of 118,831
square meters was also registered in the name of
Fortunato D. Santiago on September 6, 1938 under TCT
No. RT-2695 (28192). 4 Said transfer certificate of title
also contains a certification to the effect that Lot 773-B
was originally registered under OCT No. 8804.

On May 30, 1955, Santiago sold Lots 773-A and 773-B to
Monico B. Fuentebella, Jr. in consideration of the sum of
P7,000.00. 5 Consequently, on February 20, 1956, TCT
Nos. T-19291 and T-19292 were issued in Fuentebellas
name. 6

After Fuentebellas death and during the settlement of his
estate, the administratrix thereof (Arsenia R. Vda. de
Fuentebella, his wife) filed in Special Proceedings No.
4373 in the Court of First Instance of Negros Occidental, a
motion requesting authority to sell Lots 773-A and 773-B
7 By virtue of a court order granting said motion, 8 on
March 24, 1958, Arsenia Vda. de Fuentebella sold said lots
for P6,000.00 to Rosendo Alvarez. 9 Hence, on April 1,
1958. TCT Nos. T-23165 and T-23166 covering Lots 773-A
and 773-B were respectively issued to Rosendo Alvarez.
10

Two years later or on May 26, 1960, Teodora Yanes and
the children of her brother Rufino, namely, Estelita,
Iluminado and Jesus, filed in the Court of First Instance of
Negros Occidental a complaint against Fortunato Santiago,
Arsenia Vda. de Fuentebella, Alvarez and the Register of
Deeds of Negros Occidental for the "return" of the
ownership and possession of Lots 773 and 823. They also
prayed that an accounting of the produce of the land from
1944 up to the filing of the complaint be made by the
defendants, that after court approval of said accounting,
the share or money equivalent due the plaintiffs be
delivered to them, and that defendants be ordered to pay
plaintiffs P500.00 as damages in the form of attorneys
fees. 11

During the pendency in court of said case or on November
13, 1961, Alvarez sold Lots 773-A, 773-B and another lot
for P25,000.00 to Dr. Rodolfo Siason. 12 Accordingly, TCT
Nos. 30919 and 30920 were issued to Siason, 13 who,
thereafter, declared the two lots in his name for
assessment purposes. 14

Meanwhile, on November 6, 1962, Jesus Yanes, in his own
behalf and in behelf of the other plaintiffs, and assisted by
their counsel, filed a manifestation in Civil Case No. 5022
stating that the therein plaintiffs "renounce, forfeit and
quitclaims (sic) any claim, monetary or otherwise, against
the defendant Arsenia Vda. de Fuentebella in connection
with the above entitled case." 15

On October 11, 1963, a decision was rendered by the
Court of First Instance of Negros Occidental in Civil Case
No. 5022, the dispositive portion of which
reads:chanroblesvirtualawlibrary

WHEREFORE, judgment is rendered, ordering the
defendant Rosendo Alvarez to reconvey to the plaintiffs
lots Nos. 773 and 823 of the Cadastral Survey of Murcia,
Negros Occidental, now covered by Transfer Certificates of
Title Nos. T-23165 and T-23166 in the name of said
defendant, and thereafter to deliver the possession of said
lots to the plaintiffs. No special pronouncement as to
costs.

SO ORDERED." 16

It will be noted that the above-mentioned manifestation of
Jesus Yanes was not mentioned in the aforesaid decision.

However, execution of said decision proved unsuccessful
with respect to Lot 773. In his return of service dated
October 20, 1965, the sheriff stated that he discovered
that Lot 773 had been subdivided into Lots 773-A and
773-B; that they were "in the name" of Rodolfo Siason
who had purchased them from Alvarez, and that Lot 773
could not be delivered to the plaintiffs as Siason was "not
a party per writ of execution." 17

The execution of the decision in Civil Case No. 5022
having met a hindrance, herein private respondents (the
Yaneses) filed on July 31, 1965, in the Court of First
Instance of Negros Occidental a petition for the issuance
of a new certificate of title and for a declaration of nullity
of TCT Nos. T-23165 and T-23166 issued to Rosendo
Alvarez. 18 Thereafter, the court required Rodolfo Siason
to produce the certificates of title covering Lots 773 and
823.

Expectedly, Siason filed a manifestation stating that he
purchased Lots 773-A, 773-B and 658, not Lots 773 and
823, "in good faith and for a valuable consideration
without any knowledge of any lien or encumbrances
against said propert(ies)" ; that the decision in the
cadastral proceeding 19 could not be enforced against him
as he was not a party thereto; and that the decision in
Civil Case No. 5022 could neither be enforced against him
not only because he was not a party-litigant therein but
also because it had long become final and executory. 20
Finding said manifestation to be well-founded, the
cadastral court, in its order of September 4, 1965,
nullified its previous order requiring Siason to surrender
the certificates of title mentioned therein. 21

In 1968, the Yaneses filed an ex-parte motion for the
issuance of an alias writ of execution in Civil Case No.
5022. Siason opposed it. 22 In its order of September 28,
1968 in Civil Case No. 5022, the lower court, noting that
the Yaneses had instituted another action for the recovery
of the land in question, ruled that the judgment therein
could not be enforced against Siason as he was not a
party in the case. 23

The action filed by the Yaneses on February 21, 1968 was
for recovery of real property with damages. 24 Named
defendants therein were Dr. Rodolfo Siason, Laura
Alvarez, Flora Alvarez, Raymundo Alvarez and the
Register of Deeds of Negros Occidental. The Yaneses
prayed for the cancellation of TCT Nos. T-19291 and
19292 issued to Siason (sic) for being null and void; the
issuance of a new certificate of title in the name of the
Yaneses "in accordance with the sheriffs return of service
dated October 20, 1965;" Siasons delivery of possession
of Lot 773 to the Yaneses; and if, delivery thereof could
not be effected, or, if the issuance of a new title could not
be made, that the Alvarezes and Siason jointly and
severally pay the Yaneses the sum of P45,000.00. They
also prayed that Siason render an accounting of the fruits
of Lot 773 from November 13, 1961 until the filing of the
complaint; and that the defendants jointly and severally
pay the Yaneses moral damages of P20,000.00 and
exemplary damages of P10,000.00 plus attorneys fees of
P4,000.00.25cralaw:red

In his answer to the complaint, Siason alleged that the
validity of his titles to Lots 773-A and 773-B, having been
passed upon by the court in its order of September 4,
1965, had become res judicata and the Yaneses were
estopped from questioning said order. 26 On their part,
the Alvarezes stated in their answer that the Yaneses
cause of action had been "barred by res judicata, statute
of limitation and estoppel." 27

In its decision of July 8, 1974, the lower court found that
Rodolfo Siason, who purchased the properties in question
thru an agent as he was then in Mexico pursuing further
medical studies, was a buyer in good faith for a valuable
consideration. Although the Yaneses were negligent in
their failure to place a notice of lis pendens "before the
Register of Deeds of Negros Occidental in order to protect
their rights over the property in question" in Civil Case No.
5022, equity demanded that they recover the actual value
of the land because the sale thereof executed between
Alvarez and Siason was without court approval. 28 The
dispositive portion of the decision states:cralawnad

"IN VIEW OF THE FOREGOING CONSIDERATION,
judgment is hereby rendered in the following
manner:chanrob1es virtual 1aw library

A. The case against the defendant Dr. Rodolfo Siason and
the Register of Deeds are (sic) hereby dismissed.

B. The defendants, Laura, Flora and Raymundo, all
surnamed Alvarez being the legitimate children of the
deceased Rosendo Alvarez are hereby ordered to pay
jointly and severally the plaintiffs the sum of P20,000.00
representing the actual value of Lots Nos. 773-A and 773-
B of Murcia Cadastre, Negros Occidental; the sum of
P2,000.00 as actual damages suffered by the plaintiffs;
the sum of P5,000.00 representing moral damages and
the sum of P2,000 as attorneys fees, all with legal rate of
interest from date of the filing of this complaint up to final
payment.

C. The cross-claim filed by the defendant Dr. Rodolfo
Siason against the defendants, Laura, Flora and
Raymundo, all surnamed Alvarez is hereby dismissed.

D. Defendants, Laura, Flora and Raymundo, all surnamed
Alvarez, are hereby ordered to pay the costs of this suit.

SO ORDERED." 29

The Alvarezes appealed to the then Intermediate
Appellate Court which, in its decision of August 31, 1983,
30 affirmed the lower courts decision "insofar as it
ordered defendants-appellants to pay jointly and severally
the plaintiffs-appellees the sum of P20,000.00
representing the actual value of Lots Nos. 773-A and 773-
B of the cadastral survey of Murcia, Negros Occidental,
and is reversed insofar as it awarded the sums of
P2,000.00, P5,000.00 and P2,000.00 as actual damages,
moral damages and attorneys fees, respectively." 31

The dispositive portion of said decision
reads:jgc:chanrobles.com.ph

"WHEREFORE, the decision appealed from is affirmed
insofar as it ordered defendants-appellants to pay jointly
and severally the plaintiffs-appellees the sum of
P20,000.00 representing the actual value of Lots Nos.
773-A and 773-B of the cadastral survey of Murcia,
Negros Occidental, and is reversed insofar as it awarded
the sums of P2,000.00, P5,000.00 and P2,000.00 as
actual damages, moral damages and attorneys fees,
respectively. No costs.

SO ORDERED. 32

Finding no cogent reason to grant appellants motion for
reconsideration, said appellate court denied the same.

Hence, the instant petition.

In their memorandum petitioners raised the following
issues:chanrob1es virtual 1aw library

1. Whether or not the defense of prescription and estoppel
had been timely and properly invoked and raised by the
petitioners in the lower court.

2. Whether or not the cause and/or causes of action of the
private respondents, if ever there are any, as alleged in
their complaint dated February 21, 1968 which has been
docketed in the trial court as Civil Case No. 8474 supra,
are forever barred by statute of limitation and/or
prescription of action and estoppel.

3. Whether or not the late Rosendo Alvarez, a defendant
in Civil Case No. 5022, supra, and father of the petitioners
become a privy and/or party to the waiver (Exhibit "4" -
defendant Siason) in Civil Case No. 8474, supra, where
the private respondents had unqualifiedly and absolutely
waived, renounced and quitclaimed all their alleged rights
and interests, if ever there is any, on Lots Nos. 773-A and
773-B of Murcia Cadastre as appearing in their written
manifestation dated November 6, 1962 (Exhibits "4" -
Siason) which had not been controverted or even
impliedly or indirectly denied by them.

4. Whether or not the liability or liabilities of Rosendo
Alvarez arising from the sale of Lots Nos. 773-A and 773-
B of Murcia Cadastre to Dr. Rodolfo Siason, if ever there is
any, could be legally passed or transmitted by operations
(sic) of law to the petitioners without violation of law and
due process." 33

The petition is devoid of merit.chanrobles.com : virtual
law library

As correctly ruled by the Court of Appeals, it is powerless
and for that matter so is the Supreme Court, to review the
decision in Civil Case No. 5022 ordering Alvarez to
reconvey the lots in dispute to herein private respondents.
Said decision had long become final and executory and
with the possible exception of Dr. Siason, who was not a
party to said case, the decision in Civil Case No. 5022 is
the law of the case between the parties thereto. It ended
when Alvarez or his heirs failed to appeal the decision
against them. 34

Thus, it is axiomatic that when a right or fact has been
judicially tried and determined by a court of competent
jurisdiction, so long as it remains unreversed, it should be
conclusive upon the parties and those in privity with them
in law or estate. 35 As consistently ruled by this Court,
every litigation must come to an end. Access to the court
is guaranteed. But there must be a limit to it. Once a
litigants right has been adjudicated in a valid final
judgment of a competent court, he should not be granted
an unbridled license to return for another try. The
prevailing party should not be harassed by subsequent
suits. For, if endless litigation were to be allowed,
unscrupulous litigations will multiply in number to the
detriment of the administration of justice. 36

There is no dispute that the rights of the Yaneses to the
properties in question have been finally adjudicated in
Civil Case No. 5022. As found by the lower court, from the
uncontroverted evidence presented, the Yaneses have
been illegally deprived of ownership and possession of the
lots in question. 37 In fact, Civil Case No. 8474 now under
review, arose from the failure to execute Civil Case No.
5022, as subject lots can no longer be reconveyed to
private respondents Yaneses, the same having been sold
during the pendency of the case by the petitioners father
to Dr. Siason who did not know about the controversy,
there being no lis pendens annotated on the titles. Hence,
it was also settled beyond question that Dr. Siason is a
purchaser-in-good faith.

Under the circumstances, the trial court did not annul the
sale executed by Alvarez in favor of Dr. Siason on
November 11, 1961 but in fact sustained it. The trial court
ordered the heirs of Rosendo Alvarez who lost in Civil
Case No. 5022 to pay the plaintiffs (private respondents
herein) the amount of P20,000.00 representing the actual
value of the subdivided lots in dispute. It did not order
defendant Siason to pay said amount. 38

As to the propriety of the present case, it has long been
established that the sole remedy of the landowner whose
property has been wrongfully or erroneously registered in
anothers name is to bring an ordinary action in the
ordinary court of justice for reconveyance or, if the
property has passed into the hands of an innocent
purchaser for value, for damages. 39 "It is one thing to
protect an innocent third party; it is entirely a different
matter and one devoid of justification if deceit would be
rewarded by allowing the perpetrator to enjoy the fruits of
his nefarious deed. As clearly revealed by the undeviating
line of decisions coming from this Court, such an
undesirable eventuality is precisely sought to be guarded
against." 40

The issue on the right to the properties in litigation having
been finally adjudicated in Civil Case No. 5022 in favor of
private respondents, it cannot now be reopened in the
instant case on the pretext that the defenses of
prescription and estoppel have not been properly
considered by the lower court. Petitioners could have
appealed in the former case but they did not. They have
therefore foreclosed their rights, if any, and they cannot
now be heard to complain in another case in order to
defeat the enforcement of a judgment which has long
become final and executory.

Petitioners further contend that the liability arising from
the sale of Lots No. 773-A and 773-B made by Rosendo
Alvarez to Dr. Rodolfo Siason should be the sole liability of
the late Rosendo Alvarez or of his estate, after his
death.chanrobles lawlibrary : rednad

Such contention is untenable for it overlooks the doctrine
obtaining in this jurisdiction on the general transmissibility
of the rights and obligations of the deceased to his
legitimate children and heirs. Thus, the pertinent
provisions of the Civil Code state:jgc:chanrobles.com.ph

"Art. 774. Succession is a mode of acquisition by virtue of
which the property, rights and obligations to the extent of
the value of the inheritance, of a person are transmitted
through his death to another or others either by his will or
by operation of law.

"Art. 776. The inheritance includes all the property, rights
and obligations of a person which are not extinguished by
his death.

"Art. 1311. Contracts take effect only between the parties,
their assigns and heirs, except in case where the rights
and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by
provision of law. The heir is not liable beyond the value of
the property received from the decedent."cralaw
virtua1aw library

As explained by this Court through Associate Justice J.B.L.
Reyes in the case of Estate of Hemady v. Luzon Surety
Co., Inc. 41

"The binding effect of contracts upon the heirs of the
deceased party is not altered by the provision of our Rules
of Court that money debts of a deceased must be
liquidated and paid from his estate before the residue is
distributed among said heirs (Rule 89). The reason is that
whatever payment is thus made from the state is
ultimately a payment by the heirs or distributees, since
the amount of the paid claim in fact diminishes or reduces
the shares that the heirs would have been entitled to
receive.

"Under our law, therefore, the general rule is that a
partys contractual rights and obligations are transmissible
to the successors. The rule is a consequence of the
progressive depersonalization of patrimonial rights and
duties that, as observed by Victorio Polacco, has
characterized the history of these institutions. From the
Roman concept of a relation from person to person, the
obligation has evolved into a relation from patrimony to
patrimony, with the persons occupying only a
representative position, barring those rare cases where
the obligation is strictly personal, i.e., is contracted intuitu
personae, in consideration of its performance by a specific
person and by no other. . . ."cralaw virtua1aw library

Petitioners being the heirs of the late Rosendo Alvarez,
they cannot escape the legal consequences of their
fathers transaction, which gave rise to the present claim
for damages. That petitioners did not inherit the property
involved herein is of no moment because by legal fiction,
the monetary equivalent thereof devolved into the mass of
their fathers hereditary estate, and we have ruled that
the hereditary assets are always liable in their totality for
the payment of the debts of the estate. 42

It must, however, be made clear that petitioners are liable
only to the extent of the value of their inheritance. With
this clarification and considering petitioners admission
that there are other properties left by the deceased which
are sufficient to cover the amount adjudged in favor of
private respondents, we see no cogent reason to disturb
the findings and conclusions of the Court of
Appeals.chanrobles.com:cralaw:red

WHEREFORE, subject to the clarification herein above
stated, the assailed decision of the Court of Appeals is
hereby AFFIRMED. Costs against petitioners.

SO ORDERED.

Gutierrez, Jr., Feliciano and Cortes, JJ., concur.

Bidin, J., took no part.
Endnotes:


1. TSN, October 17, 1973, pp. 4-5.

2. TSN, December 11, 1973, pp. 11 & 55.

3. Exhibits 26 and 28.

4. Exhibit 27.

5. Exhibit B-Alvarez.

6. Exhibits 23 and 24-Siason.

7. Exhibits 1-Alvarez: Exh. 17-Siason.

8. Exh. 2-Alvarez.

9. Exh. 3-Alvarez.

10. Exh. 2-Siason.

11. Civil Case No. 5022; Exhibit B.

12. Exhibit F.

13. Exhibits 12 and 13.

14. Exhibits 10, 11, 14 and 15.

15. Exhibit 4-Alvarez.

16. Record on Appeal, p. 25.

17. Exhibit E.

18. Cad. Case No. 6; Exhibit 3.

19. Cad. Case No. 6.

20. Exhibit 5.

21. Exhibit 6.

22. Exhibit 78.

23. Exhibit 9.

24. Civil Case No. 8474.

25. Record on Appeal, pp. 8-9.

26. Record on Appeal, p. 36.

27. Ibid., p. 63.

28. Ibid., pp. 95-99.

29. Record on Appeal, pp. 100-101.

30. Porfirio V. Sison Jr. J., ponente Abdulwahid A. Bidin,
Marcelino R. Veloso and Desiderio P. Jurado , JJ.,
concurring.

31. Rollo, p. 32.

32. Rollo, p. 32.

33. Rollo, p. 119.

34. Rollo, p. 27.

35. Miranda v. C.A., 141 SCRA 302 [1986].

36. Ngo Bun Tiong v. Judge Sayo, G.R. No. 45825, June
30, 1988.

37. Record on Appeal, pp. 24-25.

38. Rollo, p. 27.

39. Quiniano Et. Al. v. C.A., 39 SCRA 221 [1971].

40. Ibid.

41. 100 Phil. 388.

