G.R. No.

165554 (July 26 2010)

LAZARO PASCO and LAURO PASCO, Petitioners,Present: - versus - HEIRS OF
FILOMENA DE GUZMAN, represented by CRESENCIA DE GUZMAN- PRINCIPE,
LEONARDO-DE CASTRO, DEL CASTILLO, and PEREZ, JJ. Respondents.
DECISION
DEL CASTILLO, J.:
No court should shield a party from compliance with valid obligations based on wholly
unsubstantiated claims of mistake or fraud. Having refused to abide by a compromise
agreement, the aggrieved party may either enforce it or regard it as rescinded and insist
upon the original demand.
This Petition for Review on Certiorari[1] assails the May 13, 2004 Decision[2] of the Court
of Appeals (CA) and its October 5, 2004 Resolution[3] in CA-G.R. SP No. 81464 which
dismissed petitioners appeal and affirmed the validity of the parties Compromise
Agreement.
Factual Antecedents
The present petition began with a Complaint for Sum of Money and Damages[4] filed on
December 13, 2000 by respondents, the heirs of Filomena de Guzman (Filomena),
represented by Cresencia de Guzman-Principe (Cresencia), against petitioners Lauro
Pasco (Lauro) and Lazaro Pasco (Lazaro). The case was filed before the Municipal Trial
Court (MTC) of Bocaue, Bulacan, and docketed as Civil Case No. MM-3191.[5]
In their Complaint,[6] herein respondents alleged that on February 7, 1997, petitioners
obtained a loan in the amount of P140,000.00 from Filomena (now deceased). To secure
the petitioners loan, Lauro executed a chattel mortgage on his Isuzu Jeep in favor of
Filomena. Upon her death, her heirs sought to collect from the petitioners, to no avail.
Despite numerous demands, petitioners refused to either pay the balance of the loan or
surrender the Isuzu Jeep to the respondents. Thus, respondents were constrained to file
the collection case to compel the petitioners to pay the principal amount of P140,000.00
plus damages in the amount of 5% monthly interest from February 7, 1997, 25% attorneys
fees, exemplary damages, and expenses of litigation.
Filomenas heirs, consisting of Avelina de Guzman-Cumplido, Cecilia de Guzman, Rosita
de Guzman, Natividad de Guzman, and Cresencia de Guzman-Principe, authorized
Cresencia to act as their attorney-in-fact through a Special Power of Attorney[7] (SPA)
dated April 6, 1999. The SPA authorized Cresencia to do the following on behalf of the coheirs:
1)
To represent us on all matters concerning the intestate estate of our deceased
sister, Filomena de Guzman;
2)
To file cases for collection of all accounts due said Filomena de Guzman or her
estate, including the power to file petition for foreclosure of mortgaged properties;
3)
To do and perform all other acts necessary to carry out the powers hereinabove
conferred.

During the pre-trial of the case on February 15, 2002, the parties verbally agreed to settle
the case. On February 21, 2002, the parties jointly filed a Compromise Agreement[8] that
was signed by the parties and their respective counsel. Said Compromise Agreement,
approved by the MTC in an Order[9] dated April 4, 2002, contained the following salient
provisions:
1. That [petitioners] admit their principal loan and obligation to the [respondents] in the sum
of One Hundred Forty Thousand Pesos (P140,000.00) Philippine currency; in addition to
the incidental and other miscellaneous expenses that they have incurred in the pursuit of
this case, in the further sum of P18,700.00;
2. That, [petitioners] undertake to pay to the [respondents] their aforementioned
obligations, together with attorneys fees equivalent to ten percentum (10%) of the total
sum thereof, directly at the BULACAN OFFICE of the [respondents] counsel, located at
No. 24 Hornbill Street, St. Francis Subdivision, Bo. Pandayan, Meycauayan, Bulacan,
WITHOUT NEED OF FURTHER DEMAND in the following specific manner, to wit:
P60,000.00 to be paid on or before May 15, 2002
P10,000.00 monthly payments thereafter, starting June 15, 2002 up to and until the
aforementioned obligations shall have been fully paid;
3. That, provided that [petitioners] shall truely [sic] comply with the foregoing specifically
agreed manner of payments, [respondents] shall forego and waive all the interests charges
of 5% monthly from February 7, 1998 and the 25% attorneys fees provided for in Annex AA
of the Complaint;
4. In the event of failure on the part of the [petitioners] to comply with any of the specific
provisions of this Compromise Agreement, the [respondents] shall be entitled to the
issuance of a Writ of Execution to enforce the satisfaction of [petitioners] obligations, as
mentioned in paragraph 1, together with the 5% monthly interests charges and attorneys
fees mentioned in paragraph 3 thereof.[10]
Ruling of the Municipal Trial Court
Unfortunately, this was not the end of litigation. On May 2, 2002, petitioners filed a verified
Motion to Set Aside Decision[11] alleging that the Agreement was written in a language not
understood by them, and the terms and conditions thereof were not fully explained to them.
Petitioners further questioned the MTCs jurisdiction, arguing that the total amount allegedly
covered by the Compromise Agreement amounted to P588,500.00, which exceeded the
MTCs P200,000.00 jurisdictional limit. In an Order[12] dated June 28, 2002, the MTC
denied the motion; it also granted Cresencias prayer for the issuance of a writ of execution.
The writ of execution[13] was subsequently issued on July 3, 2002. Petitioners Motion for
Reconsideration and to Quash Writ/Order of Execution[14] dated August 1, 2002 was
denied by the MTC in an Order[15] dated September 5, 2002.
Undeterred, on October 10, 2002, petitioners filed a Petition for Certiorari and Prohibition
with Application for Temporary Restraining Order/Preliminary Injunction[16] before the
Regional Trial Court (RTC) of Bocaue. The case was raffled to Branch 82,[17] and
docketed as Civil Case No. 764-M-2002. In their petition, petitioners argued that the MTC
gravely abused its discretion in approving the Compromise Agreement because (1) the
amount involved was beyond the jurisdiction of the MTC; (2) the MTC failed to ascertain
that the parties fully understood the contents of the Agreement; (3) Crescencia had no
authority to represent her co-heirs because Filomenas estate had a personality of its own;
and (4) the Compromise Agreement was void for failure of the judge and Cresencia to
explain the terms and conditions to the petitioners.

In their Comment[18] dated October 29, 2002, respondents argued that (1) the principal
claim of P140,000.00 was within the MTCs jurisdiction; and (2) the records reveal that it
was the petitioners themselves, assisted by their counsel, who proposed the terms of the
settlement, which offer of compromise was accepted in open court by the respondents.
Thus, the Compromise Agreement merely reduced the parties agreement into writing.

Republic Act No. 7691,[29] fixes the MTCs jurisdiction over cases where the demand does
not exceed Two hundred thousand pesos (P200,000.00) exclusive of interest, damages of
whatever kind, attorney's fees, litigation expenses, and costs.[30] Thus, respondents
initiatory complaint, covering the principal amount of P140,000.00, falls squarely within the
MTCs jurisdiction.
Petitioners properly resorted to the special civil action of certiorari.

Ruling of the Regional Trial Court

The RTC initially granted petitioners prayer for the issuance of a Temporary Restraining
Order (TRO)[19] on November 18, 2002, and later issued a preliminary injunction in an
Order[20] dated December 10, 2002, primarily on the ground that the SPA did not
specifically authorize Cresencia to settle the case. However, Presiding Judge Herminia V.
Pasamba later inhibited herself,[21] so the case was re-raffled to Branch 6, presided over
by Judge Manuel D.J. Siayngo.[22] The grant of the preliminary injunction was thus
reconsidered and set aside in an Order[23] dated May 15, 2003. In the same Order, the
RTC dismissed the petition and held that (1) the MTC had jurisdiction over the subject
matter; (2) Cresencia was authorized to institute the action and enter into a Compromise
Agreement on behalf of her co-heirs; and (3) the MTCs approval of the Compromise
Agreement was not done in a capricious, whimsical, or arbitrary manner; thus, petitioners
resort to certiorari under Rule 65 was improper. Petitioners Motion for Reconsideration[24]
was denied,[25] hence they sought recourse before the CA.
Ruling of the Court of Appeals
In its Decision[26] dated May 13, 2004 and Resolution[27] dated October 5,
2004, the CA dismissed petitioners appeal, and held that:

On the first question, the CA held that the proper remedy from the MTCs Order approving
the Compromise Agreement was a Petition for Relief from Judgment under Rule 38 and
not a Petition for Certiorari under Rule 65. We recall that petitioners filed a verified Motion
to Set Aside Decision on May 2, 2002,[31] which was denied by the MTC on June 28,
2002. This Order of denial was properly the subject of a petition for certiorari, pursuant to
Rule 41, Section 1, of the Rules of Court:
Section 1. Subject of Appeal An appeal may be taken from a judgment or final order that
completely disposes of the case, or of a particular matter therein when declared by these
Rules to be appealable.
No appeal may be taken from:
xxxx
(e) an order denying a motion to set aside a judgment by consent, confession or
compromise on the ground of fraud, mistake or duress, or any other ground vitiating
consent.
xxxx

1)
the MTC had jurisdiction, since the principal amount of the loan only amounted to
P140,000.00;
2)
Cresencia was duly authorized by her co-heirs to enter into the Compromise
Agreement;
3)
Petitioners improperly sought recourse before the RTC through a Petition for
Certiorari under Rule 65, when the proper remedy was a Petition for Relief from Judgment
under Rule 38.
Issues
Before us, petitioners claim that, first, they correctly resorted to the remedy of certiorari
under Rule 65; second, the RTC gravely erred in dismissing their Petition for Certiorari and
Prohibition, when the matter under consideration was merely the propriety of the grant of
the preliminary injunction; and third, that the SPA did not validly authorize Cresencia to
enter into the Compromise Agreement on behalf of her co-heirs.
Our Ruling
We deny the petition.
The MTC had jurisdiction over the case.
It bears stressing that the question of the MTCs jurisdiction has not been raised before this
Court; hence, petitioners appear to have admitted that the MTC had jurisdiction to approve
the Compromise Agreement. In any event, it is beyond dispute that the Judiciary
Reorganization Act of 1980, or Batas Pambansa (BP) Blg. 129,[28] as amended by

In all the above instances where the judgment or final order is not appealable, the
aggrieved party may file an appropriate special civil action under Rule 65.
From the express language of Rule 41, therefore, the MTCs denial of petitioners Motion to
Set Aside Decision could not have been appealed. Indeed, a decision based on a
compromise agreement is immediately final and executory and cannot be the subject of
appeal,[32] for when parties enter into a compromise agreement and request a court to
render a decision on the basis of their agreement, it is presumed that such action
constitutes a waiver of the right to appeal said decision.[33] While there may have been
other remedies available to assail the decision,[34] petitioners were well within their rights
to institute a special civil action under Rule 65.
The Regional Trial Court rightly dismissed the petition for certiorari.
On the second issue, petitioners argue that the RTC, in reconsidering the order granting
the application for writ of preliminary injunction, should not have gone so far as dismissing
the main case filed by the petitioners. They claim that the issue in their application for writ
of preliminary injunction was different from the issues in the main case for certiorari, and
that the dissolution of the preliminary injunction should have been without prejudice to the
conduct of further proceedings in the main case. They also claim that the RTC did not have
the power to dismiss the case without requiring the parties to file memoranda.
These assertions are belied, however, by petitioners own submissions.
Their arguments were exactly the same, whether relating to the preliminary or permanent
injunction. Identical matters were at issue the MTCs jurisdiction, petitioners alleged vitiated

consent, and the propriety of enforcing the Compromise Agreement. The reliefs sought,
too, were the same, that is, the grant of an injunction against the enforcement of the
compromise:[35]
WHEREFORE, it is most respectfully prayed that:
1)
A Temporary Restraining Order and/or Preliminary Injunction issue ex parte
directing the respondents to cease and desist from enforcing, executing, or implementing
in any manner the Decision dated April 4, 2002 and acting in Civil Case No. MM-3191 until
further orders from this Honorable Court.
2)
After hearing, the temporary restraining order/ex parte injunction be replaced by
a writ of preliminary injunction.
3)

After hearing on the merits, judgment be rendered:

a. Making the injunction permanent.

