Title IV.

- SUCCESSION
CHAPTER 1
GENERAL PROVISIONS

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

Art. 775. In this Title, "decedent" is the general term applied to the person whose property is
transmitted through succession, whether or not he left a will. If he left a will, he is also called the
testator. (n)

Art. 776. The inheritance includes all the property, rights and obligations of a person which are not
extinguished by his death. (659)

Art. 777. The rights to the succession are transmitted from the moment of the death of the decedent.
(657a)

Art. 778. Succession may be:

(1) Testamentary;

(2) Legal or intestate; or

(3) Mixed. (n)

Art. 779. Testamentary succession is that which results from the designation of an heir, made in a will
executed in the form prescribed by law. (n)

Art. 780. Mixed succession is that effected partly by will and partly by operation of law. (n)

Art. 781. The inheritance of a person includes not only the property and the transmissible rights and
obligations existing at the time of his death, but also those which have accrued thereto since the
opening of the succession. (n)

Art. 782. An heir is a person called to the succession either by the provision of a will or by operation
of law.

Devisees and legatees are persons to whom gifts of real and personal property are respectively given
by virtue of a will. (n)

CHAPTER 2
TESTAMENTARY SUCCESSION

SECTION 1. - Wills

SUBSECTION 1. - Wills in General

Art. 783. A will is an act whereby a person is permitted, with the formalities prescribed by law, to
control to a certain degree the disposition of this estate, to take effect after his death. (667a)

Art. 784. The making of a will is a strictly personal act; it cannot be left in whole or in part of the
discretion of a third person, or accomplished through the instrumentality of an agent or attorney.
(670a)
Art. 785. The duration or efficacy of the designation of heirs, devisees or legatees, or the
determination of the portions which they are to take, when referred to by name, cannot be left to the
discretion of a third person. (670a)

Art. 786. The testator may entrust to a third person the distribution of specific property or sums of
money that he may leave in general to specified classes or causes, and also the designation of the
persons, institutions or establishments to which such property or sums are to be given or applied.
(671a)

Art. 787. The testator may not make a testamentary disposition in such manner that another person
has to determine whether or not it is to be operative. (n)

Art. 788. If a testamentary disposition admits of different interpretations, in case of doubt, that
interpretation by which the disposition is to be operative shall be preferred. (n)

Art. 789. When there is an imperfect description, or when no person or property exactly answers the
description, mistakes and omissions must be corrected, if the error appears from the context of the
will or from extrinsic evidence, excluding the oral declarations of the testator as to his intention; and
when an uncertainty arises upon the face of the will, as to the application of any of its provisions, the
testator's intention is to be ascertained from the words of the will, taking into consideration the
circumstances under which it was made, excluding such oral declarations. (n)

Art. 790. The words of a will are to be taken in their ordinary and grammatical sense, unless a clear
intention to use them in another sense can be gathered, and that other can be ascertained.

Technical words in a will are to be taken in their technical sense, unless the context clearly indicates a
contrary intention, or unless it satisfactorily appears that he was unacquainted with such technical
sense. (675a)

Art. 791. The words of a will are to receive an interpretation which will give to every expression some
effect, rather than one which will render any of the expressions inoperative; and of two modes of
interpreting a will, that is to be preferred which will prevent intestacy. (n)

Art. 792. The invalidity of one of several dispositions contained in a will does not result in the
invalidity of the other dispositions, unless it is to be presumed that the testator would not have made
such other dispositions if the first invalid disposition had not been made. (n)

Art. 793. Property acquired after the making of a will shall only pass thereby, as if the testator had
possessed it at the time of making the will, should it expressly appear by the will that such was his
intention. (n)

Art. 794. Every devise or legacy shall cover all the interest which the testator could device or
bequeath in the property disposed of, unless it clearly appears from the will that he intended to convey
a less interest. (n)

Art. 795. The validity of a will as to its form depends upon the observance of the law in force at the
time it is made. (n)
 SECOND DIVISION

[G.R. No. 149926. February 23, 2005]

UNION BANK OF THE PHILIPPINES, petitioner, vs. EDMUND SANTIBAEZ and

FLORENCE SANTIBAEZ ARIOLA, respondents.

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court which
seeks the reversal of the Decision[1] of the Court of Appeals dated May 30, 2001 in CA-G.R. CV No.
48831 affirming the dismissal[2] of the petitioners complaint in Civil Case No. 18909 by the Regional
Trial Court (RTC) of Makati City, Branch 63.

The antecedent facts are as follows:

On May 31, 1980, the First Countryside Credit Corporation (FCCC) and Efraim M. Santibaez entered
into a loan agreement[3] in the amount of P128,000.00. The amount was intended for the payment of
the purchase price of one (1) unit Ford 6600 Agricultural All-Purpose Diesel Tractor. In view thereof,
Efraim and his son, Edmund, executed a promissory note in favor of the FCCC, the principal sum
payable in five equal annual amortizations of P43,745.96 due on May 31, 1981 and every May 31st
thereafter up to May 31, 1985.

On December 13, 1980, the FCCC and Efraim entered into another loan agreement,[4] this time in the
amount of P123,156.00. It was intended to pay the balance of the purchase price of another unit of
Ford 6600 Agricultural All-Purpose Diesel Tractor, with accessories, and one (1) unit Howard
Rotamotor Model AR 60K. Again, Efraim and his son, Edmund, executed a promissory note for the
said amount in favor of the FCCC. Aside from such promissory note, they also signed a Continuing
Guaranty Agreement[5] for the loan dated December 13, 1980.

Sometime in February 1981, Efraim died, leaving a holographic will.[6] Subsequently in March 1981,
testate proceedings commenced before the RTC of Iloilo City, Branch 7, docketed as Special
Proceedings No. 2706. On April 9, 1981, Edmund, as one of the heirs, was appointed as the special
administrator of the estate of the decedent.[7] During the pendency of the testate proceedings, the
surviving heirs, Edmund and his sister Florence Santibaez Ariola, executed a Joint Agreement[8]
dated July 22, 1981, wherein they agreed to divide between themselves and take possession of the
three (3) tractors; that is, two (2) tractors for Edmund and one (1) tractor for Florence. Each of them
was to assume the indebtedness of their late father to FCCC, corresponding to the tractor respectively
taken by them.
On August 20, 1981, a Deed of Assignment with Assumption of Liabilities[9] was executed by and
between FCCC and Union Savings and Mortgage Bank, wherein the FCCC as the assignor, among
others, assigned all its assets and liabilities to Union Savings and Mortgage Bank.

Demand letters[10] for the settlement of his account were sent by petitioner Union Bank of the
Philippines (UBP) to Edmund, but the latter failed to heed the same and refused to pay. Thus, on
February 5, 1988, the petitioner filed a Complaint[11] for sum of money against the heirs of Efraim
Santibaez, Edmund and Florence, before the RTC of Makati City, Branch 150, docketed as Civil Case
No. 18909. Summonses were issued against both, but the one intended for Edmund was not served
since he was in the United States and there was no information on his address or the date of his return
to the Philippines.[12] Accordingly, the complaint was narrowed down to respondent Florence S.
Ariola.

On December 7, 1988, respondent Florence S. Ariola filed her Answer[13] and alleged that the loan
documents did not bind her since she was not a party thereto. Considering that the joint agreement
signed by her and her brother Edmund was not approved by the probate court, it was null and void;
hence, she was not liable to the petitioner under the joint agreement.

On January 29, 1990, the case was unloaded and re-raffled to the RTC of Makati City, Branch 63.[14]
Consequently, trial on the merits ensued and a decision was subsequently rendered by the court
dismissing the complaint for lack of merit. The decretal portion of the RTC decision reads:

WHEREFORE, judgment is hereby rendered DISMISSING the complaint for lack of merit.[15]

The trial court found that the claim of the petitioner should have been filed with the probate court
before which the testate estate of the late Efraim Santibaez was pending, as the sum of money being
claimed was an obligation incurred by the said decedent. The trial court also found that the Joint
Agreement apparently executed by his heirs, Edmund and Florence, on July 22, 1981, was, in effect, a
partition of the estate of the decedent. However, the said agreement was void, considering that it had
not been approved by the probate court, and that there can be no valid partition until after the will has
been probated. The trial court further declared that petitioner failed to prove that it was the now
defunct Union Savings and Mortgage Bank to which the FCCC had assigned its assets and liabilities.
The court also agreed to the contention of respondent Florence S. Ariola that the list of assets and
liabilities of the FCCC assigned to Union Savings and Mortgage Bank did not clearly refer to the
decedents account. Ruling that the joint agreement executed by the heirs was null and void, the trial
court held that the petitioners cause of action against respondent Florence S. Ariola must necessarily
fail.

The petitioner appealed from the RTC decision and elevated its case to the Court of Appeals (CA),
assigning the following as errors of the trial court:

1. THE COURT A QUO ERRED IN FINDING THAT THE JOINT AGREEMENT (EXHIBIT A)
SHOULD BE APPROVED BY THE PROBATE COURT.
2. THE COURT A QUO ERRED IN FINDING THAT THERE CAN BE NO VALID PARTITION
AMONG THE HEIRS UNTIL AFTER THE WILL HAS BEEN PROBATED.

3. THE COURT A QUO ERRED IN NOT FINDING THAT THE DEFENDANT HAD WAIVED
HER RIGHT TO HAVE THE CLAIM RE-LITIGATED IN THE ESTATE PROCEEDING.[16]

The petitioner asserted before the CA that the obligation of the deceased had passed to his legitimate
children and heirs, in this case, Edmund and Florence; the unconditional signing of the joint
agreement marked as Exhibit A estopped respondent Florence S. Ariola, and that she cannot deny her
liability under the said document; as the agreement had been signed by both heirs in their personal
capacity, it was no longer necessary to present the same before the probate court for approval; the
property partitioned in the agreement was not one of those enumerated in the holographic will made
by the deceased; and the active participation of the heirs, particularly respondent Florence S. Ariola,
in the present ordinary civil action was tantamount to a waiver to re-litigate the claim in the estate
proceedings.

On the other hand, respondent Florence S. Ariola maintained that the money claim of the petitioner
should have been presented before the probate court.[17]

The appellate court found that the appeal was not meritorious and held that the petitioner should have
filed its claim with the probate court as provided under Sections 1 and 5, Rule 86 of the Rules of
Court. It further held that the partition made in the agreement was null and void, since no valid
partition may be had until after the will has been probated. According to the CA, page 2, paragraph (e)
of the holographic will covered the subject properties (tractors) in generic terms when the deceased
referred to them as all other properties. Moreover, the active participation of respondent Florence S.
Ariola in the case did not amount to a waiver. Thus, the CA affirmed the RTC decision, viz.:

WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court of Makati
City, Branch 63, is hereby AFFIRMED in toto.

SO ORDERED.[18]

In the present recourse, the petitioner ascribes the following errors to the CA:

I.

THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE JOINT

AGREEMENT SHOULD BE APPROVED BY THE PROBATE COURT.
II.

THE COURT OF APPEALS ERRED IN FINDING THAT THERE CAN BE NO VALID

PARTITION AMONG THE HEIRS OF THE LATE EFRAIM SANTIBAEZ UNTIL AFTER THE
WILL HAS BEEN PROBATED.

III.

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE RESPONDENT HAD
WAIVED HER RIGHT TO HAVE THE CLAIM RE-LITIGATED IN THE ESTATE PROCEEDING.

IV.

RESPONDENTS CAN, IN FACT, BE HELD JOINTLY AND SEVERALLY LIABLE WITH THE
PRINCIPAL DEBTOR THE LATE EFRAIM SANTIBAEZ ON THE STRENGTH OF THE
CONTINUING GUARANTY AGREEMENT EXECUTED IN FAVOR OF PETITIONER-
APPELLANT UNION BANK.

V.

THE PROMISSORY NOTES DATED MAY 31, 1980 IN THE SUM OF P128,000.00 AND
DECEMBER 13, 1980 IN THE AMOUNT OF P123,000.00 CATEGORICALLY ESTABLISHED
THE FACT THAT THE RESPONDENTS BOUND THEMSELVES JOINTLY AND SEVERALLY
LIABLE WITH THE LATE DEBTOR EFRAIM SANTIBAEZ IN FAVOR OF PETITIONER
UNION BANK.[19]

The petitioner claims that the obligations of the deceased were transmitted to the heirs as provided in
Article 774 of the Civil Code; there was thus no need for the probate court to approve the joint
agreement where the heirs partitioned the tractors owned by the deceased and assumed the obligations
related thereto. Since respondent Florence S. Ariola signed the joint agreement without any condition,
she is now estopped from asserting any position contrary thereto. The petitioner also points out that
the holographic will of the deceased did not include nor mention any of the tractors subject of the
complaint, and, as such was beyond the ambit of the said will. The active participation and resistance
of respondent Florence S. Ariola in the ordinary civil action against the petitioners claim amounts to a
waiver of the right to have the claim presented in the probate proceedings, and to allow any one of the
heirs who executed the joint agreement to escape liability to pay the value of the tractors under
consideration would be equivalent to allowing the said heirs to enrich themselves to the damage and
prejudice of the petitioner.

