Luzon Surety filed a claim against the estate of K.H.

Hemady based on indemnity agreements

(counterbonds) subscribed by distinct principals and by the deceased K.H. Hemady as surety
(solidary guarantor). As a contingent claim, Luzon Surety prayed for the allowance of the value of
the indemnity agreements it had executed. The lower court dismissed the claim of Luzon Surety on
the ground that “whatever losses may occur after Hemady’s death, are not chargeable to his
estate, because upon his death he ceased to be a guarantor.”
ISSUES: What obligations are transmissible upon the death of the decedent? Are contingent claims
chargeable against the estate?
HELD: Under the present Civil Code (Article 1311), the rule is that “Contracts take effect only as
between the parties, their assigns and heirs, except in case where the rights and obligations arising
from the contract are not transmissible by their nature, or by stipulation or by provision of law.”
While in our successional system the responsibility of the heirs for the debts of their decedent cannot
exceed the value of the inheritance they receive from him, the principle remains intact that these
heirs succeed not only to the rights of the deceased but also to his obligations. Articles 774 and 776
of the New Civil Code expressly so provide, thereby confirming Article 1311.
In Mojica v. Fernandez, the Supreme Court ruled — “Under the Civil Code the heirs, by virtue of the
rights of succession are subrogated to all the rights and obligations of the deceased (Article 661)
and can not be regarded as third parties with respect to a contract to which the deceased was a party,
touching the estate of the deceased x x x which comes in to their hands by right of inheritance; they
take such property subject to all the obligations resting thereon in the hands of him from whom they
derive their rights.” The third exception to the transmissibility of obligations under Article 1311 exists
when they are ‘not transmissible by operation of law.’ The provision makes reference to those cases
where the law expresses that the rights or obligations are extinguished by death, as is the case in
legal support, parental authority, usufruct, contracts for a piece of work, partnership and agency. By
contrast, the articles of the Civil Code that regulate guaranty or suretyship contain no provision that
the guaranty is extinguished upon the death of the guarantor or the surety.
The contracts of suretyship in favor of Luzon Surety Co. not being rendered intransmissible due to
the nature of the undertaking, nor by stipulations of the contracts themselves, nor by provision of
law, his eventual liability therefrom necessarily passed upon his death to his heirs. The contracts,
therefore, give rise to contingent claims provable against his estate. A contingent liability of a
deceased person is part and parcel of the mass of obligations that must be paid if and when the
contingent liability is converted into a real liability. Therefore, the settlement or final liquidation of
the estate must be deferred until such time as the bonded indebtedness is paid.

Laura Alvarez, Flora Alvarez and Raymundo Alvarez , petitioners, vs. The Honorable Intermediate
Appellate Court and Jesus Yanes, Estelita Yanes, Antonio Yanes, Rosario Yanes, and Iluminado
Yanes, respondents.
(G.R. No. 68053, 7 May 1990, 185 SCRA 8)

Ponente: Chief Justice Marcelo B. Fernan

 Doctrines

(Succession)
(1) Hereditary assets are always liable in their totality for the payment of the debts of the estate.
However, the estate’s heirs are only liable only to the extent of the value of their inheritance.

(2) When a right or fact has been judicially tried and determined by a court of competent jurisdiction,
so long as it remains unreversed, it should be conclusive upon the parties and those in privity with
them in law or estate.

(Property)
The sole remedy of the landowner whose property has been wrongfully or erroneously registered in
another's name is to bring an ordinary action in the ordinary court of justice for reconveyance or, if the
property has passed into the hands of an innocent purchaser for value, for damages.

Type of Action / Appeal

A petition for review on certiorari which seeks reversal of (a) decision of the Intermediate Appellate Court’s
Fourth Civil Cases Division dated 31 August 1983 which affirmed the decision of Court of the First Instance
(CFI) of Negros Occidental and (b) (b) the resolution of said appellate court dated 30 May 1984 which
denied the petitioner’s motion for reconsideration of its decision.

Facts

The properties involved in the suit are Lots 773-A and 773-B, originally parts of Lot 773 of the Cadastral
Survey of Murcia, Negros Occidental, which had an area of 156,549 square meters. Lot 773 was registered
in the name of the heirs of Aniceto Yanes under Original Certificate of Title No. RO-4858 (8804) issued
on 9 October 1917 by the Register of Deeds of Occidental Negros. Aniceto Yanes left Lots 773 and 823 to
his children Rufino, Felipe and Teodora.

