A.

Articles 774-782 ***CASES

Title IV. - SUCCESSION
CHAPTER 1
GENERAL PROVISIONS 1. Union Bank vs Santibanez

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to
G.R. No. 149926             February 23, 2005
the extent of the value of the inheritance, of a person are transmitted through his death to another or
others either by his will or by operation of law. (n)
Art. 775. In this Title, "decedent" is the general term applied to the person whose property is transmitted UNION BANK OF THE PHILIPPINES, petitioner, 
through succession, whether or not he left a will. If he left a will, he is also called the testator. (n) vs. EDMUND SANTIBAÑEZ and FLORENCE SANTIBAÑEZ ARIOLA, respondents.
Art. 776. The inheritance includes all the property, rights and obligations of a person which are not
extinguished by his death. (659) DECISION
Art. 777. The rights to the succession are transmitted from the moment of the death of the
decedent. (657a) CALLEJO, SR., J.:
Art. 778. Succession may be:
(1) Testamentary; Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court which seeks
(2) Legal or intestate; or the reversal of the Decision1 of the Court of Appeals dated May 30, 2001 in CA-G.R. CV No. 48831
(3) Mixed. (n) affirming the dismissal2 of the petitioner’s complaint in Civil Case No. 18909 by the Regional Trial
Art. 779. Testamentary succession is that which results from the designation of an heir, made in a will Court (RTC) of Makati City, Branch 63.
executed in the form prescribed by law. (n)
Art. 780. Mixed succession is that effected partly by will and partly by operation of law. (n) The antecedent facts are as follows:
Art. 781. The inheritance of a person includes not only the property and the transmissible rights and
obligations existing at the time of his death, but also those which have accrued thereto since the opening
On May 31, 1980, the First Countryside Credit Corporation (FCCC) and Efraim M. Santibañez entered
of the succession. (n)
into a loan agreement3 in the amount of ₱128,000.00. The amount was intended for the payment of the
Art. 782. An heir is a person called to the succession either by the provision of a will or by operation of
purchase price of one (1) unit Ford 6600 Agricultural All-Purpose Diesel Tractor. In view thereof,
law.
Efraim and his son, Edmund, executed a promissory note in favor of the FCCC, the principal sum
Devisees and legatees are persons to whom gifts of real and personal property are respectively given by
payable in five equal annual amortizations of ₱43,745.96 due on May 31, 1981 and every May 31st
virtue of a will. (n) 
thereafter up to May 31, 1985.

On December 13, 1980, the FCCC and Efraim entered into another loan agreement, 4 this time in the
amount of ₱123,156.00. It was intended to pay the balance of the purchase price of another unit of Ford
6600 Agricultural All-Purpose Diesel Tractor, with accessories, and one (1) unit Howard Rotamotor
Model AR 60K. Again, Efraim and his son, Edmund, executed a promissory note for the said amount in
favor of the FCCC. Aside from such promissory note, they also signed a Continuing Guaranty
Agreement5 for the loan dated December 13, 1980.

Sometime in February 1981, Efraim died, leaving a holographic will. 6 Subsequently in March 1981,
testate proceedings commenced before the RTC of Iloilo City, Branch 7, docketed as Special
Proceedings No. 2706. On April 9, 1981, Edmund, as one of the heirs, was appointed as the special
administrator of the estate of the decedent. 7 During the pendency of the testate proceedings, the surviving
heirs, Edmund and his sister Florence Santibañez Ariola, executed a Joint Agreement 8 dated July 22,
 
1981, wherein they agreed to divide between themselves and take possession of the three (3) tractors;
that is, two (2) tractors for Edmund and one (1) tractor for Florence. Each of them was to assume the
indebtedness of their late father to FCCC, corresponding to the tractor respectively taken by them.
On August 20, 1981, a Deed of Assignment with Assumption of Liabilities9 was executed by and
between FCCC and Union Savings and Mortgage Bank, wherein the FCCC as the assignor, among
others, assigned all its assets and liabilities to Union Savings and Mortgage Bank.
Demand letters10 for the settlement of his account were sent by petitioner Union Bank of the Philippines
(UBP) to Edmund, but the latter failed to heed the same and refused to pay. Thus, on February 5, 1988,
the petitioner filed a Complaint11 for sum of money against the heirs of Efraim Santibañez, Edmund and
Florence, before the RTC of Makati City, Branch 150, docketed as Civil Case No. 18909. Summonses
were issued against both, but the one intended for Edmund was not served since he was in the United
States and there was no information on his address or the date of his return to the
Philippines.12 Accordingly, the complaint was narrowed down to respondent Florence S. Ariola.
On December 7, 1988, respondent Florence S. Ariola filed her Answer 13 and alleged that the loan
documents did not bind her since she was not a party thereto. Considering that the joint agreement
signed by her and her brother Edmund was not approved by the probate court, it was null and void;
hence, she was not liable to the petitioner under the joint agreement.
On January 29, 1990, the case was unloaded and re-raffled to the RTC of Makati City, Branch
63.14 Consequently, trial on the merits ensued and a decision was subsequently rendered by the court
dismissing the complaint for lack of merit. The decretal portion of the RTC decision reads:
WHEREFORE, judgment is hereby rendered DISMISSING the complaint for lack of merit. 15
The trial court found that the claim of the petitioner should have been filed with the probate court before
which the testate estate of the late Efraim Santibañez was pending, as the sum of money being claimed
was an obligation incurred by the said decedent. The trial court also found that the Joint Agreement
apparently executed by his heirs, Edmund and Florence, on July 22, 1981, was, in effect, a partition of
the estate of the decedent. However, the said agreement was void, considering that it had not been
approved by the probate court, and that there can be no valid partition until after the will has been
probated. The trial court further declared that petitioner failed to prove that it was the now defunct
Union Savings and Mortgage Bank to which the FCCC had assigned its assets and liabilities. The court
also agreed to the contention of respondent Florence S. Ariola that the list of assets and liabilities of the
FCCC assigned to Union Savings and Mortgage Bank did not clearly refer to the decedent’s account.
Ruling that the joint agreement executed by the heirs was null and void, the trial court held that the
petitioner’s cause of action against respondent Florence S. Ariola must necessarily fail.
The petitioner appealed from the RTC decision and elevated its case to the Court of Appeals (CA),
assigning the following as errors of the trial court:
1. THE COURT A QUO ERRED IN FINDING THAT THE JOINT AGREEMENT
(EXHIBIT A) SHOULD BE APPROVED BY THE PROBATE COURT.
2. THE COURT A QUO ERRED IN FINDING THAT THERE CAN BE NO VALID
PARTITION AMONG THE HEIRS UNTIL AFTER THE WILL HAS BEEN PROBATED.