Since the RTC found at the preliminary injunction phase that petitioners were not entitled
to an injunction (whether preliminary or permanent), that petitioners arguments were
insufficient to support the relief sought, and that the MTCs approval of the Compromise
Agreement was not done in a capricious, whimsical, or arbitary manner, the RTC was not
required to engage in unnecessary duplication of proceedings. As such, it rightly dismissed
the petition.
In addition, nothing in the Rules of Court commands the RTC to require the parties to file
Memoranda. Indeed, Rule 65, Sec. 8 is explicit in that the court may dismiss the petition if
it finds the same to be patently without merit, prosecuted manifestly for delay, or that the
questions raised therein are too unsubstantial to require consideration.[36]
Cresencia was authorized to enter into the Compromise Agreement.

authorization.[39] This ruling is even more significant here, where the co-heirs have not
taken any action to invalidate the Compromise Agreement or assail their SPA.
Moreover, we note that petitioners never assailed the validity of the SPA
during the pre-trial stage prior to entering the Compromise Agreement. This matter was
never even raised as a ground in petitioners Motion to Set Aside the compromise, or in the
initial Petition before the RTC. It was only months later, in December 2002, that petitioners
rather self-servingly - claimed that the SPA was insufficient.
The stated interest rate should be reduced.
Although the petition is unmeritorious, we find the 5% monthly interest rate stipulated in
Clause 4 of the Compromise Agreement to be iniquitous and unconscionable. Accordingly,
the legal interest of 12% per annum must be imposed in lieu of the excessive interest
stipulated in the agreement. As we held in Castro v. Tan:[40]
In several cases, we have ruled that stipulations authorizing iniquitous or unconscionable
interests are contrary to morals, if not against the law. In Medel v. Court of Appeals, we
annulled a stipulated 5.5% per month or 66% per annum interest on a P500,000.00 loan
and a 6% per month or 72% per annum interest on a P60,000.00 loan, respectively, for
being excessive, iniquitous, unconscionable and exorbitant. In Ruiz v. Court of Appeals, we
declared a 3% monthly interest imposed on four separate loans to be excessive. In both
cases, the interest rates were reduced to 12% per annum.
In this case, the 5% monthly interest rate, or 60% per annum, compounded monthly,
stipulated in the Kasulatan is even higher than the 3% monthly interest rate imposed in the
Ruiz case. Thus, we similarly hold the 5% monthly interest to be excessive, iniquitous,
unconscionable and exorbitant, contrary to morals, and the law. It is therefore void ab initio
for being violative of Article 1306 of the Civil Code. x x x (citations omitted)
The proceeds of the loan should be released to Filomenas heirs only upon settlement of
her estate.

As regards the third issue, petitioners maintain that the SPA was fatally defective because
Cresencia was not specifically authorized to enter into a compromise agreement. Here, we
fully concur with the findings of the CA that:
x x x It is undisputed that Cresencias co-heirs executed a Special Power of Attorney, dated
6 April 1999, designating the former as their attorney-in-fact and empowering her to file
cases for collection of all the accounts due to Filomena or her estate. Consequently,
Cresencia entered into the subject Compromise Agreement in order to collect the overdue
loan obtained by Pasco from Filomena. In so doing, Cresencia was merely performing her
duty as attorney-in-fact of her co-heirs pursuant to the Special Power of Attorney given to
her.[37]
Our ruling in Trinidad v. Court of Appeals[38] is illuminating. In Trinidad, the heirs of Vicente
Trinidad executed a SPA in favor of Nenita Trinidad (Nenita) to be their representative in
litigation involving the sale of real property covered by the decedents estate. As here, there
was no specific authority to enter into a Compromise Agreement. When a compromise
agreement was finally reached, the heirs later sought to invalidate it, claiming that Nenita
was not specifically authorized to enter into the compromise agreement. We held then, as
we do now, that the SPA necessarily included the power of the attorney-in-fact to
compromise the case, and that Nenitas co-heirs could not belatedly disavow their original

Finally, it is true that Filomenas estate has a different juridical personality than that of the
heirs. Nonetheless, her heirs certainly have an interest in the preservation of the estate
and the recovery of its properties,[41] for at the moment of Filomenas death, the heirs start
to own the property, subject to the decedent's liabilities. In this connection, Article 777 of
the Civil Code states that [t]he rights to the succession are transmitted from the moment of
the death of the decedent.[42]
Unfortunately, the records before us do not show the status of the proceedings for the
settlement of the estate of Filomena, if any. But to allow the release of the funds directly to
the heirs would amount to a distribution of the estate; which distribution and delivery
should be made only after, not before, the payment of all debts, charges, expenses, and
taxes of the estate have been paid.[43] We thus decree that respondent Cresencia should
deposit the amounts received from the petitioners with the MTC of Bocaue, Bulacan and in
turn, the MTC of Bocaue, Bulacan should hold in abeyance the release of the amounts to
Filomenas heirs until after a showing that the proper procedure for the settlement of
Filomenas estate has been followed.
WHEREFORE, the petition is DENIED. The May 13, 2004 Decision of the Court of Appeals
and its October 5, 2004 Resolution are AFFIRMED with MODIFICATIONS that the interest
rate of 5% per month (60% per annum) is ordered reduced to 12 % per annum.

Respondent Cresencia De Guzman-Principe is DIRECTED to deposit with the Municipal

Trial Court of Bocaue, Bulacan the amounts received from the petitioners. The Municipal
Trial Court of Bocaue, Bulacan is likewise DIRECTED to hold in abeyance the release of
any amounts recovered from the petitioners until after a showing that the procedure for
settlement of estates of Filomena de Guzmans estate has been followed, and after all
charges on the estate have been fully satisfied.
SO ORDERED.

[G.R. No. 125835. July 30, 1998]

NATALIA CARPENA OPULENCIA, petitioner, vs. COURT OF APPEALS, ALADIN
SIMUNDAC and MIGUEL OLIVAN, respondents.
DECISION
PANGANIBAN, J.
Is a contract to sell a real property involved in testate proceedings valid and binding
without the approval of the probate court?
Statement of the Case
This is the main question raised in this petition for review before us, assailing the
Decision[1] of the Court of Appeals[2] in CA-GR CV No. 41994 promulgated on February 6,
1996 and its Resolution[3] dated July 19, 1996. The challenged Decision disposed as
follows:
WHEREFORE, premises considered, the order of the lower court dismissing the complaint
is SET ASIDE and judgment is hereby rendered declaring the CONTRACT TO SELL
executed by appellee in favor of appellants as valid and binding, subject to the result of the
administration proceedings of the testate Estate of Demetrio Carpena.
SO ORDERED. [4]
Petitioners Motion for Reconsideration was denied in the challenged Resolution.[5]
The Facts

1. That on February 3, 1989, [private respondents] and [petitioner] entered into a contract
to sell involving a parcel of land situated in Sta. Rosa, Laguna, otherwise known as Lot No.
2125 of the Sta. Rosa Estate.
2. That the price or consideration of the said sell [sic] is P150.00 per square meters;
3. That the amount of P300,000.00 had already been received by [petitioner];
4. That the parties have knowledge that the property subject of the contract to sell is
subject of the probate proceedings;
5. That [as] of this time, the probate Court has not yet issued an order either approving or
denying the said sale. (p. 3, appealed Order of September 15, 1992, pp. 109-112, record).
[Private respondents] submitted their evidence in support of the material allegations of the
complaint. In addition to testimonies of witnesses, [private respondents] presented the
following documentary evidences: (1) Contract to Sell (Exh A); (2) machine copy of the last
will and testament of Demetrio Carpena (defendants father) to show that the property sold
by defendant was one of those devised to her in said will (Exh B); (3) receipts signed by
defendant for the downpayment in the total amount of P300,000.00 (Exhs C, D & E); and
(4) demand letters sent to defendant (Exhs F & G).
It appears that [petitioner], instead of submitting her evidence, filed a Demurrer to
Evidence. In essence, defendant maintained that the contract to sell was null and void for
want of approval by the probate court. She further argued that the contract was subject to
a suspensive condition, which was the probate of the will of defendants father Demetrio
Carpena. An Opposition was filed by [private respondents]. It appears further that in an
Order dated December 15, 1992 the court a quo granted the demurrer to evidence and
dismissed the complaint. It justified its action in dismissing the complaint in the following
manner:

The antecedent facts, as succinctly narrated by Respondent Court of Appeals are:

In a complaint for specific performance filed with the court a quo [herein private
respondents] Aladin Simundac and Miguel Oliven alleged that [herein petitioner] Natalia
Carpena Opulencia executed in their favor a CONTRACT TO SELL Lot 2125 of the Sta.
Rosa Estate, consisting of 23,766 square meters located in Sta. Rosa, Laguna at P150.00
per square meter; that plaintiffs paid a downpayment of P300,000.00 but defendant,
despite demands, failed to comply with her obligations under the contract. [Private
respondents] therefore prayed that [petitioner] be ordered to perform her contractual
obligations and to further pay damages, attorneys fee and litigation expenses.
In her traverse, [petitioner] admitted the execution of the contract in favor of plaintiffs and
receipt of P300,000.00 as downpayment. However, she put forward the following
affirmative defenses: that the property subject of the contract formed part of the Estate of
Demetrio Carpena (petitioners father), in respect of which a petition for probate was filed
with the Regional Trial Court, Branch 24, Bian, Laguna; that at the time the contract was
executed, the parties were aware of the pendency of the probate proceeding; that the
contract to sell was not approved by the probate court; that realizing the nullity of the
contract [petitioner] had offered to return the downpayment received from [private
respondents], but the latter refused to accept it; that [private respondents] further failed to
provide funds for the tenant who demanded P150,00.00 in payment of his tenancy rights
on the land; that [petitioner] had chosen to rescind the contract.
At the pre-trial conference the parties stipulated on [sic] the following facts:

It is noteworthy that when the contract to sell was consummated, no petition was filed in
the Court with notice to the heirs of the time and place of hearing, to show that the sale is
necessary and beneficial. A sale of properties of an estate as beneficial to the interested
parties must comply with the requisites provided by law, (Sec. 7, Rule 89, Rules of Court)
which are mandatory, and without them, the authority to sell, the sale itself, and the order
approving it, would be null and void ab initio. (Arcilla vs. David, 77 Phil. 718, Gabriel, et al.,
vs. Encarnacion, et al., L-6736, May 4, 1954; Bonaga vs. Soler, 2 Phil. 755) Besides, it is
axiomatic that where the estate of a 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. (Estate of Obave, vs. Reyes, 123 SCRA 767).
As held by the Supreme Court, a decedents representative (administrator) is not estopped
from questioning the validity of his own void deed purporting to convey land. (Bona vs.
Soler, 2 Phil, 755). In the case at bar, the [petitioner,] realizing the illegality of the
transaction[,] has interposed the nullity of the contract as her defense, there being no
approval from the probate Court, and, in good faith offers to return the money she received
from the [private respondents]. Certainly, the administratrix is not estop[ped] from doing so
and the action to declare the inexistence of contracts do not prescribe. This is what
precipitated the filing of [petitioners] demurrer to evidence.[6]
The trial courts order of dismissal was elevated to the Court of Appeals by private
respondents who alleged:

1. The lower court erred in concluding that the contract to sell is null and void, there being
no approval of the probate court.

of Transfer Certificate of Title No. 2125 duly confirmed after the survey to be conducted by
the BUYERs Licensed Geodetic Engineer, and whatever area [is] left. (Emphasis added).

2. The lower court erred in concluding that [petitioner] in good faith offers to return the
money to [private respondents].

To emphasize, it is evident from the foregoing clauses of the contract that appellee sold Lot
2125 not in her capacity as executrix of the will or administratrix of the estate of her father,
but as an heir and more importantly as owner of said lot which, along with other properties,
was devised to her under the will sought to be probated. That being so, the requisites
stipulated in Rule 89 of the Revised Rules of Court which refer to a sale made by the
administrator for the benefit of the estate do not apply.

3. The lower court erred in concluding that [petitioner] is not under estoppel to question the
validity of the contract to sell.
4. The lower court erred in not ruling on the consideration of the contract to sell which is
tantamount to plain unjust enrichment of [petitioner] at the expense of [private
respondents].[7]
Public Respondents Ruling
Declaring the Contract to Sell valid, subject to the outcome of the testate proceedings on
Demetrio Carpenas estate, the appellate court set aside the trial courts dismissal of the
complaint and correctly ruled as follows:
It is apparent from the appealed order that the lower court treated the contract to sell
executed by appellee as one made by the administratrix of the Estate of Demetrio Carpena
for the benefit of the estate. Hence, its main reason for voiding the contract in question was
the absence of the probate courts approval. Presumably, what the lower court had in mind
was the sale of the estate or part thereof made by the administrator for the benefit of the
estate, as authorized under Rule 89 of the Revised Rules of Court, which requires the
approval of the probate court upon application therefor with notice to the heirs, devisees
and legatees.
However, as adverted to by appellants in their brief, the contract to sell in question is not
covered by Rule 89 of the Revised Rules of Court since it was made by appellee in her
capacity as an heir, of a property that was devised to her under the will sought to be
probated. Thus, while the document inadvertently stated that appellee executed the
contract in her capacity as executrix and administratrix of the estate, a cursory reading of
the entire text of the contract would unerringly show that what she undertook to sell to
appellants was one of the other properties given to her by her late father, and more
importantly, it was not made for the benefit of the estate but for her own needs. To illustrate
this point, it is apropos to refer to the preambular or preliminary portion of the document,
which reads:
WHEREAS, the SELLER is the lawful owner of a certain parcel of land, which is more
particularly described as follows:
xxxxxxxxx
xxxxxxxxx
xxxxxxxxx
WHEREAS, the SELLER suffers difficulties in her living and has forced to offer the sale of
the above-described property, which property was only one among the other properties
given to her by her late father, to anyone who can wait for complete clearance of the court
on the Last Will Testament of her father.
WHEREAS, the SELLER in order to meet her need of cash, has offered for sale the said
property at ONE HUNDRED FIFTY PESOS (150.00) Philippine Currency, per square
meter unto the BUYERS, and with this offer, the latter has accepted to buy and/or
purchase the same, less the area for the road and other easements indicated at the back