42. Lopez v. Enriquez, 16 Phil. 336 (1910).
















13
SECOND DIVISION
[G.R. No. 124715. January 24, 2000]
RUFINA LUY LIM petitioner, vs. COURT OF APPEALS,
AUTO TRUCK TBA CORPORATION, SPEED
DISTRIBUTING, INC., ACTIVE DISTRIBUTORS,
ALLIANCE MARKETING CORPORATION, ACTION
COMPANY, INC. respondents.
D E C I S I O N
BUENA, J .:
May a corporation, in its universality, be the proper subject of and be
included in the inventory of the estate of a deceased person?
Petitioner disputes before us through the instant petition for review
on certiorari, the decision
[1]
of the Court of Appeals promulgated on 18
April 1996, in CA-GR SP No. 38617, which nullified and set aside the
orders dated 04 July 1995
[2]
, 12 September 1995
[3]
and 15 September
1995
[4]
of the Regional Trial Court of Quezon City, Branch 93, sitting as a
probate court.
Petitioner Rufina Luy Lim is the surviving spouse of the late Pastor Y.
Lim whose estate is the subject of probate proceedings in Special
Proceedings Q-95-23334, entitled, "In Re: Intestate Estate of Pastor Y.
Lim Rufina Luy Lim, represented by George Luy, Petitioner".
Private respondents Auto Truck Corporation, Alliance Marketing
Corporation, Speed Distributing, Inc., Active Distributing, Inc. and
Action Company are corporations formed, organized and existing under
Philippine laws and which owned real properties covered under the
Torrens system.
On 11 June 1994, Pastor Y. Lim died intestate. Herein petitioner, as
surviving spouse and duly represented by her nephew George Luy, filed
on 17 March 1995, a joint petition
[5]
for the administration of the estate of
Pastor Y. Lim before the Regional Trial Court of Quezon City.
Private respondent corporations, whose properties were included in the
inventory of the estate of Pastor Y. Lim, then filed a motion
[6]
for the
lifting of lis pendens and motion
[7]
for exclusion of certain properties from
the estate of the decedent.
In an order
[8]
dated 08 June 1995, the Regional Trial Court of Quezon
City, Branch 93, sitting as a probate court, granted the private
respondents twin motions, in this wise:
"Wherefore, the Register of Deeds of Quezon City is
hereby ordered to lift, expunge or delete the annotation of
lis pendens on Transfer Certificates of Title Nos. 116716,
116717, 116718, 116719 and 5182 and it is hereby further
ordered that the properties covered by the same titles as
well as those properties by (sic) Transfer Certificate of
Title Nos. 613494, 363123, 236236 and 263236 are
excluded from these proceedings.
SO ORDERED."
Subsequently, Rufina Luy Lim filed a verified amended petition
[9]
which
contained the following averments:
"3. The late Pastor Y. Lim personally owned during his
lifetime the following business entities, to wit:
Business Entity Address:
X X X X
Alliance Marketing ,Inc. Block
3, Lot 6, Dacca
BF Homes,
Paraaque,
Metro Manila.
X X X X
Speed Distributing Inc. 910 Barrio Niog,
Aguinaldo Highway,
Bacoor, Cavite.
X X X X
Auto Truck TBA Corp. 2251
Roosevelt Avenue,
Quezon City.
X X X X
Active Distributors, Inc. Block 3,
Lot 6, Dacca BF
Homes, Paraaque,
Metro Manila.
X X X X
Action Company 100
20th Avenue
Murphy, Quezon City
or
92-D Mc-Arthur Highway
Valenzuela Bulacan.
"3.1 Although the above business entities dealt and
engaged in business with the public as corporations, all
their capital, assets and equity were however, personally
owned by the late Pastor Y Lim. Hence the alleged
stockholders and officers appearing in the respective
articles of incorporation of the above business entities
were mere dummies of Pastor Y. Lim, and they were listed
therein only for purposes of registration with the Securities
and Exchange Commission.
"4. Pastor Lim, likewise, had Time, Savings and Current
Deposits with the following banks: (a) Metrobank, Grace
Park, Caloocan City and Quezon Avenue, Quezon City
Branches and (b) First Intestate Bank (formerly Producers
Bank), Rizal Commercial Banking Corporation and in
other banks whose identities are yet to be determined.
"5. That the following real properties, although registered
in the name of the above entities, were actually acquired
by Pastor Y. Lim during his marriage with petitioner, to
wit:
Corporation Title
Location
X X X X
k. Auto Truck TCT No.
617726 Sto. Domingo
TBA
Corporation
Cainta, Rizal
q. Alliance Marketing TCT No.
27896 Prance,
Metro Manila
Copies of the above-mentioned Transfer Certificate of
Title and/or Tax Declarations are hereto attached as
Annexes "C" to "W".
X X X X
"7. The aforementioned properties and/or real interests left
by the late Pastor Y. Lim, are all conjugal in nature,
having been acquired by him during the existence of his
marriage with petitioner.
"8. There are other real and personal properties owned by
Pastor Y. Lim which petitioner could not as yet identify.
Petitioner, however will submit to this Honorable Court
the identities thereof and the necessary documents
covering the same as soon as possible."
On 04 July 1995, the Regional Trial Court acting on petitioners motion
issued an order
[10]
, thus:
"Wherefore, the order dated 08 June 1995 is hereby set
aside and the Registry of Deeds of Quezon City is hereby
directed to reinstate the annotation of lis pendens in case
said annotation had already been deleted and/or cancelled
said TCT Nos. 116716, 116717, 116718, 116719 and
51282.
Further more (sic), said properties covered by TCT Nos.
613494, 365123, 236256 and 236237 by virtue of the
petitioner are included in the instant petition.
SO ORDERED."
On 04 September 1995, the probate court appointed Rufina Lim as
special administrator
[11]
and Miguel Lim and Lawyer Donald Lee, as co-
special administrators of the estate of Pastor Y. Lim, after which letters of
administration were accordingly issued.
In an order
[12]
dated 12 September 1995, the probate court denied anew
private respondents motion for exclusion, in this wise:
"The issue precisely raised by the petitioner in her petition
is whether the corporations are the mere alter egos or
instrumentalities of Pastor Lim, Otherwise (sic) stated, the
issue involves the piercing of the corporate veil, a matter
that is clearly within the jurisdiction of this Honorable
Court and not the Securities and Exchange Commission.
Thus, in the case of Cease vs. Court of Appeals, 93 SCRA
483, the crucial issue decided by the regular court was
whether the corporation involved therein was the mere
extension of the decedent. After finding in the affirmative,
the Court ruled that the assets of the corporation are also
assets of the estate.
A reading of P.D. 902, the law relied upon by oppositors,
shows that the SECs exclusive (sic) applies only to intra-
corporate controversy. It is simply a suit to settle the
intestate estate of a deceased person who, during his
lifetime, acquired several properties and put up
corporations as his instrumentalities.
SO ORDERED."
On 15 September 1995, the probate court acting on an ex parte motion
filed by petitioner, issued an order
[13]
the dispositive portion of which
reads:
"Wherefore, the parties and the following banks concerned
herein under enumerated are hereby ordered to comply
strictly with this order and to produce and submit to the
special administrators , through this Honorable Court
within (5) five days from receipt of this order their
respective records of the savings/current accounts/time
deposits and other deposits in the names of Pastor Lim
and/or corporations above-mentioned, showing all the
transactions made or done concerning savings /current
accounts from January 1994 up to their receipt of this
court order.
XXX XXX XXX
SO ORDERED."
Private respondent filed a special civil action for certiorari
[14]
, with an
urgent prayer for a restraining order or writ of preliminary injunction,
before the Court of Appeals questioning the orders of the Regional Trial
Court, sitting as a probate court.
On 18 April 1996, the Court of Appeals, finding in favor of herein private
respondents, rendered the assailed decision
[15]
, the decretal portion of
which declares:
"Wherefore, premises considered, the instant special civil
action for certiorari is hereby granted, The impugned
orders issued by respondent court on July 4,1995 and
September 12, 1995 are hereby nullified and set aside. The
impugned order issued by respondent on September 15,
1995 is nullified insofar as petitioner corporations" bank
accounts and records are concerned.
SO ORDERED."
Through the expediency of Rule 45 of the Rules of Court, herein
petitioner Rufina Luy Lim now comes before us with a lone assignment
of error
[16]
:
"The respondent Court of Appeals erred in reversing the
orders of the lower court which merely allowed the
preliminary or provisional inclusion of the private
respondents as part of the estate of the late deceased (sic)
Pastor Y. Lim with the respondent Court of Appeals
arrogating unto itself the power to repeal, to disobey or to
ignore the clear and explicit provisions of Rules 81,83,84
and 87 of the Rules of Court and thereby preventing the
petitioner, from performing her duty as special
administrator of the estate as expressly provided in the said
Rules."
Petitioners contentions tread on perilous grounds.
In the instant petition for review, petitioner prays that we affirm the
orders issued by the probate court which were subsequently set aside by
the Court of Appeals.
Yet, before we delve into the merits of the case, a review of the rules on
jurisdiction over probate proceedings is indeed in order.
The provisions of Republic Act 7691
[17]
, which introduced amendments to
Batas Pambansa Blg. 129, are pertinent:
"Section 1. Section 19 of Batas Pambansa Blg. 129,
otherwise known as the "Judiciary Reorganization Act of
1980", is hereby amended to read as follows:
Section 19. Jurisdiction in civil cases. Regional Trial
Courts shall exercise exclusive jurisdiction:
xxx xxx xxx
(4) In all matters of probate, both testate and intestate,
where the gross value of the estate exceeds One Hundred
Thousand Pesos (P100,000) or, in probate matters in
Metro Manila, where such gross value exceeds Two
Hundred Thousand Pesos (P200,000);
xxx xxx xxx
Section 3. Section 33 of the same law is hereby amended
to read as follows:
Section 33. Jurisdiction of Metropolitan
Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in Civil
Cases.-Metropolitan Trial Courts,
Municipal Trial Courts and Municipal
Circuit Trial Courts shall exercise:
1. Exclusive original jurisdiction
over civil actions and probate proceedings,
testate and intestate, including the grant of
provisional remedies in proper cases, where
the value of the personal property, estate or
amount of the demand does not exceed One
Hundred Thousand Pesos(P100,000) or, in
Metro Manila where such personal
property, estate or amount of the demand
does not exceed Two Hundred Thousand
Pesos (P200,000), exclusive of interest,
damages of whatever kind, attorneys fees,
litigation expenses and costs, the amount of
which must be specifically alleged,
Provided, that interest, damages of
whatever kind, attorneys, litigation
expenses and costs shall be included in the
determination of the filing fees, Provided
further, that where there are several claims
or causes of actions between the same or
different parties, embodied in the same
complaint, the amount of the demand shall
be the totality of the claims in all the causes
of action, irrespective of whether the causes
of action arose out of the same or different
transactions;
xxx xxx xxx"
Simply put, the determination of which court exercises jurisdiction over
matters of probate depends upon the gross value of the estate of the
decedent.
As to the power and authority of the probate court, petitioner relies
heavily on the principle that a probate court may pass upon title to certain
properties, albeit provisionally, for the purpose of determining whether a
certain property should or should not be included in the inventory.
In a litany of cases, We defined the parameters by which the court may
extend its probing arms in the determination of the question of title in
probate proceedings.
This Court, in PASTOR, J R. vs. COURT OF APPEALS,
[18]
held:
"X X X As a rule, the question of ownership is an
extraneous matter which the probate court cannot resolve
with finality. Thus, for the purpose of determining whether
a certain property should or should not be included in the
inventory of estate properties, the Probate Court may pass
upon the title thereto, but such determination is
provisional, not conclusive, and is subject to the final
decision in a separate action to resolve title."
We reiterated the rule in PEREI RA vs. COURT OF APPEALS
[19]
:
"X X X The function of resolving whether or not a certain
property should be included in the inventory or list of
properties to be administered by the administrator is one
clearly within the competence of the probate court.
However, the courts determination is only provisional in
character, not conclusive, and is subject to the final
decision in a separate action which may be instituted by
the parties."
Further, in MORALES vs. CFI OF CAVI TE
[20]
citing CUI ZON vs.
RAMOLETE
[21]
, We made an exposition on the probate courts limited
jurisdiction:
"It is a well-settled rule that a probate court or one in
charge of proceedings whether testate or intestate cannot
adjudicate or determine title to properties claimed to be a
part of the estate and which are equally claimed to belong
to outside parties. All that the said court could do as
regards said properties is to determine whether they should
or should not be included in the inventory or list of
properties to be administered by the administrator. If there
is no dispute, well and good; but if there is, then the
parties, the administrator and the opposing parties have to
resort to an ordinary action for a final determination of the
conflicting claims of title because the probate court cannot
do so."
Again, in VALERA vs. I NSERTO
[22]
, We had occasion to elucidate,
through Mr. Justice Andres Narvasa
[23]
:
"Settled is the rule that a Court of First Instance (now
Regional Trial Court), acting as a probate court, exercises
but limited jurisdiction, and thus has no power to take
cognizance of and determine the issue of title to property
claimed by a third person adversely to the decedent, unless
the claimant and all other parties having legal interest in
the property consent, expressly or impliedly, to the
submission of the question to the probate court for
adjudgment, or the interests of third persons are not
thereby prejudiced, the reason for the exception being that
the question of whether or not a particular matter should
be resolved by the court in the exercise of its general
jurisdiction or of its limited jurisdiction as a special court
(e.g. probate, land registration, etc.), is in reality not a
jurisdictional but in essence of procedural one, involving a
mode of practice which may be waived. x x x
x x x. These considerations assume greater cogency
where, as here, the Torrens title is not in the decedents
name but in others, a situation on which this Court has
already had occasion to rule x x x."(emphasis Ours)
Petitioner, in the present case, argues that the parcels of land covered
under the Torrens system and registered in the name of private respondent
corporations should be included in the inventory of the estate of the
decedent Pastor Y. Lim, alleging that after all the determination by the
probate court of whether these properties should be included or not is
merely provisional in nature, thus, not conclusive and subject to a final
determination in a separate action brought for the purpose of adjudging
once and for all the issue of title.
Yet, under the peculiar circumstances, where the parcels of land are
registered in the name of private respondent corporations, the
jurisprudence pronounced in BOLI SAY vs., ALCID
[24]
is of great essence
and finds applicability, thus:
"It does not matter that respondent-administratrix has
evidence purporting to support her claim of ownership,
for, on the other hand, petitioners have a Torrens title in
their favor, which under the law is endowed with
incontestability until after it has been set aside in the
manner indicated in the law itself, which, of course, does
not include, bringing up the matter as a mere incident in
special proceedings for the settlement of the estate of
deceased persons. x x x"
"x x x. In regard to such incident of inclusion or exclusion,
We hold that if a property covered by Torrens title is
involved, the presumptive conclusiveness of such title
should be given due weight, and in the absence of strong
compelling evidence to the contrary, the holder thereof
should be considered as the owner of the property in
controversy until his title is nullified or modified in an
appropriate ordinary action, particularly, when as in the
case at bar, possession of the property itself is in the
persons named in the title. x x x"
A perusal of the records would reveal that no strong compelling evidence
was ever presented by petitioner to bolster her bare assertions as to the
title of the deceased Pastor Y. Lim over the properties. Even so, P.D.
1529, otherwise known as, " The Property Registration Decree",
proscribes collateral attack on Torrens Title, hence:
"xxx xxx xxx
Section 48. Certificate not subject to collateral attack.
- A certificate of title shall not be subject to collateral
attack. It cannot be altered, modified or cancelled except in
a direct proceeding in accordance with law."
In CUI ZON vs. RAMOLETE, where similarly as in the case at bar, the
property subject of the controversy was duly registered under the Torrens
system, We categorically stated:
"x x x Having been apprised of the fact that the property in
question was in the possession of third parties and more
important, covered by a transfer certificate of title issued
in the name of such third parties, the respondent court
should have denied the motion of the respondent
administrator and excluded the property in question from
the inventory of the property of the estate. It had no
authority to deprive such third persons of their possession
and ownership of the property. x x x"
Inasmuch as the real properties included in the inventory of the estate of
the late Pastor Y. Lim are in the possession of and are registered in the
name of private respondent corporations, which under the law possess a
personality separate and distinct from their stockholders, and in the
absence of any cogency to shred the veil of corporate fiction, the
presumption of conclusiveness of said titles in favor of private
respondents should stand undisturbed.
Accordingly, the probate court was remiss in denying private
respondents motion for exclusion. While it may be true that the Regional
Trial Court, acting in a restricted capacity and exercising limited
jurisdiction as a probate court, is competent to issue orders involving
inclusion or exclusion of certain properties in the inventory of the estate
of the decedent, and to adjudge, albeit, provisionally the question of title
over properties, it is no less true that such authority conferred upon by
law and reinforced by jurisprudence, should be exercised judiciously,
with due regard and caution to the peculiar circumstances of each
individual case.
Notwithstanding that the real properties were duly registered under the
Torrens system in the name of private respondents, and as such were to
be afforded the presumptive conclusiveness of title, the probate court
obviously opted to shut its eyes to this gleamy fact and still proceeded to
issue the impugned orders.
By its denial of the motion for exclusion, the probate court in effect acted
in utter disregard of the presumption of conclusiveness of title in favor of
private respondents. Certainly, the probate court through such brazen act
transgressed the clear provisions of law and infringed settled
jurisprudence on this matter.
Moreover, petitioner urges that not only the properties of private
respondent corporations are properly part of the decedents estate but also
the private respondent corporations themselves. To rivet such flimsy
contention, petitioner cited that the late Pastor Y. Lim during his lifetime,
organized and wholly-owned the five corporations, which are the private
respondents in the instant case.
[25]
Petitioner thus attached as Annexes
"F"
[26]
and "G"
[27]
of the petition for review affidavits executed by Teresa
Lim and Lani Wenceslao which among others, contained averments that
the incorporators of Uniwide Distributing, Inc. included on the list had no
actual participation in the organization and incorporation of the said
corporation. The affiants added that the persons whose names appeared
on the articles of incorporation of Uniwide Distributing, Inc., as
incorporators thereof, are mere dummies since they have not actually
contributed any amount to the capital stock of the corporation and have
been merely asked by the late Pastor Y. Lim to affix their respective
signatures thereon.
It is settled that a corporation is clothed with personality separate and
distinct from that of the persons composing it. It may not generally be
held liable for that of the persons composing it. It may not be held liable
for the personal indebtedness of its stockholders or those of the entities
connected with it.
[28]

Rudimentary is the rule that a corporation is invested by law with a
personality distinct and separate from its stockholders or members. In the
same vein, a corporation by legal fiction and convenience is an entity
shielded by a protective mantle and imbued by law with a character alien
to the persons comprising it.
Nonetheless, the shield is not at all times invincible. Thus, in FI RST
PHI LI PPI NE I NTERNATI ONAL BANK vs. COURT OF APPEALS
[29]
,
We enunciated:
"x x x When the fiction is urged as a means of perpetrating
a fraud or an illegal act or as a vehicle for the evasion of
an existing obligation, the circumvention of statutes, the
achievement or perfection of a monopoly or generally the
perpetration of knavery or crime, the veil with which the
law covers and isolates the corporation from the members
or stockholders who compose it will be lifted to allow for
its consideration merely as an aggregation of individuals. x
x x"
Piercing the veil of corporate entity requires the court to see through the
protective shroud which exempts its stockholders from liabilities that
ordinarily, they could be subject to, or distinguishes one corporation from
a seemingly separate one, were it not for the existing corporate fiction.
[30]

The corporate mask may be lifted and the corporate veil may be pierced
when a corporation is just but the alter ego of a person or of another
corporation. Where badges of fraud exist, where public convenience is
defeated; where a wrong is sought to be justified thereby, the corporate
fiction or the notion of legal entity should come to naught.
[31]

Further, the test in determining the applicability of the doctrine of
piercing the veil of corporate fiction is as follows: 1) Control, not mere
majority or complete stock control, but complete domination, not only of
finances but of policy and business practice in respect to the transaction
attacked so that the corporate entity as to this transaction had at the time
no separate mind, will or existence of its own; (2) Such control must have
been used by the defendant to commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal duty, or dishonest and
unjust act in contravention of plaintiffs legal right; and (3) The aforesaid
control and breach of duty must proximately cause the injury or unjust
loss complained of. The absence of any of these elements prevent
"piercing the corporate veil".
[32]

Mere ownership by a single stockholder or by another corporation of all
or nearly all of the capital stock of a corporation is not of itself a
sufficient reason for disregarding the fiction of separate corporate
personalities.
[33]

Moreover, to disregard the separate juridical personality of a corporation,
the wrong-doing must be clearly and convincingly established. It cannot
be presumed.
[34]

Granting arguendo that the Regional Trial Court in this case was not
merely acting in a limited capacity as a probate court, petitioner
nonetheless failed to adduce competent evidence that would have justified
the court to impale the veil of corporate fiction. Truly, the reliance
reposed by petitioner on the affidavits executed by Teresa Lim and Lani
Wenceslao is unavailing considering that the aforementioned documents
possess no weighty probative value pursuant to the hearsay rule. Besides
it is imperative for us to stress that such affidavits are inadmissible in
evidence inasmuch as the affiants were not at all presented during the
course of the proceedings in the lower court. To put it differently, for this
Court to uphold the admissibility of said documents would be to relegate
from Our duty to apply such basic rule of evidence in a manner consistent
with the law and jurisprudence.
Our pronouncement in PEOPLE BANK AND TRUST COMPANY vs.
LEONI DAS
[35]
finds pertinence:
"Affidavits are classified as hearsay evidence since they
are not generally prepared by the affiant but by another
who uses his own language in writing the affiants
statements, which may thus be either omitted or
misunderstood by the one writing them. Moreover, the
adverse party is deprived of the opportunity to cross-
examine the affiants. For this reason, affidavits are
generally rejected for being hearsay, unless the affiant
themselves are placed on the witness stand to testify
thereon."
As to the order
[36]
of the lower court, dated 15 September 1995, the Court
of Appeals correctly observed that the Regional Trial Court, Branch 93
acted without jurisdiction in issuing said order; The probate court had no
authority to demand the production of bank accounts in the name of the
private respondent corporations.
WHEREFORE, in view of the foregoing disquisitions, the instant
petition is hereby DISMISSED for lack of merit and the decision of the
Court of Appeals which nullified and set aside the orders issued by the
Regional Trial Court, Branch 93, acting as a probate court, dated 04 July
1995 and 12 September 1995 is AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and De Leon, Jr.,
JJ., concur.