The petitioner, likewise, avers that the decisions of both the trial and appellate courts failed to
consider the fact that respondent Florence S. Ariola and her brother Edmund executed loan
documents, all establishing the vinculum juris or the legal bond between the late Efraim Santibaez and
his heirs to be in the nature of a solidary obligation. Furthermore, the Promissory Notes dated May 31,
1980 and December 13, 1980 executed by the late Efraim Santibaez, together with his heirs, Edmund
and respondent Florence, made the obligation solidary as far as the said heirs are concerned. The
petitioner also proffers that, considering the express provisions of the continuing guaranty agreement
and the promissory notes executed by the named respondents, the latter must be held liable jointly and
severally liable thereon. Thus, there was no need for the petitioner to file its money claim before the
probate court. Finally, the petitioner stresses that both surviving heirs are being sued in their
respective personal capacities, not as heirs of the deceased.

In her comment to the petition, respondent Florence S. Ariola maintains that the petitioner is trying to
recover a sum of money from the deceased Efraim Santibaez; thus the claim should have been filed
with the probate court. She points out that at the time of the execution of the joint agreement there
was already an existing probate proceedings of which the petitioner knew about. However, to avoid a
claim in the probate court which might delay payment of the obligation, the petitioner opted to require
them to execute the said agreement.

According to the respondent, the trial court and the CA did not err in declaring that the agreement was
null and void. She asserts that even if the agreement was voluntarily executed by her and her brother
Edmund, it should still have been subjected to the approval of the court as it may prejudice the estate,
the heirs or third parties. Furthermore, she had not waived any rights, as she even stated in her answer
in the court a quo that the claim should be filed with the probate court. Thus, the petitioner could not
invoke or claim that she is in estoppel.

Respondent Florence S. Ariola further asserts that she had not signed any continuing guaranty
agreement, nor was there any document presented as evidence to show that she had caused herself to
be bound by the obligation of her late father.

The petition is bereft of merit.

The Court is posed to resolve the following issues: a) whether or not the partition in the Agreement
executed by the heirs is valid; b) whether or not the heirs assumption of the indebtedness of the
deceased is valid; and c) whether the petitioner can hold the heirs liable on the obligation of the
deceased.

At the outset, well-settled is the rule that a probate court has the jurisdiction to determine all the
properties of the deceased, to determine whether they should or should not be included in the
inventory or list of properties to be administered.[20] The said court is primarily concerned with the
administration, liquidation and distribution of the estate.[21]

In our jurisdiction, the rule is that there can be no valid partition among the heirs until after the will
has been probated:

In testate succession, there can be no valid partition among the heirs until after the will has been
probated. The law enjoins the probate of a will and the public requires it, because unless a will is
probated and notice thereof given to the whole world, the right of a person to dispose of his property
by will may be rendered nugatory. The authentication of a will decides no other question than such as
touch upon the capacity of the testator and the compliance with those requirements or solemnities
which the law prescribes for the validity of a will.[22]
This, of course, presupposes that the properties to be partitioned are the same properties embraced in
the will.[23] In the present case, the deceased, Efraim Santibaez, left a holographic will[24] which
contained, inter alia, the provision which reads as follows:

(e) All other properties, real or personal, which I own and may be discovered later after my demise,
shall be distributed in the proportion indicated in the immediately preceding paragraph in favor of
Edmund and Florence, my children.

We agree with the appellate court that the above-quoted is an all-encompassing provision embracing
all the properties left by the decedent which might have escaped his mind at that time he was making
his will, and other properties he may acquire thereafter. Included therein are the three (3) subject
tractors. This being so, any partition involving the said tractors among the heirs is not valid. The joint
agreement[25] executed by Edmund and Florence, partitioning the tractors among themselves, is
invalid, specially so since at the time of its execution, there was already a pending proceeding for the
probate of their late fathers holographic will covering the said tractors.

It must be stressed that the probate proceeding had already acquired jurisdiction over all the properties
of the deceased, including the three (3) tractors. To dispose of them in any way without the probate
courts approval is tantamount to divesting it with jurisdiction which the Court cannot allow.[26] Every
act intended to put an end to indivision among co-heirs and legatees or devisees is deemed to be a
partition, although it should purport to be a sale, an exchange, a compromise, or any other transaction.
[27] Thus, in executing any joint agreement which appears to be in the nature of an extra-judicial
partition, as in the case at bar, court approval is imperative, and the heirs cannot just divest the court
of its jurisdiction over that part of the estate. Moreover, it is within the jurisdiction of the probate
court to determine the identity of the heirs of the decedent.[28] In the instant case, there is no showing
that the signatories in the joint agreement were the only heirs of the decedent. When it was executed,
the probate of the will was still pending before the court and the latter had yet to determine who the
heirs of the decedent were. Thus, for Edmund and respondent Florence S. Ariola to adjudicate unto
themselves the three (3) tractors was a premature act, and prejudicial to the other possible heirs and
creditors who may have a valid claim against the estate of the deceased.

The question that now comes to fore is whether the heirs assumption of the indebtedness of the
decedent is binding. We rule in the negative. Perusing the joint agreement, it provides that the heirs as
parties thereto have agreed to divide between themselves and take possession and use the above-
described chattel and each of them to assume the indebtedness corresponding to the chattel taken as
herein after stated which is in favor of First Countryside Credit Corp.[29] The assumption of liability
was conditioned upon the happening of an event, that is, that each heir shall take possession and use
of their respective share under the agreement. It was made dependent on the validity of the partition,
and that they were to assume the indebtedness corresponding to the chattel that they were each to
receive. The partition being invalid as earlier discussed, the heirs in effect did not receive any such
tractor. It follows then that the assumption of liability cannot be given any force and effect.

The Court notes that the loan was contracted by the decedent. The petitioner, purportedly a creditor of
the late Efraim Santibaez, should have thus filed its money claim with the probate court in accordance
with Section 5, Rule 86 of the Revised Rules of Court, which provides:
Section 5. Claims which must be filed under the notice. If not filed barred; exceptions. All claims for
money against the decedent, arising from contract, express or implied, whether the same be due, not
due, or contingent, all claims for funeral expenses for the last sickness of the decedent, and judgment
for money against the decedent, must be filed within the time limited in the notice; otherwise they are
barred forever, except that they may be set forth as counterclaims in any action that the executor or
administrator may bring against the claimants. Where an executor or administrator commences an
action, or prosecutes an action already commenced by the deceased in his lifetime, the debtor may set
forth by answer the claims he has against the decedent, instead of presenting them independently to
the court as herein provided, and mutual claims may be set off against each other in such action; and
if final judgment is rendered in favor of the defendant, the amount so determined shall be considered
the true balance against the estate, as though the claim had been presented directly before the court in
the administration proceedings. Claims not yet due, or contingent, may be approved at their present
value.

The filing of a money claim against the decedents estate in the probate court is mandatory.[30] As we
held in the vintage case of Py Eng Chong v. Herrera:[31]

This requirement is for the purpose of protecting the estate of the deceased by informing the executor
or administrator of the claims against it, thus enabling him to examine each claim and to determine
whether it is a proper one which should be allowed. The plain and obvious design of the rule is the
speedy settlement of the affairs of the deceased and the early delivery of the property to the
distributees, legatees, or heirs. `The law strictly requires the prompt presentation and disposition of
the claims against the decedent's estate in order to settle the affairs of the estate as soon as possible,
pay off its debts and distribute the residue.[32]

Perusing the records of the case, nothing therein could hold private respondent Florence S. Ariola
accountable for any liability incurred by her late father. The documentary evidence presented,
particularly the promissory notes and the continuing guaranty agreement, were executed and signed
only by the late Efraim Santibaez and his son Edmund. As the petitioner failed to file its money claim
with the probate court, at most, it may only go after Edmund as co-maker of the decedent under the
said promissory notes and continuing guaranty, of course, subject to any defenses Edmund may have
as against the petitioner. As the court had not acquired jurisdiction over the person of Edmund, we
find it unnecessary to delve into the matter further.

We agree with the finding of the trial court that the petitioner had not sufficiently shown that it is the
successor-in-interest of the Union Savings and Mortgage Bank to which the FCCC assigned its assets
and liabilities.[33] The petitioner in its complaint alleged that by virtue of the Deed of Assignment
dated August 20, 1981 executed by and between First Countryside Credit Corporation and Union
Bank of the Philippines[34] However, the documentary evidence[35] clearly reflects that the parties in
the deed of assignment with assumption of liabilities were the FCCC, and the Union Savings and
Mortgage Bank, with the conformity of Bancom Philippine Holdings, Inc. Nowhere can the
petitioners participation therein as a party be found. Furthermore, no documentary or testimonial
evidence was presented during trial to show that Union Savings and Mortgage Bank is now, in fact,
petitioner Union Bank of the Philippines. As the trial court declared in its decision:
[T]he court also finds merit to the contention of defendant that plaintiff failed to prove or did not
present evidence to prove that Union Savings and Mortgage Bank is now the Union Bank of the
Philippines. Judicial notice does not apply here. The power to take judicial notice is to [be] exercised
by the courts with caution; care must be taken that the requisite notoriety exists; and every reasonable
doubt upon the subject should be promptly resolved in the negative. (Republic vs. Court of Appeals,
107 SCRA 504).[36]

This being the case, the petitioners personality to file the complaint is wanting. Consequently, it failed
to establish its cause of action. Thus, the trial court did not err in dismissing the complaint, and the
CA in affirming the same.

IN LIGHT OF ALL THE FOREGOING, the petition is hereby DENIED. The assailed Court of
Appeals Decision is AFFIRMED. No costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

EN BANC
[G.R. No. L-8437. November 28, 1956.]
ESTATE OF K. H. HEMADY, deceased, vs. LUZON SURETY CO., INC., claimant-Appellant.