xxxxxxxxx
It is noteworthy that in a Manifestation filed with this court by appellants, which is not
controverted by appellee, it is mentioned that the last will and testament of Demetrio
Carpena was approved in a final judgment rendered in Special Proceeding No. B-979 by
the Regional Trial Court, Branch 24 Binan, Laguna. But of course such approval does not
terminate the proceeding[s] since the settlement of the estate will ensue. Such
proceedings will consist, among others, in the issuance by the court of a notice to creditors
(Rule 86), hearing of money claims and payment of taxes and estate debts (Rule 88) and
distribution of the residue to the heirs or persons entitled thereto (Rule 90). In effect, the
final execution of the deed of sale itself upon appellants payment of the balance of the
purchase price will have to wait for the settlement or termination of the administration
proceedings of the Estate of Demetrio Carpena. Under the foregoing premises, what the
trial court should have done with the complaint was not to dismiss it but to simply put on
hold further proceedings until such time that the estate or its residue will be distributed in
accordance with the approved will.
The rule is that when a demurrer to the evidence is granted by the trial court but reversed
on appeal, defendant loses the right to adduce his evidence. In such a case, the appellate
court will decide the controversy on the basis of plaintiffs evidence. In the case at bench,
while we find the contract to sell valid and binding between the parties, we cannot as yet
order appellee to perform her obligations under the contract because the result of the
administration proceedings of the testate Estate of Demetrio Carpena has to be awaited.
Hence, we shall confine our adjudication to merely declaring the validity of the questioned
Contract to Sell.
Hence, this appeal.[8]
The Issue
Petitioner raises only one issue:
Whether or not the Contract to Sell dated 03 February 1989 executed by the [p]etitioner
and [p]rivate [r]espondent[s] without the requisite probate court approval is valid.
The Courts Ruling
The petition has no merit.
Contract to Sell Valid
In a nutshell, petitioner contends that where 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.[9] She maintains that
the Contract to Sell is void because it was not approved by the probate court, as required
by Section 7, Rule 89 of the Rules of Court:

SEC. 7. Regulations for granting authority to sell, mortgage, or otherwise encumber estate.
The court having jurisdiction of the estate of the deceased may authorize the executor or
administrator to sell, mortgage, or otherwise encumber real estate, in cases provided by
these rules and when it appears necessary or beneficial, under the following regulations:
xxx
Insisting that the above rule should apply to this case, petitioner argues that the
stipulations in the Contract to Sell require her to act in her capacity as an executrix or
administratrix. She avers that her obligation to eject tenants pertains to the administratrix
or executrix, the estate being the landlord of the said tenants.[10] Likewise demonstrating
that she entered into the contract in her capacity as executor is the stipulation that she
must effect the conversion of subject land from irrigated rice land to residential land and
secure the necessary clearances from government offices. Petitioner alleges that these
obligations can be undertaken only by an executor or administrator of an estate, and not by
an heir.[11]
The Court is not persuaded. As correctly ruled by the Court of Appeals, Section 7 of Rule
89 of the Rules of Court is not applicable, because petitioner entered into the Contract to
Sell in her capacity as an heiress, not as an executrix or administratrix of the estate. In the
contract, she represented herself as the lawful owner and seller of the subject parcel of
land.[12] She also explained the reason for the sale to be difficulties in her living conditions
and consequent need of cash.[13] These representations clearly evince that she was not
acting on behalf of the estate under probate when she entered into the Contract to Sell.
Accordingly, the jurisprudence cited by petitioner has no application to the instant case.

Petitioners contention is not convincing. The Contract to Sell stipulates that petitioners
offer to sell is contingent on the complete clearance of the court on the Last Will Testament
of her father.[19] Consequently, although the Contract to Sell was perfected between the
petitioner and private respondents during the pendency of the probate proceedings, the
consummation of the sale or the transfer of ownership over the parcel of land to the private
respondents is subject to the full payment of the purchase price and to the termination and
outcome of the testate proceedings. Therefore, there is no basis for petitioners
apprehension that the Contract to Sell may result in a premature partition and distribution
of the properties of the estate. Indeed, it is settled that the sale made by an heir of his
share in an inheritance, subject to the pending administration, in no wise stands in the way
of such administration.[20]
Estoppel
Finally, petitioner is estopped from backing out of her representations in her valid Contract
to Sell with private respondents, from whom she had already received P300,000 as initial
payment of the purchase price. Petitioner may not renege on her own acts and
representations, to the prejudice of the private respondents who have relied on them.[21]
Jurisprudence teaches us that neither the law nor the courts will extricate a party from an
unwise or undesirable contract he or she entered into with all the required formalities and
with full awareness of its consequences.[22]
WHEREFORE, the petition is hereby DENIED and the assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioner.
SO ORDERED.

We emphasize that hereditary rights are vested in the heir or heirs from the moment of the
decedents death.[14] Petitioner, therefore, became the owner of her hereditary share the
moment her father died. Thus, the lack of judicial approval does not invalidate the Contract
to Sell, because the petitioner has the substantive right to sell the whole or a part of her
share in the estate of her late father.[15] Thus, in Jakosalem vs. Rafols,[16] the Court
resolved an identical issue under the old Civil Code and held:
Article 440 of the Civil Code provides that the possession of hereditary property is deemed
to be transmitted to the heir without interruption from the instant of the death of the
decedent, in case the inheritance be accepted. And Manresa with reason states that upon
the death of a person, each of his heirs becomes the undivided owner of the whole estate
left with respect to the part or portion which might be adjudicated to him, a community of
ownership being thus formed among the coowners of the estate while it remains undivided.
xxx And according to article 399 of the Civil Code, every part owner may assign or
mortgage his part in the common property, and the effect of such assignment or mortgage
shall be limited to the portion which may be allotted him in the partition upon the dissolution
of the community. Hence, where some of the heirs, without the concurrence of the others,
sold a property left by their deceased father, this Court, speaking thru its then Chief Justice
Cayetano Arellano, said that the sale was valid, but that the effect thereof was limited to
the share which may be allotted to the vendors upon the partition of the estate.
Administration of the Estate Not Prejudiced by the Contract to Sell
Petitioner further contends that [t]o sanction the sale at this stage would bring about a
partial distribution of the decedents estate pending the final termination of the testate
proceedings.[17] This becomes all the more significant in the light of the trial courts finding,
as stated in its Order dated August 20, 1997, that the legitime of one of the heirs has been
impaired.[18]

[G.R. No. 146006. February 23, 2004]

JOSE C. LEE AND ALMA AGGABAO, in their capacities as President and Corporate
Secretary, respectively, of Philippines Internationl 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.
DECISION
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).

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 OrtaezEnderes 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 OrtaezEnderes 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:

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.

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.

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),

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 FLAGcontrolled 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.

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:

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.

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;

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

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]

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

The petition has no merit.

JUSTICE AQUINO:
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?

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.

JUSTICE AQUINO:

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

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?

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)

ATTY. CALIMAG:
Your Honor please, at that time, Your Honor, it is already known to them.

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 of Godoy 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.
xxxxxxxxx
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 Godoy and 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. 11-944909, 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.
xxxxxxxxx
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?
Futhermore, 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]

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals in CAG.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.

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
Aggaboa 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. 97-717981), grave coercion (Criminal Case No. 84624) and robbery (Criminal Case No. Q-9667919) 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.

On February 7, 1997, the RTC rendered a Decision[9] disposing as follows:

G.R. No. 168970 (January 15, 2010)
CELESTINO BALUS - versus - SATURNINO BALUS and LEONARDA BALUS VDA. DE
CALUNOD,
Respondents.

WHEREFORE, judgment is hereby rendered, ordering the plaintiffs to execute a Deed of

Sale in favor of the defendant, the one-third share of the property in question, presently
possessed by him, and described in the deed of partition, as follows:

PERALTA, J.:

A one-third portion of Transfer Certificate of Title No. T-39,484 (a.f.), formerly Original
Certificate of Title No. P-788, now in the name of Saturnino Balus and Leonarda B. Vda. de
Calunod, situated at Lagundang, Bunawan, Iligan City, bounded on the North by Lot 5122;
East by shares of Saturnino Balus and Leonarda Balus-Calunod; South by Lot 4649,
Dodiongan River; West by Lot 4661, consisting of 10,246 square meters, including
improvements thereon and dismissing all other claims of the parties.

Assailed in the present petition for review on certiorari under Rule 45 of the Rules of Court
is the Decision[1] of the Court of Appeals (CA) dated May 31, 2005 in CA-G.R. CV No.
58041 which set aside the February 7, 1997 Decision of the Regional Trial Court (RTC) of
Lanao del Norte, Branch 4 in Civil Case No. 3263.
The facts of the case are as follows:
Herein petitioner and respondents are the children of the spouses Rufo and Sebastiana
Balus. Sebastiana died on September 6, 1978, while Rufo died on July 6, 1984.
On January 3, 1979, Rufo mortgaged a parcel of land, which he owns, as security for a
loan he obtained from the Rural Bank of Maigo, Lanao del Norte (Bank). The said property
was originally covered by Original Certificate of Title No. P-439(788) and more particularly
described as follows:
A parcel of land with all the improvements thereon, containing an area of 3.0740 hectares,
more or less, situated in the Barrio of Lagundang, Bunawan, Iligan City, and bounded as
follows: Bounded on the NE., along line 1-2, by Lot 5122, Csd-292; along line 2-12, by
Dodiongan River; along line 12-13 by Lot 4649, Csd-292; and along line 12-1, by Lot 4661,
Csd-292. x x x [2]

The amount of P6,733.33 consigned by the defendant with the Clerk of Court is hereby
ordered delivered to the plaintiffs, as purchase price of the one-third portion of the land in
question.
Plaintiffs are ordered to pay the costs.
SO ORDERED.[10]
The RTC held that the right of petitioner to purchase from the respondents his share in the
disputed property was recognized by the provisions of the Extrajudicial Settlement of
Estate, which the parties had executed before the respondents bought the subject lot from
the Bank.
Aggrieved by the Decision of the RTC, herein respondents filed an appeal with the CA.

Rufo failed to pay his loan. As a result, the mortgaged property was foreclosed and was
subsequently sold to the Bank as the sole bidder at a public auction held for that purpose.
On November 20, 1981, a Certificate of Sale[3] was executed by the sheriff in favor of the
Bank. The property was not redeemed within the period allowed by law. More than two
years after the auction, or on January 25, 1984, the sheriff executed a Definite Deed of
Sale[4] in the Bank's favor. Thereafter, a new title was issued in the name of the Bank.
On October 10, 1989, herein petitioner and respondents executed an Extrajudicial
Settlement of Estate[5] adjudicating to each of them a specific one-third portion of the
subject property consisting of 10,246 square meters. The Extrajudicial Settlement also
contained provisions wherein the parties admitted knowledge of the fact that their father
mortgaged the subject property to the Bank and that they intended to redeem the same at
the soonest possible time.
Three years after the execution of the Extrajudicial Settlement, herein respondents bought
the subject property from the Bank. On October 12, 1992, a Deed of Sale of Registered
Land[6] was executed by the Bank in favor of respondents. Subsequently, Transfer
Certificate of Title (TCT) No. T-39,484(a.f.)[7] was issued in the name of respondents.
Meanwhile, petitioner continued possession of the subject lot.
On June 27, 1995, respondents filed a Complaint[8] for Recovery of Possession and
Damages against petitioner, contending that they had already informed petitioner of the
fact that they were the new owners of the disputed property, but the petitioner still refused
to surrender possession of the same to them. Respondents claimed that they had
exhausted all remedies for the amicable settlement of the case, but to no avail.

