SPECIAL PROCEEDINGS DIGESTED CASES-RULE 87 to 89

RULE 87 ACTIONS BY & AGAINST EXECUTORS & ADMINISTRATORS G.R. No. 144881 October 16, 2003 BETTY T. CHUA, ET AL. VS. ABSOLUTE MGT CORP, ET AL FACTS: Upon a petition for letters of administration filed by [herein petitioners] Jennifer T. Chua-Locsin, Benison T. Chua, and Baldwin T. Chua with the RTC of Pasay City, Betty T. Chua was appointed as administratrix of the intestate estate of the deceased Jose L. Chua. Thereafter, she submitted to the trial court an inventory of all the real and personal properties of the deceased. One of the creditors of the deceased, [herein respondent] Absolute Management Corporation, filed a claim on the estate in the amount of P63,699,437.74. In the interim, Absolute Management Corporation noticed that the deceaseds shares of stocks with Ayala Sales Corporation and Ayala Construction Supply, Inc. were not included in the inventory of assets. As a consequence, it filed a motion to require Betty T. Chua to explain why she did not report these shares of stocks in the inventory. Through a reply, Betty T. Chua alleged that these shares had already been assigned and transferred to other parties prior to the death of her husband, Jose L. Chua. She attached to her reply the deeds of assignment which allegedly constituted proofs of transfer. The judge accepted the explanation as meritorious. Absolute Management Corporation, suspecting that the documents attached to Betty T. Chuas reply were spurious and simulated, filed a motion for the examination of the supposed transferees. It premised its motion on Section 6, Rule 87, Revised Rules of Court, which states that when a person is suspected of having concealed, embezzled, or conveyed away any of the properties of the deceased, a creditor may file a complaint with the trial court and the trial court may cite the suspected person to appear before it and be examined under oath on the matter of such complaint. Private respondents opposed the motion on the ground that this provision bears no application to the case. RTC denied Absolute Management Corporations ("Absolute") Motion as it in effect seeks to engage in a fishing expedition for evidence to be used against the administratrix and others whom it seeks to examine. Absolute alleged that the trial court deprived it of the right to show that the documents presented by petitioners were fictitious to the prejudice of Absolute. During the hearing conducted before the CA, counsel for Absolute presented evidences to support its assertion that the transfers of the shares were spurious. Such as (1) Certification that the notary public who notarized the questioned Secretarys Certificate and Deeds of Assignment of Shares of Stock is not listed in the Roll of Notaries Public for the City of Pasay; (2) Certification that the questioned Secretarys Certificate and Deeds of Assignment of Shares of Stock were not included in the Notarial Report of Atty. Lope M. Velasco for the years 1998-1999.

ATTY. GERALDINE QUIMUSING-TIU LAKAS ATENISTA

In setting aside the trial courts order, the CA pointed out that the presentation of the deeds of assignment executed by the decedent in petitioners favor does not automatically negate the existence of concealment. The appellate court stated that it is a common occurrence in estate proceedings for heirs to execute simulated deeds of transfer which conceal and place properties of the decedent beyond the reach of creditors. ISSUE: WON the CA correctly ordered the trial court to give due course to the Motion for Examination. RULING: YES. Section 6, Rule 87 of the Rules of Court provides:

SEC. 6. Proceedings when property concealed, embezzled, or fraudulently conveyed. If an executor or administrator, heir, legatee, creditor, or other individual interested in the estate of the deceased, complains to the court having jurisdiction of the estate that a person is suspected of having concealed, embezzled, or conveyed away any of the money, goods, or chattels of the deceased, or that such person has in his possession or has knowledge of any deed, conveyance, bond, contract, or other writing which contains evidence of or tends to disclose the right, title, interest, or claim of the deceased, the court may cite such suspected person to appear before it and may examine him on oath on the matter of such complaint; and if the person so cited refuses to appear, or to answer on such examination or such interrogatories as are put to him, the court may punish him for contempt, and may commit him to prison until he submits to the order of the court. The interrogatories put to any such person, and his answers thereto, shall be in writing and shall be filed in the clerks office.
Section 6 of Rule 87 seeks to secure evidence from persons suspected of having possession or knowledge of the properties left by a deceased person, or of having concealed, embezzled or conveyed any of the properties of the deceased. The court which acquires jurisdiction over the properties of a deceased person through the filing of the corresponding proceedings has supervision and control over these properties. The trial court has the inherent duty to see to it that the inventory of the administrator lists all the properties, rights and credits which the law requires the administrator to include in his inventory. In compliance with this duty, the court also has the inherent power to determine what properties, rights and credits of the deceased the administrator should include or exclude in the inventory. An heir or person interested in the properties of a deceased may call the courts attention that certain properties, rights or credits are left out from the inventory. In such a case, it is likewise the courts duty to hear the observations of such party. The court has the power to determine if such observations deserve attention and if such properties belong prima facie to the estate. However, in such proceedings the trial court has no authority to decide whether the properties, real or personal, belong to the estate or to the persons examined. If after such examination there is good reason to believe that the person examined is keeping properties belonging to the estate, then the administrator should file an ordinary action in court to recover the same. Inclusion of certain shares of stock by the administrator in the inventory does not automatically deprive the assignees of their shares. They have
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SPECIAL PROCEEDINGS DIGESTED CASES-RULE 87 to 89