3. THE COURT A QUO ERRED IN NOT FINDING THAT THE DEFENDANT HAD
WAIVED HER RIGHT TO HAVE THE CLAIM RE-LITIGATED IN THE ESTATE
PROCEEDING.16
The petitioner asserted before the CA that the obligation of the deceased had passed to his legitimate
children and heirs, in this case, Edmund and Florence; the unconditional signing of the joint agreement
marked as Exhibit "A" estopped respondent Florence S. Ariola, and that she cannot deny her liability
under the said document; as the agreement had been signed by both heirs in their personal capacity, it
was no longer necessary to present the same before the probate court for approval; the property
partitioned in the agreement was not one of those enumerated in the holographic will made by the
deceased; and the active participation of the heirs, particularly respondent Florence S. Ariola, in the
present ordinary civil action was tantamount to a waiver to re-litigate the claim in the estate proceedings.
On the other hand, respondent Florence S. Ariola maintained that the money claim of the petitioner
should have been presented before the probate court. 17
The appellate court found that the appeal was not meritorious and held that the petitioner should have
filed its claim with the probate court as provided under Sections 1 and 5, Rule 86 of the Rules of Court.
It further held that the partition made in the agreement was null and void, since no valid partition may be
had until after the will has been probated. According to the CA, page 2, paragraph (e) of the holographic
will covered the subject properties (tractors) in generic terms when the deceased referred to them as "all
other properties." Moreover, the active participation of respondent Florence S. Ariola in the case did not
amount to a waiver. Thus, the CA affirmed the RTC decision, viz.:
WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court of Makati City,
Branch 63, is hereby AFFIRMED in toto.
SO ORDERED.18
In the present recourse, the petitioner ascribes the following errors to the CA:
 I.
THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE JOINT AGREEMENT
SHOULD BE APPROVED BY THE PROBATE COURT.
II.
THE COURT OF APPEALS ERRED IN FINDING THAT THERE CAN BE NO VALID PARTITION
AMONG THE HEIRS OF THE LATE EFRAIM SANTIBAÑEZ UNTIL AFTER THE WILL HAS
BEEN PROBATED.
III.
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE RESPONDENT HAD WAIVED
HER RIGHT TO HAVE THE CLAIM RE-LITIGATED IN THE ESTATE PROCEEDING.
IV.
RESPONDENTS CAN, IN FACT, BE HELD JOINTLY AND SEVERALLY LIABLE WITH THE
PRINCIPAL DEBTOR THE LATE EFRAIM SANTIBAÑEZ ON THE STRENGTH OF THE
CONTINUING GUARANTY AGREEMENT EXECUTED IN FAVOR OF PETITIONER-
APPELLANT UNION BANK.
V.
THE PROMISSORY NOTES DATED MAY 31, 1980 IN THE SUM OF ₱128,000.00 AND
DECEMBER 13, 1980 IN THE AMOUNT OF ₱123,000.00 CATEGORICALLY ESTABLISHED THE
FACT THAT THE RESPONDENTS BOUND THEMSELVES JOINTLY AND SEVERALLY
LIABLE WITH THE LATE DEBTOR EFRAIM SANTIBAÑEZ IN FAVOR OF PETITIONER
UNION BANK.19
The petitioner claims that the obligations of the deceased were transmitted to the heirs as provided in
Article 774 of the Civil Code; there was thus no need for the probate court to approve the joint
agreement where the heirs partitioned the tractors owned by the deceased and assumed the obligations
related thereto. Since respondent Florence S. Ariola signed the joint agreement without any condition,
she is now estopped from asserting any position contrary thereto. The petitioner also points out that the
holographic will of the deceased did not include nor mention any of the tractors subject of the complaint,
and, as such was beyond the ambit of the said will. The active participation and resistance of respondent
Florence S. Ariola in the ordinary civil action against the petitioner’s claim amounts to a waiver of the
right to have the claim presented in the probate proceedings, and to allow any one of the heirs who
executed the joint agreement to escape liability to pay the value of the tractors under consideration
would be equivalent to allowing the said heirs to enrich themselves to the damage and prejudice of the
petitioner.
The petitioner, likewise, avers that the decisions of both the trial and appellate courts failed to consider
the fact that respondent Florence S. Ariola and her brother Edmund executed loan documents, all
establishing the vinculum jurisor the legal bond between the late Efraim Santibañez and his heirs to be in
the nature of a solidary obligation. Furthermore, the Promissory Notes dated May 31, 1980 and
December 13, 1980 executed by the late Efraim Santibañez, together with his heirs, Edmund and
respondent Florence, made the obligation solidary as far as the said heirs are concerned. The petitioner
also proffers that, considering the express provisions of the continuing guaranty agreement and the
promissory notes executed by the named respondents, the latter must be held liable jointly and severally
liable thereon. Thus, there was no need for the petitioner to file its money claim before the probate court.
Finally, the petitioner stresses that both surviving heirs are being sued in their respective personal
capacities, not as heirs of the deceased.
In her comment to the petition, respondent Florence S. Ariola maintains that the petitioner is trying to
recover a sum of money from the deceased Efraim 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 of which the petitioner knew about. However, to avoid a claim
in the probate court which might delay payment of the obligation, the petitioner opted to require them to
execute the said agreement.1a\^/phi1.net
According to the respondent, the trial court and the CA did not err in declaring that the agreement was
null and void. She asserts that even if the agreement was voluntarily executed by her and her brother
Edmund, it should still have been subjected to the approval of the court as it may prejudice the estate,
the heirs or third parties. Furthermore, she had not waived any rights, as she even stated in her answer in
the court a quo that the claim should be filed with the probate court. Thus, the petitioner could not
invoke or claim that she is in estoppel.
Respondent Florence S. Ariola further asserts that she had not signed any continuing guaranty
agreement, nor was there any document presented as evidence to show that she had caused herself to be
bound by the obligation of her late father.
The petition is bereft of merit.
The Court is posed to resolve the following issues: a) whether or not the partition in the Agreement
executed by the heirs is valid; b) whether or not the heirs’ assumption of the indebtedness of the
deceased is valid; and c) whether the petitioner can hold the heirs liable on the obligation of the
deceased.
At the outset, well-settled is the rule that a probate court has the jurisdiction to determine all the
properties of the deceased, to determine whether they should or should not be included in the inventory
or list of properties to be administered.20 The said court is primarily concerned with the administration,
liquidation and distribution of the estate.21
In our jurisdiction, the rule is that there can be no valid partition among the heirs until after the will has
been probated:
In testate succession, there can be no valid partition among the heirs until after the will has been
probated. The law enjoins the probate of a will and the public requires it, because unless a will is
probated and notice thereof given to the whole world, the right of a person to dispose of his property by
will may be rendered nugatory. The authentication of a will decides no other question than such as touch
upon the capacity of the testator and the compliance with those requirements or solemnities which the
law prescribes for the validity of a will.22
This, of course, presupposes that the properties to be partitioned are the same properties embraced in the
will.23 In the present case, the deceased, Efraim Santibañez, left a holographic will 24 which
contained, inter alia, the provision which reads as follows:
(e) All other properties, real or personal, which I own and may be discovered later after my demise, shall
be distributed in the proportion indicated in the immediately preceding paragraph in favor of Edmund
and Florence, my children.