On May 31, 2005, the CA promulgated the presently assailed Decision, reversing and
setting aside the Decision of the RTC and ordering petitioner to immediately surrender
possession of the subject property to the respondents. The CA ruled that when petitioner
and respondents did not redeem the subject property within the redemption period and
allowed the consolidation of ownership and the issuance of a new title in the name of the
Bank, their co-ownership was extinguished.
Hence, the instant petition raising a sole issue, to wit:
WHETHER OR NOT CO-OWNERSHIP AMONG THE PETITIONER AND THE
RESPONDENTS OVER THE PROPERTY PERSISTED/CONTINUED TO EXIST (EVEN
AFTER THE TRANSFER OF TITLE TO THE BANK) BY VIRTUE OF THE PARTIES'
AGREEMENT PRIOR TO THE REPURCHASE THEREOF BY THE RESPONDENTS;
THUS, WARRANTING THE PETITIONER'S ACT OF ENFORCING THE AGREEMENT BY
REIMBURSING THE RESPONDENTS OF HIS (PETITIONER'S) JUST SHARE OF THE
REPURCHASE PRICE.[11]
The main issue raised by petitioner is whether co-ownership by him and respondents over
the subject property persisted even after the lot was purchased by the Bank and title
thereto transferred to its name, and even after it was eventually bought back by the
respondents from the Bank.
Petitioner insists that despite respondents' full knowledge of the fact that the title over the
disputed property was already in the name of the Bank, they still proceeded to execute the

subject Extrajudicial Settlement, having in mind the intention of purchasing back the
property together with petitioner and of continuing their co-ownership thereof.
Petitioner posits that the subject Extrajudicial Settlement is, in and by itself, a contract
between him and respondents, because it contains a provision whereby the parties agreed
to continue their co-ownership of the subject property by redeeming or repurchasing the
same from the Bank. This agreement, petitioner contends, is the law between the parties
and, as such, binds the respondents. As a result, petitioner asserts that respondents' act of
buying the disputed property from the Bank without notifying him inures to his benefit as to
give him the right to claim his rightful portion of the property, comprising 1/3 thereof, by
reimbursing respondents the equivalent 1/3 of the sum they paid to the Bank.
The Court is not persuaded.
Petitioner and respondents are arguing on the wrong premise that, at the time of the
execution of the Extrajudicial Settlement, the subject property formed part of the estate of
their deceased father to which they may lay claim as his heirs.
At the outset, it bears to emphasize that there is no dispute with respect to the fact that the
subject property was exclusively owned by petitioner and respondents' father, Rufo, at the
time that it was mortgaged in 1979. This was stipulated by the parties during the hearing
conducted by the trial court on October 28, 1996.[12] Evidence shows that a Definite Deed
of Sale[13] was issued in favor of the Bank on January 25, 1984, after the period of
redemption expired. There is neither any dispute that a new title was issued in the Bank's
name before Rufo died on July 6, 1984. Hence, there is no question that the Bank acquired
exclusive ownership of the contested lot during the lifetime of Rufo.
The rights to a person's succession are transmitted from the moment of his death.[14] In
addition, the inheritance of a person consists of the property and transmissible rights and
obligations existing at the time of his death, as well as those which have accrued thereto
since the opening of the succession.[15] In the present case, since Rufo lost ownership of
the subject property during his lifetime, it only follows that at the time of his death, the
disputed parcel of land no longer formed part of his estate to which his heirs may lay claim.
Stated differently, petitioner and respondents never inherited the subject lot from their
father.
Petitioner and respondents, therefore, were wrong in assuming that they became coowners of the subject lot. Thus, any issue arising from the supposed right of petitioner as
co-owner of the contested parcel of land is negated by the fact that, in the eyes of the law,
the disputed lot did not pass into the hands of petitioner and respondents as compulsory
heirs of Rufo at any given point in time.
The foregoing notwithstanding, the Court finds a necessity for a complete determination of
the issues raised in the instant case to look into petitioner's argument that the Extrajudicial
Settlement is an independent contract which gives him the right to enforce his right to claim
a portion of the disputed lot bought by respondents.
It is true that under Article 1315 of the Civil Code of the Philippines, contracts are perfected
by mere consent; and from that moment, the parties are bound not only to the fulfillment of
what has been expressly stipulated but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage and law.
Article 1306 of the same Code also provides that the contracting parties may establish
such stipulations, clauses, terms and conditions as they may deem convenient, provided
these are not contrary to law, morals, good customs, public order or public policy.

In the present case, however, there is nothing in the subject Extrajudicial Settlement to
indicate any express stipulation for petitioner and respondents to continue with their
supposed co-ownership of the contested lot.
On the contrary, a plain reading of the provisions of the Extrajudicial Settlement would not,
in any way, support petitioner's contention that it was his and his sibling's intention to buy
the subject property from the Bank and continue what they believed to be co-ownership
thereof. It is a cardinal rule in the interpretation of contracts that the intention of the parties
shall be accorded primordial consideration.[16] It is the duty of the courts to place a
practical and realistic construction upon it, giving due consideration to the context in which
it is negotiated and the purpose which it is intended to serve.[17] Such intention is
determined from the express terms of their agreement, as well as their contemporaneous
and subsequent acts.[18] Absurd and illogical interpretations should also be avoided.[19]
For petitioner to claim that the Extrajudicial Settlement is an agreement between him and
his siblings to continue what they thought was their ownership of the subject property, even
after the same had been bought by the Bank, is stretching the interpretation of the said
Extrajudicial Settlement too far.
In the first place, as earlier discussed, there is no co-ownership to talk about and no
property to partition, as the disputed lot never formed part of the estate of their deceased
father.
Moreover, petitioner's asseveration of his and respondents' intention of continuing with
their supposed co-ownership is negated by no less than his assertions in the present
petition that on several occasions he had the chance to purchase the subject property
back, but he refused to do so. In fact, he claims that after the Bank acquired the disputed
lot, it offered to re-sell the same to him but he ignored such offer. How then can petitioner
now claim that it was also his intention to purchase the subject property from the Bank,
when he admitted that he refused the Bank's offer to re-sell the subject property to him?
In addition, it appears from the recitals in the Extrajudicial Settlement that, at the time of
the execution thereof, the parties were not yet aware that the subject property was already
exclusively owned by the Bank. Nonetheless, the lack of knowledge on the part of
petitioner and respondents that the mortgage was already foreclosed and title to the
property was already transferred to the Bank does not give them the right or the authority
to unilaterally declare themselves as co-owners of the disputed property; otherwise, the
disposition of the case would be made to depend on the belief and conviction of the partylitigants and not on the evidence adduced and the law and jurisprudence applicable
thereto.
Furthermore, petitioner's contention that he and his siblings intended to continue their
supposed co-ownership of the subject property contradicts the provisions of the subject
Extrajudicial Settlement where they clearly manifested their intention of having the subject
property divided or partitioned by assigning to each of the petitioner and respondents a
specific 1/3 portion of the same. Partition calls for the segregation and conveyance of a
determinate portion of the property owned in common. It seeks a severance of the
individual interests of each co-owner, vesting in each of them a sole estate in a specific
property and giving each one a right to enjoy his estate without supervision or interference
from the other.[20] In other words, the purpose of partition is to put an end to co-ownership,
[21] an objective which negates petitioner's claims in the present case.
WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of
Appeals, dated May 31, 2005 in CA-G.R. CV No. 58041, is AFFIRMED.

After trial, however, or on June 10, 1992, to be definite, the trial court dismissed the
petition, lifted the temporary restraining order earlier issued, and cancelled the notice of lis
pendens on the certificates of title covering the real properties of the deceased Evarista.
[G.R. No. 126707. February 25, 1999]
In dismissing the petition, the trial court stated:
BLANQUITA E. DELA MERCED, LUISITO E. DELA MERCED, BLANQUITA M.
MACATANGAY, MA. OLIVIA M. PAREDES, TERESITA P. RUPISAN, RUBEN M.
ADRIANO, HERMINIO M. ADRIANO, JOSELITO M. ADRIANO, ROGELIO M. ADRIANO,
WILFREDO M. ADRIANO, VICTOR M. ADRIANO, CORAZON A. ONGOCO, JASMIN A.
MENDOZA and CONSTANTINO M. ADRIANO, petitioners, vs. JOSELITO P. DELA
MERCED, respondent.
DECISION
PURISIMA, J.:

The factual setting of the instant motion after considering the circumstances of the entire
case and the other evidentiary facts and documents presented by the herein parties points
only to one issue which goes into the very skeleton of the controversy, to wit: Whether or
not the plaintiff may participate in the intestate estate of the late Evarista M. Dela Merced
in his capacity as representative of his alleged father, Francisdo Dela Merced, brother of
the deceased, whose succession is under consideration.
xxxxxxxxx

This is a Petition for Review on Certiorari of the Decision of the Court of Appeals, dated
October 17, 1996, in CA-G.R. CV No. 41283, which reversed the decision, dated June 10,
1992, of the Regional Trial Court, Branch 67, Pasig City, in Civil Case No. 59705.
The facts of the case are, as follows:
On March 23, 1987, Evarista M. dela Merced died intestate, without issue. She left five (5)
parcels of land situated in Orambo, Pasig City.
At the time of her death, Evarista was survived by three sets of heirs, viz: (1) Francisco M.
dela Merced, her legitimate brother ; (2) Teresita P. Rupisan, her niece who is the only
daughter of Rosa de la Merced-Platon (a sister who died in 1943) ; and (3) the legitimate
children of Eugenia dela Merced-Adriano (another sister of Evarista who died in 1965),
namely: Herminio, Ruben, Joselito, Rogelio, Wilfredo, Victor and Constantino, all
surnamed Adriano, Corazon Adriano-Ongoco and Jasmin Adriano-Mendoza.
Almost a year later or on March 19, 1988, to be precise, Francisco (Evaristas brother) died.
He was survived by his wife Blanquita Errea dela Merced and their three legitimate
children, namely, Luisito E. dela Merced, Blanquita M. Macatangay and Ma. Olivia M.
Paredes.
On April 20, 1989, the three sets of heirs of the decedent, Evarista M. dela Merced,
referring to (1) the abovenamed heirs of Francisco; (2) Teresita P. Rupisan and (3) the nine
[9] legitimate children of Eugenia, executed an extrajudicial settlement, entitled
Extrajudicial Settlement of the Estate of the Deceased Evarista M. dela Merced
adjudicating the properties of Evarista to them, each set with a share of one-third (1/3) proindiviso.

It is to be noted that Francisco Dela Merced, alleged father of the herein plaintiff, is a
legitimate child, not an illegitimate. Plaintiff, on the other hand, is admittedly an illegitimate
child of the late Francisco Dela Merced. Hence, as such, he cannot represent his alleged
father in the succession of the latter in the intestate estate of the late Evarista Dela
Merced, because of the barrier in Art. 992 of the New Civil Code which states that:
An illegitimate child has no right to inherit ab intestato from the legitimate children and
relatives of his father or mother, nor shall such children or relatives inherit in the same
manner from the illegitimate child.
The application of Art. 992 cannot be ignored in the instant case, it is clearly worded in
such a way that there can be no room for any doubts and ambiguities. This provision of the
law imposes a barrier between the illegitimate and the legitimate family. x x x (Rollo, p. 8788)
Not satisfied with the dismissal of his petition, the private respondent appealed to the Court
of Appeals.
In its Decision of October 17,1996, the Court of Appeals reversed the decision of the trial
court of origin and ordered the petitioners to execute an amendatory agreement which
shall form part of the original settlement, so as to include private respondent Joselito as a
co-heir to the estate of Francisco, which estate includes one-third (1/3) pro indiviso of the
latters inheritance from the deceased Evarista.
The relevant and dispositive part of the Decision of the Court of Appeals, reads:
xxxxxxxxx

On July 26 ,1990, private respondent Joselito P. Dela Merced , illegitimate son of the late
Francisco de la Merced, filed a Petition for Annulment of the Extrajudicial Settlement of the
Estate of the Deceased Evarista M. Dela Merced with Prayer for a Temporary Restraining
Order, alleging that he was fraudulently omitted from the said settlement made by
petitioners, who were fully aware of his relation to the late Francisco. Claiming
successional rights, private respondent Joselito prayed that he be included as one of the
beneficiaries, to share in the one-third (1/3) pro-indiviso share in the estate of the
deceased Evarista, corresponding to the heirs of Francisco.
On August 3, 1990, the trial court issued the temporary restraining order prayed for by
private respondent Joselito, enjoining the sale of any of the real properties of the deceased
Evarista.

It is a basic principle embodied in Article 777, New Civil Code that the rights to the
succession are transmitted from the moment of the death of the decedent, so that
Francisco dela Merced inherited 1/3 of his sisters estate at the moment of the latters death.
Said 1/3 of Evaristas estate formed part of Franciscos estate which was subsequently
transmitted upon his death on March 23, 1987 to his legal heirs, among whom is appellant
as his illegitimate child. Appellant became entitled to his share in Franciscos estate from
the time of the latters death in 1987. The extrajudicial settlement therefore is void insofar
as it deprives plaintiff-appellant of his share in the estate of Francisco M. dela Merced. As
a consequence, the cancellation of the notice of lis pendens is not in order because the
property is directly affected. Appellant has the right to demand a partition of his fathers
estate which includes 1/3 of the property inherited from Evarista dela Merced.