Estelita, Iluminado and Jesus, are the children of Rufino who died in 1962, while Antonio and Rosario
Yanes are children of Felipe. Teodora was survived by her child Jovito Alib.

Teodora cultivated only three hectares of Lot 823 as she could not attend to the other portions of the two
lots which had a total area of around twenty-four hectares. The record does not show whether Felipe’s
children also cultivated some portions of the lots but it is established that Rufino and his children left the
province to settle in other places as a result of the outbreak of World War II.

According to Estelita, from the "Japanese time up to peace time", they did not visit the parcels of land in
question but "after liberation", when her brother went there to get their share of the sugar produced therein,
he was informed that Fortunato Santiago, Fuentebella (Puentevella) and Alvarez were in possession of Lot
773.

On 19 May 1938, Fortunato D. Santiago was issued Transfer Certificate of Title No. RF 2694 (29797)
covering Lot 773-A with an area of 37,818 square meters and described as a portion of Lot 773 of the
cadastral survey of Murcia originally registered under OCT No. 8804. Later, on 6 September 1938, the
bigger portion Lot 773-B, with an area of 118,831 square meters was also registered to his name under TCT
No. RT-2695 (28192). Fortunato sold Lots 773-A and 773-B on 30 May 1955 to Monico B. Fuentebella,
Jr. for P7,000.00 and on 20 February 1956, TCT Nos. T-19291 and T-19292 were issued in Fuentebella's
name.
After Monico's death and during the settlement of estate, his wife and the administratrix of his estate Arsenia
Vda de Fuentebella filed a motion which requested authority to sell Lots 773-A and 773-B in the Court of
First Instance of Negros Occidental (as Special Proceedings No. 4373). The court granted Arsenia’s motion,
and the two lots were sold on 24 March 1958 by Arsenia for P6,000.00 to Rosendo Alvarez. TCT Nos. T-
23165 and T-23166 covering Lots 773-A and 773-B were respectively issued on 1 April 1958 to Rosendo.

On 26 May 1960, Teodora Yanes and Rufino’s children Estelita, Iluminado and Jesus, filed in the Court of
First Instance of Negros Occidental a complaint against Fortunato Santiago, Arsenia Vda. de Fuentebella,
Alvarez and the Register of Deeds of Negros Occidental for the "return" of the ownership and possession
of Lots 773 and 823 (docketed as Civil Case 5022). However, while the case was pending with the trial
court, Rosendo sold on 13 November 1961 Lots 773-A, 773-B and another lot for P25,000.00 to Dr. Rodolfo
Siason, and TCT Nos. 30919 and 30920 were issued in Siason’s name.

On 11 October 1963, the trial court via its judgment in Civil Case 5022 that Rosendo would reconvey and
deliver possession to the respondents (plaintiffs in the civil case) the lots Nos. 773 and 823. However,
execution of said decision proved unsuccessful as to Lot 773, as the lot was already subdivided into 773-A
and 773-B and under Siason’s name.

Later, the Yaneses filed an action for recovery of real property with damages (docketed as Civil Case 8474)
against Register of Deeds of Negros Occidental, Rodolfo Siason and Rosendo Alvarez’s children
(petitioners Laura, Flora and Raymundo), which prayed for cancellation of TCT Nos. T-19291 and 19292
issued to Siason and delivery of Lot 773 (as Lot 773-A and 773-B) to them. They also prayed that if delivery
of the lot could not be effected or a new title could be issued, the Alvarezes and Siason jointly and severally
pay the Yaneses the sum of P45,000.00; accounting of the fruits of Lot 773 from 13 November 1961 until
the time of complaint’s filing, and payment of attorney’s fees, moral and exemplary damages.

On 8 July 1974, the trial court rendered its decision which found Rodolfo Siason as a buyer in good faith
for a valuable consideration. It ordered Laura, Flora and Raymundo Alvarez to pay jointly and severally
respondents Jesus, Estelita, Antonio, Rosario and Illuminado Yanes the sum of P20,000.00 representing the
actual value of Lots Nos. 773-A and 773-B, P2,000.00 as actual damages suffered by the plaintiffs; moral
damages of P5,000.00 and attorney’s fees of P2,000, all with legal rate of interest from the time of the
complaint’s filing up to final payment.

The Alvarezes appealed the 8 July 1974 decision of the trial court to the Intermediate Appellate Court. The
appellate court, via its decision dated 31 August 1983, affirmed the lower court’s decision except the award
of attorney’s fees, moral and exemplary damages. It also ruled that it it is powerless to review the decision
in Civil Case No. 5022 which ordered the late Rosendo Alvarez to reconvey the lots to the Yaneses, as the
decision in that case had been long final and executory. The Alvarezes filed their Motion for
Reconsideration of the appellate court’s decision, but the appellate court denied their motion via its
resolution dated 30 May 1984.

