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Heirs of the Late Spouses Maglasang v.

Manila Banking Corp


September 23, 2013
Heirs of the Late Spouses Flaviano Maglasang and Salud Adaza-Maglasang, representing the Estates of the afore-named
Deceased Parents (Oscar A. Maglasang, Edgar A. Maglasang, Concepcion Chona A. Magalasang, Glenda A. Maglasang-
Arnaiz, Lerma A. Maglasang, Felma A. Maglasang, Fe Doris A. Maglasang, Leolino A. Maglasang, Margie Leila A.
Maglasang, Ma. Milalie A. Maglasang, Salud Maglasang and Ma. Flasalie A. Maglasang)
vs.
Manila Banking Corporation, Now Substituted by First Sovereign Asset Management (SPV-AMC), Inc, INC. (FSAMI)
PERLAS-BERNABE, J.:
SUMMARY: Sps. Maglasang obtained a credit line fromMBC secured by REM. When Flaviano Maglasang died, his son
Edgar was appointed as atty-in-fact by Flavianos heirs. He filed a petition for letters of administration of Flavianos
intestate estate w/c the probate court granted. Court issued a Notice to Creditors for filing of money claims against the
estate. MBC notified the court of its claim. When Court terminated the proceedings and executed an extra-judicial partition
over the properties, the loan obligations owed to MBC remained unsatisfied though the court recognized the rights of MBC
to foreclose the mortgage. MBC extrajudicially foreclosed the mortgage; however, after auction sale, a deficiency
remained on Maglasangs obligation. Thus, it filed a suit to recover the deficiency. RTC ruled in their favor so Maglasangs
appealed to CA contending that under Remedies available to Manila Banking Corp. under Sec. 7, Rule 86 of ROC are
alternative and exclusive, such that the election of one operates as a waiver of the others and since MBC filed a claim in
the probate court, it has abandoned its right to foreclose the property and is barred from recovering any deficiency. CA
denied the appeal and contended that Act. 3135 applies w/c allows MBC to extrajudicially foreclose and recover the
deficiency. HELD: MBC had a right to extrajudicially foreclose the property but it cannot recover the deficiency. Both Sec.
7, Rule 86 of ROC and Act. 3135 apply complementarily in the case at bar. Foreclosure under the 3 rd remedy in Sec. 7,
Rule 86 of ROC includes extrajudicial foreclosure under Act. 3135. However, upon choosing said remedy, creditor waives
his right to recover the deficiency. When MBC sought to extra-judicially foreclose the mortgage of the properties previously
belonging to Sps. Maglasang and it therefore, availed of the third option waiving its right to recover the deficiency.
DOCTRINE:
There are 3 remedies/options by secured creditor under Sec. 7, Rule 86: (a) waive the mortgage and claim the entire
debt from the estate of the mortgagor as an ordinary claim; (b) foreclose the mortgage judicially and prove the
deficiency as an ordinary claim; and (c) rely on the mortgage exclusively, or other security and foreclose the same
before it is barred by prescription, without the right to file a claim for any deficiency. These may be ALTERNATIVELY
adopted for the satisfaction of his indebtedness. However, these remedies are distinct, independent and mutually
EXCLUSIVE from each other; the election of one effectively BARS the exercise of the others.
Sec. 7, Rule 86 of ROC lays down the options for the secured creditor to claim against the estate and, according to
jurisprudence, the availment of the 3rd option BARS HIM FROM CLAIMING ANY DEFICIENCY amount. After 3rd
option is chosen (under Sec. 7, Rule 86), the procedure governing the manner in which the extra-judicial foreclosure
should proceed would still be governed by the provisions of Act No. 3135.
FACTS:
June 16, 75: Sps. Flaviano and Salud Maglasang obtained a credit line from Manila Banking Corp. for P350,000
which was secured by a real estate mortgage executed over 7 of their properties in Ormoc City and Kananga, Leyte.
They availed of their credit line by securing loans of P209,790.50 (Oct. 24, 75) & P139,805.83 (Mar. 15, 1976)
o Both due and demandable w/n 1 year with interest @ 12% per annum & additional 4% penalty charged upon
default
Feb. 14, 1977: Flaviano Maglasang died intestate
Thus, his widow Salud Maglasang and their surviving children, herein petitioners, appointed their brother petitioner
Edgar Maglasang as their attorney-in-fact.
o Other petitioners: Oscar, Concepcion Chona, Lerma, Felma, Fe Doris, Leolino, Margie Leila, Ma. Milalie,
Salud and Ma. Flasalie, all surnamed Maglasang, and Glenda Maglasang-Arnaiz.
Mar. 30, 1977: Edgar filed a verified petition for letters of administration of the intestate estate of Flaviano before
CFI of Leyte, Ormoc City (probate court).
CFI-probate court (Aug. 9, 1977): Granted petition appointing Edgar as the administrator of Flavianos estate.
CFI-probate court (Aug. 30, 1977): In view of the issuance of letters of administration, probate court issued a Notice
to Creditors for the filing of money claims against Flavianos estate.
As one of the creditors of Flaviano, Manila Banking Corp. notified the probate court of its claim for P382,753.19
(as of Oct. 11, 1978, exclusive of interests and charges).
During the pendency of the intestate proceedings, Edgar and Oscar were able to obtain several loans from Manila
Banking Corp, secured by promissory notes which they signed.
CFI-probate court (Dec. 14, 1978): Terminated the proceedings with the surviving heirs, executing an extra-
judicial partition of the properties of Flavianos estate.
o Loan obligations owed by the estate to Manila Banking Corp., however, remained unsatisfied due to
Manila Banking Corp.s certification that Flavianos account was undergoing a restructuring.
o Nonetheless, probate court expressly recognized the rights of Manila Banking Corp. under the mortgage
and promissory notes executed by the Sps. Maglasang, specifically, its right to foreclose the same within
the statutory period.
Manila Banking Corp. proceeded to extra-judicially foreclose the mortgage covering the Sps. Maglasangs
properties and emerged as the highest bidder at the public auction for P350k done at Ormoc City.
There, however, remained a deficiency on Sps. Maglasangs obligation to Manila Banking Corp.
June 24, 1981: Manila Banking Corp. filed a suit to recover the deficiency of P250,601.05 as of May 31, 81 against
the estate of Flaviano, his widow Salud and their children.
RTC-former probate court (Apr. 6, 1987): Directed the Maglasangs to pay Manila Banking Corp. jointly and severally,
P434,742.36 representing the deficiency of the formers total loan obligation to the latter after the extra-judicial
foreclosure of the REM with interest at the rate of 12% p.a., plus a 4% penalty charge, reckoned from Sept. 5, 1984
until fully paid + attys. fees (10% of the outstanding obligation)
Maglasangs elevated the case to CA on appeal, contending that:
o Remedies available to Manila Banking Corp. under Sec. 7, Rule 86 of ROC are alternative and exclusive,
such that the election of one operates as a waiver or abandonment of the others.
o When Manila Banking Corp. filed its claim against the estate of Flaviano in the proceedings before the
probate court, it effectively abandoned its right to foreclose on the mortgage.
o Even on the assumption that it has not so waived its right to foreclose, it is nonetheless barred from filing
any claim for any deficiency amount.
July 25, 97: During the pendency of the appeal, Flavianos widow, Salud, passed away.
CA (July 20, 2005): Denied Maglasangs appeal and affirmed RTCs Decision.
o Probate court erred when it closed and terminated the intestate proceedings (as seen in its Dec. 14, 78
Order) without first satisfying the claims of the creditors of the estate (ie. Manila Banking Corp.) in violation of
Sec. 1, Rule 90 of ROC
o As a consequence, Manila Banking Corp. was not able to collect from the Maglasangs and thereby was left
with the option of foreclosing the real estate mortgage
o Sec. 7, Rule 86 of ROC does not apply since the case does not involve a mortgage made by the
administrator over any property belonging to the estate of the decedent pursuant to PNB v CA.
o Act No. 3135 (An Act to Regulate the Sale of Property under Special Powers inserted or annexed to Real-
Estate Mortgages) is applicable which entitles Manila Banking Corp. to claim the deficiency amount
after the extra-judicial foreclosure of the real estate mortgage of Sps. Maglasangs properties.
Maglasangs MR was subsequently denied; hence, this petition for review on certiorari by Heirs of Sps. Maglasang
o It is not Act No. 3135 but Sec. 7, Rule 86 of ROC which applies in this case. (same claims as that raised in
CA)
o The extra-judicial foreclosure of the subject properties was null and void, not having been conducted in the
capital of the Province of Leyte in violation of the stipulations in the real estate mortgage contract.
ISSUES:
1) Whether or not the CA erred in affirming the RTCs award of the deficiency amount in favor of Manila Banking
Corporation? (YES) [corollarily, Whether Sec. 7, Rule 86 of ROC and not Act. 3135 applies in this case ? (Both apply
concordantly)]
2) Whether extrajudicial foreclosure of the subject properties was null and void? (NO)
HELD: The petition is partly meritorious.
RATIO:
(1) Both Sec. 7, Rule 86 of ROC and Act. 3135 apply complementarily in the case at bar. Foreclosure under the 3 rd
remedy in Sec. 7, Rule 86 of ROC includes extrajudicial foreclosure under Act. 3135. However, upon choosing said
remedy, creditor waives his right to recover the deficiency.
Claims against deceased persons should be filed during the settlement proceedings of their estate. Such
proceedings are primarily governed by special rules found under Rules 73 to 90 of the Rules, although rules
governing ordinary actions may, as far as practicable, apply suppletorily
Among these special rules, Sec. 7, Rule 86 of ROC provides the rule in dealing with secured claims against the
estate.
Sec. 7, Rule 86 of ROC: Mortgage debt due from estate. A creditor holding a claim against the deceased
secured by a mortgage or other collateral security, may abandon the security and PROSECUTE his claim in the
manner provided in this rule, and share in the general distribution of the assets of the estate; OR he may
FORECLOSE his mortgage or realize upon his security, by ACTION in court, making the executor or administrator a
party defendant, and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property
pledged, in the foreclosure or other proceeding to realize upon the security, he may CLAIM HIS DEFICIENCY
judgment in the manner provided in the preceding section; OR he may rely upon his mortgage or other security alone,
and FORECLOSE the same at any time within the period of the statute of limitations, and in that event he shall not be
admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate; but nothing
herein contained shall prohibit the executor or administrator from redeeming the property mortgaged or pledged, by
paying the debt for which it is held as security, under the direction of the court, if the court shall adjudged it to be for
the best interest of the estate that such redemption shall be made.
COVERAGE OF THE RULE: The rule speaks of A creditor holding a claim against the deceased secured by a
mortgage or other collateral security, thus it covers all secured claims, whether by mortgage or any other form of
collateral, which a creditor may enforce against the estate of the deceased debtor.
o It does not narrowly apply only to mortgages made by the administrator over any property belonging to the
estate of the decedent (as claimed by CA). Note though that mortgages of estate property executed by the
administrator are also governed by Rule 89, captioned as Sales, Mortgages, and Other Encumbrances of
Property of Decedent.
PNB v. CA relied by CA did not limit the scope of the rule as it only stated that Sec. 7, Rule 86 equally applies to
cases where the administrator mortgages the property of the estate to secure the loan he obtained. It was a ruling of
inclusion and not one which created a distinction.
Thus, Sec. 7, Rule 86 applies to: A creditors claim against the mortgaged property of the deceased debtor, as in
this case AND mortgages made by the administrator, as that in the PNB case.
3 Remedies/Options by Secured Creditor under Sec. 7, Rule 86
(a) waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim;
(b) foreclose the mortgage judicially and prove the deficiency as an ordinary claim; and
(c) rely on the mortgage exclusively, or other security and foreclose the same before it is barred by prescription,
without the right to file a claim for any deficiency
RULE: These may be ALTERNATIVELY adopted for the satisfaction of his indebtedness. However, these
remedies are distinct, independent and mutually EXCLUSIVE from each other; the election of one effectively
BARS the exercise of the others.
Bank of America v. American Realty Corporation (w/ respect to real properties): In our jurisdiction, the remedies
available to the mortgage creditor are deemed ALTERNATIVE and not cumulative. Notably, an election of one
remedy operates as a WAIVER of the other.
When Remedy Deemed Elected by Mortgage Creditor
o JUDICIAL FORECLOSURE: Upon the filing of the suit for collection OR upon the filing of the complaint in
an action for foreclosure of mortgage, pursuant to Rule 68 of the 1997 Rules of Civil Procedure.
o EXTRAJUDICIAL FORECLOSURE: Upon filing of the petition not with any court of justice but with the
Office of the Sheriff of the province where the sale is to be made, in accordance with the provisions of Act No.
3135, as amended by Act No. 4118.
Third Option includes Extrajudicial Foreclosure
Third remedy includes the option of extra-judicially foreclosing the mortgage under Act No. 3135, as availed of by
Manila Banking Corp. in this case.
Under Extrajudicial Foreclosure by Creditor: No right to Deficiency
However, the plain result of adopting the last mode of foreclosure is that the creditor waives his right to recover
any deficiency from the estate.
PNB v CA case, citing Perez v. PNB which overturned earlier Pasno v. Ravina ruling:
o Perez v. PNB reversing Pasno vs. Ravina: After examination, we observe that the dissenting opinion in our
ruling in Pasno v. Ravina is more in conformity with reason and law.
3rd remedy to wit: (3) to rely on the mortgage exclusively, foreclosing the same at any time before it is
barred by prescription, without right to file a claim for any deficiency,
Majority opinion in Pasno v. Ravina, in requiring a judicial foreclosure, virtually wipes out the 3rd
alternative conceded by the Rules to the mortgage creditor, and which would precisely include
extra-judicial foreclosures by contrast with the 2nd alternative.
o The plain result of adopting the last mode of foreclosure is that the creditor waives his right to
recover any deficiency from the estate.
o Following the Perez ruling that the 3rd mode includes extrajudicial foreclosure sales, the result of
extrajudicial foreclosure is that the creditor waives any further deficiency claim.
Act. 3135 vs. Sec. 7, Rule 86: In Tandem (hehe)
Operation of Act No. 3135 does not entirely discount the application of Sec. 7, Rule 86, or vice-versa. Rather, the 2
complement each other within their respective spheres of operation.
Sec. 7, Rule 86, ROC Act. No. 3135