WHEREFORE, premises considered, the appealed decision is hereby REVERSED and

SET ASIDE. Defendants-appellees are hereby ordered to execute an amendatory
agreement/settlement to include herein plaintiff-appellant Joselito dela Merced as co-heir
to the estate of Francisco dela Merced which includes 1/3 of the estate subject of the
questioned Deed of Extrajudicial Settlement of the Estate of Evarista M. dela Merced dated
April 20, 1989. The amendatory agreement/settlement shall form part of the original
Extrajudicial Settlement. With costs against defendants-appellees.
SO ORDERED. (Rollo, p. 41)
In the Petition under consideration, petitioners insist that being an illegitimate child, private
respondent Joselito is barred from inheriting from Evarista because of the provision of
Article 992 of the New Civil Code, which lays down an impassable barrier between the
legitimate and illegitimate families.
The Petition is devoid of merit.
Article 992 of the New Civil Code is not applicable because involved here is not a situation
where an illegitimate child would inherit ab intestato from a legitimate sister of his father,
which is prohibited by the aforesaid provision of law. Rather, it is a scenario where an
illegitimate child inherits from his father, the latters share in or portion of, what the latter
already inherited from the deceased sister, Evarista.
As opined by the Court of Appeals, the law in point in the present case is Article 777 of the
New Civil Code, which provides that the rights to succession are transmitted from the
moment of death of the decedent.
Since Evarista died ahead of her brother Francisco, the latter inherited a portion of the
estate of the former as one of her heirs. Subsequently, when Francisco died, his heirs,
namely: his spouse, legitimate children, and the private respondent, Joselito, an
illegitimate child, inherited his (Franciscos) share in the estate of Evarista. It bears
stressing that Joselito does not claim to be an heir of Evarista by right of representation but
participates in his own right, as an heir of the late Francisco, in the latters share (or portion
thereof) in the estate of Evarista.
Petitioners argue that if Joselito desires to assert successional rights to the intestate estate
of his father, the proper forum should be in the settlement of his own fathers intestate
estate, as this Court held in the case of Gutierrez vs. Macandog (150 SCRA 422 [1987])
Petitioners reliance on the case of Gutierrez vs. Macandog (supra) is misplaced. The said
case involved a claim for support filed by one Elpedia Gutierrez against the estate of the
decedent, Agustin Gutierrez, Sr., when she was not even an heir to the estate in question,
at the time, and the decedent had no obligation whatsoever to give her support. Thus, this
Court ruled that Elpedia should have asked for support pendente lite before the Juvenile
and Domestic Relations Court in which court her husband (one of the legal heirs of the
decedent) had instituted a case for legal separation against her on the ground of an
attempt against his life. When Mauricio (her husband) died, she should have commenced
an action for the settlement of the estate of her husband, in which case she could receive
whatever allowance the intestate court would grant her.
The present case, however, relates to the rightful and undisputed right of an heir to the
share of his late father in the estate of the decedent Evarista, ownership of which had been
transmitted to his father upon the death of Evarista. There is no legal obstacle for private
respondent Joselito, admittedly the son of the late Francisco, to inherit in his own right as

an heir to his fathers estate, which estate includes a one-third (1/3) undivided share in the
estate of Evarista.
WHEREFORE, for lack of merit, the Petition is hereby DENIED and the Appealed Decision
of the Court of Appeals AFFIRMED in toto.
SO ORDERED.

[G.R. No. 103577. October 7, 1996]

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL,
ANNABELLE C. GONZALES (for herself and on behalf of Floraida C. Tupper, as
attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA
BALAIS MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D.
ALCARAZ and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as
attorney-in-fact, respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for specific performance to compel
herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the
sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon
City entered into by the parties sometime in January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred
to as Coronels) executed a document entitled Receipt of Down Payment (Exh. A) in favor
of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is
reproduced hereunder:
RECEIPT OF DOWN PAYMENT

3. Upon the transfer in their names of the subject property, the Coronels will execute the
deed of absolute sale in favor of Ramona and the latter will pay the former the whole
balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter
referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand
(P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the name of the Coronels father
was transferred in their names under TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One
Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid
Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by
depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia
Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance
against the Coronels and caused the annotation of a notice of lis pendens at the back of
TCT No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the
same property with the Registry of Deeds of Quezon City (Exh. F; Exh. 6).

P1,240,000.00 - Total amount

50,000.00 - Down payment
------------------------------------------

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject
property in favor of Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in the name of Catalina
under TCT No. 351582 (Exh. H; Exh. 8).

P1,190,000.00 - Balance
(Rollo, pp. 134-136)
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No.
119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father,
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down
payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the deed
of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay
the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the
parties agreed to submit the case for decision solely on the basis of documentary exhibits.
Thus, plaintiffs therein (now private respondents) proffered their documentary evidence
accordingly marked as Exhibits A through J, inclusive of their corresponding submarkings.
Adopting these same exhibits as their own, then defendants (now petitioners) accordingly
offered and marked them as Exhibits 1 through 10, likewise inclusive of their
corresponding submarkings. Upon motion of the parties, the trial court gave them thirty
(30) days within which to simultaneously submit their respective memoranda, and an
additional 15 days within which to submit their corresponding comment or reply thereto,
after which, the case would be deemed submitted for resolution.

1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon
execution of the document aforestated;

On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura,
who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City.
On March 1, 1989, judgment was handed down by Judge Roura from his regular bench at
Macabebe, Pampanga for the Quezon City branch, disposing as follows:

2. The Coronels will cause the transfer in their names of the title of the property registered
in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00)
Pesos down payment;

WHEREFORE, judgment for specific performance is hereby rendered ordering defendant

to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land
embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No.

331582) of the Registry of Deeds for Quezon City, together with all the improvements
existing thereon free from all liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the
plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting
to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds
for Quezon City in the name of intervenor is hereby canceled and declared to be without
force and effect. Defendants and intervenor and all other persons claiming under them are
hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs.
Plaintiffs claim for damages and attorneys fees, as well as the counterclaims of defendants
and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new presiding judge of the
Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew
decision by the undersigned Presiding Judge should be denied for the following reasons:
(1) The instant case became submitted for decision as of April 14, 1988 when the parties
terminated the presentation of their respective documentary evidence and when the
Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed
to file memoranda at some future date did not change the fact that the hearing of the case
was terminated before Judge Roura and therefore the same should be submitted to him for
decision; (2) When the defendants and intervenor did not object to the authority of Judge
Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for
the first time before the undersigned Presiding Judge at the hearing of a pending incident
in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced
thereto and they are now estopped from questioning said authority of Judge Roura after
they received the decision in question which happens to be adverse to them; (3) While it is
true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court,
he was in all respects the Presiding Judge with full authority to act on any pending incident
submitted before this Court during his incumbency. When he returned to his Official Station
at Macabebe, Pampanga, he did not lose his authority to decide or resolve cases
submitted to him for decision or resolution because he continued as Judge of the Regional
Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule
and supported by jurisprudence is that a Judge to whom a case is submitted for decision
has the authority to decide the case notwithstanding his transfer to another branch or
region of the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989
rendered in the instant case, resolution of which now pertains to the undersigned Presiding
Judge, after a meticulous examination of the documentary evidence presented by the
parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and,
therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision
and Render Anew Decision by the Incumbent Presiding Judge dated March 20, 1989 is
hereby DENIED.

SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of
Appeals (Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision fully
agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private
respondents Reply Memorandum, was filed on September 15, 1993. The case was,
however, re-raffled to undersigned ponente only on August 28, 1996, due to the voluntary
inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of
respondent court in the affirmance of the trial courts decision, we definitely find the instant
petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other issues
in the case at bar is the precise determination of the legal significance of the document
entitled Receipt of Down Payment which was offered in evidence by both parties. There is
no dispute as to the fact that the said document embodied the binding contract between
Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the
other, pertaining to a particular house and lot covered by TCT No. 119627, as defined in
Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.
While, it is the position of private respondents that the Receipt of Down Payment embodied
a perfected contract of sale, which perforce, they seek to enforce by means of an action for
specific performance, petitioners on their part insist that what the document signified was a
mere executory contract to sell, subject to certain suspensive conditions, and because of
the absence of Ramona P. Alcaraz, who left for the United States of America, said contract
could not possibly ripen into a contract of absolute sale.
Plainly, such variance in the contending parties contention is brought about by the way
each interprets the terms and/or conditions set forth in said private instrument. Withal,
based on whatever relevant and admissible evidence may be available on record, this
Court, as were the courts below, is now called upon to adjudge what the real intent of the
parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determinate thing, and the other to pay therefor a price
certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent.
The essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for
the price;

b) Determinate subject matter; and

although the property may have been previously delivered to him. The prospective seller
still has to convey title to the prospective buyer by entering into a contract of absolute sale.

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale
because the first essential element is lacking. In a contract to sell, the prospective seller
explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective
seller does not as yet agree or consent to transfer ownership of the property subject of the
contract to sell until the happening of an event, which for present purposes we shall take
as the full payment of the purchase price. What the seller agrees or obliges himself to do is
to fulfill his promise to sell the subject property when the entire amount of the purchase
price is delivered to him. In other words the full payment of the purchase price partakes of
a suspensive condition, the non-fulfillment of which prevents the obligation to sell from
arising and thus, ownership is retained by the prospective seller without further remedies
by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had
occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a
contract to sell where the ownership or title is retained by the seller and is not to pass until
the full payment of the price, such payment being a positive suspensive condition and
failure of which is not a breach, casual or serious, but simply an event that prevented the
obligation of the vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full payment
of the purchase price, the prospective sellers obligation to sell the subject property by
entering into a contract of sale with the prospective buyer becomes demandable as
provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor of the promise is supported by a consideration distinct from the
price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said property exclusively to the
prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the
purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional
contract of sale where the seller may likewise reserve title to the property subject of the
sale until the fulfillment of a suspensive condition, because in a conditional contract of sale,
the first element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive condition is not fulfilled,
the perfection of the contract of sale is completely abated (cf. Homesite and Housing Corp.
vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had already been
previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to be
performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, ownership will not automatically transfer to the buyer

It is essential to distinguish between a contract to sell and a conditional contract of sale

specially in cases where the subject property is sold by the owner not to the party the seller
contracted with, but to a third person, as in the case at bench. In a contract to sell, there
being no previous sale of the property, a third person buying such property despite the
fulfillment of the suspensive condition such as the full payment of the purchase price, for
instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek
the relief of reconveyance of the property. There is no double sale in such case. Title to the
property will transfer to the buyer after registration because there is no defect in the ownersellers title per se, but the latter, of course, may be sued for damages by the intending
buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition,
the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if
there had been previous delivery of the subject property, the sellers ownership or title to
the property is automatically transferred to the buyer such that, the seller will no longer
have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such
second buyer of the property who may have had actual or constructive knowledge of such
defect in the sellers title, or at least was charged with the obligation to discover such
defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first
buyers title. In case a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of deciphering the
real nature of the contract entered into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used therein should be given
their natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court
of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said Receipt of
Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No.
1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural
and ordinary idea conveyed is that they sold their property.
When the Receipt of Down payment is considered in its entirety, it becomes more manifest
that there was a clear intent on the part of petitioners to transfer title to the buyer, but since
the transfer certificate of title was still in the name of petitioners father, they could not fully
effect such transfer although the buyer was then willing and able to immediately pay the
purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment
from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of
title in their names from that of their father, after which, they promised to present said title,
now in their names, to the latter and to execute the deed of absolute sale whereupon, the
latter shall, in turn, pay the entire balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein made no
express reservation of ownership or title to the subject parcel of land. Furthermore, the
circumstance which prevented the parties from entering into an absolute contract of sale
pertained to the sellers themselves (the certificate of title was not in their names) and not
the full payment of the purchase price. Under the established facts and circumstances of

the case, the Court may safely presume that, had the certificate of title been in the names
of petitioners-sellers at that time, there would have been no reason why an absolute
contract of sale could not have been executed and consummated right there and then.

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

Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise
to sell the property to private respondent upon the fulfillment of the suspensive condition.
On the contrary, having already agreed to sell the subject property, they undertook to have
the certificate of title change to their names and immediately thereafter, to execute the
written deed of absolute sale.

Since the condition contemplated by the parties which is the issuance of a certificate of title
in petitioners names was fulfilled on February 6, 1985, the respective obligations of the
parties under the contract of sale became mutually demandable, that is, petitioners, as
sellers, were obliged to present the transfer certificate of title already in their names to
private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of
absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the
purchase price amounting to P1,190,000.00.

Thus, the parties did not merely enter into a contract to sell where the sellers, after
compliance by the buyer with certain terms and conditions, promised to sell the property to
the latter. What may be perceived from the respective undertakings of the parties to the
contract is that petitioners had already agreed to sell the house and lot they inherited from
their father, completely willing to transfer ownership of the subject house and lot to the
buyer if the documents were then in order. It just so happened, however, that the transfer
certificate of title was then still in the name of their father. It was more expedient to first
effect the change in the certificate of title so as to bear their names. That is why they
undertook to cause the issuance of a new transfer of the certificate of title in their names
upon receipt of the down payment in the amount of P50,000.00. As soon as the new
certificate of title is issued in their names, petitioners were committed to immediately
execute the deed of absolute sale. Only then will the obligation of the buyer to pay the
remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into so
as to protect the seller against a buyer who intends to buy the property in installment by
withholding ownership over the property until the buyer effects full payment therefor, in the
contract entered into in the case at bar, the sellers were the ones who were unable to enter
into a contract of absolute sale by reason of the fact that the certificate of title to the
property was still in the name of their father. It was the sellers in this case who, as it were,
had the impediment which prevented, so to speak, the execution of an contract of absolute
sale.
What is clearly established by the plain language of the subject document is that when the
said Receipt of Down Payment was prepared and signed by petitioners Romulo A.
Coronel, et. al., the parties had agreed to a conditional contract of sale, consummation of
which is subject only to the successful transfer of the certificate of title from the name of
petitioners father, Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled on
February 6, 1985 (Exh. D; Exh. 4). Thus, on said date, the conditional contract of sale
between petitioners and private respondent Ramona P. Alcaraz became obligatory, the
only act required for the consummation thereof being the delivery of the property by means
of the execution of the deed of absolute sale in a public instrument, which petitioners
unequivocally committed themselves to do as evidenced by the Receipt of Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the
case at bench. Thus,

It is also significant to note that in the first paragraph in page 9 of their petition, petitioners
conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names
from our deceased father Constancio P. Coronel, the transfer certificate of title immediately
upon receipt of the downpayment above-stated". The sale was still subject to this
suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a
suspensive condition. Only, they contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title to
the property under their names, there could be no perfected contract of sale. (Emphasis
supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the Civil
Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than these
mere hypothetical arguments is the fact that the condition herein referred to was actually
and indisputably fulfilled on February 6, 1985, when a new title was issued in the names of
petitioners as evidenced by TCT No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced by the document
denominated as Receipt of Down Payment (Exh. A; Exh. 1), the parties entered into a
contract of sale subject to the suspensive condition that the sellers shall effect the
issuance of new certificate title from that of their fathers name to their names and that, on
February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which pertinently provides -

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.

Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled,
shall retroact to the day of the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the retroactive
effect of the condition that has been complied with.

the rights and obligations of the parties with respect to the perfected contract of sale
became mutually due and demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations of
both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985
because they were then not yet the absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as
follows:
Art. 774. Succession is a mode of acquisition by virtue of which 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.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent
Constancio P. Coronel are compulsory heirs who were called to succession by operation of
law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes
insofar as the subject property is concerned, such that any rights or obligations pertaining
thereto became binding and enforceable upon them. It is expressly provided that rights to
the succession are transmitted from the moment of death of the decedent (Article 777, Civil
Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners claim that succession may not be declared unless the
creditors have been paid is rendered moot by the fact that they were able to effect the
transfer of the title to the property from the decedents name to their names on February 6,
1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to
enter into an agreement at that time and they cannot be allowed to now take a posture
contrary to that which they took when they entered into the agreement with private
respondent Ramona P. Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon
the person making it, and cannot be denied or disproved as against the person relying
thereon.
Having represented themselves as the true owners of the subject property at the time of
sale, petitioners cannot claim now that they were not yet the absolute owners thereof at
that time.
Petitioners also contend that although there was in fact a perfected contract of sale
between them and Ramona P. Alcaraz, the latter breach her reciprocal obligation when she
rendered impossible the consummation thereof by going to the United States of America,
without leaving her address, telephone number, and Special Power of Attorney
(Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint,
p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in
unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in
the instant case. We note that these supposed grounds for petitioners rescission, are mere
allegations found only in their responsive pleadings, which by express provision of the

rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6,
Revised Rules of Court). The records are absolutely bereft of any supporting evidence to
substantiate petitioners allegations. We have stressed time and again that allegations must
be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro
vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De
Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on
February 6, 1985, we cannot justify petitioners-sellers act of unilaterally and extrajudicially
rescinding the contract of sale, there being no express stipulation authorizing the sellers to
extrajudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988];
Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz
because although the evidence on record shows that the sale was in the name of Ramona
P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz,
Ramonas mother, who had acted for and in behalf of her daughter, if not also in her own
behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own
personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz. There is no
evidence showing that petitioners ever questioned Concepcions authority to represent
Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any
objection as regards payment being effected by a third person. Accordingly, as far as
petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to
rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her
obligation to pay the full purchase price is concerned. Petitioners who are precluded from
setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained
offered no proof whatsoever to show that they actually presented the new transfer
certificate of title in their names and signified their willingness and readiness to execute the
deed of absolute sale in accordance with their agreement. Ramonas corresponding
obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as
buyer) never became due and demandable and, therefore, she cannot be deemed to have
been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal
obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment
one of the parties fulfill his obligation, delay by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between
petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave
rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit:

Art. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.

sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that
the same property had already been previously sold to private respondents, or, at least,
she was charged with knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the defect in petitioners title to the
property at the time of the registration of the property.
This Court had occasions to rule that:

Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof to the person who presents the
oldest title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof
of the second contract of sale was registered with the Registry of Deeds of Quezon City
giving rise to the issuance of a new certificate of title in the name of Catalina B. Mabanag
on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass to the buyer,
the exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of
the first buyer, and (b) should there be no inscription by either of the two buyers, when the
second buyer, in good faith, acquires possession of the property ahead of the first buyer.
Unless, the second buyer satisfies these requirements, title or ownership will not transfer to
him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a
distinguished member of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in right).
Knowledge by the first buyer of the second sale cannot defeat the first buyers rights except
when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales,
159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats
his rights even if he is first to register, since knowledge taints his registration with bad faith
(see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs.
Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to
merit the protection of Art. 1544, second paragraph, that the second realty buyer must act
in good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA
99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at bar was annotated on the
title of the subject property only on February 22, 1985, whereas, the second sale between
petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on
February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second
buyer, bought the property under a clean title, she was unaware of any adverse claim or
previous sale, for which reason she is a buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the
second buyer in good faith but whether or not said second buyer registers such second
sale in good faith, that is, without knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in
good faith, registered the sale entered into on February 18, 1985 because as early as
February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of
title in the names of petitioners, whereas petitioner Mabanag registered the said sale

If a vendee in a double sale registers the sale after he has acquired knowledge that there
was a previous sale of the same property to a third party or that another person claims said
property in a previous sale, the registration will constitute a registration in bad faith and will
not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs.
Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs.
Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz,
perfected on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag
on February 18, 1985, was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between
Ramona as principal and Concepcion, her mother, as agent insofar as the subject contract
of sale is concerned, the issue of whether or not Concepcion was also acting in her own
behalf as a co-buyer is not squarely raised in the instant petition, nor in such assumption
disputed between mother and daughter. Thus, We will not touch this issue and no longer
disturb the lower courts ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the
appealed judgment AFFIRMED.
SO ORDERED.

G.R. No. 61584

November 25, 1992

DONATO S. PAULMITAN, JULIANA P. FANESA and RODOLFO FANESA, petitioners,

vs. COURT OF APPEALS, ALICIO PAULMITAN, ELENA PAULMITAN, ABELINO
PAULMITAN, ANITA PAULMITAN, BAKING PAULMITAN, ADELINA PAULMITAN and
ANITO PAULMITAN, respondents.

Petitioners set up the defense of prescription with respect to Lot No. 757 as an affirmative
defense, contending that the Complaint was filed more than eleven years after the
issuance of a transfer certificate of title to Donato Paulmitan over the land as consequence
of the registration with the Register of Deeds, of Donato's affidavit extrajudicially
adjudicating unto himself Lot No. 757. As regards Lot No. 1091, petitioner Juliana P.
Fanesa claimed in her Answer to the Complaint that she acquired exclusive ownership
thereof not only by means of a deed of sale executed in her favor by her father, petitioner
Donato Paulmitan, but also by way of redemption from the Provincial Government of
Negros Occidental.

ROMERO, J.:
This is a petition for review on certiorari seeking the reversal of the decision 1 of the Court
of Appeals, dated July 14, 1982 in CA-G.R. No. 62255-R entitled "Alicio Paulmitan, et al. v.
Donato Sagario Paulmitan, et al." which affirmed the decision 2 of the then Court of First
Instance (now RTC) of Negros Occidental, 12th Judicial District, Branch IV, Bacolod City, in
Civil Case No. 11770.
The antecedent facts are as follows:
Agatona Sagario Paulmitan, who died sometime in 1953, 3 left the two following parcels of
land located in the Province of Negros Occidental: (1) Lot No. 757 with an area of 1,946
square meters covered by Original Certificate of Title (OCT) No. RO-8376; and (2) Lot No.
1091 with an area of 69,080 square meters and covered by OCT No. RO-11653. From her
marriage with Ciriaco Paulmitan, who is also now deceased, Agatona begot two legitimate
children, namely: Pascual Paulmitan, who also died in 1953, 4 apparently shortly after his
mother passed away, and Donato Paulmitan, who is one of the petitioners. Petitioner
Juliana P. Fanesa is Donato's daughter while the third petitioner, Rodolfo Fanes, is
Juliana's husband. Pascual Paulmitan, the other son of Agatona Sagario, is survived by
the respondents, who are his children, name: Alicio, Elena, Abelino, Adelina, Anita, Baking
and Anito, all surnamed Paulmitan.
Until 1963, the estate of Agatona Sagario Paulmitan remained unsettled and the titles to
the two lots mentioned above remained in the name of Agatona. However, on August 11,
1963, petitioner Donato Paulmitan executed an Affidavit of Declaration of Heirship,
extrajudicially adjudicating unto himself Lot No. 757 based on the claim that he is the only
surviving heir of Agatona Sagario. The affidavit was filed with the Register of Deeds of
Negros Occidental on August 20, 1963, cancelled OCT No. RO-8376 in the name of
Agatona Sagario and issued Transfer Certificate of Title (TCT) No. 35979 in Donato's
name.
As regards Lot No. 1091, Donato executed on May 28, 1974 a Deed of Sale over the same
in favor of petitioner Juliana P. Fanesa, his daughter. 5
In the meantime, sometime in 1952, for non-payment of taxes, Lot No. 1091 was forfeited
and sold at a public auction, with the Provincial Government of Negros Occidental being
the buyer. A Certificate of Sale over the land was executed by the Provincial Treasurer in
favor of the Provincial Board of Negros Occidental. 6
On May 29, 1974, Juliana P. Fanesa redeemed the property from the Provincial
Government of Negros Occidental for the amount of P2,959.09. 7
On learning of these transactions, respondents children of the late Pascual Paulmitan filed
on January 18, 1975 with the Court of First Instance of Negros Occidental a Complaint
against petitioners to partition the properties plus damages.

Acting on the petitioners' affirmative defense of prescription with respect to Lot No. 757,
the trial court issued an order dated April 22, 1976 dismissing the complaint as to the said
property upon finding merit in petitioners' affirmative defense. This order, which is not the
object of the present petition, has become final after respondents' failure to appeal
therefrom.
Trial proceeded with respect to Lot No. 1091. In a decision dated May 20, 1977, the trial
court decided in favor of respondents as to Lot No. 1091. According to the trial court, the
respondents, as descendants of Agatona Sagario Paulmitan were entitled to one-half (1/2)
of Lot No. 1091, pro indiviso. The sale by petitioner Donato Paulmitan to his daughter,
petitioner Juliana P. Fanesa, did not prejudice their rights. And the repurchase by Juliana P.
Fanesa of the land from the Provincial Government of Negros Occidental did not vest in
Juliana exclusive ownership over the entire land but only gave her the right to be
reimbursed for the amount paid to redeem the property. The trial court ordered the partition
of the land and directed petitioners Donato Paulmitan and Juliana P. Fanesa to pay private
respondents certain amounts representing the latter's share in the fruits of the land. On the
other hand, respondents were directed to pay P1,479.55 to Juliana P. Fanesa as their
share in the redemption price paid by Fanesa to the Provincial Government of Negros
Occidental. The dispositive portion of the trial court's decision reads:
WHEREFORE, judgment is hereby rendered on the second cause of action pleaded in the
complain as follows:
1.
The deed of sale (Exh. "F") dated May 28, 1974 is valid insofar as the one-half
undivided portion of Lot 1091 is concerned as to vest ownership over said half portion in
favor of defendant Juliana Fanesa and her husband Rodolfo Fanesa, while the remaining
half shall belong to plaintiffs, pro-indiviso;
2.
Lot 1091, Cadastral Survey of Pontevedra, Province of Negros Occidental, now
covered by TCT No. RO-11653 (N.A.), is ordered partitioned. The parties must proceed to
an actual partition by property instrument of partition, submitting the corresponding
subdivision within sixty (60) days from finality of this decision, and should they fail to agree,
commissioners of partition may be appointed by the Court;
3.
Pending the physical partition, the Register of Deeds of Negros Occidental is
ordered to cancel Original Certificate of Title No. RO-11653 (N.A.) covering Lot 1091,
Pontevedra Cadastre, and to issue in lieu thereof a new certificate of title in the name of
plaintiffs and defendants, one-half portion each, pro-indiviso, as indicated in paragraph 1
above;
4.
Plaintiffs are ordered to pay, jointly and severally, defendant Juliana Fanesa the
amount of P1,479.55 with interest at the legal rate from May 28, 1974 until paid;
5
Defendants Donato Sagario Paulmitan and Juliana Paulmitan Fanesa are
ordered to account to plaintiffs and to pay them, jointly and severally, the value of the

produce from Lot 1091 representing plaintiffs' share in the amount of P5,000.00 per year
from 1966 up to the time of actual partition of the property, and to pay them the sum of
P2,000.00 as attorney's fees as well as the costs of the suit.

made the buyer a co-owner of the land until it is partitioned. In Bailon-Casilao v. Court of
Appeals, 15 the Court, through Justice Irene R. Cortes, outlined the effects of a sale by
one co-owner without the consent of all the co-owners, thus:

xxx

The rights of a co-owner of a certain property are clearly specified in Article 493 of the Civil
Code, Thus:

xxx

xxx

On appeal, the Court of Appeals affirmed the trial court's decision. Hence this petition.
To determine the rights and obligations of the parties to the land in question, it is well to
review, initially, the relatives who survived the decedent Agatona Sagario Paulmitan. When
Agatona died in 1953, she was survived by two (2) sons, Donato and Pascual. A few
months later in the same year, Pascual died, leaving seven children, the private
respondents. On the other had, Donato's sole offspring was petitioner Juliana P. Fanesa.
At the time of the relevant transactions over the properties of decedent Agatona Sagario
Paulmitan, her son Pascual had died, survived by respondents, his children. It is, thus,
tempting to apply the principles pertaining to the right of representation as regards
respondents. It must, however, be borne in mind that Pascual did no predecease his
mother, 8 thus precluding the operation of the provisions in the Civil Code on the right of
representation 9 with respect to his children, the respondents. When Agatona Sagario
Paulmitan died intestate in 1952, her two (2) sons Donato and Pascual were still alive.
Since it is well-settled by virtue of Article 777 of the Civil Code that "[t]he rights to the
succession are transmitted from the moment of the death of the decedent," 10 the right of
ownership, not only of Donato but also of Pascual, over their respective shares in the
inheritance was automatically and by operation of law vested in them in 1953 when their
mother died intestate. At that stage, the children of Donato and Pascual did not yet have
any right over the inheritance since "[i]n every inheritance, the relative nearest in degree
excludes the more distant
ones." 11 Donato and Pascual excluded their children as to the right to inherit from
Agatona Sagario Paulmitan, their mother.
From the time of the death of Agatona Sagario Paulmitan to the subsequent passing away
of her son Pascual in 1953, the estate remained unpartitioned. Article 1078 of the Civil
Code provides: "Where there are two or more heirs, the whole estate of the decedent is,
before its partition, owned in common by such heirs, subject to the payment of debts of the
deceased." 12 Donato and Pascual Paulmitan were, therefore, co-owners of the estate left
by their mother as no partition was ever made.

Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and
benefits pertaining thereto, and he may therefore alienate, assign or mortgage it and even
substitute another person its enjoyment, except when personal rights are involved. But the
effect of the alienation or mortgage, with respect to the co-owners, shall be limited to the
portion which may be allotted to him in the division upon the termination of the coownership. [Emphasis supplied.]
As early as 1923, this Court has ruled that even if a co-owner sells the whole property as
his, the sale will affect only his own share but not those of the other co-owners who did not
consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320 (1923)]. This is because under the
aforementioned codal provision, the sale or other disposition affects only his undivided
share and the transferee gets only what would correspond to his grantor in the partition of
the thing owned in common [Ramirez v. Bautista, 14 Phil. 528 (1909)]. Consequently, by
virtue of the sales made by Rosalia and Gaudencio Bailon which are valid with respect to
their proportionate shares, and the subsequent transfers which culminated in the sale to
private respondent Celestino Afable, the said Afable thereby became a co-owner of the
disputed parcel of land as correctly held by the lower court since the sales produced the
effect of substituting the buyers in the enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730
(1910)].
From the foregoing, it may be deduced that since a co-owner is entitled to sell his
undivided share, a sale of the entire property by one co-owner without the consent of the
other co-owners is not null and void. However, only the rights of the co-owner-seller are
transferred, thereby making the buyer a co-owner of the property.
Applying this principle to the case at bar, the sale by petitioner Donato Paulmitan of the
land to his daughter, petitioner Juliana P. Fanesa, did not give to the latter ownership over
the entire land but merely transferred to her the one half (1/2) undivided share of her
father, thus making her the co-owner of the land in question with the respondents, her first
cousins.

When Pascual Paulmitan died intestate in 1953, his children, the respondents, succeeded
him in the co-ownership of the disputed property. Pascual Paulmitan's right of ownership
over an undivided portion of the property passed on to his children, who, from the time of
Pascual's death, became co-owners with their uncle Donato over the disputed decedent
estate.

Petitioner Juliana P. Fanesa also claims ownership of the entire property by virtue of the
fact that when the Provincial Government of Negros Occidental bought the land after it was
forfeited for non-payment of taxes, she redeemed it.

Petitioner Juliana P. Fanesa claims ownership over Lot No. 1091 by virtue of two
transactions, namely: (a) the sale made in her favor by her father Donato Paulmitan; and
(b) her redemption of the land from the Provincial of Negros Occidental after it was
forfeited for non-payment of taxes.

The redemption of the land made by Fanesa did not terminate the co-ownership nor give
her title to the entire land subject of the co-ownership. Speaking on the same issue raised
by petitioners, the Court, in Adille v. Court of Appeals, 16 resolved the same with the
following pronouncements:

When Donato Paulmitan sold on May 28, 1974 Lot No. 1091 to his daughter Juliana P.
Fanesa, he was only a co-owner with respondents and as such, he could only sell that
portion which may be allotted to him upon termination of the co-ownership. 13 The sale did
not prejudice the rights of respondents to one half (1/2) undivided share of the land which
they inherited from their father. It did not vest ownership in the entire land with the buyer
but transferred only the seller's pro-indiviso share in the property 14 and consequently

The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over
the property held in common?

The contention is without merit.

Essentially, it is the petitioners' contention that the property subject of dispute devolved
upon him upon the failure of his co-heirs to join him in its redemption within the period
required by law. He relies on the provisions of Article 1515 of the old Civil Code, Article

1613 of the present Code, giving the vendee a retro the right to demand redemption of the
entire property.
There is no merit in this petition.
The right of repurchase may be exercised by co-owner with respect to his share alone
(CIVIL CODE, art. 1612, CIVIL CODE (1889), art. (1514.). While the records show that
petitioner redeemed the property in its entirety, shouldering the expenses therefor, that did
not make him the owner of all of it. In other words, it did not put to end the existing state of
co-ownership (Supra, Art. 489). There is no doubt that redemption of property entails a
necessary expense. Under the Civil Code:
Art. 488. Each co-owner shall have a right to compel the other co-owners to contribute to
the expenses of preservation of the thing or right owned in common and to the taxes. Any
one of the latter may exempt himself from this obligation by renouncing so much of his
undivided interest as may be equivalent to his share of the expenses and taxes. No such
waiver shall be made if it is prejudicial to the co-ownership.
The result is that the property remains to be in a condition of co-ownership. While a
vendee a retro, under Article 1613 of the Code, "may not be compelled to consent to a
partial redemption," the redemption by one co-heir or co-owner of the property in its totality
does not vest in him ownership over it. Failure on the part of all the co-owners to redeem it
entitles the vendee a retro to retain the property and consolidate title thereto in his name
(Supra, art. 1607). But the provision does not give to the redeeming co-owner the right to
the entire property. It does not provide for a mode of terminating a co-ownership.
Although petitioner Fanesa did not acquire ownership over the entire lot by virtue of the
redemption she made, nevertheless, she did acquire the right to reimbursed for half of the
redemption price she paid to the Provincial Government of Negros Occidental on behalf of
her co-owners. Until reimbursed, Fanesa hold a lien upon the subject property for the
amount due her. 17
Finally, petitioners dispute the order of the trial court, which the Court of Appeals affirmed,
for them to pay private respondents P5,000.00 per year from 1966 until the partition of the
estate which represents the share of private respondents in the fruits of the land. According
to petitioners, the land is being leased for P2,000.00 per year only. This assigned error,
however raises a factual question. The settled rule is that only questions of law may be
raised in a petition for review. As a general rule, findings of fact made by the trial court and
the Court of Appeals are final and conclusive and cannot be reviewed on appeal. 18
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals
AFFIRMED.
SO ORDERED.

[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.
DECISION
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 Administration docketed 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.

G.R. No. 126334

November 23, 2001
EMILIO EMNACE, petitioner, vs. COURT OF APPEALS, ESTATE OF VICENTE
TABANAO, SHERWIN TABANAO, VICENTE WILLIAM TABANAO, JANETTE
TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA, ROSELA TABANAO and
VINCENT TABANAO, respondents.
YNARES-SANTIAGO, J.:
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a
business concern known as Ma. Nelma Fishing Industry. Sometime in January of 1986,
they decided to dissolve their partnership and executed an agreement of partition and
distribution of the partnership properties among them, consequent to Jacinto Divinagracia's
withdrawal from the partnership.1 Among the assets to be distributed were five (5) fishing
boats, six (6) vehicles, two (2) parcels of land located at Sto. Nio and Talisay, Negros
Occidental, and cash deposits in the local branches of the Bank of the Philippine Islands
and Prudential Bank.
Throughout the existence of the partnership, and even after Vicente Tabanao's untimely
demise in 1994, petitioner failed to submit to Tabanao's heirs any statement of assets and
liabilities of the partnership, and to render an accounting of the partnership's finances.
Petitioner also reneged on his promise to turn over to Tabanao's heirs the deceased's 1/3
share in the total assets of the partnership, amounting to P30,000,000.00, or the sum of
P10,000,000.00, despite formal demand for payment thereof.2
Consequently, Tabanao' s heirs, respondents herein, filed against petitioner an action for
accounting, payment of shares, division of assets and damages.3 In their complaint,
respondents prayed as follows:
1. Defendant be ordered to render the proper accounting of all the assets and liabilities of
the partnership at bar; and
2. After due notice and hearing defendant be ordered to pay/remit/deliver/surrender/yield to
the plaintiffs the following:
A. No less than One Third (1/3) of the assets, properties, dividends, cash, land(s), fishing
vessels, trucks, motor vehicles, and other forms and substance of treasures which belong
and/or should belong, had accrued and/or must accrue to the partnership;
B. No less than Two Hundred Thousand Pesos (P200,000.00) as moral damages;
C. Attorney's fees equivalent to Thirty Percent (30%) of the entire share/amount/award
which the Honorable Court may resolve the plaintiffs as entitled to plus P1,000.00 for every
appearance in court.4
Petitioner filed a motion to dismiss the complaint on the grounds of improper venue, lack of
jurisdiction over the nature of the action or suit, and lack of capacity of the estate of
Tabanao to sue.5 On August 30, 1994, the trial court denied the motion to dismiss. It held
that venue was properly laid because, while realties were involved, the action was directed
against a particular person on the basis of his personal liability; hence, the action is not
only a personal action but also an action in personam. As regards petitioner's argument of
lack of jurisdiction over the action because the prescribed docket fee was not paid
considering the huge amount involved in the claim, the trial court noted that a request for
accounting was made in order that the exact value of the partnership may be ascertained
and, thus, the correct docket fee may be paid. Finally, the trial court held that the heirs of

Tabanao had aright to sue in their own names, in view of the provision of Article 777 of the
Civil Code, which states that the rights to the succession are transmitted from the moment
of the death of the decedent.6
The following day, respondents filed an amended complaint,7 incorporating the additional
prayer that petitioner be ordered to "sell all (the partnership's) assets and thereafter
pay/remit/deliver/surrender/yield to the plaintiffs" their corresponding share in the proceeds
thereof. In due time, petitioner filed a manifestation and motion to dismiss,8 arguing that
the trial court did not acquire jurisdiction over the case due to the plaintiffs' failure to pay
the proper docket fees. Further, in a supplement to his motion to dismiss,9 petitioner also
raised prescription as an additional ground warranting the outright dismissal of the
complaint.
On June 15, 1995, the trial court issued an Order,10 denying the motion to dismiss
inasmuch as the grounds raised therein were basically the same as the earlier motion to
dismiss which has been denied. Anent the issue of prescription, the trial court ruled that
prescription begins to run only upon the dissolution of the partnership when the final
accounting is done. Hence, prescription has not set in the absence of a final accounting.
Moreover, an action based on a written contract prescribes in ten years from the time the
right of action accrues.
Petitioner filed a petition for certiorari before the Court of Appeals,11 raising the following
issues:
I.
Whether or not respondent Judge acted without jurisdiction or with grave abuse of
discretion in taking cognizance of a case despite the failure to pay the required docket fee;
II.
Whether or not respondent Judge acted without jurisdiction or with grave abuse of
discretion in insisting to try the case which involve (sic) a parcel of land situated outside of
its territorial jurisdiction;
III. Whether or not respondent Judge acted without jurisdiction or with grave abuse of
discretion in allowing the estate of the deceased to appear as party plaintiff, when there is
no intestate case and filed by one who was never appointed by the court as administratrix
of the estates; and
IV. Whether or not respondent Judge acted without jurisdiction or with grave abuse of
discretion in not dismissing the case on the ground of prescription.
On August 8, 1996, the Court of Appeals rendered the assailed decision,12 dismissing the
petition for certiorari, upon a finding that no grave abuse of discretion amounting to lack or
excess of jurisdiction was committed by the trial court in issuing the questioned orders
denying petitioner's motions to dismiss.
Not satisfied, petitioner filed the instant petition for review, raising the same issues
resolved by the Court of Appeals, namely:
I.

Failure to pay the proper docket fee;

II.
Parcel of land subject of the case pending before the trial court is outside the said
court's territorial jurisdiction;
III.

Lack of capacity to sue on the part of plaintiff heirs of Vicente Tabanao; and

IV.