We agree with the appellate court that the above-quoted is an all-encompassing provision embracing all
the properties left by the decedent which might have escaped his mind at that time he was making his
will, and other properties he may acquire thereafter. Included therein are the three (3) subject tractors.
This being so, any partition involving the said tractors among the heirs is not valid. The joint
agreement25 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.
It must be stressed that the probate proceeding had already acquired jurisdiction over all the properties
of the deceased, including the three (3) tractors. To dispose of them in any way without the probate
court’s approval is tantamount to divesting it with jurisdiction which the Court cannot allow. 26 Every act
intended to put an end to indivision among co-heirs and legatees or devisees is deemed to be a partition,
although it should purport to be a sale, an exchange, a compromise, or any other transaction. 27 Thus, in
executing any joint agreement which appears to be in the nature of an extra-judicial partition, as in the
case at bar, court approval is imperative, and the heirs cannot just divest the court of its jurisdiction over
that part of the estate. Moreover, it is within the jurisdiction of the probate court to determine the
identity of the heirs of the decedent.28 In the instant case, there is no showing that the signatories in the
joint agreement were the only heirs of the decedent. When it was executed, the probate of the will was
still pending before the court and the latter had yet to determine who the heirs of the decedent were.
Thus, for Edmund and respondent Florence S. Ariola to adjudicate unto themselves the three (3) tractors
was a premature act, and prejudicial to the other possible heirs and creditors who may have a valid claim
against the estate of the deceased.
The question that now comes to fore is whether the heirs’ assumption of the indebtedness of the
decedent is binding. We rule in the negative. Perusing the joint agreement, it provides that the heirs as
parties thereto "have agreed to divide between themselves and take possession and use the above-
described chattel and each of them to assume the indebtedness corresponding to the chattel taken as
herein after stated which is in favor of First Countryside Credit Corp."29 The assumption of liability was
conditioned upon the happening of an event, that is, that each heir shall take possession and use of their
respective share under the agreement. It was made dependent on the validity of the partition, and that
they were to assume the indebtedness corresponding to the chattel that they were each to receive. The
partition being invalid as earlier discussed, the heirs in effect did not receive any such tractor. It follows
then that the assumption of liability cannot be given any force and effect.
The Court notes that the loan was contracted by the decedent.l^vvphi1.net The petitioner, 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, which provides:
Section 5. Claims which must be filed under the notice. If not filed barred; exceptions. — All claims for
money against the decedent, arising from contract, express or implied, whether the same be due, not due,
or contingent, all claims for funeral expenses for the last sickness of the decedent, and judgment for
money against the decedent, must be filed within the time limited in the notice; otherwise they are
barred forever, except that they may be set forth as counterclaims in any action that the executor or
administrator may bring against the claimants. Where an executor or administrator commences an
action, or prosecutes an action already commenced by the deceased in his lifetime, the debtor may set
forth by answer the claims he has against the decedent, instead of presenting them independently to the
court as herein provided, and mutual claims may be set off against each other in such action; and if final
judgment is rendered in favor of the defendant, the amount so determined shall be considered the true
balance against the estate, as though the claim had been presented directly before the court in the
administration proceedings. Claims not yet due, or contingent, may be approved at their present value.
The filing of a money claim against the decedent’s estate in the probate court is mandatory. 30 As we held
in the vintage case of Py Eng Chong v. Herrera:31
… This requirement is for the purpose of protecting the estate of the deceased by informing the executor
or administrator of the claims against it, thus enabling him to examine each claim and to determine
whether it is a proper one which should be allowed. The plain and obvious design of the rule is the
speedy settlement of the affairs of the deceased and the early delivery of the property to the distributees,
legatees, or heirs. `The law strictly requires the prompt presentation and disposition of the claims against
the decedent's estate in order to settle the affairs of the estate as soon as possible, pay off its debts and
distribute the residue.32
Perusing the records of the case, nothing therein could hold private respondent Florence S. Ariola
accountable for any liability incurred by her late father. The documentary evidence presented,
particularly the promissory notes and the continuing guaranty agreement, were executed and signed only
by the late Efraim 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, of course, subject to any defenses Edmund may have as
against the petitioner. As the court had not acquired jurisdiction over the person of Edmund, we find it
unnecessary to delve into the matter further.
We agree with the finding of the trial court that the petitioner had not sufficiently shown that it is the
successor-in-interest of the Union Savings and Mortgage Bank to which the FCCC assigned its assets
and liabilities.33 The petitioner in its complaint alleged that "by virtue of the Deed of Assignment dated
August 20, 1981 executed by and between First Countryside Credit Corporation and Union Bank of the
Philippines…"34 However, the documentary evidence35 clearly reflects that the parties in the deed of
assignment with assumption of liabilities were the FCCC, and the Union Savings and Mortgage Bank,
with the conformity of Bancom Philippine Holdings, Inc. Nowhere can the petitioner’s participation
therein as a party be found. Furthermore, no documentary or testimonial evidence was presented during
trial to show that Union Savings and Mortgage Bank is now, in fact, petitioner Union Bank of the
Philippines. As the trial court declared in its decision:
… [T]he court also finds merit to the contention of defendant that plaintiff failed to prove or did not
present evidence to prove that Union Savings and Mortgage Bank is now the Union Bank of the
Philippines. Judicial notice does not apply here. "The power to take judicial notice is to [be] exercised by
the courts with caution; care must be taken that the requisite notoriety exists; and every reasonable doubt
upon the subject should be promptly resolved in the negative." (Republic vs. Court of Appeals, 107
SCRA 504).36
This being the case, the petitioner’s personality to file the complaint is wanting. Consequently, it failed
to establish its cause of action. Thus, the trial court did not err in dismissing the complaint, and the CA
in affirming the same.
IN LIGHT OF ALL THE FOREGOING, the petition is hereby DENIED. The assailed Court of
Appeals Decision is AFFIRMED. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.
2. Estate of K.H. Hernady vs Luzon Surety
G.R. No. L-8437. November 28, 1956.
ESTATE OF K. H. HEMADY, deceased, v. LUZON SURETY CO., INC., claimant-appellant.
SYLLABUS
1. CONTRACTS; BINDING EFFECT OF CONTRACTS UPON HEIRS OF DECEASED PARTY. —
The binding effect of contracts upon the heirs of the deceased party is not altered by the provision in the
Rules of Court that money debts of a deceased must be liquidated and paid from his estate before the
residue is distributed among said heirs (Rule 39). The reason is that whatever payment is thus made
from the estate is ultimately a payment is thus made from the estate is ultimately a payment by the heirs
and distributes, since the amount of the paid claim in fact diminishes or reduces the shares that the heirs
would have been entitled to receive. The general rule, therefore, is that a party’s contractual rights and
obligations are transmissible to the successors.
2. ID.; SURETYHIP; NATURE OF OBLIGATION OF SURETY. — The nature of the obligation of the
surety or guarantor does not warrant the conclusion that his peculiar individual qualities are
contemplated as a principal inducement for the contract. The creditor expects of the surety nothing but
the reimbursement of the moneys that said creditor might have to disburse on account of the obligations
of the principal debtors. This reimbursement is a payment of a sum of money, resulting from an
obligation to give; and to the creditor, it was indifferent that the reimbursement should be made by the
surety himself or by some one else in his behalf, so long as the money was paid to it.
