Succession; Art.

781 - #09
Balus v. Balus (2010)
Doctrine: Property, the ownership over which has been lost during the lifetime of a
decedent, no longer forms part of the estate which his compulsory heirs may lay a claim
over.
Facts:
- Rufo Balus mortgaged a parcel of land as security for a loan he obtained from the
Rural Bank of Maigo, Lanao del Norte
- Rufo failed to pay, and as a consequence the property was foreclosed and was
subsequently sold to the bank in a public bidding. A certificate of sale in favor of the
bank was executed by the sheriff on November 20, 1981.
- The property was not redeemed during the redemption period, and the sheriff
executed a definite deed of sale in the banks favor on January 25, 1984. A new title
was thereafter issued in favor of the bank.
- The heirs of Rufo Petitioner Celestino and Respondents Saturnino and Leonarda
executed an Extrajudicial Settlement of Estate adjudicating to each of them a specific
one-third portion of the property.
o Here they also admitted knowledge of the fact that the property was
mortgaged to the bank and that they intended to redeem the same ASAP.
- Three years after, respondents Saturnino and Leonarda bought the property from the
bank. Meanwhile, petitioner Celestino continued in possession of the lot.
- Respondents filed a complaint for recovery of possession and damages against
petitioner, contending that they were the new owners of the property.
o RTC: Respondents ordered to execute a Deed of Sale in favor of petitioner with
respect to his one-third share of the property. Petitioner is given this right by
the Extrajudicial Settlement they executed before respondents purchased the
land from the bank, which gave each specific one-third portions.
o CA: RTC reversed. When both petitioner and respondents failed to redeem the
property within the period of redemption and allowed the consolidation of
ownership and the issuance of title in favor of the bank, their co-ownership
was deemed extinguished.
- Hence, the instant case.
o Petitioner argues that the Extrajudicial Settlement entered into by the parties
shows an intention of purchasing back the property together and continuing in
the co-ownership thereof. Therefore when respondents repurchased the lot
from the Bank, they were bound by his right per the agreement to claim his
rightful 1/3 share over the property by reimbursing 1/3 of the sum they paid to
the Bank.
Issue/s:
- WoN the co-ownership between petitioner and respondents over the subject property
persisted even after the lot was purchased by the Bank, and even after it was bought
back by respondents.
- WoN the Extrajudicial Settlement constituted an independent contract which gave
petitioner the right to claim a portion of the lot purchased by respondents from the
bank.

Held/Ratio:
- NO. NO CO-OWNERSHIP EVER EXISTED BETWEEN THE PARTIES BECAUSE THE
SUBJECT LOT NO LONGER FORMED PART OF RUFOS ESTATE OVER WHICH THEY MAY
LAY CLAIM AS HEIRS.
o Per Art. 781, the inheritance of a person includes the property and the
transmissible rights and obligations existing at the time of his death x x x.
o When the Bank foreclosed on the subject property and upon the issuance of a
Definite Deed of Sale in favor of the Bank due to the Rufos failure to redeem
the property during the redemption period allowed by law, the Bank acquired
exclusive ownership over the same during the latters lifetime.
o Hence, at the time of Rufos death, the property no longer formed part of his
estate which his heirs (i.e. herein petitioner and respondents) may law claim
over. It is thus erroneous to suppose that petitioner had a right over the
property as co-owner given that the same never passed into their (the heirs)
hands as compulsory heirs of Rufo.
o Further, no co-ownership existed between the parties over the subject lot
which could be continued.
- NO. NOTHING IN THE SETTLEMENT INDICATES AN EXPRESS STIPULATION FOR THE
PARTIES TO CONTINUE WITH THEIR SUPPOSED CO-OWNERSHIP.
Digested by: Oyie Javelosa (A2015)