Lays down the options for the secured creditor to claim After 3rd option is chosen (under Sec. 7, Rule 86), the
against the estate and, according to jurisprudence, the procedure governing the manner in which the extra-judicial
availment of the 3rd option bars him from claiming any foreclosure should proceed would still be governed by the
deficiency amount provisions of Act No. 3135.
Governs the parameters and the extent to which a Sets out the specific procedure to be followed when the
claim may be advanced against the estate creditor subsequently chooses the 3rd option
specifically, that of extra-judicially foreclosing real property
belonging to the estate.
The application of the procedure under Act No. 3135 must be concordant with Sec. 7, Rule 86 as the latter is a
special rule applicable to claims against the estate.
At the same time, since Sec. 7, Rule 86 does not detail the procedure for extra-judicial foreclosures, the formalities
governing the manner of availing of the 3rd option such as the place where the application for extra-judicial
foreclosure is filed, the requirements of publication and posting and the place of sale must be governed by Act No.
3135.
Case at Bar
Manila Banking Corp. sought to extra-judicially foreclose the mortgage of the properties previously belonging to Sps.
Maglasang and, therefore, availed of the third option. Thus, it is now precluded from filing a suit to recover any
deficiency amount as earlier discussed.
It did not exercise the first option of directly filing a claim against the estate, as Heirs of Maglasang assert, since it
merely notified the probate court of the outstanding amount of its claim against the estate of Flaviano and that it was
currently restructuring the account. (sinama ko lang yung footnote pero di relevant; yung nakabold ata yung dapat
ginawa ng Manila Banking Corp. para sabihing 1st option)
o FOOTNOTE: Manila Banking Corp. did not file a claim against the estate since its notice deviates from the
proper characterization under Sec. 9, Rule 86 of ROC which sets forth the manner through which a claim
against the estate may be filed:
o A claim may be filed by delivering the same with the necessary vouchers to the clerk of court and by
serving a copy thereof on the executor or administrator.
o If the claim be founded on a bond, bill, note, or any other instrument, the original need not be filed,
but a copy thereof with all indorsements shall be attached to the claim and filed therewith.
On demand, however, of the executor or administrator, or by order of the court or judge, the original
shall be exhibited, unless it be lost or destroyed, in which case the claimant must accompany his
claim with affidavit or affidavits containing a copy or particular description of the instrument and
stating its loss or destruction.
o When the claim is due, it must be supported by affidavit stating the amount justly due, that no
payments have been made thereon which are not credited, and that there are no offsets to the same, to
the knowledge of the affiant.
o If the claim is not due, or is contingent, when filed, it must also be supported by affidavit stating the particulars
thereof.
o When the affidavit is made by a person other than the claimant, he must set forth therein the reason why it is
not made by the claimant.
o The claim once filed shall be attached to the record of the case in which the letters testamentary or of
administration were issued, although the court, in its discretion, and as a matter of convenience, may order all
the claims to be collected in a separate folder.
(2) Extra-judicial foreclosure is valid. (di masyado related sa topic but read na din)
Heirs of Maglasang: Extra-judicial foreclosure of the subject properties was null and void since the same was
conducted in violation of the stipulation in the REM contract stating that the auction sale should be held in the
capital of the province where the properties are located, i.e., Province of Leyte (Tacloban City sabi sa baba-capital ba
to ng Leyte?).
o STIPULATION: It is hereby agreed that in case of foreclosure of this mortgage under Act 3135, the auction
sale shall be held at the capital of the province if the property is within the territorial jurisdiction of the
province concerned, OR shall be held in the city if the property is within the territorial jurisdiction of the city
concerned.
SC: Disagrees. The stipulation under the REM contract lacks words of exclusivity which would bar any other
acceptable fora wherein the said sale may be conducted. Absent such qualifying or restrictive words to indicate the
exclusivity of the agreed forum, the stipulated place should only be as an additional, not a limiting venue.
The venue then would be alternative between that stated in the law or rule governing the action or the one agreed in
the contract. Thus, the stipulated venue and that provided under Act No. 3135 can be applied alternatively.
Sec. 2 of Act No. 3135 allows the foreclosure sale to be done within the province where the property to be sold is
situated.
SEC. 2 of Act No. 3135: Said sale cannot be made legally outside of the province which the property sold is
situated; and in case the place within said province in which the sale is to be made is subject to stipulation, such sale
shall be made in said place or in the municipal building of the municipality in which the property or part thereof is
situated.
Case at Bar: Auction sale was conducted in Ormoc City, which is within the territorial jurisdiction of the Province of
Leyte, thus there is sufficient compliance with the above-cited requirement.
SUMMARY
Extra-judicial foreclosure subject of this case was properly conducted in accordance with the formalities of Act No.
3135. The same was a valid exercise of Manila Banking's third option under Section 7, Rule 86.
Manila Banking cannot, however, file any suit to recover any deficiency amount since it effectively waived its right
thereto when it chose to avail of extra-judicial foreclosure as jurisprudence instructs.
DISPOSITIVE: Petition PARTLY GRANTED. The complaint for the recovery of the deficiency amount after extra-judicial
foreclosure filed by Manila Banking Corporation DISMISSED. The extra-judicial foreclosure of the mortgaged properties,
however, stands.

