1

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-14713 April 28, 1960

Intestate Estate of ARSENIO R. AFAN, deceased. MARIAN AFAN, petitioner-appellee,

vs.
APOLINARIO S. DE GUZMAN, creditor-appellant.

Vicente L. Santiago for appellee.

Bausa Ampil & Suarez for appellant.

CONCEPCION, J.:

This is an appeal, taken by Apolinario S. de Guzman, from an order of the Court of First
Instance of Manila, dated July 27, 1957.

It appears that, on July 12, 1957, De Guzman filed, in this special proceeding for the
settlement of intestate estate of Arsenio R. Afan, a claim for P1,000, allegedly due from the
latter, with interest thereon, within 30 days from August 16, 1949, as set forth in a promissory
note then issued by Afan. On July 22, 1957, the administratrix of his estate objected to the
consideration of the claim upon the ground, among others, that it had been filed long after the
expiration of the period for the presentation of claims against said estate. For this reason, the
lower court issued the order appealed from, refusing to entertain the aforementioned claim. De
Guzman invokes, in support of his appeal, section 2, Rule 87 of the Rules of Court, reading:

Time within which claims shall be filed.—In the notice provided in the preceding section,
the court shall state the time for the filing of claims against the estate, which shall not
be more than twelve nor less than six months after the date of the first publication of
the notice. However, at any time before an order of distribution is entered, on application
of a creditor who has failed to file his claim within the time previously limited, the court
may, for cause shown and on such terms as are equitable, allow such claims to be filed
within a time not exceeding one month.

Relying upon this provision, De Guzman maintains that the lower court should have entertained
his claim, the same having been filed prior to the distribution of the estate of the deceased.
This pretense is not borne out, however, by the rule above quoted.

The second sentence thereof clothes the court with authority to permit the filing of a claim
after the lapse of the period stated in the first sentence, but prior to and distribution, subject
to the following conditions, namely(1) there must be tin application therefor; (2) a cause must
 2

be shown why the permission should be granted; and (3) the extension of time granted for the
filing of the claim shall not exceed one (1) month.

De Guzman has not sought permission to file the claim. Moreover, the same does not allege any
reason why he should be excused for his failure to file the claim in this proceeding within the
period stated in the Rules of Court. Again, whether or not the reasons given — and none were
set forth in De Guzman's claim — are sufficient, rests upon the discretion of the court
(Roguera vs. Tanodra, 81 Phil., 404; Umpig, et al. vs. De Gala, et al., 96 Phil., 77; 50 Off. Gaz.,
5305), and the record before us does not show that the lower court has abused its discretion in
acting as it did in the present case. De Guzman now alleges, for the first time, a "cause" why
the lower court should allegedly have considered his claim. He says, in his brief (p. 6, thereof)
that "he had no actual knowledge of the fact that the estate of the deceased . . . was then
already in the process of settlement . . . . " He did not explain why he refrained from making
such averment either in his claim or in the motion, filed by him in the lower court, for a
reconsideration of the order appealed from. The reason is, however, not difficult to surmise —
he had actual knowledge of the present proceeding long before the filing of his claim therein on
July 27, 1957. To be precise, he was aware of its existence as early as August, 1955.

In this connection, it appears that, during the lifetime of Afan, or on May 24, 1950, De Guzman
instituted, against him, Civil Case No. 1148 of the Court of First Instance of Rizal, to recover
the amount of the promissory note above referred to. On appeal, the decision of said court in
favor of De Guzman was set aside, and a trial de novo ordered, by the Court of Appeals, in case
CA-G.R. No. 7340-R. Sometime after the records had been remanded to the lower court, Afan
died. On August 15, 1955, that court issued an order requiring counsel for his heirs "to submit
to the court the number of the intestate estate proceedings of the deceased Arsenio R.
Afan now pending in the Court of First Instance of Manila." This order was complied with on
August 30, 1955, by the filing with the Court of First Instance of Rizal, in said Case No. 1148,
of a "notification" containing the required information, copy of which "notification" was served
upon counsel for De Guzman, as plaintiff therein. On January 18, 1956, his counsel filed in said
case a motion for the appointment of a legal representative of the deceased Afan, to substitute
him as defendant therein. Accordingly, on January 21, 1956, said court gave De Guzman five (5)
days within which to submit the names of the legal heirs of Afan who may be appointed as his
legal representative. On January 24, 1956 De Guzman filed, therefore, with the aforementioned
court, a statement, entitled "compliance", setting forth the names, ages and addresses of the
heirs of the deceased, "as shown by the records in Special Proceedings No. 26858, entitled
'Instance estate of Arsenio R. Afan' before the Court of First Instance of Manila," with the
prayer that said "heirs be substituted as party defendants" in Case No. 1148, "in place of the
deceased Arsenio R. Afan." Yet, De Guzman choose not to file his claim in such proceeding until
July 27, 1957, one year and a half after the filing of his aforementioned "compliance."

Instead of furnishing a "cause" for the extension of the reglementary period for the filing of
his claim, this omission on the part of De Guzman fully justifies the denial of such extension and
the order appealed from. We have already held that failure to file a claim within the time
 3

provided therefor upon the sole ground that the claimant was negotiating with one of the heirs
for payment, is not sufficient to justify extension (In Re: Estate of De Dios, 24 Phil., 573,
576; see also Santos vs. Manarang, 27 Phil., 209), and that, where a claimant knew of the death
of the decedent and for four (4) or five (5) months thereafter he did nothing to present his
claim, this can hardly be considered as a good excuse for such neglect (In Re: Estate of
Tiangco, 39 Phil., 967).

Wherefore, the order appealed from is hereby affirmed with costs against appellant Apolinario
S. de Guzman. It is so ordered.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-51278 May 9, 1988

HEIRS OF RAMON PIZARRO, SR., petitioners,

vs.
HON. FRANCISCO Z. CONSOLACION, CFI of Davao and LUIS TAN alias CHEN YEH-
AN, respondents.

Rogelio A. Barba for petitioners.

Oscar Breva for private respondent.

GANCAYCO, J.:

This is a petition for review on certiorari seeking the reversal of the Order of June 1, 1979, of
the then Court of First Instance of Davao * dismissing petitioners' claim against the estate of
the late Dominga Garcia, and questioning the legality of the Order of the same court dated July
17, 1979 which denied due course to the petitioners' notice of appeal to the Court of Appeals
and directed them to file instead a petition for review before this Tribunal.

Petitioners are the oppositors in Special Proceeding No. 2116 in the then Court of First
Instance (CFI) of Davao City Branch II, for settlement of the estate of the deceased Dominga
Garcia, filed by private respondent herein, Luis Tan alias Chen Yeh-An.

The records disclose that on August 12,1977, Luis Tan filed a verified petition with the CFI of
Davao for the issuance of letters of administration in favor of a certain Alfonso Atilano. The
petition alleged, among others that private respondent is the only surviving son of the deceased
Dominga Garcia who died intestate sometime in 1930 in Canton, China; that the deceased left a
 4

parcel of land 1 located at C.M. Recto Avenue, Davao City; and that the said lot is in the
possession of the heirs of Ramon Pizarro, 2 petitioners herein.

On October 4, 1977, petitioners filed an opposition to the said petition claiming that they are
the heirs of Ramon Pizarro who died intestate on June 16, 1974; and that the deceased was the
vendee of one-half (1/2) of the aforementioned lot by virtue of an extrajudicial settlement of
estate and deed of absolute sale executed by Vicente Tan in Hongkong on May 27, 1966.
Petitioners prayed that letters of administration of Dominga Garcia's estate be issued in favor
of anyone of them.

The respondent court set the petition for hearing. Said order and the petition were duly
published in the Mindanao Times. ** The City of Davao 3 was likewise served with a copy of said
petition. On December 6, 1977, after private respondent had begun presentation of evidence in
support of his petition, the parties herein entered into a compromise whereby petitioners
agreed, among others, to withdraw their opposition to the appointment of private respondent's
recommendee and for the intestate proceedings to proceed in due course. Said agreement was
approved in the order of respondent court dated December 6,1977. 4

Accordingly, on March 27, 1978, after the judicial administrator had qualified and his inventory
of the assets of the late Dominga Garcia was approved, respondent court issued an order
requiring the filing of creditors' claim against the said estate within the period of six (6)
months from the date of the first publication. 5 Copy of said order was received by petitioners
through counsel on March 28, 1979. 6

Meanwhile, on January 23,1979, private respondent and the City of Davao filed a joint motion
asking respondent court to take notice of their agreement which in substance provides for an
agreement to file a joint motion in the CFI of Davao to proceed with the determination of the
heirs of the deceased Domingao Garcia which shall be determinative of their respective claims
against the estate. On February 19, 1979, petitioners filed their opposition to the said joint
motion on the sole ground that it is without procedural basis. Private respondent filed his reply
thereto on February 21, 1979. On February 22, 1979, respondent court issued an order taking
note of the agreement between private respondent and the City of Davao.

On February 28, 1979, private respondent filed a motion to drop and exclude the petitioners on
the ground that they do not even claim to be the heirs of the deceased Dominga Garcia and that
the extrajudicial deed of partition and deed of absolute sale allegedly executed in Hongkong in
favor of the petitioners' deceased father is spurious and simulated. On March 5, 1979,
petitioners filed their opposition to said motion. They likewise filed a claim against the estate
of the deceased Garcia in the amount of P350,000.00 representing services allegedly rendered
by their deceased father in favor of Vicente Tan. On March 8, 1979, private respondent filed a
reply to petitioners' opposition and a motion to strike out or dismiss the claim on the ground
that it is spurious and barred for having been filed beyond the six (6) month period set in the
notice for the filing of creditors' claim. On March 29, 1979, petitioners filed another claim
 5

against the estate for P200,000.00 allegedly advanced by their deceased father for the
payment of realty and income taxes of the said lot sometime in 1936, to which claim private
respondent filed an opposition on the ground that it is barred for having been filed beyond the
six (6) month period and that it was merely intended to delay the proceedings.

In the Order of June 1, 1979, respondent court dismissed both claims of the petitioners on the
ground that they are barred for having been filed out of time. 7 On June 26, 1979, petitioners
filed a notice of appeal stating that they are appealing the order of June 1, 1979 to the Court
of Appeals in so far as it declared their claims barred. 8 On July 5, 1979, private respondent
filed an opposition to the projected appeal on the ground that the appeal involves a pure
question of law and thus, the same should be directed to the Supreme Court. 9 On July 17, 1979,
respondent court issued an order dismissing petitioners' appeal and directed petitioners to file
instead a petition for review on certiorari before this Court.10

Hence, the present petition. ***

It is the position of the petitioners that the order of June 1, 1979 of the respondent court,
which directed that the filing of claims against the estate of the late Dominga Garcia be filed
within six (6) months after the first publication of the notice thereof, is null and void in that it
is violative of Section 2, Rule 86 of the Revised Rules of Court. They contend that said provision
mandates that the filing of such claims should be for a period of six (6) months starting from
the sixth month after the date of the first publication of the notice down to the twelfth
month. 11 They argue that to require filing of claims within the sixth month from publication of
notice will shorten the period in violation of the mandatory provisions of Section 2, Rule 86,
which provides:

Sec. 2. Time within which claims shall be filed. — In the notice provided in the
preceding section, the court shall state the time for the filing of claims against
the estate, which shall not be more than twelve (12) nor less than six (6) months
after the date of the first publication of the notice. However, at anytime before
an order of distribution is entered, on application of a creditor who has failed to
file his claim within the time previously limited, the court may, for cause shown and
on such terms as are equitable, allow such claim to be filed within a time not
exceeding one (1) months.

We agree. The range of the period specified in the rule is intended to give the probate court
the discretion to fix the period for the filing of claims. The probate court is permitted by the
rule to set the period provided it is not less than six (6) months nor more than twelve (12)
months from the date of the first publication of the notice thereof. Such period once fixed by
the court is mandatory.

The purpose of the law, in fixing a period within which claims against an estate must be
presented, is to insure a speedy settlement of the affairs of the deceased person and the early
delivery of the property to the person entitled to the same. 12
 6

In Sikat vs. Vda. Mafincode Villanueva, 13 this Court ruled that the speedy settlement of the
estate of deceased persons for the benefit of creditors and those entitled to the residue by
way of inheritance or legacy after the debts and expenses of administration have been paid is
the ruling spirit of our probate law.

However, in this case the trial court set the period for the filing of the claims within six (6)
months from the date of the first publication of the notice. It was obviously short of the
minimum limit of six (6) months provided for by the law. Petitioner correctly observed that the
trial court thereby shortened the period set by the law.

Since the notice issued and the period set by the trial court was not in accordance with the
requirements of Section 2, Rule 86 of the Rules of Court, what should then apply is the period
as provided for by the rules which is not less than six months nor more than twelve (12) months
from the date of first publication of notice. The first publication of the notice in the Mindanao
Times was on March 30, 1978. Thus the two claims of petitioners against the estate which were
filed on March 5, 1979 and March 29, 1979 respectively were filed on time.

The other issue raised in the petition is the authority of the trial court to determine whether
the appeal involves a question of law or both questions of law and facts. The petitioners cite
Section 3, Rule 50 of the Rules of Court, which provides as follows:

Sec. 3. Where appealed case erroneously brought. — Where the appealed case has
been erroneously brought to the Court of Appeals, it shall not dismiss the appeal,
but shall certify the case to the proper court, with a specific and clear statement
of the grounds therefor.

Petitioners contend that it is the Court of Appeals which has the authority to determine
whether the issue in the appeal is purely a question of law in which case it shall certify the same
to the proper court, which in this case is this Tribunal.

In the present case, when the lower court found that the order sought to be appealed was its
order of June 1, 1979, wherein it held that the claims filed by petitioners against the estates
were barred having been filed beyond the period fixed by the trial court in the notice, which
appeal involves an interpretation of Section 2, Rule 86 of the Rules of Court, instead of giving
due course to the notice of appeal to the Court of Appeals filed by petitioners, the petitioners
were instructed to file a petition for review with this Court as the issue is a pure question of
law.

We find the action taken by the trial court to be well-taken. Certainly, it is within the
competence and jurisdiction of the trial court to determine whether the appeal interposed was
based on pure questions of law or involves both questions of law and facts in considering the
appeal.14 The provision of Section 3, Rule 50 of the Rules of Court applies only when the appeal
is already brought to the Court of Appeals at which time it may, instead of dismissing the
 7

appeal, upon determination that it involves a pure question of law, order that the case be
certified to this Court.

It must be noted that in the notice of appeal it is not even required that the appellant indicate
the court to which its appeal is being interposed. The requirement is merely directory and
failure to comply with it or error in the court indicated is not fatal to the appeal. 15

WHEREFORE, the petition is GRANTED and the orders of the respondent court of June 1, 1979
and July 17, 1979 are reversed and set aside in so far as the claims filed by petitioners were
found to be barred, the same having been timely filed, without pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-17175 July 31, 1962

RICARDO M. GUTIERREZ, plaintiff-appellant,

vs.
LUCIA MILAGROS BARRETTO-DATU, Executrix of the Testate Estate of the deceased
MARIA GERARDO VDA. DE BARRETTO, defendant-appellee.

Teofilo Sison and Mariano G. Bustos and Associates for plaintiff-appellant.

Deogracias T. Reyes and Luison and Associates for defendant-appellee.

MAKALINTAL, J.:

Ricardo M. Gutierrez appeals from the orders of Court of First Instance of Rizal (1) dismissing
his complaint against Lucia Milagros Barretto-Datu, as executive of the estate of the deceased
Maria Gerardo Vda. de Barreto, and (2) denying his motion for reconsideration the dismissal.

The relevant facts alleged by appellant are as follows; In 1940, Maria Gerardo Vda. de Barretto,
owner of hectares of fishpond lands in Pampanga, leased the same to appellant Gutierrez for a
term to expire on May 1, 1947. On November 1, 1941, pursuant to a decision of Department of
Public Works rendered after due investigation the dikes of the fishponds were opened at
several points, resulting in their destruction and in the loss great quantities of fish inside, to
the damage and prejudice of the lessee.

In 1956, the lessor having died in 1948 and the corresponding testate proceeding to settle her
estate having been opened (Sp. Proc. No. 5002, C.F.I., Manila), Gutierrez filed a claim therein
for two items: first, for the sum of P32,000.00 representing advance rentals he had to the
 8

decedent (the possession of the leased property is alleged, having been returned to her after
the open of the dikes ordered by the government); and second, the sum of P60,000.00 as
damages in the concept of earned profits, that is, profits which the claimant failed to realize
because of the breach of the lease contract allegedly committed by the lessor.

On June 7, 1957 appellant commenced the instant ordinary civil action in the Court of First
Instance of Rizal (Quezon City branch) against the executrix of the testate for the recovery
of the same amount of P60,000 referred to as the second item claimed in the administration
proceeding. The complaint specifically charges decedent Manila Gerardo Vda. de Barretto, is
lessor, was having violated a warranty in the lease contract again any damages the lessee might
suffer by reason of the claim of the government that several rivers and creeks of the public
domain were included in the fishponds.

In July 1957 appellant amended his claim in the testate proceeding by withdrawing therefrom
the item of P60,000.00, leaving only the one for refund of advance rentals in the sum of
P32,000.00.

After the issues were joined in the present case with the filing of the defendant's answer,
together with a counterclaim, and after two postponements of the trial were granted, the
second of which was in January 1958, the court dismissed the action for abandonment by both
parties in an order dated July 31, 1959. Appellant moved to reconsider; appellee opposed the
motion; and after considerable written argument the court, on March 7, 1960, denied the
motion for reconsideration on the ground that the claim should have been prosecuted in the
testate proceeding and not by ordinary civil action.

Appellant submits his case on this lone legal question: whether or not his claim for damages
based on unrealized profits is a money claim against the estate of the deceased Maria Gerardo
Vda. de Barretto within the purview of Rule 87, Section 5. This section states:

SEC. 5. Claims which must be filed under the notice. If not filed, barred; exception. — 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 and
expenses of 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
 9

the court in the administration proceedings. Claims not yet due, or contingent, may be
approved at their present value.

The word "claims" as used in statutes requiring the presentation of claims against a decedent's
estate is generally construed to mean debts or demands of a pecuniary nature which could have
been enforced against the deceased in his lifetime and could have been reduced to simple money
judgments; and among these are those founded upon contract. 21 Am. Jur. 579. The claim in this
case is based on contract — specifically, on a breach thereof. It falls squarely under section 5
of Rule 87 "Upon all contracts by the decedent broken during his lifetime, even though they
were personal to the decedent in liability, the personal representative is answerable for the
breach out of the assets." 3 Schouler on Wills, Executors and Administrators, 6th Ed., 2395. A
claim for breach of a covenant in a deed of the decedent must be presented under a statute
requiring such presentment of all claims grounded on contract. Id. 2461; Clayton v. Dinwoody, 93
P. 723; James v. Corvin, 51 P. 2nd 689.1

The only actions that may be instituted against the executor or administrator are those to
recover real or personal property from the estate, or to enforce a lien thereon, and actions to
recover damages for an injury to person or property, real or personal. Rule 88, section 1. The
instant suit is not one of them.

Appellant invokes Gavin v. Melliza, 84 Phil. 794, in support of his contention that this action is
proper against the executrix. The citation is not in point. The claim therein, which was filed in
the testate proceeding, was based upon a breach of contract committed by the executrix
herself, in dismissing the claimant as administrator of the hacienda of the deceased. While the
contract was with the decedent, its violation was by the executrix and hence personal to her.
Besides, the claim was for indemnity in the form of a certain quantity of palay every year for
the unexpired portion of the term of the contract. The denial of the claim was affirmed by this
Court on the grounds that it was not a money claim and that it arose after the decedent's
demise, placing it outside the scope of Rule 87, Section 5.

The orders appealed from are affirmed, with costs against appellant.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-18107 August 30, 1962

MARIA G. AGUAS, FELIX GUARDINO and FRANCISCO SALINAS, plaintiffs-appellants,

vs.
HERMOGENES LLEMOS, deceased defendant substituted by his representatives,
 10

PERPETUA YERRO-LLEMOS, HERMENEGILDO LLEMOS, FELINO LLEMOS and AMADO

LLEMOS,defendants-appellees.

Jesus M. Aguas for plaintiffs-appellants.

Serafin P. Ramento for defendants-appellees.

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

On 14 March 1960, Francisco Salinas and the spouses Felix Guardino and Maria Aguas jointly
filed an action in the Court of First Instance of Catbalogan, Samar (Civil Case No. 4824), to
recover damages from Hermogenes Llemos, averring that the latter had served them by
registered mail with a copy of a petition for a writ of possession, with notice that the same
would be submitted to the said court of Samar on February 23, 1960 at 8: 00 a.m.; that in view
of the copy and notice served, plaintiffs proceeded to the court from their residence in Manila
accompanied by their lawyers, only to discover that no such petition had been filed; and that
defendant Llemos maliciously failed to appear in court, so that plaintiffs' expenditure and
trouble turned out to be in vain, causing them mental anguish and undue embarrassment.

On 1 April 1960, before he could answer the complaint, the defendant died. Upon leave of court,
plaintiffs amended their complaint to include the heirs of the deceased. On 21 July 1960, the
heirs filed a motion to dismiss, and by order of 12 August 1960, the court below dismissed it, on
the ground that the legal representative, and not the heirs, should have been made the party
defendant; and that anyway the action being for recovery of money, testate or intestate
proceedings should be initiated and the claim filed therein (Rec. on Appeal, pp. 26-27).

Motion for reconsideration having been denied, the case was appealed to us on points of
law.1äwphï1.ñët

Plaintiffs argue with considerable cogency that contrasting the correlated provisions of the
Rules of Court, those concerning claims that are barred if not filed in the estate settlement
proceedings (Rule 87, sec. 5) and those defining actions that survive and may be prosecuted
against the executor or administrator (Rule 88, sec. 1), it is apparent that actions for damages
caused by tortious conduct of a defendant (as in the case at bar) survive the death of the
latter. Under Rule 87, section 5, the actions that are abated by death are: (1) claims for funeral
expenses and those for the last sickness of the decedent; (2) judgments for money; and (3) "all
claims for money against the decedent, arising from contract express or implied". None of
these includes that of the plaintiffs-appellants; for it is not enough that the claim against the
deceased party be for money, but it must arise from "contract express or implied", and these
words (also used by the Rules in connection with attachments and derived from the common law)
were construed in Leung Ben vs. O'Brien, 38 Phil., 182, 189-194.

to include all purely personal obligations other than those which have their source
in delict or tort.
 11

Upon the other hand, Rule 88, section 1, enumerates actions that survive against a decedent's
executors or administrators, and they are: (1) actions to recover real and personal property
from the estate; (2) actions to enforce a lien thereon; and (3) actions to recover damages for
an injury to person or property. The present suit is one for damages under the last class, it
having been held that "injury to property" is not limited to injuries to specific property, but
extends to other wrongs by which personal estate is injured or diminished (Baker vs. Crandall,
47 Am. Rep. 126; also 171 A.L.R., 1395). To maliciously cause a party to incur unnecessary
expenses, as charged in this case, is certainly injurious to that party's property (Javier vs.
Araneta, L-4369, Aug. 31, 1953).

Be that as it may, it now appears from a communication from the Court of First Instance of
Samar that the parties have arrived at an amicable settlement of their differences, and that
they have agreed to dismiss this appeal. The settlement has been approved and embodied in an
order of the Court of First Instance.

The case having thus become moot, it becomes unnecessary to resolve the questions raised
therein. This appeal is, therefore, ordered dismissed, without special pronouncement as to
costs.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-27701 July 21, 1928

THE BANK OF THE PHILIPPINE ISLANDS, plaintiff-appellant,

vs.
V. CONCEPCION E HIJOS, INC., and VENANCIO CONCEPCION,
defendants-appellants. HENRY W. ELSER, defendant-appellee.

Araneta & Zaragoza for plaintiff-appellant.

No appearance for defendants-appellants.
DeWitt, Perkins & Brady for defendant-appellee.

OSTRAND, J.:

It appears from the record that on July 6, 1921, the defendants Concepcion executed a
promissory note in favor of the plaintiff for the sum of P342,372.64, payable on demand, and as
security for payment, deposited 700 shares of the Philippine National Bank as collateral with
the plaintiff and gave it a mortgage on 5,680 square meters of land, with improvements,
situated on R. Hidalgo Street in Manila. The defendants Concepcion defaulted in the payment of
 12

the note, and on February 3, 1922, the plaintiff bank instituted the present foreclosure
proceedings.

Shortly afterwards, Henry W. Elser entered into negotiations with the Concepcions and offered
to take over the mortgaged property and assume the mortgage debt. To this the Concepcions
agreed on the condition that they be relieved of all liability for the debt.

On March 23, 1922, Elser wrote the plaintiff bank the following letter:

DEAR SIR: Confirming our conversation of this morning, I take pleasure in advising you
that I have made arrangements with Mssrs. Puno & Concepcion to take over their
property on Calle R. Hidalgo, consisting of 5,680 square meters, including all
improvements thereon, and also 700 shares in the Philippine National Bank mortgaged to
you in the total sum of P342,000, and by which arrangement I am to be substituted in the
place and stead of Messrs. Puno & Concepcion in the obligation to your bank.

I have present prospects of renting the entire property and in consideration thereof I
will undertake to pay to the bank on the obligation thus undertaken by me, the sum of not
less than five thousand pesos (P5,000) monthly on the principal, together with interest
every six months. I will also reduce the mortgage not less than 25 per cent during the
first year, not less than 50 per cent during the second year, and the balance within the
third year, without prejudice, however, to my right to mortgage the property to any
bonding institution or to take up the mortgage myself at any time during the three years
period mentioned above, which I expect that I may be in a position to do.

Yours very truly,

(Sgd.) H. W. ELSER

No answer to this letter was given by the bank, and it clearly appears from the allegations in its
amended complaint, and from the evidence, that it was unwilling to release the Concepcions from
their liability for the mortgage debt and insisted on their confessing a judgment in the
foreclosure proceedings. This the Concepcions refused to do unless the bank would agree to bid
in the mortgage property for the full amount of the judgment.

After further conversations with the representatives of the plaintiff bank, Elser on April 21,
1922, wrote in the following letter:

DEAR SIRS (Attention of Mr. Zaragoza): With reference to our recent conversation
regarding the R. Hidalgo property belonging to Venancio Concepcion (Puno & Concepcion), I
respectfully request that you confirm in writing your verbal agreement that should the
property in question become the property of your bank, in the amount of P342,000 plus
interest to date, that you will sell the same to me for the same amount.
 13

This information is desired by the Attorneys for Venancio Concepcion, Mr. R. M. Calvo, in
order to satisfy himself that in case Messrs. Puno & Concepcion accept judgment, turning
over the property to you, that you in return will sell the property to me for the above
mentioned sum, and not less than that sum.