3. ID.; ID.; QUALIFICATION OF GUARANTOR; SUPERVENING INCAPACITY OF
GUARANTOR, EFFECT ON CONTRACT. — The qualification of integrity in the guarantor or surety
is required to be present only at the time of the perfection of the contract of guaranty. Once the contract
of guaranty has become perfected and binding, the supervening dishonesty of the guarantor (that is to
say, the disappearance of his integrity after he has become bound) does not terminate the contract but
merely entitles the creditor to demand a replacement of the guarantor. But the step remains optional in
the creditor; it is his right, not his duty, he may waive it if he chooses, and hold the guarantor to his
bargain.
 DECISION
REYES, J. B. L., J.:
Appeal by Luzon Surety Co., Inc., from an order of the Court of First Instance of Rizal, presided by
Judge Hermogenes Caluag, dismissing its claim against the Estate of K. H. Hemady (Special Proceeding
No. Q-293) for failure to state a cause of action.
The Luzon Surety Co. had filed a claim against the Estate based on twenty different indemnity
agreements, or counter bonds, each subscribed by a distinct principal and by the deceased K. H.
Hemady, a surety solidary guarantor) in all of them, in consideration of the Luzon Surety Co.’s of
having guaranteed, the various principals in favor of different creditors. The twenty counterbonds, or
indemnity agreements, all contained the following stipulations:chanroblesvirtual 1awlibrary
"Premiums. — As consideration for this suretyship, the undersigned jointly and severally, agree to pay
the COMPANY the sum of ________________ (P______) pesos, Philippines Currency, in advance as
premium there of for every __________ months or fractions thereof, this ________ or any renewal or
substitution thereof is in effect.
Indemnity. — The undersigned, jointly and severally, agree at all times to indemnify the COMPANY
and keep it indemnified and hold and save it harmless from and against any and all damages, losses,
costs, stamps, taxes, penalties, charges, and expenses of whatsoever kind and nature which the
COMPANY shall or may, at any time sustain or incur in consequence of having become surety upon this
bond or any extension, renewal, substitution or alteration thereof made at the instance of the undersigned
or any of them or any order executed on behalf of the undersigned or any of them; and to pay, reimburse
and make good to the COMPANY, its successors and assigns, all sums and amount of money which it or
its representatives shall pay or cause to be paid, or become liable to pay, on account of the undersigned
or any of them, of whatsoever kind and nature, including 15% of the amount involved in the litigation or
other matters growing out of or connected therewith for counsel or attorney’s fees, but in no case less
than P25. It is hereby further agreed that in case of extension or renewal of this ________ we equally
bind ourselves for the payment thereof under the same terms and conditions as above mentioned without
the necessity of executing another indemnity agreement for the purpose and that we hereby equally
waive our right to be notified of any renewal or extension of this ________ which may be granted under
this indemnity agreement.
Interest on amount paid by the Company. — Any and all sums of money so paid by the company shall
bear interest at the rate of 12% per annum which interest, if not paid, will be accummulated and added to
the capital quarterly order to earn the same interests as the capital and the total sum thereof, the capital
and interest, shall be paid to the COMPANY as soon as the COMPANY shall have become liable
therefore, whether it shall have paid out such sums of money or any part thereof or not.
x       x       x
Waiver. — It is hereby agreed upon by and between the undersigned that any question which may arise
between them by reason of this document and which has to be submitted for decision to Courts of
Justice shall be brought before the Court of competent jurisdiction in the City of Manila, waiving for this
purpose any other venue. Our right to be notified of the acceptance and approval of this indemnity
agreement is hereby likewise waived.
x       x       x
Our Liability Hereunder. — It shall not be necessary for the COMPANY to bring suit against the
principal upon his default, or to exhaust the property of the principal, but the liability hereunder of the
undersigned indemnitor shall be jointly and severally, a primary one, the same as that of the principal,
and shall be exigible immediately upon the occurrence of such default." (Rec. App. pp. 98- 102.)
The Luzon Surety Co., prayed for allowance, as a contingent claim, of the value of the twenty bonds it
had executed in consideration of the counterbonds, and further asked for judgment for the unpaid
premiums and documentary stamps affixed to the bonds, with 12 per cent interest thereon.
Before answer was filed, and upon motion of the administratrix of Hemady’s estate, the lower court, by
order of September 23, 1953, dismissed the claims of Luzon Surety Co., on two grounds: (1) that the
premiums due and cost of documentary stamps were not contemplated under the indemnity agreements
to be a part of the undertaking of the guarantor (Hemady), since they were not liabilities incurred after
the execution of the counterbonds; and (2) that "whatever losses may occur after Hemady’s death, are
not chargeable to his estate, because upon his death he ceased to be guarantor."chanrob1es virtual 1aw
library
Taking up the latter point first, since it is the one more far reaching in effects, the reasoning of the court
below ran as follows:chanroblesvirtual 1awlibrary
"The administratrix further contends that upon the death of Hemady, his liability as a guarantor
terminated, and therefore, in the absence of a showing that a loss or damage was suffered, the claim
cannot be considered contingent. This Court believes that there is merit in this contention and finds
support in Article 2046 of the new Civil Code. It should be noted that a new requirement has been added
for a person to qualify as a guarantor, that is: integrity. As correctly pointed out by the Administratrix,
integrity is something purely personal and is not transmissible. Upon the death of Hemady, his integrity
was not transmitted to his estate or successors. Whatever loss therefore, may occur after Hemady’s
death, are not chargeable to his estate because upon his death he ceased to be a guarantor.
Another clear and strong indication that the surety company has exclusively relied on the personality,
character, honesty and integrity of the now deceased K. H. Hemady, was the fact that in the printed form
of the indemnity agreement there is a paragraph entitled ‘Security by way of first mortgage, which was
expressly waived and renounced by the security company. The security company has not demanded
from K. H. Hemady to comply with this requirement of giving security by way of first mortgage. In the
supporting papers of the claim presented by Luzon Surety Company, no real property was mentioned in
the list of properties mortgaged which appears at the back of the indemnity agreement." (Rec. App., pp.
407-408).
We find this reasoning untenable. Under the present Civil Code (Article 1311), as well as under the Civil
Code of 1889 (Article 1257), the rule is that — "Contracts take effect only as between the parties, their
assigns and heirs, except in the case where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law."chanrob1es virtual 1aw library
While in our successional system the responsibility of the heirs for the debts of their decedent cannot
exceed the value of the inheritance they receive from him, the principle remains intact that these heirs
succeed not only to the rights of the deceased but also to his obligations. Articles 774 and 776 of the
New Civil Code (and Articles 659 and 661 of the preceding one) expressly so provide, thereby
confirming Article 1311 already quoted.