DECISION
REYES, J. B. L., J.:
Appeal by Luzon Surety Co., Inc., from an order of the Court of First Instance of Rizal, presided by
Judge Hermogenes Caluag, dismissing its claim against the Estate of K. H. Hemady (Special
Proceeding No. Q-293) for failure to state a cause of action.
The Luzon Surety Co. had filed a claim against the Estate based on twenty different indemnity
agreements, or counter bonds, each subscribed by a distinct principal and by the deceased K. H.
Hemady, a surety solidary guarantor) in all of them, in consideration of the Luzon Surety Co.s of
having guaranteed, the various principals in favor of different creditors. The twenty counterbonds, or
indemnity agreements, all contained the following stipulations:chanroblesvirtuallawlibrary
Premiums. As consideration for this suretyship, the undersigned jointly and severally, agree to pay
the COMPANY the sum of ________________ (P______) pesos, Philippines Currency, in advance as
premium there of for every __________ months or fractions thereof, this ________ or any renewal or
substitution thereof is in effect.
Indemnity. The undersigned, jointly and severally, agree at all times to indemnify the COMPANY
and keep it indemnified and hold and save it harmless from and against any and all damages, losses,
costs, stamps, taxes, penalties, charges, and expenses of whatsoever kind and nature which the
COMPANY shall or may, at any time sustain or incur in consequence of having become surety upon
this bond or any extension, renewal, substitution or alteration thereof made at the instance of the
undersigned or any of them or any order executed on behalf of the undersigned or any of them; chan
roblesvirtualawlibraryand to pay, reimburse and make good to the COMPANY, its successors and
assigns, all sums and amount of money which it or its representatives shall pay or cause to be paid, or
become liable to pay, on account of the undersigned or any of them, of whatsoever kind and nature,
including 15% of the amount involved in the litigation or other matters growing out of or connected
therewith for counsel or attorneys fees, but in no case less than P25. It is hereby further agreed that in
case of extension or renewal of this ________ we equally bind ourselves for the payment thereof
under the same terms and conditions as above mentioned without the necessity of executing another
indemnity agreement for the purpose and that we hereby equally waive our right to be notified of any
renewal or extension of this ________ which may be granted under this indemnity agreement.
Interest on amount paid by the Company. Any and all sums of money so paid by the company shall
bear interest at the rate of 12% per annum which interest, if not paid, will be accummulated and
added to the capital quarterly order to earn the same interests as the capital and the total sum thereof,
the capital and interest, shall be paid to the COMPANY as soon as the COMPANY shall have become
liable therefore, whether it shall have paid out such sums of money or any part thereof or not.
xxx xxx xxx
Waiver. It is hereby agreed upon by and between the undersigned that any question which may
arise between them by reason of this document and which has to be submitted for decision to Courts
of Justice shall be brought before the Court of competent jurisdiction in the City of Manila, waiving
for this purpose any other venue. Our right to be notified of the acceptance and approval of this
indemnity agreement is hereby likewise waived.
xxx xxx xxx
Our Liability Hereunder. It shall not be necessary for the COMPANY to bring suit against the
principal upon his default, or to exhaust the property of the principal, but the liability hereunder of the
undersigned indemnitor shall be jointly and severally, a primary one, the same as that of the principal,
and shall be exigible immediately upon the occurrence of such default. (Rec. App. pp. 98- 102.)
The Luzon Surety Co., prayed for allowance, as a contingent claim, of the value of the twenty bonds it
had executed in consideration of the counterbonds, and further asked for judgment for the unpaid
premiums and documentary stamps affixed to the bonds, with 12 per cent interest thereon.
Before answer was filed, and upon motion of the administratrix of Hemadys estate, the lower court,
by order of September 23, 1953, dismissed the claims of Luzon Surety Co., on two
grounds:chanroblesvirtuallawlibrary (1) that the premiums due and cost of documentary stamps were
not contemplated under the indemnity agreements to be a part of the undertaking of the guarantor
(Hemady), since they were not liabilities incurred after the execution of the counterbonds; chan
roblesvirtualawlibraryand (2) that whatever losses may occur after Hemadys death, are not
chargeable to his estate, because upon his death he ceased to be guarantor.
Taking up the latter point first, since it is the one more far reaching in effects, the reasoning of the
court below ran as follows:chanroblesvirtuallawlibrary
The administratrix further contends that upon the death of Hemady, his liability as a guarantor
terminated, and therefore, in the absence of a showing that a loss or damage was suffered, the claim
cannot be considered contingent. This Court believes that there is merit in this contention and finds
support in Article 2046 of the new Civil Code. It should be noted that a new requirement has been
added for a person to qualify as a guarantor, that is:chanroblesvirtuallawlibrary integrity. As correctly
pointed out by the Administratrix, integrity is something purely personal and is not transmissible.
Upon the death of Hemady, his integrity was not transmitted to his estate or successors. Whatever loss
therefore, may occur after Hemadys death, are not chargeable to his estate because upon his death he
ceased to be a guarantor.
Another clear and strong indication that the surety company has exclusively relied on the personality,
character, honesty and integrity of the now deceased K. H. Hemady, was the fact that in the printed
form of the indemnity agreement there is a paragraph entitled Security by way of first mortgage,
which was expressly waived and renounced by the security company. The security company has not
demanded from K. H. Hemady to comply with this requirement of giving security by way of first
mortgage. In the supporting papers of the claim presented by Luzon Surety Company, no real property
was mentioned in the list of properties mortgaged which appears at the back of the indemnity
agreement. (Rec. App., pp. 407-408).
We find this reasoning untenable. Under the present Civil Code (Article 1311), as well as under the
Civil Code of 1889 (Article 1257), the rule is that
Contracts take effect only as between the parties, their assigns and heirs, except in the case where the
rights and obligations arising from the contract are not transmissible by their nature, or by stipulation
or by provision of law.
While in our successional system the responsibility of the heirs for the debts of their decedent cannot
exceed the value of the inheritance they receive from him, the principle remains intact that these heirs
succeed not only to the rights of the deceased but also to his obligations. Articles 774 and 776 of the
New Civil Code (and Articles 659 and 661 of the preceding one) expressly so provide, thereby
confirming Article 1311 already quoted.
ART. 774. Succession is a mode of acquisition by virtue of which the property, rights and
obligations to the extent of the value of the inheritance, of a person are transmitted through his death
to another or others either by his will or by operation of law.
ART. 776. The inheritance includes all the property, rights and obligations of a person which are
not extinguished by his death.
In Mojica vs. Fernandez, 9 Phil. 403, this Supreme Court ruled:
Under the Civil Code the heirs, by virtue of the rights of succession are subrogated to all the rights
and obligations of the deceased (Article 661) and cannot be regarded as third parties with respect to a
contract to which the deceased was a party, touching the estate of the deceased (Barrios vs. Dolor, 2
Phil. 44).
xxx xxx xxx
The principle on which these decisions rest is not affected by the provisions of the new Code of Civil
Procedure, and, in accordance with that principle, the heirs of a deceased person cannot be held to be
third persons in relation to any contracts touching the real estate of their decedent which comes in to
their hands by right of inheritance; chan roblesvirtualawlibrarythey take such property subject to all
the obligations resting thereon in the hands of him from whom they derive their rights.
(See also Galasinao vs. Austria, 51 Off. Gaz. (No. 6) p. 2874 and de Guzman vs. Salak, 91 Phil., 265).
The binding effect of contracts upon the heirs of the deceased party is not altered by the provision in
our Rules of Court that money debts of a deceased must be liquidated and paid from his estate before
the residue is distributed among said heirs (Rule 89). The reason is that whatever payment is thus
made from the estate is ultimately a payment by the heirs and distributees, since the amount of the
paid claim in fact diminishes or reduces the shares that the heirs would have been entitled to receive.
Under our law, therefore, the general rule is that a partys contractual rights and obligations are
transmissible to the successors. The rule is a consequence of the progressive depersonalization of
patrimonial rights and duties that, as observed by Victorio Polacco, has characterized the history of
these institutions. From the Roman concept of a relation from person to person, the obligation has
evolved into a relation from patrimony to patrimony, with the persons occupying only a representative
position, barring those rare cases where the obligation is strictly personal, i.e., is contracted intuitu
personae, in consideration of its performance by a specific person and by no other. The transition is
marked by the disappearance of the imprisonment for debt.
Of the three exceptions fixed by Article 1311, the nature of the obligation of the surety or guarantor
does not warrant the conclusion that his peculiar individual qualities are contemplated as a principal
inducement for the contract. What did the creditor Luzon Surety Co. expect of K. H. Hemady when it
accepted the latter as surety in the counterbonds? Nothing but the reimbursement of the moneys that
the Luzon Surety Co. might have to disburse on account of the obligations of the principal debtors.
This reimbursement is a payment of a sum of money, resulting from an obligation to give; chan
roblesvirtualawlibraryand to the Luzon Surety Co., it was indifferent that the reimbursement should
be made by Hemady himself or by some one else in his behalf, so long as the money was paid to it.
The second exception of Article 1311, p. 1, is intransmissibility by stipulation of the parties. Being
exceptional and contrary to the general rule, this intransmissibility should not be easily implied, but
must be expressly established, or at the very least, clearly inferable from the provisions of the contract
itself, and the text of the agreements sued upon nowhere indicate that they are non-transferable.
(b) Intransmisibilidad por pacto. Lo general es la transmisibilidad de darechos y
obligaciones; chan roblesvirtualawlibraryle excepcion, la intransmisibilidad. Mientras nada se diga en
contrario impera el principio de la transmision, como elemento natural a toda relacion juridica, salvo
las personalisimas. Asi, para la no transmision, es menester el pacto expreso, porque si no, lo
convenido entre partes trasciende a sus herederos.
Siendo estos los continuadores de la personalidad del causante, sobre ellos recaen los efectos de los
vinculos juridicos creados por sus antecesores, y para evitarlo, si asi se quiere, es indespensable
convension terminante en tal sentido.
Por su esencia, el derecho y la obligacion tienden a ir ms all de las personas que les dieron vida, y a
ejercer presion sobre los sucesores de esa persona; chan roblesvirtualawlibrarycuando no se quiera
esto, se impone una estipulacion limitativa expresamente de la transmisibilidad o de cuyos tirminos
claramente se deduzca la concresion del concreto a las mismas personas que lo otorgon. (Scaevola,
Codigo Civil, Tomo XX, p. 541-542) (Emphasis supplied.)
Because under the law (Article 1311), a person who enters into a contract is deemed to have
contracted for himself and his heirs and assigns, it is unnecessary for him to expressly stipulate to that
effect; chan roblesvirtualawlibraryhence, his failure to do so is no sign that he intended his bargain to
terminate upon his death. Similarly, that the Luzon Surety Co., did not require bondsman Hemady to
execute a mortgage indicates nothing more than the companys faith and confidence in the financial
stability of the surety, but not that his obligation was strictly personal.
The third exception to the transmissibility of obligations under Article 1311 exists when they are not
transmissible by operation of law. The provision makes reference to those cases where the law
expresses that the rights or obligations are extinguished by death, as is the case in legal support
(Article 300), parental authority (Article 327), usufruct (Article 603), contracts for a piece of work
(Article 1726), partnership (Article 1830 and agency (Article 1919). By contract, the articles of the
Civil Code that regulate guaranty or suretyship (Articles 2047 to 2084) contain no provision that the
guaranty is extinguished upon the death of the guarantor or the surety.
The lower court sought to infer such a limitation from Art. 2056, to the effect that one who is obliged
to furnish a guarantor must present a person who possesses integrity, capacity to bind himself, and
sufficient property to answer for the obligation which he guarantees. It will be noted, however, that
the law requires these qualities to be present only at the time of the perfection of the contract of
guaranty. It is self-evident that once the contract has become perfected and binding, the supervening
incapacity of the guarantor would not operate to exonerate him of the eventual liability he has
contracted; chan roblesvirtualawlibraryand if that be true of his capacity to bind himself, it should also
be true of his integrity, which is a quality mentioned in the article alongside the capacity.
The foregoing concept is confirmed by the next Article 2057, that runs as
follows:chanroblesvirtuallawlibrary
ART. 2057. If the guarantor should be convicted in first instance of a crime involving dishonesty
or should become insolvent, the creditor may demand another who has all the qualifications required
in the preceding article. The case is excepted where the creditor has required and stipulated that a
specified person should be guarantor.
From this article it should be immediately apparent that the supervening dishonesty of the guarantor
(that is to say, the disappearance of his integrity after he has become bound) does not terminate the
contract but merely entitles the creditor to demand a replacement of the guarantor. But the step
remains optional in the creditor:chanroblesvirtuallawlibrary it is his right, not his duty; chan
roblesvirtualawlibraryhe may waive it if he chooses, and hold the guarantor to his bargain. Hence
Article 2057 of the present Civil Code is incompatible with the trial courts stand that the requirement
of integrity in the guarantor or surety makes the latters undertaking strictly personal, so linked to his
individuality that the guaranty automatically terminates upon his death.
The contracts of suretyship entered into by K. H. Hemady in favor of Luzon Surety Co. not being
rendered intransmissible due to the nature of the undertaking, nor by the stipulations of the contracts
themselves, nor by provision of law, his eventual liability thereunder necessarily passed upon his
death to his heirs. The contracts, therefore, give rise to contingent claims provable against his estate
under section 5, Rule 87 (2 Moran, 1952 ed., p. 437; chan roblesvirtualawlibraryGaskell & Co. vs.
Tan Sit, 43 Phil. 810, 814).
The most common example of the contigent claim is that which arises when a person is bound as
surety or guarantor for a principal who is insolvent or dead. Under the ordinary contract of suretyship
the surety has no claim whatever against his principal until he himself pays something by way of
satisfaction upon the obligation which is secured. When he does this, there instantly arises in favor of
the surety the right to compel the principal to exonerate the surety. But until the surety has contributed
something to the payment of the debt, or has performed the secured obligation in whole or in part, he
has no right of action against anybody no claim that could be reduced to judgment. (May vs. Vann,
15 Pla., 553; chan roblesvirtualawlibraryGibson vs. Mithell, 16 Pla., 519; chan
roblesvirtualawlibraryMaxey vs. Carter, 10 Yarg. [Tenn.], 521 Reeves vs. Pulliam, 7 Baxt. [Tenn.],
119; chan roblesvirtualawlibraryErnst vs. Nou, 63 Wis., 134.)
For Defendant administratrix it is averred that the above doctrine refers to a case where the surety
files claims against the estate of the principal debtor; chan roblesvirtualawlibraryand it is urged that
the rule does not apply to the case before us, where the late Hemady was a surety, not a principal
debtor. The argument evinces a superficial view of the relations between parties. If under the Gaskell
ruling, the Luzon Surety Co., as guarantor, could file a contingent claim against the estate of the
principal debtors if the latter should die, there is absolutely no reason why it could not file such a
claim against the estate of Hemady, since Hemady is a solidary co-debtor of his principals. What the
Luzon Surety Co. may claim from the estate of a principal debtor it may equally claim from the estate
of Hemady, since, in view of the existing solidarity, the latter does not even enjoy the benefit of
exhaustion of the assets of the principal debtor.
The foregoing ruling is of course without prejudice to the remedies of the administratrix against the
principal debtors under Articles 2071 and 2067 of the New Civil Code.
Our conclusion is that the solidary guarantors liability is not extinguished by his death, and that in
such event, the Luzon Surety Co., had the right to file against the estate a contingent claim for
reimbursement. It becomes unnecessary now to discuss the estates liability for premiums and stamp
taxes, because irrespective of the solution to this question, the Luzon Suretys claim did state a cause
of action, and its dismissal was erroneous.
Wherefore, the order appealed from is reversed, and the records are ordered remanded to the court of
origin, with instructions to proceed in accordance with law. Costs against the
Administratrix- Appellee. SO ORDERED.
Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia
and Felix, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION
 G.R. No. L-68053 May 7, 1990

LAURA ALVAREZ, FLORA ALVAREZ and RAYMUNDO ALVAREZ, petitioners,

vs.
THE HONORABLE INTERMEDIATE APELLATE COURT and JESUS YANES, ESTELITA
YANES, ANTONIO YANES, ROSARIO YANES, and ILUMINADO YANES, respondents.