Trusting you will see your way clear to furnish this confirmation, in accordance with our
conversation, we are

Very truly,
(Sgd.) H. W. ELSER

It must be inferred from this letter that Elser had been led to understand that the bank would
bid in the land at the foreclosure sale for the full amount of the judgment and sell it to him for
the same price. It will be readily seen that this proposition is entirely different from that
contained in the letter of March 23d.

The plaintiff made no direct reply to the letter of April 21st, but Calvo, testifying for the
plaintiff, stated that on April 28, Elser invited him to a conference with Nolting, the president
of the bank, in regard to the matter; that on meeting Nolting, Elser said: "Mr. Nolting, do you
still adhere to your acceptation of the offer I have made you in writing?" to which Nolting
answered that he did not think that there was any reason for him to go back on his word. He
thereupon referred Elser and Calvo to Zaragoza, who in some matters appears to have acted as
counsel for the bank, for further conferences. The negotiations did not lead to any action on
the part of the bank, but on May 5, 1922, Elser entered into an agreement in the form of
bilateral deed of sale, with V. Concepcion & Hijos, Inc., and Venancio Concepcion which appears
in the record as Exhibit C and reads as follows in translation from Spanish:

DEED OF PURCHASE AND SALE

This deed of purchase and sale executed in the City of Manila, P.I., this fifth day of May
1922 A. D., by and between V. Concepcion & Hijos, Inc., a domestic corporation duly
organized under the laws of Philippine Islands domiciled at No. 861 Calle R. Hidalgo,
District of Quiapo, City of Manila, represented herein by the president, Mr. Venancio
Concepcion, by virtue of the powers granted him by the Board of Directors of said
corporation in a resolution dated May 2, 1922, a copy of which duly certified, is attached
hereto and made a part hereof, and Mr. Venancio Concepcion, of age, married with Mrs.
Rosario San Agustin and resident of City of Manila, his place of residence being in the
municipality of San Juan, Province of Rizal, P.I., as party of the first part, and Mr. Henry
W. Elser, of age, married with Mrs. Elaine Childs Elser, and a resident of City of Manila,
with her place of residence at No. 600 Calle M. H. del Pilar, District of Malate, as party
of the second part,

WITNESSETH:
 14

Whereas, V. Concepcion e Hijos, Inc., is at present indebted to the Bank of the Philippine
Islands, in the sum of P342,372.64, Philippine currency with interest thereon at the rate
of 9 per cent per annum from September 30, 1921, to secure the payment of which, the
firm of V. Concepcion e Hijos, Inc., and Mr. Venancio Concepcion as joint land several
obligors, have executed in favor of the creditor bank on the 6th of July, 1921, a deed of
mortgage and one of pledge upon the following properties:

A tract of land with the buildings of strong materials erected thereon, situated on Calle
Sa n Sebastian, District of Quiapo. Bounded on the N. by Calle San Sebastian; on the E.
by property Maximino Paterno and Manuel Zamora; on the S. by property of the City of
Manila; and on W. by the Estero de Curtidor; containing an area of 5,686.80 square
meters, more or less, of which land, buildings and improvements, the aforesaid Venancio
Concepcion is the registered owner in accordance with the Land Registration Act,
according to transfer certificate of title No. 14019, issued by the registrar of deeds of
the City of Manila.

Seven hundred shares of stock of the Philippine National Bank, belonging to Mr. Venancio
Concepcion, issued to him and indorsed in the blank in favor of the Bank of the Philippine
Islands, described as follows: (Here follows the numbers and amounts of the certificates
of shares.)

Whereas on January 20, 1922, Mr. Venancio Concepcion, owner of the property above
described, in consideration of the fact that they were subject to the payment of the sum
of P342,372.64 with interest thereon at the rate of 9 per cent per annum, which was
owing from V. Concepcion e Hijos, Inc., to the Bank of Philippine Islands, as per deeds of
mortgage and of pledge executed on July 6, 1921, has sold, assigned, and transferred to
said firm of V. Concepcion e Hijos, Inc., the aforesaid properties for the sum of
P290,000 Philippine currency, the agreed and stipulated price of the urban property
being P220,000, Philippine currency, and that of the 700 shares of stock of the Philippine
National Bank, the sum of P70,000 Philippine currency, as per public document executed
on said date before Mr. Recaredo Ma. Calvo, a notary public in and for the City of Manila.

Whereas, on February 28, 1922 the Bank of the Philippine Islands, filed with the clerk's
office of the Court of First Instance of Manila, under No. 21537, a complaint, against V.
Concepcion e Hijos, Inc., and Venancio Concepcion for the recovery of its mortgage credit
evidenced by the deeds of mortgage and of pledge executed on July 6, 1921,
notwithstanding the offer made by V. Concepcion e Hijos, Inc., to assign absolutely and
forever to said creditor entity the properties which are the subject matter of the
mortgage and pledge in full and total payment of their obligation.

Whereas, Mr. Henry W. Elser is willing to subrogate himself to the obligation of V.

Concepcion e Hijos, Inc., and Venancio Concepcion in favor of the Bank of Philippine
Islands and release them from the total of said obligation contracted by them on July 6,
 15

1921, as per deeds of mortgage and of pledge executed on said date, in consideration of
the sale, assignment and transfer in his favor of all the rights, interest, action or share
that they have or may have upon the properties described in said deeds of mortgage and
pledge;

Now, therefore, we, V. Concepcion e Hijos, Inc., and Venancio Concepcion, in consideration
of the sum of one peso (P1) Philippine currency, which we have this day and which we
declare was paid to us to our complete satisfaction, and of other important
considerations, especially the subrogation into our joint and several obligations in favor of
the Bank of the Philippine Islands, amounting to P342,372.64, Philippine currency, with
interest thereon at the rate of 9 per cent per annum from September 30, 1921, which
said Mr. Henry W. Elser hereby makes, binding himself, moreover, to release us from our
obligation contracted in favor of the Bank of the Philippine Islands on July 6, 1921, do
hereby sell, assign, and transfer absolutely and forever to said Mr. Henry W. Elser, his
heirs and successors in interest the properties described herein with the incumbrances
created and existing in favor of the Bank of the Philippine Islands.

That I, Henry W. Elser, accept this contract upon the precise terms in which it is
executed.

In testimony whereof, we sign third presents in place and on the date above-mentioned.

V. CONCEPCION E HIJOS, INC.

(Sgd.) V. CONCEPCION
(Sgd.) V. CONCEPCION
(Sgd.) H. W. ELSER

Signed in the presence of:

(Sgd.) ERNESTO Ma. CALVO
GREGORIO BUHAY

The bank never gave notice of its conformity with the agreement above quoted but of June 15,
1922, it petitioned the court to include Henry W. Elser as defendant in the complaint, on the
strength of the obligations assumed by him in said agreement.

On June 23, 1922, the defendants Concepcion answered said petition praying that instead of
merely being included, said Elser be substituted in their place as defendants, on the ground
that the plaintiff had accepted the substitution of Elser in their place as its debtor.

On June 27, 1922, the trial court entered an order including Henry W. Elser as defendant and
one month later, the plaintiff filed an amended complaint against the defendants Concepcion
and Elser asking for a joint and several judgment against them in the amount prayed for in the
original complaint and for the foreclosure of the mortgage securing the same.
 16

On July 18, 1922, the defendants Concepcion filed a supplemental answer alleging the consent
of the plaintiff to the subrogation of Elser in their place with respect to the obligations sued
upon and asking for the dismissal of the case as to them on the ground.

On October 16, 1922, the defendant Elser demurred to the amended complaint on the ground
that it failed to alleged that the plaintiff had consented to the substitution of Elser in place of
the Concepcions so as to render Elser personally liable to the plaintiff. This demurrer was
sustained by the court and due exception was taken by the plaintiff.

On November 1, 1922, the plaintiff presented a second amended complaint, in which it is alleged
that the sale from the Concepcions to Elser was with the knowledge and consent of the plaintiff
but without waiver of it as right of action against the Concepcions. The defendant Elser
demurred on the ground that it did not appear from the amended complaint that the plaintiff
had accepted Elser as debtor and on the further ground that there was no showing therein as
to the disposition of the collateral security held by the plaintiff for the same debt. This
demurrer was sustained on both grounds, on December 1, 1922.

On December 6, 1922, the plaintiff presented its third amended complaint, without material
change in the averments of the second amended complaint, and a third demurrer thereto was
sustained on December 28, 1922.

The plaintiff thereupon filed a fourth amended complaint, reiterating the allegations of the
third amended complaint, alleging that the defendant Elser entered into possession of the
mortgaged premises with plaintiff's consent; that plaintiff had not sold the shares of the
Philippine National Bank held by it as collateral, and asking for judgment decreeing that said
shares and the mortgaged property be sold under order of the court, and that the defendants
Concepcion and Elser be condemned to pay the deficiency, if any there should be. A demurrer to
this complaint was sustained, on the ground that it failed to show a contractual relationship
between the plaintiff and the defendant Elser.

On March 2, 1923, the plaintiff presented a fifth amended complaint, similar to the foregoing,
but containing the additional allegation that the plaintiff accepted the assumption of the
mortgage by the defendant Elser "without releasing the liability of the defendants" Concepcion.
This complaint was demurred to on the ground that it did not sufficiently state that the
plaintiff had accepted the substitution of Elser in place of the Concepcions, as the contract
between them provided. The demurrer was overruled and the defendant Elser excepted.

On April 2, 1923, the defendant Elser answered, denying generally and specifically the
allegations of the plaintiff's complaint. On the same date, C. W. Rosenstock, as guardian of the
defendant Elser, filed a cross-complaint alleging that at the time Elser is alleged to have
assumed the obligations of the Concepcions to the plaintiff, he was of unsound mind that he had
been induced to sign the same by false representations on the part of the Concepcion to the
effect that the plaintiff had agreed that he be substituted in place of Concepcions with
respect to the obligations set up in the plaintiff's complaint and that the plaintiff would accept
 17

payment of the same in monthly installments on account of the principal of not less than P5,000,
with interest payable every six months, and that the mortgage should be reduced not less than
25 per cent the first year, not less than 50 per cent the second year, and the balance within
the third year, when, as a matter of fact, the plaintiff had not agreed hereto or accepted said
terms of payment, as the Concepcions well knew, and had never accepted Elser's offer to the
plaintiff made pursuant to said representations, and praying for the reasons stated, that the
deed from the Concepcions to Elser, wherein he assumed the obligations of the former to the
plaintiff be cancelled. These allegations were denied by the plaintiff and the defendants
Concepcion in their replies.

Elser died on June 18, 1923, and on January 4, 1924, the plaintiff suggested the death of the
defendant Elser, and asked that the administrator of the estate, C. W. Rosenstock, be
substituted in his place as defendants, and that the action be continued against Rosenstock in
the capacity on the ground that this action is for the foreclosure of a mortgage

On January 11, 1924, the attorneys of record for the defendant Elser filed an opposition to the
application to have the action continued against Rosenstock, in substitution of Elser, this is not
a foreclosure action, and hence this action, as to him, abated by reason of his death, and any
claim of the plaintiff against him should be presented to the committee on claims and appraisals
of his estate.

This objection was overruled and Rosenstock, as Elser's administrator, was substituted in his
place as defendant, by order of the court dated January 14, 1924, and exception thereto was
duly taken. Subsequently, Rosenstock became the executor of Elser's estate, and as such, filed
various amended answers and cross-complaints.

The last amended cross-complaint was filed by him on August 9, 1924 in case No. 24485 of the
Court of First Instance of Manila, in which the estate of the deceased Elser was being
administered. He repeated therein the allegations and prayer of his cross-complaint as guardian
filed on April 2, 1923, and referred to above. The last amended answer was filed by him on
August 21, 1925. It consisted of denial of the allegations of the complaint and of the
authenticity of the document whereby Elser is alleged to have assumed the obligations of the
defendants Concepcion to the plaintiff; an allegation that at the time of execution thereof,
Elser was of unsound mind; and a statement of willingness to relinquished and abandon any
rights Elser might have acquired under said document in favor of the plaintiff.

After a lengthy trial, the court below, on January 22, 1927, rendered its decision absolving the
Elser estate from the complaint, ordering the Concepcions to pay the plaintiff the sum of
P342,372.64, with interest of 9 per cent and costs, and providing for the sale of the mortgaged
property, in case of non-payment of the judgment.

Both the plaintiff and the defendants Concepcion excepted to this judgment and moved for a
new trial on the usual statutory grounds. The motions were denied and exceptions noted.
 18

The case is now before this court on a joint bill of exceptions presented by the plaintiff and
the defendants Concepcion pursuant to stipulation. No briefs have been filed by the
Concepcions.

From the facts stated and from the pleadings it will be readily seen that as far as the
defendant Elser is concerned, the plaintiff alleged cause of action rests exclusively on the deed
of contract Exhibit C. The well known general rule is that a contract affects only the parties
and privies thereto. But there are exceptions to this rule and the plaintiff contends that
though it is neither a party nor a privy to the contract here in question, the subrogation of
Elser to the obligations of the Concepcions in favor of the plaintiff as provided for in the
contract, is a stipulation pour autrui upon which the plaintiff may maintain its action

The nature and reach of the doctrine of the stipulations pour autrui is so thoroughly discussed
in the case of Uy Tam and Uy Yet vs. Leonard (30 Phil., 471), that no further discussion thereof
is here necessary. We wish , however, to emphasize the fact that it was there held that in
order to constitute a valid stipulation pour autrui, it must be the purpose and intent of the
stipulating parties to benefit the third person may be incidentally benefited by stipulation. This
conclusion is supported by numerous authorities and is in complete harmony with the second
paragraph of article 1257 of the Civil Code, which reads as follows:

Should the contract contain any stipulation in favor of the third person, he may demand
its fulfillment, provided he has given notice of his acceptance to the person bound before
the stipulation has been revoked.

Applying this test, it seems clear that neither Exhibit C nor any other agreement between the
Concepcion and the Elser contained any stipulation pour autrui in favor of the plaintiff. As
stated in the appellee's brief:

The Concepcion owed the plaintiff a large sum of money and wanted to be relieved of that
obligation. Elser wanted the property which he had been mortgaged to secure that
obligation, and had to assume the obligation and agree to secure the discharge of the
Concepcion therefrom, in order to get the property. Neither of them had any desire to
confer any benefit to the bank. Neither of them entered into the contract for the sake
of the bank. It is obvious that each entered into the contract impelled by the advantage
accruing to him personally as a result thereof.

We may add that the stipulation here in question is not merely for the assumption of the
mortgaged debt by Elser, but is a provision for the subrogation of Elser to the Concepcion
obligations to the plaintiff. Inasmuch as the mere assumption of the mortgage debt by the
purchaser of the mortgaged land does not relieved the mortgagor from his liability, it might be
said that some show of reason that by such an arrangement the mortgagee will have two
debtors for the same debt instead of only one and that this furnishes additional security and is
to the creditor's advantage and for his benefit. But such is not the case where, as here, the
stipulation is for the subrogation of the purchasers to the obligation of the original debtor; if
 19

such a stipulation is duly accepted by the creditor, it works a novation of the original agreement
and releases the original debtor from further liability. Such subrogation is rarely for the
benefit of the creditor and that, in the present case, it was not believed to be of any advantage
to the bank is well shown by the fact that the parties were unable to obtain its written consent
to the stipulation.

But assuming that the stipulation is for the benefit of a third person, the plaintiff is
nevertheless not in position to maintain its action against Elser. In order to be enforceable,
such stipulations must be accepted by the third person and not has not been done here. The
plaintiff asserts that it accepted the stipulations in part, but that is not a sufficient
acceptance. The ordinary rules of offer and acceptance are applicable, and it is a cardinal rule
of the law of contracts that in order to create a binding agreement, the acceptance must be
absolute, unconditional, and identical with the terms of the offer; otherwise there is no meeting
of the minds or an expression of one and the same common intention, one of the essential
elements of a valid contract (Civil Code, art., 1257; Page on Contracts, sec. 1308, and authorities
there cited).

But the plaintiff argues that in American jurisprudence, the purchaser of the mortgaged
property who assumes the payment of the mortgage debt, may for the reason alone sued for
the debt by the creditor and that the rule is applicable in this jurisdiction. Aside from the fact
that we are not dealing with a mere assumption of the debt, but with a subrogation, it may be
noted that this court has already held that the American doctrine in this respect is not in
harmony with the spirit of our legislation and has not been adopted in this country. In the case
of E.C. McCullough & Co. vs. Veloso and Serna (46 Phil., 1), the court. speaking through its
present Chief Justice, said:

The effects of transfer of a mortgaged property to a third person are well determined
by the Civil Code. According to article 1879 of this Code, the creditor may demand of the
third person in possession of the property mortgaged payment of such part of the debt,
as is secured by the property in his possession, in the manner and form established by
law. The Mortgage Law in force at the promulgation of the Civil Code and referred to in
the latter, exacted, among other conditions, also the circumstance that after judicial or
notarial demand, the original debtor had failed to make payment of the debt at maturity.
(Art. 135 of the Mortgage Law of the Philippines of 1889.) According to this, the
obligation of the new possessor to pay the debt originated from the right of the creditor
to demand payment of him, it being necessary that a demand for payment should have
previously been made upon the debtor and the latter should have failed to pay. And even
if these requirements were complied with, still the third possessor might abandon the
property mortgaged, and in that case it is considered to be in the possession of the
debtor. (Art. 136 of the same law.) This clearly shows that the spirit of the Civil Code is
to let the obligation of the debtor to pay the debt stand although the property
mortgaged to secure payment of said debt may have been transferred to a third person.
While the Mortgage Law of 1893 eliminated this provisions, it contained nothing
 20

indicating any change in the spirit of the law in this respect. Article 129 of this law,
which provides for the substitution of the debtor by the third person in possession of
the property, for the purposes of giving notice, does not show this change and has
reference to a case where the action is directed only against the property burdened with
the mortgage. (Art. 168 of the Regulation.)

From what we have said it follows that the plaintiff can have no cause of action against Elser, or
rather against his estate. Assuming that Elser was of sound mind at the time of the execution
of Exhibit C — and that is a much debated question — the Concepcion, and not the plaintiff
might have maintained an action against the Elser state; but that action is now barred through
their failure to present their claim and appraisal in the probate proceedings, and the plaintiff
can therefore, not successfully invoked article 1111 of the Civil Code, which in effect provides
that after exhausting the property of which the debtor may be in possession, the creditor may
have recourse to the debtor's credit and choses an action for the collection of unpaid portion
of the debt.

Counsel for the appellee also argue that the bank, having failed to present its claim to the
committee on claims and appraisal, it must be regarded as having elected to rely on its mortgage
alone and therefore can have no personal judgement against the Elser estate. That is good law.
Section 708 of the Code of Civil Procedure provides as follows:

SEC. 708. Mortgage debt due from estate. — A creditor holding a claim against the
deceased, secured by mortgage or other collateral security, may abandon the security
and prosecute his claim before the committee, and share in the general distribution of
the assets of the estate; or he may foreclose his mortgage or realize upon security, by
ordinary action in court, making the executor or administrator a party defendant; and if
there is a judgment for a deficiency, after the sale of the mortgaged premises, or the
property pledge, in the foreclosure or other proceedings to realize upon the security, he
any prove his deficiency judgment before the committee against the estate of the
deceased; or he may rely upon his mortgage or other security alone, and foreclose the
same at any time, within the period of statute of limitations, and in that event he shall
not be admitted as an creditor, and shall receive no share in the distribution of the other
assets of the estate;

As will be seen, the mortgagee has the election of one out of three courses: (1) He may abandon
his security and share in the general distribution of the assets of the estate, or (2) he may
foreclose, secure a deficiency judgment and prove his deficiency judgment before the
committee, or (3) he may rely upon his security alone, in which case he can receive no share in
the distribution of the assets of the estate.

In this case the bank did not abandon the security and took no steps of any sort before the
committee within the time limit provided by the sections 689 and 690 of the Code of Civil
Procedure. The committed ceased to function long ago, and the bank has now nothing to rely on
 21

except the mortgage. Internationally or not, it has bought itself within the third course
provided for in section 708; it has no alternative.

But counsel for the plaintiff say that the amount of the deficiency, if any, could not be proved
before the foreclosure sale and had been effected; that section 708 expressly provide for the
proof of the deficiency judgment before the committee after the sale of the mortgaged
property; that this provisions must be construed to mean that the presentation and prosecution
of the claim of the deficiency must be made after, not before, the sale; and that if the
mortgagee presents his claim from a deficiency before a deficiency judgment have been
rendered, he will loose his rights under the mortgage and be regarded as having abandon his
security.

This clearly a misconception of the statute, and the cases cited by the appellant in support for
its contention are not in point. Until the foreclosure sale is made, the demand for the payment
of deficiency is a contingent claim within the meaning of sections 746, 747, and 748 of the
Code of Civil Procedure, which sections reads as follows:

SEC. 746. Claims may be presented to committee. — If a person is liable as surety for
the deceased, or has other contingent claims against his estate which cannot be proved
as a debt before the committee, the same may be presented with the proof, to the
committee, who shall state in their report that such claim was presented to them.

SEC. 747. Estate to be retained to meet claims. — If the court is satisfied from the
report of the committee, or from proofs exhibited to it, that such contingent claim is
valid, it may order the executor or administrator to retains in his hands sufficient estate
to pay such contingent claim, when the same becomes absolute, or if the estate is
insolvent, sufficient to pay a portion equal to the dividend of the other creditors.

SEC. 748. Claim becoming absolute in two years, how allowed. — If such contingent claims
becomes absolute and is presented to the court, or to the executor or administrator,
within two years from the time limited for other creditors to present their claims, it may
be allowed by the court if not disputed by the executor or administrator, and, if
disputed, it may be proved that the committee already appointed, or before others to be
appointed, for the purpose, as if presented for allowance before the committee had made
its report.

These sections are in entire harmony with section 708; the amount of the deficiency cannot be
ascertained or proven until the foreclosure proceedings have terminated, but the claim for the
deficiency must be presented to the committee within the period fixed by sections 689 and
690 of the Code. The committee does not then pass upon the validity of the claim but reports it
to the court. If the court "from the report of the committee" or from "the proofs exhibited to
it" is satisfied that the contingent claim is valid, the executor or administrator may be required
to retain in his possession sufficient assets to pay the claim when it becomes absolute, or
enough to pay the creditor his proportionate share if the assets of the estate are insufficient
 22

to pay the debts. When the contingent claim has become absolute, its amount may be
ascertained and established in the manner indicated by sections 748 and 749. As will be seen,
the bank both could and should have presented its claim to the committee within the time
prescribed by the law. The concurring opinion of Justices Malcolm and Fisher in the case of
Jaucian vs. Querol (38 Phil., 707), contains a very lucid expositions of the law on the subject
and further comment is therefore unnecessary.

The appeal is without merit and the judgment of the court below is affirmed with the costs
against the plaintiff-appellant. So ordered.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-32425 November 21, 1984

THE IMPERIAL INSURANCE, INC., plaintiff-appellee,

vs.
EMILIA T. DAVID, defendant-appellant.

RELOVA, J.:

Petition for review on certiorari of the decision rendered by the then Court of First Instance
of Manila in Civil Case No. 67713, sustaining the money claims of plaintiff-appellee, The Imperial
Insurance, Inc. against defendant-appellant Emilia T. David, based on three (3) different causes
of action in the complaint.

The first two causes of action involve the indemnity agreements which defendant-appellant and
her deceased husband, Felicisimo V. Reyes, jointly and severally, executed in favor of herein
appellee, for and in consideration of two (2) surety bonds underwritten by it to lift the lift the
writs of attachment in Civil Case No. 5213 of the Rizal Court of First Instance for the amount
of P60,000.00, and in Civil Case No. Q-5214, also with the same court for the amount of
P40,000.00

The third cause of action involves accrued premiums and documentary stamps for four (4) years
with legal interest therein from the filing of the complaint also underwritten by appellee.

Records show that Felicisimo V. Reyes and his wife, herein appellant, executed two (2)
indemnity agreements in favor of appellee jointly and severally to assure indemnification of the
latter for whatever liability it may incur in connection with its posting the security bonds to lift
 23

the attachments in Civil Case No. Q-5213 for the amount of P60,000.00, and in Civil Case No. Q-
5214 for the amount of P40,000.00, for the benefit of Felicisimo V. Reyes.

Later, Felicisimo V. Reyes and his wife, jointly and severally, executed another indemnity
agreement in favor of appellee to assure indemnification of the latter under a homestead bond
for the sum of P7,500.00 it had executed jointly and severally with them in favor of the
Development Bank of the Philippines. On the same date, Felicisimo V. Reyes and his wife paid to
appellee the sum of P153.33 covering the premium and other expenses for the homestead bond
on the first year.

Felicisimo V.Reyes died and Special Proceedings No. 12948 of the then Court of First Instance
of Bulacan, entitled "In the Matter of the Instestate of Felicisimo V. Reyes," was commenced.
His wife, herein appellant, qualified and took her oath of office as the administratrix of said
intestate estate. Corresponding notices to creditors were issued and published for three (3)
consecutive weeks in the "Manila Chronicle" and were duly posted in the required places.

Meanwhile, judgment was rendered in the aforesaid two cases (Civil Cases Nos. Q-5213 and Q-
5214) against the spouses Felicisimo V. Reyes and appellant Emilia T. David which has become
final and executory. Writs of execution of the decision on the said cases were returned
unsatisfied. As a consequence, judgment was rendered against the surety bonds for the sum of
P60,000.00 in Civil Case No. Q-5213 and for the sum of P40,000.00 in Civil Case No. Q-5214.

Appellee made demands on Emilia T. David to pay the amounts of P60,000.00 and P40,000.00
under the surety bonds and arrears in premiums thereon. When appellant David failed to make
payments, appellee filed Civil Case No. 67713 in the then Court of First Instance of Manila,
Branch 1, for collection of sums of money under three (3) different causes of action.

A motion to dismiss was filed by herein appellant on the following grounds. to wit: (1) the court
has no jurisdiction over the nature of the action or suit; (2) the complaint states no cause of
action; and (3) the plaintiff's causes of action, if there be any, have been barred for its failure
to file its claims against the estate of the deceased Felicisimo V. Reyes in due time.

The lower court denied the motion for lack of merit. Thereafter, appellant, as defendant in said
Civil Case No. 67713, filed her answer.