[1]
In CA GR SP No. 38617, promulgated on 18 April 1996, penned by Justice Ramon A
Barcelona and concurred in by Justice Artemon D. Luna and Justice Portia Alino-
Hormachuelos, Thirteenth Division.
[2]
Rollo, p.83.
[3]
Rollo, pp.92-94.
[4]
Ibid, 95-97.
[5]
Docketed as Special Proceeding No. Q-95-23334;Rollo, pp. 76-82.
[6]
Rollo, p.32.
[7]
Rollo, pp. 84-87.
[8]
Rollo, p.33.
[9]
Ibid.
[10]
Ibid, p.35.
[11]
Order dated 04 September 1995, issued by RTC -Quezon City Branch 93, Presiding
Judge Amado M. Costales, in SP Proc. No. Q-95-23334; Rollo, pp. 88-91.
[12]
Order dated 12 September 1995, issued by RTC- Quezon City, Branch 93, Presiding
Judge Amado M. Costales, in SP. Proc. No. Q-95-23334; Rollo, pp. 92-94.
[13]
Order dated 15 September, issued by RTC-Quezon City, Branch 93, Presiding Judge
Amado M. Costales, in SP Proc. No. Q-95-23334;Rollo, pp. 95-97.
[14]
Rollo, p. 32.
[15]
Ibid, pp. 32-40.
[16]
Petition for Review in GR No. 124715; Rollo, pp. 20-21.
[17]
Republic Act 7691, otherwise known as "An Act Expanding the Jurisdiction of the
Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts,
Amending for the Purpose Batas Pambansa Blg. 129, Otherwise Known as the Judiciary
Reorganization Act of 1980", approved on 25 March 1994.
[18]
GR No. L-56340, 24 June 1983; 122 SCRA 885.
[19]
GR No. L-81147, 20 June 1989; 174 SCRA 154.
[20]
GR No. L-47125, 29 December 1986; 146 SCRA 373.
[21]
129 SCRA 495.
[22]
GR No. L-56504, May 7, 1987; 149 SCRA 533.
[23]
Later Chief Justice of the Supreme Court.
[24]
GR No. L-45494, August 31, 1978; 85 SCRA 213.
[25]
Rollo, p.17.
[26]
Affidavit executed by Teresa T. Lim, dated 13 January 1995; Rollo, p.74.
[27]
Affidavit executed by Lani G. Wenceslao; Rollo, p. 75.
[28]
Mataguina Integrated Wood Products, Inc. vs. Court of Appeals, 263 SCRA 490.
[29]
252 SCRA 259.
[30]
Traders Royal Bank vs. Court of Appeals, 269 SCRA 15.
[31]
Concept Builders, Inc. vs. NLRC, 257, SCRA 149.
[32]
257 SCRA 149.
[33]
Traders Royal Bank vs. Court of Appeals,269 SCRA 15.
[34]
Mataguina Integrated Wood Products Inc. vs. Court of Appeals, 263 SCRA 491,
citing Del Rosario vs. NLRC, GR No. 85416, 24 July 1990, 187 SCRA 777.
[35]
207 SCRA 164.
[36]
Rollo, pp.95-97.































14
G.R. No. 145736 March 4, 2009
ESTATE OF ORLANDO LLENADO and WENIFREDA T.
LLENADO, in her capacity as (a) Administratrix of the Estate of
Orlando A. Llenado and (b) Judicial Guardian of the Minor
children of Orlando A. Llenado, and (c) in her Own behalf as the
Surviving Spouse and Legal Heir of Orlando A.
Llenado, Petitioners,
vs.
EDUARDO LLENADO, JORGE LLENADO, FELIZA
GALLARDO VDA. DE LLENADO and REGISTER OF DEEDS
of Valenzuela City, Metro Manila, Respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the May 30, 2000
Decision
1
of the Court of Appeals in CA-G.R. CV No. 58911 which
reversed the May 5, 1997 Decision
2
of the Regional Trial Court of
Valenzuela City, Branch 75 in Civil Case No. 4248-V-93, and the
October 6, 2000 Resolution
3
which denied the motion for
reconsideration. The appellate court dismissed for lack of merit the
complaint for annulment of deed of conveyance, title and damages
filed by petitioner against herein respondents.
The subject of this controversy is a parcel of land denominated as
Lot 249-D-1 (subject lot) consisting of 1,554 square meters located
in Barrio Malinta, Valenzuela, Metro Manila and registered in the
names of Eduardo Llenado (Eduardo) and Jorge Llenado (Jorge)
under Transfer of Certificate of Title (TCT) No. V-1689.
4
The
subject lot once formed part of Lot 249-D owned by and registered
in the name of their father, Cornelio Llenado (Cornelio), under
TCT No. T-16810.
On December 2, 1975, Cornelio leased Lot 249-D-1 to his nephew,
Romeo Llenado (Romeo), for a period of five years, renewable for
another five years at the option of Cornelio. On March 31, 1978,
Cornelio, Romeo and the latters cousin Orlando Llenado
(Orlando) executed an Agreement
5
whereby Romeo assigned all
his rights to Orlando over the unexpired portion of the aforesaid
lease contract. The parties further agreed that Orlando shall have
the option to renew the lease contract for another three years
commencing from December 3, 1980, up to December 2, 1983,
renewable for another four years or up to December 2, 1987, and
that "during the period that [this agreement] is enforced, the x x x
property cannot be sold, transferred, alienated or conveyed in
whatever manner to any third party."
Shortly thereafter or on June 24, 1978, Cornelio and Orlando
entered into a Supplementary Agreement
6
amending the March 31,
1978 Agreement. Under the Supplementary Agreement, Orlando
was given an additional option to renew the lease contract for an
aggregate period of 10 years at five-year intervals, that is, from
December 3, 1987 to December 2, 1992 and from December 3, 1992
to December 2, 1997. The said provision was inserted in order to
comply with the requirements of Mobil Philippines, Inc. for the
operation of a gasoline station which was subsequently built on
the subject lot.
Upon the death of Orlando on November 7, 1983, his wife,
Wenifreda Llenado (Wenifreda), took over the operation of the
gasoline station. Meanwhile, on January 29, 1987, Cornelio sold Lot
249-D to his children, namely, Eduardo, Jorge, Virginia and
Cornelio, Jr., through a deed of sale, denominated as "Kasulatan sa
Ganap Na Bilihan,"
7
for the sum of P160,000.00. As stated earlier,
the subject lot, which forms part of Lot 249-D, was sold to Eduardo
and Jorge, and titled in their names under TCT No. V-1689. Several
months thereafter or on September 7, 1987, Cornelio passed away.
Sometime in 1993, Eduardo informed Wenifreda of his desire to
take over the subject lot. However, the latter refused to vacate the
premises despite repeated demands. Thus, on September 24, 1993,
Eduardo filed a complaint for unlawful detainer before the
Metropolitan Trial Court of Valenzuela, Metro Manila against
Wenifreda, which was docketed as Civil Civil Case No. 6074.
On July 22, 1996, the Metropolitan Trial Court rendered its
Decision in favor of Eduardo and ordered Wenifreda to: (1) vacate
the leased premises; (2) pay Eduardo reasonable compensation for
the use and occupation of the premises plus attorneys fees, and (3)
pay the costs of the suit.
Wenifreda appealed to the Regional Trial Court of Valenzuela,
Metro Manila, which reversed the decision of the court a quo.
Thus, Eduardo appealed to the Court of Appeals which rendered a
Decision
8
on March 31, 1998 reversing the decision of the Regional
Trial Court and reinstating the decision of the Metropolitan Trial
Court. It also increased the amount of reasonable compensation
awarded to Eduardo for the use of the leased premises.
Wenifredas appeal to this Court, docketed as G.R. No. 135001,
was dismissed in a Resolution
9
dated December 2, 1998.
Accordingly, an Entry of Judgment
10
was made in due course on
July 8, 1999.
Previously, after Eduardo instituted the aforesaid unlawful
detainer case on September 24, 1993, herein petitioner Wenifreda,
in her capacity as administratrix of the estate of Orlando Llenado,
judicial guardian of their minor children, and surviving spouse
and legal heir of Orlando, commenced the subject
Complaint,
11
later amended, on November 10, 1993 for annulment
of deed of conveyance, title and damages against herein
respondents Eduardo, Jorge, Feliza Llenado (mother of the
Llenado brothers), and the Register of Deeds of Valenzuela, Metro
Manila. The case was docketed as Civil Case No. 4248-V-93 and
raffled to Branch 75 of the Regional Trial Court of Valenzuela,
Metro Manila.
Petitioner alleged that the transfer and conveyance of the subject
lot by Cornelio in favor of respondents Eduardo and Jorge, was
fraudulent and in bad faith considering that the March 31, 1978
Agreement provided that while the lease is in force, the subject lot
cannot be sold, transferred or conveyed to any third party; that the
period of the lease was until December 3, 1987 with the option to
renew granted to Orlando; that the subject lot was transferred and
conveyed to respondents Eduardo and Jorge on January 29, 1987
when the lease was in full force and effect making the sale null and
void; that Cornelio verbally promised Orlando that in case he
(Cornelio) decides to sell the subject lot, Orlando or his heirs shall
have first priority or option to buy the subject lot so as not to
prejudice Orlandos business and because Orlando is the owner of
the property adjacent to the subject lot; and that this promise was
wantonly disregarded when Cornelio sold the said lot to
respondents Jorge and Eduardo.
In their Answer,
12
respondents Eduardo and Jorge claimed that
they bought the subject lot from their father, Cornelio, for value
and in good faith; that the lease agreement and its supplement
were not annotated at the back of the mother title of the subject lot
and do not bind them; that said agreements are personal only to
Cornelio and Orlando; that the lease expired upon the death of
Orlando on November 7, 1983; that they were not aware of any
verbal promise to sell the subject lot granted by Cornelio to
Orlando and, even if there was, said option to buy is unenforceable
under the statute of frauds.
After the parties presented their respective evidence, the Regional
Trial Court rendered judgment on May 5, 1997 in favor of
petitioner, viz:
WHEREFORE, PREMISES CONSIDERED, this Court finds the
[petitioners] civil action duly established by preponderance of
evidence, renders judgment (adjudicates) in favor of the
[petitioner], Estate of Orlando Llenado represented by Wenifreda
Llenado, and against [respondents] e.g. Jorge, Eduardo, Felisa
Gallardo, all surnamed Llenado, and the Register of Deeds of
Valenzuela, Metro Manila, as follows:
1) It hereby judicially declare as non-existence (sic) and null
and void, the following:
a) The Kasulatan Sa Ganap na Kasunduan or Deed of
Sale;
b) TCT- Transfer Certificate of Title No. V-9440, in
the name of [respondent] Eduardo Llenado, TCT-
Transfer Certificate of Title No. V-1689, in the name
of Jorge Llenado, and Eduardo Llenado, and all
deeds, documents or proceedings leading to the
issuance of said title, and all subsequent title issued
therefrom and likewise whatever deeds, documents
or proceedings leading to the issuance of said
subsequent titles;
2) It hereby orders the reconveyance of the said properties
embraced in the said TCTs-Transfer Certificate of Title Nos.
V-9440 and V-1689 to the [petitioner] for the same
consideration, or purchase price, paid by [respondents]
Eduardo Llenado and Jorge Llenado for the same
properties;
3) It hereby orders [respondent], Register of Deeds of
Valenzuela, Metro Manila, to cause the issuance of new
transfer certificates of title over the said property in the
name of the [petitioner];
4) And, because this Court is not only a court of law, but of
equity, it hereby rendered the following damages to be paid
by the [respondents], as the [respondents] litigated under
bonafide assertions that they have meritorious defense, viz:
a) P400,000.00 as moral damages;
b) 10,000.00 as nominal damages;
c) 10,000.00 as temperate damages;
d) 10,000.00 as exemplary damages;
e) 10,000.00 attorneys fees on the basis of quantum
merit; and
f) costs of suit.
SO ORDERED.
13

The Regional Trial Court found that upon the death of Orlando on
November 7, 1983, his rights under the lease contract were
transmitted to his heirs; that since the lease was in full force and
effect at the time the subject lot was sold by Cornelio to his sons,
the sale violated the prohibitory clause in the said lease contract.
Further, Cornelios promise to sell the subject lot to Orlando may
be established by parole evidence since an option to buy is not
covered by the statute of frauds. Hence, the same is binding on
Cornelio and his heirs.
Respondents appealed before the Court of Appeals which
rendered the assailed May 30, 2000 Decision reversing the
judgment of the Regional Trial Court and dismissing the
Complaint. The appellate court held that the death of Orlando did
not extinguish the lease agreement and had the effect of
transmitting his lease rights to his heirs. However, the breach of
the non-alienation clause of the said agreement did not nullify the
sale between Cornelio and his sons because the heirs of Orlando
are mere lessees on the subject lot and can never claim a superior
right of ownership over said lot as against the registered owners
thereof. It further ruled that petitioner failed to establish by a
preponderance of evidence that Cornelio made a verbal promise to
Orlando granting the latter the right of first refusal if and when the
subject lot was sold.
Upon the denial of its motion for reconsideration, petitioner is now
before this Court on the following assignment of errors:
[T]he Court of Appeals erred:
1.- In finding and concluding that there is no legal basis to
annul the deed of conveyance involved in the case and in
not applying R.A. No. 3516, further amending R.A. No.
1162; and
2.- In not finding and holding as null and void the subject
deed of conveyance, the same having been executed in
direct violation of an expressed covenant in said deed and
in total disregard of the pre-emptive, or preferential rights
of the herein petitioners to buy the property subject of their
lease contract under said R.A. No. 3516, further amending
R.A. No. 1162.
14

The petition lacks merit.
Petitioner contends that the heirs of Orlando are entitled to the
rights of a tenant under Republic Act (R.A.) No. 1162,
15
as
amended by R.A. No. 3516.
16
The right of first refusal or
preferential right to buy the leased premises is invoked pursuant
to Section 5
17
of said law and this Courts ruling in Mataas Na
Lupa Tenants Association, Inc. v. Dimayuga.
18

This issue is being raised for the first time on appeal. True, in
Mataas Na Lupa Tenants Association, Inc., the Court explained
that Section 1 of R.A. No. 1162, as amended by R.A. No. 3516,
authorizes the expropriation of any piece of land in the City of
Manila, Quezon City and suburbs which have been and are
actually being leased to tenants for at least 10 years, provided said
lands have at least 40 families of tenants thereon.
19
Prior to and
pending the expropriation, the tenant shall have a right of first
refusal or preferential right to buy the leased premises should the
landowner sell the same. However, compliance with the
conditions for the application of the aforesaid law as well as the
qualifications of the heirs of Orlando to be beneficiaries thereunder
were never raised before the trial court, or even the Court of
Appeals, because petitioner solely anchored its claim of ownership
over the subject lot on the alleged violation of the prohibitory
clause in the lease contract between Cornelio and Orlando, and the
alleged non-performance of the right of first refusal given by
Cornelio to Orlando. The rule is settled, impelled by basic
requirements of due process, that points of law, theories, issues
and arguments not adequately brought to the attention of the
lower court will not be ordinarily considered by a reviewing court
as they cannot be raised for the first time on appeal.
20
As the issue
of the applicability of R.A. No. 1162, as amended, was neither
averred in the pleadings nor raised during the trial below, the
same cannot be raised for the first time on appeal.
At any rate, the allegations in the Complaint and the evidence
presented during the trial below do not establish that Orlando or
his heirs are covered by R.A. No. 1162, as amended. It was not
alleged nor shown that the subject lot is part of the landed estate or
haciendas in the City of Manila which were authorized to be
expropriated under said law; that the Solicitor General has
instituted the requisite expropriation proceedings pursuant to
Section 2
21
thereof; that the subject lot has been actually leased for a
period of at least ten (10) years; and that the subject lot has at least
forty (40) families of tenants thereon. Instead, what was merely
established during the trial is that the subject lot was leased by
Cornelio to Orlando for the operation of a gasoline station, thus,
negating petitioners claim that the subject lot is covered by the
aforesaid law. In Mataas Na Lupa Tenants Association, Inc., the
Court further explained that R.A. No. 1162, as amended, has been
superseded by Presidential Decree (P.D.) No. 1517
22
entitled
"Proclaiming Urban Land Reform in the Philippines and Providing
for the Implementing Machinery Thereof."
23
However, as held in
Tagbilaran Integrated Settlers Association Incorporated v. Court of
Appeals,
24
P.D. No. 1517 is applicable only in specific areas
declared, through presidential proclamation,
25
to be located within
the so-called urban zones.
26
Further, only legitimate tenants who
have resided on the land for ten years or more who have built their
homes on the land and residents who have legally occupied the
lands by contract, continuously for the last ten years, are given the
right of first refusal to purchase the land within a reasonable
time.
27
Consequently, those lease contracts entered into for
commercial use are not covered by said law.
28
Thus, considering
that petitioner failed to prove that a proclamation has been issued
by the President declaring the subject lot as within the urban land
reform zone and considering further that the subject lot was leased
for the commercial purpose of operating a gasoline station, P.D.
No. 1517 cannot be applied to this case.
In fine, the only issue for our determination is whether the sale of
the subject lot by Cornelio to his sons, respondents Eduardo and
Jorge, is invalid for (1) violating the prohibitory clause in the lease
agreement between Cornelio, as lessor-owner, and Orlando, as
lessee; and (2) contravening the right of first refusal of Orlando
over the subject lot.
It is not disputed that the lease agreement contained an option to
renew and a prohibition on the sale of the subject lot in favor of
third persons while the lease is in force. Petitioner claims that
when Cornelio sold the subject lot to respondents Eduardo and
Jorge the lease was in full force and effect, thus, the sale violated
the prohibitory clause rendering it invalid. In resolving this issue,
it is necessary to determine whether the lease agreement was in
force at the time of the subject sale and, if it was in force, whether
the violation of the prohibitory clause invalidated the sale.
Under Article 1311 of the Civil Code, the heirs are bound by the
contracts entered into by their predecessors-in-interest except
when the rights and obligations therein are not transmissible by
their nature, by stipulation or by provision of law. A contract of
lease is, therefore, generally transmissible to the heirs of the lessor
or lessee. It involves a property right and, as such, the death of a
party does not excuse non-performance of the contract.
29
The rights
and obligations pass to the heirs of the deceased and the heir of the
deceased lessor is bound to respect the period of the lease.
30
The
same principle applies to the option to renew the lease. As a
general rule, covenants to renew a lease are not personal but will
run with the land.
31
Consequently, the successors-in-interest of the
lessee are entitled to the benefits, while that of the lessor are
burdened with the duties and obligations, which said covenants
conferred and imposed on the original parties.
The foregoing principles apply with greater force in this case
because the parties expressly stipulated in the March 31, 1978
Agreement that Romeo, as lessee, shall transfer all his rights and
interests under the lease contract with option to renew "in favor
of the party of the Third Part (Orlando), the latters heirs,
successors and assigns"
32
indicating the clear intent to allow the
transmissibility of all the rights and interests of Orlando under
the lease contract unto his heirs, successors or assigns.
Accordingly, the rights and obligations under the lease contract
with option to renew were transmitted from Orlando to his heirs
upon his death on November 7, 1983.
It does not follow, however, that the lease subsisted at the time
of the sale of the subject lot on January 29, 1987. When Orlando
died on November 7, 1983, the lease contract was set to expire 26
days later or on December 3, 1983, unless renewed by Orlandos
heirs for another four years. While the option to renew is an
enforceable right, it must necessarily be first exercised to be
given effect.
33
As the Court explained in Dioquino v. Intermediate
Appellate Court:
34

A clause found in an agreement relative to the renewal of the lease
agreement at the option of the lessee gives the latter an enforceable
right to renew the contract in which the clause is found for such
time as provided for. The agreement is understood as being in
favor of the lessee, and the latter is authorized to renew the
contract and to continue to occupy the leased property after
notifying the lessor to that effect. A lessors covenant or agreement to
renew gives a privilege to the tenant, but is nevertheless an
executory contract, and until the tenant has exercised the privilege
by way of some affirmative act, he cannot be held for the
additional term. In the absence of a stipulation in the lease
requiring notice of the exercise of an option or an election to renew
to be given within a certain time before the expiration of the lease,
which of course, the lessee must comply with, the general rule is
that a lessee must exercise an option or election to renew his lease
and notify the lessor thereof before, or at least at the time of the expiration
of his original term, unless there is a waiver or special circumstances
warranting equitable relief.1avvphi1.zw+
There is no dispute that in the instant case, the lessees (private
respondents) were granted the option to renew the lease for
another five (5) years after the termination of the original period of
fifteen years. Yet, there was never any positive act on the part of
private respondents before or after the termination of the original
period to show their exercise of such option. The silence of the
lessees after the termination of the original period cannot be taken
to mean that they opted to renew the contract by virtue of the
promise by the lessor, as stated in the original contract of lease, to
allow them to renew. Neither can the exercise of the option to
renew be inferred from their persistence to remain in the
premises despite petitioners demand for them to vacate. x x x.
35

Similarly, the election of the option to renew the lease in this case
cannot be inferred from petitioner Wenifredas continued
possession of the subject lot and operation of the gasoline station
even after the death of Orlando on November 7, 1983 and the
expiration of the lease contract on December 3, 1983. In the
unlawful detainer case against petitioner Wenifreda and in the
subject complaint for annulment of conveyance, respondents
consistently maintained that after the death of Orlando, the lease
was terminated and that they permitted petitioner Wenifreda and
her children to remain in possession of the subject property out of
tolerance and respect for the close blood relationship between
Cornelio and Orlando. It was incumbent, therefore, upon
petitioner as the plaintiff with the burden of proof during the trial
below to establish by some positive act that Orlando or his heirs
exercised the option to renew the lease. After going over the
records of this case, we find no evidence, testimonial or
documentary, of such nature was presented before the trial court
to prove that Orlando or his heirs exercised the option to renew
prior to or at the time of the expiration of the lease on December 3,
1983. In particular, the testimony of petitioner Wenifreda is
wanting in detail as to the events surrounding the implementation
of the subject lease agreement after the death of Orlando and any
overt acts to establish the renewal of said lease.
Given the foregoing, it becomes unnecessary to resolve the issue
on whether the violation of the prohibitory clause invalidated the
sale and conferred ownership over the subject lot to Orlandos
heirs, who are mere lessees, considering that at the time of said
sale on January 29, 1987 the lease agreement had long been
terminated for failure of Orlando or his heirs to validly renew
the same. As a result, there was no obstacle to the sale of the
subject lot by Cornelio to respondents Eduardo and Jorge as the
prohibitory clause under the lease contract was no longer in
force.
Petitioner also anchors its claim over the subject lot on the alleged
verbal promise of Cornelio to Orlando that should he (Cornelio)
sell the same, Orlando would be given the first opportunity to
purchase said property. According to petitioner, this amounted to
a right of first refusal in favor of Orlando which may be proved by
parole evidence because it is not one of the contracts covered by
the statute of frauds. Considering that Cornelio sold the subject lot
to respondents Eduardo and Jorge without first offering the same
to Orlandos heirs, petitioner argues that the sale is in violation of
the latters right of first refusal and is, thus, rescissible.
The question as to whether a right of first refusal may be proved
by parole evidence has been answered in the affirmative by this
Court in Rosencor Development Corporation v. Inquing:
36

We have previously held that not all agreements "affecting land"
must be put into writing to attain enforceability. Thus, we have
held that the setting up of boundaries, the oral partition of real
property, and an agreement creating a right of way are not covered
by the provisions of the statute of frauds. The reason simply is that
these agreements are not among those enumerated in Article 1403
of the New Civil Code.
A right of first refusal is not among those listed as unenforceable
under the statute of frauds. Furthermore, the application of Article
1403, par. 2(e) of the New Civil Code presupposes the existence of
a perfected, albeit unwritten, contract of sale. A right of first
refusal, such as the one involved in the instant case, is not by any
means a perfected contract of sale of real property. At best, it is a
contractual grant, not of the sale of the real property involved, but
of the right of first refusal over the property sought to be sold.
It is thus evident that the statute of frauds does not contemplate
cases involving a right of first refusal. As such, a right of first
refusal need not be written to be enforceable and may be proven
by oral evidence.
37

In the instant case, the Regional Trial Court ruled that the right of
first refusal was proved by oral evidence while the Court of
Appeals disagreed by ruling that petitioner merely relied on the
allegations in its Complaint to establish said right. We have
reviewed the records and find that no testimonial evidence was
presented to prove the existence of said right. The testimony of
petitioner Wenifreda made no mention of the alleged verbal
promise given by Cornelio to Orlando. The two remaining
witnesses for the plaintiff, Michael Goco and Renato Malindog,
were representatives from the Register of Deeds of Caloocan City
who naturally were not privy to this alleged promise. Neither was
it established that respondents Eduardo and Jorge were aware of
said promise prior to or at the time of the sale of the subject lot. On
the contrary, in their answer to the Complaint, respondents denied
the existence of said promise for lack of knowledge
thereof.
38
Within these parameters, petitioners allegations in its
Complaint cannot substitute for competent proof on such a crucial
factual issue. Necessarily, petitioners claims based on this alleged
right of first refusal cannot be sustained for its existence has not
been duly established.
WHEREFORE, the petition is DENIED. The May 30, 2000 Decision
of the Court of Appeals in CA-G.R. CV No. 58911 dismissing the
complaint for annulment of deed of conveyance, title and
damages, and the October 6, 2000 Resolution denying the motion
for reconsideration, are AFFIRMED.
Costs against petitioner.
SO ORDERED.

