a right to be heard on the question of ownership, when that property is properly presented to the court. In the present case, some of the transferees of the shares of stock do not appear to be heirs of the decedent. Neither do they appear to be parties to the intestate proceedings. Third persons to whom the decedents assets had been conveyed may be cited to appear in court and examined under oath as to how they came into possession of the decedents assets. In case of fraudulent conveyances, a separate action is necessary to recover these assets. Taken in this light, there is no reason why the trial court should disallow the examination of the alleged transferees of the shares of stocks. This is only for purposes of eliciting information or securing evidence from persons suspected of concealing or conveying some of the decedents properties to the prejudice of creditors. Petitioners admission that these persons are the decedents assignees does not automatically negate concealment of the decedents assets on their part. The assignment might be simulated so as to place the shares beyond the reach of creditors. In case the shares are eventually included in the estate, this inventory is merely provisional and is not determinative of the issue of ownership. A separate action is necessary for determination of ownership and recovery of possession. Also, petitioners quote Arcega and Miranda v. Pecson and Arcega to question the propriety of filing a petition for certiorari before the CA: Without deciding whether the proceeding thus conducted complies with the provision of Section 6 of Rule 88 [Section 6, Rule 87 under the 1997 Rules of Civil Procedure], which says that "the court may cite such suspected person to appear before it and may examine him on oath on the matter of such complaint," and without deciding whether the duty of the judge to make the examination is or not mandatory, we are satisfied that certiorari is not an appropriate remedy under the aforecited rule. The facts in Arcega are not on all fours with the facts in the instant case. In Arcega, the judge granted the examination but only with respect to three of the several lots involved. In the present case, there was an absolute refusal by the trial court to conduct an examination on the ground that it would constitute a "fishing expedition" of evidence that could be used against the administratrix. In Arcega, the trial court issued an order in favor of the person suspected of having concealed properties of the estate and against the special administratrix and the judicial receiver. The special administratrix had the remedy of filing another case to recover such properties in the name of thee state. In the present case, Absolute as a creditor of the decedent filed the petition after the trial court denied its Motion for examination. Absolute questioned the ruling in favor of the administratrix and heirs of the decedent. Although as a creditor, Absolute does have the remedy of filing another case to recover such properties, its Motion for examination was intended merely to investigate and take testimony in preparation for an independent action. Aside from the administratrix and the heirs of the decedent, Absolute also sought to examine the supposed assignees of the decedents shares, who are third persons with respect to the probate proceedings. The Motion was a preparatory move sanctioned by the Rules of Court. The denial of Absolutes Motion was an

ATTY. GERALDINE QUIMUSING-TIU LAKAS ATENISTA

interlocutory order not subject to appeal. The order of denial may, however, be challenged before a superior court through a petition for certiorari under Rule 65. G.R. No. 129008 January 13, 2004 TEODORA A. RIOFERIO, ET AL. vs. CA, ET AL FACTS: 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, with whom he had seven children who are the herein respondents, namely: Lourdes, Alfonso "Clyde", Nancy, Alfonso James, Christopher, Alfonso Mike, 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, and co-petitioners Veronica, Alberto and Rowena. On November 14, 1995, respondents Alfonso James and Lourdes Orfinada discovered that 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. 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. On December 1, 1995, respondent Alfonso "Clyde" P. Orfinada III filed a Petition for Letters of Administration before the RTC of Angeles City, praying that letters of administration encompassing the estate of Alfonso P. Orfinada, Jr. be issued to him. 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. Petitioners interposed 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 and that the titles thereof were delivered to her as an advance inheritance but the decedent had managed to register them in his name. Petitioners also argued 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. Hence, petitioners filed a Motion to Set Affirmative Defenses for Hearing on the aforesaid ground. The lower court denied the motion 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. The
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SPECIAL PROCEEDINGS DIGESTED CASES-RULE 87 to 89

CA found that the lower court committed no grave abuse of discretion amounting to lack or excess of jurisdiction. ISSUE: WON the heirs have legal standing to prosecute the rights belonging to the deceased subsequent to the commencement of the administration proceedings. RULING: YES. 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. 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. 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. 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 326 and Section 2, Rule 87 of the Rules of Court. In fact, in the case of Gochan v. Young, 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, 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

ATTY. GERALDINE QUIMUSING-TIU LAKAS ATENISTA

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 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.