After trial, the court rendered judgment ordering defendant Emilia T. David (herein appellant)

1. to pay the plaintiff under the first cause of action, the amount of P60,000.00
with interest at legal rate from the filing of the complaint until fun payment shall
be effected; and a further sum of P1,522.50 annually from June 20, 1961 until
termination of this case, said amount representing premiums and documentary
stamps in the surety bond, Exh. "B", with interest at legal rate from the filing of
the complaint until full payment is made;
 24

2. to pay the plaintiff under the second cause of action, the amount of P40,000.00
with interest at the legal rate from the filing of the complaint until full payment
shag be made; and a further sum of P1,105.00 annually from June 20, 1961 until
termination of this case, said amount representing premiums and documentary
stamps on the surety bond Exh. "B", with interest at the legal rate from the filing
of the complaint until full payment is made;

3. to pay the plaintiff under the third cause of action the amount of P153.33
annually for a period of 4 years from June 29, 1962 representing premiums and
documentary stamps on the Homestead Bond Exh. "C-1" with interest at the legal
rate from the filing of the complaint until full payment is made;

4. to pay the plaintiff in concept of attorney's fees the sum of P20,000.00,

representing 20% of the principal claim of plaintiff; plus cost. (pp. 39-40, Rollo)

The principal issue raised by appellant Emilia T. David in this appeal is whether or not the lower
court has jurisdiction over plaintiff's causes of action. She contends that appellee's claim
should have been presented according to Rule 86 of the Revised Rules of Court and its failure
to do so operates to bar its claim forever; that the complaint failed to state a cause of action;
that the writ of attachment was improvidently issued; and, that the lower court should have
discharged the writs. Further, she argues that the judgment on attorney's fees has neither
legal nor factual basis.

We find no merit in this appeal. Under the law and well settled jurisprudence, when the
obligation is a solidary one, the creditor may bring his action in toto against any of the debtors
obligated in solidum. Thus, if husband and wife bound themselves jointly and severally, in case of
his death her liability is independent of and separate from her husband s; she may be sued for
the whole debt and it would be error to hold that the claim against her as well as the claim
against her husband should be made in the decedent's estate. (Agcaoili vs. Vda. de Agcaoili, 90
Phil. 97)

In the case at bar, appellant signed a joint and several obligation with her husband in favor of
herein appellee; as a consequence, the latter may demand from either of them the whole
obligation. As distinguished from a joint obligation where each of the debtor is liable only for a
proportionate part of the debt and the creditor is entitled only to a proportionate part of the
credit, in a solidary obligation the creditor may enforce the entire obligation against one of the
debtors.

Where the obligation assumed by several persons is joint and several, each of the
debtors is answerable for the whole obligation with the right to seek contribution
from his co-debtors. (Philippine International Surety Co., Inc. vs. Gonzales, 3 SCRA
391)
 25

And, in Manila Surety and Fidelity Co., Inc. vs. Villarama, et al., 107 Phil. 891, this
Court ruled that the Rules of Court provide the procedure should the creditor
desire to go against the. deceased debtor, "but there is noting in the aid provision
making compliance with such procedure a condition precedent an ordinary action
against the solidary debtors. should the creditor choose to demand payment from
the latter, could be entertained to the extent that failure to observe the same
would deprive the court jurisdiction to make cognizance of the action against the
surviving debtors. Upon lie other hand, the Civil Code expressly allows the creditor
to proceed against any one of the solidary debtors or some or all of them
simultaneously. Hence, there is nothing improper in the creditor's filing of an
action against the surviving solidary debtors alone, instead of instituting a
proceeding for the settlement of the estate of the deceased debtor wherein his
claim could be filed.

ACCORDINGLY, the decision of the court a quo is hereby AFFIRMED in toto with costs against
appellant.

SO ORDERED.

FIRST DIVISION

G.R. No. 147561 June 22, 2006

STRONGHOLD INSURANCE COMPANY, INC., Petitioner,

vs.
REPUBLIC-ASAHI GLASS CORPORATION, Respondent.

DECISION

PANGANIBAN, CJ:

Asurety company’s liability under the performance bond it issues is solidary. The death of the
principal obligor does not, as a rule, extinguish the obligation and the solidary nature of that
liability.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to reverse the
March 13, 2001 Decision2 of the Court of Appeals (CA) in CA-GR CV No. 41630. The assailed
Decision disposed as follows:

"WHEREFORE, the Order dated January 28, 1993 issued by the lower court is REVERSED and
SET ASIDE. Let the records of the instant case be REMANDED to the lower court for the
reception of evidence of all parties."3
 26

The Facts

The facts of the case are narrated by the CA in this wise:

"On May 24, 1989, [respondent] Republic-Asahi Glass Corporation (Republic-Asahi) entered into
a contract with x x x Jose D. Santos, Jr., the proprietor of JDS Construction (JDS), for the
construction of roadways and a drainage system in Republic-Asahi’s compound in Barrio
Pinagbuhatan, Pasig City, where [respondent] was to pay x x x JDS five million three hundred
thousand pesos (P5,300,000.00) inclusive of value added tax for said construction, which was
supposed to be completed within a period of two hundred forty (240) days beginning May 8,
1989. In order ‘to guarantee the faithful and satisfactory performance of its undertakings’ x x
x JDS, shall post a performance bond of seven hundred ninety five thousand pesos
(P795,000.00). x x x JDS executed, jointly and severally with [petitioner] Stronghold Insurance
Co., Inc. (SICI) Performance Bond No. SICI-25849/g(13)9769.

"On May 23, 1989, [respondent] paid to x x x JDS seven hundred ninety five thousand pesos
(P795,000.00) by way of downpayment.

"Two progress billings dated August 14, 1989 and September 15, 1989, for the total amount of
two hundred seventy four thousand six hundred twenty one pesos and one centavo (P274,621.01)
were submitted by x x x JDS to [respondent], which the latter paid. According to [respondent],
these two progress billings accounted for only 7.301% of the work supposed to be undertaken
by x x x JDS under the terms of the contract.

"Several times prior to November of 1989, [respondent’s] engineers called the attention of x x
x JDS to the alleged alarmingly slow pace of the construction, which resulted in the fear that
the construction will not be finished within the stipulated 240-day period. However, said
reminders went unheeded by x x x JDS.

"On November 24, 1989, dissatisfied with the progress of the work undertaken by x x x JDS,
[respondent] Republic-Asahi extrajudicially rescinded the contract pursuant to Article XIII of
said contract, and wrote a letter to x x x JDS informing the latter of such rescission. Such
rescission, according to Article XV of the contract shall not be construed as a waiver of
[respondent’s] right to recover damages from x x x JDS and the latter’s sureties.

"[Respondent] alleged that, as a result of x x x JDS’s failure to comply with the provisions of
the contract, which resulted in the said contract’s rescission, it had to hire another contractor
to finish the project, for which it incurred an additional expense of three million two hundred
fifty six thousand, eight hundred seventy four pesos (P3,256,874.00).

"On January 6, 1990, [respondent] sent a letter to [petitioner] SICI filing its claim under the
bond for not less than P795,000.00. On March 22, 1991, [respondent] again sent another letter
reiterating its demand for payment under the aforementioned bond. Both letters allegedly went
unheeded.
 27

"[Respondent] then filed [a] complaint against x x x JDS and SICI. It sought from x x x JDS
payment of P3,256,874.00 representing the additional expenses incurred by [respondent] for
the completion of the project using another contractor, and from x x x JDS and SICI, jointly
and severally, payment of P750,000.00 as damages in accordance with the performance bond;
exemplary damages in the amount of P100,000.00 and attorney’s fees in the amount of at
least P100,000.00.

"According to the Sheriff’s Return dated June 14, 1991, submitted to the lower court by
Deputy Sheriff Rene R. Salvador, summons were duly served on defendant-appellee SICI.
However, x x x Jose D. Santos, Jr. died the previous year (1990), and x x x JDS Construction
was no longer at its address at 2nd Floor, Room 208-A, San Buena Bldg. Cor. Pioneer St., Pasig,
Metro Manila, and its whereabouts were unknown.

"On July 10, 1991, [petitioner] SICI filed its answer, alleging that the [respondent’s] money
claims against [petitioner and JDS] have been extinguished by the death of Jose D. Santos, Jr.
Even if this were not the case, [petitioner] SICI had been released from its liability under the
performance bond because there was no liquidation, with the active participation and/or
involvement, pursuant to procedural due process, of herein surety and contractor Jose D.
Santos, Jr., hence, there was no ascertainment of the corresponding liabilities of Santos and
SICI under the performance bond. At this point in time, said liquidation was impossible because
of the death of Santos, who as such can no longer participate in any liquidation. The unilateral
liquidation on the party (sic) of [respondent] of the work accomplishments did not bind SICI for
being violative of procedural due process. The claim of [respondent] for the forfeiture of the
performance bond in the amount of P795,000.00 had no factual and legal basis, as payment of
said bond was conditioned on the payment of damages which [respondent] may sustain in the
event x x x JDS failed to complete the contracted works. [Respondent] can no longer prove its
claim for damages in view of the death of Santos. SICI was not informed by [respondent] of
the death of Santos. SICI was not informed by [respondent] of the unilateral rescission of its
contract with JDS, thus SICI was deprived of its right to protect its interests as surety under
the performance bond, and therefore it was released from all liability. SICI was likewise denied
due process when it was not notified of plaintiff-appellant’s process of determining and fixing
the amount to be spent in the completion of the unfinished project. The procedure contained in
Article XV of the contract is against public policy in that it denies SICI the right to procedural
due process. Finally, SICI alleged that [respondent] deviated from the terms and conditions of
the contract without the written consent of SICI, thus the latter was released from all
liability. SICI also prayed for the award of P59,750.00 as attorney’s fees, and P5,000.00 as
litigation expenses.

"On August 16, 1991, the lower court issued an order dismissing the complaint of [respondent]
against x x x JDS and SICI, on the ground that the claim against JDS did not survive the death
of its sole proprietor, Jose D. Santos, Jr. The dispositive portion of the [O]rder reads as
follows:
 28

‘ACCORDINGLY, the complaint against the defendants Jose D. Santos, Jr., doing business under
trade and style, ‘JDS Construction’ and Stronghold Insurance Company, Inc. is ordered
DISMISSED.

‘SO ORDERED.’

"On September 4, 1991, [respondent] filed a Motion for Reconsideration seeking

reconsideration of the lower court’s August 16, 1991 order dismissing its complaint. [Petitioner]
SICI field its ‘Comment and/or Opposition to the Motion for Reconsideration.’ On October 15,
1991, the lower court issued an Order, the dispositive portion of which reads as follows:

‘WHEREFORE, premises considered, the Motion for Reconsideration is hereby given due course.
The Order dated 16 August 1991 for the dismissal of the case against Stronghold Insurance
Company, Inc., is reconsidered and hereby reinstated (sic). However, the case against
defendant Jose D. Santos, Jr. (deceased) remains undisturbed.

‘Motion for Preliminary hearing and Manifestation with Motion filed by [Stronghold] Insurance
Company Inc., are set for hearing on November 7, 1991 at 2:00 o’clock in the afternoon.

‘SO ORDERED.’

"On June 4, 1992, [petitioner] SICI filed its ‘Memorandum for Bondsman/Defendant SICI (Re:
Effect of Death of defendant Jose D. Santos, Jr.)’ reiterating its prayer for the dismissal of
[respondent’s] complaint.

"On January 28, 1993, the lower court issued the assailed Order reconsidering its Order dated
October 15, 1991, and ordered the case, insofar as SICI is concerned, dismissed. [Respondent]
filed its motion for reconsideration which was opposed by [petitioner] SICI. On April 16, 1993,
the lower court denied [respondent’s] motion for reconsideration. x x x."4

Ruling of the Court of Appeals

The CA ruled that SICI’s obligation under the surety agreement was not extinguished by the
death of Jose D. Santos, Jr. Consequently, Republic-Asahi could still go after SICI for the
bond.

The appellate court also found that the lower court had erred in pronouncing that the
performance of the Contract in question had become impossible by respondent’s act of
rescission. The Contract was rescinded because of the dissatisfaction of respondent with the
slow pace of work and pursuant to Article XIII of its Contract with JDS.

The CA ruled that "[p]erformance of the [C]ontract was impossible, not because of
[respondent’s] fault, but because of the fault of JDS Construction and Jose D. Santos, Jr. for
failure on their part to make satisfactory progress on the project, which amounted to non-
 29

performance of the same. x x x [P]ursuant to the [S]urety [C]ontract, SICI is liable for the
non-performance of said [C]ontract on the part of JDS Construction."5

Hence, this Petition.6

Issue

Petitioner states the issue for the Court’s consideration in the following manner:

"Death is a defense of Santos’ heirs which Stronghold could also adopt as its defense against
obligee’s claim."7

More precisely, the issue is whether petitioner’s liability under the performance bond was
automatically extinguished by the death of Santos, the principal.

The Court’s Ruling

The Petition has no merit.

Sole Issue:

Effect of Death on the Surety’s Liability

Petitioner contends that the death of Santos, the bond principal, extinguished his liability
under the surety bond. Consequently, it says, it is automatically released from any liability under
the bond.

As a general rule, the death of either the creditor or the debtor does not extinguish the
obligation.8 Obligations are transmissible to the heirs, except when the transmission is
prevented by the law, the stipulations of the parties, or the nature of the obligation.9 Only
obligations that are personal10 or are identified with the persons themselves are extinguished
by death.11

Section 5 of Rule 8612 of the Rules of Court expressly allows the prosecution of money claims
arising from a contract against the estate of a deceased debtor. Evidently, those claims are not
actually extinguished.13 What is extinguished is only the obligee’s action or suit filed before the
court, which is not then acting as a probate court.14

In the present case, whatever monetary liabilities or obligations Santos had under his contracts
with respondent were not intransmissible by their nature, by stipulation, or by provision of law.
Hence, his death did not result in the extinguishment of those obligations or liabilities, which
merely passed on to his estate.15 Death is not a defense that he or his estate can set up to wipe
out the obligations under the performance bond. Consequently, petitioner as surety cannot use
his death to escape its monetary obligation under its performance bond.
 30

The liability of petitioner is contractual in nature, because it executed a performance bond

worded as follows:

"KNOW ALL MEN BY THESE PRESENTS:

"That we, JDS CONSTRUCTION of 208-A San Buena Building, contractor, of Shaw Blvd., Pasig,
MM Philippines, as principal and the STRONGHOLD INSURANCE COMPANY, INC. a corporation
duly organized and existing under and by virtue of the laws of the Philippines with head office
at Makati, as Surety, are held and firmly bound unto the REPUBLIC ASAHI GLASS
CORPORATION and to any individual, firm, partnership, corporation or association supplying the
principal with labor or materials in the penal sum of SEVEN HUNDRED NINETY FIVE
THOUSAND (P795,000.00), Philippine Currency, for the payment of which sum, well and truly to
be made, we bind ourselves, our heirs, executors, administrators, successors and assigns, jointly
and severally, firmly by these presents.

"The CONDITIONS OF THIS OBLIGATION are as follows;

"WHEREAS the above bounden principal on the ___ day of __________, 19__ entered into a
contract with the REPUBLIC ASAHI GLASS CORPORATION represented by
_________________, to fully and faithfully. Comply with the site preparation works road and
drainage system of Philippine Float Plant at Pinagbuhatan, Pasig, Metro Manila.

"WHEREAS, the liability of the Surety Company under this bond shall in no case exceed the sum
of PESOS SEVEN HUNDRED NINETY FIVE THOUSAND (P795,000.00) Philippine Currency,
inclusive of interest, attorney’s fee, and other damages, and shall not be liable for any advances
of the obligee to the principal.

"WHEREAS, said contract requires the said principal to give a good and sufficient bond in the
above-stated sum to secure the full and faithfull performance on its part of said contract, and
the satisfaction of obligations for materials used and labor employed upon the work;

"NOW THEREFORE, if the principal shall perform well and truly and fulfill all the undertakings,
covenants, terms, conditions, and agreements of said contract during the original term of said
contract and any extension thereof that may be granted by the obligee, with notice to the
surety and during the life of any guaranty required under the contract, and shall also perform
well and truly and fulfill all the undertakings, covenants, terms, conditions, and agreements of
any and all duly authorized modifications of said contract that may hereinafter be made,
without notice to the surety except when such modifications increase the contract price; and
such principal contractor or his or its sub-contractors shall promptly make payment to any
individual, firm, partnership, corporation or association supplying the principal of its sub-
contractors with labor and materials in the prosecution of the work provided for in the said
contract, then, this obligation shall be null and void; otherwise it shall remain in full force and
effect. Any extension of the period of time which may be granted by the obligee to the
 31

contractor shall be considered as given, and any modifications of said contract shall be
considered as authorized, with the express consent of the Surety.

"The right of any individual, firm, partnership, corporation or association supplying the
contractor with labor or materials for the prosecution of the work hereinbefore stated, to
institute action on the penal bond, pursuant to the provision of Act No. 3688, is hereby
acknowledge and confirmed."16

As a surety, petitioner is solidarily liable with Santos in accordance with the Civil Code, which
provides as follows:

"Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill
the obligation of the principal debtor in case the latter should fail to do so.

"If a person binds himself solidarily with the principal debtor, the provisions of Section
4,17 Chapter 3, Title I of this Book shall be observed. In such case the contract is called a
suretyship."

xxxxxxxxx

"Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of
them simultaneously. The demand made against one of them shall not be an obstacle to those
which may subsequently be directed against the others, so long as the debt has not been fully
collected."

Elucidating on these provisions, the Court in Garcia v. Court of Appeals18 stated thus:

"x x x. The surety’s obligation is not an original and direct one for the performance of his own
act, but merely accessory or collateral to the obligation contracted by the principal.
Nevertheless, although the contract of a surety is in essence secondary only to a valid principal
obligation, his liability to the creditor or promisee of the principal is said to be direct, primary
and absolute; in other words, he is directly and equally bound with the principal. x x x."19

Under the law and jurisprudence, respondent may sue, separately or together, the principal
debtor and the petitioner herein, in view of the solidary nature of their liability. The death of
the principal debtor will not work to convert, decrease or nullify the substantive right of the
solidary creditor. Evidently, despite the death of the principal debtor, respondent may still sue
petitioner alone, in accordance with the solidary nature of the latter’s liability under the
performance bond.

WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals AFFIRMED.
Costs against petitioner.

SO ORDERED.
 32

SECOND DIVISION

G.R. No. 170498 : January 9, 2013

METROPOLITAN BANK & TRUST COMPANY, Petitioner, v. ABSOLUTE MANAGEMENT

CORPORATION, Respondent.

D E C I S I O N

BRION, J.:

We resolve petitioner Metropolitan Bank & Trust Company's (Metro bank's) petition for review
on certiorari1 seeking the reversal of the decision2 dated August 25, 2005 and the
resolution3 dated November 17, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 86336.
The assailed decision affirmed the order4 dated May 7, 2004 of the Regional Trial Court (RTC)
of Quezon City, Branch 80. The RTC had denied the admission of Metrobank's Fourth-Party
Complaint5 against the Estate of Jose L. Chua for being a money claim that falls under Section
5, Rule 86 of the Rules of Court; the claim should have been filed in the pending judicial
settlement of Chuas estate before the RTC of Pasay City. The CA affirmed the RTCs order
based on the same ground.

Factual Antecedents

On October 5, 2000, Sherwood Holdings Corporation, Inc. (SHCI) filed a complaint for sum of
money against Absolute Management Corporation (AMC). The complaint was docketed as Civil
Case No. Q-00-42105 and was assigned to the RTC of Quezon City, Branch 80.6?r?l1

SHCI alleged in its complaint that it made advance payments to AMC for the purchase of
27,000 pieces of plywood and 16,500 plyboards in the sum of P12,277,500.00, covered by
Metrobank Check Nos. 1407668502, 140768507, 140768530, 140768531, 140768532,
140768533 and 140768534. These checks were all crossed, and were all made payable to AMC.
They were given to Chua, AMCs General Manager, in 1998.7?r?l1

Chua died in 1999, 8 and a special proceeding for the settlement of his estate was commenced
before the RTC of Pasay City. This proceeding was pending at the time AMC filed its answer
with counterclaims and third-party complaint.9?r?l1

SHCI made demands on AMC, after Chuas death, for allegedly undelivered items
worth P8,331,700.00. According to AMC, these transactions could not be found in its records.
Upon investigation, AMC discovered that in 1998, Chua received from SHCI 18 Metrobank
checks worth P31,807,500.00. These were all payable to AMC and were crossed or "for payees
account only."10?r?l1
 33

In its answer with counterclaims and third-party complaint,11 AMC averred that it had no
knowledge of Chuas transactions with SHCI and it did not receive any money from the latter.
AMC also asked the RTC to hold Metrobank liable for the subject checks in case it is adjudged
liable to SHCI.

Metrobank filed a motion for bill of particulars,12 seeking to clarify certain ambiguous
statements in AMCs answer. The RTC granted the motion but AMC failed to submit the
required bill of particulars. Hence, Metrobank filed a motion to strike out the third-party
complaint.13?r?l1

In the meantime, Metrobank filed a motion to dismiss14 against AMC on the ground that the
latter engaged in prohibited forum shopping. According to Metrobank, AMCs claim against it is
the same claim that it raised against Chuas estate in Special Proceedings No. 99-0023 before
the RTC of Pasay City, Branch 112. The RTC subsequently denied this motion.15?r?l1

The RTC of Quezon City opted to defer consideration16 of Metrobanks motion to strike out
third-party complaint17 and it instead granted AMCs motion for leave to serve written
interrogatories on the third-party defendant.18 While Metrobank filed its answer to the written
interrogatories, AMC was again directed by the RTC, in an order19 dated August 13, 2003, to
submit its bill of particulars. Instead, AMC filed a motion for reconsideration20 which was
denied in an order21 dated October 28, 2003. AMC still did not file its bill of particulars. The
RTC, on the other hand, did not act on Metrobanks motion to strike out AMCs third-party
complaint.22?r?l1

In its answer23 dated December 1, 2003, Metrobank admitted that it deposited the checks in
question to the account of Ayala Lumber and Hardware, a sole proprietorship Chua owned and
managed. The deposit was allegedly done with the knowledge and consent of AMC. According to

Metrobank, Chua then gave the assurance that the arrangement for the handling of the checks
carried AMCs consent. Chua also submitted documents showing his position and interest in AMC.
These documents, as well as AMCs admission in its answer that it allowed Chua to manage AMC
with a relative free hand, show that it knew of Chuas arrangement with Metrobank. Further,
Chuas records show that the proceeds of the checks were remitted to AMC which cannot
therefore now claim that it did not receive these proceeds.

Metrobank also raised the defense of estoppel. According to Metrobank, AMC had knowledge of
its arrangements with Chua for several years. Despite this arrangement, AMC did not object to
nor did it call the attention of Metrobank about Chuas alleged lack of authority to deposit the
checks in Ayala Lumber and Hardwares account. At this point, AMC is already estopped from
questioning Chuas authority to deposit these checks in Ayala Lumber and Hardwares account.

Lastly, Metrobank asserted that AMC gave Chua unbridled control in managing AMCs affairs.
This measure of control amounted to gross negligence that was the proximate cause of the loss
that AMC must now bear.
 34

Subsequently, Metrobank filed a motion for leave to admit fourth-party complaint24 against
Chuas estate. It alleged that Chuas estate should reimburse Metrobank in case it would be held
liable in the third-party complaint filed against it by AMC.

The RTCs Ruling

In an order25 dated May 7, 2004, the RTC denied Metrobanks motion. It likewise denied
Metrobanks motion for reconsideration in an order26 dated July 7, 2004.

The RTC categorized Metrobanks allegation in the fourth-party complaint as a "cobro de lo

indebido"27 a kind of quasi-contract that mandates recovery of what has been improperly paid.
Quasi-contracts fall within the concept of implied contracts that must be included in the claims
required to be filed with the judicial settlement of the deceaseds estate under Section 5, Rule
86 of the Rules of Court. As such claim, it should have been filed in Special Proceedings No. 99-
0023, not before the RTC as a fourth-party complaint. The RTC, acting in the exercise of its
general jurisdiction, does not have the authority to adjudicate the fourth-party complaint. As a
trial court hearing an ordinary action, it cannot resolve matters pertaining to special
proceedings because the latter is subject to specific rules.

Metrobank responded to the RTC ruling by filing a petition for certiorari28 under Rule 65
before the CA.

The CAs Ruling

The CA affirmed the RTCs ruling that Metrobanks fourth-party complaint should have been
filed in Special Proceedings No. 99-0023.29 According to the CA, the relief that Metrobank
prayed for was based on a quasi-contract and was a money claim categorized as an implied
contract that should be filed under Section 5, Rule 86 of the Rules of Court.

Based on the statutory construction principle of lex specialis derogat generali, the CA held that
Section 5, Rule 86 of the Rules of Court is a special provision that should prevail over the
general provisions of Section 11, Rule 6 of the Rules of Court. The latter applies to money claims
in ordinary actions while a money claim against a person already deceased falls under the
settlement of his estate that is governed by the rules on special proceedings. If at all, rules for
ordinary actions only apply suppletorily to special proceedings.

The Present Petition

In its present petition for review on certiorari,30 Metrobank asserts that it should be allowed
to file a fourth-party complaint against Chuas estate in the proceedings before the RTC; its
fourth-party complaint was filed merely to enforce its right to be reimbursed by Chuas estate
in case Metrobank is held liable to AMC. Hence, Section 11, Rule 6 of the Rules of Court should
apply.
 35

AMC, in its comment,31 maintains the line that the CA and the RTC rulings should be followed,
i.e., that Metrobanks claim is a quasi-contract that should be filed as a claim under Section 5,
Rule 86 of the Rules of Court.

AMC also challenges the form of Metrobanks petition for failure to comply with Section 4, Rule
45 of the Rules of Court. This provision requires petitions filed before the Supreme Court to be
accompanied by "such material portions of the record as would support the
petition."???ñr?bl?š ??r†??l l?? l?br?rÿ

According to AMC, the petitions annexes are mostly Metrobanks pleadings and court issuances.
It did not append all relevant AMC pleadings before the RTC and the CA. For this reason, the
petition should have been dismissed outright.

Issues

The parties arguments, properly joined, present to us the following issues:cralawlibrary

1) Whether the petition for review on certiorari filed by Metrobank before the Supreme Court
complies with Section 4, Rule 45 of the Rules of Court; and

2) Whether Metrobanks fourth-party complaint against Chuas estate should be allowed.

The Courts Ruling

The Present Petition Complies With Section 4, Rule 45 of the Rules of Court

AMC posits that Metrobanks failure to append relevant AMC pleadings submitted to the RTC
and to the CA violated Section 4, Rule 45 of the Rules of Court,32 and is a sufficient ground to
dismiss the petition under Section 5, Rule 45 of the Rules of Court.33?r?l1

We disagree with AMCs position.