15
FIRST DIVISION
[G.R. No. 118248. April 5, 2000]
DKC HOLDINGS CORPORATION, petitioner, vs. COURT
OF APPEALS, VICTOR U. BARTOLOME and REGISTER
OF DEEDS FOR METRO MANILA, DISTRICT
III, respondents. francis
D E C I S I O N
YNARES_SANTIAGO, J .:
This is a petition for review on certiorari seeking the reversal of the
December 5, 1994 Decision of the Court of Appeals in CA-G.R. CV
No. 40849 entitled "DKC Holdings Corporation vs. Victor U.
Bartolome, et al.",
[1]
affirming in toto the January 4, 1993 Decision
of the Regional Trial Court of Valenzuela, Branch 172,
[2]
which
dismissed Civil Case No. 3337-V-90 and ordered petitioner to pay
P30,000.00 as attorneys fees.
The subject of the controversy is a 14,021 square meter parcel of
land located in Malinta, Valenzuela, Metro Manila which was
originally owned by private respondent Victor U. Bartolomes
deceased mother, Encarnacion Bartolome, under Transfer
Certificate of Title No. B-37615 of the Register of Deeds of Metro
Manila, District III. This lot was in front of one of the textile plants of
petitioner and, as such, was seen by the latter as a potential
warehouse site.
On March 16, 1988, petitioner entered into a Contract of Lease
with Option to Buy with Encarnacion Bartolome, whereby petitioner
was given the option to lease or lease with purchase the subject
land, which option must be exercised within a period of two years
counted from the signing of the Contract. In turn, petitioner
undertook to pay P3,000.00 a month as consideration for the
reservation of its option. Within the two-year period, petitioner shall
serve formal written notice upon the lessor Encarnacion Bartolome
of its desire to exercise its option. The contract also provided that
in case petitioner chose to lease the property, it may take actual
possession of the premises. In such an event, the lease shall be
for a period of six years, renewable for another six years, and the
monthly rental fee shall be P15,000.00 for the first six years and
P18,000.00 for the next six years, in case of renewal.
Petitioner regularly paid the monthly P3,000.00 provided for by the
Contract to Encarnacion until her death in January 1990.
Thereafter, petitioner coursed its payment to private respondent
Victor Bartolome, being the sole heir of Encarnacion. Victor,
however, refused to accept these payments. iska
Meanwhile, on January 10, 1990, Victor executed an Affidavit of
Self-Adjudication over all the properties of Encarnacion, including
the subject lot. Accordingly, respondent Register of Deeds
cancelled Transfer Certificate of Title No. B-37615 and issued
Transfer Certificate of Title No. V-14249 in the name of Victor
Bartolome.
On March 14, 1990, petitioner served upon Victor, via registered
mail, notice that it was exercising its option to lease the property,
tendering the amount of P15,000.00 as rent for the month of
March. Again, Victor refused to accept the tendered rental fee and
to surrender possession of the property to petitioner.
Petitioner thus opened Savings Account No. 1-04-02558-I-1 with
the China Banking Corporation, Cubao Branch, in the name of
Victor Bartolome and deposited therein the P15,000.00 rental fee
for March as well as P6,000.00 reservation fees for the months of
February and March.
Petitioner also tried to register and annotate the Contract on the
title of Victor to the property. Although respondent Register of
Deeds accepted the required fees, he nevertheless refused to
register or annotate the same or even enter it in the day book or
primary register.
Thus, on April 23, 1990, petitioner filed a complaint for specific
performance and damages against Victor and the Register of
Deeds,
[3]
docketed as Civil Case No. 3337-V-90 which was raffled
off to Branch 171 of the Regional Trial Court of Valenzuela.
Petitioner prayed for the surrender and delivery of possession of
the subject land in accordance with the Contract terms; the
surrender of title for registration and annotation thereon of the
Contract; and the payment of P500,000.00 as actual damages,
P500,000.00 as moral damages, P500,000.00 as exemplary
damages and P300,000.00 as attorneys fees.
Meanwhile, on May 8, 1990, a Motion for Intervention with Motion
to Dismiss
[4]
was filed by one Andres Lanozo, who claimed that he
was and has been a tenant-tiller of the subject property, which was
agricultural riceland, for forty-five years. He questioned the
jurisdiction of the lower court over the property and invoked the
Comprehensive Agrarian Reform Law to protect his rights that
would be affected by the dispute between the original parties to the
case. ella
On May 18, 1990, the lower court issued an Order
[5]
referring the
case to the Department of Agrarian Reform for preliminary
determination and certification as to whether it was proper for trial
by said court.
On July 4, 1990, the lower court issued another Order
[6]
referring
the case to Branch 172 of the RTC of Valenzuela which was
designated to hear cases involving agrarian land, after the
Department of Agrarian Reform issued a letter-certification stating
that referral to it for preliminary determination is no longer required.
On July 16, 1990, the lower court issued an Order denying the
Motion to Intervene,
[7]
holding that Lanozos rights may well be
ventilated in another proceeding in due time.
After trial on the merits, the RTC of Valenzuela, branch 172
rendered its Decision on January 4, 1993, dismissing the
Complaint and ordering petitioner to pay Victor P30,000.00 as
attorneys fees. On appeal to the CA, the Decision was affirmed in
toto.
Hence, the instant Petition assigning the following errors:
(A)
FIRST ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED
IN RULING THAT THE PROVISION ON THE
NOTICE TO EXERCISE OPTION WAS NOT
TRANSMISSIBLE.
(B)
SECOND ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED
IN RULING THAT THE NOTICE OF OPTION MUST
BE SERVED BY DKC UPON ENCARNACION
BARTOLOME PERSONALLY.
(C) nigel
THIRD ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED
IN RULING THAT THE CONTRACT WAS ONE-
SIDED AND ONEROUS IN FAVOR OF DKC.
(D)
FOURTH ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED
IN RULING THAT THE EXISTENCE OF A
REGISTERED TENANCY WAS FATAL TO THE
VALIDITY OF THE CONTRACT.
(E)
FIFTH ASSIGNMENT OF ERROR
THE HONORABLE COURT OF APPEALS ERRED
IN RULING THAT PLAINTIFF-APPELLANT WAS
LIABLE TO DEFENDANT-APPELLEE FOR
ATTORNEYS FEES.
[8]

The issue to be resolved in this case is whether or not the Contract
of Lease with Option to Buy entered into by the late Encarnacion
Bartolome with petitioner was terminated upon her death or
whether it binds her sole heir, Victor, even after her demise.
Both the lower court and the Court of Appeals held that the said
contract was terminated upon the death of Encarnacion Bartolome
and did not bind Victor because he was not a party thereto.
Article 1311 of the Civil Code provides, as follows-
"ART. 1311. Contracts take effect only between the
parties, their assigns and heirs, except in case where
the rights and obligations arising from the contract
are not transmissible by their nature, or by stipulation
or by provision of law. The heir is not liable beyond
the value of the property he received from the
decedent. brnado
x x x x x x x x x."
The general rule, therefore, is that heirs are bound by contracts
entered into by their predecessors-in-interest except when the
rights and obligations arising therefrom are not transmissible by (1)
their nature, (2) stipulation or (3) provision of law.
In the case at bar, there is neither contractual stipulation nor legal
provision making the rights and obligations under the contract
intransmissible. More importantly, the nature of the rights and
obligations therein are, by their nature, transmissible.
The nature of intransmissible rights as explained by Arturo
Tolentino, an eminent civilist, is as follows:
"Among contracts which are intransmissible are
those which are purely personal, either by provision
of law, such as in cases of partnerships and agency,
or by the very nature of the obligations arising
therefrom, such as those requiring special personal
qualifications of the obligor. It may also be stated that
contracts for the payment of money debts are not
transmitted to the heirs of a party, but constitute a
charge against his estate. Thus, where the client in a
contract for professional services of a lawyer died,
leaving minor heirs, and the lawyer, instead of
presenting his claim for professional services under
the contract to the probate court, substituted the
minors as parties for his client, it was held that the
contract could not be enforced against the minors;
the lawyer was limited to a recovery on the basis
of quantum meruit."
[9]

In American jurisprudence, "(W)here acts stipulated in a contract
require the exercise of special knowledge, genius, skill, taste,
ability, experience, judgment, discretion, integrity, or other personal
qualification of one or both parties, the agreement is of a personal
nature, and terminates on the death of the party who is required to
render such service."
[10]
marinella
It has also been held that a good measure for determining whether
a contract terminates upon the death of one of the parties is
whether it is of such a character that it may be performed by the
promissors personal representative. Contracts to perform personal
acts which cannot be as well performed by others are discharged
by the death of the promissor. Conversely, where the service or act
is of such a character that it may as well be performed by another,
or where the contract, by its terms, shows that performance by
others was contemplated, death does not terminate the contract or
excuse nonperformance.
[11]

In the case at bar, there is no personal act required from
the late Encarnacion Bartolome. Rather, the
obligation of Encarnacion in the contract to deliver
possession of the subject property to petitioner upon
the exercise by the latter of its option to lease the
same may very well be performed by her heir Victor.
As early as 1903, it was held that "(H)e who contracts does so for
himself and his heirs."
[12]
In 1952, it was ruled that if the
predecessor was duty-bound to reconvey land to another, and at
his death the reconveyance had not been made, the heirs can be
compelled to execute the proper deed for reconveyance. This was
grounded upon the principle that heirs cannot escape the legal
consequence of a transaction entered into by their predecessor-in-
interest because they have inherited the property subject to the
liability affecting their common ancestor.
[13]

It is futile for Victor to insist that he is not a party to the contract
because of the clear provision of Article 1311 of the Civil Code.
Indeed, being an heir of Encarnacion, there is privity of interest
between him and his deceased mother. He only succeeds to what
rights his mother had and what is valid and binding against her is
also valid and binding as against him.
[14]
This is clear
from Paraaque Kings Enterprises vs. Court of Appeals,
[15]
where
this Court rejected a similar defense-alonzo
With respect to the contention of respondent
Raymundo that he is not privy to the lease contract,
not being the lessor nor the lessee referred to
therein, he could thus not have violated its
provisions, but he is nevertheless a proper party.
Clearly, he stepped into the shoes of the owner-
lessor of the land as, by virtue of his purchase, he
assumed all the obligations of the lessor under the
lease contract. Moreover, he received benefits in the
form of rental payments. Furthermore, the complaint,
as well as the petition, prayed for the annulment of
the sale of the properties to him. Both pleadings also
alleged collusion between him and respondent
Santos which defeated the exercise by petitioner of
its right of first refusal.
In order then to accord complete relief to petitioner,
respondent Raymundo was a necessary, if not
indispensable, party to the case. A favorable
judgment for the petitioner will necessarily affect the
rights of respondent Raymundo as the buyer of the
property over which petitioner would like to assert its
right of first option to buy.
In the case at bar, the subject matter of the contract is likewise
a lease, which is a property right. The death of a party does not
excuse nonperformance of a contract which involves a property
right, and the rights and obligations thereunder pass to the
personal representatives of the deceased. Similarly,
nonperformance is not excused by the death of the party when the
other party has a property interest in the subject matter of the
contract.
[16]

Under both Article 1311 of the Civil Code and jurisprudence,
therefore, Victor is bound by the subject Contract of Lease
with Option to Buy.
That being resolved, we now rule on the issue of whether petitioner
had complied with its obligations under the contract and with the
requisites to exercise its option. The payment by petitioner of the
reservation fees during the two-year period within which it had the
option to lease or purchase the property is not disputed. In fact, the
payment of such reservation fees, except those for February and
March, 1990 were admitted by Victor.
[17]
This is clear from the
transcripts, to wit-
"ATTY. MOJADO:
One request, Your Honor. The last payment
which was allegedly made in January 1990 just
indicate in that stipulation that it was issued
November of 1989 and postdated Janaury 1990 and
then we will admit all. rodp;fo
COURT:
All reservation fee?
ATTY. MOJADO:
Yes, Your Honor.
COURT:
All as part of the lease?
ATTY. MOJADO:
Reservation fee, Your Honor. There was no
payment with respect to payment of rentals."
[18]

Petitioner also paid the P15,000.00 monthly rental fee on the
subject property by depositing the same in China Bank Savings
Account No. 1-04-02558-I-1, in the name of Victor as the sole heir
of Encarnacion Bartolome,
[19]
for the months of March to July 30,
1990, or a total of five (5) months, despite the refusal of Victor to
turn over the subject property.
[20]

Likewise, petitioner complied with its duty to inform the other party
of its intention to exercise its option to lease through its letter dated
Match 12, 1990,
[21]
well within the two-year period for it to exercise
its option. Considering that at that time Encarnacion Bartolome had
already passed away, it was legitimate for petitioner to have
addressed its letter to her heir.
It appears, therefore, that the exercise by petitioner of its option to
lease the subject property was made in accordance with the
contractual provisions. Concomitantly, private respondent Victor
Bartolome has the obligation to surrender possession of and lease
the premises to petitioner for a period of six (6) years, pursuant to
the Contract of Lease with Option to Buy. micks
Coming now to the issue of tenancy, we find that this is not for this
Court to pass upon in the present petition. We note that the Motion
to Intervene and to Dismiss of the alleged tenant, Andres Lanozo,
was denied by the lower court and that such denial was never
made the subject of an appeal. As the lower court stated in its
Order, the alleged right of the tenant may well be ventilated in
another proceeding in due time.
WHEREFORE, in view of the foregoing, the instant Petition for
Review is GRANTED. The Decision of the Court of Appeals in CA-
G.R. CV No. 40849 and that of the Regional Trial Court of
Valenzuela in Civil Case No. 3337-V-90 are both SET ASIDE and
a new one rendered ordering private respondent Victor Bartolome
to:
(a) surrender and deliver possession of that parcel of
land covered by Transfer Certificate of Title No. V-
14249 by way of lease to petitioner and to perform all
obligations of his predecessor-in-interest,
Encarnacion Bartolome, under the subject Contract
of Lease with Option to Buy;
(b) surrender and deliver his copy of Transfer
Certificate of Title No. V-14249 to respondent
Register of Deeds for registration and annotation
thereon of the subject Contract of Lease with Option
to Buy;
(c) pay costs of suit. Sc
Respondent Register of Deeds is, accordingly, ordered to register
and annotate the subject Contract of Lease with Option to Buy at
the back of Transfer Certificate of Title No. V-14249 upon
submission by petitioner of a copy thereof to his office.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo,
JJ., concur. Scmis



[1]
Penned by Associate Justice Corona Ibay-Somera, concurred in by Justices Asaali S.
Isnani and Celia Lipana-Reyes.
[2]
Penned by Judge Teresita Dizon-Capulong.
[3]
Records, Civil Case No. 3337-V-90, pp. 1-28.
[4]
Id., pp. 35-43.
[5]
Id., p. 60.
[6]
Id., p. 129.
[7]
Id., p. 130.
[8]
Petition for Review, pp. 9-10; Rollo, pp. 10-11.
[9]
IV Tolentino, CIVIL CODE OF THE PHILIPPINES, 430 (1986).
[10]
Kanawha Banking & Trust Co. v. Gilbert, 46 S.E. 2d 225, 131 W. Va. 88; Rowe v.
Compensation Research Bureau, Inc., 62 N.W. 2d 581, 265 Wis. 589; Fressil v. Nichols,
114 So. 431, 94 Fla. 403; Cutler v. United Shoe Manufacturing Corporation, 174 N.E.
507, 274 Mass. 341, cited in 17A C.J.S. Sec. 465.
[11]
17 Am. Jur. 2d, Sec. 413, p. 866.
[12]
Eleizegui v. Lawn Tennis Club, G.R. No. 967, 2 Phil. 309, 313 (1903), citing Article
1257 of the old Civil Code.
[13]
Carillo v. Salak de Paz, G.R. No. L-4133, 91 Phil. 265 (1952).
[14]
See Galsinao v. Austria, G.R. No. L-7918, 97 Phil. 82, 87 (1955).
[15]
G.R. No. 111538, 268 SCRA 727, 745 (1997).
[16]
17A C.J.S. Section 465, p. 627.
[17]
See T.S.N., 19 October 1991, pp. 11-12, 14, 16, 19 and 20-21.
[18]
T.S.N., 29 October 1991, pp. 20-21.
[19]
See Exhibit "K"; Records, Civil Case No. 3337-V-90, pp. 274-276.
[20]
See T.S.N., 9 January 1992, pp. 16-17.
[21]
Exh. "J", Records, Civil Case No. 3337-V-90, pp. 272-273.
16
SECOND DIVISION
[G.R. No. 121940. December 4, 2001]
JESUS SAN AGUSTIN, petitioner, vs. HON. COURT OF
APPEALS and MAXIMO MENEZ, JR., respondents.
D E C I S I O N
QUISUMBING, J .:
This petition for review on certiorari seeks the reversal of the
decision
[1]
of the Court of Appeals dated May 19, 1995, affirming that of
the Regional Trial Court in LRC Case No. R-4659.
The relevant facts, as summarized by the CA, are as follows:
On February 11, 1974, the Government Service Insurance System
(GSIS) sold to a certain Macaria Vda. de Caiquep, a parcel of residential
land with an area of 168 square meters located in Rosario, Pasig City and
denominated as Lot 13, Block 7, Pcs-5816 of the Government Service
and Insurance System Low Cost Housing Project (GSIS-LCHP). The
sale is evidenced by a Deed of Absolute Sale.
[2]
On February 19, 1974, the
Register of Deeds of Rizal issued in the name of Macaria Vda. de
Caiquep, Transfer Certificate of Title (TCT) No. 436465 with the
following encumbrance annotated at the back of the title:
This Deed of Absolute Sale is subject to the conditions
enumerated below which shall be permanent encumbrances on
the property, the violation of any of which shall entitle the vendor
to cancel x x x this Deed of Absolute Sale and reenter the
property;
The purpose of the sale be to aid the vendee in acquiring a lot for
himself/themselves and not to provide him/them with a means for
speculation or profit by a future assignment of his/their right
herein acquired or the resale of the lot through rent, lease or
subletting to others of the lot and subject of this deed, and
therefore, the vendee shall not sell, convey, lease or sublease, or
otherwise encumber the property in favor of any other party
within five (5) years from the date final and absolute ownership
thereof becomes vested in the vendee, except in cases of
hereditary succession or resale in favor of the vendor;
x x x (Underscoring supplied).
[3]