[G.R. No. 156407. January 15, 2014.]THELMA M. ARANAS, petitioner, vs. TERESITA V. MERCADO, FELIMON V.MERCADO,
CARMENCITA M. SUTHERLAND, RICHARD V. MERCADO, MA.TERESITA M. ANDERSON, and FRANKLIN L. MERCADO,
respondents.

The probate court is authorized to determine the issue of ownership of properties for purposes of their
inclusion or exclusion from
the inventory to be submitted by the administrator, but its determination shall only be provisional unless the
interested parties are all heirs
of the decedent, or the question is one of collation or advancement, or the parties consent to the assumption of
jurisdiction by the probate
court and the rights of third parties are not impaired. Its jurisdiction extends to matters
incidental or collateral to the settlement and
distribution of the estate, such as the determination by the status of each heir and whether property included in
the inventory is the conjugal
or exclusive property of the deceased spouse.
Civil Law; Succession
The assailed order of March 14, 2001 denying Teresitas motion for the approval of the inventory and the order dated May
18, 2001 denying her motion for reconsideration were interlocutory. This is because the inclusion of the properties in the
inventory was not yet a final determination of their ownership. Hence, the approval of the inventory and the
concomitant determination of the ownership as basis for inclusion or exclusion from the inventory were
provisional and subject to revision at anytime during the course of the administration proceedings.

Remedial Law; Civil Procedure


An appeal would not be the correct recourse for Teresita, et al. to take against the assailed orders. The final judgment
rule embodied in the first paragraph of Section 1, Rule 41, Rules of Court, which also governs appeals in special
proceedings, stipulates that only the judgments, final orders (and resolutions) of a court of law that completely
disposes of the case, or of a particular matter therein when declared by these Rules to be appealable may be the
subject of an appeal in due course. The same rule states that an interlocutory order or resolution (interlocutory because
it deals with preliminary matters, or that the trial on the merits is yet to be held and the judgment rendered) is expressly
made non-appealable.

Remedial Law; Civil Procedure


Multiple appeals are permitted in special proceedings as a practical recognition of the possibility that material
issues may be finally determined at various stages of the special proceedings. Section 1, Rule 109 of the Rules of
Court enumerates the specific instances in which multiple appeals may be resorted to in special proceedings, viz.: Section
1. Orders or judgments from which appeals may be taken.An interested person may appeal in special proceedings from
an order or judgment rendered by a Court of First Instance or a Juvenile and Domestic Relations Court, where such order
or judgment: (a) Allows or disallows a will; (b) Determines who are the lawful heirs of a deceased person, or the
distributive share of the estate to which such person is entitled; (c) Allows or disallows, in whole or in part, any claim
against the estate of a deceased person, or any claim presented on behalf of the estate in offset to a claim against it; (d)
Settles the account of an executor, administrator, trustee or guardian; (e) Constitutes, in proceedings relating to the
settlement of the estate of a deceased person, or the administration of a trustee or guardian, a final determination in the
lower court of the rights of the party appealing, except that no appeal shall be allowed from the appointment of a special
administrator; and (f) Is the final order or judgment rendered in the case, and affects the substantial rights of the person
appealing, unless it be an order granting or denying a motion for a new trial or for reconsideration.

Civil Law; Succession;


Under Section 6(a), Rule 78 of the Rules of Court, the letters of administration may be granted at the discretion of
the court to the surviving spouse, who is competent and willing to serve when the person dies intestate. Upon
issuing the letters of administration to the surviving spouse, the RTC becomes duty-bound to direct the preparation and
submission of the inventory of the properties of the estate, and the surviving spouse, as the administrator, has the duty
and responsibility to submit the inventory within three months from the issuance of letters of administration pursuant to
Rule 83 of the Rules of Court.