In F.A.T. Kee Computer Systems, Inc. v. Online Networks International, Inc.,34 Online Networks
International, Inc. similarly assailed F.A.T. Kee Computer Systems, Inc.s failure to attach the
transcript of stenographic notes (TSN) of the RTC proceedings, and claimed this omission to be
a violation of Section 4, Rule 45 of the Rules of Court that warranted the petitions dismissal.
The Court held that the defect was not fatal, as the TSN of the proceedings before the RTC
forms part of the records of the case. Thus, there was no incurable omission that warranted
the outright dismissal of the petition.

The Court significantly pointed out in F.A.T. Kee that the requirement in Section 4, Rule 45 of
the Rules of Court is not meant to be an absolute rule whose violation would automatically lead
to the petitions dismissal.35 The Rules of Court has not been intended to be totally rigid. In
fact, the Rules of Court provides that the Supreme Court "may require or allow the filing of
such pleadings, briefs, memoranda or documents as it may deem necessary within such periods
 36

and under such conditions as it may consider appropriate";36 and "[i]f the petition is given due
course, the Supreme Court may require the elevation of the complete record of the case or
specified parts thereof within fifteen (15) days from notice."37 These provisions are in keeping
with the overriding standard that procedural rules should be liberally construed to promote
their objective and to assist the parties in obtaining a just, speedy and inexpensive
determination of every action or proceeding.38?r?l1

Under this guiding principle, we do not see Metrobanks omission to be a fatal one that should
warrant the petitions outright dismissal. To be sure, the omission to submit the adverse partys
pleadings in a petition before the Court is not a commendable practice as it may lead to an
unduly biased narration of facts and arguments that masks the real issues before the Court.
Such skewed presentation could lead to the waste of the Courts time in sifting through the
maze of the parties narrations of facts and arguments and is a danger the Rules of Court seeks
to avoid.

Our examination of Metrobanks petition shows that it contains AMCs opposition to its motion to
admit fourth-party complaint among its annexes. The rest of the pleadings have been
subsequently submitted as attachments in Metrobanks Reply. A reading of these pleadings
shows that their arguments are the same as those stated in the orders of the trial court and
the Court of Appeals. Thus, even if Metrobanks petition did not contain some of AMCs
pleadings, the Court still had the benefit of a clear narration of facts and arguments according
to both parties perspectives. In this broader view, the mischief that the Rules of Court seeks
to avoid has not really been present. If at all, the omission is not a grievous one that the spirit
of liberality cannot address.

The Merits of the Main Issue

The main issue poses to us two essential points that must be addressed. First, are quasi-
contracts included in claims that should be filed pursuant to Rule 86, Section 5 of the Rules of
Court? Second, if so, is Metrobanks claim against the Estate of Jose Chua based on a quasi-
contract?

Quasi-contracts are included in

claims that should be filed under Rule
86, Section 5 of the Rules of Court

In Maclan v. Garcia,39 Gabriel Maclan filed a civil case to recover from Ruben Garcia the
necessary expenses he spent as possessor of a piece of land. Garcia acquired the land as an heir
of its previous owner. He set up the defense that this claim should have been filed in the
special proceedings to settle the estate of his predecessor. Maclan, on the other hand,
contended that his claim arises from law and not from contract, express or implied. Thus, it
need not be filed in the settlement of the estate of Garcias predecessor, as mandated by
Section 5, Rule 87 of the Rules of Court (now Section 5, Rule 86).
 37

The Court held under these facts that a claim for necessary expenses spent as previous
possessor of the land is a kind of quasi-contract. Citing Leung Ben v. OBrien,40 it explained that
the term "implied contracts," as used in our remedial law, originated from the common law
where obligations derived from quasi-contracts and from law are both considered as implied
contracts. Thus, the term quasi-contract is included in the concept "implied contracts" as used
in the Rules of Court. Accordingly, liabilities of the deceased arising from quasi-contracts
should be filed as claims in the settlement of his estate, as provided in Section 5, Rule 86 of
the Rules of Court.41?r?l1

Metrobanks fourth-party complaint is

based on quasi-contract

Both the RTC and the CA described Metrobanks claim against Chuas estate as one based on
quasi-contract. A quasi-contract involves a juridical relation that the law creates on the basis of
certain voluntary, unilateral and lawful acts of a person, to avoid unjust enrichment.42 The Civil
Code provides an enumeration of quasi-contracts,43 but the list is not exhaustive and merely
provides examples.44?r?l1

According to the CA, Metrobanks fourth-party complaint falls under the quasi-contracts
enunciated in Article 2154 of the Civil Code.45 Article 2154 embodies the concept "solutio
indebiti" which arises when something is delivered through mistake to a person who has no right
to demand it. It obligates the latter to return what has been received through mistake.46?r?l1

Solutio indebiti, as defined in Article 2154 of the Civil Code, has two indispensable requisites:
first, that something has been unduly delivered through mistake; and second, that something
was received when there was no right to demand it.47?r?l1

In its fourth-party complaint, Metrobank claims that Chuas estate should reimburse it if it
becomes liable on the checks that it deposited to Ayala Lumber and Hardwares account upon
Chuas instructions.

This fulfills the requisites of solutio indebiti. First, Metrobank acted in a manner akin to a
mistake when it deposited the AMC checks to Ayala Lumber and Hardwares account; because of
Chuas control over AMCs operations, Metrobank assumed that the checks payable to AMC could
be deposited to Ayala Lumber and Hardwares account. Second, Ayala Lumber and Hardware had
no right to demand and receive the checks that were deposited to its account; despite Chuas
control over AMC and Ayala Lumber and Hardware, the two entities are distinct, and checks
exclusively and expressly payable to one cannot be deposited in the account of the other. This
disjunct created an obligation on the part of Ayala Lumber and Hardware, through its sole
proprietor, Chua, to return the amount of these checks to Metrobank.

The Court notes, however, that its description of Metrobanks fourth-party complaint as a
claimclosely analogous to solutio indebiti is only to determine the validity of the lower courts
orders denying it. It is not an adjudication determining the liability of Chuas estate against
 38

Metrobank. The appropriate trial court should still determine whether Metrobank has a lawful
claim against Chuas estate based on quasi-contract.

Metrobanks fourth-party complaint,

as a contingent claim, falls within the
claims that should be filed under
Section 5, Rule 86 of the Rules of
Court

A distinctive character of Metrobanks fourth-party complaint is its contingent nature the claim
depends on the possibility that Metrobank would be adjudged liable to AMC, a future event that
may or may not happen. This characteristic unmistakably marks the complaint as a contingent
one that must be included in the claims falling under the terms of Section 5, Rule 86 of the
Rules of Court:cralawlibrary

Sec. 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 and 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. [italics ours]

Specific provisions of Section 5, Rule

86 of the Rules of Court prevail over
general provisions of Section 11, Rule
6 of the Rules of Court

Metrobank argues that Section 11, Rule 6 of the Rules of Court should apply because it
impleaded Chuas estate for reimbursement in the same transaction upon which it has been sued
by AMC. On this point, the Court supports the conclusion of the CA, to wit:cralawlibrary

Notably, a comparison of the respective provisions of Section 11, Rule 6 and Section 5, Rule 86
of the Rules of Court readily shows that Section 11, Rule 6 applies to ordinary civil actions while
Section 5, Rule 86 specifically applies to money claims against the estate. The specific
provisions of Section 5, Rule 86 x x x must therefore prevail over the general provisions of
Section 11, Rule 6.48?r?l1

We read with approval the CAs use of the statutory construction principle of lex specialis
derogat generali, leading to the conclusion that the specific provisions of Section 5, Rule 86 of
the Rules of Court should prevail over the general provisions of Section 11, Rule 6 of the Rules
of Court; the settlement of the estate of deceased persons (where claims against the deceased
should be filed) is primarily governed by the rules on special proceedings, while the rules
provided for ordinary claims, including Section 11, Rule 6 ofthe Rules of Court, merely apply
suppletorily.49?r?l1
 39

In sum, on all counts in the considerations material to the issues posed, the resolution points to
the affirmation of the assailed CA decision and resolution. Metrobank's claim in its fourth-
party complaint against Chua's estate is based on quasi-contract. It is also a contingent claim
that depends on another event. Both belong to the category of claims against a deceased person
that should be filed under Section 5, Rule 86 of the Rules of Comi and, as such, should have
been so filed in Special Proceedings No. 99-0023.

WHEREFORE, premises considered, we hereby DENY the petition for lack of merit. The
decision of the Court of Appeals dated August 25, 2005, holding that the Regional Trial Court
of Quezon City, Branch 80, did not commit grave abuse of discretion in denying Metropolitan
Bank & Trust Company's motion for leave to admit fourth-party complaint Is

AFFIRMED. Costs against Metropolitan Bank & Trust Company.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-8235 March 19, 1914

ISIDRO SANTOS, plaintiff-appellant,

vs.
LEANDRA MANARANG, administratrix, defendant-appellee.

W. A. Kincaid and Thomas L. Hartigan for appellant.

Ramon Salinas for appellee.

TRENT, J.:

Don Lucas de Ocampo died on November 18, 1906, possessed of certain real and personal
property which, by his last will and testament dated July 26, 1906, he left to his three children.
The fourth clause of this will reads as follows:

I also declare that I have contracted the debts detailed below, and it is my desire that
they may be religiously paid by my wife and executors in the form and at the time agreed
upon with my creditors.

Among the debts mentioned in the list referred to are two in favor of the plaintiff, Isidro
Santos; one due on April 14, 1907, for P5,000, and various other described as falling due at
different dates (the dates are not given) amounting to the sum of P2,454. The will was duly
probated and a committee was regularly appointed to hear and determine such claims against
 40

the estate as might be presented. This committee submitted its report to the court on June
27, 1908. On July 14, 1908, the plaintiff, Isidro Santos, presented a petition to the court
asking that the committee be required to reconvene and pass upon his claims against the estate
which were recognized in the will of testator. This petition was denied by the court, and on
November 21, 1910, the plaintiff instituted the present proceedings against the administratrix
of the estate to recover the sums mentioned in the will as due him. Relief was denied in the
court below, and now appeals to this court.

In his first assignment of error, the appellant takes exception to the action of the court in
denying his petition asking that the committee be reconvened to consider his claim. In support
of this alleged error counsel say that it does not appear in the committee's report that the
publications required by section 687 of the Code of Civil Procedure had been duly made. With
reference to this point the record affirmatively shows that the committee did make the
publications required by law. It is further alleged that at the time the appellant presented his
petition the court had not approved the report of the committee. If this were necessary we
might say that, although the record does not contain a formal approval of the committee's
report, such approval must undoubtedly have been made, as will appear from an inspection of the
various orders of the court approving the annual accounts of the administratrix, in which claims
allowed against the estate by the committee were written off in accordance with its report.
This is shown very clearly from the court's order of August 1, 1912, in which the account of the
administratrix was approved after reducing final payments of some of the claims against the
estate to agree with the amounts allowed by the committee. It is further alleged that at the
time this petition was presented the administration proceedings had not been terminated. This
is correct.

In his petition of July 14, 1909, asking that the committee be reconvened to consider his claims,
plaintiff states that his failure to present the said claims to the committee was due to his
belief that it was unnecessary to do so because of the fact that the testator, in his will,
expressly recognized them and directed that they should be paid. The inference is that had
plaintiff's claims not been mentioned in the will he would have presented to the committee as a
matter of course; that plaintiff was held to believe by this express mention of his claims in the
will that it would be unnecessary to present them to the committee; and that he did not become
aware of the necessity of presenting them to the committee until after the committee had
made its final report.

Under these facts and circumstances, did the court err in refusing to reconvene the committee
for the purpose of considering plaintiff's claim? The first step towards the solution of this
question is to determine whether plaintiff's claims were such as a committee appointed to hear
claims against an estate is, by law, authorized to pass upon. Unless it was such a claim plaintiff's
argument has no foundation. Section 686 empowers the committee to try and decide claims
which survive against the executors and administrators, even though they be demandable at a
future day "except claims for the possession of or title to real estate." Section 700 provides
that all actions commenced against the deceased person for the recovery of money, debt, or
 41

damages, pending at the time the committee is appointed, shall be discontinued, and the claims
embraced within such actions presented to the committee. Section 703 provides that actions to
recover title or possession of real property, actions to recover damages for injury to person or
property, real and personal, and actions to recover the possession of specified articles of
personal property, shall survive, and may be commenced and prosecuted against the executor or
administrator; "but all other actions commenced against the deceased before his death shall be
discontinued and the claims therein involved presented before the committee as herein
provided." Section 708 provides that a claim secured by a mortgage or other collateral security
may be abandoned and the claim prosecuted before the committee, or the mortgage may be
foreclosed or the security be relied upon, and in the event of a deficiency judgment, the
creditor may, after the sale of mortgage or upon the insufficiency of the security, prove such
deficiency before the committee on claims. There are also certain provisions in section 746 et
seq., with reference to the presentation of contingent claims to the committee after the
expiration of the time allowed for the presentation of claims not contingent. Do plaintiff's
claims fall within any of these sections? They are described in the will as debts. There is
nothing in the will to indicate that any or all of them are contingent claims, claims for the
possession of or title to real property, damages for injury to person or property, real or
personal, or for the possession of specified articles of personal property. Nor is it asserted by
the plaintiff that they do. The conclusion is that they were claims proper to be considered by
the committee.

This being true, the next point to determine is, when and under what circumstances may the
committee be recalled to consider belated claims? Section 689 provides:

That court shall allow such time as the circumstances of the case require for the
creditors to present their claims the committee for examination and allowance; but not,
in the first instance, more than twelve months, or less than six months; and the time
allowed shall be stated in the commission. The court may extend the time as
circumstances require, but not so that the whole time shall exceed eighteen months.

It cannot be questioned that thus section supersedes the ordinary limitation of actions
provided for in chapter 3 of the Code. It is strictly confined, in its application, to claims against
the estate of deceased persons, and has been almost universally adopted as part of the probate
law of the United States. It is commonly termed the statute of nonclaims, and its purpose is to
settle the affairs of the estate with dispatch, so that residue may be delivered to the persons
entitled thereto without their being afterwards called upon to respond in actions for claims,
which, under the ordinary statute of limitations, have not yet prescribed.

The object of the law in fixing a definite period within which claims must be presented is
to insure the speedy settling of the affairs of a deceased person and the early delivery
of the property of the estate in the hands of the persons entitled to receive it. (Estate
of De Dios, 24 Phil. Rep., 573.)
 42

Due possibly to the comparative shortness of the period of limitation applying to such claims as
compared with the ordinary statute of limitations, the statute of nonclaims has not the finality
of the ordinary statute of limitations. It may be safely said that a saving provision, more or less
liberal, is annexed to the statute of nonclaims in every jurisdiction where is found. In this
country its saving clause is found in section 690, which reads as follows:

On application of a creditor who has failed to present his claim, if made within six months
after the time previously limited, or, if a committee fails to give the notice required by
this chapter, and such application is made before the final settlement of the estate, the
court may, for cause shown, and on such terms as are equitable, renew the commission
and allow further time, not exceeding one month, for the committee to examine such
claim, in which case it shall personally notify the parties of the time and place of hearing,
and as soon as may be make the return of their doings to the court.

If the committee fails to give the notice required, that is a sufficient cause for reconvening it
for further consideration of claims which may not have been presented before its final report
was submitted to the court. But, as stated above, this is not the case made by the plaintiff, as
the committee did give the notice required by law. Where the proper notice has been given the
right to have the committee recalled for the consideration of a belated claim appears to rest
first upon the condition that it is presented within six months after the time previously limited
for the presentation of claims. In the present case the time previously limited was six months
from July 23, 1907. This allowed the plaintiff until January 23, 1908, to present his claims to
the committee. An extension of this time under section 690 rested in the discretion of the
court. (Estate of De Dios, supra.) In other words, the court could extend this time and recall
the committee for a consideration of the plaintiff's claims against the estate of justice
required it, at any time within the six months after January 23, 1908, or until July 23, 1908.
Plaintiff's petition was not presented until July 14, 1909. The bar of the statute of nonclaims is
an conclusive under these circumstances as the bar of the ordinary statute of limitations would
be. It is generally held that claims are not barred as to property not included in the inventory.
(Waughop vs. Bartlett, 165 III., 124; Estate of Reyes, 17 Phil. Rep., 188.) So also, as indicated
by this court in the case last cited, fraud would undoubtedly have the same effect. These
exceptions to the operation of the statute are, of course, founded upon the highest principles
of equity. But what is the plea of the plaintiff in this case? Simply this: That he was laboring
under a mistake of law — a mistake which could easily have been corrected had he sought to
inform himself; a lack of information as to the law governing the allowance of claims against
estate of the deceased persons which, by proper diligence, could have been remedied in ample
to present the claims to the committee. Plaintiff finally discovered his mistake and now seeks
to assert his right when they have been lost through his own negligence. Ignorantia legis
neminem excusat. We conclude that the learned trial court made no error in refusing to
reconvene the committee for the purpose of considering plaintiff's claims against the estate.

In his second assignment of error the appellant insists that the court erred in dismissing his
petition filed on November 21, 1910, wherein he asks that the administratrix be compelled to
 43

pay over to him the amounts mentioned in the will as debts due him. We concede all that is
implied in the maxim, dicat testor et erit lex. But the law imposes certain restrictions upon the
testator, not only as to the disposition of his estate, but also as to the manner in which he may
make such disposition. As stated in Rood on Wills, sec. 412: "Some general rules have been
irrevocably established by the policy of the law, which cannot be exceeded or transgressed by
any intention of the testator, be it ever so clearly expressed."

It may be safely asserted that no respectable authority can be found which holds that the will
of the testator may override positive provisions of law and imperative requirements of public
policy. (Page on Wills, sec. 461.)

Impossible conditions and those contrary to law and good morals shall be considered as
not imposed, . . . (Art. 792, Civil Code.)

Conceding for the moment that it was the testator's desire in the present case that the debts
listed by him in his will should be paid without referring them to a committee appointed by the
court, can such a provision be enforced? May the provisions of the Code of Civil Procedure
relating to the settlement of claims against an estate by a committee appointed by the court be
superseded by the contents of a will?

It is evident from the brief outline of the sections referred to above that the Code of Civil
Procedure has established a system for the allowance of claims against the estates of
decedents. Those are at least two restrictions imposed by law upon the power of the testator
to dispose of his property, and which pro tanto restrict the maxim that "the will of the
testator law: (1) His estate is liable for all legal obligations incurred by him; and (2) he can not
dispose of or encumber the legal portion due his heirs by force of law. The former take
precedence over the latter. (Sec. 640, Code Civ, Proc.) In case his estate is sufficient they
must be paid. (Sec, 734, id.) In case the estate is insolvent they must be paid in the order
named in section 735. It is hardly necessary to say that a provision in an insolvent's will that a
certain debt be paid would not entitle it to preference over other debts. But, if the express
mention of a debt in the will requires the administrator to pay it without reference to the
committee, what assurance is there, in the case of an insolvent estate, that it will not take
precedence over preferred debts?

If it is unnecessary to present such claim to the committee, the source of nonclaims is not
applicable. It is not barred until from four to ten years, according to its classification in
chapter 3 of the Code of Civil Procedure, establishing questions upon actions. Under such
circumstances, when then the legal portion is determined? If, in the meantime the estate has
been distributed, what security have the differences against the interruption of their
possession? Is the administrator required to pay the amount stipulated in the will regardless of
its correctness? And, if not, what authority has he to vise the claim? Section 706 of the Code
of Civil Procedure provides that an executor may, with the approval of the court, compound with
a debtor of deceased for a debt due the estate, But he is nowhere permitted or directed to
 44

deal with a creditor of the estate. On the contrary, he is the advocate of the estate before an
impartial committee with quasi-judicial power to determine the amount of the claims against the
estate, and, in certain cases, to equitably adjust the amounts due. The administrator,
representing the debtor estate, and the creditor appear before this body as parties litigant
and, if either is dissatisfied with its decision, an appeal to the court is their remedy. To allow
the administrator to examine and approve a claim against the estate would put him in the dual
role of a claimant and a judge. The law in this jurisdiction has been so framed that this may not
occur. The most important restriction, in this jurisdiction, on the disposition of property by will
are those provisions of the Civil Code providing for the preservation of the legal portions due to
heirs by force of law, and expressly recognized and continued in force by sections 614, 684, and
753 of the Code of Civil Procedure. But if a debt is expressly recognized in the will must be paid
without its being verified, there is nothing to prevent a partial or total alienation of the legal
portion by means of a bequest under a guise of a debt, since all of the latter must be paid
before the amount of the legal portion can be determined.

We are aware that in some jurisdictions executors and administrators are, by law, obligated to
perform the duties which, in this jurisdiction, are assign to the committee on claims; that in
some other jurisdictions it is the probate court itself that performs these duties; that in some
jurisdictions the limitation upon the presentment of claims for allowance is longer and, possibly,
in some shorter; and that there is a great divergence in the classification of actions which
survive and actions which do not survive the death of the testator. It must be further
remembered that there are but few of the United States which provide for heirs by force of
law. These differences render useless as authorities in this jurisdiction many of the cases
coming from the United States. The restriction imposed upon the testator's power to dispose
of his property when they are heirs by force of law is especially important. The rights of these
heirs by force law pass immediately upon the death of the testator. (Art. 657, Civil Code.) The
state intervenes and guarantees their rights by many stringent provisions of law to the extent
mentioned in article 818 of the Civil Code. Having undertaken the responsibility to deliver the
legal portion of the net assets of the estate to the heirs by force of law, it is idle to talk of
substituting for the procedure provided by law for determining the legal portion, some other
procedure provided in the will of the testator. The state cannot afford to allow the
performance of its obligations to be directed by the will of an individual. There is but one
instance in which the settlement of the estate according to the probate procedure provided in
the Code of Civil Procedure may be dispense with, and it applies only to intestateestates. (Sec.
596, Code Civ. Proc.) A partial exemption from the lawful procedure is also contained in section
644, when the executor or administrator is the sole residuary legatee. Even in such case, and
although the testator directs that no bond be given, the executor is required to give a bond for
the payment of the debts of the testator. The facts of the present case do not bring it within
either of this sections. We conclude that the claims against the estate in the case at bar were
enforceable only when the prescribed legal procedure was followed.

But we are not disposed to rest our conclusion upon this phase of the case entirely upon legal
grounds. On the contrary we are strongly of the opinion that the application of the maxim, "The
 45

will of the testator is the law of the case," but strengthens our position so far as the present
case is concerned.

It will ordinarily be presumed in construing a will that the testator is acquainted with the
rules of law, and that he intended to comply with them accordingly. If two constructions
of a will or a part thereof are possible, and one of these constructions is consistent with
the law, and the other is inconsistent, the presumption that the testator intended to
comply with the law will compel that construction which is consistent with the law to be
adopted. (Page on Wills, sec. 465.)

Aside from this legal presumption, which we believe should apply in the present case as against
any construction of the will tending to show an intention of the testator that the ordinary legal
method of probating claims should be dispensed with, it must be remembered that the testator
knows that the execution of his will in no way affects his control over his property. The dates
of his will and of his death may be separated by a period of time more or less appreciable. In
the meantime, as the testator well knows, he may acquire or dispose of property, pay or assume
additional debts, etc. In the absence of anything to the contrary, it is only proper to presume
that the testator, in his will, is treating of his estate at the time and in the condition it is in at
his death. Especially is this true of his debts. Debts may accrue and be paid in whole or in part
between the time the will is made and the death of the testator. To allow a debt mentioned in
the will in the amount expressed therein on the ground that such was the desire of the
testator, when, in fact, the debt had been wholly or partly paid, would be not only unjust to the
residuary heirs, but a reflection upon the good sense of the testator himself. Take the present
case for example. It would be absurd to say that the testator knew what the amount of his just
debt would be at a future and uncertain date. A mere comparison of the list of the creditors of
the testator and the amounts due them as described in his will, with the same list and amounts
allowed by the committee on claims, shows that the testator had creditors at the time of his
death not mention in the will at all. In other instances the amounts due this creditors were
either greater or less than the amounts mentioned as due them in the will. In fact, of those
debts listed in the will, not a single one was allowed by the committee in the amount named in
the will. This show that the testator either failed to list in his will all his creditors and that, as
to those he did include, he set down an erroneous amount opposite their names; or else, which is
the only reasonable view of the matter, he overlooked some debts or contracted new ones after
the will was made and that as to others he did include he made a partial payments on some and
incurred additional indebtedness as to others.

While the testator expresses the desire that his debts be paid, he also expressly leaves the
residue of his estate, in equal parts, to his children. Is it to be presumed that he desired to
overpay some of his creditors notwithstanding his express instructions that his own children
should enjoy the net assets of his estate after the debts were paid? Again, is the net
statement of the amount due some of his creditors and the omission all together of some of his
creditors compatible with his honorable and commendable desire, so clearly expressed in his
 46

will, that all his debts be punctually paid? We cannot conceive that such conflicting ideas were
present in the testator's mind when he made his will.

Again, suppose the testator erroneously charged himself with a debt which he was under no
legal or even moral obligation to pay. The present case suggests, if it does not actually present,
such a state of affairs. Among the assets of the estate mentioned in the will is a parcel of land
valued at P6,500; while in the inventory of the administratrix the right to repurchase this land
from one Isidro Santos is listed as an asset. Counsel for the administratrix alleges that he is
prepared to prove that this is the identical plaintiff in the case at bar; that the testator
erroneously claimed the fee of this land in his last will and stated Santos' rights in the same as
a mere debt due him of P5,000; that in reality, the only asset of the testator regard to this
land was the value of the right to repurchase, while the ownership of the land, subject only to
that right of redemption, belonged to Santos; that the right to repurchase this land expired in
1907, after the testator's death. Assuming, without in the least asserting, that such are the
underlying facts of this case, the unjust consequences of holding that a debt expressly
mentioned in the will may be recovered without being presented to the committee on claims, is
at once apparent. In this supposed case, plaintiff needed only wait until the time for redemption
of the land had expired, when he would acquired an absolute title to the land, and could also
have exacted the redemption price. Upon such a state of facts, the one item of P5,000 would be
a mere fictitious debt, and as the total net value of the estate was less than P15,000, the legal
portion of the testator's children would be consumed in part in the payment of this item. Such a
case cannot occur if the prescribed procedure is followed of requiring of such claims be viseed
by the committee on claims.

The direction in the will for the executor to pay all just debts does not mean that he
shall pay them without probate. There is nothing in the will to indicate that the testator
in tended that his estate should be administered in any other than the regular way under
the statute, which requires "all demands against the estates of the deceased persons,"
"all such demands as may be exhibited," etc. The statute provides the very means for
ascertaining whether the claims against the estate or just debts. (Kaufman vs. Redwine,
97 Ark., 546.)

See also Collamore vs. Wilder (19 Kan., 67); O'Neil vs. Freeman (45 N. J. L., 208).