A day after the issuance of TCT No. 436465, or on February 20,
1974, Macaria Vda. de Caiquep sold the subject lot to private respondent,
Maximo Menez, Jr., as evidenced by a Deed of Absolute Sale (Exhibit
D).
[4]
This deed was notarized but was not registered immediately upon
its execution in 1974 because GSIS prohibited him from registering the
same in view of the five-year prohibition to sell during the period ending
in 1979.
Sometime in 1979, for being suspected as a subversive, an Arrest,
Search and Seizure Order (ASSO) was issued against private respondent.
Military men ransacked his house in Cainta, Rizal. Upon learning that he
was wanted by the military, he voluntarily surrendered and was detained
for two (2) years. When released, another order for his re-arrest was
issued so he hid in Mindanao for another four (4) years or until March
1984. In December of 1990, he discovered that the subject TCT was
missing. He consulted a lawyer but the latter did not act immediately on
the matter. Upon consulting a new counsel, an Affidavit of Loss
[5]
was
filed with the Register of Deeds of Pasig and a certified copy
[6]
of TCT
No. 436465 was issued. Private respondent also declared the property for
tax purposes and obtained a certification thereof from the Assessors
Office.
[7]

Private respondent sent notices to the registered owner at her address
appearing in the title and in the Deed of Sale. And, with his counsel, he
searched for the registered owner in Metro Manila and Rizal and as far as
Samar, Leyte, Calbayog City, Tacloban City, and in Eastern and Northern
Samar. However, their search proved futile.
On July 8, 1992, private respondent filed a petition docketed as LRC
Case No. R-4659 with the RTC, Branch 154, Pasig, Metro Manila for the
issuance of owners duplicate copy of TCT No. 436465 to replace the lost
one. To show he was the owner of the contested lot, he showed the Deed
of Absolute Sale, Exhibit D. The petition was set for hearing and the
courts order dated July 10, 1992 was published once in Malaya, a
nationally circulated newspaper in the Philippines.
[8]

During the hearing on September 3, 1992, only Menez and his
counsel appeared. The Register of Deeds who was not served notice, and
the Office of the Solicitor General and the Provincial Prosecutor who
were notified did not attend.
On September 18, 1992, there being no opposition, Menez presented
his evidence ex-parte. The trial court granted his petition in its
decision
[9]
dated September 30, 1992, the dispositive portion of which
reads:
WHEREFORE, the petition is hereby GRANTED and the
Registry of Deeds of Pasig, Metro Manila, is hereby directed to
issue a new Owners Duplicate Copy of Transfer Certificate of
Title No. 436465 based on the original thereon filed in his office
which shall contain the memorandum of encumbrance and an
additional memorandum of the fact that it was issued in place of
the lost duplicate and which shall, in all respect, be entitled to
like faith and credit as the original duplicate, for all legal intents
and purposes.
Issuance of new owners duplicate copy shall be made only after
this decision shall have become final and executory. The said
lost owners duplicate is hereby declared null and void.
Petitioner shall pay all legal fees in connection with the issuance
of the new owners copy.
Let copies of this Order be furnished the petitioner; the registered
owner of his given address in the title, in the deed of sale, and in
the tax declaration; the Registry of Deeds of Pasig; the Office of
the Solicitor General; and the Provincial Fiscal of Pasig, Metro
Manila.
SO ORDERED.
[10]

On October 13, 1992, herein petitioner, Jesus San Agustin, received a
copy of the abovecited decision. He claimed this was the first time he
became aware of the case of her aunt, Macaria Vda. de Caiquep who,
according to him, died sometime in 1974. Claiming that he was the
present occupant of the property and the heir of Macaria, he filed his
Motion to Reopen Reconstitution Proceedings
[11]
on October 27,
1992. On December 3, 1992, RTC issued an order denying said
motion.
[12]

Petitioner filed an appeal with the Court of Appeals which, as earlier
stated, was denied in its decision of May 19, 1995. Petitioner moved for
a reconsideration, but it was denied in a resolution dated September 11,
1995.
[13]

Thus, the present petition, attributing the following errors to the court
a quo:
A.
THE RESPONDENT COURT GRAVELY ERRED IN
HOLDING THAT LRC CASE NO. R-4659 BEING ONLY
A PETITION FOR THE ISSUANCE OF A NEW
OWNERS DUPLICATE OF TITLE, THERE IS NO NEED
OF PERSONAL NOTICE TO THE PETITIONER, THE
ACTUAL POSSESSOR [WHO HAS] AND ACTUALLY
BEEN PAYING THE REAL ESTATE TAX, DESPITE
PRIVATE RESPONDENTS KNOWLEDGE OF ACTUAL
POSSESSION OF AND INTEREST OVER THE
PROPERTY COVERED BY TCT NO. 436465.
[14]

B.
RESPONDENT COURT GRAVELY ERRED IN
HOLDING THAT THE SALE BETWEEN THE PRIVATE
RESPONDENT AND MACARIA VDA. DE CAIQUEP IS
NOT NULL AND VOID AND UNDER ARTICLE 1409 OF
THE CIVIL CODE SPECIFICALLY PARAGRAPH (7)
THEREOF WHICH REFERS TO CONTRACTS
EXPRESSLY PROHIBITED OR DECLARED VOID BY
LAW.
[15]

Considering the above assignment of errors, let us resolve the
corresponding issues raised by petitioner.
The first issue involves private respondents alleged failure to send
notice to petitioner who is the actual possessor of the disputed lot. Stated
briefly, is petitioner entitled to notice? Our finding is in the negative.
Presidential Decree No. 1529, otherwise known as the Property
Registration Decree is decisive. It provides:
Sec. 109. Notice and replacement of lost duplicate certificate.
In case of loss or theft of an owners duplicate certificate of title,
due notice under oath shall be sent by the owner or by someone
in his behalf to the Register of Deeds of the province or city
where the land lies as soon as the loss or theft is discovered. If a
duplicate certificate is lost or destroyed, or cannot be produced
by a person applying for the entry of a new certificate to him or
for the registration of any instrument, a sworn statement of the
fact of such loss or destruction may be filed by the registered
owner or other person in interest and registered.
Upon the petition of the registered owner or other person in
interest, the court may, after notice and due hearing, direct the
issuance of a new duplicate certificate, which shall contain a
memorandum of the fact that it is issued in place of the lost
duplicate certificate, but shall in all respects be entitled to like
faith and credit as the original duplicate, and shall thereafter be
regarded as such for all purposes of this decree.
In Office of Court Administrator vs. Matas, A.M. No. RTJ-92-836,
247 SCRA 9, 16-17 (1995), we held:
In the case at bar, the respective certificate of title of the
properties in question on file with the Register of Deeds are
existing, and it is the owners copy of the certificate of title that
was alleged to have been lost or destroyed. Thus, it is Section 109
of P.D. 1529 which was approved on June 11, 1978 that becomes
effective and is applicable, a reading of which shows that it is
practically the same as Section 109 of Act No. 496, governing
reconstitution of a duplicate certificate of title lost or destroyed.
Consequently, it is sufficient that the notice under Section 109 is
sent to the Register of Deeds and to those persons who are known
to have, or appear to have, an interest in the property as shown in
the Memorandum of encumbrances at the back of the original or
transfer certificate of title on file in the office of the Register of
Deeds. From a legal standpoint, there are no other interested
parties who should be notified, except those abovementioned
since they are the only ones who may be deemed to have a claim
to the property involved. A person dealing with registered
property is not charged with notice of encumbrances not
annotated on the back of the title.

(Italics supplied.)
Here, petitioner does not appear to have an interest in the property
based on the memorandum of encumbrances annotated at the back of the
title. His claim that he is an heir (nephew) of the original owner of the lot
covered by the disputed lot and the present occupant thereof is not
annotated in the said memorandum of encumbrances. Neither was his
claim entered on the Certificate of Titles in the name of their
original/former owners on file with the Register of Deeds at the time of
the filing or pendency of LRC Case No. R-4659. Clearly, petitioner is not
entitled to notice.
Noteworthy is the fact that there was compliance by private
respondent of the RTCs order of publication of the petition in a
newspaper of general circulation. This is sufficient notice of the petition
to the public at large.
Petitioner contends that as possessor or actual occupant of the lot in
controversy, he is entitled under the law to be notified. He relies
on Alabang Development Corporation vs. Valenzuela,G.R. No. L-54094,
116 SCRA 261, 277 (1982), which held that in reconstitution
proceedings, courts must make sure that indispensable parties, i.e., the
actual owners and possessors of the lands involved, are duly served with
actual and personal notice of the petition. As pointed out by the appellate
court, his reliance on Alabang is misplaced because the cause of action in
that case is based on Republic Act No. 26, entitled An Act Providing A
Special Procedure for the Reconstitution of Torrens Certificate of Title
Lost or Destroyed, while the present case is based on Section 109 of
P.D. 1529 as above explained.
Under Republic Act No. 26, reconstitution is validly made only in
case the original copy of the certificate of title with the Register of Deeds
is lost or destroyed. And if no notice of the date of hearing of a
reconstitution case is served on a possessor or one having interest in the
property involved, he is deprived of his day in court and the order of
reconstitution is null and void.
[16]
The case at bar is not for reconstitution,
but merely for replacement of lost duplicate certificate.
On the second assigned error, petitioner contends that Exhibit D is
null and void under Article 1409 of the Civil Code, specifically paragraph
(7),
[17]
because the deed of sale was executed within the five-year
prohibitory period under Commonwealth Act No. 141, as amended,
otherwise known as The Public Land Act.
[18]

We find petitioners contention less than meritorious. We agree with
respondent court that the proscription under Com. Act No. 141 on sale
within the 5-year restrictive period refers to homestead lands only. Here
the lot in dispute is not a homestead land, as found by the trial and
appellate courts. Said lot is owned by GSIS, under TCT No. 10028 in its
proprietary capacity.
Moreover, as far as the violation of the 5-year restrictive condition
imposed by GSIS in its contract with petitioners predecessor-in-interest
is concerned, it is the GSIS and not petitioner who had a cause of action
against private respondent. Vide the instructive case of Sarmiento vs.
Salud:
The condition that the appellees Sarmiento spouses could not
resell the property except to the People's Homesite and Housing
Corporation (PHHC for short) within the next 25 years after
appellees' purchasing the lot is manifestly a condition in favor of
the PHHC, and not one in favor of the Sarmiento spouses. The
condition conferred no actionable right on appellees herein, since
it operated as a restriction upon their jus disponendi of the
property they bought, and thus limited their right of ownership. It
follows that on the assumption that the mortgage to appellee
Salud and the foreclosure sale violated the condition in the
Sarmiento contract, only the PHHC was entitled to invoke the
condition aforementioned, and not the Sarmientos. The validity
or invalidity of the sheriff's foreclosure sale to appellant Salud
thus depended exclusively on the PHHC; the latter could attack
the sale as violative of its right of exclusive reacquisition; but it
(PHHC) also could waive the condition and treat the sale as good,
in which event, the sale can not be assailed for breach of the
condition aforestated.
[19]

In this case, the GSIS has not filed any action for the annulment of
Exhibit D, nor for the forfeiture of the lot in question. In our view, the
contract of sale remains valid between the parties, unless and until
annulled in the proper suit filed by the rightful party, the GSIS. For
now, the said contract of sale is binding upon the heirs of Macaria Vda.
de Caiquep, including petitioner who alleges to be one of her heirs, in line
with the rule that heirs are bound by contracts entered into by their
predecessors-in-interest.
[20]

We are not unmindful of the social justice policy of R.A. 8291
otherwise known as Government Service Insurance Act of 1997 in
granting housing assistance to the less-privileged GSIS members and
their dependents payable at an affordable payment scheme.
[21]
This is the
same policy which the 5-year restrictive clause in the contract seeks to
implement by stating in the encumbrance itself annotated at the back of
TCT No. 436465 that, The purpose of the sale is to aid the vendee in
acquiring a lot for himself/themselves and not to provide him/them with a
means for speculation or profit by a future assignment of his/their right
herein acquired or the resale of the lot through rent, lease or subletting to
others of the lot and subject of this deed, xxx within five (5) years from
the date final and absolute ownership thereof becomes vested in the
vendee, except in cases of hereditary succession or resale in favor of the
vendor.
[22]
However, absent the proper action taken by the GSIS as the
original vendor referred to, the contract between petitioners predecessor-
in-interest and private respondent deserves to be upheld. For as pointed
out by said private respondent, it is protected by the Constitution under
Section 10, Article III, of the Bill of Rights stating that, No law
impairing the obligation of contracts shall be passed. Much as we would
like to see a salutary policy triumph, that provision of the Constitution
duly calls for compliance.
More in point, however, is the fact that, following Sarmiento v.
Salud,
[23]
Even if the transaction between the original awardee and herein
petitioner were wrongful, still, as between themselves, the purchaser and
the seller were both in pari delicto, being participes criminis as it
were. As in Sarmiento, in this case both were aware of the existence of
the stipulated condition in favor of the original seller, GSIS, yet both
entered into an agreement violating said condition and nullifying its
effects. Similarly, as Acting Chief Justice JBL Reyes concluded
in Sarmiento, Both parties being equally guilty, neither is entitled to
complain against the other. Having entered into the transaction with open
eyes, and having benefited from it, said parties should be held in estoppel
to assail and annul their own deliberate acts.
WHEREFORE, the appeal is DENIED, and the decision of the
respondent court is AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, and De Leon, Jr., JJ., concur.
Buena, J., on official leave.



[1]
CA Rollo, pp. 52-66.
[2]
RTC Records, pp. 40-41.
[3]
Id., Annex B, at 5.
[4]
Id. at 12. Also referred to as Annex A, Id. at 3.
[5]
Id., Annex C, at 6.
[6]
Id., Annex B or Exh. E, at 14-15.
[7]
Id., Exh. F, at 16.
[8]
Id., Exh. C-1, at 10.
[9]
CA Rollo, pp. 24-27.
[10]
Id. at 26-27.
[11]
RTC Records, pp. 29-33.
[12]
Id. at 47-49.
[13]
Rollo, p. 39.
[14]
Id. at 15.
[15]
Id. at 18.
[16]
Manila Railroad Company vs. Hon. Jose M. Moya, et al., No. L-17913, 14 SCRA
358, 363 (1965).
[17]
Art. 1409. The following contracts are inexistent and void from the beginning:
xxx
Those expressly prohibited or declared void by law.
xxx.
[18]
Sec. 118. Except in favor of the Government or any of its branches, units, or
institutions, or legally constituted banking corporations, lands acquired under free patent
or homestead provisions shall not be subject to encumbrance or alienation from the date
of the approval of the application and for a term of five years from and after the date of
issuance of the patent or grant nor shall they become liable to the satisfaction of any
debt contracted prior to the expiration of said period; but the improvements or crops on
the land may be mortgaged or pledged to qualified persons, associations, or
corporations.
No alienation, transfer, or conveyance of any homestead after five years and before
twenty-five years after issuance of title shall be valid without the approval of the
Secretary of Agriculture and Commerce, (now Secretary of Agriculture) which approval
shall not be denied except on constitutional and legal grounds. (As amended by Com.
Act No. 456, approved June 8, 1939).
Sec. 124. Any acquisition, conveyance, alienation, transfer, or other contract made or
executed in violation of any of the provisions of sections one hundred and eighteen, x x x
of this Act shall be unlawful and null and void from its execution and shall produce the
effect of annulling and cancelling the grant, title, patent, or permit originally
issued, recognized or confirmed, actually or presumptively, and cause the reversion of
the property and its improvements to the State (underscoring supplied).
[19]
G.R. No. L-25221, 45 SCRA 213, 215-216 (1972).
[20]
Art. 1311, New Civil Code; DKC Holdings Corporation vs. CA, G.R. No. 118248,
329 SCRA 666, 674 ( 2000).
[21]

SEC. 36. Investment of funds.- The funds of the GSIS which are not needed to meet the current obligations may be invested under
such terms and conditions and rules and regulations as may be prescribed by the Board: Provided, That the GSIS shall submit an
annual report on all investments made to both Houses of Congress of the Philippines, to wit:

xxx

( c ) In direct housing loans to members and group housing projects secured by first mortgage, giving priority to the low
income groups and in short and medium-term loans to members such as salary, policy, educational, emergency, stock purchase plan and
other similar loans xxx.

[22]
RTC Records, Annex B, at p. 5.
[23]
G.R. No. L-25221, 45 SCRA 213, 216 (1972), citing Civil Code, Articles 1411,
1412; Philippine Scrappers, Inc., et al., vs. Auditor General, 96 Phil. 454, 456-457
(1955).
17
G.R. No. 146006 February 23, 2004
JOSE C. LEE AND ALMA AGGABAO, in their capacities as
President and Corporate Secretary, respectively, of Philippines
International Life Insurance Company, and FILIPINO LOAN
ASSISTANCE GROUP, petitioners
vs.
REGIONAL TRIAL COURT OF QUEZON CITY BRANCH 85
presided by JUDGE PEDRO M. AREOLA, BRANCH CLERK OF
COURT JANICE Y. ANTERO, DEPUTY SHERIFFS ADENAUER
G. RIVERA and PEDRO L. BORJA, all of the Regional Trial
Court of Quezon City Branch 85, MA. DIVINA ENDERES
claiming to be Special Administratrix, and other persons/ public
officers acting for and in their behalf, respondents.
D E C I S I O N
CORONA, J.:
This is a petition for review under Rule 45 of the Rules of Court
seeking to reverse and set aside the decision
1
of the Court of
Appeals, First Division, dated July 26, 2000, in CA G.R. 59736,
which dismissed the petition for certiorari filed by petitioners Jose
C. Lee and Alma Aggabao (in their capacities as president and
secretary, respectively, of Philippine International Life Insurance
Company) and Filipino Loan Assistance Group.
The antecedent facts follow.
Dr. Juvencio P. Ortaez incorporated the Philippine International
Life Insurance Company, Inc. on July 6, 1956. At the time of the
companys incorporation, Dr. Ortaez owned ninety percent (90%)
of the subscribed capital stock.
On July 21, 1980, Dr. Ortaez died. He left behind a wife (Juliana
Salgado Ortaez), three legitimate children (Rafael, Jose and
Antonio Ortaez) and five illegitimate children by Ligaya Novicio
(herein private respondent Ma. Divina Ortaez-Enderes and her
siblings Jose, Romeo, Enrico Manuel and Cesar, all surnamed
Ortaez).
2

On September 24, 1980, Rafael Ortaez filed before the Court of
First Instance of Rizal, Quezon City Branch (now Regional Trial
Court of Quezon City) a petition for letters of administration of the
intestate estate of Dr. Ortaez, docketed as SP Proc. Q-30884
(which petition to date remains pending at Branch 85 thereof).
Private respondent Ma. Divina Ortaez-Enderes and her siblings
filed an opposition to the petition for letters of administration and,
in a subsequent urgent motion, prayed that the intestate court
appoint a special administrator.
On March 10, 1982, Judge Ernani Cruz Pao, then presiding judge
of Branch 85, appointed Rafael and Jose Ortaez joint special
administrators of their fathers estate. Hearings continued for the
appointment of a regular administrator (up to now no regular
administrator has been appointed).
As ordered by the intestate court, special administrators Rafael
and Jose Ortaez submitted an inventory of the estate of their
father which included, among other properties, 2,029
3
shares of
stock in Philippine International Life Insurance Company
(hereafter Philinterlife), representing 50.725% of the companys
outstanding capital stock.
On April 15, 1989, the decedents wife, Juliana S. Ortaez, claiming
that she owned 1,014
4
Philinterlife shares of stock as her conjugal
share in the estate, sold said shares with right to repurchase in
favor of herein petitioner Filipino Loan Assistance Group (FLAG),
represented by its president, herein petitioner Jose C. Lee. Juliana
Ortaez failed to repurchase the shares of stock within the
stipulated period, thus ownership thereof was consolidated by
petitioner FLAG in its name.
On October 30, 1991, Special Administrator Jose Ortaez, acting in
his personal capacity and claiming that he owned the remaining
1,011
5
Philinterlife shares of stocks as his inheritance share in the
estate, sold said shares with right to repurchase also in favor of
herein petitioner FLAG, represented by its president, herein
petitioner Jose C. Lee. After one year, petitioner FLAG
consolidated in its name the ownership of the Philinterlife shares
of stock when Jose Ortaez failed to repurchase the same.
It appears that several years before (but already during the
pendency of the intestate proceedings at the Regional Trial Court
of Quezon City, Branch 85), Juliana Ortaez and her two children,
Special Administrators Rafael and Jose Ortaez, entered into a
memorandum of agreement dated March 4, 1982 for the
extrajudicial settlement of the estate of Dr. Juvencio Ortaez,
partitioning the estate (including the Philinterlife shares of stock)
among themselves. This was the basis of the number of shares
separately sold by Juliana Ortaez on April 15, 1989 (1,014 shares)
and by Jose Ortaez on October 30, 1991 (1,011 shares) in favor of
herein petitioner FLAG.
On July 12, 1995, herein private respondent Ma. Divina Ortaez
Enderes and her siblings (hereafter referred to as private
respondents Enderes et al.) filed a motion for appointment of
special administrator of Philinterlife shares of stock. This move
was opposed by Special Administrator Jose Ortaez.
On November 8, 1995, the intestate court granted the motion of
private respondents Enderes et al. and appointed private
respondent Enderes special administratrix of the Philinterlife
shares of stock.
On December 20, 1995, Special Administratrix Enderes filed an
urgent motion to declare void ab initio the memorandum of
agreement dated March 4, 1982. On January 9, 1996, she filed a
motion to declare the partial nullity of the extrajudicial settlement
of the decedents estate. These motions were opposed by Special
Administrator Jose Ortaez.
On March 22, 1996, Special Administratrix Enderes filed an urgent
motion to declare void ab initio the deeds of sale of Philinterlife
shares of stock, which move was again opposed by Special
Administrator Jose Ortaez.
On February 4, 1997, Jose Ortaez filed an omnibus motion for (1)
the approval of the deeds of sale of the Philinterlife shares of stock
and (2) the release of Ma. Divina Ortaez-Enderes as special
administratrix of the Philinterlife shares of stock on the ground
that there were no longer any shares of stock for her to administer.
On August 11, 1997, the intestate court denied the omnibus motion
of Special Administrator Jose Ortaez for the approval of the
deeds of sale for the reason that:
Under the Godoy case, supra, it was held in substance that a sale of
a property of the estate without an Order of the probate court is
void and passes no title to the purchaser. Since the sales in
question were entered into by Juliana S. Ortaez and Jose S.
Ortaez in their personal capacity without prior approval of the
Court, the same is not binding upon the Estate.
WHEREFORE, the OMNIBUS MOTION for the approval of the
sale of Philinterlife shares of stock and release of Ma. Divina
Ortaez-Enderes as Special Administratrix is hereby denied.
6