Civil Law; Succession;


The objective of the Rules of Court in requiring the inventory and appraisal of the estate of the decedent is to aid
the court in revising the accounts and determining the liabilities of the executor or the administrator, and in
making a final and equitable distribution (partition) of the estate and otherwise to facilitate the administration of
the estate. Hence, the RTC that presides over the administration of an estate is vested with wide discretion on the
question of what properties should be included in the inventory. According to Peralta v. Peralta, 71 Phil. 66 (1940), the CA
cannot impose its judgment in order to supplant that of the RTC on the issue of which properties are to be included or
excluded from the inventory in the absence of positive abuse of discretion, for in the administration of the estates of
deceased persons, the judges enjoy ample discretionary powers and the appellate courts should not interfere with or
attempt to replace the action taken by them, unless it be shown that there has been a positive abuse of discretion. As
long as the RTC commits no patently grave abuse of discretion, its orders must be respected as part of the regular
performance of its judicial duty.

Remedial Law; Civil Procedure;


There is no dispute that the jurisdiction of the trial court as an intestate court is special and limited. The trial court
cannot adjudicate title to properties claimed to be a part of the estate but are claimed to belong to third parties by title
adverse to that of the decedent and the estate, not by virtue of any right of inheritance from the decedent. All that the trial
court can do regarding said properties is to determine whether or not they should be included in the inventory of
properties to be administered by the administrator. Such determination is provisional and may be still revised.

[G.R. No. 156407. January 15, 2014.]


THELMA M. ARANAS, petitioner, vs. TERESITA V. MERCADO, FELIMON V. MERCADO, CARMENCITA M.
SUTHERLAND, RICHARD V. MERCADO, MA. TERESITA M. ANDERSON, and FRANKLIN L. MERCADO,
respondents.

FACTS:
Emigdio S. Mercado (Emigdio) died intestate on January 12, 1991, survived by his second wife, Teresita V.
Mercado (Teresita), and their five children, namely: Allan V. Mercado, Felimon V. Mercado, Carmencita M. Sutherland,
Richard V. Mercado, and Maria Teresita M. Anderson; and his two children by his first marriage, namely: respondent
Franklin L. Mercado and petitioner Thelma M. Aranas (Thelma).

Emigdio inherited and acquired real properties during his lifetime. He owned corporate shares in Mervir Realty
Corporation (Mervir Realty) and Cebu Emerson Transportation Corporation (Cebu Emerson). He assigned his real
properties in exchange for corporate stocks of Mervir Realty, and sold his real property in Badian, Cebu (Lot 3353 covered
by Transfer Certificate of Title No. 3252) to Mervir Realty.

Thelma filed in the Regional Trial Court (RTC) in Cebu City a petition for the appointment of Teresita as the
administrator of Emigdio's estate. The RTC granted the petition considering that there was no opposition. The letters of
administration in favor of Teresita.

As the administrator, Teresita submitted an inventory of the estate of Emigdiofor the consideration and approval
by the RTC. She indicated in the inventory that at the time of his death, Emigdio had "left no real properties but only
personal properties" worth P6,675,435.25 in all, consisting of cash of P32,141.20; furniture and fixtures worth P20,000.00;
pieces of jewelry valued at P15,000.00; 44,806 shares of stock of Mervir Realty worth P6,585,585.80; and 30 shares of
stock of Cebu Emerson worth P22,708.25.

Claiming that Emigdio had owned other properties that were excluded from the inventory, Thelma moved that the
RTC direct Teresita to amend the inventory, and to be examined regarding it.Teresita filed a compliance with the order of
January 8, 1993, 3 supporting her inventory with copies of three certificates of stocks covering the 44,806 Mervir Realty
shares of stock; 4 the deed of assignment executed by Emigdio on January 10, 1991 involving real properties with the
market value of P4,440,651.10 in exchange for 44,407 Mervir Realty shares of stock with total par value of
P4,440,700.00; 5 and the certificate of stock issued on January 30, 1979 for 300 shares of stock of Cebu Emerson worth
P30,000.00.

Thelma again moved to require Teresita to be examined under oath on the inventory. The RTC issued an order
expressing the need for the parties to present evidence and for Teresita to be examined to enable the court to resolve the
motion for approval of the inventory. Thelma opposed the approval of the inventory, and asked leave of court to examine
Teresita on the inventory.

The RTC issued on March 14, 2001 an order finding and holding that the inventory submitted by Teresita had
excluded properties that should be included. The RTCdenied the administratrix's motion for approval of inventory and
orders the said administratrix to re-do the inventory of properties which are supposed to constitute as the estate of the late
Emigdio S. Mercado. The RTC also directed the administratrix to render an account of her administration of the estate of
the late Emigdio S. Mercado which had come to her possession.

Teresita, joined by other heirs of Emigdio, timely sought the reconsideration of the order of March 14, 2001 on the
ground that one of the real properties affected, Lot No. 3353 located in Badian, Cebu, had already been sold to Mervir
Realty,

On appeal, the CA reversed the RTC decision insofar as the inclusion of the inclusion of parcels of land known as
Lot No. 3353 located at Badian, Cebu with an area of 53,301 square meters subject matter of the Deed of Absolute Sale
dated November 9, 1989 and the various parcels of land subject matter of the Deeds of Assignment dated February 17,
1989 and January 10, 1991 in the revised inventory to be submitted by the administratrix is concerned.

ISSUE:
Whether or not he RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction in
directing the inclusion of certain properties in the inventory notwithstanding that such properties had been either
transferred by sale or exchanged for corporate shares in Mervir Realty by the decedent during his lifetime?

RULING: No. The CA's conclusion of grave abuse of discretion on the part of the RTC was unwarranted and erroneous.

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS ASIDE the
decision promulgated on May 15, 2002; REINSTATES the orders issued on March 14, 2001 and May 18, 2001 by the
Regional Trial Court in Cebu; DIRECTS the Regional Trial Court in Cebu to proceed with dispatch in Special Proceedings
No. 3094-CEB entitled Intestate Estate of the late Emigdio Mercado, Thelma Aranas, petitioner, and to resolve the case;
and ORDERS the respondents to pay the costs of suit.

RATIO:
The probate court is authorized to determine the issue of ownership of properties for purposes of their inclusion or
exclusion from the inventory to be submitted by the administrator, but its determination shall only be provisional unless the
interested parties are all heirs of the decedent, or the question is one of collation or advancement, or the parties consent
to the assumption of jurisdiction by the probate court and the rights of third parties are not impaired. Its jurisdiction
extends to matters incidental or collateral to the settlement and distribution of the estate, such as the determination of the
status of each heir and whether property included in the inventory is the conjugal or exclusive property of the deceased
spouse.