The petition of the plaintiff filed on November 21, 1910, wherein he asks that the
administratrix be compelled to pay over to him the amounts mentioned in the will as debts due
him appears to be nothing more nor less than a complaint instituting an action against the
administratrix for the recovery of the sum of money. Obviously, the plaintiff is not seeking
possession of or title to real property or specific articles of personal property.

When a committee is appointed as herein provided, no action or suit shall be commenced

or prosecute against the executor or administrator upon a claim against the estate to
recover a debt due from the state; but actions to recover the seizing and possession of
 47

real estate and personal chattels claimed by the estate may be commenced against him.
(Sec. 699, Code Civ. Proc.)

The sum of money prayed for in the complaint must be due the plaintiff either as a debt of a
legacy. If it is a debt, the action was erroneously instituted against the administratrix. Is it a
legacy?

Plaintiff's argument at this point becomes obviously inconsistent. Under his first assignment of
error he alleges that the committee on claims should have been reconvened to pass upon his
claim against the estate. It is clear that this committee has nothing to do with legacies. It is
true that a debt may be left as a legacy, either to the debtor (in which case it virtually amounts
to a release), or to a third person. But this case can only arise when the debt is an asset of the
estate. It would be absurd to speak of a testator's leaving a bare legacy of his own debt. (Arts.
866, 878, Civil Code.) The creation of a legacy depends upon the will of the testator, is an act
of pure beneficence, has no binding force until his death, and may be avoided in whole or in part
by the mere with whim of the testator, prior to that time. A debt arises from an obligation
recognized by law (art. 1089, Civil Code) and once established, can only be extinguished in a
lawful manner. (Art. 1156, id.) Debts are demandable and must be paid in legal tender. Legacies
may, and often do, consist of specific articles of personal property and must be satisfied
accordingly. In order to collect as legacy the sum mentioned in the will as due him, the plaintiff
must show that it is in fact a legacy and not a debt. As he has already attempted to show that
this sum represents a debt, it is an anomaly to urge now it is a legacy.

Was it the intention of the testator to leave the plaintiff a legacy of P7,454? We have already
touched upon this question. Plaintiff's claim is described by the testator as a debt. It must be
presumed that he used this expression in its ordinary and common acceptation; that is, a legal
liability existing in favor of the plaintiff at the time the will was made, and demandable and
payable in legal tender. Had the testator desired to leave a legacy to the plaintiff, he would
have done so in appropriate language instead of including it in a statement of what he owed the
plaintiff. The decedent's purpose in listing his debts in his will is set forth in the fourth clause
of the will, quoted above. There is nothing contained in that clause which indicates, even
remotely, a desire to pay his creditors more than was legally due them.

A construction leading to a legal, just and sensible result is presumed to be correct, as

against one leading to an illegal, unnatural, or absurd effect. (Rood on Wills, sec. 426.)

The testator, in so many words, left the total net assets of his estate, without reservation of
any kind, to his children per capita. There is no indication that he desired to leave anything by
way of legacy to any other person. These considerations clearly refute the suggestion that the
testator intended to leave plaintiff any thing by way of legacy. His claim against the estate
having been a simple debt, the present action was improperly instituted against the
administratrix. (Sec. 699, Code Civ. Proc.)
 48

But it is said that the plaintiff's claims should be considered as partaking of the nature of a
legacy and disposed of accordingly. If this be perfect then the plaintiff would receive nothing
until after all debts had been paid and the heirs by force of law had received their shares.
From any point of view the inevitable result is that there must be a hearing sometime before
some tribunal to determine the correctness of the debts recognized in the wills of deceased
persons. This hearing, in the first instance, can not be had before the court because the law
does not authorize it. Such debtors must present their claims to the committee, otherwise
their claims will be forever barred.

For the foregoing reasons the orders appealed from are affirmed, with costs against the
appellant.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-29407 July 29, 1983

ESTATE OF AMADEO MATUTE OLAVE, as represented by JOSE S. MATUTE, Judicial

Co-Administrator in Sp. Proc. No. 25876, Court of First Instance of Manila, petitioner,
vs.
HONORABLE MANASES G. REYES, Presiding Judge of Branch III, Court of First
Instance of Davao, Davao City; SOUTHWEST AGRICULTURAL MARKETING
CORPORATION also known as (SAMCO); CARLOS V. MATUTE, as another Administrator
of the Estate of Amadeo Matute Olave, Sp. Proc. No. 25876 CFI, Manila; and MATIAS
S. MATUTE, as former Co-Administrator of the Estate of Amadeo Matute Olave, Sp.
Proc. No. 25876, CFI, Manila, respondents.

Jose W. Diokno for petitioner.

Wingerfortis F. Escudero for respondents.

RELOVA, J.:

In this petition for certiorari, the estate of Amadeo Matute Olave, represented by Jose S.
Matute, Judicial Administrator in Sp. Proc. No. 25876, of the then Court of First Instance of
Manila, assails the Order, dated November 10, 1967, of the respondent judge, approving the
"Amicable Settlement" submitted by the parties in Civil Case No. 4623 of the then Court of
First Instance of Davao, 16th Judicial District, Branch III, and prays that the said Order be
set aside.
 49

The petition alleged that the estate of Amadeo Matute Olave is the owner in fee simple of a
parcel of land containing an area of 293,578 square meters, situated in sitio Tibambam, barrio
Tibambam, municipality of Sigaboy (now Governor Generoso), province of Davao, and covered by
Original Certificate of Title No. 0-27 of the Registry of Deeds of Davao Province; that in April
1965 herein private respondent Southwest Agricultural Marketing Corporation (SAMCO), as
plaintiff, filed Civil Case No. 4623 with the respondent Court of First Instance of Davao against
respondents, Carlos V. Matute and Matias S. Matute, as defendants, in their capacities as co-
administrators of the estate of Amadeo Matute Olave, for the collection of an alleged
indebtedness of P19,952.11 and for attorney's fees of P4,988.02; that on May 8, 1965,
defendants Carlos V. Matute and Matias S. Matute in said Civil Case No. 4623, filed an answer
denying their lack of knowledge and questioning the legality of the claim of SAMCO; that on
October 25, 1966 in Sp. Proc. No. 25876, the then Court of First Instance of Manila, Branch
IV, issued an order directing the administrators to secure the probate court's approval before
entering into any transaction involving the seventeen (17) titles of the estate, of which the
property described in OCT No. 0-27 is one of them; that on October 20, 1967, the parties
(plaintiff and defendants) in Civil Case No. 4623 of the Court of First Instance of Davao,
submitted to the respondent court an Amicable Settlement whereby the property of the estate
covered by OCT No. 0-27 of Davao was conveyed and ceded to SAMCO as payment of its claim;
that the said Amicable Settlement signed by the herein respondents was not submitted to and
approved by the then Court of First Instance of Manila, Branch IV, in Sp. Proc. No. 25876, nor
notice thereof made to the beneficiaries and heirs in said special proceedings; that on
November 10, 1967, respondent court, despite the opposition of the other parties who sought
to intervene in Civil Case No. 4623 and despite the utter lack of approval of the probate court
in Manila, approved the said Amicable Settlement and gave the same the enforceability of a
court decision which, in effect, ceded the property covered by OCT No. 0-27, containing an
area of 293,578 square meters and with an assessed value of P31,700.00 to SAMCO in payment
of its claim for only P19,952.11; and, that if the said Order of respondent dated November 10,
1967 is not set aside, the same will operate as a judgment that "conveys illegally and unfairly,
the property of petitioner-estate without the requisite approval of the probate court of Manila,
which has the sole jurisdiction to convey this property in custodia legis of the estate. (par. 16,
Petition).

Made to answer, herein respondent SAMCO and respondent judge, among others, contend that
the Amicable Settlement need not be approved by the probate court, "the same having been
entered into in another independent action and in another court of co-equal rank. Article 2032
of the Civil Code applies only to extrajudicial compromise entered into by the administrators of
the estate. In the alternative, lack of approval of the probate court of the Amicable
Settlement does not render it null and void, but at most voidable, which must be the subject
matter of a direct proceeding in the proper Court of First Instance." (p. 60, Rollo)

In said Civil Case No. 4623 for sum of money, plaintiff SAMCO and defendants Carlos V.
Matute and Matias S. Matute, in their capacities as judicial administrators of the estate of
 50

Amado Matute Olave in Special Proceeding No. 25876, Court of First Instance of Manila,
Branch IV, submitted the following Amicable Settlement:

1. That defendants in their capacity as judicial administrators of the Estate of

Amadeo Matute, hereby submit and acknowledge that the said Estate of Amadeo
Matute is justly indebted to plaintiff in the total sum of P28,403.02 representing
the principal account of P19,952.11 and in the sum of P8,450.91 as attorney's fees,
damages, interest and costs;

2. That at present the defendant estate is devoid of or does not have any funds
with which to pay or settle the aforestated obligation in favor of the plaintiff, and
that being so, the defendant estate through the undersigned administrators,
decides to pay the plaintiff by way of conveying and ceding unto the plaintiff the
ownership of a certain real property owned by the defendant estate now under the
administration of the said undersigned administrators;

3. That plaintiff hereby accepts the offer of defendants of conveying,

transferring and ceding the ownership of the above described property as full and
complete payment and satisfaction of the total obligation of P28,403.02;

4. That the defendant estate, through the undersigned administrators hereby

agree and bind the defendant estate to pay their counsel Atty. Dominador Zuho, of
the Zufio Law Offices the sum of Eight Thousand (P8,000.00) Pesos by way of
Attorney's Fee;

5. That the parties herein waive an other claims which they might have against one
another.

WHEREFORE, premises considered, it is respectfully prayed that this Honorable

Court approves the foregoing settlement and that judgment be rendered
transferring the said real property covered by Original Certificate of Title No. 0-
27 to plaintiff Southwest Agricultural Marketing Corporation and that a new
transfer certificate of title be issued to said plaintiff. (pp. 25-26, Rollo)

Section 1, Rule 87 of the Rules of Court, provides that "no action upon a claim for the recovery
of money or debt or interest thereon shall be commenced against the executor or
administrator; ..." The claim of private respondent SAMCO being one arising from a contract
may be pursued only by filing the same in the administration proceedings in the Court of First
Instance of Manila (Sp. Proc. No. 25876) for the settlement of the estate of the deceased
Amadeo Matute Olave; and the claim must be filed within the period prescribed, otherwise, the
same shall be deemed "barred forever." (Section 5, Rule 86, Rules of Court).

The purpose of presentation of claims against decedents of the estate in the probate court is
to protect the estate of deceased persons. That way, the executor or administrator will be able
 51

to examine each claim and determine whether it is a proper one which should be allowed.
Further, the primary object of the provisions requiring presentation is to apprise the
administrator and the probate court of the existence of the claim so that a proper and timely
arrangement may be made for its payment in full or by pro-rata portion in the due course of the
administration, inasmuch as upon the death of a person, his entire estate is burdened with the
payment of all of his debts and no creditor shall enjoy any preference or priority; all of them
shag share pro-rata in the liquidation of the estate of the deceased.

It is clear that the main purpose of private respondent SAMCO in filing Civil Case No. 4623 in
the then Court of First Instance of Davao was to secure a money judgment against the estate
which eventually ended in the conveyance to SAMCO of more than twenty-nine (29) hectares of
land belonging to the estate of the deceased Amadeo Matute Olave in payment of its claim,
without prior authority of the probate court of Manila, in Sp. Proc. No. 25876, which has the
exclusive jurisdiction over the estate of Amadeo Matute Olave. It was a mistake on the part of
respondent court to have given due course to Civil Case No. 4623, much less issue the
questioned Order, dated November 10, 1967, approving the Amicable Settlement.

Section 1, Rule 73 of the Rules of Court, expressly provides that "the court first taking
cognizance of the settlement of the estate of a decedent, shall exercise jurisdiction to
the exclusion of all other courts." (Emphasis supplied). The law is clear that where the estate of
the deceased person is already the subject of a testate or intestate proceeding, the
administrator cannot enter into any transaction involving it without prior approval of the
probate court.

WHEREFORE, the petition for certiorari is GRANTED, and the Order, dated November 10,
1967, of the respondent court approving the Amicable Settlement of the parties in Civil Case
No. 4623 of the then Court of First Instance of Davao, is hereby SET ASIDE.

SO ORDERED.

THIRD DIVISION
SALONGA HERNANDEZ & G.R. No. 127165
ALLADO,
Petitioner, Present:

QUISUMBING, J.,
Chairperson,
CARPIO,
- versus - CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
OLIVIA SENGCO PASCUAL Promulgated:
 52

and THE HONORABLE COURT

OF APPEALS, May 2, 2006
Respondents.
x----------------------------------------------------------------------------x

D E C I S I O N

TINGA, J.:

Petitioner, a professional law partnership, brings forth this Petition for Review assailing
the Decision[1] of the Court of Appeals dated 22 December 1995. The appellate court had
affirmed two orders promulgated by the Malabon Regional Trial Court (RTC), Branch 72 (Probate
Court), in Sp. Proc. No. 136-MN, entitled In the Matter of Testate Estate of Doa AdelaPascual,
Dr. Olivia S. Pascual, Executrix.

The case actually centers on two estate proceedings, that

of Doa Adela Pascual (Doa Adela) and the other, her husband Don Andres Pascuals (Don Andres),
who predeceased her. Don Andres died intestate, while Doa Adela left behind a last will and
testament. The dispute over the intestate estate of Don Andres has spawned at least two cases
already settled by this Court.[2]

On 1 December 1973, an intestate proceeding for the settlement of the estate of Don
Andres was commenced by his widow Doa Adela before the then Court of First Instance, now
Regional Trial Court of Pasig, Branch 23 (Intestate Court), docketed as Sp. Proc. No.
7554. Apart from his wife, who bore him no children, Don Andres was survived by several
nephews and nieces from his full-blood and half-blood brothers.[3] This proceeding proved to be
the source of many controversies, owing to the attempts of siblings Olivia and Hermes Pascual,
acknowledged natural children of Don Andress brother, Eligio, to be recognized as heirs of Don
Andres. Olivia and Hermes Pascual procured the initial support of Doa Adela to their claims.
However, on 16 October 1985, the other heirs of Don Andres entered into a Compromise
Agreement over the objections of Olivia and Hermes Pascual, whereby three-fourths (3/4) of
the estate would go to Doa Adela and one-fourth (1/4) to the other heirs of Don Andres,
without prejudice to the final determination by the court or another compromise agreement as
regards the claims of Olivia and Hermes Pascual.[4] Subsequently, the Intestate Court denied
the claims of Olivia and Hermes Pascual. Said denial was eventually affirmed by this Court in
1992 in Pascual v. Pascual-Bautista,[5] applying Article 992 of the Civil Code.

In the meantime, Doa Adela died on 18 August 1987, leaving behind a last will and
testament executed in 1978, designating Olivia Pascual as the executrix, as well as the principal
 53

beneficiary of her estate. The will also bequeathed several legacies and devises to several
individuals and institutions.

Olivia Pascual then engaged the services of petitioner in connection with the settlement
of the estate of Doa Adela. Their agreement as to the professional fees due to petitioner is
contained in a letter dated 25 August 1987, signed by Atty. Esteban Salonga in behalf of
petitioner and Olivia Pascual. It is stipulated therein, among others, that the final professional
fee shall be 3% of the total gross estate as well as the fruits thereof based on the court
approved inventory of the estate. Fruits shall be reckoned from the time of [Olivia Pascuals]
appointment as executrix of the estate. The 3% final fee shall be payable upon approval by the
court of the agreement for the distribution of the properties to the court designated heirs of
the estate.[6]

On 26 August 1987, private respondent, represented by petitioner, commenced a petition

for the probate of the last will and testament of Doa Adela before the Probate Court,
docketed as Sp. Proc. No. 136-MN and raffled to Branch 72 presided by Judge Benjamin M.
Aquino, Jr. The petition was opposed by a certain Miguel Cornejo, Jr. and his siblings, who in
turn presented a purported will executed in 1985 by Doa Adela in their favor. [7]

After due trial, on 1 July 1993, the Probate Court rendered a Decision[8] allowing probate
of the 1978 Last Will and Testament of Doa Adela and disallowing the purported 1985 Will.
Letters testamentary were issued to Olivia Pascual.[9] Cornejo attempted to appeal this decision
of the Probate Court, but his notice of appeal was denied due course by the Probate Court, said
notice not having been accompanied by any record on appeal as required under the Interim
Rules and by Rule 109 of the Rules of Court.[10]

On 27 July 1993, petitioner filed a Notice of Attorneys Lien equivalent to three percent
(3%) of the total gross estate of the late Doa Adela S. Pascual as well as the fruits thereof
based on the court approved inventory of the estate, pursuant to the retainer agreement
signed by and between petitioner and Olivia S. Pascual, on 25 August 1987. In an Order dated 4
November 1993, the Probate Court ruled that petitioners notice of attorneys lien, being fully
supported by a retainers contract not repudiated nor questioned by his client Olivia S. Pascual,
is hereby noted as a lien that must be satisfied chargeable to the share of Olivia
S. Pascual.[11] This was followed by another Order, dated 11 November 1993, wherein it was
directed that notice be x x x given, requiring all persons having claims for money against the
decedent, Doa Adela S. Vda. de Pascual, arising from contracts, express or implied, whether the
same be due, not due, or contingent, for funeral expenses and expenses of the last sickness of
the said decedent, and judgment for money against her, to file said claims with the Clerk of
Court at Malabon, Metro Manila, within six (6) months from November 4, 1993.[12]
 54

Accordingly, on 22 November 1993, petitioner filed a Motion to Annotate Attorneys Lien

on Properties of the Estate of Doa Adela Vda. de Pascual.[13]

It was at this stage, on 19 January 1994, that the Intestate Court rendered a Decision
in Sp. Proc. No. 7554, finally giving judicial approval to the aforementioned 1985 Compromise
Agreement, and partitioning the estate of Don Andres by adjudicating one-fourth (1/4) thereof
to the heirs of Don Andres and three-fourths (3/4) thereof to the estate of Doa Adela.
The Intestate Court also awarded attorneys fees to Atty. Jesus I. Santos, equivalent to 15%
of the three-fourths (3/4) share of the estate of Doa Adela.[14] Olivia Pascual filed a petition
for annulment of the award of attorneys fees with the Court of Appeals, but the same was
denied, first by the appellate court, then finally by this Court in its 1998 decision in Pascual v.
Court of Appeals.[15]

On 26 April 1994, petitioner filed a Motion for Writ of Execution for the partial
execution of petitioners attorneys lien estimated at P1,198,097.02. The figure, characterized as
tentative, was arrived at based on a Motion to Submit Project Partition dated 26 October
1993 filed by Olivia Pascual, which alleged the gross appraised value of Doa Adelas estate
at P39,936,567.19. This sum was in turn derived from the alleged value of the total estate of
Don Andres, three-fourths (3/4) of which had been adjudicated to Doa Adela. At the same time,
petitioner noted that the stated values must be considered as only provisional, considering that
they were based on a July 1988 appraisal report; thus, the claim for execution was, according to
petitioner, without prejudice to an updated appraisal of the properties comprising the gross
estate of Doa Adela.[16]

On 29 April 1994, Olivia Pascual, through Atty. Antonio Ravelo, filed her comment and/or
opposition to the motion for the issuance of a writ of execution on attorneys fees. She argued
that a lawyer of an administrator or executor should charge the individual client, not the estate,
for professional fees. Olivia Pascual also claimed, citing jurisprudence[17], that the counsel
claiming attorneys fees should give sufficient notice to all interested parties to the estate, and
that such was not accomplished by petitioner considering that no notices were given to the
several legatees designated in Doa Adelas will.[18] It was further argued that the motion for
execution was premature, considering that the proceedings before the Intestate Court had not
yet been terminated; that the computation of the figure of P1,198,097.02 was erroneous; and
that the enforcement of the writ of execution on the undivided estate of Don Andres would
prejudice his other heirs entitled to one-fourth (1/4) thereof.
 55

On 2 June 1994, the Probate Court issued the first assailed order denying the motion for
writ of execution in view of the fact that the bulk of the estate of the late Doa Adela S. Vda.
De Pascual is still tied-up with the estate of the late Don Andres Pascual, the proceedings over
which and the final disposition thereof with respect to the partition and segregation of what is
to form part of the estate of the late Doa Adela S. Vda. De Pascual is pending with another
court sitting in Pasig, Metro Manila, and for having been prematurely filed.[19]

On 14 November 1994, Olivia Pascual, filed with the Probate Court a Motion to Declare
General Default and Distribution of Testamentary Dispositions with Cancellation of
Administrators Bond. It was noted therein that no creditor had filed a claim against the estate
of Doa Adela despite due notice published pursuant to Section 1, Rule 86 of the Rules of Court.
The Probate Court was also informed of the fact that the proceedings before the Intestate
Court had already been terminated by reason of the 14 January 1994 Decision rendered by the
latter court. It was also stated that the corresponding estate taxes had been paid as evidenced
by the Estate Tax Return filed with the Bureau of Internal Revenue, and of the Certificate of
Authority issued by the said agency.[20] Interestingly, it was also manifested that two of the
properties that formed part of the estates of the spouses, the Ongpin Property and the
Valenzuela Property, had in fact already been partitioned between the estate of Doa Adela and
the heirs of Don Andres at the ratio of three-fourths (3/4) and one-fourth (1/4), respectively.

In response, petitioner filed a Comment/Manifestation praying that an order be issued:

(1) ordering the annotation of the attorneys lien on the properties comprising the
estate of Doa Adela Pascual;

(2) a writ of partial execution be issued for the satisfaction of the attorneys lien
of the undersigned counsel [herein petitioner] in relation to the Ongpin and
Valenzuela properties for the amount of P635,368.14, without prejudice to the
issuance of a writ of execution after the re-appraisal of the present market value
of the estate and the determination of the amount due to [petitioner] as
attorneysfees;

(3) ordering the appointment of a reputable appraisal company to re-appraise the

present market value of the estate of Doa Adela Pascual including the fruits
thereof for the purpose of determining the value of the attorneys fees of
[petitioner]; and

(4) after the re-appraisal of the estate of Doa Adela Pascual a writ of execution
be issued for the full satisfaction and settlement of the attorneys lien of
[petitioner].[21]
 56

On 17 March 1995, the Probate Court issued an order which denied petitioners motion for
a re-appraisal of the property and the issuance of a partial writ of execution for being
prematurely filed as there is no exact estate yet to be inventoried and re-appraised, assuming
re-appraisal would be proper, because the bulk of the estate subject of this case, as far as this
court is concerned, has not yet been turned over to the executrix or to the court itself.[22]

Through a petition for certiorari and mandamus, petitioner assailed the two orders of the
Probate Court denying its motion for the immediate execution, partial or otherwise, of its claim
for attorneys fees: the 2 June 1994 Order and the 17 March 1995 Order. Nonetheless, the twin
orders of the RTC were affirmed by the Court of Appeals, effectively precluding petitioners
attempt to execute on its attorneys lien. The appellate court noted that the attorneys lien
issued by the Probate Court was chargeable only to the share of Olivia Pascual, and not to the
estate of Doa Adela, since it was Olivia Pascual who entered into the agreement with petitioner
for the payment of attorneys fees in connection with the settlement of the estate of Doa Adela.
Citing Lacson v. Reyes,[23] the Court of Appeals asserted that as a rule an administrator or
executor may be allowed fees for the necessary expenses he has incurred but he may not
recover attorneys fees from the estate.
The Court of Appeals likewise noted that in the retainer agreement between petitioner and
Olivia Pascual, it is stipulated that the 3% final fee shall be payable upon approval by the court
of the agreement for the distribution of the properties to the court designated heirs of the
estate.[24] On this score, the Court of Appeals ruled that as the petition before it did not show
that an agreement on the distribution of properties of the estate of Doa Adela S. Pascual has
been submitted and approved by the probate court,[25] the filing of the motion for execution and
that of the motion for re-appraisal of the market value of the estate were both premature.

Petitioner sought to reconsider the Decision of the Court of Appeals, but in vain.[26] Hence this
petition.

Petitioner argues that as held in Occea v. Marquez,[27] the counsel seeking to recover attorneys
fees for legal services to the executor or administrator is authorized to file a petition in the
testate or intestate proceedings asking the court, after notice to all the heirs and interested
parties, to direct the payment of his fees as expenses of administration. [28] Lacson, it is alleged,
was inappropriately cited, since that case involved an executor who

concurrently was a lawyer who subsequently claimed attorneys fees as part of the expenses of
administration. Petitioner also claims that the decision of the probate court
admitting DoaAdelas will to probate sufficiently satisfies the condition in the Retainer
 57

Agreement that the final fee be payable upon approval by the court of the agreement for the
distribution of the properties to the court designated heirs of the estate, the court-approved
will comprising the agreement referred to in the contract.

Petitioner also takes exception to the Probate Courts finding that the bulk of the estate
subject of this case, as far as this [c]ourt is concerned, has not been turned over to the
executrix or to the [c]ourt itself, on which the appellate court predicated its ruling that the
motion for a writ of execution was premature. Petitioner submits that the Probate Court
ineluctably has jurisdiction over the estate of Doa Adela, and has necessarily assumed control
over the properties belonging to the said estate. Thus, petitioner continues, there is no longer
need to await the turnover of the properties involved in the intestate estate of Don Andres
which constitute part of the testate estate of Doa Adela since the Probate Court and
the Intestate Court have concurrent jurisdiction over these properties as they have not yet
been physically divided.

Petitioner refers to the averment made by Olivia Pascual before the Probate Court that
the proceedings before the Intestate Court had already been terminated, and that the proceeds
of the sale of the Ongpin Property and the Valenzuela Property had in fact been already divided
based on the three-fourths (3/4) to one-fourth (1/4) ratio between the estate of Doa Adelaand
the heirs of Don Andres. Petitioner further points out that the Probate Court had authorized
and approved the sale of the Ongpin Property, yet refused to allow the partial execution of its
claim for attorneys fees.

Finally, petitioner asserts that the Probate Court erred in refusing to grant the prayer
seeking the re-appraisal of the property of Doa Adelas estate. Such re-appraisal, so it claims, is
necessary in order to determine the three percent (3%) share in the total gross estate
committed to petitioner by reason of the Retainer Agreement.

It appears that the thrust of the assailed Decision of the Court of Appeals is along these
lines: that petitioner may directly claim attorneys fees only against Olivia Pascual and not
against the estate of Doa Adela; and that petitioners claim is also premature since contrary to
the requisite stipulated in the Retainer Agreement, there is no court-approved agreement for
the distribution of the properties of the estate of Doa Adela as yet.