"ART. 774. — Succession is a mode of acquisition by virtue of which the property, rights and
obligations to the extent of the value of the inheritance, of a person are transmitted through his death to
another or others either by his will or by operation of law."chanrob1es virtual 1aw library
"ART. 776. — The inheritance includes all the property, rights and obligations of a person which are not
extinguished by his death."chanrob1es virtual 1aw library
In Mojica v. Fernandez, 9 Phil. 403, this Supreme Court ruled:chanroblesvirtual 1awlibrary
"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 (Barrios v. Dolor, 2 Phil.
44).
x       x       x
"The principle on which these decisions rest is not affected by the provisions of the new Code of Civil
Procedure, and, in accordance with that principle, the heirs of a deceased person cannot be held to be
"third persons" in relation to any contracts touching the real estate of their decedent which comes in to
their hands by right of inheritance; they take such property subject to all the obligations resting thereon
in the hands of him from whom they derive their rights."chanrob1es virtual 1aw library
(See also Galasinao v. Austria, 51 Off. Gaz. (No. 6) p. 2874 and de Guzman v. Salak, 91 Phil., 265).
The binding effect of contracts upon the heirs of the deceased party is not altered by the provision in our
Rules of Court that money debts of a deceased must be liquidated and paid from his estate before the
residue is distributed among said heirs (Rule 89). The reason is that whatever payment is thus made
from the estate is ultimately a payment by the heirs and distributees, since the amount of the paid claim
in fact diminishes or reduces the shares that the heirs would have been entitled to receive.
Under our law, therefore, the general rule is that a party’s contractual rights and obligations are
transmissible to the successors. The rule is a consequence of the progressive "depersonalization" of
patrimonial rights and duties that, as observed by Victorio Polacco, has characterized the history of these
institutions. From the Roman concept of a relation from person to person, the obligation has evolved
into a relation from patrimony to patrimony, with the persons occupying only a representative position,
barring those rare cases where the obligation is strictly personal, i.e., is contracted intuitu personae, in
consideration of its performance by a specific person and by no other. The transition is marked by the
disappearance of the imprisonment for debt.
Of the three exceptions fixed by Article 1311, the nature of the obligation of the surety or guarantor does
not warrant the conclusion that his peculiar individual qualities are contemplated as a principal
inducement for the contract. What did the creditor Luzon Surety Co. expect of K. H. Hemady when it
accepted the latter as surety in the counterbonds? Nothing but the reimbursement of the moneys that the
Luzon Surety Co. might have to disburse on account of the obligations of the principal debtors. This
reimbursement is a payment of a sum of money, resulting from an obligation to give; and to the Luzon
Surety Co., it was indifferent that the reimbursement should be made by Hemady himself or by some
one else in his behalf, so long as the money was paid to it.
The second exception of Article 1311, p. 1, is intransmissibility by stipulation of the parties. Being
exceptional and contrary to the general rule, this intransmissibility should not be easily implied, but must
be expressly established, or at the very least, clearly inferable from the provisions of the contract itself,
and the text of the agreements sued upon nowhere indicate that they are non-transferable.
"(b) Intransmisibilidad por pacto. — Lo general es la transmisibilidad de darechos y obligaciones; le
excepcion, la intransmisibilidad. Mientras nada se diga en contrario impera el principio de la
transmision, como elemento natural a toda relacion juridica, salvo las personalisimas. Asi, para la no
transmision, es menester el pacto expreso, porque si no, lo convenido entre partes trasciende a sus
herederos.
Siendo estos los continuadores de la personalidad del causante, sobre ellos recaen los efectos de los
vinculos juridicos creados por sus antecesores, y para evitarlo, si asi se quiere, es indespensable
convension terminante en tal sentido.
Por su esencia, el derecho y la obligacion tienden a ir más allá de las personas que les dieron vida, y a
ejercer presion sobre los sucesores de esa persona; cuando no se quiera esto, se impone una estipulacion
limitativa expresamente de la transmisibilidad o de cuyos tirminos claramente se deduzca la concresion
del concreto a las mismas personas que lo otorgon." (Scaevola, Codigo Civil, Tomo XX, p. 541-542)
(Emphasis supplied.)
Because under the law (Article 1311), a person who enters into a contract is deemed to have contracted
for himself and his heirs and assigns, it is unnecessary for him to expressly stipulate to that effect; hence,
his failure to do so is no sign that he intended his bargain to terminate upon his death. Similarly, that the
Luzon Surety Co., did not require bondsman Hemady to execute a mortgage indicates nothing more than
the company’s faith and confidence in the financial stability of the surety, but not that his obligation was
strictly personal.
The third exception to the transmissibility of obligations under Article 1311 exists when they are "not
transmissible by operation of law". The provision makes reference to those cases where the law
expresses that the rights or obligations are extinguished by death, as is the case in legal support (Article
300), parental authority (Article 327), usufruct (Article 603), contracts for a piece of work (Article
1726), partnership (Article 1830 and agency (Article 1919). By contract, the articles of the Civil Code
that regulate guaranty or suretyship (Articles 2047 to 2084) contain no provision that the guaranty is
extinguished upon the death of the guarantor or the surety.
The lower court sought to infer such a limitation from Art. 2056, to the effect that "one who is obliged to
furnish a guarantor must present a person who possesses integrity, capacity to bind himself, and
sufficient property to answer for the obligation which he guarantees". It will be noted, however, that the
law requires these qualities to be present only at the time of the perfection of the contract of guaranty. It
is self-evident that once the contract has become perfected and binding, the supervening incapacity of
the guarantor would not operate to exonerate him of the eventual liability he has contracted; and if that
be true of his capacity to bind himself, it should also be true of his integrity, which is a quality
mentioned in the article alongside the capacity.
The foregoing concept is confirmed by the next Article 2057, that runs as follows:chanroblesvirtual
1awlibrary
"ART. 2057. — If the guarantor should be convicted in first instance of a crime involving dishonesty or
should become insolvent, the creditor may demand another who has all the qualifications required in the
preceding article. The case is excepted where the creditor has required and stipulated that a specified
person should be guarantor."chanrob1es virtual 1aw library
From this article it should be immediately apparent that the supervening dishonesty of the guarantor
(that is to say, the disappearance of his integrity after he has become bound) does not terminate the
contract but merely entitles the creditor to demand a replacement of the guarantor. But the step remains
optional in the creditor: it is his right, not his duty; he may waive it if he chooses, and hold the guarantor
to his bargain. Hence Article 2057 of the present Civil Code is incompatible with the trial court’s stand
that the requirement of integrity in the guarantor or surety makes the latter’s undertaking strictly
personal, so linked to his individuality that the guaranty automatically terminates upon his death.
The contracts of suretyship entered into by K. H. Hemady in favor of Luzon Surety Co. not being
rendered intransmissible due to the nature of the undertaking, nor by the stipulations of the contracts
themselves, nor by provision of law, his eventual liability thereunder necessarily passed upon his death
to his heirs. The contracts, therefore, give rise to contingent claims provable against his estate under
section 5, Rule 87 (2 Moran, 1952 ed., p. 437; Gaskell & Co. v. Tan Sit, 43 Phil. 810, 814).