VERDICT

The assailed decision of the Court of Appeals is AFFIRMED, and the instant petition for review of the
petitioner’s Laura, Flora and Raymundo Alvarez is DEVOID OF MERIT.

LAW PROVISIONS

Articles 774 and 776, Rep. Act. 386 (New Civil Code of the Philippines) states:
Article 774: Succession is a mode of acquisition by virtue of which the property, rights and
obligations to the extent of the value of the inheritance, of a person are transmitted through his
death to another or others either by his will or by operation of law. (n)

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

ISSUES AND RULING OF THE SUPREME COURT

Hence, the instant petition for review by Rosendo’s children (Laura, Flora and Raymundo) raised the
following issues:

(1) Whether the Yaneses’ claim against Dr. Siason and the petitioners as heirs of late Rosendo Alvarez
barred by statute of limitation and/or prescription of action and estoppel?

NO. The Supreme Court ruled that the decision in Civil Case No. 5022 has been long final and
executory and is the law of the case between the parties. It ended when Alvarez or his heirs failed
to appeal the decision against them. In fact, Civil Case No. 8474 arose from the failure to execute
the reconveyance and delivery of possession of the lots (Lots 773-A and 773-B) in Civil Case No.
5022, as these lots can no longer be reconveyed to private respondents because of the sale of said
lots during the pendency of the case between the petitioners' father Rosendo and Dr. Siason (who
did not know about the controversy), as there is no lis pendens annotated on the titles. Hence, it
was also settled beyond question that Dr. Siason is a purchaser-in-good faith.

In the present case, it was ruled by the Supreme Court that sole remedy of the landowner whose
property has been wrongfully or erroneously registered in another's name is to bring an ordinary
action in the ordinary court of justice for reconveyance or, if the property has passed into the hands
of an innocent purchaser for value, for damages.

Also, the Supreme Court ruled that when a right or fact has been judicially tried and determined by
a court of competent jurisdiction, so long as it remains unreversed, it should be conclusive upon
the parties and those in privity with them in law or estate. Once a litigant's right has been
adjudicated in a valid final judgment of a competent court, he should not be granted an unbridled
license to return for another try. The prevailing party should not be harassed by subsequent suits.

(2) Whether the liability or liabilities of Rosendo Alvarez arising from the sale of Lots Nos. 773-A and
773-B to to Dr. Rodolfo Siason, if any, could be legally passed or transmitted by operation of law
to the petitioners?

YES, as they are heirs of Rosendo Alvarez. Thus, they cannot escape the legal consequences of
their father's transaction which gave rise to the present claim for damages. The Supreme Court said
that hereditary assets are always liable in their totality for the payment of the debts of the estate.
However, the estate’s heirs are only liable only to the extent of the value of their inheritance.

The Supreme Court reiterated its decision in Estate of K.H. Hemady vs. Luzon Surety, that while
the responsibility of the heirs for the debts of their decedent cannot exceed the value of the
inheritance they receive, the principle remains intact that these heirs succeed not only to the rights
of the deceased but also to his obligations, as expressly provided by Article 774 and 776 of the
Civil Code. The Supreme Court stated that the binding effect of contracts upon the heirs of the
deceased party is not altered by the provision in our Rules of Court that money debts of a deceased
 must be liquidated and paid from his estate before the residue is distributed among said heirs. The
reason is that whatever payment is thus made from the estate is ultimately a payment by the heirs
and distributees, since the amount of the paid claim in fact diminishes or reduces the shares that the
heirs would have been entitled to receive.

Case Digest:Union Bank v. Santibanez

452 SCRA 228

FACTS:

On May 31, 1980, the First Countryside Credit Corporation (FCCC) and Efraim
Santibañez entered into a loan agreement in the amount of P128,000.00. The amount
was intended for the payment of one (1) unit Ford 6600 AgriculturalTractor. In view
thereof, Efraim and his son, Edmund, executed a promissory note in favor of the FCCC,
the principal sum payable in five equal annual amortizations. On Dec. 1980, FCCC and
Efraim entered into another loan agreement for the payment of another unit of Ford 6600
and one unit of a Rotamotor. Again, Efraim and Edmund executed a promissory note and
a Continuing Guaranty Agreement for the later loan. In 1981, Efraim died, leaving a
holographic will. Testate proceedings commenced before the RTC of Iloilo
City. Edmund was appointed as the special administrator of the estate. During the
pendency of the testate proceedings, the surviving heirs, Edmund and his sister Florence,
executed a Joint Agreement, wherein they agreed to divide between themselves and take
possession of the three (3) tractors: (2) tractors for Edmund and (1) for Florence. Each of
them was to assume the indebtedness of their late father to FCCC, corresponding to the
tractor respectively taken by them. In the meantime, a Deed of Assignment with
Assumption of Liabilities was executed by and between FCCC and Union Bank, wherein
the FCCC assigned all its assets and liabilities to Union Bank.

Demand letters were sent by Union Bank to Edmund, but the latter refused to pay. Thus,
on February 5, 1988, Union Bank filed a Complaint for sum of money against the heirs of
Efraim Santibañez, Edmund and Florence, before the RTC of Makati City. Summonses
were issued against both, but the one intended for Edmund was not served since he was
in the United States and there was no information on his address or the date of his return
to the Philippines. Florence filed her Answer and alleged that the loan documents did not
bind her since she was not a party thereto. Considering that the joint agreement signed
by her and her brother Edmund was not approved by the probate court, it was null and
void; hence, she was not liable to Union Bank under the joint agreement.

Union Bank asserts that the obligation of the deceased had passed to his legitimate heirs
(Edmund and Florence) as provided in Article 774 of the Civil Code; and that the
unconditional signing of the joint agreement estopped Florence, and that she
cannot deny her liability under the said document.
 In her comment to the petition, Florence maintains that Union Bank is trying to recover
a sum of money from the deceased Efraim Santibañez; thus the claim should have been
filed with the probate court. She points out that at the time of the execution of the joint
agreement there was already an existing probate proceedings. She asserts that even if the
agreement was voluntarily executed by her and her brother Edmund, it should still have
been subjected to the approval of the court as it may prejudice the estate, the heirs or third
parties.

ISSUE:

W/N the claim of Union Bank should have been filed with the probate court before which
the testate estate of the late Efraim Santibañez was pending. W/N the agreement
between Edmund and Florence (which was in effect, a partition of hte estate) was void
considering that it had not been approved by the probate court. W/N there can be a valid
partition among the heirs before the will is probated.

HELD:

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

In our jurisdiction, the rule is that there can be no valid partition among the heirs until
after the will has been probated. In the present case, Efraim left a holographic will
which contained the provision which reads as follows:

In our jurisdiction, the rule is that there can be no valid partition among the heirs until
after the will has been probated. In the present case, Efraim left a holographic will
which contained the provision which reads as follows:

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

The above-quoted is an all-encompassing provision embracing all the properties left by

the decedent which might have escaped his mind at that time he was making his will, and
other properties he may acquire thereafter. Included therein are the three (3) subject
tractors. This being so, any partition involving the said tractors among the heirs is not
valid. The joint agreement executed by Edmund and Florence, partitioning the tractors
among themselves, is invalid, specially so since at the time of its execution, there was
already a pending proceeding for the probate of their late father’s holographic will
covering the said tractors.

The Court notes that the loan was contracted by the decedent. The bank, purportedly
a creditor of the late Efraim Santibañez, should have thus filed its money claim with the
probate court in accordance with Section 5, Rule 86 of the Revised Rules of Court.
The filing of a money claim against the decedent’s estate in the probate court is
mandatory. This requirement is for the purpose of protecting the estate of the deceased
by informing the executor or administrator of the claims against it, thus enabling him to
examine each claim and to determine whether it is a proper one which should be allowed.
The plain and obvious design of the rule is the speedy settlement of the affairs of the
deceased and the early delivery of the property to the distributees, legatees, or heirs.

Perusing the records of the case, nothing therein could hold Florence accountable for any
liability incurred by her late father. The documentary evidence presented, particularly the
promissory notes and the continuing guaranty agreement, were executed and signed only
by the late Efraim Santibañez and his son Edmund. As the petitioner failed to file its
money claim with the probate court, at most, it may only go after Edmund as co-maker of
the decedent under the said promissory notes and continuing guaranty.

Spouses Santos vs Lumbao

Herein petitioners Virgilio, Victorino, Ernesto and Tadeo, all surnamed Santos, are
the legitimate and surviving heirs of the late Rita Catoc Santos (Rita), who died
on 20 October 1985.The other petitioners Esperanza Lati and Lagrimas Santos are
the daughters-in-law of Rita. Respondents Spouses Jose Lumbao
and Proserfina Lumbao are the alleged owners of the 107-square meter lot (subject
property), which they purportedly bought from Rita during her lifetime.