Under Section 6 (a), Rule 78 of the Rules of Court, the letters of administration may be granted at the discretion of
the court to the surviving spouse, who is competent and willing to serve when the person dies intestate. Upon issuing the
letters of administration to the surviving spouse, the RTC becomes duty-bound to direct the preparation and submission of
the inventory of the properties of the estate, and the surviving spouse, as the administrator, has the duty and responsibility
to submit the inventory within three months from the issuance of letters of administration pursuant to Rule 83 of the Rules
of Court, viz.:
Section 1. Inventory and appraisal to be returned within three months. Within three (3)
months after his appointment every executor or administrator shall return to the court a
true inventory and appraisal of all the real and personal estate of the deceased which has
come into his possession or knowledge. In the appraisement of such estate, the court
may order one or more of the inheritance tax appraisers to give his or their assistance.
The usage of the word all in Section 1, supra, demands the inclusion of all the real and personal properties of the
decedent in the inventory. However, the word all is qualified by the phrase which has come into his possession or
knowledge, which signifies that the properties must be known to the administrator to belong to the decedent or are in her
possession as the administrator. Section 1 allows no exception, for the phrase true inventory implies that no properties
appearing to belong to the decedent can be excluded from the inventory, regardless of their being in the possession of
another person or entity.
The objective of the Rules of Court in requiring the inventory and appraisal of the estate of the decedent is "to aid
the court in revising the accounts and determining the liabilities of the executor or the administrator, and in malting a final
and equitable distribution (partition) of the estate and otherwise to facilitate the administration of the estate." Hence, the
RTC that presides over the administration of an estate is vested with wide discretion on the question of what properties
should be included in the inventory. According to Peralta v. Peralta, the CA cannot impose its judgment in order to
supplant that of the RTC on the issue of which properties are to be included or excluded from the inventory in the absence
of "positive abuse of discretion," for in the administration of the estates of deceased persons, "the judges enjoy ample
discretionary powers and the appellate courts should not interfere with or attempt to replace the action taken by them,
unless it be shown that there has been a positive abuse of discretion." As long as the RTC commits no patently grave
abuse of discretion, its orders must be respected as part of the regular performance of its judicial duty.
There is no dispute that the jurisdiction of the trial court as an intestate court is special and limited. The trial court
cannot adjudicate title to properties claimed to be a part of the estate but are claimed to belong to third parties by title
adverse to that of the decedent and the estate, not by virtue of any right of inheritance from the decedent. All that the trial
court can do regarding said properties is to determine whether or not they should be included in the inventory of
properties to be administered by the administrator. Such determination is provisional and may be still revised. As the Court
said in Agtarap v. Agtarap:
The general rule is that the jurisdiction of the trial court, either as a probate court or an intestate court, relates only
to matters having to do with the probate of the will and/or settlement of the estate of deceased persons, but does not
extend to the determination of questions of ownership that arise during the proceedings. The patent rationale for this rule
is that such court merely exercises special and limited jurisdiction. As held in several cases, a probate court or one in
charge of estate proceedings, whether testate or intestate, cannot adjudicate or determine title to properties claimed to be
a part of the estate and which are claimed to belong to outside parties, not by virtue of any right of inheritance from the
deceased but by title adverse to that of the deceased and his estate. All that the said court could do as regards said
properties is to determine whether or not they should be included in the inventory of properties to be administered by the
administrator. If there is no dispute, there poses no problem, but if there is, then the parties, the administrator, and the
opposing parties have to resort to an ordinary action before a court exercising general jurisdiction for a final determination
of the conflicting claims of title.
However, this general rule is subject to exceptions as justified by expediency and convenience.
The probate court may provisionally pass upon in an intestate or a testate proceeding the question of inclusion in,
or exclusion from, the inventory of a piece of property without prejudice to final determination of ownership in a separate
action. Second, if the interested parties are all heirs to the estate, or the question is one of collation or advancement, or
the parties consent to the assumption of jurisdiction by the probate court and the rights of third parties are not impaired,
then the probate court is competent to resolve issues on ownership. Verily, its jurisdiction extends to matters incidental or
collateral to the settlement and distribution of the estate, such as the determination of the status of each heir and whether
the property in the inventory is conjugal or exclusive property of the deceased spouse.

The inventory of the estate of Emigdio must be prepared and submitted for the important purpose of resolving the
difficult issues of collation and advancement to the heirs. Article 1061 of the Civil Code required every compulsory heir
and the surviving spouse, herein Teresita herself, to "bring into the mass of the estate any property or right which he (or
she) may have received from the decedent, during the lifetime of the latter, by way of donation, or any other gratuitous
title, in order that it may be computed in the determination of the legitime of each heir, and in the account of the partition."
Section 2, Rule 90 of the Rules of Court also provided that any advancement by the decedent on the legitime of an heir
"may be heard and determined by the court having jurisdiction of the estate proceedings, and the final order of the court
thereon shall be binding on the person raising the questions and on the heir." Rule 90 thereby expanded the special and
limited jurisdiction of the RTC as an intestate court about the matters relating to the inventory of the estate of the decedent
by authorizing it to direct the inclusion of properties donated or bestowed by gratuitous title to any compulsory heir by the
decedent.
The determination of which properties should be excluded from or included in the inventory of estate properties
was well within the authority and discretion of the RTC as an intestate court. In making its determination, the RTC acted
with circumspection, and proceeded under the guiding policy that it was best to include all properties in the possession of
the administrator or were known to the administrator to belong to Emigdio rather than to exclude properties that could turn
out in the end to be actually part of the estate. As long as the RTC commits no patent grave abuse of discretion, its orders
must be respected as part of the regular performance of its judicial duty. Grave abuse of discretion means either that the
judicial or quasi-judicial power was exercised in an arbitrary or despotic manner by reason of passion or personal hostility,
or that the respondent judge, tribunal or board evaded a positive duty, or virtually refused to perform the duty enjoined or
to act in contemplation of law, such as when such judge, tribunal or board exercising judicial or quasi-judicial powers
acted in a capricious or whimsical manner as to be equivalent to lack of jurisdiction.

ADVENT CAPITAL AND FINANCE CORPORATION vs ALCANTARA

G.R. No. 183050/ January 25, 2012


ABAD, J.:
Topic: Rule 98; The trust property is only fictitiously attributed by law to the trustee to the extent that the rights and
powers vested in a nominal owner shall be used by him on behalf of the real owner.
This case is about the validity of a rehabilitation courts order that compelled a third party, in possession of money
allegedly belonging to the debtor of a company under rehabilitation, to deliver such money to its court-appointed receiver
over the debtors objection.

On July 16, 2001 petitioner Advent Capital and Finance Corporation (Advent Capital) filed a petition for
rehabilitation with the Regional Trial Court (RTC) of Makati City. RTC named Atty. Danilo L. Concepcion as rehabilitation
receiver. Upon audit of Advent Capitals books, Atty. Concepcion found that respondents Nicasio and Editha Alcantara
(collectively, the Alcantaras) owed Advent Capital P27,398,026.59, representing trust fees that it supposedly earned for
managing their several trust accounts
.
Prompted by this finding, Atty. Concepcion requested Belson Securities, Inc. (Belson) to deliver to him, as Advent
Capitals rehabilitation receiver, the P7,635,597.50 in cash dividends that Belson held under the Alcantaras Trust Account
95-013. Atty. Concepcion claimed that the dividends, as trust fees, formed part of Advent Capitals assets. Belson
refused, however, citing the Alcantaras objections as well as the absence of an appropriate order from the rehabilitation
court.[

Thus, Atty. Concepcion filed a motion before the rehabilitation court to direct Belson to release the money to
him. He said that, as rehabilitation receiver, he had the duty to take custody and control of Advent Capitals assets, such
as the sum of money that Belson held on behalf of Advent Capitals Trust Department. [6]

The Alcantaras oppose claimed that the money in the trust account belonged to them under their Trust
Agreement with Advent Capital. The latter, they said, could not claim any right or interest in the dividends generated by
their investments since Advent Capital merely held these in trust for the Alcantaras, the trustors-beneficiaries. For this
reason, Atty. Concepcion had no right to compel the delivery of the dividends to him as receiver. The Alcantaras
concluded that, under the circumstances, the rehabilitation court had no jurisdiction over the subject dividends.

Rehabilitation court granted Atty. Concepcions motion. It held that, under Rule 59, Section 6 of the Rules of Court, a
receiver has the duty to immediately take possession of all of the corporations assets and administer the same
for the benefit of corporate creditors. Complying with the rehabilitation courts order and Atty. Concepcions demand
letter, Belson turned over the subject dividends to him.