As an initial premise, we consider whether a lawyer who renders legal services to the
executor or administrator of an estate can claim attorneys fees against the estate instead of
the executor or administrator. Petitioner correctly cites Occea v. Marquez[29] as providing the
governing rule on that matter as previously settled in the 1905 case of Escueta v. Sy-
Juilliong,[30] to wit:
 58

The rule is that when a lawyer has rendered legal services to the executor
or administrator to assist him in the execution of his trust, his attorney's fees
may be allowed as expenses of administration. The estate is, however, not directly
liable for his fees, the liability for payment resting primarily on the executor or
administrator. If the administrator had paid the fees, he would be entitled to
reimbursement from the estate. The procedure to be followed by counsel in order
to collect his fees is to request the administrator to make payment, and should the
latter fail to pay, either to (a) file an action against him in his personal capacity,
and not as administrator, or (b) file a petition in the testate or intestate
proceedings asking the court, after notice to all the heirs and interested parties,
to direct the payment of his fees as expenses of administration. Whichever course
is adopted, the heirs and other persons interested in the estate will have the right
to inquire into the value of the services of the lawyer and on the necessity of his
employment.[31]

We reiterate that as a general rule, it is the executor or administrator who is primarily liable
for attorneys fees due to the lawyer who rendered legal services for the executor or
administrator in relation to the settlement of the estate. The executor or administrator may
seek reimbursement from the estate for the sums paid in attorneys fees if it can be shown that
the services of the lawyer redounded to the benefit of the estate.[32] However, if the executor
or administrator refuses to pay the attorneys fees, the lawyer has two modes of
recourse. First, the lawyer may file an action against the executor or administrator, but in
his/her personal capacity and not as administrator or executor. Second, the lawyer may file a
petition in the testate or intestate proceedings, asking the court to direct the payment of
attorneys fees as an expense of administration. If the second mode is resorted to, it is
essential that notice to all the heirs and interested parties be made so as to enable these
persons to inquire into the value of the services of the lawyer and on the necessity of his
employment.

Lacson v. Reyes,[33] cited by the appellate court, involved an executor who also happened to be
the lawyer for the heirs who had filed the petition for probate. For that reason, that case is not
squarely in point to the case at bar. It was pronounced therein that the administrator or
executor of the estate cannot charge professional fees for legal services against the same
estate, as explicitly provided under Section 7, Rule 85 of the Rules of Court of 1985.[34] No such
rule exists barring direct recovery of professional legal fees from the estate by the lawyer who
is not the executor or administrator of the said estate. The limitations on such direct recovery
are nonetheless established by jurisprudence, as evinced by the rulings in Escueta and Occea.
 59

The character of such claim for attorneys fees bears reiteration. As stated in Escueta, it
partakes the nature of an administration expense. Administration expenses include attorneys
fees incurred in connection with the administration of the estate.[35] It is an expense attending
the accomplishment of the purpose of administration growing out of the contract or obligation
entered into by the personal representative of the estate, and thus the claim for
reimbursement must be superior to the rights of the beneficiaries.[36]

Notwithstanding, there may be instances wherein the estate should not be charged with
attorneys fees. If the costs of counsels fees arise out of litigation among the beneficiaries
thereof themselves or in the protection of the interests of particular persons, the estate
generally cannot be held liable for such costs, although when the administrator employs
competent counsel on questions which affect his/her duties as the administrator and on which
he/she is in reasonable doubt, reasonable expenses for such services may be charged against
the estate subject to the approval of the court.[37] It has also been held that an administrator
who brings on litigation for the deliberate purpose of defrauding the legitimate heirs and for his
own benefit is not entitled to reimbursement for counsels fees incurred in such litigation.[38]
Clearly then, while the direct recovery of attorneys fees from the estate may be authorized if
the executor refuses to pay such fees, and claimed through the filing of the proper petition
with the probate court, such claim remains controvertible. This is precisely why Escueta and its
progenies require that the petition be made with notice to all the heirs and interested
parties.

It is these perspectives that we apply to the case at bar. Notably, petitioner had filed
both a Notice of Attorneys Lien and a Motion for Writ of Execution. These two pleadings have
distinct character and must be treated as such.

After Doa Adelas will had been admitted to probate, petitioner had initially filed a Notice
of Attorneys Lien wherein it identified itself as the attorney for the executrix named in the
said will, Dra. Olivia S. Pascual, and sought to file its claim and/or lien for attorneys fees
equivalent to Three Percent (3%) of the total gross estate, pursuant to the 1987 Retainer
Agreement. Copies of this Notice of Attorneys Lien were furnished Attys. Fortunato Viray, Jr.
and Crisanto Cornejo, who appear on record to have served as counsels for the
various oppositors to the probate of the 1978 will of Doa Adela. This Notice of Attorneys Lien
was noted by the Probate Court in its Order of 4 November 1993, as a lien that must be
satisfied chargeable to the share of Olivia S. Pascual.

It may be so that petitioner, in filing this Notice of Attorneys Lien, initially intended to
hold Olivia Pascual, and not Doa Adelas estate, liable for the attorneys fees. It did identify
itself as the lawyer of Olivia Pascual, and the Probate Court did note that the lien be satisfied
chargeable to the share of the executor. Yet it must also be noted that such lien, as it is, is only
 60

contingent on the final settlement of the estate of Doa Adela, at such time, since the Retainer
Agreement on which the lien is hinged provides that the final fee be payable upon approval by
the court of the agreement for the distribution of the properties to the court designated heirs
of the estate.[39] This is also made clear by the order noting the lien, which qualified that said
lien was chargeable only to the share of Olivia Pascual, hence implying that at the very least, it
may be claimed only after her share to Doa Adelas estate is already determinate.

In rendering its assailed Decision, the Court of Appeals relied on this qualification made
by the Probate Court that the lien for attorneys fees was chargeable only to the share of
Olivia Pascual. Yet the Notice of Attorneys Lien only seeks to serve notice of the pendency
of the claim for attorneys fees, and not the payment of such fees itself. On its own, the
Notice of Attorneys Lien cannot serve as the basis for the Probate Court to authorize the
payment to petitioner of attorneys fees.

On the other hand, Escueta and its kindred cases do explicitly recognize the
recourse for the lawyer to directly make the claim for attorneys fees against the estate,
not the executor or administrator. The filing of the Notice of Attorneys Lien and
the qualificatory character of the rulings thereon, do not preclude the resort to the mode
of recovery against the estate as authorized by jurisprudence. Clearly then, we disagree
with the opinion of the Court of Appeals that attorneys fees can be claimed only against
the share of Olivia Pascual.

The instant case is rooted in an incomplete attempt to resort to the second mode of
recovery of attorneys fees as authorized in Escueta, originating as it did from the denial of
petitioners Motion for Writ of Execution, and not the Notice of Attorneys Lien. The Motion did
expressly seek the payment of attorneys fees to petitioner. Escueta and Occea, among other
cases, did clearly lay down the manner under which such fees may be paid out even prior to the
final settlement of the estate as an administration expense directly chargeable to the estate
itself. The critical question in the present petition is thus whether this Motion for Writ of
Execution satisfies the requisites set in Escueta for a claim for attorneys fees directly
chargeable against the estate. It does not.

The fact that the prayer for attorneys fees was cast in a motion and not a petition should
not impede such claim, considering that the motion was nonetheless filed with the Probate
Court. However, the record bears that the requisite notice to all heirs and interested
parties has not been satisfied. Doa Adelas will designated 19 other individuals apart from
Olivia Pascual, and four (4) different institutions as recipients of devises or legacies consisting
of real properties, jewelries, and cash amounts. Yet only Olivia Pascual was served with a copy of
the Motion for Writ of Execution, the motion which effectively sought the immediate payment
of petitioners attorneys fees. As early as 29 April 1994, Olivia Pascual, in opposing the Motion
 61

for Writ of Execution, already pointed out that petitioner had failed to give sufficient notice to
all interested parties to the estate, particularly the several devisees and legatees so named
in Doa Adelas will.

Such notice is material to the other heirs to Doa Adelas estate. The payment of attorneys
fees, especially in the amount of 3% of the total gross estate as sought for by petitioner,
substantially diminishes the estate of Doa Adela and may consequently cause the diminution of
their devises and legacies. Since these persons were so named in the very will itself and the
action for probate which was filed by petitioner itself, there is no reason why petitioner could
not have given due notice to these persons on its claim for attorneys fees.

The requisite notice to the heirs, devisees, and legatees is anchored on the constitutional
principle that no person shall be deprived of property without due process of law. [40] The fact
that these persons were designated in the will as recipients of the testamentary dispositions
from the decedent establishes their rights to the succession, which are transmitted to them
from the moment of the death of the decedent.[41] The payment of such attorneys fees
necessarily diminishes the estate of the decedent, and may effectively diminish the value of the
testamentary dispositions made by the decedent. These heirs, devisees, and legatees acquire
proprietary rights by reason of the will upon the moment of the death of the decedent, incipient
or inchoate as such rights may be. Hence, notice to these interested persons of the claims for
attorneys fees is integral, so as to allow them to pose any objections or oppositions to such claim
which, after all, could lead to the reduction of their benefits from the estate.

The failure to notify the other heirs, devisees or legatees, to the estate
of Doa Adela likewise deprives these interested persons of the right to be heard in a hearing
geared towards determining whether petitioner was entitled to the immediate payment of
attorneys fees. Notably, petitioner, in filing its Motion for Writ of Execution, had initially set
the hearing on the motion on 29 April 1994, but one day prior to the scheduled hearing, gave
notice instead that the motion was being submitted for the consideration of the Probate Court
without further argument.[42] Evidently, petitioner did not intend a full-blown hearing to ensue
on whether it was entitled to the payment of attorneys fees. Yet the claim for attorneys fees is
hardly incontrovertible.

That the Retainer Agreement set the attorneys fees at three percent (3%) of the gross
estate does not imply that the basis for attorneys fees is beyond controversy. Attorneys fees in
this case are in the nature of administration expenses, or necessary expenses in the first place.
Any party interested in the estate may very well, in theory, posit a myriad of objections to the
attorneys fees sought, such as for example, that these fees were not necessary expenses in the
 62

care, management, and settlement of the estate. Whether or not such basis for valid objections
exists in this case is not evident, but the fact remains that all the parties interested in the
estate, namely the other devisees and legatees, were deprived of the opportunity to raise such
objections as they were not served notice of the Motion for Writ of Execution.

The instant claim for attorneys fees is thus precluded by the absence of the requisite
notices by petitioner to all the interested persons such as the designated heirs, devisees,
legatees, as required by the jurisprudential rule laid down in Escueta. However, the Court of
Appeals held that it was the prematurity of the claim for attorneys fees that served as the
fatal impediment. On this point, the Court does not agree.

Again, the remaining peripheral questions warrant clarification.

Escueta itself provides for two alternative approaches through which counsel may proceed
with his claim for attorneys fees. The first involves a separate suit against the executor or
administrator in the latters personal capacity. The second approach is a direct claim against the
estate itself, with due notice to all interested persons, filed with the probate court.

In the same vein, the existence of the Retainer Agreement between petitioner and
Olivia Pascual allows petitioner two possible causes of action on which to claim attorneys fees in
connection with the administration of the estate of Doa Adela. The first possible cause of
action pivots on the Retainer Agreement, which establishes an obligation on the part of
Olivia Pascual to pay the final fee of 3% of the gross total estate of Doa Adela, payable upon
approval by the Probate Court of the agreement for the distribution of the properties to the
court designated heirs of the estate. Necessarily, since the recovery of attorneys fees is
premised on the Retainer Agreement any award thereupon has to await the final ascertainment
of value of the gross total estate of Doa Adela, as well as the approval by the Probate Court of
the agreement for the distribution of the properties. The Retainer Agreement makes it clear
that the final payment of attorneys fees is contingent on these two conditions, [43] and the claim
for attorneys fees based on the Retainer Agreement cannot ripen until these conditions are met.

Moreover, it cannot be escaped that the Retainer Agreement was entered into between
petitioner and Olivia Pascual prior to the filing of the probate petition, and that at such time,
she had no recognized right to represent the estate of Doa Adela yet. This
circumstance further bolsters our opinion that if petitioner insists on the judicial enforcement
of the Retainer Agreement, its proper remedy, authorized by law and jurisprudence, would be a
personal action against Olivia Pascual, and not against the estate of Doa Adela. If this were the
recourse pursued by petitioner, and Olivia Pascual is ultimately held liable under the Retainer
 63

Agreement for attorneys fees, she may nonetheless seek reimbursement from the estate
of Doa Adela if she were able to establish that the attorneys fees paid to petitioner were
necessary administration expenses.

The second or alternative recourse is the direct claim for attorneys fees against the
estate, as authorized under Escueta. The character of this claim is not contractual in nature,
but rather, as a reimbursement for a necessary expense of administration, and it will be
allowed if it satisfies the criteria for necessary expenses of administration. Its entitlement
can be established by the actual services rendered by the lawyer necessary to the
accomplishment of the purposes of administration, and not necessarily by the contract of
engagement of the attorneys services.

By filing their claim directly against the estate of Doa Adela, petitioner has clearly
resorted to this second cause of action. There are consequent advantages and disadvantages to
petitioner. Since the claim arises irrespective of the contingencies as stipulated in the Retainer
Agreement, the attorneys fees may be collected against the estate even before the final
determination of its gross total value or the final approval of the project of partition. As earlier
stated, such claim for reimbursement is superior to the right of the beneficiaries to the estate,
and as such, there is need to finally determine the respective shares of the beneficiaries before
attorneys fees in the nature of administration expenses may be paid out.

The one distinct disadvantage, however, is that the Retainer Agreement cannot be
deemed binding on the estate or the Probate Court since the estate is not a party to such
contract. This would not preclude the Probate Court from enforcing the provisions of the
Retainer Agreement if, in its sound discretion, the terms of payment therein are commensurate
to the value of the actual services necessary to the administration of the estate actually
rendered by petitioner. Yet if the Probate Court does choose to adopt the Retainer Agreement
as binding on the estate of Doa Adela, petitioner may again be precluded from immediate
recovery of attorneys fees in view of the necessity or precondition of ascertaining the gross
total value of the estate, as well as the judicial approval of the final agreement of partition.

In any event, whether the claim for attorneys fees was pursued through a separate suit
against Olivia Pascual (in her personal capacity) for the enforcement of the Retainer Agreement,
or against the estate of Doa Adela as reimbursement for necessary administration expenses, it
remains essential that a hearing be conducted on the claim. In either case too, the hearing will
focus on the value of the services of the petitioner and the necessity of engaging petitioner as
counsel.
 64

We reiterate that the direct claim against the estate for attorneys fees must be made
with due notice to the heirs, devisees, and legatees. The failure of petitioner to give such notice
renders its present claim inefficacious for now. Indeed, there is sufficient cause to dismiss
outright petitioners Motion for Writ of Immediate Execution filed with the Probate Court, for
its failure to notify therein the other persons interested in the estate of Doa Adela.
Nonetheless, to authorize said outright denial at this stage could unduly delay the settlement of
the estate of Doa Adela, considering the likelihood that petitioner would again pursue such claim
for attorneys fees as the right to which is affirmed by law and jurisprudence.

Hence, in order not to unduly protract further the settlement of the estate of Doa Adela,
the Court deems it proper instead to mandate the Probate Court to treat the Motion for Writ
of Immediate Execution as a petition seeking a court order to direct the payment of attorneys
fees as expenses of administration, but subject to the condition that petitioner give due notice
to the other designated devisees and legatees so designated in the will of the claim prior to the
requisite hearing thereon. Petitioner may as well seize such opportunity to formally amend or
reconfigure its motion to a petition to direct payment of attorneys fees. Once this step is
accomplished, there should be no impediment to petitioners claim for recovery of attorneys fees
as reimbursement for necessary administration expenses, within the terms established by law,
jurisprudence, and this decision.

One final note. Petitioners final prayer before this court is that it be issued a partial writ
of execution, consistent with its position before the Probate Court that it is already entitled to
at least a partial payment of its attorneys fees. This prayer cannot obviously be granted at this
stage by the Court, considering the fatal absence of due notice to the other designated
beneficiaries to the estate of Doa Adela. Still, we do not doubt that the Probate Court, within
its discretion, is capacitated to render the award of attorneys fees as administration expenses
either partially or provisionally, depending on the particular circumstances and its ultimate basis
for the determination of the appropriate attorneys fees.

WHEREFORE, the petition is GRANTED IN PART. The Decision of the Court of Appeals
dated 22 December 1995 and the Orders of the Regional Trial Court of Malabon, Branch 72,
dated 2 June 1994 and 17 March 1995 are hereby SET ASIDE insofar as said orders denied
petitioners Motion for Writ of Immediate Execution dated 26 April 1994. Petitioner is hereby
directed to set for hearing its claim for attorneys fees, giving due notice thereof to all the
heirs, devisees, and legatees designated in the 1978 Last Will and Testament executed
by Doa Adela Pascual. The Regional Trial Court is directed to treat petitioners aforesaid motion
 65

as a PETITION for the payment of attorneys fees as expenses of administration, and after due
hearing resolve the same with DISPATCH, conformably with this decision. No pronouncement as
to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-27486 November 18, 1927

In the matter of the estate of J. H. Ankrom, deceased. HEIRS OF RAFAEL

GREGOIRE, claimants-appellants,
vs.
ALBERT L. BAKER, administrator-appellee.

Camus, Delgado and Recto for appellants.

No appearance for appellee.

STREET, J.:

This appeal has been brought to set aside an order entered on March 5, 1926, by Hon. Pedro J.
Rich, Judge of the Court of First Instance of Davao, authorizing the administrator of J. H.
Ankrom, deceased, to exclude a large tract of land, with improvements, from the inventory of
assets of the decedent.

It appears that J. H. Ankrom, resident of the Province of Davao, died on September 18, 1922;
and on September 25, thereafter, the appellee, A. L. Baker, qualified as his administrator. On
December 13 of the same year, the administrator filed his inventory of the assets pertaining to
the estate of his decedent, in which inventory was included a tract of land covered by Torrens
certificate of title and containing an area of more than 930 hectares. In this inventory, said
tract of land, with the improvements thereon, was estimated at nearly P60,000. On September
24, 1924, the heirs of Rafael Gregoire, appellants herein, filed a claim against the estate of
Ankrom for the sum of $35,438.78, U. S. currency, or P70, 877.56, based upon a judgment
rendered in the Supreme Court of the Republic of Panama. This claim was allowed by the
commissioners in the estate of Ankrom, and no appeal was at any time taken against the order
so allowing it. It appears that the total recognized claims against the estate amounted originally
 66

to P76,645.13, but four of the creditors, having claims in the amount of P1,639.82, have been
paid in full, leaving a balance owing by the estate of P75,005.31, the greater part of which is
comprised of the claim of the appellants.

As the affairs of the estate stood upon the original inventory, there appeared to be sufficient
assets to pay all claimants; but while these intestate proceedings were being conducted the
administrator discovered that on April 22, 1920, or about a year and a half before his death,
Ankrom had executed a mortgage on the property here in question in favor of the Philippine
Trust Company to secure that company from liability on a note in the amount of P20,000.00, of
the same date, upon which it had made itself contigently liable. Two days after this mortgage
had been executed Ankrom appears to have made an assignment of all his interest in the
mortgaged property to one J. G. Jung, of Cincinnati, Ohio, for a purported consideration of the
sum of P1 and other good and valuable considerations. In view of these conveyances by his
intestate, the administrator presented an amended inventory, omitting therefrom the tract of
930 hectares with its improvements thereon, the same being the land covered by the transfers
above mentioned. The court, however, having its attention called to the fact that the omission
of this property from the inventory would leave the estate insolvent, made an order on October
7, 1925, directing the administrator to restore said item to his inventory. Nevertheless, upon a
later motion of the administrator accompanied by authenticated copies of the documents of
transfer, the court made a new order, dated march 5, 1926, approving of the omission by the
administrator of said property from the inventory; and its is from this order that the present
appeal is here being prosecuted.

From the foregoing statement it will be collected that the appellants have an undeniable credit
in a large amount against the estate of the decedent, and that upon the showing of the last
approved inventory the estate is insolvent. In view of these facts that appellants, assuming
apparently that the assignment to Jung by Ankrom of the equity of redemption of the latter in
the tract of land above mentioned was affected in fraud of creditors, are desirous of reaching
and subjecting this interest to the payment of the appellant's claim. The appellants also insist
that it was the duty of the administrator to retain the possession of this tract of land and
thereby place upon Jung, or persons claiming under him, the burden of instituting any action
that may be necessary to maintain the rights of the transferee under said assignment. The
administrator, on the other hand, supposes the assignment to be valid and apparently does not
desire to enter into a contest over the question of its validity with the person or persons
claiming under it.

The precise remedy open to the appellants in the predicament above described is clearly
pointed pout in section 713 of our Code of Civil Procedure, which reads as follows:

When there is a deficiency of assets in the hands of an executor or administrator to pay

debts and expenses, and when the deceased person made in his life-time such fraudulent
conveyance of such real or personal estate or of a right or interest therein, as is stated
in the preceding section, any creditor of the estate may, by license of the court, if the
 67

executor or administrator has not commenced such action, commence and prosecute to
final judgment, in the name of the executor or administrator, an action for the recovery
of the same and may recover for the benefit of the creditors, such real or personal
estate, or interest therein so conveyed. But such action shall not be commenced until the
creditor files in court a bond with sufficient surety, to be approved by the judge,
conditioned to indemnify the executor or administrator against the costs of such action.
Such creditor shall have a lien upon the judgment by him so recovered for the costs
incurred and such other expenses as the court deems equitable.

The remedy of the appellants is, therefore, to indemnify the administrator against costs and,
by leave of court, to institute an action in the name of the administrator to set aside the
assignment or other conveyance believed to have been made in fraud of creditors.

For the appellants it is contended that, inasmuch as no appeal was taken from the order of
October 7, 1925, directing the administrator to include the land in question in the inventory,
said order became final, with the result that the appealed order of March 5, 1926, authorizing
the exclusion of said property from the inventory, should be considered beyond the competence
of the court. This contention is untenable. Orders made by a court with reference to the
inclusion of items of property in the inventory or the exclusion of items therefrom are
manifestly of a purely discretionary, provisional, and interlocutory nature and are subject to
modification or change at any time during the course of the administration proceedings. Such
order in question not final in the sense necessary to make it appealable. In fact we note that
the appealed order was expressly made without prejudice to the rights of the creditors to
proceed in the manner indicated in the provision above quoted from the Code of Civil
Procedure. lawphil.net

The order appealed from not being of an appealable nature, it results that this appeal must be
dismissed, and it is so ordered, with costs against the appellants.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-48140 May 4, 1942

SINFOROSO PASCUAL, plaintiff-appellant,

vs.
PONCIANO S. PASCUAL, ET AL., defendants-appellees.

Celedonio Bernardo for appellant.

Ortega & Ortega for appellees.
 68

MORAN, J.:

On September 14, 1940, while the proceedings for the probate of the will of the deceased
Eduarda de los Santos were pending in the Court of First Instance of Rizal plaintiff, Sinforoso
Pascual, instituted in the Court of First Instance of Pampanga against Ponciano S. Pascual and
others, an action for the annulment of a contract of sale of a fishpond situated in Lubao,
Pampanga, supposedly executed without consideration by said deceased in her lifetime in favor
of the defendants. The complaint alleges that plaintiff and defendants are all residents of
Malabon, Rizal, and are legitimate children of the testratix, Eduarda de los Santos. Defendants
filed of a motion to dismiss, alleging want of cause of action, limitation of action, wrong venue
and pendency of another action. The trial court granted the motion on the ground that the
action should have been brought by the executor or administrator of the estate left by the
deceased, and directed the plaintiff to amend his complaint within five days. Plaintiff filed an
amended complaint, the amendment consisting in that "el demandado Miguel S. Pascual ha sido
nombrado por el Juzgado de Primera Instancia de Rizal albacea testamentario de los bienes de
la finada Eduarda de los Santos. en el asunto de la testamentaria de dicha finada." The trial
court declaring that such amendment did not cure the insufficiency of the complaint, dismissed
the action. It is from this order of dismissal that plaintiff interposed his appeal.

Under Rule 86, section 1, of the new Rules of Court, actions for the recovery or protection of
the property or rights of the deceased for causes which survive may be prosecuted or
defended by his executor or administrator. Upon the commencement of the testate or
intestate proceedings the heirs have no standing in court in actions of the above character,
except when the executor or administrator is unwilling or fails or refuses to act, in which event
to heirs may act in his place. (Pomeroy on Code Remedies, p. 158, 11 R C. L. p. 262; 21 Am. Jur.,
940) Here, the fictitious sale is alleged to have been made to the defendants, one of them,
Miguel S. Pascual, being the executor appointed by the probate court. Such executor naturally
would not bring an action against himself for recovery of the fishpond. His refusal to act may,
therefore, be implied. And this brings the case under the exception. It should be noted that in
the complaint the prayer is that the fishpond be delivered not to the plaintiff but to the
executor, thus indicating that the action is brought in behalf of the estate of the deceased.

Appellees contend that there is here a wrong venue. They argue that an action for the
annulment of a contract of sale is a personal action which must be commenced at the place of
residence of either the plaintiff or the defendant, at the election of the plaintiff (Rule 5, sec.
1, Rules of Court), and, in the instant case, both plaintiff and defendants are residents of
Malabon, Rizal, but the action was commenced in the Court of First Instance of Pampanga. It
appearing, however, that the sale is alleged to be fictitious, with absolutely no consideration, it
should be regarded as a non-existent, not merely null, contract. (8 Manresa, Comentarios al
Codigo Civil Español, 2nd ed., pp. 766-770.) And there being no contract between the deceased
and the defendants, there is in truth nothing to annul by action. The action brought cannot thus
be for annulment of contract, but is one for recovery of a fishpond, a real action that should
 69

be, as it has been, brought in Pampanga, where the property is located (Rule 5, sec. 3, Rules of
Court.)

Appellees argue further that the action brought by the plaintiff is unnecessary, the question
involved therein being one that may properly be raised and decided in the probate proceedings.
The general rule is that questions as to title to property cannot be passed upon in testate
proceedings. (Bauermann vs. Casas, 10 Phil., 386; Devesa vs.Arbes, 13 Phil., 273;
Guzman vs. Anog, 37 Phil., 61; Lunsod vs. Ortega, 46 Phil., 664; Adapon vs. Maralit, 40 Off. Gaz.,
6th Sup., p. 84.) The court is, however, of the opinion and so holds that, when as in the instant
case, the parties interested are all heirs of the deceased claiming title under him, the question
as to whether the transfer made by the latter to the former is or is not fictitious, may
properly be brought by motion in the testate or intestate proceedings on or before the
distribution of the estate among the heirs. This procedure is optional to the parties concerned
who may choose to bring a separate action as a matter of convenience in the preparation or
presentation of evidence, and accordingly, the action brought by the appellant is not improper.