"The most common example of the contigent claim is that which arises when a person is bound as surety
or guarantor for a principal who is insolvent or dead. Under the ordinary contract of suretyship the
surety has no claim whatever against his principal until he himself pays something by way of
satisfaction upon the obligation which is secured. When he does this, there instantly arises in favor of the
surety the right to compel the principal to exonerate the surety. But until the surety has contributed
something to the payment of the debt, or has performed the secured obligation in whole or in part, he has
no right of action against anybody — no claim that could be reduced to judgment. (May v. Vann, 15
Pla., 553; Gibson v. Mithell, 16 Pla., 519; Maxey v. Carter, 10 Yarg. [Tenn.], 521 Reeves v. Pulliam, 7
Baxt. [Tenn.], 119; Ernst v. Nou, 63 Wis., 134.)"chanrob1es virtual 1aw library
For defendant administratrix it is averred that the above doctrine refers to a case where the surety files
claims against the estate of the principal debtor; and it is urged that the rule does not apply to the case
before us, where the late Hemady was a surety, not a principal debtor. The argument evinces a
superficial view of the relations between parties. If under the Gaskell ruling, the Luzon Surety Co., as
guarantor, could file a contingent claim against the estate of the principal debtors if the latter should die,
there is absolutely no reason why it could not file such a claim against the estate of Hemady, since
Hemady is a solidary co-debtor of his principals. What the Luzon Surety Co. may claim from the estate
of a principal debtor it may equally claim from the estate of Hemady, since, in view of the existing
solidarity, the latter does not even enjoy the benefit of exhaustion of the assets of the principal debtor.
The foregoing ruling is of course without prejudice to the remedies of the administratrix against the
principal debtors under Articles 2071 and 2067 of the New Civil Code.
Our conclusion is that the solidary guarantor’s liability is not extinguished by his death, and that in such
event, the Luzon Surety Co., had the right to file against the estate a contingent claim for reimbursement.
It becomes unnecessary now to discuss the estate’s liability for premiums and stamp taxes, because
irrespective of the solution to this question, the Luzon Surety’s claim did state a cause of action, and its
dismissal was erroneous.
Wherefore, the order appealed from is reversed, and the records are ordered remanded to the court of
origin, with instructions to proceed in accordance with law. Costs against the Administratrix- Appellee.
So ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia and
Felix, JJ., concur.
3. Uson vs Del Rosario
G.R. No. L-4963             January 29, 1953
MARIA USON, plaintiff-appellee, vs. MARIA DEL ROSARIO, CONCEPCION NEBREDA,
CONRADO NEBREDA, DOMINADOR NEBREDA, AND FAUSTINO NEBREDA,
Jr., defendants-appellants.
BAUTISTA ANGELO, J.:
This is an action for recovery of the ownership and possession of five (5) parcels of land situated in the
Municipality of Labrador, Province of Pangasinan, filed by Maria Uson against Maria del Rosario and
her four children named Concepcion, Conrado, Dominador, and Faustino, surnamed Nebreda, who are
all of minor age, before the Court of First Instance of Pangasinan.
Maria Uson was the lawful wife of Faustino Nebreda who upon his death in 1945 left the lands involved
in this litigation. Faustino Nebreda left no other heir except his widow Maria Uson. However, plaintiff
claims that when Faustino Nebreda died in 1945, his common-law wife Maria del Rosario took
possession illegally of said lands thus depriving her of their possession and enjoyment.
Defendants in their answer set up as special defense that on February 21, 1931, Maria Uson and her
husband, the late Faustino Nebreda, executed a public document whereby they agreed to separate as
husband and wife and, in consideration of their separation, Maria Uson was given a parcel of land by
way of alimony and in return she renounced her right to inherit any other property that may be left by
her husband upon his death (Exhibit 1).
After trial, at which both parties presented their respective evidence, the court rendered decision
ordering the defendants to restore to the plaintiff the ownership and possession of the lands in dispute
without special pronouncement as to costs. Defendants interposed the present appeal.
There is no dispute that Maria Uson, plaintiff-appellee, is the lawful wife of Faustino Nebreda, former
owner of the five parcels of lands litigated in the present case. There is likewise no dispute that Maria
del Rosario, one of the defendants-appellants, was merely a common-law wife of the late Faustino
Nebreda with whom she had four illegitimate children, her now co-defendants. It likewise appears that
Faustino Nebreda died in 1945 much prior to the effectivity of the new Civil Code. With this
background, it is evident that when Faustino Nebreda died in 1945 the five parcels of land he was seized
of at the time passed from the moment of his death to his only heir, his widow Maria Uson (Article 657,
old Civil Code).As this Court aptly said, "The property belongs to the heirs at the moment of the death
of the ancestor as completely as if the ancestor had executed and delivered to them a deed for the same
before his death" (Ilustre vs. Alaras Frondosa, 17 Phil., 321). From that moment, therefore, the rights of
inheritance of Maria Uson over the lands in question became vested.
The claim of the defendants that Maria Uson had relinquished her right over the lands in question
because she expressly renounced to inherit any future property that her husband may acquire and leave
upon his death in the deed of separation they had entered into on February 21, 1931, cannot be
entertained for the simple reason that future inheritance cannot be the subject of a contract nor can it be
renounced (1 Manresa, 123, sixth edition; Tolentino on Civil Code, p. 12; Osorio vs. Osorio and
Ynchausti Steamship Co., 41 Phil., 531).
But defendants contend that, while it is true that the four minor defendants are illegitimate children of
the late Faustino Nebreda and under the old Civil Code are not entitled to any successional rights,
however, under the new Civil Code which became in force in June, 1950, they are given the status and
rights of natural children and are entitled to the successional rights which the law accords to the latter
(article 2264 and article 287, new Civil Code), and because these successional rights were declared for
the first time in the new code, they shall be given retroactive effect even though the event which gave
rise to them may have occurred under the prior legislation (Article 2253, new Civil Code).
There is no merit in this claim. Article 2253 above referred to provides indeed that rights which are
declared for the first time shall have retroactive effect even though the event which gave rise to them
may have occurred under the former legislation, but this is so only when the new rights do not prejudice
any vested or acquired right of the same origin. Thus, said article provides that "if a right should be
declared for the first time in this Code, it shall be effective at once, even though the act or event which
gives rise thereto may have been done or may have occurred under the prior legislation, provided said
new right does not prejudice or impair any vested or acquired right, of the same origin." As already
stated in the early part of this decision, the right of ownership of Maria Uson over the lands in question
became vested in 1945 upon the death of her late husband and this is so because of the imperative
provision of the law which commands that the rights to succession are transmitted from the moment of
death (Article 657, old Civil Code). The new right recognized by the new Civil Code in favor of the
illegitimate children of the deceased cannot, therefore, be asserted to the impairment of the vested right
of Maria Uson over the lands in dispute.