R filed Certiorari before the CA-reversed. The CA pointed out that the rehabilitation proceedings in this case
referred only to the assets and liabilities of the company proper, not to those of its Trust Department which held assets
belonging to other people. To enforce its lien, Advent Capital has to file a collection suit. The rehabilitation court cannot
simply enforce the latters claim by ordering Belson to deliver the money to it.

MR denied. Hence, this petition.


Issue
whether or not the cash dividends held by Belson and claimed by both the Alcantaras and Advent Capital
constitute corporate assets of the latter that the rehabilitation court may, upon motion, require to be conveyed to the
rehabilitation receiver for his disposition: NO

what court has jurisdiction to hear and adjudicate the conflicting claims of the parties over the dividends that
Belson held in trust for their owners:NO

Ruling: Denied!

First Issue:

Advent Capital asserts that the cash dividends in Belsons possession formed part of its assets based on
paragraph 9 of its Trust Agreement. That it could automatically deduct its management fees from the Alcantaras portfolio
that they entrusted to it. Paragraph 9 of the Trust Agreement provides that Advent Capital could automatically deduct its
trust fees from the Alcantaras portfolio, at the end of each calendar quarter, with the corresponding duty to submit to the
Alcantaras a quarterly accounting report within 20 days after.

But the problem is that the trust fees that Advent Capitals receiver was claiming were for past quarters. Based on
the stipulation, these should have been deducted as they became due. As it happened, at the time Advent Capital made
its move to collect its supposed management fees, it neither had possession nor control of the money it wanted to apply to
its claim. Belson, a third party, held the money in the Alcantaras names. Whether it should deliver the same to Advent
Capital or to the Alcantaras is not clear. What is clear is that the issue as to who should get the same has been seriously
contested.
The practice in the case of banks is that they automatically collect their management fees from the funds that their
clients entrust to them for investment or lending to others. But the banks can freely do this since it holds or has control of
their clients money and since their trust agreement authorized the automatic collection. If the depositor contests the
deduction, his remedy is to bring an action to recover the amount he claims to have been illegally deducted from his
account.

Here, Advent Capital does not allege that Belson had already deducted the management fees owing to it from the
Alcantaras portfolio at the end of each calendar quarter. Had this been done, it may be said that the money in Belsons
possession would technically be that of Advent Capital. Belson would be holding such amount in trust for the latter. And it
would be for the Alcantaras to institute an action in the proper court against Advent Capital and Belson for misuse of its
funds.

But the above did not happen. Advent Capital did not exercise its right to cause the automatic deduction at the
end of every quarter of its supposed management fee when it had full control of the dividends. That was its fault. For
their part, the Alcantaras had the right to presume that Advent Capital had deducted its fees in the manner stated in the
contract. The burden of proving that the fees were not in fact collected lies with Advent Capital.

Further, Advent Capital or its rehabilitation receiver cannot unilaterally decide to apply the entire amount of cash
dividends retroactively to cover the accumulated trust fees. Advent Capital merely managed in trust for the benefit of the
Alcantaras the latters portfolio, which under Paragraph 2 of the Trust Agreement, includes not only the principal but also
its income or proceeds. The trust property is only fictitiously attributed by law to the trustee to the extent that the rights
and powers vested in a nominal owner shall be used by him on behalf of the real owner.

The real owner of the trust property is the trustor-beneficiary. In this case, the trustors-beneficiaries are the
Alcantaras. Thus, Advent Capital could not dispose of the Alcantaras portfolio on its own. The income and principal of
the portfolio could only be withdrawn upon the Alcantaras written instruction or order to Advent Capital. The latter could
not also assign or encumber the portfolio or its income without the written consent of the Alcantaras . All these are
stipulated in the Trust Agreement.

Second Issue:

Certainly, not the rehabilitation court which has not been given the power to resolve ownership disputes between
Advent Capital and third parties. Neither Belson nor the Alcantaras are its debtors or creditors with interest in the
rehabilitation.

Advent Capital must file a separate action for collection to recover the trust fees that it allegedly earned and, with
the trial courts authorization if warranted, put the money in escrow for payment to whoever it rightly belongs. Having
failed to collect the trust fees at the end of each calendar quarter as stated in the contract, all it had against the Alcantaras
was a claim for payment which is a proper subject for an ordinary action for collection. It cannot enforce its money claim
by simply filing a motion in the rehabilitation case for delivery of money belonging to the Alcantaras but in the possession
of a third party.

Rehabilitation proceedings are summary and non-adversarial in nature, and do not contemplate
adjudication of claims that must be threshed out in ordinary court proceedings. Adversarial proceedings similar to
that in ordinary courts are inconsistent with the commercial nature of a rehabilitation case. The latter must be resolved
quickly and expeditiously for the sake of the corporate debtor, its creditors and other interested parties. Thus, the Interim
Rules incorporate the concept of prohibited pleadings, affidavit evidence in lieu of oral testimony, clarificatory hearings
instead of the traditional approach of receiving evidence, and the grant of authority to the court to decide the case, or any
incident, on the basis of affidavits and documentary evidence.