Francisco G. Banzon for petitioner.

Renecio R. Espiritu for private respondents.

FERNAN, C.J.:

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

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

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

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

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

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

On May 30, 1955, Santiago sold Lots 773-A and 773-B to Monico B. Fuentebella, Jr. in consideration
of the sum of P7,000.00. 5 Consequently, on February 20, 1956, TCT Nos. T-19291 and T-19292 were
issued in Fuentebella's name. 6

After Fuentebella's death and during the settlement of his estate, the administratrix thereof (Arsenia R.
Vda. de Fuentebella, his wife) filed in Special Proceedings No. 4373 in the Court of First Instance of
Negros Occidental, a motion requesting authority to sell Lots 773-A and 773-B. 7 By virtue of a court
order granting said motion, 8 on March 24, 1958, Arsenia Vda. de Fuentebella sold said lots for
P6,000.00 to Rosendo Alvarez. 9 Hence, on April 1, 1958 TCT Nos. T-23165 and T-23166 covering
Lots 773-A and 773-B were respectively issued to Rosendo Alvarez. 10

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

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

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

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

WHEREFORE, judgment is rendered, ordering the defendant Rosendo Alvarez to

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

SO ORDERED. 16

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

However, execution of said decision proved unsuccessful with respect to Lot 773. In his return of
service dated October 20, 1965, the sheriff stated that he discovered that Lot 773 had been subdivided
into Lots 773-A and 773-B; that they were "in the name" of Rodolfo Siason who had purchased them
from Alvarez, and that Lot 773 could not be delivered to the plaintiffs as Siason was "not a party per
writ of execution." 17
The execution of the decision in Civil Case No. 5022 having met a hindrance, herein private
respondents (the Yaneses) filed on July 31, 1965, in the Court of First Instance of Negros Occidental a
petition for the issuance of a new certificate of title and for a declaration of nullity of TCT Nos. T-
23165 and T-23166 issued to Rosendo Alvarez. 18 Thereafter, the court required Rodolfo Siason to
produce the certificates of title covering Lots 773 and 823.

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

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

The action filed by the Yaneses on February 21, 1968 was for recovery of real property with
damages. 24 Named defendants therein were Dr. Rodolfo Siason, Laura Alvarez, Flora Alvarez,
Raymundo Alvarez and the Register of Deeds of Negros Occidental. The Yaneses prayed for the
cancellation of TCT Nos. T-19291 and 19292 issued to Siason (sic) for being null and void; the
issuance of a new certificate of title in the name of the Yaneses "in accordance with the sheriffs return
of service dated October 20, 1965;" Siason's delivery of possession of Lot 773 to the Yaneses; and if,
delivery thereof could not be effected, or, if the issuance of a new title could not be made, that the
Alvarez and Siason jointly and severally pay the Yaneses the sum of P45,000.00. They also prayed
that Siason render an accounting of the fruits of Lot 773 from November 13, 1961 until the filing of
the complaint; and that the defendants jointly and severally pay the Yaneses moral damages of
P20,000.00 and exemplary damages of P10,000.00 plus attorney's fees of P4, 000.00. 25

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

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

IN VIEW OF THE FOREGOING CONSIDERATION, judgment is hereby rendered

in the following manner:

A. The case against the defendant Dr. Rodolfo Siason and the Register of Deeds are
(sic) hereby dismmissed,
 B. The defendants, Laura, Flora and Raymundo, all surnamed Alvarez being the
legitimate children of the deceased Rosendo Alvarez are hereby ordered to pay jointly
and severally the plaintiffs the sum of P20,000.00 representing the actual value of
Lots Nos. 773-A and 773-B of Murcia Cadastre, Negros Occidental; the sum of
P2,000.00 as actual damages suffered by the plaintiff; the sum of P5,000.00
representing moral damages and the sum of P2.000 as attorney's fees, all with legal
rate of interest from date of the filing of this complaint up to final payment.

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

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

SO ORDERED. 29

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

WHEREFORE, the decision appealed from is affirmed insofar as it ordered

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

SO ORDERED. 32

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

Hence, the instant petition. ln their memorandum petitioners raised the following issues:

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

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

3. Whether or not the late Rosendo Alvarez, a defendant in Civil Case No. 5022,
supra and father of the petitioners become a privy and/or party to the waiver (Exhibit
4-defendant Siason) in Civil Case No. 8474, supra where the private respondents had
unqualifiedly and absolutely waived, renounced and quitclaimed all their alleged
rights and interests, if ever there is any, on Lots Nos. 773-A and 773-B of Murcia
Cadastre as appearing in their written manifestation dated November 6, 1962
(Exhibits "4" Siason) which had not been controverted or even impliedly or indirectly
denied by them.
 4. Whether or not the liability or liabilities of Rosendo Alvarez arising from the sale
of Lots Nos. 773-A and 773-B of Murcia Cadastre to Dr. Rodolfo Siason, if ever there
is any, could be legally passed or transmitted by operations (sic) of law to the
petitioners without violation of law and due process . 33

The petition is devoid of merit.

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

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

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

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

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

The issue on the right to the properties in litigation having been finally adjudicated in Civil Case No.
5022 in favor of private respondents, it cannot now be reopened in the instant case on the pretext that
the defenses of prescription and estoppel have not been properly considered by the lower court.
Petitioners could have appealed in the former case but they did not. They have therefore foreclosed
their rights, if any, and they cannot now be heard to complain in another case in order to defeat the
enforcement of a judgment which has longing become final and executory.
Petitioners further contend that the liability arising from the sale of Lots No. 773-A and 773-B made
by Rosendo Alvarez to Dr. Rodolfo Siason should be the sole liability of the late Rosendo Alvarez or
of his estate, after his death.

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

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

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

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

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

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

Under our law, therefore. the general rule is that a party's contractual rights and
obligations are transmissible to the successors.

The rule is a consequence of the progressive "depersonalization" of patrimonial rights

and duties that, as observed by Victorio Polacco has characterized the history of these
institutions. From the Roman concept of a relation from person to person, the
obligation has evolved into a relation from patrimony to patrimony with the persons
occupying only a representative position, barring those rare cases where the
obligation is strictly personal, i.e., is contracted intuitu personae, in consideration of
its performance by a specific person and by no other.

xxx xxx xxx

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

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

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

SO ORDERED.

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

Bidin J., took no part.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-4963 January 29, 1953

 MARIA USON, plaintiff-appellee,
vs.
MARIA DEL ROSARIO, CONCEPCION NEBREDA, CONRADO NEBREDA, DOMINADOR
NEBREDA, AND FAUSTINO NEBREDA, Jr., defendants-appellants.

Priscilo Evangelista for appellee.

Brigido G. Estrada for appellant.

BAUTISTA ANGELO, J.:

This is an action for recovery of the ownership and possession of five (5) parcels of land situated in
the Municipality of Labrador, Province of Pangasinan, filed by Maria Uson against Maria del Rosario
and her four children named Concepcion, Conrado, Dominador, and Faustino, surnamed Nebreda,
who are all of minor age, before the Court of First Instance of Pangasinan.

Maria Uson was the lawful wife of Faustino Nebreda who upon his death in 1945 left the lands
involved in this litigation. Faustino Nebreda left no other heir except his widow Maria Uson.
However, plaintiff claims that when Faustino Nebreda died in 1945, his common-law wife Maria del
Rosario took possession illegally of said lands thus depriving her of their possession and enjoyment.

Defendants in their answer set up as special defense that on February 21, 1931, Maria Uson and her
husband, the late Faustino Nebreda, executed a public document whereby they agreed to separate as
husband and wife and, in consideration of their separation, Maria Uson was given a parcel of land by
way of alimony and in return she renounced her right to inherit any other property that may be left by
her husband upon his death (Exhibit 1).

After trial, at which both parties presented their respective evidence, the court rendered decision
ordering the defendants to restore to the plaintiff the ownership and possession of the lands in dispute
without special pronouncement as to costs. Defendants interposed the present appeal.

There is no dispute that Maria Uson, plaintiff-appellee, is the lawful wife of Faustino Nebreda, former
owner of the five parcels of lands litigated in the present case. There is likewise no dispute that Maria
del Rosario, one of the defendants-appellants, was merely a common-law wife of the late Faustino
Nebreda with whom she had four illegitimate children, her now co-defendants. It likewise appears
that Faustino Nebreda died in 1945 much prior to the effectivity of the new Civil Code. With this
background, it is evident that when Faustino Nebreda died in 1945 the five parcels of land he was
seized of at the time passed from the moment of his death to his only heir, his widow Maria Uson
(Article 657, old Civil Code).As this Court aptly said, "The property belongs to the heirs at the
moment of the death of the ancestor as completely as if the ancestor had executed and delivered to
them a deed for the same before his death" (Ilustre vs. Alaras Frondosa, 17 Phil., 321). From that
moment, therefore, the rights of inheritance of Maria Uson over the lands in question became vested.

The claim of the defendants that Maria Uson had relinquished her right over the lands in question
because she expressly renounced to inherit any future property that her husband may acquire and
leave upon his death in the deed of separation they had entered into on February 21, 1931, cannot be
entertained for the simple reason that future inheritance cannot be the subject of a contract nor can it
be renounced (1 Manresa, 123, sixth edition; Tolentino on Civil Code, p. 12; Osorio vs. Osorio and
Ynchausti Steamship Co., 41 Phil., 531).

But defendants contend that, while it is true that the four minor defendants are illegitimate children of
the late Faustino Nebreda and under the old Civil Code are not entitled to any successional rights,
however, under the new Civil Code which became in force in June, 1950, they are given the status and
rights of natural children and are entitled to the successional rights which the law accords to the latter
(article 2264 and article 287, new Civil Code), and because these successional rights were declared
for the first time in the new code, they shall be given retroactive effect even though the event which
gave rise to them may have occurred under the prior legislation (Article 2253, new Civil Code).

There is no merit in this claim. Article 2253 above referred to provides indeed that rights which are
declared for the first time shall have retroactive effect even though the event which gave rise to them
may have occurred under the former legislation, but this is so only when the new rights do not
prejudice any vested or acquired right of the same origin. Thus, said article provides that "if a right
should be declared for the first time in this Code, it shall be effective at once, even though the act or
event which gives rise thereto may have been done or may have occurred under the prior legislation,
provided said new right does not prejudice or impair any vested or acquired right, of the same origin."
As already stated in the early part of this decision, the right of ownership of Maria Uson over the
lands in question became vested in 1945 upon the death of her late husband and this is so because of
the imperative provision of the law which commands that the rights to succession are transmitted
from the moment of death (Article 657, old Civil Code). The new right recognized by the new Civil
Code in favor of the illegitimate children of the deceased cannot, therefore, be asserted to the
impairment of the vested right of Maria Uson over the lands in dispute.

As regards the claim that Maria Uson, while her deceased husband was lying in state, in a gesture of
pity or compassion, agreed to assign the lands in question to the minor children for the reason that
they were acquired while the deceased was living with their mother and Maria Uson wanted to
assuage somewhat the wrong she has done to them, this much can be said; apart from the fact that this
claim is disputed, we are of the opinion that said assignment, if any, partakes of the nature of a
donation of real property, inasmuch as it involves no material consideration, and in order that it may
be valid it shall be made in a public document and must be accepted either in the same document or in
a separate one (Article 633, old Civil Code). Inasmuch as this essential formality has not been
followed, it results that the alleged assignment or donation has no valid effect.

WHEREFORE, the decision appealed from is affirmed, without costs.

Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Montemayor, Reyes, Jugo and Labrador, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-28040 August 18, 1972

 TESTATE ESTATE OF JOSEFA TANGCO, JOSE DE BORJA, administrator-appellee; JOSE
DE BORJA, as administrator, CAYETANO DE BORJA, MATILDE DE BORJA and
CRISANTO DE BORJA (deceased) as Children of Josefa Tangco, appellees,
vs.
TASIANA VDA. DE DE BORJA, Special Administratrix of the Testate Estate of Francisco de
Borja, appellant. .