Order is reversed, and the case is remanded the trial court for further proceedings, with costs
against appellees.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-62376 October 27, 1983

MARIA VELASQUEZ, MARY GEORGE, NELLIE GEORGE, NOBLE GEORGE, and MAYBELLE
GEORGE, plaintiffs-appellants,
vs.
WILLIAM GEORGE, ROBERT GEORGE, ANDRES MUÑOZ, ISAGANI BRIAS and CIRILO
ASPERILLA defendants-appellees, ERLINDA VILLANUEVA, mortgagee-defendant-appellee.

Moises B. Ramos for plaintiffs-appellants.

Teresita G. Oledan for defendants-appellees W. George, R. George and Andres Munoz

Isagani Brias and Rogel Atienza for defendant-appellee Briñas

Eladio B. Samson for mortgagee-defendant-appellee Erlinda Villanueva.

GUTIERREZ, JR., J:
 70

Plaintiffs-appellants Maria Velasquez Vda. de George and her children, Mary, Nellie, Noble and
Maybelle, all surnamed George, appealed from the decision of the Court of First Instance of
Bulacan, which dismissed their complaint for lack of jurisdiction. According to the trial court,
the case falls within the original and exclusive jurisdiction of the Securities and Exchange
Commission. The appeal was certified to us by the Court of Appeals as one involving a pure
question of law.

The plaintiffs-appellants are the widow and legitimate children of the late Benjamin B. George
whose estate is under intestate proceedings. The case is docketed as Special Proceedings Nos.
18820 before the then Court of First Instance of Rizal at Quezon City, Branch XVIII.

In their complaint, the plaintiffs-appellants alleged that the five defendants- mortgagors are
officers of the Island Associates Inc. Andres Muñoz, aside from being the treasurer-director
of said corporation, was also appointed and qualified as administrator of the estate of Benjamin
George in the above special proceedings. In life, the latter owned 64.8 percent or 636 shares
out of the outstanding 980 shares of stock in the corporation. Without the proper approval
from the probate court and without notice to the heirs and their counsel, the defendants-
mortgagors executed a Deed of First Real Estate Mortgage in favor of the defendant-
mortgagee Erlinda Villanueva, covering three parcels of land owned by Island Associates. In said
Deed, the defendants-mortgagors also expressly waived their right to redeem the said parcels.
Subsequently, a power of attorney was executed by the defendants-mortgagors in favor of
Villanueva whereby the latter was given the full power and authority to cede, transfer, and
convey the parcels of land within the reglementary period provided by law for redemption.

A certificate of sale was executed in favor of Villanueva by the Provincial Sheriff of Bulacan
after she submitted the highest bids at the public auction. This led to the execution of a Deed
of Sale and Affidavit of Consolidation of Ownership by virtue of which Transfer Certificates of
Titles Nos. T-16717 and T-39162, covering the three parcels of land, were cancelled and in lieu
thereof, Transfer Certificates of Titles Nos. T239675 and T-239674 were issued in favor of
Villanueva. The plaintiffs-appellants, therefore, filed the complaint for the annulment of the —
1.) Deed of First Real Estate Mortgage; 2.) Power of Attorney; 3.) Certificate of Sale; 4.)
Amended Certificate of Sale; 5.) Affidavit of Consolidation of Ownership; and 6.) Transfer
Certificates of Title Nos. T-239674 and T-239675.

A motion to dismiss was filed by William George, Robert George, and administrator Andres
Muñoz on the ground that the trial court had no jurisdiction over the case. The movants
contended that the subject matter of the complaint referred to the corporate acts of the
Board of Directors of Island Associates, and, therefore, falls within the exclusive jurisdiction
of the Securities and Exchange Commission. The trial court agreed with the movants and
dismissed the complaint. The plaintiffs-appellants contend that the resolution of the validity of
a mortgage contract is within the original and exclusive jurisdiction of civil courts, and certainly
not within the jurisdiction of the Securities and Exchange Commission and that once
jurisdiction of the civil court whether in a civil or a criminal case, has properly attached, the
 71

same cannot be ousted, divested or removed. The appellants state that the questioned
composition of the board of directors, is merely incidental to the determination of the main
issue and is insufficient cause for the trial court to divest itself of its original and exclusive
jurisdiction that has already been acquired.

The defendants-appellees, on the other hand maintain that since the complaint questions the
validity of a corporate contract which the appellants contend to have been entered into as a
fraudulent and surreptitious scheme and devise to defraud them, this issue places the entire
case outside the jurisdiction of the civil courts. According to them, Presidential Decree No.
902-A gives the SEC exclusive jurisdiction over such a controversy. The relevant provision
reads:

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities

and Exchange Commission over corporations, partnerships and other forms of
associations registered with it as expressly granted under existing laws and
decrees, it shall have original and exclusive jurisdiction to hear and decide cases
involving:

a) Devices or schemes employed by any acts of the board of directors,

business associations, its officers or partners amounting to fraud and
misrepresentation which may be detrimental to the interest of the
public and/or of the stockholder, partner, members of associations or
organizations registered with the Commission ...

Villanueva further contends that the plaintiffs-appellants have no capacity to file the complaint
because the general rule laid down in Rule 87, Section 3 of the Rules of Court states that only
the administrator or executor of the estate may bring actions of such nature as the one in the
case at bar. The only exception is when the executor or administrator is unwilling or fails or
refuses to act, which exception according to the mortgagee-appellee does not apply in the
present case.

We agree with the plaintiffs-appellants. What the complaint sought to annul were documents of
title which vested ownership over the three parcels of land in question to defendant-mortgagee
Villanueva, who is neither an officer, a stockholder nor a director of the corporation, but a
third party. Clearly, the lower court had jurisdiction over the controversy. The fact that the
plaintiffs-appellants subsequently questioned the legality of the constitution of the board of
directors of the corporation did not divest the court of its jurisdiction to take cognizance of
the case. What determines jurisdiction of the court are the allegations in the complaint. If
from the same, the court has already acquired jurisdiction over the subject-matter, jurisdiction
is retained up to the end of the litigation. (See Lat v. Phil. Long Distance Co., 67 SCRA 425).

Whether or not the mortgage contract, with an unusual provision whereby the mortgagors
waived their right to redeem the mortgaged property, could be executed without proper
approval of the probate court and without notice to the widow and legitimate children of the
 72

deceased is a matter clearly within the authority of a trial court to decide. If in the course of
trial, the court believes that the validity of the composition of the board of directors is
absolutely necessary for resolution of the issues before it, the remedy is, at most, to require
that one issue to be threshed out before the Securities and Exchange Commission and to hold in
abeyance, the trial on the merits of the principal issues in the meantime. Certainly, the solution
is not for the lower court to surrender its judicial questions to an administrative agency for
resolution.

We also find without merit the defendant-mortgagee's contention that the proper party to file
the complaint is the administrator of the estate of Benjamin George. The administrator, Andres
Muñoz, is the same person charged by the plaintiffs-appellants to have voted in the board of
directors without securing the proper authority from the probate court to which he is
accountable as administrator. In Ramirez v. Baltazar (24 SCRA 918), we ruled that "since the
ground for the present action to annul the aforesaid foreclosure proceedings is the fraud
resulting from such insidious machinations and collusion in which the administrator has allegedly
participated, it would be far fetched to expect the said administrator himself to file the action
in behalf of the estate. And who else but the heirs, who have an interest to assert and to
protect, would bring the action? Inevitably, this case should fall under the exception, rather
than the general rule that pending proceedings for the settlement of the estate, the heirs have
no right to commence an action arising out of the rights belonging to the deceased." The case at
bar falls under such an exception.

WHEREFORE, the order of the Court of First Instance of Bulacan, dated June 16, 1980,
dismissing the complaint and the order dated December 1, 1980 denying the motion for
reconsideration are SET ASIDE. The said court is hereby ordered to set the case for trial on
the merits as above indicated.

SO ORDERED.

SECOND DIVISION

[G.R. No. 129008. January 13, 2004]

TEODORA A. RIOFERIO, VERONICA O. EVANGELISTA assisted by her husband ZALDY

EVANGELISTA, ALBERTO ORFINADA, and ROWENA O. UNGOS, assisted by her
husband BEDA UNGOS, petitioners, vs. COURT OF APPEALS, ESPERANZA P.
ORFINADA, LOURDES P. ORFINADA, ALFONSO ORFINADA, NANCY P.
ORFINADA, ALFONSO JAMES P. ORFINADA, CHRISTOPHER P. ORFINADA and
ANGELO P. ORFINADA, respondents.

D E C I S I O N
 73

TINGA, J.:

Whether the heirs may bring suit to recover property of the estate pending the
appointment of an administrator is the issue in this case.
This Petition for Review on Certiorari, under Rule 45 of the Rules of Court, seeks to set
aside the Decision[1] of the Court of Appeals in CA-G.R. SP No. 42053 dated January 31, 1997,
as well as its Resolution[2] dated March 26, 1997, denying petitioners motion for
reconsideration.
On May 13, 1995, Alfonso P. Orfinada, Jr. died without a will in Angeles City leaving several
personal and real properties located in Angeles City, Dagupan City and Kalookan City.[3] He also
left a widow, respondent Esperanza P. Orfinada, whom he married on July 11, 1960 and with
whom he had seven children who are the herein respondents, namely: Lourdes P. Orfinada,
Alfonso Clyde P. Orfinada, Nancy P. Orfinada-Happenden, Alfonso James P. Orfinada,
Christopher P. Orfinada, Alfonso Mike P. Orfinada (deceased) and Angelo P. Orfinada.[4]
Apart from the respondents, the demise of the decedent left in mourning his paramour and
their children. They are petitioner Teodora Riofero, who became a part of his life when he
entered into an extra-marital relationship with her during the subsistence of his marriage to
Esperanza sometime in 1965, and co-petitioners Veronica[5], Alberto and Rowena.[6]
On November 14, 1995, respondents Alfonso James and Lourdes Orfinada discovered that
on June 29, 1995, petitioner Teodora Rioferio and her children executed an Extrajudicial
Settlement of Estate of a Deceased Person with Quitclaim involving the properties of the
estate of the decedent located in Dagupan City and that accordingly, the Registry of Deeds in
Dagupan issued Certificates of Titles Nos. 63983, 63984 and 63985 in favor of petitioners
Teodora Rioferio, Veronica Orfinada-Evangelista, Alberto Orfinada and Rowena Orfinada-
Ungos. Respondents also found out that petitioners were able to obtain a loan of P700,000.00
from the Rural Bank of Mangaldan Inc. by executing a Real Estate Mortgage over the properties
subject of the extra-judicial settlement.[7]
On December 1, 1995, respondent Alfonso Clyde P. Orfinada III filed a Petition for Letters
of Administration docketed as S.P. Case No. 5118 before the Regional Trial Court of Angeles
City, praying that letters of administration encompassing the estate of Alfonso P. Orfinada, Jr.
be issued to him.[8]
On December 4, 1995, respondents filed a Complaint for the Annulment/Rescission of Extra
Judicial Settlement of Estate of a Deceased Person with Quitclaim, Real Estate Mortgage and
Cancellation of Transfer Certificate of Titles with Nos. 63983, 63985 and 63984 and Other
Related Documents with Damages against petitioners, the Rural Bank of Mangaldan, Inc. and the
Register of Deeds of Dagupan City before the Regional Trial Court, Branch 42, Dagupan City.[9]
On February 5, 1996, petitioners filed their Answer to the aforesaid complaint interposing
the defense that the property subject of the contested deed of extra-judicial settlement
pertained to the properties originally belonging to the parents of Teodora Riofero [10] and that
the titles thereof were delivered to her as an advance inheritance but the decedent had
 74

managed to register them in his name.[11] Petitioners also raised the affirmative defense that
respondents are not the real parties-in-interest but rather the Estate of Alfonso O. Orfinada,
Jr. in view of the pendency of the administration proceedings.[12] On April 29, 1996, petitioners
filed a Motion to Set Affirmative Defenses for Hearing[13] on the aforesaid ground.
The lower court denied the motion in its Order[14] dated June 27, 1996, on the ground that
respondents, as heirs, are the real parties-in-interest especially in the absence of an
administrator who is yet to be appointed in S.P. Case No. 5118. Petitioners moved for its
reconsideration[15] but the motion was likewise denied.[16]
This prompted petitioners to file before the Court of Appeals their Petition for
Certiorari under Rule 65 of the Rules of Court docketed as CA G.R. S.P. No.
42053.[17] Petitioners averred that the RTC committed grave abuse of discretion in issuing the
assailed order which denied the dismissal of the case on the ground that the proper party to
file the complaint for the annulment of the extrajudicial settlement of the estate of the
deceased is the estate of the decedent and not the respondents.[18]
The Court of Appeals rendered the assailed Decision[19] dated January 31, 1997, stating
that it discerned no grave abuse of discretion amounting to lack or excess of jurisdiction by the
public respondent judge when he denied petitioners motion to set affirmative defenses for
hearing in view of its discretionary nature.
A Motion for Reconsideration was filed by petitioners but it was denied.[20] Hence, the
petition before this Court.
The issue presented by the petitioners before this Court is whether the heirs have legal
standing to prosecute the rights belonging to the deceased subsequent to the commencement of
the administration proceedings.[21]
Petitioners vehemently fault the lower court for denying their motion to set the case for
preliminary hearing on their affirmative defense that the proper party to bring the action is
the estate of the decedent and not the respondents. It must be stressed that the holding of a
preliminary hearing on an affirmative defense lies in the discretion of the court. This is clear
from the Rules of Court, thus:

SEC. 5. Pleadings grounds as affirmative defenses.- Any of the grounds for dismissal provided
for in this rule, except improper venue, may be pleaded as an affirmative defense, and a
preliminary hearing may be had thereon as if a motion to dismiss had been filed.[22] (Emphasis
supplied.)

Certainly, the incorporation of the word may in the provision is clearly indicative of the
optional character of the preliminary hearing. The word denotes discretion and cannot be
construed as having a mandatory effect.[23] Subsequently, the electivity of the proceeding was
firmed up beyond cavil by the 1997 Rules of Civil Procedure with the inclusion of the phrase in
the discretion of the Court, apart from the retention of the word may in Section 6, [24] in Rule
16 thereof.
 75

Just as no blame of abuse of discretion can be laid on the lower courts doorstep for not
hearing petitioners affirmative defense, it cannot likewise be faulted for recognizing the legal
standing of the respondents as heirs to bring the suit.
Pending the filing of administration proceedings, the heirs without doubt have legal
personality to bring suit in behalf of the estate of the decedent in accordance with the
provision of Article 777 of the New Civil Code that (t)he rights to succession are transmitted
from the moment of the death of the decedent. The provision in turn is the foundation of the
principle that the property, rights and obligations to the extent and value of the inheritance of
a person are transmitted through his death to another or others by his will or by operation of
law.[25]

Even if administration proceedings have already been commenced, the heirs may still bring
the suit if an administrator has not yet been appointed. This is the proper modality despite the
total lack of advertence to the heirs in the rules on party representation, namely Section 3,
Rule 3[26] and Section 2, Rule 87[27] of the Rules of Court. In fact, in the case of Gochan v.
Young,[28] this Court recognized the legal standing of the heirs to represent the rights and
properties of the decedent under administration pending the appointment of an administrator.
Thus:

The above-quoted rules,[29] while permitting an executor or administrator to represent or to

bring suits on behalf of the deceased, do not prohibit the heirs from representing the
deceased. These rules are easily applicable to cases in which an administrator has already
been appointed. But no rule categorically addresses the situation in which special
proceedings for the settlement of an estate have already been instituted, yet no
administrator has been appointed. In such instances, the heirs cannot be expected to wait for
the appointment of an administrator; then wait further to see if the administrator appointed
would care enough to file a suit to protect the rights and the interests of the deceased; and in
the meantime do nothing while the rights and the properties of the decedent are violated or
dissipated.

Even if there is an appointed administrator, jurisprudence recognizes two exceptions, viz:

(1) if the executor or administrator is unwilling or refuses to bring suit; [30] and (2) when the
administrator is alleged to have participated in the act complained of [31] and he is made a party
defendant.[32] Evidently, the necessity for the heirs to seek judicial relief to recover property
of the estate is as compelling when there is no appointed administrator, if not more, as where
there is an appointed administrator but he is either disinclined to bring suit or is one of the
guilty parties himself.
All told, therefore, the rule that the heirs have no legal standing to sue for the recovery of
property of the estate during the pendency of administration proceedings has three exceptions,
the third being when there is no appointed administrator such as in this case.
As the appellate court did not commit an error of law in upholding the order of the lower
court, recourse to this Court is not warranted.
 76

WHEREFORE, the petition for review is DENIED. The assailed decision and resolution of
the Court of Appeals are hereby AFFIRMED. No costs.

SO ORDERED.
EN BANC

[G.R. No. L-11801. June 30, 1959.]

CIRILO MODESTO, Petitioner, v. JESUS MODESTO, ET AL., ETC., Respondents.

Pelayo V. Nuevo and Segundo M. Zosa for Petitioner.

Antonio Montilla for Respondents.

SYLLABUS

1. SETTLEMENT OF ESTATE OF DECEASED PERSONS; PROCEEDINGS WHEN PROPERTY OF

ESTATE IS CONCEALED, EMBEZZLED OR CONVEYED FRAUDULENTLY. — If an executor or
administrator or any individual interested in the estate of the deceased, complains to the court
having jurisdiction of the deceased, complains to the court having jurisdiction of the estate
that a person or persons are suspected of having concealed, embezzled, or conveyed away any
of the properties, real or personal, of the deceased, the court may cite such suspected person
or persons to appear before it and may examine him or them on oath on the matter of such
complaint. In such proceedings the trial court has no authority to decide whether or not said
properties belong to the estate or to the persons examined. If, after such examination there is
good reason to believe that said person or persons examined are keeping properties belonging to
the estate, then the administrator should file an ordinary action to recover the same.

D E C I S I O N

MONTEMAYOR, J.:

This is a petition for certiorari and for a writ of preliminary injunction filed by Cirilo Modesto
to set aside the order of the Court of First Instance of Leyte dated March 8, 1954, the writ of
execution dated April 27, 1954 as well as the alias writ of execution dated November 10, 1955.

The facts in this case are not in dispute. It would appear that Bruno Modesto died leaving
several heirs, among them, Cirilo Modesto and Jesus Modesto. In the course of the intestate
 77

proceedings, Jesus Modesto, acting as administrator of the estate of Bruno, filed on November
7, 1953, in the Court of First Instance of Tacloban, Leyte, a motion to cite and examine under
oath several persons, especially Cirilo Modesto, regarding properties concealed embezzled or
fraudulently conveyed. On December 7, 1953 the court issued an order appointing the Provincial
Sheriff of Leyte and the Chief of Police of Tanawan, Leyte, as join commissioners, to verify and
ascertain persons who were holding, claiming or possessing properties belonging to the estate of
the deceased Bruno Modesto. In said motion of Jesus Modesto he listed said properties
supposed to belong to the estate, classified as follows: jewels under items 1, 2 and 3; furniture
and other personal properties under items 4-10; the 11th item is supposed to be cash taken
from a deposit in the Office of the Chief of Police of Tanawan, Leyte, after taking funeral and
other expenses, in the amount of P1,700; and real properties under items 12-26.

On January 12, 1954, the joint commissioners submitted their report. On March 1, 1954 Jesus
Modesto, administrator, filed a motion in court to require Cirilo Modesto to turn over to him as
administrator the personal properties belonging to the intestate supposed to be in Cirilo’s
possession. Pursuant to said motion, the trial court, on March 8, 1954, issued an order requiring
Cirilo Modesto to deliver to the administrator personal properties listed in the order, such as
one narra aparador, 1 desk, 1 looking glass 5x3 ft., 1 trunk containing clothes, 1 bicycle, 11 pieces
of steel matting and money said to have been taken from a deposit made with the Chief of
Police in the amount of P1,700.00. Thereafter, on April 27, 1954, a writ of execution was issued
and on May 10, 1955, a writ of execution was also issued by the trial court. By virtue of said
writ of execution the Provincial Sheriff issued a Notice of Attachment against the real
property described in Certificate of Title No. 30167 of the Register of Deeds of Leyte and
under Tax Assessment in the name of Cirilo Modesto.

On June 2, 1955 Cirilo Modesto filed an Urgent Motion to Set Aside the Writ of Execution and
for a Writ of Preliminary Injunction, which motion was opposed by Jesus. On June 4, 1955 the
Provincial Sheriff sold at public auction the real property above-mentioned to the highest and
only bidder Jesus Modesto for P2,454.92 and on June 6, 1956, the Provincial Sheriff issued a
Sheriff’s Certificate of Final Sale in favor of Jesus. On June 29, 1956 Jesus Modesto filed a
Motion for a writ of Possession. On July 11, 1956, in pursuance of the motion for a Writ of
Possession, the Provincial Sheriff issued a notification to Cirilo placing Jesus in possession of
the real property sold to hem. Cirilo then filed the present petition for certiorari to annul the
proceedings had before the Court of First Instance of Leyte.

The trial court, in issuing its order of March 8, 1954 requiring Cirilo to deliver the properties
listed therein to Jesus as administrator, supposedly acted under the provisions of Section 6,
Rule 88 of the Rules of Court which reads as follows:jgc:chanrobles.com.ph

"SEC. 6. Proceedings when property concealed, embezzled, or fraudulently conveyed. — If an

executor or administrator, heir, legatee, creditor, or other individual interested in the estate
of the deceased, complains to the court having jurisdiction of the estate that a person is
suspected of having concealed, embezzled, or conveyed away any of the money, goods or
 78

chattels of the deceased, or that such person has in his possession or has knowledge of any
deed, conveyance, bond, contract, or other writing which contains evidence of or tends to
disclose the right, title, interest, or claim of the deceased to real or personal estate, or the
last will and testament of the deceased, the court may cite such suspected person to appear
before it and may examine him on oath on the matter of such complaint; and of the person so
cited refused to appear, or to answer on such examination or such interrogatories as are put to
him, the court may punish him for contempt, and may commit him to prison until he submits to
the order to the court. The interrogatories put to any such person, and his answers thereto,
shall be in writing and shall be filed in the clerk’s office."cralaw virtua1aw library

In this the trial court committed error because the purpose of the section above-reproduced,
which section was taken from Section 709 of Act 190, is merely to elicit information or to
secure evidence from those persons suspected of having possessed or having knowledge of the
properties left by a deceased person, or of having concealed, embezzled or conveyed any of the
said properties of the deceased. In such proceedings the trial court has no authority to decide
whether or not said properties, real or personal, belong to the estate or to the persons
examined. If, after such examination there is good reason to believe that said person or
persons examined are keeping properties belonging to the estate, then the next step to be
taken should be for the administrator to file an ordinary action in court to recover the same
(Alafriz v. Mina, 28 Phil., 137; Cui v. Piccio, 91 Phil., 713; 48 Off. Gaz. [7] 2769; Changco v.
Madrelejos, 12 Phil., 543; Guanco v. PNB, 54 Phil., 244, cited in Moran’s Rules of Court, Vol. 2
1957 Edition, pp. 443-444.

The order requiring Cirilo to deliver the properties and cash stated in the order, as belonging to
the estate, said that Cirilo was supposed to have admitted having received or taken possession
of said properties after the death of Bruno. This statement or findings of the lower court is
not supported by the evidence on record. As a matter of fact, in the answer of Cirilo to the
motion of the administrator, he claimed that although he held the aparador mentioned in Item 4
in the list of properties, nevertheless, said furniture belonged to their parents and so Bruno
Modesto had only 1/6 share; that he, Cirilo, did not have the looking glass mentioned in the
motion because the same had been taken by Jesus himself, neither did he have the desk in
question; that though he held a trunk, it was empty and only contained clothes which were torn;
that the bicycle in question was in the possession of Mauricio Modesto, the nephew of Bruno;
that he, Cirilo, did not keep the 11 pieces of steel matting; neither did he ever receive the
amount of P1,700.00 supposed to have been deposited in the office of the Chief of Police. But,
even if Cirilo had admitted possession of the properties which he was required by the court to
deliver to Jesus, still it was necessary for the ordinary courts, not the probate court, to
determine the title and ownership of said properties.

In view of the foregoing, the petition for certiorari is hereby granted and the order of the
trial court of March 8, 1954, the Writ of Execution of April 27, 1954 and the alias Writ of
Execution of May 10, 1955, and of course the sale made by the Sheriff of the real property
 79

covered by Certificate of Title No. 30167 are set aside. Respondent Jesus Modesto will pay the
costs.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-56504 May 7, 1987

POMPILLO VALERA and EUMELIA VALERA CABADO, petitioners,

vs.
HON. JUDGE SANCHO Y. INSERTO, in his capacity as Presiding Judge, Court of First
Instance of Iloilo, Branch 1, and MANUEL R. FABIANA, respondents.

Nos. L-59867-68 May 7, 1987

EUMELIA V. CABADO, POMPILLO VALERA and HON. MIDPANTAO L. ADIL, petitioners-

appellants,
vs.
MANUEL FABIANA, JOSE GARIN and HON. COURT OF APPEALS (Tenth
Division), respondents-appellants.

Eduardo S. Baranda and Avelino T Javellana for petitioners.

Dominador G. Garin for private respondents.

NARVASA, J.:

Conflicting claims over a fishpond asserted by the administrators of the estate of deceased
spouses, on the one hand, and by the heirs of a daughter of said spouses and their lessee, on
the other, have given rise to the proceedings now docketed in this Court as (1) G.R. No. 56504
and (2) G.R. Nos. 59867-68.

Sp. Proc. No. 2223, CFI, Iloilo

In the proceedings for the settlement of the intestate estate of the decedent spouses, Rafael
Valera and Consolacion Sarrosa 1 — in which Eumelia Cabado and Pompiro Valera had been
appointed administrators 2 — the heirs of a deceased daughter of the spouses, Teresa Garin,
filed a motion asking that the Administratrix, Cabado, be declared in contempt for her failure
to render an accounting of her administration. 3 Cabado replied that no accounting could be
 80

submitted unless Jose Garin, Teresa's husband and the movant heirs' father, delivered to the
administrator an 18-hectare fishpond in Baras, Barotoc Nuevo, Iloilo, belonging to the estate
and she in turn moved for the return thereof to the estate, 4 so that it might be partitioned
among the decedents' heirs. Jose Garin opposed the plea for the fishpond's return to the
estate, asserting that the property was owned by his children and this was why it had never
been included in any inventory of the estate.