EN BANC
A.C. No. 10196 September 9, 2014
MELODY R. NERY, Complainant,
vs.
ATTY. GLICERIO A. SAMPANA, Respondent.
RESOLUTION
CARPIO, Acting C.J.:
The Case
This is a disbarment complaint filed by Melody R. Nery (Nery) against Atty. Glicerio A. Sampana (Sampana) for failing to
file the petition for adoption despite receiving his legal fees and for making Nery believe that the petition was already filed.
The Facts
In her verified complaint filed on 18 June 2010,1 Nery alleged that in June 2008, she engaged the services of Sampana for
the annulment of her marriage and for her adoption by an alien adopter. The petition for annulment was eventually
granted, and Nery paid P200,000.00 to Sampana. As for the adoption, Sampana asked Nery if she had an aunt, whom
they could represent as the wife of her alien adopter. Sampana then gave Nery a blurred copy of a marriage contract,
which they would use for her adoption. Thereafter, Nery paid Sampana P100,000.00, in installment: (a) P10,000.00 on 10
September 2008; (b) P50,000.00 on 2 October 2008; and (c) P40,000.00 on 17 November 2008. Nery no longer asked for
receipts since she trusted Sampana.
On 14 February 2009, Sampana sent a text message informing Nery that he already filed the petition for adoption and it
was already published. Sampana further informed Nery that they needed to rehearse before the hearing. Subsequently,
Sampana told Nery that the hearing was set on 5 March 2010 in Branch 11 of Malolos, Bulacan. When Nery asked why
she did not receive notices from the court, Sampana claimed that her presence was no longer necessary because the
hearing was only jurisdictional. Sampana told Nery that the hearing was reset to 12 March 2010.
On 11 March 2010, Nery inquired from Branch 11 of Malolos, Bulacan about the status of the petition for adoption and
discovered that there was no such petition filed in the court. 2 Thus, in the afternoon of the same day, Nery met Sampana
and sought the reimbursement of the P100,000.00 she paid him. Sampana agreed, but said that he would deduct the
filing fee worth P12,000.00. Nery insisted that the filing fee should not be deducted, since the petition for adoption was
never filed. Thereafter, Nery repeatedly demanded for the reimbursement of the P100,000.00 from Sampana, but the
demands were left unheeded.
In an Order dated 25 February 2011,3 the Integrated Bar of the Philippines Commission on Bar Discipline (IBP-CBD),
through Commissioner Atty. Eldrid C. Antiquiera (Commissioner Antiquiera), stated that Sampana failed to file his answer
to the complaint and to appear during the mandatory conference. Thus, both parties were directed to submit their position
papers.
In her position paper,4 Nery reiterated her allegations in the complaint.
On the other hand, in his position paper dated 25 March 2011, 5 Sampana argued that Nerys allegations were self-serving
and unsubstantiated. However, Sampana admitted receiving "one package fee" from Nery for both cases of annulment of
marriage and adoption. Sampana alleged that he initially frowned upon the proposed adoption because of the old age,
civil status and nationality of the alien adopter, but Nery insisted on being adopted. Thus, Sampana suggested that "if the
[alien] adopter would be married to a close relative of [Nery], the intended [adoption by an alien] could be possible."
Sampana, then, required Nery to submit the documents, including the marriage contracts and the certification of the
aliens qualification to adopt from the Japanese Embassy (certification). Nery furnished the blurred marriage contract, but
not the certification. Sampana alleged that he prepared the petition for adoption but did not file it because he was still
waiting for the certification.
Sampana denied that he misled Nery as to the filing of the petition for adoption. Sampana claimed that Nery could have
mistaken the proceeding for the annulment case with the petition for adoption, and that the annulment case could have
overshadowed the adoption case. In any case, Sampana committed to refund the amount Nery paid him, after deducting
his legal services and actual expenses.
The IBPs Report and Recommendation
In his Report and Recommendation,6 Commissioner Antiquiera found Sampana guilty of malpractice for making Nery
believe that he already filed the petition for adoption and for failing to file the petition despite receiving his legal fees. Thus,
Commissioner Antiquiera recommended a penalty of three (3) months suspension from the practice of law.
In Resolution No. XX-2013-217 passed on 20 March 2013, the IBP Board of Governors adopted and approved
Commissioner Antiquieras report and recommendation, as follows:
RESOLVED to ADOPT and APPROVE, as it is hereby unanimously ADOPTED and APPROVED, with modification, [t]he
Report and Recommendation of the Investigating Commissioner in the above-entitled case, herein made part of this
Resolution as Annex "A", and finding the recommendation fully supported by the evidence on record and the applicable
laws and rules and considering that Respondent is guilty of malpractice by his failure to file a petition for adoption and
made complainant believe that he filed the petition in Court, Atty. Glicerio Sampana is hereby SUSPENDED from the
practice of law for three (3) months and ORDERED to RETURN to complainant the amount of One Hundred Thousand
(P100,000.00) Pesos with legal interest within thirty days from receipt of notice. 7
The Ruling of the Court
The recommendation of the IBP Board of Governors is well-taken, except as to the penalty.
Acceptance of money from a client establishes an attorney-client relationship and gives rise to the dutyof fidelity to the
clients cause.8 Every case accepted by a lawyer deserves full attention, diligence, skill and competence, regardless of
importance.9 A lawyer also owes it to the court, their clients, and other lawyers to be candid and fair.10 Thus, the Code of
Professional Responsibility clearly states:
CANON 15 - A lawyer shall observe candor, fairness and loyalty in all his dealings and transactions with his client.
CANON 16 - A lawyer shall hold in trust all moneys and properties of his client thatmay come into his possession.
Rule 16.03 - A lawyer shall deliver the funds and property of his client when due or upon demand. x x x.
CANON 17 - A lawyer owes fidelity to the cause of his client and he shall be mindful of the trust and confidence reposed in
him.
CANON 18 - A lawyer shall serve his client with competence and diligence.
Rule 18.03 - A lawyer shall not neglect a legal matter entrusted to him and his negligence in connection therewith shall
render him liable.
In the present case, Sampana admitted that he received "one package fee" for both cases of annulment and adoption.
Despite receiving this fee, he unjustifiably failed to file the petition for adoption and fell short of his duty of due diligence
and candor to his client. Sampanas proffered excuse of waiting for the certification before filing the petition for adoption is
disingenuous and flimsy. Inhis position paper, he suggested to Nery that if the alien adopter would be married to her close
relative, the intended adoption could be possible. Under the Domestic Adoption Act provision, which Sampana suggested,
the alien adopter can jointly adopt a relative within the fourth degree of consanguinity or affinity of his/her Filipino spouse,
and the certification of the aliens qualification to adopt is waived. 11
Having no valid reason not to file the petition for adoption, Sampana misinformed Nery of the status of the
petition.1wphi1 He then conceded that the annulment case overshadowed the petition for adoption. Verily, Sampana
neglected the legal matter entrusted tohim. He even kept the money given him, in violation of the Codes mandate to
deliver the clients funds upon demand. A lawyers failure to return upon demand the funds held by him gives rise to the
presumption that he has appropriated the same for his own use, in violation of the trust reposed in him by his client and of
the public confidence in the legal profession.12
This is not the first administrative case filed against Sampana. In Lising v. Sampana, 13 we already found Sampana guilty
of violating Canon 1 of the Code of Professional Responsibility for his unethical and illegal act relative to his double sale of
a parcel of land. We imposed upon him the penalty of suspension from the practice of law for one (1) year and warned
him that a repetition of a similar act shall be dealt with more severely.
In Rollon v. Naraval,14 we imposed upon the respondent therein the penalty of suspension from the practice of law for two
(2) years for failing to render any legal service after receiving the filing and partial service fee. Considering the serious
consequence of disbarment and the previous rulings of this Court, we deem it proper to increase the penalty for
Sampanas malpractice and violation of the Code of Professional Responsibility to suspension from the practice of law for
three (3) years.
WHEREFORE, we SUSPEND Atty. Glicerio A. Sampana from the practice of law for THREE (3) YEARS with a stern
warning that a repetition of a similar act shall be dealt with more severely. We also ORDER Atty. Glicerio A. Sampana to
RETURN to complainant Melody R. Nery the amount of One Hundred Thousand Pesos (P100,000.00), with 12% interest
per annum from the time of his receipt of the full amount of money on 17 November 2008 until 30 June 2013, then 6%
interest per annum from 1 July 2013 until fully paid.
Let a copy of this resolution be furnished the Bar Confidant to be included in the records of the respondent; the Integrated
Bar of the Philippines for distribution to all its chapters; and the Office of the Court Administrator for dissemination to all
courts throughout the country.
SO ORDERED.
ANTONIO T. CARPIO**
Acting Chief Justice