On August 29, 1997, the intestate court issued another order
granting the motion of Special Administratrix Enderes for the
annulment of the March 4, 1982 memorandum of agreement or
extrajudicial partition of estate. The court reasoned that:
In consonance with the Order of this Court dated August 11, 1997
DENYING the approval of the sale of Philinterlife shares of stocks
and release of Ma. Divina Ortaez-Enderes as Special
Administratrix, the "Urgent Motion to Declare Void Ab
Initio Memorandum of Agreement" dated December 19, 1995. . . is
hereby impliedly partially resolved insofar as the
transfer/waiver/renunciation of the Philinterlife shares of stock
are concerned, in particular, No. 5, 9(c), 10(b) and 11(d)(ii) of the
Memorandum of Agreement.
WHEREFORE, this Court hereby declares the Memorandum of
Agreement dated March 4, 1982 executed by Juliana S. Ortaez,
Rafael S. Ortaez and Jose S. Ortaez as partially void ab
initio insofar as the transfer/waiver/renunciation of the
Philinterlife shares of stocks are concerned.
7

Aggrieved by the above-stated orders of the intestate court, Jose
Ortaez filed, on December 22, 1997, a petition for certiorari in the
Court of Appeals. The appellate court denied his petition,
however, ruling that there was no legal justification whatsoever for
the extrajudicial partition of the estate by Jose Ortaez, his brother
Rafael Ortaez and mother Juliana Ortaez during the pendency
of the settlement of the estate of Dr. Ortaez, without the requisite
approval of the intestate court, when it was clear that there were
other heirs to the estate who stood to be prejudiced thereby.
Consequently, the sale made by Jose Ortaez and his mother
Juliana Ortaez to FLAG of the shares of stock they invalidly
appropriated for themselves, without approval of the intestate
court, was void.
8

Special Administrator Jose Ortaez filed a motion for
reconsideration of the Court of Appeals decision but it was denied.
He elevated the case to the Supreme Court via petition for review
under Rule 45 which the Supreme Court dismissed on October 5,
1998, on a technicality. His motion for reconsideration was denied
with finality on January 13, 1999. On February 23, 1999, the
resolution of the Supreme Court dismissing the petition of Special
Administrator Jose Ortaez became final and was subsequently
recorded in the book of entries of judgments.
Meanwhile, herein petitioners Jose Lee and Alma Aggabao, with
the rest of the FLAG-controlled board of directors, increased the
authorized capital stock of Philinterlife, diluting in the process the
50.725% controlling interest of the decedent, Dr. Juvencio Ortaez,
in the insurance company.
9
This became the subject of a separate
action at the Securities and Exchange Commission filed by private
respondent-Special Administratrix Enderes against petitioner Jose
Lee and other members of the FLAG-controlled board of
Philinterlife on November 7, 1994. Thereafter, various cases were
filed by Jose Lee as president of Philinterlife and Juliana Ortaez
and her sons against private respondent-Special Administratrix
Enderes in the SEC and civil courts.
10
Somehow, all these cases
were connected to the core dispute on the legality of the sale of
decedent Dr. Ortaezs Philinterlife shares of stock to petitioner
FLAG, represented by its president, herein petitioner Jose Lee who
later became the president of Philinterlife after the controversial
sale.
On May 2, 2000, private respondent-Special Administratrix
Enderes and her siblings filed a motion for execution of the Orders
of the intestate court dated August 11 and August 29, 1997 because
the orders of the intestate court nullifying the sale (upheld by the
Court of Appeals and the Supreme Court) had long became final.
Respondent-Special Administratrix Enderes served a copy of the
motion to petitioners Jose Lee and Alma Aggabao as president and
secretary, respectively, of Philinterlife,
11
but petitioners ignored the
same.
On July 6, 2000, the intestate court granted the motion for
execution, the dispositive portion of which read:
WHEREFORE, premises considered, let a writ of execution issue as
follows:
1. Confirming the nullity of the sale of the 2,029 Philinterlife
shares in the name of the Estate of Dr. Juvencio Ortaez to
Filipino Loan Assistance Group (FLAG);
2. Commanding the President and the Corporate Secretary
of Philinterlife to reinstate in the stock and transfer book of
Philinterlife the 2,029 Philinterlife shares of stock in the
name of the Estate of Dr. Juvencio P. Ortaez as the owner
thereof without prejudice to other claims for violation of
pre-emptive rights pertaining to the said 2,029 Philinterlife
shares;
3. Directing the President and the Corporate Secretary of
Philinterlife to issue stock certificates of Philinterlife for
2,029 shares in the name of the Estate of Dr. Juvencio P.
Ortaez as the owner thereof without prejudice to other
claims for violations of pre-emptive rights pertaining to the
said 2,029 Philinterlife shares and,
4. Confirming that only the Special Administratrix, Ma.
Divina Ortaez-Enderes, has the power to exercise all the
rights appurtenant to the said shares, including the right to
vote and to receive dividends.
5. Directing Philinterlife and/or any other person or
persons claiming to represent it or otherwise, to
acknowledge and allow the said Special Administratrix to
exercise all the aforesaid rights on the said shares and to
refrain from resorting to any action which may tend directly
or indirectly to impede, obstruct or bar the free exercise
thereof under pain of contempt.
6. The President, Corporate Secretary, any responsible
officer/s of Philinterlife, or any other person or persons
claiming to represent it or otherwise, are hereby directed to
comply with this order within three (3) days from receipt
hereof under pain of contempt.
7. The Deputy Sheriffs Adenauer Rivera and Pedro Borja are
hereby directed to implement the writ of execution with
dispatch to forestall any and/or further damage to the
Estate.
SO ORDERED.
12

In the several occasions that the sheriff went to the office of
petitioners to execute the writ of execution, he was barred by the
security guard upon petitioners instructions. Thus, private
respondent-Special Administratrix Enderes filed a motion to cite
herein petitioners Jose Lee and Alma Aggabao (president and
secretary, respectively, of Philinterlife) in contempt.
13

Petitioners Lee and Aggabao subsequently filed before the Court
of Appeals a petition for certiorari, docketed as CA G.R. SP No.
59736. Petitioners alleged that the intestate court gravely abused its
discretion in (1) declaring that the ownership of FLAG over the
Philinterlife shares of stock was null and void; (2) ordering the
execution of its order declaring such nullity and (3) depriving the
petitioners of their right to due process.
On July 26, 2000, the Court of Appeals dismissed the petition
outright:
We are constrained to DISMISS OUTRIGHT the present petition
for certiorari and prohibition with prayer for a temporary
restraining order and/or writ of preliminary injunction in the light
of the following considerations:
1. The assailed Order dated August 11, 1997 of the
respondent judge had long become final and executory;
2. The certification on non-forum shopping is signed by
only one (1) of the three (3) petitioners in violation of the
Rules; and
3. Except for the assailed orders and writ of execution, deed
of sale with right to repurchase, deed of sale of shares of
stocks and omnibus motion, the petition is not accompanied
by such pleadings, documents and other material portions
of the record as would support the allegations therein in
violation of the second paragraph, Rule 65 of the 1997 Rules
of Civil Procedure, as amended.
Petition is DISMISSED.
SO ORDERED.
14

The motion for reconsideration filed by petitioners Lee and
Aggabao of the above decision was denied by the Court of
Appeals on October 30, 2000:
This resolves the "urgent motion for reconsideration" filed by the
petitioners of our resolution of July 26, 2000 dismissing outrightly
the above-entitled petition for the reason, among others, that the
assailed Order dated August 11, 1997 of the respondent Judge had
long become final and executory.
Dura lex, sed lex.
WHEREFORE, the urgent motion for reconsideration is hereby
DENIED, for lack of merit.
SO ORDERED.
15

On December 4, 2000, petitioners elevated the case to the Supreme
Court through a petition for review under Rule 45 but on
December 13, 2000, we denied the petition because there was no
showing that the Court of Appeals in CA G.R. SP No. 59736
committed any reversible error to warrant the exercise by the
Supreme Court of its discretionary appellate jurisdiction.
16

However, upon motion for reconsideration filed by petitioners Lee
and Aggabao, the Supreme Court granted the motion and
reinstated their petition on September 5, 2001. The parties were
then required to submit their respective memoranda.
Meanwhile, private respondent-Special Administratrix Enderes, on
July 19, 2000, filed a motion to direct the branch clerk of court in
lieu of herein petitioners Lee and Aggabao to reinstate the name of
Dr. Ortaez in the stock and transfer book of Philinterlife and issue
the corresponding stock certificate pursuant to Section 10, Rule 39
of the Rules of Court which provides that "the court may direct the
act to be done at the cost of the disobedient party by some other
person appointed by the court and the act when so done shall have
the effect as if done by the party." Petitioners Lee and Aggabao
opposed the motion on the ground that the intestate court should
refrain from acting on the motion because the issues raised therein
were directly related to the issues raised by them in their petition
for certiorari at the Court of Appeals docketed as CA-G.R. SP No.
59736. On October 30, 2000, the intestate court granted the motion,
ruling that there was no prohibition for the intestate court to
execute its orders inasmuch as the appellate court did not issue
any TRO or writ of preliminary injunction.
On December 3, 2000, petitioners Lee and Aggabao filed a petition
for certiorari in the Court of Appeals, docketed as CA-G.R. SP No.
62461, questioning this time the October 30, 2000 order of the
intestate court directing the branch clerk of court to issue the stock
certificates. They also questioned in the Court of Appeals the order
of the intestate court nullifying the sale made in their favor by
Juliana Ortaez and Jose Ortaez. On November 20, 2002, the
Court of Appeals denied their petition and upheld the power of
the intestate court to execute its order. Petitioners Lee and
Aggabao then filed motion for reconsideration which at present is
still pending resolution by the Court of Appeals.
Petitioners Jose Lee and Alma Aggabao (president and secretary,
respectively, of Philinterlife) and FLAG now raise the following
errors for our consideration:
The Court of Appeals committed grave reversible ERROR:
A. In failing to reconsider its previous resolution denying
the petition despite the fact that the appellate courts
mistake in apprehending the facts had become patent and
evident from the motion for reconsideration and the
comment of respondent Enderes which had admitted the
factual allegations of petitioners in the petition as well as in
the motion for reconsideration. Moreover, the resolution of
the appellate court denying the motion for reconsideration
was contained in only one page without even touching on
the substantive merits of the exhaustive discussion of facts
and supporting law in the motion for reconsideration in
violation of the Rule on administrative due process;
B. in failing to set aside the void orders of the intestate court
on the erroneous ground that the orders were final and
executory with regard to petitioners even as the latter were
never notified of the proceedings or order canceling its
ownership;
C. in not finding that the intestate court committed grave
abuse of discretion amounting to excess of jurisdiction (1)
when it issued the Omnibus Order nullifying the ownership
of petitioner FLAG over shares of stock which were alleged
to be part of the estate and (2) when it issued a void writ of
execution against petitioner FLAG as present owner to
implement merely provisional orders, thereby violating
FLAGs constitutional right against deprivation of property
without due process;
D. In failing to declare null and void the orders of the
intestate court which nullified the sale of shares of stock
between the legitimate heir Jose S. Ortaez and petitioner
FLAG because of settled law and jurisprudence, i.e., that an
heir has the right to dispose of the decedents property even
if the same is under administration pursuant to Civil Code
provision that possession of hereditary property is
transmitted to the heir the moment of death of the decedent
(Acedebo vs. Abesamis, 217 SCRA 194);
E. In disregarding the final decision of the Supreme Court
in G.R. No. 128525 dated December 17, 1999 involving
substantially the same parties, to wit, petitioners Jose C. Lee
and Alma Aggabao were respondents in that case while
respondent Ma. Divina Enderes was the petitioner therein.
That decision, which can be considered law of the case,
ruled that petitioners cannot be enjoined by respondent
Enderes from exercising their power as directors and
officers of Philinterlife and that the intestate court in charge
of the intestate proceedings cannot adjudicate title to
properties claimed to be part of the estate and which are
equally CLAIMED BY petitioner FLAG.
17

The petition has no merit.
Petitioners Jose Lee and Alma Aggabao, representing Philinterlife
and FLAG, assail before us not only the validity of the writ of
execution issued by the intestate court dated July 7, 2000 but also
the validity of the August 11, 1997 order of the intestate court
nullifying the sale of the 2,029 Philinterlife shares of stock made by
Juliana Ortaez and Jose Ortaez, in their personal capacities and
without court approval, in favor of petitioner FLAG.
We cannot allow petitioners to reopen the issue of nullity of the
sale of the Philinterlife shares of stock in their favor because this
was already settled a long time ago by the Court of Appeals in its
decision dated June 23, 1998 in CA-G.R. SP No. 46342. This
decision was effectively upheld by us in our resolution dated
October 9, 1998 in G.R. No. 135177 dismissing the petition for
review on a technicality and thereafter denying the motion for
reconsideration on January 13, 1999 on the ground that there was
no compelling reason to reconsider said denial.
18
Our decision
became final on February 23, 1999 and was accordingly entered in
the book of entry of judgments. For all intents and purposes
therefore, the nullity of the sale of the Philinterlife shares of stock
made by Juliana Ortaez and Jose Ortaez in favor of petitioner
FLAG is already a closed case. To reopen said issue would set a
bad precedent, opening the door wide open for dissatisfied parties
to relitigate unfavorable decisions no end. This is completely
inimical to the orderly and efficient administration of justice.
The said decision of the Court of Appeals in CA-G.R. SP No. 46342
affirming the nullity of the sale made by Jose Ortaez and his
mother Juliana Ortaez of the Philinterlife shares of stock read:
Petitioners asseverations relative to said [memorandum]
agreement were scuttled during the hearing before this Court thus:
JUSTICE AQUINO:
Counsel for petitioner, when the Memorandum of
Agreement was executed, did the children of Juliana
Salgado know already that there was a claim for share in
the inheritance of the children of Novicio?
ATTY. CALIMAG:
Your Honor please, at that time, Your Honor, it is already
known to them.
JUSTICE AQUINO:
What can be your legal justification for extrajudicial
settlement of a property subject of intestate proceedings
when there is an adverse claim of another set of heirs,
alleged heirs? What would be the legal justification for
extra-judicially settling a property under administration
without the approval of the intestate court?
ATTY. CALIMAG:
Well, Your Honor please, in that extra-judicial settlement
there is an approval of the honorable court as to the
propertys partition x x x. There were as mentioned by the
respondents counsel, Your Honor.
ATTY. BUYCO:
No
JUSTICE AQUINO:
The point is, there can be no adjudication of a property
under intestate proceedings without the approval of the
court. That is basic unless you can present justification on
that. In fact, there are two steps: first, you ask leave and
then execute the document and then ask for approval of the
document executed. Now, is there any legal justification to
exclude this particular transaction from those steps?
ATTY. CALIMAG:
None, Your Honor.
ATTY. BUYCO:
With that admission that there is no legal justification, Your
Honor, we rest the case for the private respondent. How can
the lower court be accused of abusing its discretion? (pages
33-35, TSN of January 29, 1998).
Thus, We find merit in the following postulation by private
respondent:
What we have here is a situation where some of the heirs of the
decedent without securing court approval have appropriated as
their own personal property the properties of [the] Estate, to the
exclusion and the extreme prejudice of the other claimant/heirs. In
other words, these heirs, without court approval, have distributed
the asset of the estate among themselves and proceeded to dispose
the same to third parties even in the absence of an order of
distribution by the Estate Court. As admitted by petitioners
counsel, there was absolutely no legal justification for this action
by the heirs. There being no legal justification, petitioner has no
basis for demanding that public respondent [the intestate court]
approve the sale of the Philinterlife shares of the Estate by Juliana
and Jose Ortaez in favor of the Filipino Loan Assistance Group.
It is an undisputed fact that the parties to the Memorandum of
Agreement dated March 4, 1982 (see Annex 7 of the Comment). . .
are not the only heirs claiming an interest in the estate left by Dr.
Juvencio P. Ortaez. The records of this case. . . clearly show that
as early as March 3, 1981 an Opposition to the Application for
Issuance of Letters of Administration was filed by the
acknowledged natural children of Dr. Juvencio P. Ortaez with
Ligaya Novicio. . . This claim by the acknowledged natural
children of Dr. Juvencio P. Ortaez is admittedly known to the
parties to the Memorandum of Agreement before they executed
the same. This much was admitted by petitioners counsel during
the oral argument. xxx
Given the foregoing facts, and the applicable jurisprudence, public
respondent can never be faulted for not approving. . . the
subsequent sale by the petitioner [Jose Ortaez] and his mother
[Juliana Ortaez] of the Philinterlife shares belonging to the Estate
of Dr. Juvencio P. Ortaez." (pages 3-4 of Private Respondents
Memorandum; pages 243-244 of the Rollo)
Amidst the foregoing, We found no grave abuse of discretion
amounting to excess or want of jurisdiction committed by
respondent judge.
19

From the above decision, it is clear that Juliana Ortaez, and her
three sons, Jose, Rafael and Antonio, all surnamed Ortaez,
invalidly entered into a memorandum of agreement extrajudicially
partitioning the intestate estate among themselves, despite their
knowledge that there were other heirs or claimants to the estate
and before final settlement of the estate by the intestate court.
Since the appropriation of the estate properties by Juliana Ortaez
and her children (Jose, Rafael and Antonio Ortaez) was invalid,
the subsequent sale thereof by Juliana and Jose to a third party
(FLAG), without court approval, was likewise void.
An heir can sell his right, interest, or participation in the property
under administration under Art. 533 of the Civil Code which
provides that possession of hereditary property is deemed
transmitted to the heir without interruption from the moment of
death of the decedent.
20
However, an heir can only alienate such
portion of the estate that may be allotted to him in the division of
the estate by the probate or intestate court after final adjudication,
that is, after all debtors shall have been paid or the devisees or
legatees shall have been given their shares.
21
This means that an
heir may only sell his ideal or undivided share in the estate, not any
specific property therein. In the present case, Juliana Ortaez and
Jose Ortaez sold specific properties of the estate (1,014 and 1,011
shares of stock in Philinterlife) in favor of petitioner FLAG. This
they could not lawfully do pending the final adjudication of the
estate by the intestate court because of the undue prejudice it
would cause the other claimants to the estate, as what happened in
the present case.
Juliana Ortaez and Jose Ortaez sold specific properties of the
estate, without court approval. It is well-settled that court approval
is necessary for the validity of any disposition of the decedents
estate. In the early case ofGodoy vs. Orellano,
22
we laid down the
rule that the sale of the property of the estate by an administrator
without the order of the probate court is void and passes no title to
the purchaser. And in the case of Dillena vs. Court of Appeals,
23
we
ruled that:
[I]t must be emphasized that the questioned properties (fishpond)
were included in the inventory of properties of the estate
submitted by then Administratrix Fausta Carreon Herrera on
November 14, 1974. Private respondent was appointed as
administratrix of the estate on March 3, 1976 in lieu of Fausta
Carreon Herrera. On November 1, 1978, the questioned deed of
sale of the fishponds was executed between petitioner and private
respondent without notice and approval of the probate court. Even
after the sale, administratrix Aurora Carreon still included the
three fishponds as among the real properties of the estate in her
inventory submitted on August 13, 1981. In fact, as stated by the
Court of Appeals, petitioner, at the time of the sale of the
fishponds in question, knew that the same were part of the estate
under administration.
x x x x x x x x x
The subject properties therefore are under the jurisdiction of the
probate court which according to our settled jurisprudence has the
authority to approve any disposition regarding properties under
administration. . . More emphatic is the declaration We made in
Estate of Olave vs. Reyes (123 SCRA 767) where We stated that
when the estate of the deceased person is already the subject of a
testate or intestate proceeding, the administrator cannot enter into
any transaction involving it without prior approval of the probate
court.
Only recently, in Manotok Realty, Inc. vs. Court of Appeals (149
SCRA 174), We held that the sale of an immovable property
belonging to the estate of a decedent, in a special proceedings,
needs court approval. . . This pronouncement finds support in the
previous case of Dolores Vda. De Gil vs. Agustin Cancio (14 SCRA
797) wherein We emphasized that it is within the jurisdiction of a
probate court to approve the sale of properties of a deceased
person by his prospective heirs before final adjudication. x x x
It being settled that property under administration needs the
approval of the probate court before it can be disposed of, any
unauthorized disposition does not bind the estate and is null and
void. As early as 1921 in the case of Godoy vs. Orellano (42 Phil
347), We laid down the rule that a sale by an administrator of
property of the deceased, which is not authorized by the probate
court is null and void and title does not pass to the purchaser.
There is hardly any doubt that the probate court can declare null
and void the disposition of the property under administration,
made by private respondent, the same having been effected
without authority from said court. It is the probate court that has the
power to authorize and/or approve the sale (Section 4 and 7, Rule 89),
hence, a fortiori, it is said court that can declare it null and void for as
long as the proceedings had not been closed or terminated. To uphold
petitioners contention that the probate court cannot annul the
unauthorized sale, would render meaningless the power
pertaining to the said court. (Bonga vs. Soler, 2 SCRA 755).
(emphasis ours)
Our jurisprudence is therefore clear that (1) any disposition of
estate property by an administrator or prospective heir pending
final adjudication requires court approval and (2) any
unauthorized disposition of estate property can be annulled by the
probate court, there being no need for a separate action to annul
the unauthorized disposition.
The question now is: can the intestate or probate court execute its
order nullifying the invalid sale?
We see no reason why it cannot. The intestate court has the power
to execute its order with regard to the nullity of an unauthorized
sale of estate property, otherwise its power to annul the
unauthorized or fraudulent disposition of estate property would
be meaningless. In other words, enforcement is a necessary adjunct
of the intestate or probate courts power to annul unauthorized or
fraudulent transactions to prevent the dissipation of estate
property before final adjudication.
Moreover, in this case, the order of the intestate court nullifying
the sale was affirmed by the appellate courts (the Court of Appeals
in CA-G.R. SP No. 46342 dated June 23, 1998 and subsequently by
the Supreme Court in G.R. No. 135177 dated October 9, 1998). The
finality of the decision of the Supreme Court was entered in the
book of entry of judgments on February 23, 1999. Considering the
finality of the order of the intestate court nullifying the sale, as
affirmed by the appellate courts, it was correct for private
respondent-Special Administratrix Enderes to thereafter move for
a writ of execution and for the intestate court to grant it.
Petitioners Jose Lee, Alma Aggabao and FLAG, however, contend
that the probate court could not issue a writ of execution with
regard to its order nullifying the sale because said order was
merely provisional:
The only authority given by law is for respondent judge to
determine provisionally whether said shares are included or
excluded in the inventory In ordering the execution of the
orders, respondent judge acted in excess of his jurisdiction and
grossly violated settled law and jurisprudence, i.e., that the
determination by a probate or intestate court of whether a property is
included or excluded in the inventory of the estate being provisional in
nature, cannot be the subject of execution.
24
(emphasis ours)
Petitioners argument is misplaced. There is no question, based on
the facts of this case, that the Philinterlife shares of stock were part
of the estate of Dr. Juvencio Ortaez from the very start as in fact
these shares were included in the inventory of the properties of the
estate submitted by Rafael Ortaez after he and his brother, Jose
Ortaez, were appointed special administrators by the intestate
court.
25