Rita sold to respondents Spouses Lumbao the subject property which is a part of her
share in the estate of her deceased mother, Maria Catoc, who died intestate. Rita
sold 100 square meters of her inchoate share in her mother’s estate through a
document denominated as Bilihan ng Lupa. Respondents Spouses Lumbao claimed
the execution of the aforesaid document was witnessed by petitioners Virgilio and
Tadeo, as shown by their signatures affixed therein. Later an additional seven square
meters was added to the land as evidenced by a document also denominated as
Bilihan ng Lupa.

After acquiring the subject property, respondents Spouses Lumbao took actual
possession thereof and erected thereon a house which they have been occupying as
exclusive owners up to the present. As the exclusive owners of the subject property,
respondents Spouses Lumbao made several verbal demands upon Rita, during her
lifetime, and thereafter upon herein petitioners, for them to execute the necessary
documents to effect the issuance of a separate title in favor of respondents Spouses
Lumbao insofar as the subject property is concerned. Respondents Spouses Lumbao
alleged that prior to her death, Rita informed respondent Proserfina Lumbao she
could not deliver the title to the subject property because the entire property inherited
by her and her co-heirs from Maria had not yet been partitioned. Spouses Lumbao
then claimed that petitioners, acting fraudulently and in conspiracy with one another,
executed a Deed of Extrajudicial Settlement adjudicating and partitioning among
themselves and the other heirs, the estate left by Maria, which included the subject
property already sold to respondents Spouses Lumbao and now covered by TCT No.
81729[7] of the Registry of Deeds of Pasig City.

Spouses Lumbao sent a formal demand letter to petitioners but despite receipt
of such demand letter, petitioners still failed and refused to reconvey the subject
property to the respondents Spouses Lumbao. Later a complaint for Reconveyance
with Damages was filed before the RTC of Pasig.

Petitioners denied that the subject property had been sold to Spouses
Lumbao. They likewise denied that the Deed of Extrajudicial Settlement had been
fraudulently executed.

Respondents Spouses Lumbao, with leave of court, amended their Complaint

because they discovered that on 16 February 1990, without their knowledge,
petitioners executed a Deed of Real Estate Mortgage in favor of Julieta S. Esplana
for the sum of P30,000.00. The said Deed of Real Estate Mortgage was annotated at
the back of TCT No. PT-81729 on 26 April 1991.
During the trial, respondents Spouses Lumbao presented Proserfina Lumbao
and Carolina Morales as their witnesses, while the petitioners presented only the
testimony of petitioner Virgilio.

The trial court rendered a Decision on 17 June 1998, the dispositive portion
of which reads as follows:

Premises considered, the instant complaint is hereby denied for lack

of merit.
 Considering that [petitioners] have incurred expenses in order to
protect their interest, [respondents spouses Lumbao] are hereby directed
to pay [petitioners], to wit: 1) the amount of P30,000.00 as attorneys fees
and litigation expenses, and 2) costs of the suit.[11]

Aggrieved, respondents Spouses Lumbao appealed to the Court of Appeals. On 8

June 2005, the appellate court rendered a Decision, thus:

WHEREFORE, premises considered, the present appeal is hereby

GRANTED. The appealed Decision dated June 17, 1998 of the Regional
Trial Court of Pasig City, Branch 69 in Civil Case No. 62175 is hereby
REVERSED and SET ASIDE. A new judgment is hereby entered
ordering [petitioners] to reconvey 107 square meters of the subject
[property] covered by TCT No. PT-81729 of the Registry of Deeds of
Pasig City, Metro Manila, and to pay to [respondents spouses Lumbao]
the sum of P30,000.00 for attorneys fees and litigation expenses.

No pronouncement as to costs.[12]

Dissatisfied, petitioners filed a Motion for Reconsideration of the aforesaid

Decision but it was denied in the Resolution of the appellate court dated 29 July
2005 for lack of merit.

Hence, this Petition.