Castro vs Gregorio GR No 188801 15 October 2014

Facts: This is a petition for review on Certiorari assailing the decision of the CA which denied the petition for annulment of
judgment filed by petitioners. The petition before the appellate court sought to annul the judgment of the trial court that
granted Rs decree of adoption.
Atty. Castro was allegedly married to Rosario Castro (Petitioner). Unfortunately, they separated later on due to their
incompatibilities and Joses alleged homosexual tendencies. Their marriage bore two daughters: Rose Marie, who
succumbed to death after nine days from birth due to congenital heart disease, and Joanne Benedicta Charissima Castro
(Petitioner).
On August 2000, A petition for adoption of Jose Maria Jed Gregorio (Jed) and Ana Maria Regina Gregorio (Regina) was
instituted by Atty. Jose Castro. Atty. Castro alleged that Jed and Regina were his illegitimate children with Lilibeth Gregorio
(Rosarios housekeeper). After a Home Study Report conducted by the Social Welfare Officer of the TC, the petition was
granted.
A disbarment complaint was filed against Atty. Castro by Rosario. She alleged that Jose had been remiss in providing
support to his daughter Joanne for the past 36 year; that she single-handedly raised and provided financial support to
Joanne while Jose had been showering gifts to his driver and allege lover, Larry, and even went to the extent of adopting
Larrys two children, Jed and Regina, without her and Joanne knowledge and consent. Atty. Castro denied the allegation
that he had remiss his fatherly duties to Joanne. He alleged that he always offered help but it was often declined. He also
alleged that Jed and Regina were his illegitimate children thats why he adopted them. Later on Atty. Castro died.
Rosario and Joanne filed a petition for annulment of judgment seeking to annul the decision of the TC approving Jed and
Reginas adoption.
Petitioner allege that Rosarios consent was not obtained and the document purporting as Rosarios affidavit of consent
was fraudulent. P also allege that Jed and Reginas birth certificates shows disparity. One set shows that the father to is
Jose, while another set of NSO certificates shows the father to be Larry. P further alleged that Jed and Regina are not
actually Joses illegitimate children but the legitimate children of Lilibeth and Larry who were married at the time of their
birth. CA denied the petition.
CA held that while no notice was given by the TC to Rosario and Joanne of the adoption, it ruled that there is no explicit
provision in the rules that spouses and legitimate child of the adopter. . . should be personally notified of the hearing.
CA also ruled that the alleged fraudulent information contained in the different sets of birth certificates required the
determination of the identities of the persons stated therein and was, therefore, beyond the scope of the action for
annulment of judgment. The alleged fraud could not be classified as extrinsic fraud, which is required in an action for
annulment of judgment.
Issues:
1. Whether extrinsic fraud exist in the instant case?
2. Whether consent of the spouse and legitimate children 10 years or over of the adopter is required?
Decision:
1. The grant of adoption over R should be annulled as the trial court did not validly acquire jurisdiction over the
proceedings, and the favorable decision was obtained through extrinsic fraud.
When fraud is employed by a party precisely to prevent the participation of any other interested party, as in this case, then
the fraud is extrinsic, regardless of whether the fraud was committed through the use of forged documents or perjured
testimony during the trial.
Joses actions prevented Rosario and Joanne from having a reasonable opportunity to contest the adoption. Had Rosario
and Joanne been allowed to participate, the trial court would have hesitated to grant Joses petition since he failed to fulfill
the necessary requirements under the law. There can be no other conclusion than that because of Joses acts, the trial
court granted the decree of adoption under fraudulent circumstances.
2. RA 8552 requires that the adoption by the father of a child born out of wedlock obtain not only the consent of his
wife but also the consent of his legitimate children. (Art. III, Sec. 7, RA 8552)

As a rule, the husband and wife must file a joint petition for adoption. The law, however, provides for several exceptions to
the general rule, as in a situation where a spouse seeks to adopt his or her own children born out of wedlock. In this
instance, joint adoption is not necessary. But, the spouse seeking to adopt must first obtain the consent of his or her
spouse.
In the absence of any decree of legal separation or annulment, Jose and Rosario remained legally married despite their
de facto separation. For Jose to be eligible to adopt Jed and Regina, Rosario must first signify her consent to the
adoption. Since her consent was not obtained, Jose was ineligible to adopt.
The law also requires the written consent of the adopters children if they are 10 years old or older (ART. III, Sec. 9, RA
8552).
For the adoption to be valid, petitioners consent was required by Republic Act No. 8552. Personal service of summons
should have been effected on the spouse and all legitimate children to ensure that their substantive rights are protected. It
is not enough to rely on constructive notice as in this case. Surreptitious use of procedural technicalities cannot be
privileged over substantive statutory rights.
Since the trial court failed to personally serve notice on Rosario and Joanne of the proceedings, it never validly acquired
jurisdiction.

BARTOLOME vs. SSS and SCANMAR MARITIME SERVICES

Citation: G.R. No. 192531; November 12, 2014


Ponente: Velasco; THIRD DIVISION
Doctrine:
Repeal of laws
Relative; definition
Reversion of parental authority; death of adoptive parent
FACTS:
Petitioner Bernardina Bartolome (Bartolome) was the biological mother of John Colcol (John). John was a seaman and he
died due to an accident while on duty. Bartolome sought to claim death benefits from the SSS as she was the sole heir
and beneficiary of John.
Her request was denied. The SSS explained that she is no longer considered the parent of JOHN as he was legally
adopted by CORNELIO COLCOL based on the documents you submitted to us.
Cornelio Colcol was John's great grandfather. The decree of adoption attained finality in February of 1985 while john was
just 2 years old.
Based on these facts, the SSS claimed that Bartolome is no longer the legitimate parent of John and is thus not entitled to
Employees compensation. That the legitimate parent is now Cornelio Colcol.
Respondents cite the Amended Rules on Employee Compensation which states:
RULE XV BENEFICIARIES
SECTION 1. Definition. (a) Beneficiaries shall be either primary or secondary, and determined at the time of employees
death.
(b) The following beneficiaries shall be considered primary:
(1) The legitimate spouse living with the employee at the time of the employees death until he remarries; and
(2) Legitimate, legitimated, legally adopted or acknowledged natural children, who are unmarried not gainfully employed,
not over 21 years of age, or over 21 years of age provided that he is incapacitated and incapable of self - support due to
physical or mental defect which is congenital or acquired during minority; Provided, further, that a dependent
acknowledged natural child shall be considered as a primary beneficiary only when there are no other dependent children
who are qualified and eligible for monthly income benefit; provided finally, that if there are two or more acknowledged
natural children, they shall be counted from the youngest and without substitution, but not exceeding five.
(c) The following beneficiaries shall be considered secondary:
(1) The legitimate parents wholly dependent upon the employee for regular support;
(2) The legitimate descendants and illegitimate children who are unmarried, not gainfully employed, and not over 21 years
of age, or over 21 years of age provided that he is incapacitated and incapable of self - support due to physical or mental
defect which is congenital or acquired during minority.
ISSUES:
1. Whether or not the interpretation of the ECC stating that only legitimate parents may benefit from compensation is
correct.
2. Whether or not Petitioner qualifies as a dependent parent notwithstanding her son's adoption by someone else.
HELD:
1. No. The interpretation is incorrect. Art. 167 (j) of the Labor Code on employee's compensation provides that
beneficiaries are the dependent spouse until he remarries and dependent children, who are the primary beneficiaries. In
their absence, the dependent parents and subject to the restrictions imposed on dependent children, the illegitimate
children and legitimate descendants who are the secondary beneficiaries; Provided; that the dependent acknowledged
natural child shall be considered as a primary beneficiary when there are no other dependent children who are qualified
and eligible for monthly income benefit. The ECC on the other hand, interpreted this provision to state that only
legitimate parents wholly dependent upon the employee for regular support.
This is unauthorized administrative legislation. Article 7 of the New Civil Code states that:
Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse, or
custom or practice to the contrary.
When the courts declared a law to be inconsistent with the Constitution, the former shall be void and the latter shall
govern.
Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the
Constitution.
Administrative regulations must always be in harmony with the provisions of the law because any resulting discrepancy
between the two will always be resolved in favor of the basic law.
Guided by this doctrine, We find that the Amended Rules on Employees Compensation is patently a wayward restriction
of and a substantial deviation from Article 167 (j) of the Labor Code when it interpreted the phrase dependent parents to
refer to legitimate parents.
2. YES. The Supreme Court also noted that three years after the adoption decree, Cornelio died while John was still a
minor. John's minority at the time of his adopter's death is a significant factor because under such circumstance, parental
authority must be deemed to have reverted back to the biological parent. Adoption is a personal relationship and that
there are no collateral relatives by virtue of adoptionwho was then left to care for the adopted minor child if the
adopter passed away?
Moreover, this ruling finds support on the fact that even though parental authority is severed by virtue of adoption, the ties
between the adoptee and the biological parents are not entirely eliminated. To demonstrate, the biological parents, in
some instances, are able to inherit from the adopted, as can be gleaned from Art. 190 of the Family Code:
Art. 190. Legal or intestate succession to the estate of the adopted shall be governed by the following rules:
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(2) When the parents, legitimate or illegitimate, or the legitimate ascendants of the adopted concur with the adopter, they
shall divide the entire estate, one-half to be inherited by the parents or ascendants and the other half, by the adopters;
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(6) When only collateral blood relatives of the adopted survive, then the ordinary rules of legal or intestate succession
shall apply.
The Supreme Court thus ordered the ECC to release the benefits to petitioner Bartolome.