G.R. No L-28568 August 18, 1972

TESTATE ESTATE OF THE LATE FRANCISCO DE BORJA, TASIANA O. VDA. DE DE

BORJA, special Administratrix appellee,
vs.
JOSE DE BORJA, oppositor-appellant.

G.R. No. L-28611 August 18, 1972

TASIANA 0. VDA. DE BORJA, as Administratrix of the Testate Estate of the late Francisco de
Borja, plaintiff-appellee,
vs.
JOSE DE BORJA, as Administrator of the Testate Estate of the late Josefa Tangco, defendant-
appellant.

L-28040

Pelaez, Jalandoni & Jamir for administrator-appellee.

Quiogue & Quiogue for appellee Matilde de Borja.

Andres Matias for appellee Cayetano de Borja.

Sevilla & Aquino for appellant.

L-28568

Sevilla & Aquino for special administratrix-appellee.

Pelaez, Jalandoni & Jamir for oppositor-appellant.

L-28611

Sevilla & Aquino for plaintiff-appellee.

Pelaez, Jalandoni & Jamir and David Gueverra for defendant-appellant.

REYES, J.B.L., J.:p

Of these cases, the first, numbered L-28040 is an appeal by Tasiana Ongsingco Vda. de de Borja,
special administratrix of the testate estate of Francisco de Borja, 1 from the approval of a compromise
agreement by the Court of First Instance of Rizal, Branch I, in its Special Proceeding No. R-7866,
entitled, "Testate Estate of Josefa Tangco, Jose de Borja, Administrator".
Case No. L-28568 is an appeal by administrator Jose Borja from the disapproval of the same
compromise agreement by the Court of First Instance of Nueva Ecija, Branch II, in its Special
Proceeding No. 832, entitled, "Testate Estate of Francisco de Borja, Tasiana O. Vda. de de Borja,
Special Administratrix".

And Case No. L-28611 is an appeal by administrator Jose de Borja from the decision of the Court of
First Instance of Rizal, Branch X, in its Civil Case No. 7452, declaring the Hacienda Jalajala
Poblacion, which is the main object of the aforesaid compromise agreement, as the separate and
exclusive property of the late Francisco de Borja and not a conjugal asset of the community with his
first wife, Josefa Tangco, and that said hacienda pertains exclusively to his testate estate, which is
under administrator in Special Proceeding No. 832 of the Court of First Instance of Nueva Ecija,
Branch II.

It is uncontested that Francisco de Borja, upon the death of his wife Josefa Tangco on 6 October 1940,
filed a petition for the probate of her will which was docketed as Special Proceeding No. R-7866 of
the Court of First Instance of Rizal, Branch I. The will was probated on 2 April 1941. In 1946,
Francisco de Borja was appointed executor and administrator: in 1952, their son, Jose de Borja, was
appointed co-administrator. When Francisco died, on 14 April 1954, Jose became the sole
administrator of the testate estate of his mother, Josefa Tangco. While a widower Francisco de Borja
allegedly took unto himself a second wife, Tasiana Ongsingco. Upon Francisco's death, Tasiana
instituted testate proceedings in the Court of First Instance of Nueva Ecija, where, in 1955, she was
appointed special administratrix. The validity of Tasiana's marriage to Francisco was questioned in
said proceeding.

The relationship between the children of the first marriage and Tasiana Ongsingco has been plagued
with several court suits and counter-suits; including the three cases at bar, some eighteen (18) cases
remain pending determination in the courts. The testate estate of Josefa Tangco alone has been
unsettled for more than a quarter of a century. In order to put an end to all these litigations, a
compromise agreement was entered into on 12 October 1963, 2 by and between "[T]he heir and son of
Francisco de Borja by his first marriage, namely, Jose de Borja personally and as administrator of the
Testate Estate of Josefa Tangco," and "[T]he heir and surviving spouse of Francisco de Borja by his
second marriage, Tasiana Ongsingco Vda. de Borja, assisted by her lawyer, Atty. Luis Panaguiton Jr."
The terms and conditions of the compromise agreement are as follows:

AGREEM ENT

THIS AGREEMENT made and entered into by and between

The heir and son of Francisco de Borja by his first marriage, namely, Jose de Borja
personally and as administrator of the Testate Estate of Josefa Tangco,

AND

The heir and surviving spouse of Francisco de Borja by his second marriage, Tasiana
Ongsingco Vda. de Borja, assisted by her lawyer, Atty. Luis Panaguiton Jr.

WITNESSETH

THAT it is the mutual desire of all the parties herein terminate and settle, with
finality, the various court litigations, controversies, claims, counterclaims, etc.,
between them in connection with the administration, settlement, partition,
adjudication and distribution of the assets as well as liabilities of the estates of
Francisco de Borja and Josefa Tangco, first spouse of Francisco de Borja.
THAT with this end in view, the parties herein have agreed voluntarily and without
any reservations to enter into and execute this agreement under the following terms
and conditions:

1. That the parties agree to sell the Poblacion portion of the Jalajala properties
situated in Jalajala, Rizal, presently under administration in the Testate Estate of
Josefa Tangco (Sp. Proc. No. 7866, Rizal), more specifically described as follows:

Linda al Norte con el Rio Puwang que la separa de la jurisdiccion del

Municipio de Pililla de la Provincia de Rizal, y con el pico del Monte
Zambrano; al Oeste con Laguna de Bay; por el Sur con los herederos
de Marcelo de Borja; y por el Este con los terrenos de la Familia
Maronilla

with a segregated area of approximately 1,313 hectares at the amount of P0.30 per
square meter.

2. That Jose de Borja agrees and obligates himself to pay Tasiana Ongsingco Vda. de
de Borja the total amount of Eight Hundred Thousand Pesos (P800,000) Philippine
Currency, in cash, which represent P200,000 as his share in the payment and
P600,000 as pro-rata shares of the heirs Crisanto, Cayetano and Matilde, all surnamed
de Borja and this shall be considered as full and complete payment and settlement of
her hereditary share in the estate of the late Francisco de Borja as well as the estate of
Josefa Tangco, Sp. Proc. No. 832-Nueva Ecija and Sp. Proc. No. 7866-Rizal,
respectively, and to any properties bequeathed or devised in her favor by the late
Francisco de Borja by Last Will and Testament or by Donation Inter Vivos or Mortis
Causa or purportedly conveyed to her for consideration or otherwise. The funds for
this payment shall be taken from and shall depend upon the receipt of full payment of
the proceeds of the sale of Jalajala, "Poblacion."

3. That Tasiana Ongsingco Vda. de de Borja hereby assumes payment of that

particular obligation incurred by the late Francisco de Borja in favor of the
Rehabilitation Finance Corporation, now Development Bank of the Philippines,
amounting to approximately P30,000.00 and also assumes payment of her 1/5 share
of the Estate and Inheritance taxes on the Estate of the late Francisco de Borja or the
sum of P3,500.00, more or less, which shall be deducted by the buyer of Jalajala,
"Poblacion" from the payment to be made to Tasiana Ongsingco Vda. de Borja under
paragraph 2 of this Agreement and paid directly to the Development Bank of the
Philippines and the heirs-children of Francisco de Borja.

4. Thereafter, the buyer of Jalajala "Poblacion" is hereby authorized to pay directly to

Tasiana Ongsingco Vda. de de Borja the balance of the payment due her under
paragraph 2 of this Agreement (approximately P766,500.00) and issue in the name of
Tasiana Ongsingco Vda. de de Borja, corresponding certified checks/treasury
warrants, who, in turn, will issue the corresponding receipt to Jose de Borja.

5. In consideration of above payment to Tasiana Ongsingco Vda. de de Borja, Jose de

Borja personally and as administrator of the Testate Estate of Josefa Tangco, and
Tasiana Ongsingco Vda. de de Borja, for themselves and for their heirs, successors,
executors, administrators, and assigns, hereby forever mutually renounce, withdraw,
waive, remise, release and discharge any and all manner of action or actions, cause or
causes of action, suits, debts, sum or sums of money, accounts, damages, claims and
demands whatsoever, in law or in equity, which they ever had, or now have or may
have against each other, more specifically Sp. Proceedings Nos. 7866 and 1955, CFI-
 Rizal, and Sp. Proc. No. 832-Nueva Ecija, Civil Case No. 3033, CFI Nueva Ecija and
Civil Case No. 7452-CFI, Rizal, as well as the case filed against Manuel Quijal for
perjury with the Provincial Fiscal of Rizal, the intention being to completely,
absolutely and finally release each other, their heirs, successors, and assigns, from
any and all liability, arising wholly or partially, directly or indirectly, from the
administration, settlement, and distribution of the assets as well as liabilities of the
estates of Francisco de Borja and Josefa Tangco, first spouse of Francisco de Borja,
and lastly, Tasiana Ongsingco Vda. de de Borja expressly and specifically renounce
absolutely her rights as heir over any hereditary share in the estate of Francisco de
Borja.

6. That Tasiana Ongsingco Vda. de de Borja, upon receipt of the payment under
paragraph 4 hereof, shall deliver to the heir Jose de Borja all the papers, titles and
documents belonging to Francisco de Borja which are in her possession and said heir
Jose de Borja shall issue in turn the corresponding receive thereof.

7. That this agreement shall take effect only upon the fulfillment of the sale of the
properties mentioned under paragraph 1 of this agreement and upon receipt of the
total and full payment of the proceeds of the sale of the Jalajala property "Poblacion",
otherwise, the non-fulfillment of the said sale will render this instrument NULL AND
VOID AND WITHOUT EFFECT THEREAFTER.

IN WITNESS WHEREOF, the parties hereto have her unto set their hands in the City
of Manila, Philippines, the 12th of October, 1963.

On 16 May 1966, Jose de Borja submitted for Court approval the agreement of 12 October 1963 to the
Court of First Instance of Rizal, in Special Proceeding No. R-7866; and again, on 8 August 1966, to
the Court of First Instance of Nueva Ecija, in Special Proceeding No. 832. Tasiana Ongsingco Vda. de
de Borja opposed in both instances. The Rizal court approved the compromise agreement, but the
Nueva Ecija court declared it void and unenforceable. Special administratrix Tasiana Ongsingco Vda.
de de Borja appealed the Rizal Court's order of approval (now Supreme Court G.R. case No. L-
28040), while administrator Jose de Borja appealed the order of disapproval (G.R. case No. L-28568)
by the Court of First Instance of Nueva Ecija.

The genuineness and due execution of the compromised agreement of 12 October 1963 is not
disputed, but its validity is, nevertheless, attacked by Tasiana Ongsingco on the ground that: (1) the
heirs cannot enter into such kind of agreement without first probating the will of Francisco de Borja;
(2) that the same involves a compromise on the validity of the marriage between Francisco de Borja
and Tasiana Ongsingco; and (3) that even if it were valid, it has ceased to have force and effect.

In assailing the validity of the agreement of 12 October 1963, Tasiana Ongsingco and the Probate
Court of Nueva Ecija rely on this Court's decision in Guevara vs. Guevara. 74 Phil. 479, wherein the
Court's majority held the view that the presentation of a will for probate is mandatory and that the
settlement and distribution of an estate on the basis of intestacy when the decedent left a will, is
against the law and public policy. It is likewise pointed out by appellant Tasiana Ongsingco that
Section 1 of Rule 74 of the Revised Rules explicitly conditions the validity of an extrajudicial
settlement of a decedent's estate by agreement between heirs, upon the facts that "(if) the decedent left
no will and no debts, and the heirs are all of age, or the minors are represented by their judicial and
legal representatives ..." The will of Francisco de Borja having been submitted to the Nueva Ecija
Court and still pending probate when the 1963 agreement was made, those circumstances, it is argued,
bar the validity of the agreement.

Upon the other hand, in claiming the validity of the compromise agreement, Jose de Borja stresses
that at the time it was entered into, on 12 October 1963, the governing provision was Section 1, Rule
74 of the original Rules of Court of 1940, which allowed the extrajudicial settlement of the estate of a
deceased person regardless of whether he left a will or not. He also relies on the dissenting opinion of
Justice Moran, in Guevara vs. Guevara, 74 Phil. 479, wherein was expressed the view that if the
parties have already divided the estate in accordance with a decedent's will, the probate of the will is a
useless ceremony; and if they have divided the estate in a different manner, the probate of the will is
worse than useless.

The doctrine of Guevara vs. Guevara, ante, is not applicable to the case at bar. This is apparent from
an examination of the terms of the agreement between Jose de Borja and Tasiana Ongsingco.
Paragraph 2 of said agreement specifically stipulates that the sum of P800,000 payable to Tasiana
Ongsingco

shall be considered as full complete payment settlement of her hereditary share

in the estate of the late Francisco de Borja as well as the estate of Josefa Tangco, ...
and to any properties bequeathed or devised in her favor by the late Francisco de
Borja by Last Will and Testament or by Donation Inter Vivos or Mortis Causa or
purportedly conveyed to her for consideration or otherwise.