Issue: Whether or not a co owner an alienate, mortgage or assign his aliquot share in the property?
Held: As a general rule, heirs are bound by contracts entered into by their predecessors-
in-interest applies in the present case. Article 1311[32] of the NCC is the basis of this
rule. It is clear from the said provision that whatever rights and obligations the
decedent have over the property were transmitted to the heirs by way of succession,
a mode of acquiring the property, rights and obligations of the decedent to the extent
of the value of the inheritance of the heirs.[33] Thus, the heirs cannot escape the legal
consequence of a transaction entered into by their predecessor-in-interest because
they have inherited the property subject to the liability affecting their common
ancestor. Being heirs, there is privity of interest between them and their deceased
mother. They only succeed to what rights their mother had and what is valid and
binding against her is also valid and binding as against them. The death of a party
does not excuse nonperformance of a contract which involves a property right and
the rights and obligations thereunder pass to the personal representatives of the
deceased. Similarly, nonperformance is not excused by the death of the party when
the other party has a property interest in the subject matter of the contract.[34]

In the end, despite the death of the petitioners mother, they are still bound to
comply with the provisions of the Bilihan ng Lupa, dated 17 August 1979 and 9
January 1981. Consequently, they must reconvey to herein respondents Spouses
Lumbao the 107-square meter lot which they bought from Rita, petitioners
mother. And as correctly ruled by the appellate court, petitioners must pay
respondents Spouses Lumbao attorneys fees and litigation expenses for having been
compelled to litigate and incur expenses to protect their interest.[35] On this matter,
we do not find reasons to reverse the said findings.

Borja v. Borja
46 SCRA 577

FACTS:

Francisco de Borja filed a petition for probate of the will of his wife who died, Josefa Tangco, with
the CFI of Rizal. He was appointed executorand administrator, until he died; his son Jose became
the sole administrator. Francisco had taken a 2nd wife Tasiana before he died; she instituted testate
proceedings with the CFI of Nueva Ecija upon his death and was appointed special administatrix.
Jose and Tasiana entered upon a compromise agreement, but Tasiana opposed the approval of the
compromise agreement. She argues that it was no valid, because the heirs cannot enter into such
kind of agreement without first probating the will of Francisco, and at the time the agreement was
made, the will was still being probated with the CFI of Nueva Ecija.

ISSUE: W/N the compromise agreement is valid, even if the will of Francisco has not yet been
probated.

HELD: YES, the compromise agreement is valid. The agreement stipulated that Tasiana will
receive P800,000 as full payment for her hereditary share in the estate of Francisco and Josefa.

There was here no attempt to settle or distribute the estate of Francisco de Borja among the heirs
thereto before the probate of his will. The clear object of the contract was merely
the conveyance by Tasiana Ongsingco of any and all her individual share and interest, actual or
eventual, in the estate of Francisco de Borja and Josefa Tangco. There is no stipulation as to any
other claimant, creditor or legatee.
And as a hereditary share in a decedent’s estate is transmitted or vested immediately from the
moment of the death of such causante or predecessor in interest (Civil Code of the Philippines,
Art. 777) there is no legal bar to a successor (with requisite contracting capacity) disposing of her
or his hereditary share immediately after such death, even if the actual extent of such share is not
determined until the subsequent liquidation of the estate.

Balus vs Balus
FACTS: On January 3, 1979, Rufo mortgaged a parcel of land as security for a loan he obtained
from the Rural Bank of Maigo, Lanao del Norte. Rufo failed to pay his loan. As a result, the
mortgaged property was foreclosed and was subsequently sold to the Bank as the sole bidder
at a public auction held for that purpose. On November 20, 1981, a Certificate of Sale was
executed by the sheriff in favor of the Bank. The property was not redeemed within the period
allowed by law. On January 25, 1984, the sheriff executed a Definite Deed of Sale in the Bank’s
favor. Thereafter, a new title was issued in the name of the Bank. Subsequently Rufo died
on July 6, 1984. On October 10, 1989, herein petitioner and respondents executed an
Extrajudicial Settlement of Estate adjudicating to each of them a specific one-third portion of
the subject property consisting of 10,246 square meters. The Extrajudicial Settlement also
contained provisions wherein the parties admitted knowledge of the fact that their father
mortgaged the subject property to the Bank and that they intended to redeem the same at the
soonest possible time.

ISSUE: Whether or not the questioned land is part of the Estate of Rufo.

HELD: No the subject land is not part of the estate of Rufo. ART 777 provides that the rights to
a person’s succession are transmitted from the moment of his death. The inheritance of a
person consists of the property and transmissible rights and obligations existing at the time of
his death, as well as those which have accrued thereto since the opening of the succession.
Rufo lost ownership of the subject property during his lifetime, it only follows that at the time
of his death, the disputed parcel of land no longer formed part of his estate to which his heirs
may lay claim. Stated differently, petitioner and respondents never inherited the subject lot
from their father.