The controversy here actually started when, during the pendency
of the settlement of the estate of Dr. Ortaez, his wife Juliana
Ortaez sold the 1,014 Philinterlife shares of stock in favor
petitioner FLAG without the approval of the intestate court. Her
son Jose Ortaez later sold the remaining 1,011 Philinterlife shares
also in favor of FLAG without the approval of the intestate court.
We are not dealing here with the issue of inclusion or exclusion of
properties in the inventory of the estate because there is no
question that, from the very start, the Philinterlife shares of stock
were owned by the decedent, Dr. Juvencio Ortaez. Rather, we are
concerned here with the effect of the sale made by the decedents
heirs, Juliana Ortaez and Jose Ortaez, without the required
approval of the intestate court. This being so, the contention of
petitioners that the determination of the intestate court was merely
provisional and should have been threshed out in a separate
proceeding is incorrect.
The petitioners Jose Lee and Alma Aggabao next contend that the
writ of execution should not be executed against them because
they were not notified, nor they were aware, of the proceedings
nullifying the sale of the shares of stock.
We are not persuaded. The title of the purchaser like herein
petitioner FLAG can be struck down by the intestate court after a
clear showing of the nullity of the alienation. This is the logical
consequence of our ruling in Godoyand in several subsequent
cases.
26
The sale of any property of the estate by an administrator
or prospective heir without order of the probate or intestate court
is void and passes no title to the purchaser. Thus, in Juan Lao et al.
vs. Hon. Melencio Geneto, G.R. No. 56451, June 19, 1985, we ordered
the probate court to cancel the transfer certificate of title issued to
the vendees at the instance of the administrator after finding that
the sale of real property under probate proceedings was made
without the prior approval of the court. The dispositive portion of
our decision read:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the assailed
Order dated February 18, 1981 of the respondent Judge approving
the questioned Amicable Settlement is declared NULL and VOID
and hereby SET ASIDE. Consequently, the sale in favor of Sotero
Dioniosio III and by the latter to William Go is likewise declared
NULL and VOID. The Transfer Certificate of Title issued to the
latter is hereby ordered cancelled.
It goes without saying that the increase in Philinterlifes authorized
capital stock, approved on the vote of petitioners non-existent
shareholdings and obviously calculated to make it difficult for Dr.
Ortaezs estate to reassume its controlling interest in Philinterlife,
was likewise void ab initio.
Petitioners next argue that they were denied due process.
We do not think so.
The facts show that petitioners, for reasons known only to them,
did not appeal the decision of the intestate court nullifying the sale
of shares of stock in their favor. Only the vendor, Jose Ortaez,
appealed the case. A careful review of the records shows that
petitioners had actual knowledge of the estate settlement
proceedings and that they knew private respondent Enderes was
questioning therein the sale to them of the Philinterlife shares of
stock.
It must be noted that private respondent-Special Administratrix
Enderes filed before the intestate court (RTC of Quezon City,
Branch 85) a "Motion to Declare Void Ab Initio Deeds of Sale of
Philinterlife Shares of Stock" on March 22, 1996. But as early as
1994, petitioners already knew of the pending settlement
proceedings and that the shares they bought were under the
administration by the intestate court because private respondent
Ma. Divina Ortaez-Enderes and her mother Ligaya Novicio had
filed a case against them at the Securities and Exchange
Commission on November 7, 1994, docketed as SEC No. 11-94-
4909, for annulment of transfer of shares of stock, annulment of
sale of corporate properties, annulment of subscriptions on
increased capital stocks, accounting, inspection of corporate books
and records and damages with prayer for a writ of preliminary
injunction and/or temporary restraining order.
27
In said case,
Enderes and her mother questioned the sale of the aforesaid shares
of stock to petitioners. The SEC hearing officer in fact, in his
resolution dated March 24, 1995, deferred to the jurisdiction of the
intestate court to rule on the validity of the sale of shares of stock
sold to petitioners by Jose Ortaez and Juliana Ortaez:
Petitioners also averred that. . . the Philinterlife shares of Dr.
Juvencio Ortaez who died, in 1980, are part of his estate which is
presently the subject matter of an intestate proceeding of the RTC
of Quezon City, Branch 85. Although, private respondents [Jose
Lee et al.] presented the documents of partition whereby the
foregoing share of stocks were allegedly partitioned and conveyed
to Jose S. Ortaez who allegedly assigned the same to the other
private respondents, approval of the Court was not presented.
Thus, the assignments to the private respondents [Jose Lee et al.] of
the subject shares of stocks are void.
x x x x x x x x x
With respect to the alleged extrajudicial partition of the shares of
stock owned by the late Dr. Juvencio Ortaez, we rule that the
matter properly belongs to the jurisdiction of the regular court
where the intestate proceedings are currently pending.
28

With this resolution of the SEC hearing officer dated as early as
March 24, 1995 recognizing the jurisdiction of the intestate court to
determine the validity of the extrajudicial partition of the estate of
Dr. Ortaez and the subsequent sale by the heirs of the decedent of
the Philinterlife shares of stock to petitioners, how can petitioners
claim that they were not aware of the intestate proceedings?
Furthermore, when the resolution of the SEC hearing officer
reached the Supreme Court in 1996 (docketed as G.R. 128525),
herein petitioners who were respondents therein filed their answer
which contained statements showing that they knew of the
pending intestate proceedings:
[T]he subject matter of the complaint is not within the jurisdiction
of the SEC but with the Regional Trial Court; Ligaya Novicio and
children represented themselves to be the common law wife and
illegitimate children of the late Ortaez; that on March 4, 1982, the
surviving spouse Juliana Ortaez, on her behalf and for her minor
son Antonio, executed a Memorandum of Agreement with her
other sons Rafael and Jose, both surnamed Ortaez, dividing the
estate of the deceased composed of his one-half (1/2) share in the
conjugal properties; that in the said Memorandum of Agreement,
Jose S. Ortaez acquired as his share of the estate the 1,329 shares
of stock in Philinterlife; that on March 4, 1982, Juliana and Rafael
assigned their respective shares of stock in Philinterlife to Jose; that
contrary to the contentions of petitioners, private respondents Jose
Lee, Carlos Lee, Benjamin Lee and Alma Aggabao became
stockholders of Philinterlife on March 23, 1983 when Jose S.
Ortaez, the principal stockholder at that time, executed a deed of
sale of his shares of stock to private respondents; and that the right
of petitioners to question the Memorandum of Agreement and the
acquisition of shares of stock of private respondent is barred by
prescription.
29

Also, private respondent-Special Administratrix Enderes offered
additional proof of actual knowledge of the settlement
proceedings by petitioners which petitioners never denied: (1) that
petitioners were represented by Atty. Ricardo Calimag previously
hired by the mother of private respondent Enderes to initiate cases
against petitioners Jose Lee and Alma Aggabao for the nullification
of the sale of the shares of stock but said counsel made a
conflicting turn-around and appeared instead as counsel of
petitioners, and (2) that the deeds of sale executed between
petitioners and the heirs of the decedent (vendors Juliana Ortaez
and Jose Ortaez) were acknowledged before Atty. Ramon Carpio
who, during the pendency of the settlement proceedings, filed a
motion for the approval of the sale of Philinterlife shares of stock
to the Knights of Columbus Fraternal Association, Inc. (which
motion was, however, later abandoned).
30
All this sufficiently
proves that petitioners, through their counsels, knew of the
pending settlement proceedings.
Finally, petitioners filed several criminal cases such as libel
(Criminal Case No. 97-7179-81), grave coercion (Criminal Case No.
84624) and robbery (Criminal Case No. Q-96-67919) against private
respondents mother Ligaya Novicio who was a director of
Philinterlife,
31
all of which criminal cases were related to the
questionable sale to petitioners of the Philinterlife shares of stock.
Considering these circumstances, we cannot accept petitioners
claim of denial of due process. The essence of due process is the
reasonable opportunity to be heard. Where the opportunity to be
heard has been accorded, there is no denial of due process.
32
In this
case, petitioners knew of the pending instestate proceedings for
the settlement of Dr. Juvencio Ortaezs estate but for reasons they
alone knew, they never intervened. When the court declared the
nullity of the sale, they did not bother to appeal. And when they
were notified of the motion for execution of the Orders of the
intestate court, they ignored the same. Clearly, petitioners alone
should bear the blame.
Petitioners next contend that we are bound by our ruling in G.R.
No. 128525 entitled Ma. Divina Ortaez-Enderes vs. Court of
Appeals, dated December 17, 1999, where we allegedly ruled that
the intestate court "may not pass upon the title to a certain
property for the purpose of determining whether the same should
or should not be included in the inventory but such determination
is not conclusive and is subject to final decision in a separate action
regarding ownership which may be constituted by the parties."
We are not unaware of our decision in G.R. No. 128525. The issue
therein was whether the Court of Appeals erred in affirming the
resolution of the SEC that Enderes et al. were not entitled to the
issuance of the writ of preliminary injunction. We ruled that the
Court of Appeals was correct in affirming the resolution of the SEC
denying the issuance of the writ of preliminary injunction because
injunction is not designed to protect contingent rights. Said case
did not rule on the issue of the validity of the sale of shares of
stock belonging to the decedents estate without court approval
nor of the validity of the writ of execution issued by the intestate
court. G.R. No. 128525 clearly involved a different issue and it does
not therefore apply to the present case.
Petitioners and all parties claiming rights under them are hereby
warned not to further delay the execution of the Orders of the
intestate court dated August 11 and August 29, 1997.
WHEREFORE, the petition is hereby DENIED. The decision of the
Court of Appeals in CA-G.R. S.P. No. 59736 dated July 26, 2000,
dismissing petitioners petition for certiorari and affirming the July
6, 2000 order of the trial court which ordered the execution of its
(trial courts) August 11 and 29, 1997 orders, is hereby AFFIRMED.
SO ORDERED.
















G.R. No. 146006. April 22, 2005
JOSE C. LEE AND ALMA AGGABAO, in their capacities as
President and Corporate Secretary, respectively, of Philippine
International Life Insurance Company, and FILIPINO LOAN
ASSISTANCE GROUP, Petitioners,
vs.
REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 85
presided by JUDGE PEDRO M. AREOLA, BRANCH CLERK OF
COURT JANICE Y. ANTERO, DEPUTY SHERIFFS ADENAUER
G. RIVERA and PEDRO L. BORJA, all of the Regional Trial
Court of Quezon City Branch 85, MA. DIVINA ENDERES
claiming to be Special Administratrix, and other persons/public
officers acting for and in their behalf, Respondents.
R E S O L U T I O N
CORONA, J.:
For resolution is private respondent Ma. Divina Ortaez-Enderes
omnibus motion to cite petitioners in indirect contempt of Court
and for the disbarment and/or imposition of disciplinary sanctions
on petitioners counsel
1
for their refusal to comply with the final
and executory decision of this Court dated February 23, 2004.
18
G.R. No. 129008 January 13, 2004
TEODORA A. RIOFERIO, VERONICA O. EVANGELISTA assisted by her
husband ZALDY EVANGELISTA, ALBERTO ORFINADA, and ROWENA O.
UNGOS, assisted by her husband BEDA UNGOS, petitioners,
vs.
COURT OF APPEALS, ESPERANZA P. ORFINADA, LOURDES P.
ORFINADA, ALFONSO ORFINADA, NANCY P. ORFINADA, ALFONSO
JAMES P. ORFINADA, CHRISTOPHER P. ORFINADA and ANGELO P.
ORFINADA,respondents.
D E C I S I O N
TINGA, J.:
Whether the heirs may bring suit to recover property of the estate pending the
appointment of an administrator is the issue in this case.
This Petition for Review on Certiorari, under Rule 45 of the Rules of Court, seeks to
set aside the Decision
1
of the Court of Appeals in CA-G.R. SP No. 42053 dated
January 31, 1997, as well as its Resolution
2
dated March 26, 1997, denying
petitioners motion for reconsideration.
On May 13, 1995, Alfonso P. Orfinada, Jr. died without a will in Angeles City
leaving several personal and real properties located in Angeles City, Dagupan
City and Kalookan City.
3
He also left a widow, respondent Esperanza P.
Orfinada, whom he married on July 11, 1960 and with whom he had seven
children who are the herein respondents, namely: Lourdes P. Orfinada, Alfonso
"Clyde" P. Orfinada, Nancy P. Orfinada-Happenden, Alfonso James P. Orfinada,
Christopher P. Orfinada, Alfonso Mike P. Orfinada (deceased) and Angelo P.
Orfinada.
4

Apart from the respondents, the demise of the decedent left in mourning his
paramour and their children. They are petitioner Teodora Riofero, who became
a part of his life when he entered into an extra-marital relationship with her
during the subsistence of his marriage to Esperanza sometime in 1965, and co-
petitioners Veronica
5
, Alberto and Rowena.
6

On November 14, 1995, respondents Alfonso James and Lourdes Orfinada
discovered that on June 29, 1995, petitioner Teodora Rioferio and her children
executed an Extrajudicial Settlement of Estate of a Deceased Person with
Quitclaim involving the properties of the estate of the decedent located in
Dagupan City and that accordingly, the Registry of Deeds in Dagupan issued
Certificates of Titles Nos. 63983, 63984 and 63985 in favor of petitioners Teodora
Rioferio, Veronica Orfinada-Evangelista, Alberto Orfinada and Rowena
Orfinada-Ungos. Respondents also found out that petitioners were able to
obtain a loan of P700,000.00 from the Rural Bank of Mangaldan Inc. by
executing a Real Estate Mortgage over the properties subject of the extra-judicial
settlement.
7

On December 1, 1995, respondent Alfonso "Clyde" P. Orfinada III filed a Petition
for Letters of Administrationdocketed as S.P. Case No. 5118 before the Regional
Trial Court of Angeles City, praying that letters of administration encompassing
the estate of Alfonso P. Orfinada, Jr. be issued to him.
8

On December 4, 1995, respondents filed a Complaint for the Annulment/Rescission
of Extra Judicial Settlement of Estate of a Deceased Person with Quitclaim, Real Estate
Mortgage and Cancellation of Transfer Certificate of Titles with Nos. 63983, 63985 and
63984 and Other Related Documents with Damages against petitioners, the Rural
Bank of Mangaldan, Inc. and the Register of Deeds of Dagupan City before the
Regional Trial Court, Branch 42, Dagupan City.
9

On February 5, 1996, petitioners filed their Answer to the aforesaid complaint
interposing the defense that the property subject of the contested deed of extra-
judicial settlement pertained to the properties originally belonging to the
parents of Teodora Riofero
10
and that the titles thereof were delivered to her as
an advance inheritance but the decedent had managed to register them in his
name.
11
Petitioners also raised the affirmative defense that respondents are not
the real parties-in-interest but rather the Estate of Alfonso O. Orfinada, Jr. in
view of the pendency of the administration proceedings.
12
On April 29, 1996,
petitioners filed a Motion to Set Affirmative Defenses for Hearing
13
on the aforesaid
ground.
The lower court denied the motion in its Order
14
dated June 27, 1996, on the
ground that respondents, as heirs, are the real parties-in-interest especially in
the absence of an administrator who is yet to be appointed in S.P. Case No. 5118.
Petitioners moved for its reconsideration
15
but the motion was likewise denied.
16

This prompted petitioners to file before the Court of Appeals their Petition for
Certiorari under Rule 65 of the Rules of Court docketed as CA G.R. S.P. No.
42053.
17
Petitioners averred that the RTC committed grave abuse of discretion in
issuing the assailed order which denied the dismissal of the case on the ground
that the proper party to file the complaint for the annulment of the extrajudicial
settlement of the estate of the deceased is the estate of the decedent and not the
respondents.
18

The Court of Appeals rendered the assailed Decision
19
dated January 31, 1997,
stating that it discerned no grave abuse of discretion amounting to lack or excess
of jurisdiction by the public respondent judge when he denied petitioners
motion to set affirmative defenses for hearing in view of its discretionary nature.
A Motion for Reconsideration was filed by petitioners but it was denied.
20
Hence,
the petition before this Court.
The issue presented by the petitioners before this Court is whether the heirs
have legal standing to prosecute the rights belonging to the deceased
subsequent to the commencement of the administration proceedings.
21

Petitioners vehemently fault the lower court for denying their motion to set the
case for preliminary hearing on their affirmative defense that the proper party
to bring the action is the estate of the decedent and not the respondents. It must
be stressed that the holding of a preliminary hearing on an affirmative defense
lies in the discretion of the court. This is clear from the Rules of Court, thus:
SEC. 5. Pleadings grounds as affirmative defenses.- Any of the grounds
for dismissal provided for in this rule, except improper venue, may be
pleaded as an affirmative defense, and a preliminary hearing may be
had thereon as if a motion to dismiss had been filed.
22
(Emphasis
supplied.)
Certainly, the incorporation of the word "may" in the provision is clearly
indicative of the optional character of the preliminary hearing. The word
denotes discretion and cannot be construed as having a mandatory
effect.
23
Subsequently, the electivity of the proceeding was firmed up beyond
cavil by the 1997 Rules of Civil Procedure with the inclusion of the phrase "in
the discretion of the Court", apart from the retention of the word "may" in
Section 6,
24
in Rule 16 thereof.
Just as no blame of abuse of discretion can be laid on the lower courts doorstep
for not hearing petitioners affirmative defense, it cannot likewise be faulted for
recognizing the legal standing of the respondents as heirs to bring the suit.
Pending the filing of administration proceedings, the heirs without doubt have
legal personality to bring suit in behalf of the estate of the decedent in
accordance with the provision of Article 777 of the New Civil Code "that (t)he
rights to succession are transmitted from the moment of the death of the
decedent." The provision in turn is the foundation of the principle that the
property, rights and obligations to the extent and value of the inheritance of a
person are transmitted through his death to another or others by his will or by
operation of law.
25

Even if administration proceedings have already been commenced, the heirs
may still bring the suit if an administrator has not yet been appointed. This is
the proper modality despite the total lack of advertence to the heirs in the rules
on party representation, namely Section 3, Rule 3
26
and Section 2, Rule 87
27
of
the Rules of Court. In fact, in the case of Gochan v. Young,
28
this Court recognized
the legal standing of the heirs to represent the rights and properties of the
decedent under administration pending the appointment of an administrator.
Thus:
The above-quoted rules,
29
while permitting an executor or administrator
to represent or to bring suits on behalf of the deceased, do not prohibit
the heirs from representing the deceased. These rules are easily
applicable to cases in which an administrator has already been
appointed. But no rule categorically addresses the situation in which
special proceedings for the settlement of an estate have already been
instituted, yet no administrator has been appointed. In such instances,
the heirs cannot be expected to wait for the appointment of an
administrator; then wait further to see if the administrator appointed
would care enough to file a suit to protect the rights and the interests of
the deceased; and in the meantime do nothing while the rights and the
properties of the decedent are violated or dissipated.
Even if there is an appointed administrator, jurisprudence recognizes two
exceptions, viz: (1) if the executor or administrator is unwilling or refuses to
bring suit;
30
and (2) when the administrator is alleged to have participated in the
act complained of
31
and he is made a party defendant.
32
Evidently, the necessity
for the heirs to seek judicial relief to recover property of the estate is as
compelling when there is no appointed administrator, if not more, as where
there is an appointed administrator but he is either disinclined to bring suit
or is one of the guilty parties himself.
All told, therefore, the rule that the heirs have no legal standing to sue for the
recovery of property of the estate during the pendency of administration
proceedings has three exceptions, the third being when there is no appointed
administrator such as in this case.
As the appellate court did not commit an error of law in upholding the order of
the lower court, recourse to this Court is not warranted.
WHEREFORE, the petition for review is DENIED. The assailed decision and
resolution of the Court of Appeals are hereby AFFIRMED. No costs.
SO ORDERED.