This provision evidences beyond doubt that the ruling in the Guevara case is not applicable to the
cases at bar. There was here no attempt to settle or distribute the estate of Francisco de Borja among
the heirs thereto before the probate of his will. The clear object of the contract was merely the
conveyance by Tasiana Ongsingco of any and all her individual share and interest, actual or eventual
in the estate of Francisco de Borja and Josefa Tangco. There is no stipulation as to any other claimant,
creditor or legatee. And as a hereditary share in a decedent's estate is transmitted or vested
immediately from the moment of the death of such causante or predecessor in interest (Civil Code of
the Philippines, Art. 777) 3 there is no legal bar to a successor (with requisite contracting capacity)
disposing of her or his hereditary share immediately after such death, even if the actual extent of such
share is not determined until the subsequent liquidation of the estate. 4 Of course, the effect of such
alienation is to be deemed limited to what is ultimately adjudicated to the vendor heir. However, the
aleatory character of the contract does not affect the validity of the transaction; neither does the
coetaneous agreement that the numerous litigations between the parties (the approving order of the
Rizal Court enumerates fourteen of them, Rec. App. pp. 79-82) are to be considered settled and should
be dismissed, although such stipulation, as noted by the Rizal Court, gives the contract the character
of a compromise that the law favors, for obvious reasons, if only because it serves to avoid a
multiplicity of suits.

It is likewise worthy of note in this connection that as the surviving spouse of Francisco de Borja,
Tasiana Ongsingco was his compulsory heir under article 995 et seq. of the present Civil Code.
Wherefore, barring unworthiness or valid disinheritance, her successional interest existed independent
of Francisco de Borja's last will and testament and would exist even if such will were not probated at
all. Thus, the prerequisite of a previous probate of the will, as established in the Guevara and
analogous cases, can not apply to the case of Tasiana Ongsingco Vda. de de Borja.

Since the compromise contract Annex A was entered into by and between "Jose de Borja personally
and as administrator of the Testate Estate of Josefa Tangco" on the one hand, and on the other, "the
heir and surviving spouse of Francisco de Borja by his second marriage, Tasiana Ongsingco Vda. de
de Borja", it is clear that the transaction was binding on both in their individual capacities, upon the
perfection of the contract, even without previous authority of the Court to enter into the same. The
only difference between an extrajudicial compromise and one that is submitted and approved by the
Court, is that the latter can be enforced by execution proceedings. Art. 2037 of the Civil Code is
explicit on the point:
 8. Art. 2037. A compromise has upon the parties the effect and authority of res
judicata; but there shall be no execution except in compliance with a judicial
compromise.

It is argued by Tasiana Ongsingco that while the agreement Annex A expressed no

definite period for its performance, the same was intended to have a resolutory period
of 60 days for its effectiveness. In support of such contention, it is averred that such a
limit was expressly stipulated in an agreement in similar terms entered into by said
Ongsingco with the brothers and sister of Jose de Borja, to wit, Crisanto, Matilde and
Cayetano, all surnamed de Borja, except that the consideration was fixed at P600,000
(Opposition, Annex/Rec. of Appeal, L-28040, pp. 39- 46) and which contained the
following clause:

III. That this agreement shall take effect only upon the consummation of the sale of
the property mentioned herein and upon receipt of the total and full payment of the
proceeds of the sale by the herein owner heirs-children of Francisco de Borja, namely,
Crisanto, Cayetano and Matilde, all surnamed de Borja; Provided that if no sale of the
said property mentioned herein is consummated, or the non-receipt of the purchase
price thereof by the said owners within the period of sixty (60) days from the date
hereof, this agreement will become null and void and of no further effect.

Ongsingco's argument loses validity when it is considered that Jose de Borja was not a party to this
particular contract (Annex 1), and that the same appears not to have been finalized, since it bears no
date, the day being left blank "this day of October 1963"; and while signed by the parties, it was
not notarized, although plainly intended to be so done, since it carries a proposed notarial ratification
clause. Furthermore, the compromise contract with Jose de Borja (Annex A), provides in its par. 2
heretofore transcribed that of the total consideration of P800, 000 to be paid to Ongsingco, P600,000
represent the "prorata share of the heirs Crisanto, Cayetano and Matilde all surnamed de Borja" which
corresponds to the consideration of P600,000 recited in Annex 1, and that circumstance is proof that
the duly notarized contract entered into wit Jose de Borja under date 12 October 1963 (Annex A), was
designed to absorb and supersede the separate unformalize agreement with the other three Borja heirs.
Hence, the 60 days resolutory term in the contract with the latter (Annex 1) not being repeated in
Annex A, can not apply to the formal compromise with Jose de Borja. It is moreover manifest that the
stipulation that the sale of the Hacienda de Jalajala was to be made within sixty days from the date of
the agreement with Jose de Borja's co-heirs (Annex 1) was plainly omitted in Annex A as improper
and ineffective, since the Hacienda de Jalajala (Poblacion) that was to be sold to raise the P800,000 to
be paid to Ongsingco for her share formed part of the estate of Francisco de Borja and could not be
sold until authorized by the Probate Court. The Court of First Instance of Rizal so understood it, and
in approving the compromise it fixed a term of 120 days counted from the finality of the order now
under appeal, for the carrying out by the parties for the terms of the contract.

This brings us to the plea that the Court of First Instance of Rizal had no jurisdiction to approve the
compromise with Jose de Borja (Annex A) because Tasiana Ongsingco was not an heir in the estate of
Josefa Tangco pending settlement in the Rizal Court, but she was an heir of Francisco de Borja, whose
estate was the object of Special Proceeding No. 832 of the Court of First Instance of Nueva Ecija.
This circumstance is irrelevant, since what was sold by Tasiana Ongsingco was only her eventual
share in the estate of her late husband, not the estate itself; and as already shown, that eventual share
she owned from the time of Francisco's death and the Court of Nueva Ecija could not bar her selling
it. As owner of her undivided hereditary share, Tasiana could dispose of it in favor of whomsoever she
chose. Such alienation is expressly recognized and provided for by article 1088 of the present Civil
Code:

Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the
partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by
 reimbursing him for the price of the sale, provided they do so within the period of one
month from the time they were notified in writing of the sale of the vendor.

If a sale of a hereditary right can be made to a stranger, then a fortiori sale thereof to a coheir could
not be forbidden.

Tasiana Ongsingco further argues that her contract with Jose de Borja (Annex "A") is void because it
amounts to a compromise as to her status and marriage with the late Francisco de Borja. The point is
without merit, for the very opening paragraph of the agreement with Jose de Borja (Annex "A")
describes her as "the heir and surviving spouse of Francisco de Borja by his second marriage, Tasiana
Ongsingco Vda. de de Borja", which is in itself definite admission of her civil status. There is nothing
in the text of the agreement that would show that this recognition of Ongsingco's status as the
surviving spouse of Francisco de Borja was only made in consideration of the cession of her
hereditary rights.

It is finally charged by appellant Ongsingco, as well as by the Court of First Instance of Nueva Ecija
in its order of 21 September 1964, in Special Proceedings No. 832 (Amended Record on Appeal in L-
28568, page 157), that the compromise agreement of 13 October 1963 (Annex "A") had been
abandoned, as shown by the fact that, after its execution, the Court of First Instance of Nueva Ecija, in
its order of 21 September 1964, had declared that "no amicable settlement had been arrived at by the
parties", and that Jose de Borja himself, in a motion of 17 June 1964, had stated that the proposed
amicable settlement "had failed to materialize".

It is difficult to believe, however, that the amicable settlement referred to in the order and motion
above-mentioned was the compromise agreement of 13 October 1963, which already had been
formally signed and executed by the parties and duly notarized. What the record discloses is that some
time after its formalization, Ongsingco had unilaterally attempted to back out from the compromise
agreement, pleading various reasons restated in the opposition to the Court's approval of Annex "A"
(Record on Appeal, L-20840, page 23): that the same was invalid because of the lapse of the allegedly
intended resolutory period of 60 days and because the contract was not preceded by the probate of
Francisco de Borja's will, as required by this Court's Guevarra vs. Guevara ruling; that Annex "A"
involved a compromise affecting Ongsingco's status as wife and widow of Francisco de Borja, etc., all
of which objections have been already discussed. It was natural that in view of the widow's attitude,
Jose de Borja should attempt to reach a new settlement or novatory agreement before seeking judicial
sanction and enforcement of Annex "A", since the latter step might ultimately entail a longer delay in
attaining final remedy. That the attempt to reach another settlement failed is apparent from the letter
of Ongsingco's counsel to Jose de Borja quoted in pages 35-36 of the brief for appellant Ongsingco in
G.R. No. 28040; and it is more than probable that the order of 21 September 1964 and the motion of
17 June 1964 referred to the failure of the parties' quest for a more satisfactory compromise. But the
inability to reach a novatory accord can not invalidate the original compromise (Annex "A") and
justifies the act of Jose de Borja in finally seeking a court order for its approval and enforcement from
the Court of First Instance of Rizal, which, as heretofore described, decreed that the agreement be
ultimately performed within 120 days from the finality of the order, now under appeal.

We conclude that in so doing, the Rizal court acted in accordance with law, and, therefore, its order
should be upheld, while the contrary resolution of the Court of First Instance of Nueva Ecija should
be, and is, reversed.

In her brief, Tasiana Ongsingco also pleads that the time elapsed in the appeal has affected her
unfavorably, in that while the purchasing power of the agreed price of P800,000 has diminished, the
value of the Jalajala property has increased. But the fact is that her delay in receiving the payment of
the agreed price for her hereditary interest was primarily due to her attempts to nullify the agreement
(Annex "A") she had formally entered into with the advice of her counsel, Attorney Panaguiton. And
as to the devaluation de facto of our currency, what We said in Dizon Rivera vs. Dizon, L-24561, 30
June 1970, 33 SCRA 554, that "estates would never be settled if there were to be a revaluation with
every subsequent fluctuation in the values of currency and properties of the estate", is particularly
opposite in the present case.

Coming now to Case G.R. No. L-28611, the issue is whether the Hacienda de Jalajala (Poblacion),
concededly acquired by Francisco de Borja during his marriage to his first wife, Josefa Tangco, is the
husband's private property (as contended by his second spouse, Tasiana Ongsingco), or whether it
forms part of the conjugal (ganancial) partnership with Josefa Tangco. The Court of First Instance of
Rizal (Judge Herminio Mariano, presiding) declared that there was adequate evidence to overcome
the presumption in favor of its conjugal character established by Article 160 of the Civil Code.

We are of the opinion that this question as between Tasiana Ongsingco and Jose de Borja has become
moot and academic, in view of the conclusion reached by this Court in the two preceding cases (G.R.
No. L-28568), upholding as valid the cession of Tasiana Ongsingco's eventual share in the estate of
her late husband, Francisco de Borja, for the sum of P800,000 with the accompanying reciprocal quit-
claims between the parties. But as the question may affect the rights of possible creditors and legatees,
its resolution is still imperative.

It is undisputed that the Hacienda Jalajala, of around 4,363 hectares, had been originally acquired
jointly by Francisco de Borja, Bernardo de Borja and Marcelo de Borja and their title thereto was duly
registered in their names as co-owners in Land Registration Case No. 528 of the province of Rizal,
G.L.R.O. Rec. No. 26403 (De Barjo vs. Jugo, 54 Phil. 465). Subsequently, in 1931, the Hacienda was
partitioned among the co-owners: the Punta section went to Marcelo de Borja; the Bagombong section
to Bernardo de Borja, and the part in Jalajala proper (Poblacion) corresponded to Francisco de Borja
(V. De Borja vs. De Borja 101 Phil. 911, 932).

The lot allotted to Francisco was described as

Una Parcela de terreno en Poblacion, Jalajala: N. Puang River; E. Hermogena

Romero; S. Heirs of Marcelo de Borja O. Laguna de Bay; containing an area of
13,488,870 sq. m. more or less, assessed at P297,410. (Record on Appeal, pages 7
and 105)

On 20 November 1962, Tasiana O. Vda. de Borja, as Administratrix of the Testate Estate of Francisco
de Borja, instituted a complaint in the Court of First Instance of Rizal (Civil Case No. 7452) against
Jose de Borja, in his capacity as Administrator of Josefa Tangco (Francisco de Borja's first wife),
seeking to have the Hacienda above described declared exclusive private property of Francisco, while
in his answer defendant (now appellant) Jose de Borja claimed that it was conjugal property of his
parents (Francisco de Borja and Josefa Tangco), conformably to the presumption established by
Article 160 of the Philippine Civil Code (reproducing Article 1407 of the Civil Code of 1889), to the
effect that:

Art. 160. All property of the marriage is presumed to belong to the conjugal
partnership, unless it be proved that it pertains exclusively to the husband or to the
wife.