As regards the claim that Maria Uson, while her deceased husband was lying in state, in a gesture of pity
or compassion, agreed to assign the lands in question to the minor children for the reason that they were
acquired while the deceased was living with their mother and Maria Uson wanted to assuage somewhat
the wrong she has done to them, this much can be said; apart from the fact that this claim is disputed, we
are of the opinion that said assignment, if any, partakes of the nature of a donation of real property,
inasmuch as it involves no material consideration, and in order that it may be valid it shall be made in a
public document and must be accepted either in the same document or in a separate one (Article 633, old
Civil Code). Inasmuch as this essential formality has not been followed, it results that the alleged
assignment or donation has no valid effect.
WHEREFORE, the decision appealed from is affirmed, without costs.
Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Montemayor, Reyes, Jugo and Labrador, JJ., concur.
4. De Borja vs Vda De Borja
G.R. No. L-28040 August 18, 1972
TESTATE ESTATE OF JOSEFA TANGCO, JOSE DE BORJA, administrator-appellee; JOSE
DE BORJA, as administrator, CAYETANO DE BORJA, MATILDE DE BORJA and
CRISANTO DE BORJA (deceased) as Children of Josefa Tangco, appellees, 
vs.
TASIANA VDA. DE DE BORJA, Special Administratrix of the Testate Estate of Francisco de
Borja, appellant. .
G.R. No L-28568 August 18, 1972
TESTATE ESTATE OF THE LATE FRANCISCO DE BORJA, TASIANA O. VDA. DE DE
BORJA, special Administratrix appellee,  estate of his mother, Josefa Tangco. While a widower Francisco de Borja allegedly took unto himself a
vs.
JOSE DE BORJA, oppositor-appellant.
G.R. No. L-28611 August 18, 1972
TASIANA 0. VDA. DE BORJA, as Administratrix of the Testate Estate of the late Francisco de
Borja, plaintiff-appellee,  conditions of the compromise agreement are as follows:
vs. JOSE DE BORJA, as Administrator of the Testate Estate of the late Josefa Tangco, defendant-
appellant.
REYES, J.B.L., J.:p
Of these cases, the first, numbered L-28040 is an appeal by Tasiana Ongsingco Vda. de de Borja, special
administratrix of the testate estate of Francisco de Borja, 1 from the approval of a compromise agreement
by the Court of First Instance of Rizal, Branch I, in its Special Proceeding No. R-7866, entitled, "Testate
Estate of Josefa Tangco, Jose de Borja, Administrator".
Case No. L-28568 is an appeal by administrator Jose Borja from the disapproval of the same
compromise agreement by the Court of First Instance of Nueva Ecija, Branch II, in its Special
Proceeding No. 832, entitled, "Testate Estate of Francisco de Borja, Tasiana O. Vda. de de Borja,
Special Administratrix".
And Case No. L-28611 is an appeal by administrator Jose de Borja from the decision of the Court of
First Instance of Rizal, Branch X, in its Civil Case No. 7452, declaring the Hacienda Jalajala Poblacion,
which is the main object of the aforesaid compromise agreement, as the separate and exclusive property
of the late Francisco de Borja and not a conjugal asset of the community with his first wife, Josefa
Tangco, and that said hacienda pertains exclusively to his testate estate, which is under administrator in
Special Proceeding No. 832 of the Court of First Instance of Nueva Ecija, Branch II.
It is uncontested that Francisco de Borja, upon the death of his wife Josefa Tangco on 6 October 1940,
filed a petition for the probate of her will which was docketed as Special Proceeding No. R-7866 of the
Court of First Instance of Rizal, Branch I. The will was probated on 2 April 1941. In 1946, Francisco de
Borja was appointed executor and administrator: in 1952, their son, Jose de Borja, was appointed co-
administrator. When Francisco died, on 14 April 1954, Jose became the sole administrator of the testate
second wife, Tasiana Ongsingco. Upon Francisco's death, Tasiana instituted testate proceedings in the
Court of First Instance of Nueva Ecija, where, in 1955, she was appointed special administratrix. The
validity of Tasiana's marriage to Francisco was questioned in said proceeding.
The relationship between the children of the first marriage and Tasiana Ongsingco has been plagued
with several court suits and counter-suits; including the three cases at bar, some eighteen (18) cases
remain pending determination in the courts. The testate estate of Josefa Tangco alone has been unsettled
for more than a quarter of a century. In order to put an end to all these litigations, a compromise
agreement was entered into on 12 October 1963,2 by and between "[T]he heir and son of Francisco de
Borja by his first marriage, namely, Jose de Borja personally and as administrator of the Testate Estate
of Josefa Tangco," and "[T]he heir and surviving spouse of Francisco de Borja by his second marriage,
Tasiana Ongsingco Vda. de Borja, assisted by her lawyer, Atty. Luis Panaguiton Jr." The terms and
AGREEMENT
THIS AGREEMENT made and entered into by and between
The heir and son of Francisco de Borja by his first marriage, namely, Jose de Borja
personally and as administrator of the Testate Estate of Josefa Tangco,
AND
The heir and surviving spouse of Francisco de Borja by his second marriage,
Tasiana Ongsingco Vda. de Borja, assisted by her lawyer, Atty. Luis Panaguiton Jr.
WITNESSETH
THAT it is the mutual desire of all the parties herein terminate and settle, with
finality, the various court litigations, controversies, claims, counterclaims, etc.,
between them in connection with the administration, settlement, partition,
adjudication and distribution of the assets as well as liabilities of the estates of
Francisco de Borja and Josefa Tangco, first spouse of Francisco de Borja.
THAT with this end in view, the parties herein have agreed voluntarily and without
any reservations to enter into and execute this agreement under the following terms
and conditions:
1. That the parties agree to sell the Poblacion portion of the Jalajala properties
situated in Jalajala, Rizal, presently under administration in the Testate Estate of
Josefa Tangco (Sp. Proc. No. 7866, Rizal), more specifically described as follows:
Linda al Norte con el Rio Puwang que la separa de la
jurisdiccion del Municipio de Pililla de la Provincia de Rizal, y
con el pico del Monte Zambrano; al Oeste con Laguna de Bay;
por el Sur con los herederos de Marcelo de Borja; y por el Este
con los terrenos de la Familia Maronilla
with a segregated area of approximately 1,313 hectares at the amount of P0.30 per
square meter.
2. That Jose de Borja agrees and obligates himself to pay Tasiana Ongsingco Vda.
de de Borja the total amount of Eight Hundred Thousand Pesos (P800,000)
Philippine Currency, in cash, which represent P200,000 as his share in the payment
and P600,000 as pro-rata shares of the heirs Crisanto, Cayetano and Matilde, all
surnamed de Borja and this shall be considered as full and complete payment and
settlement of her hereditary share in the estate of the late Francisco de Borja as well
as the estate of Josefa Tangco, Sp. Proc. No. 832-Nueva Ecija and Sp. Proc. No.
7866-Rizal, respectively, and to any properties bequeathed or devised in her favor
by the late Francisco de Borja by Last Will and Testament or by Donation Inter
Vivos or Mortis Causa or purportedly conveyed to her for consideration or
otherwise. The funds for this payment shall be taken from and shall depend upon the
receipt of full payment of the proceeds of the sale of Jalajala, "Poblacion."