The Court, presided over by Hon. Judge Midpantao Adil, viewed the Garin Heirs' motion for
contempt, as well as Cabado's prayer for the fishpond's return to the estate, as having given
rise to a claim for the recovery of an asset of the estate within the purview of Section 6, Rule
87 of the Rules of Court. 5 It accordingly set said incidents for hearing during which the parties
presentee evidence in substantiation of their positions. 6 Thereafter, the Court issued an Order
dated September 17, 1980 commanding the Heirs of Teresa Garin "to reconvey immediately the
fishpond in question * * to the intestate Estate of the Spouses. 7

The Order was predicated upon the Court's factual findings mainly derived from the testimony
of the two administrators that:

1. the fishpond originally belonged to the Government, and had been given in lease to Rafael
Valera in his lifetime;

2. Rafael Valera ostensibly sold all his leasehold rights in the fishpond to his daughter, Teresa
Garin; but the sale was fictitious, having been resorted to merely so that she might use the
property to provide for her children's support and education, and was subject to the resolutory
term that the fishpond should revert to Rafael Valera upon completion of the schooling of
Teresa Garin's Children; and

3. with the income generated by the fishpond, the property was eventually purchased from the
Government by the Heirs of Teresa Garin, collectively named as such in the Original Certificate
of Title issued in their favor.

Upon these facts, Judge Adil ruled that an implied trust had been created, obligating Teresa
Garin's heirs to restore the property to the Valera Spouses' Estate, in accordance with
Articles 1453 and 1455 of the Civil Code providing as follows:

Article 1453. When property is conveyed to a person in reliance upon his declared
intentions to hold it for, or transfer it to another or the grantor, there is an
implied trust in favor of the person for whose benefit it is contemplated.

Article 1455. When any trustee, guardian or other person holding a fiduciary
relationship uses trust funds for the purchase of property and causes a
conveyance to be made to him or to a third person, a trust is established by
operation of law in favor of the person to whom the fund belongs.
 81

The Court also held that the action for reconveyance based on constructive trust had not yet
prescribed, Cabado's motion for the fishpond's reversion to the estate having been filed well
within ten (10) years from June 30, 1980, the date on which Teresa Garin's heirs allegedly
acquired title over it. 8

There seems little doubt, however, that the Court's pronouncement regarding the estate's title
to the fishpond was merely provisional in character, made solely to determine whether or not
the fishpond should be included in the inventory of estate assets. So it was evidently
understood by the administrators who have more than once asserted that "the probate court
has jurisdiction to determine the ownership of the fishpond for purposes of inclusion in the
inventory of the properties. 9 So it was made clear by the Probate Court itself which, at the
outset, stated that the hearing on the matter 10 was meant "merely to determine whether or
not the fishpond should be included as part of the estate and whether or not the person holding
it should be made to deliver and/or return ** (it) to the estate. 11 And so it was emphasized in
another Order, denying reconsideration of the Order of September 17, 1980, which states
that:

**(i)t is never the intendment of this court to write a finish to the issue of
ownership of the fishpond in dispute. The movants may pursue their claim of
ownership over the same in an ordinary civil action. Meanwhile, however, it is the
finding of this probate court that the fishpond must be delivered to the estate.

Clearly, there is no incompatibility between the exercise of the power of this

probate court under Section 6 in relation to Section 7, both of Rule 87, and the
contention of the movants that the proper forum to settle the issue of ownership
should be in a court of general jurisdiction. 12

Judge Adil afterwards granted the administrators' motion for execution of the order pending
appeal, and directed the sheriff to enforce the direction for the Garin Heirs to reconvey the
fishpond to the estate. 13 The corresponding writ was served on Manuel Fabiana, the
supposed encargado or caretaker. Voicing no objection to the writ, and declaring to the sheriff
that he was a mere lessee, 14 Fabiana voluntarily relinquished possession of the fishpond to the
sheriff. The latter, in turn, delivered it to the administrators. 15

Later however, Fabiana filed a complaint-in-intervention with the Probate Court seeking
vindication of his right to the possession of the fishpond, based on a contract of lease between
himself, as lessee, and Jose Garin, as lessor. 16 But Judge Adil dismissed his complaint on the
following grounds, to wit:

(1) it was filed out of time because not only had judgment been rendered, but execution as
regards transfer of possession had already taken place; and

(2) the lease contract had not been registered and hence was not binding as against the
estate. 17
 82

G.R. No. 56504

Fabiana thereupon instituted a separate action for injunction and damages, with application for
a preliminary injunction. This was docketed as Civil Case No. 13742 and assigned to Branch I of
the Iloilo CFI, Hon. Sancho Y. Inserto, presiding. 18 Judge Inserto issued a temporary
restraining order enjoining estate administrators from disturbing Fabiana in the possession of
the fishpond, as lessee. 19

The estate administrators filed a motion to dismiss the complaint and to dissolve the temporary
restraining order, averring that the action was barred by the Probate Court's prior judgment
which had exclusive jurisdiction over the issue of the lease, and that the act sought to be
restrained had already been accomplished, Fabiana having voluntarily surrendered possession of
the fishpond to the sheriff. 20 When Judge Inserto failed to act on their motion within what
the administrators believed to be a reasonable time, considering the circumstances of the Case,
the administrators filed with the Supreme Court a special civil action for certiorari and
mandamus, with a prayer for Preliminary mandatory injunction and temporary restraining order,
which was docketed as G.R. No. 56504. 21 In their petition, the administrators contended that
Branch I of the Iloilo CFI (Judge Inserto, presiding) could not and should not interfere with
the Probate Court (Branch I I, Judge Adil, presiding) in the legitimate exercise of its j
jurisdiction over the proceedings for the Settlement of the estate of the Valera Spouses.

G.R. Nos. 59867-68

In the meantime, Jose Garin — having filed a motion for reconsideration of the above
mentioned order of Judge Adil (declaring the estate to be the owner of the fishpond), in which
he asserted that the Probate Court, being of limited jurisdiction, had no competence to decide
the ownership of the fishpond,22 which motion had been denied 23-filed a notice of appeal from
said Order.24 But he quickly abandoned the appeal when, as aforestated 25 Judge Adil
authorized execution of the order pending appeal, instead, he initiated a special action for
certiorari prohibition and mandamus )with prayer for preliminary injunction) in the Court of
Appeals, therein docketed as CA-G. R. No. SP-1154-R.

Fabiana followed suit. He instituted in the same Court of Appeals his own action for certiorari
and injunction, docketed as CA-G.R. No. SP-11577-R; this, notwithstanding the pendency in
judge Inserto's sala of the case he had earlier filed. 26

These two special civil actions were jointly decided by the Court of Appeals. The Court granted
the petitions and ruled in substance that:

1. The Probate Court indeed possessed no jurisdiction to resolve the issue of ownership based
merely on evidence adduced at the hearing of a "counter-motion" conducted under Section 6,
Rule 87;
 83

2. The original and transfer certificates of title covering the fishpond stand in the names of
the Heirs of Teresa Garin as registered owners, and therefore no presumption that the estate
owns the fishpond is warranted to justify return of the property on the theory that it had
merely been borrowed; and

3. Even assuming the Probate Court's competence to resolve the ownership question, the estate
administrators would have to recover possession of the fishpond by separate action, in view of
the lessee's claim of right to superior possession, as lessee thereof.

From this joint judgment, the administrators have taken separate appeals to this Court
by certiorari,27 docketed as G.R. Nos. 59867 and 59868. They ascribe to the Appellate Court
the following errors, viz: Page 542

1) in holding that the Probate Court (Judge Adil, Presiding) had no jurisdiction to take
cognizance of and decide the issue of title covering a fishpond being claimed by an heir
adversely to the decedent spouses;

2) in ruling that it was needful for the administrators to file a separate action for the recovery
of the possession of the fishpond then in the hands of a third person; and

3) in sanctioning the act of a CFI Branch in interfering with and overruling the final judgment
of another branch, acting as probate Court, and otherwise frustrating and inhibiting the
enforcement and implementation of said judgment.

Jurisdiction of Probate Court

As regards the first issue, settled is the rule that a Court of First Instance (now Regional Trial
Court), acting as a Probate Court, exercises but limited jurisdiction, 28 and thus has no power to
take cognizance of and determine the issue of title to property claimed by a third person
adversely to the decedent, unless the claimant and all the Other parties having legal interest in
the property consent, expressly or impliedly, to the submission of the question to the Probate
Court for adjudgment, or the interests of third persons are not thereby prejudiced, 29 the
reason for the exception being that the question of whether or not a particular matter should
be resolved by the Court in the exercise of its general jurisdiction or of its limited jurisdiction
as a special court (e.g., probate, land registration, etc., is in reality not a jurisdictional but in
essence of procedural one, involving a mode of practice which may be waived. 30

The facts obtaining in this case, however, do not call for the application of the exception to the
rule. As already earlier stressed, it was at all times clear to the Court as well as to the parties
that if cognizance was being taken of the question of title over the fishpond, it was not for the
purpose of settling the issue definitely and permanently, and writing "finis" thereto, the
question being explicitly left for determination "in an ordinary civil action," but merely to
determine whether it should or should not be included in the inventory. 31 This function of
resolving whether or not property should be included in the estate inventory is, to be sure, one
 84

clearly within the Probate Court's competence, although the Court's determination is only
provisional in character, not conclusive, and is subject to the final decision in a separate action
that may be instituted by the parties. 32

The same norm governs the situation contemplated in Section 6, Rule 87 of the Rules of Court,
expressly invoked by the Probate Court in justification of its holding a hearing on the issue
arising from the parties' conflicting claims over the fishpond. 33 The examination provided in
the cited section is intended merely to elicit evidence relevant to property of the decedent
from persons suspected of having possession or knowledge thereof, or of having concealed,
embezzled, or conveyed away the same. Of course, if the latter lays no claim to the property
and manifests willingness to tum it over to the estate, no difficulty arises; the Probate Court
simply issues the appropriate direction for the delivery of the property to the estate. On the
other hand, if the third person asserts a right to the property contrary to the decedent's, the
Probate Court would have no authority to resolve the issue; a separate action must be instituted
by the administrator to recover the property. 34

Parenthetically, in the light of the foregoing principles, the Probate Court could have admitted
and taken cognizance of Fabiana's complaint in intervention after obtaining the consent of all
interested parties to its assumption of jurisdiction over the question of title to the fishpond, or
ascertaining the absence of objection thereto. But it did not. It dismissed the complaint in
intervention instead. And all this is now water under the bridge.

Possession of Fishpond Pending

Determination of Title Thereto

Since the determination by the Probate Court of the question of title to the fishpond was
merely provisional, not binding on the property with any character of authority, definiteness or
permanence, having been made only for purposes of in. conclusion in the inventory and upon
evidence adduced at the hearing of a motion, it cannot and should not be subject of execution,
as against its possessor who has set up title in himself (or in another) adversely to the
decedent, and whose right to possess has not been ventilated and adjudicated in an appropriate
action. These considerations assume greater cogency where, as here, the Torrens title to the
property is not in the decedents' names but in others, a situation on which this Court has
already had occasion to rule.

In regard to such incident of inclusion or exclusion, We hold that if a property

covered by Torrens title is involved, the presumptive conclusiveness of such title
should be given due weight, and in the absence of strong compelling evidence to the
contrary, the holder thereof should be consider as the owner of the property in
controversy until his title is nullified or modified in an appropriate ordinary action,
particularly, when as in the case at bar, possession of the property itself is in the
persons named in the title. 35
 85

Primary Jurisdiction over Title issue in

Court Taking Cognizance of Separate Action

Since, too, both the Probate Court and the estate administrators are one in the recognition of
the proposition that title to the fishpond could in the premises only be appropriately
determined in a separate action, 36 the actual firing of such a separate action should have been
anticipated, and should not therefore have come as a surprise, to the latter. And since
moreover, implicit in that recognition is also the acknowledge judgment of the superiority of the
authority of the court in which the separate action is filed over the issue of title, the estate
administrators may not now be heard to complain that in such a separate action, the court
should have issued orders necessarily involved in or flowing from the assumption of that
jurisdiction. Those orders cannot in any sense be considered as undue interference with the
jurisdiction of the Probate Court. Resulting from the exercise of primary jurisdiction over the
question of ownership involving estate property claimed by the estate, they must be deemed
superior to otherwise contrary orders issued by the Probate Court in the exercise of what may
be, regarded as merely secondary, or provisional, jurisdiction over the same question.

WHEREFORE, the petition in G.R. No. 56504 is DISMISSED, for lack of merit. The petitions in
G.R. No. 59867 and G.R. No. 59868 are DENIED, and the judgment of the Appellate Court,
subject thereof, is affirmed in toto. The temporary restraining order dated April 1, 1981 is
lifted. Costs against petitioners.

Republic of the Philippines

SUPREME COURT
Baguio City

SPECIAL THIRD DIVISION

G.R. No. 133347 April 23, 2010

ABS-CBN BROADCASTING CORPORATION, EUGENIO LOPEZ, JR., AUGUSTO ALMEDA-

LOPEZ, and OSCAR M. LOPEZ, Petitioners,
vs.
OFFICE OF THE OMBUDSMAN, ROBERTO S. BENEDICTO, EXEQUIEL B. GARCIA,
MIGUEL V. GONZALES, and SALVADOR (BUDDY) TAN, Respondents.

RESOLUTION

NACHURA, J.:
 86

Before us is a Motion for Reconsideration filed by petitioners Eugenio, Jr., Oscar and Augusto
Almeda, all surnamed Lopez, in their capacity as officers and on behalf of petitioner ABS-CBN
Broadcasting Corporation (ABS-CBN), of our Decision in G.R. No. 133347, dismissing their
petition for certiorari because of the absence of grave abuse of discretion in the Ombudsman
Resolution which, in turn, found no probable cause to indict respondents for the following
violations of the Revised Penal Code (RPC): (1) Article 298 – Execution of Deeds by Means of
Violence or Intimidation; (2) Article 315, paragraphs 1[b], 2[a], and 3[a] – Estafa; (3) Article
308 – Theft; (4) Article 302 – Robbery; (5) Article 312 – Occupation of Real Property or
Usurpation of Real Rights in Property; and (6) Article 318 – Other Deceits.

The assailed Decision disposed of the case on two (2) points: (1) the dropping of respondents
Roberto S. Benedicto and Salvador (Buddy) Tan as respondents in this case due to their death,
consistent with our rulings in People v. Bayotas1 and Benedicto v. Court of Appeals;2 and (2) our
finding that the Ombudsman did not commit grave abuse of discretion in dismissing petitioners’
criminal complaint against respondents.

Undaunted, petitioners ask for a reconsideration of our Decision on the following grounds:

I.

WITH DUE RESPECT, THE EXECUTION AND VALIDITY OF THE LETTER-AGREEMENT

DATED 8 JUNE 1973 ARE PLAINLY IRRELEVANT TO ASCERTAINING THE CRIMINAL
LIABILITY OF THE RESPONDENTS AND, THEREFORE, THE ISSUE AS TO WHETHER SAID
AGREEMENT WAS RATIFIED OR NOT IS IMMATERIAL IN THE PRESENT CASE.

II.

WITH DUE RESPECT, RESPONDENTS BENEDICTO AND TAN SHOULD NOT BE DROPPED AS
RESPONDENTS SIMPLY BECAUSE THEY MET THEIR UNTIMELY DEMISE DURING THE
PENDENCY OF THE CASE.3

Before anything else, we note that petitioners filed a Motion to Refer the Case to the Court en
banc.4 Petitioners aver that the arguments contained in their Motion for Reconsideration, such
as: (1) the irrelevance of the civil law concept of ratification in determining whether a crime
was committed; and (2) the continuation of the criminal complaints against respondents
Benedicto and Tan who have both died, to prosecute their possible civil liability therefor,
present novel questions of law warranting resolution by the Court en banc.

In the main, petitioners argue that the Decision is contrary to law because: (1) the ratification
of the June 8, 1973 letter-agreement is immaterial to the determination of respondents’
criminal liability for the aforestated felonies in the RPC; and (2) the very case cited in our
Decision, i.e. People v. Bayotas,5 allows for the continuation of a criminal case to prosecute civil
liability based on law and is independent of the civil liability arising from the crime.
 87

We disagree with petitioners. The grounds relied upon by petitioners in both motions, being
intertwined, shall be discussed jointly. Before we do so, parenthetically, the counsel for
respondent Miguel V. Gonzales belatedly informed this Court of his client’s demise on July 20,
2007.6 Hence, as to Gonzales, the case must also be dismissed.1avvphi1

Contrary to petitioners’ assertion, their motion for reconsideration does not contain a novel
question of law as would merit the attention of this Court sitting en banc. We also find no
cogent reason to reconsider our Decision.

First and foremost, there is, as yet, no criminal case against respondents, whether against
those who are living or those otherwise dead.

The question posed by petitioners on this long-settled procedural issue does not constitute a
novel question of law. Nowhere in People v. Bayotas7 does it state that a criminal complaint may
continue and be prosecuted as an independent civil action. In fact, Bayotas, once and for all,
harmonized the rules on the extinguished and on the subsisting liabilities of an accused who
dies. We definitively ruled:

From this lengthy disquisition, we summarize our ruling herein:

1. Death of an accused pending appeal of his conviction extinguishes his criminal liability
as well as the civil liability based solely thereon. As opined by Justice Regalado, in this
regard, "the death of the accused prior to final judgment terminates his criminal liability
and only the civil liability directly arising from and based solely on the offense
committed, i.e., civil liability ex delicto in senso strictiore."

2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if
the same may also be predicated on a source of obligation other than delict. Article 1157
of the Civil Code enumerates these other sources of obligation from which the civil
liability may arise as a result of the same act or omission:

a) Law

b) Contracts

c) Quasi-contracts

d) xxx xxx xxx

e) Quasi-delicts

3. Where the civil liability survives, as explained in Number 2 above, an action for
recovery thereof may be pursued but only by filing a separate civil action and subject to
Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as amended. This separate
civil action may be enforced either against the executor/administrator or the estate of
 88

the accused, depending on the source of obligation upon which the same is based as
explained above.

4. Finally, the private offended party need not fear a forfeiture of his right to file this
separate civil action by prescription, in cases where during the prosecution of the
criminal action and prior to its extinction, the private offended party instituted together
therewith the civil action. In such case, the statute of limitations on the civil liability is
deemed interrupted during the pendency of the criminal case, conformably with
provisions of Article 1155 of the Civil Code, that should thereby avoid any apprehension
on a possible [de]privation of right by prescription.

From the foregoing, it is quite apparent that Benedicto, Tan, and Gonzales, who all died during
the pendency of this case, should be dropped as party respondents. If on this score alone, our
ruling does not warrant reconsideration. We need not even delve into the explicit declaration in
Benedicto v. Court of Appeals.8

Second, and more importantly, we dismissed the petition for certiorari filed by petitioners
because they failed to show grave abuse of discretion on the part of the Ombudsman when he
dismissed petitioners’ criminal complaint against respondents for lack of probable cause. We
reiterate that our inquiry was limited to a determination of whether the Ombudsman committed
grave abuse of discretion when he found no probable cause to indict respondents for various
felonies under the RPC. The invocation of our certiorari jurisdiction over the act of a
constitutional officer, such as the Ombudsman, must adhere to the strict requirements
provided in the Rules of Court and in jurisprudence. The determination of whether there was
grave abuse of discretion does not, in any way, constitute a novel question of law.

We first pointed out in our Decision that the complaint-affidavits of petitioners, apart from a
blanket charge that remaining respondents, Gonzales (who we thought was alive at that time)
and Exequiel Garcia, are officers of KBS/RPN and/or alter egos of Benedicto, are bereft of
sufficient ground to engender a well-founded belief that crimes have been committed and that
respondents, namely, Gonzales and Garcia, are probably guilty thereof and should be held for
trial. Certainly, no grave abuse of discretion can be imputed to the Ombudsman that would
warrant a reversal of his Resolution.

The charges of individual petitioners Eugenio, Jr., Oscar and Augusto Almeda against
respondents, Gonzales and Garcia, contained in their respective complaint-affidavits simply
consisted of the following:

1. Complaint-affidavit of Eugenio, Jr.

32.1. I was briefed that Senator Estanislao Fernandez in representation of Benedicto, met with
Senator Tañada at the Club Filipino in June 1976. Discussions were had on how to arrive at the
"reasonable rental" for the use of ABS-CBN stations and facilities. A second meeting at Club
 89

Filipino took place on July 7, 1976 between Senators Tañada and Fernandez, who brought along
Atty. Miguel Gonzales, a close associate and lawyer of Benedicto and an officer of KBS.

xxxx

38.2. The illegal takeover of ABS-CBN stations, studios and facilities, and the loss and/or
damages caused to our assets occurred while Benedicto, Exequiel Garcia, Miguel Gonzales, and
Salvador Tan were in possession, control and management of our network. Roberto S. Benedicto
was the Chairman of the Board of KBS-RPN and its Chief Executive Officer (CEO), to whom
most of the KBS-RPN officers reported while he was in Metro Manila. Miguel Gonzales, the
Vice-President of KBS, and Exequiel Garcia, the Treasurer, were the alter egos of Benedicto
whenever the latter was out of the country; x x x.9

2. Complaint-affidavit of Oscar

25. All the illegal activities as complained of above, were done upon the orders, instructions and
directives of Roberto S. Benedicto, the Chairman of the Board and Chief Executive Officer of
the KBS/RPN group; Miguel Gonzales and Exequiel Garcia, close colleagues and business
partners of Benedicto who were either directors/officers KBS/RPN and who acted as
Benedicto’s alter egos whenever the latter was out of the country; x x x.

xxxx

38. Senator Estanislao Fernandez, in representation of Benedicto, met with Senator Tañada at
the Club Filipino on June 1976. Discussions were had on how to arrive at the "reasonable rental"
for the use of ABS stations and facilities. A second meeting at Club Filipino took place on July
7, 1976 between Senators Tañada and Fernandez, who brought along Atty. Mike Gonzales, a
close associate and friend of Benedicto and an officer of KBS.10

3. Complaint-affidavit of Augusto Almeda

21.1. Barely two weeks from their entry into the ABS Broadcast Center, KBS personnel started
making unauthorized withdrawals from the ABS Stock Room. All these withdrawals of supplies
and equipment were made under the orders of Benedicto, Miguel Gonzales, Exequiel Garcia, and
Salvador Tan, the Chairman, the Vice-President, Treasurer, and the General Manager of KBS,
respectively. No payment was ever made by either Benedicto or KBS for all the supplies and
equipment withdrawn from the ABS Broadcast Center.

xxxx

31. Senator Estanislao Fernandez, in representation of Benedicto, met with Senator Tañada at
the Club Filipino on June 1976. Discussions were had on how to arrive at the "reasonable rental"
for the use of ABS stations and facilities. A second meeting at Club Filipino took place on July
 90

7, 1976 between Senators Tañada and Fernandez, who brought along Atty. Mike Gonzales, a
close associate and friend of Benedicto and an officer of KBS.11

From the foregoing, it is beyond cavil that there is no reason for us to depart from our policy of
non-interference with the Ombudsman’s finding of probable cause or lack thereof. On the
strength of these allegations, we simply could not find any rational basis to impute grave abuse
of discretion to the Ombudsman’s dismissal of the criminal complaints.

Third, we did not state in the Decision that ratification extinguishes criminal liability. We
simply applied ratification in determining the conflicting claims of petitioners regarding the
execution of the letter-agreement. Petitioners, desperate to attach criminal liability to
respondents’ acts, specifically to respondent Benedicto, alleged in their complaint-affidavits
that Benedicto forced, coerced and intimidated petitioners into signing the letter-agreement.
In other words, petitioners disown this letter-agreement that they were supposedly forced into
signing, such that this resulted in a violation of Article 298 of the RPC (Execution of Deeds by
means of Violence or Intimidation).

However, three elements must concur in order for an offender to be held liable under Article
298:

(1) that the offender has intent to defraud another.

(2) that the offender compels him to sign, execute, or deliver any public instrument or
document.

(3) that the compulsion is by means of violence or intimidation.12

The element of intent to defraud is not present because, even if, initially, as claimed by
petitioners, they were forced to sign the letter-agreement, petitioners made claims based
thereon and invoked the provisions thereof. In fact, petitioners wanted respondents to honor
the letter-agreement and to pay rentals for the use of the ABS-CBN facilities. By doing so,
petitioners effectively, although they were careful not to articulate this fact, affirmed their
signatures in this letter-agreement.

True, ratification is primarily a principle in our civil law on contracts. Yet, their subsequent acts
in negotiating for the rentals of the facilities ― which translate into ratification of the letter-
agreement ― cannot be disregarded simply because ratification is a civil law concept. The claims
of petitioners must be consistent and must, singularly, demonstrate respondents’ culpability for
the crimes they are charged with. Sadly, petitioners failed in this regard because, to reiterate,
they effectively ratified and advanced the validity of this letter-agreement in their claim
against the estate of Benedicto.

Finally, we take note of the conflicting claim of petitioners by filing a separate civil action to
enforce a claim against the estate of respondent Benedicto. Petitioners do not even specifically
 91

deny this fact and simply sidestep this issue which was squarely raised in the Decision. The
Rules of Court has separate provisions for different claims against the estate of a decedent
under Section 5 of Rule 86 and Section 1 of Rule 87:

RULE 86.

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 and 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 counter claims in any action that the executor or administrator may bring against the
claimants. Xxx Claims not yet due, or contingent, may be approved at their present value.

RULE 87.

SECTION 1. Actions which may and which may not be brought against executor or
administrator. – No action upon a claim for the recovery of money or debt or interest thereon
shall be commenced against the executor or administrator; but actions to recover real or
personal property, or an interest therein, from the estate, or to enforce a lien thereon, and
actions to recover damages for an injury to person or property, real or personal, may be
commenced against him.

If, as insisted by petitioners, respondents committed felonies in forcing them to sign the
letter-agreement, petitioners should have filed an action against the executor or administrator
of Benedicto’s estate based on Section 1, Rule 87 of the Rules of Court. But they did not.
Instead they filed a claim against the estate based on contract, the unambiguous letter-
agreement, under Section 5, Rule 86 of the Rules of Court. The existence of this claim against
the estate of Benedicto as opposed to the filing of an action against the executor or
administrator of Benedicto’s estate forecloses all issues on the circumstances surrounding the
execution of this letter- agreement.

We are not oblivious of the fact that, in the milieu prevailing during the Marcos years,
incidences involving intimidation of businessmen were not uncommon. Neither are we totally
unaware of the reputed closeness of Benedicto to President Marcos. However, given the
foregoing options open to them under the Rules of Court, petitioners’ choice of remedies by
filing their claim under Section 5, Rule 86 ― after Marcos had already been ousted and full
democratic space restored ― works against their contention, challenging the validity of the
letter-agreement. Now, petitioners must live with the consequences of their choice.

WHEREFORE, in light of the foregoing, the Motion to Refer the Case to the Court en banc and
the Motion for Reconsideration are DENIED.

SO ORDERED.