Defendant Jose de Borja further counterclaimed for damages, compensatory, moral and exemplary, as
well as for attorney's fees.

After trial, the Court of First Instance of Rizal, per Judge Herminio Mariano, held that the plaintiff
had adduced sufficient evidence to rebut the presumption, and declared the Hacienda de Jalajala
(Poblacion) to be the exclusive private property of the late Francisco de Borja, and his Administratrix,
Tasiana Ongsingco Vda. de Borja, to be entitled to its possession. Defendant Jose de Borja then
appealed to this Court.
The evidence reveals, and the appealed order admits, that the character of the Hacienda in question as
owned by the conjugal partnership De Borja-Tangco was solemnly admitted by the late Francisco de
Borja no less than two times: first, in the Reamended Inventory that, as executor of the estate of his
deceased wife Josefa Tangco, he filed in the Special Proceedings No. 7866 of the Court of First
Instance of Rizal on 23 July 1953 (Exhibit "2"); and again, in the Reamended Accounting of the same
date, also filed in the proceedings aforesaid (Exhibit "7"). Similarly, the plaintiff Tasiana O. Vda. de
Borja, herself, as oppositor in the Estate of Josefa Tangco, submitted therein an inventory dated 7
September 1954 (Exhibit "3") listing the Jalajala property among the "Conjugal Properties of the
Spouses Francisco de Borja and Josefa Tangco". And once more, Tasiana Ongsingco, as administratrix
of the Estate of Francisco de Borja, in Special Proceedings No. 832 of the Court of First Instance of
Nueva Ecija, submitted therein in December, 1955, an inventory wherein she listed the Jalajala
Hacienda under the heading "Conjugal Property of the Deceased Spouses Francisco de Borja and
Josefa Tangco, which are in the possession of the Administrator of the Testate Estate of the Deceased
Josefa Tangco in Special Proceedings No. 7866 of the Court of First Instance of Rizal" (Exhibit "4").

Notwithstanding the four statements aforesaid, and the fact that they are plain admissions against
interest made by both Francisco de Borja and the Administratrix of his estate, in the course of judicial
proceedings in the Rizal and Nueva Ecija Courts, supporting the legal presumption in favor of the
conjugal community, the Court below declared that the Hacienda de Jalajala (Poblacion) was not
conjugal property, but the private exclusive property of the late Francisco de Borja. It did so on the
strength of the following evidences: (a) the sworn statement by Francis de Borja on 6 August 1951
(Exhibit "F") that

He tomado possession del pedazo de terreno ya delimitado (equivalente a 1/4 parte,

337 hectareas) adjunto a mi terreno personal y exclusivo (Poblacion de Jalajala,
Rizal).

and (b) the testimony of Gregorio de Borja, son of Bernardo de Borja, that the entire Hacienda had
been bought at a foreclosure sale for P40,100.00, of which amount P25,100 was contributed by
Bernardo de Borja and P15,000. by Marcelo de Borja; that upon receipt of a subsequent demand from
the provincial treasurer for realty taxes the sum of P17,000, Marcelo told his brother Bernardo that
Francisco (son of Marcelo) wanted also to be a co-owner, and upon Bernardo's assent to the proposal,
Marcelo issue a check for P17,000.00 to pay the back taxes and said that the amount would represent
Francisco's contribution in the purchase of the Hacienda. The witness further testified that

Marcelo de Borja said that that money was entrusted to him by Francisco de
Borja when he was still a bachelor and which he derived from his business
transactions. (Hearing, 2 February 1965, t.s.n., pages 13-15) (Emphasis supplied)

The Court below, reasoning that not only Francisco's sworn statement overweighed the admissions in
the inventories relied upon by defendant-appellant Jose de Borja since probate courts can not finally
determine questions of ownership of inventoried property, but that the testimony of Gregorio de Borja
showed that Francisco de Borja acquired his share of the original Hacienda with his private funds, for
which reason that share can not be regarded as conjugal partnership property, but as exclusive
property of the buyer, pursuant to Article 1396(4) of Civil Code of 1889 and Article 148(4) of the
Civil Code of the Philippines.

The following shall be the exclusive property of each spouse:

xxx xxx xxx

(4) That which is purchased with exclusive money of the wife or of the husband.
We find the conclusions of the lower court to be untenable. In the first place, witness Gregorio de
Borja's testimony as to the source of the money paid by Francisco for his share was plain hearsay,
hence inadmissible and of no probative value, since he was merely repeating what Marcelo de Borja
had told him (Gregorio). There is no way of ascertaining the truth of the statement, since both
Marcelo and Francisco de Borja were already dead when Gregorio testified. In addition, the statement
itself is improbable, since there was no need or occasion for Marcelo de Borja to explain to Gregorio
how and when Francisco de Borja had earned the P17,000.00 entrusted to Marcelo. A ring of
artificiality is clearly discernible in this portion of Gregorio's testimony.

As to Francisco de Borja's affidavit, Exhibit "F", the quoted portion thereof (ante, page 14) does not
clearly demonstrate that the "mi terreno personal y exclusivo (Poblacion de Jalajala, Rizal) " refers
precisely to the Hacienda in question. The inventories (Exhibits 3 and 4) disclose that there were two
real properties in Jalajala owned by Francisco de Borja, one of 72.038 sq. m., assessed at P44,600,
and a much bigger one of 1,357.260.70 sq. m., which is evidently the Hacienda de Jalajala
(Poblacion). To which of these lands did the affidavit of Francisco de Borja (Exhibit "F") refer to? In
addition, Francisco's characterization of the land as "mi terreno personal y exclusivo" is plainly self-
serving, and not admissible in the absence of cross examination.

It may be true that the inventories relied upon by defendant-appellant (Exhibits "2", "3", "4" and "7")
are not conclusive on the conjugal character of the property in question; but as already noted, they are
clear admissions against the pecuniary interest of the declarants, Francisco de Borja and his executor-
widow, Tasiana Ongsingco, and as such of much greater probative weight than the self-serving
statement of Francisco (Exhibit "F"). Plainly, the legal presumption in favor of the conjugal character
of the Hacienda de Jalajala (Poblacion) now in dispute has not been rebutted but actually confirmed
by proof. Hence, the appealed order should be reversed and the Hacienda de Jalajala (Poblacion)
declared property of the conjugal partnership of Francisco de Borja and Josefa Tangco.

No error having been assigned against the ruling of the lower court that claims for damages should be
ventilated in the corresponding special proceedings for the settlement of the estates of the deceased,
the same requires no pro announcement from this Court.

IN VIEW OF THE FOREGOING, the appealed order of the Court of First Instance of Rizal in Case
No. L-28040 is hereby affirmed; while those involved in Cases Nos. L-28568 and L-28611 are
reversed and set aside. Costs against the appellant Tasiana Ongsingco Vda. de Borja in all three (3)
cases.

Concepcion, C.J., Makalintal, Zaldivar, Castro, Teehankee, Barredo, Makasiar, Antonio and
Esguerra, JJ., concur.

Fernando, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-41715 June 18, 1976

ROSALIO BONILLA (a minor) SALVACION BONILLA (a minor) and PONCIANO

BONILLA (their father) who represents the minors, petitioners,
vs.
LEON BARCENA, MAXIMA ARIAS BALLENA, ESPERANZA BARCENA, MANUEL
 BARCENA, AGUSTINA NERI, widow of JULIAN TAMAYO and HON. LEOPOLDO
GIRONELLA of the Court of First Instance of Abra, respondents.

Federico Paredes for petitioners.

Demetrio V. Pre for private respondents.

MARTIN, J:

This is a petition for review 1 of the Order of the Court of First Instance of Abra in Civil Case No.
856, entitled Fortunata Barcena vs. Leon Barcena, et al., denying the motions for reconsideration of
its order dismissing the complaint in the aforementioned case.

On March 31, 1975 Fortunata Barcena, mother of minors Rosalio Bonilla and Salvacion Bonilla and
wife of Ponciano Bonilla, instituted a civil action in the Court of First Instance of Abra, to quiet title
over certain parcels of land located in Abra.

On May 9, 1975, defendants filed a written motion to dismiss the complaint, but before the hearing of
the motion to dismiss, the counsel for the plaintiff moved to amend the complaint in order to include
certain allegations therein. The motion to amend the complaint was granted and on July 17, 1975,
plaintiffs filed their amended complaint.

On August 4, 1975, the defendants filed another motion to dismiss the complaint on the ground that
Fortunata Barcena is dead and, therefore, has no legal capacity to sue. Said motion to dismiss was
heard on August 14, 1975. In said hearing, counsel for the plaintiff confirmed the death of Fortunata
Barcena, and asked for substitution by her minor children and her husband, the petitioners herein; but
the court after the hearing immediately dismissed the case on the ground that a dead person cannot be
a real party in interest and has no legal personality to sue.

On August 19, 1975, counsel for the plaintiff received a copy of the order dismissing the complaint
and on August 23, 1975, he moved to set aside the order of the dismissal pursuant to Sections 16 and
17 of Rule 3 of the Rules of Court. 2

On August 28, 1975, the court denied the motion for reconsideration filed by counsel for the plaintiff
for lack of merit. On September 1, 1975, counsel for deceased plaintiff filed a written manifestation
praying that the minors Rosalio Bonilla and Salvacion Bonilla be allowed to substitute their deceased
mother, but the court denied the counsel's prayer for lack of merit. From the order, counsel for the
deceased plaintiff filed a second motion for reconsideration of the order dismissing the complaint
claiming that the same is in violation of Sections 16 and 17 of Rule 3 of the Rules of Court but the
same was denied.

Hence, this petition for review.

The Court reverses the respondent Court and sets aside its order dismissing the complaint in Civil
Case No. 856 and its orders denying the motion for reconsideration of said order of dismissal. While it
is true that a person who is dead cannot sue in court, yet he can be substituted by his heirs in pursuing
the case up to its completion. The records of this case show that the death of Fortunata Barcena took
place on July 9, 1975 while the complaint was filed on March 31, 1975. This means that when the
complaint was filed on March 31, 1975, Fortunata Barcena was still alive, and therefore, the court had
acquired jurisdiction over her person. If thereafter she died, the Rules of Court prescribes the
procedure whereby a party who died during the pendency of the proceeding can be substituted. Under
Section 16, Rule 3 of the Rules of Court "whenever a party to a pending case dies ... it shall be the
duty of his attorney to inform the court promptly of such death ... and to give the name and residence
of his executor, administrator, guardian or other legal representatives." This duty was complied with
by the counsel for the deceased plaintiff when he manifested before the respondent Court that
Fortunata Barcena died on July 9, 1975 and asked for the proper substitution of parties in the case.
The respondent Court, however, instead of allowing the substitution, dismissed the complaint on the
ground that a dead person has no legal personality to sue. This is a grave error. Article 777 of the Civil
Code provides "that the rights to the succession are transmitted from the moment of the death of the
decedent." From the moment of the death of the decedent, the heirs become the absolute owners of his
property, subject to the rights and obligations of the decedent, and they cannot be deprived of their
rights thereto except by the methods provided for by law. 3 The moment of death is the determining
factor when the heirs acquire a definite right to the inheritance whether such right be pure or
contingent. 4 The right of the heirs to the property of the deceased vests in them even before judicial
declaration of their being heirs in the testate or intestate proceedings. 5 When Fortunata Barcena,
therefore, died her claim or right to the parcels of land in litigation in Civil Case No. 856, was not
extinguished by her death but was transmitted to her heirs upon her death. Her heirs have thus
acquired interest in the properties in litigation and became parties in interest in the case. There is,
therefore, no reason for the respondent Court not to allow their substitution as parties in interest for
the deceased plaintiff.

Under Section 17, Rule 3 of the Rules of Court "after a party dies and the claim is not thereby
extinguished, the court shall order, upon proper notice, the legal representative of the deceased to
appear and be substituted for the deceased, within such time as may be granted ... ." The question as to
whether an action survives or not depends on the nature of the action and the damage sued for. 6 In the
causes of action which survive the wrong complained affects primarily and principally property and
property rights, the injuries to the person being merely incidental, while in the causes of action which
do not survive the injury complained of is to the person, the property and rights of property affected
being incidental. 7 Following the foregoing criterion the claim of the deceased plaintiff which is an
action to quiet title over the parcels of land in litigation affects primarily and principally property and
property rights and therefore is one that survives even after her death. It is, therefore, the duty of the
respondent Court to order the legal representative of the deceased plaintiff to appear and to be
substituted for her. But what the respondent Court did, upon being informed by the counsel for the
deceased plaintiff that the latter was dead, was to dismiss the complaint. This should not have been
done for under the same Section 17, Rule 3 of the Rules of Court, it is even the duty of the court, if
the legal representative fails to appear, to order the opposing party to procure the appointment of a
legal representative of the deceased. In the instant case the respondent Court did not have to bother
ordering the opposing party to procure the appointment of a legal representative of the deceased
because her counsel has not only asked that the minor children be substituted for her but also
suggested that their uncle be appointed as guardian ad litem for them because their father is busy in
Manila earning a living for the family. But the respondent Court refused the request for substitution on
the ground that the children were still minors and cannot sue in court. This is another grave error
because the respondent Court ought to have known that under the same Section 17, Rule 3 of the
Rules of Court, the court is directed to appoint a guardian ad litem for the minor heirs. Precisely in the
instant case, the counsel for the deceased plaintiff has suggested to the respondent Court that the uncle
of the minors be appointed to act as guardian ad litem for them. Unquestionably, the respondent Court
has gravely abused its discretion in not complying with the clear provision of the Rules of Court in
dismissing the complaint of the plaintiff in Civil Case No. 856 and refusing the substitution of parties
in the case.