This case began with a petition for letters of administration of the intestate estate
of Dr. Juvencio P. Ortaez filed 25 years ago on September 24, 1980. Forming
part of the inventory of the estate were 2,029 shares of stock in Philippine
International Life Insurance Company (Philinterlife). During the pendency of
these proceedings, Juliana, Jose and Rafael (all surnamed Ortaez), the
surviving legitimate spouse and legitimate children of the decedent
respectively, executed an extrajudicial settlement of the estate, partitioning it
(including the Philinterlife shares of stock) among themselves. Thereafter,
Juliana and Jose sold the 2,029 shares to the Filipino Loan Assistance Group
(FLAG).
2

However, private respondent, one of the illegitimate children of the decedent,
was in the meantime appointed as special administratrix of the 2,029
Philinterlife shares of stock. When Jose Ortaez filed an omnibus motion
seeking the approval of the sale of the shares of stock to FLAG and the release of
private respondent as special administratrix, the trial court in its August 11,
1997 order, denied said motion. On August 29, 1997, the intestate court declared
the extrajudicial settlement made by Juliana, Jose and Rafael partially void ab
initio insofar as the transfer of the Philinterlife shares was concerned. These
orders were later upheld by the Court of Appeals (CA) and this Court.
In its order dated July 6, 2000, the intestate court granted the motion for
execution filed by private respondent:
WHEREFORE, premises considered, let a writ of execution issue as follows:
1. Confirming the nullity of the sale of the 2,029 Philinterlife shares in the name
of the Estate of Dr. Juvencio Ortaez to Filipino Loan Assistance Group (FLAG);
2. Commanding the President and the Corporate Secretary of Philinterlife to
reinstate in the stock and transfer book of Philinterlife the 2,029 Philinterlife
shares of stock in the name of the Estate of Dr. Juvencio P. Ortaez as the owner
thereof without prejudice to other claims for violation of pre-emptive rights
pertaining to the said 2,029 Philinterlife shares;
3. Directing the President and the Corporate Secretary of Philinterlife to issue
stock certificates of Philinterlife for 2,029 shares in the name of the Estate of Dr.
Juvencio P. Ortaez as the owner thereof without prejudice to other claims for
violation of pre-emptive rights pertaining to the said 2,029 Philinterlife shares;
and
4. Confirming that only the Special Administratrix, Ma. Divina Ortaez-
Enderes, has the power to exercise all the rights appurtenant to the said shares,
including the right to vote and to receive dividends;
5. Directing Philinterlife and/or any other person or persons claiming to
represent it or otherwise, to acknowledge and allow the said Special
Administratrix to exercise all the aforesaid rights on the said shares and to
refrain from resorting to any action which may tend (to) directly or indirectly
impede, obstruct or bar the free exercise thereof under pain of contempt.
6. The President, Corporate Secretary, any responsible officer/s of Philinterlife,
or any other person or persons claiming to represent it or otherwise, are hereby
directed to comply with this Order within three (3) days from receipt hereof
under pain of contempt.
7. The Deputy Sheriffs Adenauer Rivera and Pedro Borja are hereby directed to
implement the writ of execution with dispatch to forestall any/or further
damage to the Estate.
SO ORDERED.
3

Unfortunately, however, the writ of execution was not enforced due to the
resistance of herein petitioners. To block the execution, petitioners filed before
the CA a petition for certiorari, docketed as CA G.R. SP No. 59736, questioning
the order of execution, among others. The petition was dismissed outright on
July 26, 2000. Petitioners then elevated the case to us. On February 23, 2004, a
decision was promulgated by the Third Division of this Court:
4

WHEREFORE, the petition is hereby DENIED. The decision of the Court of
Appeals in CA-G.R. S.P. No. 59736 dated July 26, 2000, dismissing petitioners
petition for certiorari and affirming the July 6, 2000 order of the trial court which
ordered the execution of its (trial courts) August 11 and 29, 1997 orders, is
hereby AFFIRMED.
SO ORDERED.
5

On April 27, 2004, petitioners filed an omnibus motion for reconsideration and
referral of this case to the en banc allegedly in view of the conflicting rulings of
two divisions of the Court. In a resolution dated May 26, 2004, the Court denied
the motion for lack of merit:
The Court deliberated on the petitioners omnibus motion for reconsideration of
the decision of February 23, 2004 which denied the petition for review on
certiorari. It appears to the Court that the motion merely reiterates the same
arguments earlier raised and does not present any substantial reason not
previously invoked nor any matter not already considered and passed upon by
the Court.
ACCORDINGLY, the Court Resolved to DENY the motion for reconsideration
for lack of merit. This denial is FINAL.
6

Thus on July 9, 2004, the February 23, 2004 decision became final and executory,
and was recorded in the book of entries of judgments. On October 1, 2004, an
alias writ of execution was issued by the intestate court (the court of origin). In
said writ, the deputy sheriffs were ordered to enforce the August 11 and 29,
1997 and July 6, 2000 orders of the intestate court.
Instead of complying with the writ, petitioners filed on October 15, 2004, a
motion to suspend execution/period of compliance by reason of supervening
events, raising the following arguments: (1) the intestate court had already
revoked the appointment of private respondent as special administratrix; (2)
there was a need to lay down the legal procedure in the implementation of the
writ and (3) there must be a declaration that the price per share of the 2,029
shares was only P1,000 which was its book value at the time the shares were
sold in 1989 and 1991.
7

Private respondent went back to this Court and filed this omnibus motion
asserting that petitioners "made a travesty of the final and executory decisions of
the Lower Courts and this Honorable Court when they refused to comply
with the Alias Writ of Execution issued by the Lower Court."
8

Before we discuss the substance of private respondents motion, we note that
attached to it were mere photocopies of the supporting documents and not
"certified true copies of documents or papers involved therein" as required by
the Rules of Court.
9
However, given that the motion was verified and
petitioners, who were given a chance to oppose or comment on it, made no
objection thereto, we brush aside the defect in form and proceed to discuss the
merits of the motion.
Furthermore, as held in Remman Enterprises, Inc. v. CA,
10
Section 3, Rule 71 of the
Rules of Court outlines the procedural requisites before the accused may be
punished for indirect contempt: (1) the filing of a written charge and (2) an
opportunity to be heard by himself or counsel. All that the law requires is that
there is a charge in writing duly filed in court and an opportunity given to the
person charged to be heard by himself or counsel. What is important is that the
alleged contemner be granted an opportunity to meet the charges against him
and to be heard in his defense.
11
Petitioners were given this opportunity; they in
fact filed their Opposition.
12

Petitioners assert that private respondent engaged in forum-shopping because
the latter had previously filed a similar motion in the intestate court. The
argument has no merit. The charge for indirect contempt must be filed before
the court against which the indirect contempt was committed. Section 4, Rule 71
states:
SEC. 5. Where charge to be filed. Where the charge for indirect contempt has
been committed against a Regional Trial Court or a court of equivalent or higher
rank, or against an officer appointed by it, the charge may be filed with such
court. xxx
Hence, the charge for indirect contempt for disobedience to our February 23,
2004 decision was correctly brought to us. As we explained in the case of Igot v.
Court of Appeals:
In whatever context it may arise, contempt of court involves the doing of an act,
or the failure to do an act, in such a manner as to create an affront to the court
and the sovereign dignity with which it is clothed. As a matter of practical
judicial administration, jurisdiction has been felt to properly rest in only one
tribunal at a time with respect to a given controversy. Only the court which
rendered the order commanding the doing of a certain act is vested with the
right to determine whether or not the order has been complied with, or whether
a sufficient reason has been given for noncompliance, and, therefore, whether a
contempt has been committed. It is a well-established rule that the power to
determine the existence of contempt of court rests exclusively with the court
contemned. No court is authorized to punish a contempt against another.
The rationale that is usually advanced for the general rule ... is that, contempt
proceedings are sui generis and are triable only by the court against whose
authority the contempts are charged; the power to punish for contempt exists
for the purpose of enabling a court to compel due decorum and respect in its
presence and due obedience to its judgments, orders and processes and in order
that a court may compel obedience to its orders, it must have the right to inquire
whether there has been any disobedience thereof, for to submit the question of
disobedience to another tribunal would operate to deprive the proceeding of
half its efficiency.
13

We now proceed to the merits of the motion to cite for indirect contempt and for
imposition of disciplinary sanctions.
The private respondent alleges that the following acts of the petitioners
constituted indirect contempt under Section 3, Rule 71 of the Rules of Court: (1)
petitioners failure to comply with the alias writ of execution served upon them
on October 12, 2004 and (2) their act of filing a patently baseless motion (to
suspend execution/period of compliance by reason of supervening events)
which was obviously intended to defeat the implementation of the final and
executory decision of this Court.
On the other hand, petitioners allege that the immediate execution of the subject
decision would be inequitable and should be suspended pending an order of
clarification of certain matters. According to them, the certificates of the shares
of stock were turned over to the intestate court and not to private respondent
because her appointment as special administratrix had already been revoked by
the court.
Petitioners obstinate refusal to abide by this Courts February 23, 2004 decision
demonstrates a contumacious attitude which this Court cannot countenance.
This contumacy becomes all the more glaring because of the strongly worded
admonition in our decision that "(p)etitioners and all parties claiming rights
under them are hereby warned not to further delay the execution of the Orders
of the intestate court dated August 11 and August 29, 1997."
14
The previously
quoted July 6, 2000 order of the intestate court, which was affirmed by this
Court, also contained the following directives:
xxx xxx xxx
5. Directing Philinterlife and/or any other person or persons claiming to
represent it or otherwise, to acknowledge and allow the said Special
Administratrix to exercise all the aforesaid rights on the said shares and to
refrain from resorting to any action which may tend (to) directly or indirectly
impede, obstruct or bar the free exercise thereof under pain of contempt.
6. The President, Corporate Secretary, any responsible officer/s of Philinterlife,
or any other person or persons claiming to represent it or otherwise, are
hereby directed to comply with this Order within three (3) days from receipt
hereof under pain of contempt.
7. The Deputy Sheriffs Adenauer Rivera and Pedro Borja are hereby directed to
implement the writ of execution with dispatch to forestall any/or further
damage to the Estate.
SO ORDERED.
15
(Emphasis supplied)
Clearly, petitioners defiant non-compliance with these directives, as proved by
the sheriffs report dated October 13, 2004, constituted indirect contempt. The
pertinent portion of this report stated:
That on October 12, 2004, when Sheriff Borja went to the Philenterlife (sic) Office
to check whether there was already compliance with the Alias Writ of
Execution, one of their staff told Sheriff Borja that Mr. Jose Lee wanted to talk
with Sheriff Borja over the Telephone. In their telephone conversation, Mr. Jose
Lee told Sheriff Borja that he had already consulted his lawyer regarding the
matter.
WHEREFORE, we respectfully submit this report to the Honorable Court with
the information that up to this writing, Philenterlife (sic) has not submitted their
compliance to the Sheriff or to the Court.
16

Petitioners act of filing their motion to suspend execution/period of compliance
by reason of supervening events also showed their continuing, stubborn
resistance to this Courts judgment. Indeed, one of the exceptions to the
principle of immutability of final judgments is the existence
of supervening events. Supervening events refer to facts which
transpire after judgment has become final and executory or to new
circumstances which develop afterthe judgment has acquired finality.
17

The private respondent alleges that the revocation of her appointment as special
administratrix was made by the intestate court in its May 12, 2003 and
September 4, 2003 orders.
18
This is not disputed by the petitioners. In short, this
fact already existed before the decision of this Court was promulgated on
February 23, 2004 and beforeit became final and executory on July 9, 2004.
Therefore, the revocation of the appointment of private respondent as special
administratrix was evidently not a supervening event.
Furthermore, this issue had already been raised in petitioners motion for
reconsideration
19
of this Courts February 23, 2004 decision and passed upon by
the Court in its resolution dated May 26, 2004 denying the motion for lack of
merit. Likewise, the increase in the value of the shares from P1,000 to P4,000 was
also raised in the same motion for reconsideration.
20
The Court stated that "the
motion merely reiterate(d) the same arguments earlier raised and (did) not
present any substantial reason not previously invoked nor any matter not
already considered and passed upon by the Court."
21

Petitioners insist that there must be an order laying down the legal procedure
for the implementation of the writ, which implementation did not include
taking over the management of Philinterlife and obtaining possession of office
premises. We disagree. The execution should not be suspended for that reason.
Our February 23, 2004 ruling categorically stated that the estate of Dr. Juvencio
P. Ortaez was the lawful owner of 2,029 Philinterlife shares. As lawful owner
of the Philinterlife shares, the estate can exercise all the rights of ownership,
including the right to vote the shares. If, by voting the shares, the estate is able
to elect its own representatives who succeed in attaining management control of
Philinterlife, then let it be as such would be a legitimate consequence of our
February 23, 2004 decision.
We call particular attention to the fact that in our February 23, 2004 decision, we
noted that petitioners, with the rest of the FLAG-controlled directors and
stockholders, increased the authorized capital stock of Philinterlife, diluting in
the process the 2,029 shares of the estate
22
representing 50.725% of Philinterlife.
We observed that this was obviously calculated to make it difficult for the estate
to reassume its controlling interest in Philinterlife. Thus, we ruled that,
considering the nullity of the sale of the 2,029 shares to FLAG, the increase in
Philinterlifes authorized capital stock was void ab initio.
23
Consequently, any
approval by the Securities and Exchange Commission of this increase would
likewise be void ab initio.
Moreover, the directives to petitioners Jose C. Lee and Alma Aggabao, as
president and corporate secretary, respectively, of Philinterlife, were sufficiently
clear and needed absolutely no clarification in order to exact their compliance
thereto. Since the nullity of the sale of the 2,029 Philinterlife shares to FLAG had
been confirmed, they were ordered to:
(1) reinstate the shares in the name of the estate in the stock and transfer book;
(2) issue stock certificates in the name of the estate;
(3) acknowledge and allow the special administratrix to exercise all the rights
appurtenant to the shares;
(4) refrain from resorting to any action which may tend to directly or indirectly
impede, obstruct or bar the free exercise of these rights and
(5) comply with the order within three days from receipt.
The first two directives were undoubtedly covered by the duties and functions
of the corporate secretary and president of a corporation. The next two ordered
them not to resist the writ and the last directive provided a period for their
compliance. Given the foregoing, there was never any need to clarify the
procedure for the implementation of the writ.
Pertinent portions of Section 3, Rule 71 of the Rules of Court read:
Sec. 3. Indirect contempt to be punished after charge and hearing. After a
charge in writing has been filed, and an opportunity given to the respondent to
comment thereon within such period as may be fixed by the court and to be
heard by himself or counsel, a person guilty of any of the following acts may be
punished for indirect contempt:
xxx xxx xxx
(b) Disobedience of or resistance to a lawful writ, process, order or judgment of
a court xxx
(c ) Any abuse of or any unlawful interference with the processes or proceedings
of a court not constituting direct contempt xxx
(d) Any improper conduct tending, directly or indirectly, to impede, obstruct, or
degrade the administration of justice;
xxx xxx xxx
In the recent case of Heirs of Trinidad de Leon vda. de Roxas v. Court of Appeals, we
explained the concept of contempt of court:
Contempt of court is a defiance of the authority, justice or dignity of the court;
such conduct as tends to bring the authority and administration of the law into
disrespect or to interfere with or prejudice parties litigant or their witnesses
during litigation (12 Am. Jur. 389, cited in 14 SCRA 813).
Contempt of court is defined as a disobedience to the Court by acting in
opposition to its authority, justice and dignity. It signifies not only a willful
disregard or disobedience of the courts orders, but such conduct as tends to
bring the authority of the court and the administration of law into disrepute or
in some manner to impede the due administration of justice (17 C.J.S. 4).
This Court has thus repeatedly declared that the power to punish for contempt
is inherent in all courts and is essential to the preservation of order in judicial
proceedings and to the enforcement of judgments, orders and mandates of the
court, and consequently, to the due administration of justice (Slade Perkins vs.
Director of Prisons, 58 Phil. 271; In re Kelly, 35 Phil. 944; Commissioner of
Immigration vs. Cloribel, 20 SCRA 1241; Montalban vs. Canonoy, 38 SCRA 1).
24

Petitioners disobedience to this Courts judgment is an affront to the Court and
the dignity with which it is clothed. Their attempt to raise issues already laid to
rest by a final and executory judgment of no less than the highest tribunal of the
land constitutes a disrespectful and insolent defiance of the authority of this
Court and impedes the speedy administration of justice.
25
As mentioned in the
beginning of this Resolution, this controversy has been pending for 25 long
years already. Apparently, petitioners want to prolong it to eternity.
In Sacdalan v. Court of Appeals, we said:
Well-settled is the principle that a decision that has acquired finality becomes
immutable and unalterable and may no longer be modified in any respect even
if the modification is meant to correct erroneous conclusions of fact or law and
whether it will be made by the court that rendered it or by the highest court of
the land.
The reason for this is that litigation must end and terminate sometime and
somewhere, and it is essential to an effective and efficient administration of
justice that, once a judgment has become final, the winning party be not
deprived of the fruits of the verdict. Courts must guard against any scheme
calculated to bring about that result and must frown upon any attempt to
prolong the controversies.
The only exceptions to the general rule are the correction of clerical errors, the
so-called nunc pro tunc entries which cause no prejudice to any party, void
judgments, and whenever circumstances transpire after the finality of the
decision rendering its execution unjust and inequitable.
26

This case does not fall under any of the recognized exceptions. Moreover, the
immutability of the February 23, 2004 decision is all the more emphasized in this
case since it is this Court, the highest Court of the land and final arbiter of all
legal controversies, that promulgated it. Thus, petitioners are bound by the
finality of our decision and cannot, under the guise of a phony motion to
suspend execution/period of compliance by reason of supervening events,
reopen a case already decided with finality. Nor should they be permitted to
litigate anew questions or issues already laid to rest.
The fact is that virtually the same issues have been elevated to this Court no less
than three times: in G.R. Nos. 128525, 135177 and 146006. Private respondent
obtained a writ of execution in 2000 but her attempt to enforce the writ was
unsuccessful. After our February 23, 2004 decision became final and executory,
she obtained an alias writ of execution on October 1, 2004 but the petitioners
again managed to frustrate her efforts to execute the decision and torpedo its
enforcement.
As we ruled in Beautifont, Inc. v. Court of Appeals:
Considerable time has already elapsed and, to serve the ends of justice, it is
time that [the] controversy is finally laid to rest. "Sound practice seeks to
accommodate the theory which avoids waste of time, effort and expense, both to
the parties and the government, not to speak of delay in the disposal of the case.
A marked characteristic of our judicial set-up is that where the dictates of justice
so demand ... the Supreme Court should act, and act with finality." In this case,
the dictates of justice do demand that this Court act, and act with finality.
27

This Court is becoming impatient with the devious tricks and maneuvers of
petitioners.
Section 7, Rule 71 of the Rules of Court penalizes indirect contempt as follows:
Sec. 7. Punishment for indirect contempt. If the respondent is adjudged guilty
of indirect contempt committed against a Regional Trial Court or a court of
equivalent or higher rank, he may be punished by a fine not exceeding thirty
thousand pesos or imprisonment not exceeding six (6) months or both. xxx
Petitioners Jose C. Lee and Alma Aggabao, for their defiance and resistance to
the October 1, 2004 alias writ of execution enforcing this Courts February 23,
2004 decision resulting in the frustration of its execution are hereby
adjudged guilty of indirect contempt.
Finally, with regard to the administrative charge against petitioners counsel,
Atty. Teodorico Fernandez, pursuant to paragraph 2, Section 1, Rule 139-B of the
Rules of Court, this Court resolves to refer it to the Commission on Bar
Discipline of the Integrated Bar of the Philippines for investigation, report and
recommendation.
WHEREFORE, petitioners Jose C. Lee and Alma Aggabao, president and
corporate secretary, respectively, of petitioner Philippine International Life
Insurance Company, are hereby found GUILTY of INDIRECT CONTEMPT for
which the maximum FINE of P30,000 is hereby imposed on each of them,
payable in full within five days from receipt of this resolution. They are
furthermore given a final non-extendible period of five days from receipt of this
resolution within which to comply within our decision and orders as
aforementioned. Petitioners are hereby warned not to file any more pleadings in
connection herewith. Failure to comply with our decision, orders and P30,000
fine within the five-day period will subject them to imprisonment till full
compliance.
In view hereof, petitioners counsel, Atty. Teodorico Fernandez, is likewise
strongly warned to refrain from any further attempts to make a mockery of our
judicial processes.
SO ORDERED.