Prescription of the plaintiff heirs' cause of action.

It can be readily seen that respondents' primary and ultimate objective in instituting the
action below was to recover the decedent's 1/3 share in the partnership' s assets. While
they ask for an accounting of the partnership' s assets and finances, what they are actually
asking is for the trial court to compel petitioner to pay and turn over their share, or the
equivalent value thereof, from the proceeds of the sale of the partnership assets. They also
assert that until and unless a proper accounting is done, the exact value of the partnership'
s assets, as well as their corresponding share therein, cannot be ascertained.
Consequently, they feel justified in not having paid the commensurate docket fee as
required by the Rules of Court.1wphi1.nt
We do not agree. The trial court does not have to employ guesswork in ascertaining the
estimated value of the partnership's assets, for respondents themselves voluntarily pegged
the worth thereof at Thirty Million Pesos (P30,000,000.00). Hence, this case is one which
is really not beyond pecuniary estimation, but rather partakes of the nature of a simple
collection case where the value of the subject assets or amount demanded is pecuniarily
determinable.13 While it is true that the exact value of the partnership's total assets cannot
be shown with certainty at the time of filing, respondents can and must ascertain, through
informed and practical estimation, the amount they expect to collect from the partnership,
particularly from petitioner, in order to determine the proper amount of docket and other
fees.14 It is thus imperative for respondents to pay the corresponding docket fees in order
that the trial court may acquire jurisdiction over the action.15
Nevertheless, unlike in the case of Manchester Development Corp. v. Court of Appeals,16
where there was clearly an effort to defraud the government in avoiding to pay the correct
docket fees, we see no attempt to cheat the courts on the part of respondents. In fact, the
lower courts have noted their expressed desire to remit to the court "any payable balance
or lien on whatever award which the Honorable Court may grant them in this case should
there be any deficiency in the payment of the docket fees to be computed by the Clerk of
Court."17 There is evident willingness to pay, and the fact that the docket fee paid so far is
inadequate is not an indication that they are trying to avoid paying the required amount, but
may simply be due to an inability to pay at the time of filing. This consideration may have
moved the trial court and the Court of Appeals to declare that the unpaid docket fees shall
be considered a lien on the judgment award.
Petitioner, however, argues that the trial court and the Court of Appeals erred in condoning
the non-payment of the proper legal fees and in allowing the same to become a lien on the
monetary or property judgment that may be rendered in favor of respondents. There is
merit in petitioner's assertion. The third paragraph of Section 16, Rule 141 of the Rules of
Court states that:
The legal fees shall be a lien on the monetary or property judgment in favor of the pauperlitigant.
Respondents cannot invoke the above provision in their favor because it specifically
applies to pauper-litigants. Nowhere in the records does it appear that respondents are
litigating as paupers, and as such are exempted from the payment of court fees.18
The rule applicable to the case at bar is Section 5(a) of Rule 141 of the Rules of Court,
which defines the two kinds of claims as: (1) those which are immediately ascertainable;
and (2) those which cannot be immediately ascertained as to the exact amount. This
second class of claims, where the exact amount still has to be finally determined by the
courts based on evidence presented, falls squarely under the third paragraph of said
Section 5(a), which provides:

In case the value of the property or estate or the sum claimed is less or more in
accordance with the appraisal of the court, the difference of fee shall be refunded or paid
as the case may be. (Underscoring ours)
In Pilipinas Shell Petroleum Corporation v. Court of Appeals,19 this Court pronounced that
the above-quoted provision "clearly contemplates an Initial payment of the filing fees
corresponding to the estimated amount of the claim subject to adjustment as to what later
may be proved."20 Moreover, we reiterated therein the principle that the payment of filing
fees cannot be made contingent or dependent on the result of the case. Thus, an initial
payment of the docket fees based on an estimated amount must be paid simultaneous with
the filing of the complaint. Otherwise, the court would stand to lose the filing fees should
the judgment later turn out to be adverse to any claim of the respondent heirs.
The matter of payment of docket fees is not a mere triviality. These fees are necessary to
defray court expenses in the handling of cases. Consequently, in order to avoid
tremendous losses to the judiciary, and to the government as well, the payment of docket
fees cannot be made dependent on the outcome of the case, except when the claimant is
a pauper-litigant.
Applied to the instant case, respondents have a specific claim - 1/3 of the value of all the
partnership assets - but they did not allege a specific amount. They did, however, estimate
the partnership's total assets to be worth Thirty Million Pesos (P30,000,000.00), in a
letter21 addressed to petitioner. Respondents cannot now say that they are unable to
make an estimate, for the said letter and the admissions therein form part of the records of
this case. They cannot avoid paying the initial docket fees by conveniently omitting the said
amount in their amended complaint. This estimate can be made the basis for the initial
docket fees that respondents should pay. Even if it were later established that the amount
proved was less or more than the amount alleged or estimated, Rule 141, Section 5(a) of
the Rules of Court specifically provides that the court may refund the 'excess or exact
additional fees should the initial payment be insufficient. It is clear that it is only the
difference between the amount finally awarded and the fees paid upon filing of this
complaint that is subject to adjustment and which may be subjected to alien.
In the oft-quoted case of Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion,22 this
Court held that when the specific claim "has been left for the determination by the court,
the additional filing fee therefor shall constitute a lien on the judgment and it shall be the
responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and
assess and collect the additional fee." Clearly, the rules and jurisprudence contemplate the
initial payment of filing and docket fees based on the estimated claims of the plaintiff, and it
is only when there is a deficiency that a lien may be constituted on the judgment award
until such additional fee is collected.
Based on the foregoing, the trial court erred in not dismissing the complaint outright
despite their failure to pay the proper docket fees. Nevertheless, as in other procedural
rules, it may be liberally construed in certain cases if only to secure a just and speedy
disposition of an action. While the rule is that the payment of the docket fee in the proper
amount should be adhered to, there are certain exceptions which must be strictly
construed.23
In recent rulings, this Court has relaxed the strict adherence to the Manchester doctrine,
allowing the plaintiff to pay the proper docket fees within a reasonable time before the
expiration of the applicable prescriptive or reglementary period.24
In the recent case of National Steel Corp. v. Court of Appeals,25 this Court held that:

The court acquires jurisdiction over the action if the filing of the initiatory pleading is
accompanied by the payment of the requisite fees, or, if the fees are not paid at the time of
the filing of the pleading, as of the time of full payment of the fees within such reasonable
time as the court may grant, unless, of course, prescription has set in the meantime.
It does not follow, however, that the trial court should have dismissed the complaint for
failure of private respondent to pay the correct amount of docket fees. Although the
payment of the proper docket fees is a jurisdictional requirement, the trial court may allow
the plaintiff in an action to pay the same within a reasonable time before the expiration of
the applicable prescriptive or reglementary period. If the plaintiff fails to comply within this
requirement, the defendant should timely raise the issue of jurisdiction or else he would be
considered in estoppel. In the latter case, the balance between the appropriate docket fees
and the amount actually paid by the plaintiff will be considered a lien or any award he may
obtain in his favor. (Underscoring ours)
Accordingly, the trial court in the case at bar should determine the proper docket fee based
on the estimated amount that respondents seek to collect from petitioner, and direct them
to pay the same within a reasonable time, provided the applicable prescriptive or
reglementary period has not yet expired, Failure to comply therewith, and upon motion by
petitioner, the immediate dismissal of the complaint shall issue on jurisdictional grounds.
On the matter of improper venue, we find no error on the part of the trial court and the
Court of Appeals in holding that the case below is a personal action which, under the
Rules, may be commenced and tried where the defendant resides or may be found, or
where the plaintiffs reside, at the election of the latter.26
Petitioner, however, insists that venue was improperly laid since the action is a real action
involving a parcel of land that is located outside the territorial jurisdiction of the court a quo.
This contention is not well-taken. The records indubitably show that respondents are
asking that the assets of the partnership be accounted for, sold and distributed according
to the agreement of the partners. The fact that two of the assets of the partnership are
parcels of land does not materially change the nature of the action. It is an action in
personam because it is an action against a person, namely, petitioner, on the basis of his
personal liability. It is not an action in rem where the action is against the thing itself
instead of against the person.27 Furthermore, there is no showing that the parcels of land
involved in this case are being disputed. In fact, it is only incidental that part of the assets
of the partnership under liquidation happen to be parcels of land.

On the third issue, petitioner asserts that the surviving spouse of Vicente Tabanao has no
legal capacity to sue since she was never appointed as administratrix or executrix of his
estate. Petitioner's objection in this regard is misplaced. The surviving spouse does not
need to be appointed as executrix or administratrix of the estate before she can file the
action. She and her children are complainants in their own right as successors of Vicente
Tabanao. From the very moment of Vicente Tabanao' s death, his rights insofar as the
partnership was concerned were transmitted to his heirs, for rights to the succession are
transmitted from the moment of death of the decedent.32
Whatever claims and rights Vicente Tabanao had against the partnership and petitioner
were transmitted to respondents by operation of law, more particularly by succession,
which 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.33 Moreover, respondents
became owners of their respective hereditary shares from the moment Vicente Tabanao
died.34
A prior settlement of the estate, or even the appointment of Salvacion Tabanao as
executrix or administratrix, is not necessary for any of the heirs to acquire legal capacity to
sue. As successors who stepped into the shoes of their decedent upon his death, they can
commence any action originally pertaining to the decedent.35 From the moment of his
death, his rights as a partner and to demand fulfillment of petitioner's obligations as
outlined in their dissolution agreement were transmitted to respondents. They, therefore,
had the capacity to sue and seek the court's intervention to compel petitioner to fulfill his
obligations.
Finally, petitioner contends that the trial court should have dismissed the complaint on the
ground of prescription, arguing that respondents' action prescribed four (4) years after it
accrued in 1986. The trial court and the Court of Appeals gave scant consideration to
petitioner's hollow arguments, and rightly so.
The three (3) final stages of a partnership are: (1) dissolution; (2) winding-up; and (3)
termination.36 The partnership, although dissolved, continues to exist and its legal
personality is retained, at which time it completes the winding up of its affairs, including the
partitioning and distribution of the net partnership assets to the partners.37 For as long as
the partnership exists, any of the partners may demand an accounting of the partnership's
business. Prescription of the said right starts to run only upon the dissolution of the
partnership when the final accounting is done.38

The time-tested case of Claridades v. Mercader, et al.,28 settled this issue thus:
The fact that plaintiff prays for the sale of the assets of the partnership, including the
fishpond in question, did not change the nature or character of the action, such sale being
merely a necessary incident of the liquidation of the partnership, which should precede
and/or is part of its process of dissolution.
The action filed by respondents not only seeks redress against petitioner. It also seeks the
enforcement of, and petitioner's compliance with, the contract that the partners executed to
formalize the partnership's dissolution, as well as to implement the liquidation and partition
of the partnership's assets. Clearly, it is a personal action that, in effect, claims a debt from
petitioner and seeks the performance of a personal duty on his part.29 In fine,
respondents' complaint seeking the liquidation and partition of the assets of the partnership
with damages is a personal action which may be filed in the proper court where any of the
parties reside.30 Besides, venue has nothing to do with jurisdiction for venue touches
more upon the substance or merits of the case.31 As it is, venue in this case was properly
laid and the trial court correctly ruled so.

Contrary to petitioner's protestations that respondents' right to inquire into the business
affairs of the partnership accrued in 1986, prescribing four (4) years thereafter, prescription
had not even begun to run in the absence of a final accounting. Article 1842 of the Civil
Code provides:
The right to an account of his interest shall accrue to any partner, or his legal
representative as against the winding up partners or the surviving partners or the person or
partnership continuing the business, at the date of dissolution, in the absence of any
agreement to the contrary.
Applied in relation to Articles 1807 and 1809, which also deal with the duty to account, the
above-cited provision states that the right to demand an accounting accrues at the date of
dissolution in the absence of any agreement to the contrary. When a final accounting is
made, it is only then that prescription begins to run. In the case at bar, no final accounting
has been made, and that is precisely what respondents are seeking in their action before

the trial court, since petitioner has failed or refused to render an accounting of the
partnership's business and assets. Hence, the said action is not barred by prescription.
In fine, the trial court neither erred nor abused its discretion when it denied petitioner's
motions to dismiss. Likewise, the Court of Appeals did not commit reversible error in
upholding the trial court's orders. Precious time has been lost just to settle this preliminary
issue, with petitioner resurrecting the very same arguments from the trial court all the way
up to the Supreme Court. The litigation of the merits and substantial issues of this
controversy is now long overdue and must proceed without further delay.
WHEREFORE, in view of all the foregoing, the instant petition is DENIED for lack of merit,
and the case is REMANDED to the Regional Trial Court of Cadiz City, Branch 60, which is
ORDERED to determine the proper docket fee based on the estimated amount that
plaintiffs therein seek to collect, and direct said plaintiffs to pay the same within a
reasonable time, provided the applicable prescriptive or reglementary period has not yet
expired. Thereafter, the trial court is ORDERED to conduct the appropriate proceedings in
Civil Case No. 416-C.
Costs against petitioner.1wphi1.nt
SO ORDERED.