IN VIEW OF THE FOREGOING, the order of the respondent Court dismissing the complaint in Civil
Case No. 856 of the Court of First Instance of Abra and the motions for reconsideration of the order of
dismissal of said complaint are set aside and the respondent Court is hereby directed to allow the
substitution of the minor children, who are the petitioners therein for the deceased plaintiff and to
appoint a qualified person as guardian ad litem for them. Without pronouncement as to costs.
SO ORDERED.

Teehankee (Chairman), Makasiar, Esguerra and Muoz Palma, JJ., concur.

Footnotes

1 Which this Court treats as special civil action as per its Resolution dated February
11, 1976.

2 Section 16. Duty of Attorney upon which death, incapacity or incompetency of

party. - Whenever a party to a pending case dies, becomes incapacitated or
incompetent, it shall be the duty of his attorney to inform the court promptly of such
death, incapacity or incompetency, and to give the name and residence of his
executor, administrator, guardian or other legal representative.

Section 17. Death of party.After a party dies and the claim is not thereby
extinguished, the court shall order, upon proper notice, the legal representative of the
deceased to appear and to be substituted for deceased, within a period of thirty (30)
days, or within such time as may be granted. If the legal representative fails to appear
within said time, the court may order the opposing party to procure the appointment
of a legal representative of the within a time to be specified by the court, and the
representative shall immediately appear for and on behalf of the interest of the
deceased. The court charges involved in procuring such appointment, if defrayed by
the opposing party, may be recovered as costs. The heirs of the deceased may be
allowed to be substituted for the deceased, without requiring the appointment of an
executor or administrator and the court may appoint guardian ad litem for the minor
heirs.

3 Buan vs. Heirs of Buan, 53 Phil. 654.

4 Ibarle vs. Po, 92 Phil. 721.

5 Morales, et al. vs. Ybanez, 98 Phil. 677.

6 Iron Gate Bank vs. Brady, 184 U.S. 665, 22 SCT 529, 46 L. ed. 739.

7 Wenber vs. St. Paul City Co., 97 Feb. 140 R. 39 C.C.A. 79.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 82027 March 29, 1990

ROMARICO G. VITUG, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and ROWENA FAUSTINO-
CORONA, respondents.

Rufino B. Javier Law Office for petitioner.

 Quisumbing, Torres & Evangelista for private respondent.

SARMIENTO, J.:

This case is a chapter in an earlier suit decided by this Court 1 involving the probate of the two wills
of the late Dolores Luchangco Vitug, who died in New York, U. S.A., on November 10, 1980, naming
private respondent Rowena Faustino-Corona executrix. In our said decision, we upheld the
appointment of Nenita Alonte as co-special administrator of Mrs. Vitug's estate with her (Mrs. Vitug's)
widower, petitioner Romarico G. Vitug, pending probate.

On January 13, 1985, Romarico G. Vitug filed a motion asking for authority from the probate court to
sell certain shares of stock and real properties belonging to the estate to cover allegedly his advances
to the estate in the sum of P667,731.66, plus interests, which he claimed were personal funds. As
found by the Court of Appeals, 2the alleged advances consisted of P58,147.40 spent for the payment
of estate tax, P518,834.27 as deficiency estate tax, and P90,749.99 as "increment
thereto." 3 According to Mr. Vitug, he withdrew the sums of P518,834.27 and P90,749.99 from
savings account No. 35342-038 of the Bank of America, Makati, Metro Manila.

On April 12, 1985, Rowena Corona opposed the motion to sell on the ground that the same funds
withdrawn from savings account No. 35342-038 were conjugal partnership properties and part of the
estate, and hence, there was allegedly no ground for reimbursement. She also sought his ouster for
failure to include the sums in question for inventory and for "concealment of funds belonging to the
estate." 4

Vitug insists that the said funds are his exclusive property having acquired the same through a
survivorship agreement executed with his late wife and the bank on June 19, 1970. The agreement
provides:

We hereby agree with each other and with the BANK OF AMERICAN NATIONAL
TRUST AND SAVINGS ASSOCIATION (hereinafter referred to as the BANK), that
all money now or hereafter deposited by us or any or either of us with the BANK in
our joint savings current account shall be the property of all or both of us and shall be
payable to and collectible or withdrawable by either or any of us during our lifetime,
and after the death of either or any of us shall belong to and be the sole property of
the survivor or survivors, and shall be payable to and collectible or withdrawable by
such survivor or survivors.

We further agree with each other and the BANK that the receipt or check of either,
any or all of us during our lifetime, or the receipt or check of the survivor or
survivors, for any payment or withdrawal made for our above-mentioned account
shall be valid and sufficient release and discharge of the BANK for such payment or
withdrawal. 5

The trial courts 6 upheld the validity of this agreement and granted "the motion to sell some of the
estate of Dolores L. Vitug, the proceeds of which shall be used to pay the personal funds of Romarico
Vitug in the total sum of P667,731.66 ... ." 7

On the other hand, the Court of Appeals, in the petition for certiorari filed by the herein private
respondent, held that the above-quoted survivorship agreement constitutes a conveyance mortis
causa which "did not comply with the formalities of a valid will as prescribed by Article 805 of the
Civil Code," 8 and secondly, assuming that it is a mere donation inter vivos, it is a prohibited donation
under the provisions of Article 133 of the Civil Code. 9
The dispositive portion of the decision of the Court of Appeals states:

WHEREFORE, the order of respondent Judge dated November 26, 1985 (Annex II,
petition) is hereby set aside insofar as it granted private respondent's motion to sell
certain properties of the estate of Dolores L. Vitug for reimbursement of his alleged
advances to the estate, but the same order is sustained in all other respects. In
addition, respondent Judge is directed to include provisionally the deposits in Savings
Account No. 35342-038 with the Bank of America, Makati, in the inventory of actual
properties possessed by the spouses at the time of the decedent's death. With costs
against private respondent. 10

In his petition, Vitug, the surviving spouse, assails the appellate court's ruling on the strength of our
decisions in Rivera v. People's Bank and Trust Co. 11 and Macam v. Gatmaitan 12 in which we
sustained the validity of "survivorship agreements" and considering them as aleatory contracts. 13

The petition is meritorious.

The conveyance in question is not, first of all, one of mortis causa, which should be embodied in a
will. A will has been defined as "a personal, solemn, revocable and free act by which a capacitated
person disposes of his property and rights and declares or complies with duties to take effect after his
death." 14 In other words, the bequest or device must pertain to the testator. 15 In this case, the monies
subject of savings account No. 35342-038 were in the nature of conjugal funds In the case relied
on, Rivera v. People's Bank and Trust Co., 16 we rejected claims that a survivorship agreement
purports to deliver one party's separate properties in favor of the other, but simply, their joint holdings:

xxx xxx xxx

... Such conclusion is evidently predicated on the assumption that Stephenson was the
exclusive owner of the funds-deposited in the bank, which assumption was in turn
based on the facts (1) that the account was originally opened in the name of
Stephenson alone and (2) that Ana Rivera "served only as housemaid of the
deceased." But it not infrequently happens that a person deposits money in the bank
in the name of another; and in the instant case it also appears that Ana Rivera served
her master for about nineteen years without actually receiving her salary from him.
The fact that subsequently Stephenson transferred the account to the name of himself
and/or Ana Rivera and executed with the latter the survivorship agreement in question
although there was no relation of kinship between them but only that of master and
servant, nullifies the assumption that Stephenson was the exclusive owner of the bank
account. In the absence, then, of clear proof to the contrary, we must give full faith
and credit to the certificate of deposit which recites in effect that the funds in question
belonged to Edgar Stephenson and Ana Rivera; that they were joint (and several)
owners thereof; and that either of them could withdraw any part or the whole of said
account during the lifetime of both, and the balance, if any, upon the death of either,
belonged to the survivor. 17

xxx xxx xxx

In Macam v. Gatmaitan, 18 it was held:

xxx xxx xxx

This Court is of the opinion that Exhibit C is an aleatory contract whereby, according
to article 1790 of the Civil Code, one of the parties or both reciprocally bind
themselves to give or do something as an equivalent for that which the other party is
 to give or do in case of the occurrence of an event which is uncertain or will happen
at an indeterminate time. As already stated, Leonarda was the owner of the house and
Juana of the Buick automobile and most of the furniture. By virtue of Exhibit C,
Juana would become the owner of the house in case Leonarda died first, and
Leonarda would become the owner of the automobile and the furniture if Juana were
to die first. In this manner Leonarda and Juana reciprocally assigned their respective
property to one another conditioned upon who might die first, the time of death
determining the event upon which the acquisition of such right by the one or the other
depended. This contract, as any other contract, is binding upon the parties thereto.
Inasmuch as Leonarda had died before Juana, the latter thereupon acquired the
ownership of the house, in the same manner as Leonarda would have acquired the
ownership of the automobile and of the furniture if Juana had died first. 19

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There is no showing that the funds exclusively belonged to one party, and hence it must be presumed
to be conjugal, having been acquired during the existence of the marita. relations. 20

Neither is the survivorship agreement a donation inter vivos, for obvious reasons, because it was to
take effect after the death of one party. Secondly, it is not a donation between the spouses because it
involved no conveyance of a spouse's own properties to the other.

It is also our opinion that the agreement involves no modification petition of the conjugal partnership,
as held by the Court of Appeals, 21 by "mere stipulation" 22 and that it is no "cloak" 23 to circumvent
the law on conjugal property relations. Certainly, the spouses are not prohibited by law to invest
conjugal property, say, by way of a joint and several bank account, more commonly denominated in
banking parlance as an "and/or" account. In the case at bar, when the spouses Vitug opened savings
account No. 35342-038, they merely put what rightfully belonged to them in a money-making
venture. They did not dispose of it in favor of the other, which would have arguably been sanctionable
as a prohibited donation. And since the funds were conjugal, it can not be said that one spouse could
have pressured the other in placing his or her deposits in the money pool.

The validity of the contract seems debatable by reason of its "survivor-take-all" feature, but in reality,
that contract imposed a mere obligation with a term, the term being death. Such agreements are
permitted by the Civil Code. 24

Under Article 2010 of the Code:

ART. 2010. By an aleatory contract, one of the parties or both reciprocally bind
themselves to give or to do something in consideration of what the other shall give or
do upon the happening of an event which is uncertain, or which is to occur at an
indeterminate time.

Under the aforequoted provision, the fulfillment of an aleatory contract depends on either the
happening of an event which is (1) "uncertain," (2) "which is to occur at an indeterminate time." A
survivorship agreement, the sale of a sweepstake ticket, a transaction stipulating on the value of
currency, and insurance have been held to fall under the first category, while a contract for life annuity
or pension under Article 2021, et sequentia, has been categorized under the second. 25 In either case,
the element of risk is present. In the case at bar, the risk was the death of one party and survivorship
of the other.

However, as we have warned:

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 But although the survivorship agreement is per se not contrary to law its operation or
effect may be violative of the law. For instance, if it be shown in a given case that
such agreement is a mere cloak to hide an inofficious donation, to transfer property in
fraud of creditors, or to defeat the legitime of a forced heir, it may be assailed and
annulled upon such grounds. No such vice has been imputed and established against
the agreement involved in this case. 26

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There is no demonstration here that the survivorship agreement had been executed for such unlawful
purposes, or, as held by the respondent court, in order to frustrate our laws on wills, donations, and
conjugal partnership.

The conclusion is accordingly unavoidable that Mrs. Vitug having predeceased her husband, the latter
has acquired upon her death a vested right over the amounts under savings account No. 35342-038 of
the Bank of America. Insofar as the respondent court ordered their inclusion in the inventory of assets
left by Mrs. Vitug, we hold that the court was in error. Being the separate property of petitioner, it
forms no more part of the estate of the deceased.

WHEREFORE, the decision of the respondent appellate court, dated June 29, 1987, and its resolution,
dated February 9, 1988, are SET ASIDE.

No costs.

SO ORDERED.

Melencio-Herrera (Chairperson), Paras, Padilla and Regalado JJ., concur.