3. That Tasiana Ongsingco Vda. de de Borja hereby assumes payment of that
particular obligation incurred by the late Francisco de Borja in favor of the
Rehabilitation Finance Corporation, now Development Bank of the Philippines,
amounting to approximately P30,000.00 and also assumes payment of her 1/5 share
of the Estate and Inheritance taxes on the Estate of the late Francisco de Borja or the
sum of P3,500.00, more or less, which shall be deducted by the buyer of Jalajala,
"Poblacion" from the payment to be made to Tasiana Ongsingco Vda. de Borja
under paragraph 2 of this Agreement and paid directly to the Development Bank of
the Philippines and the heirs-children of Francisco de Borja.
4. Thereafter, the buyer of Jalajala "Poblacion" is hereby authorized to pay directly
to Tasiana Ongsingco Vda. de de Borja the balance of the payment due her under
paragraph 2 of this Agreement (approximately P766,500.00) and issue in the name
of Tasiana Ongsingco Vda. de de Borja, corresponding certified checks/treasury
warrants, who, in turn, will issue the corresponding receipt to Jose de Borja.
5. In consideration of above payment to Tasiana Ongsingco Vda. de de Borja, Jose
de Borja personally and as administrator of the Testate Estate of Josefa Tangco, and
Tasiana Ongsingco Vda. de de Borja, for themselves and for their heirs, successors,
executors, administrators, and assigns, hereby forever mutually renounce, withdraw,
waive, remise, release and discharge any and all manner of action or actions, cause
or causes of action, suits, debts, sum or sums of money, accounts, damages, claims
and demands whatsoever, in law or in equity, which they ever had, or now have or
may have against each other, more specifically Sp. Proceedings Nos. 7866 and 1955,
CFI-Rizal, and Sp. Proc. No. 832-Nueva Ecija, Civil Case No. 3033, CFI Nueva
Ecija and Civil Case No. 7452-CFI, Rizal, as well as the case filed against Manuel
Quijal for perjury with the Provincial Fiscal of Rizal, the intention being to
completely, absolutely and finally release each other, their heirs, successors, and
assigns, from any and all liability, arising wholly or partially, directly or indirectly,
from the administration, settlement, and distribution of the assets as well as
liabilities of the estates of Francisco de Borja and Josefa Tangco, first spouse of
Francisco de Borja, and lastly, Tasiana Ongsingco Vda. de de Borja expressly and
specifically renounce absolutely her rights as heir over any hereditary share in the
estate of Francisco de Borja.
6. That Tasiana Ongsingco Vda. de de Borja, upon receipt of the payment under
paragraph 4 hereof, shall deliver to the heir Jose de Borja all the papers, titles and
 documents belonging to Francisco de Borja which are in her possession and said heir
Jose de Borja shall issue in turn the corresponding receive thereof.
7. That this agreement shall take effect only upon the fulfillment of the sale of the
properties mentioned under paragraph 1 of this agreement and upon receipt of the
total and full payment of the proceeds of the sale of the Jalajala property
"Poblacion", otherwise, the non-fulfillment of the said sale will render this
instrument NULL AND VOID AND WITHOUT EFFECT THEREAFTER.
IN WITNESS WHEREOF, the parties hereto have her unto set their hands in the
City of Manila, Philippines, the 12th of October, 1963.
On 16 May 1966, Jose de Borja submitted for Court approval the agreement of 12 October 1963 to the
Court of First Instance of Rizal, in Special Proceeding No. R-7866; and again, on 8 August 1966, to the
Court of First Instance of Nueva Ecija, in Special Proceeding No. 832. Tasiana Ongsingco Vda. de de
Borja opposed in both instances. The Rizal court approved the compromise agreement, but the Nueva
Ecija court declared it void and unenforceable. Special administratrix Tasiana Ongsingco Vda. de de
Borja appealed the Rizal Court's order of approval (now Supreme Court G.R. case No. L-28040), while
administrator Jose de Borja appealed the order of disapproval (G.R. case No. L-28568) by the Court of
First Instance of Nueva Ecija.
The genuineness and due execution of the compromised agreement of 12 October 1963 is not disputed,
but its validity is, nevertheless, attacked by Tasiana Ongsingco on the ground that: (1) the heirs cannot
enter into such kind of agreement without first probating the will of Francisco de Borja; (2) that the
same involves a compromise on the validity of the marriage between Francisco de Borja and Tasiana
Ongsingco; and (3) that even if it were valid, it has ceased to have force and effect.
In assailing the validity of the agreement of 12 October 1963, Tasiana Ongsingco and the Probate Court
of Nueva Ecija rely on this Court's decision in Guevara vs. Guevara. 74 Phil. 479, wherein the Court's
majority held the view that the presentation of a will for probate is mandatory and that the settlement
and distribution of an estate on the basis of intestacy when the decedent left a will, is against the law and
public policy. It is likewise pointed out by appellant Tasiana Ongsingco that Section 1 of Rule 74 of the
Revised Rules explicitly conditions the validity of an extrajudicial settlement of a decedent's estate by
agreement between heirs, upon the facts that "(if) the decedent left no will and no debts, and the heirs are
all of age, or the minors are represented by their judicial and legal representatives ..." The will of
Francisco de Borja having been submitted to the Nueva Ecija Court and still pending probate when the
1963 agreement was made, those circumstances, it is argued, bar the validity of the agreement.
Upon the other hand, in claiming the validity of the compromise agreement, Jose de Borja stresses that
at the time it was entered into, on 12 October 1963, the governing provision was Section 1, Rule 74 of
the original Rules of Court of 1940, which allowed the extrajudicial settlement of the estate of a
deceased person regardless of whether he left a will or not. He also relies on the dissenting opinion of
Justice Moran, in Guevara vs. Guevara, 74 Phil. 479, wherein was expressed the view that if the parties
have already divided the estate in accordance with a decedent's will, the probate of the will is a useless
ceremony; and if they have divided the estate in a different manner, the probate of the will is worse than
useless.
The doctrine of Guevara vs. Guevara, ante, is not applicable to the case at bar. This is apparent from an
examination of the terms of the agreement between Jose de Borja and Tasiana Ongsingco. Paragraph 2
of said agreement specifically stipulates that the sum of P800,000 payable to Tasiana Ongsingco —
shall be considered as full — complete payment — settlement of her hereditary
share in the estate of the late Francisco de Borja as well as the estate of Josefa
Tangco, ... and to any properties bequeathed or devised in her favor by the late
Francisco de Borja by Last Will and Testament or by Donation Inter Vivos or Mortis
Causa or purportedly conveyed to her for consideration or otherwise.
This provision evidences beyond doubt that the ruling in the Guevara case is not applicable to the cases
at bar. There was here no attempt to settle or distribute the estate of Francisco de Borja among the heirs
thereto before the probate of his will. The clear object of the contract was merely the conveyance by
Tasiana Ongsingco of any and all her individual share and interest, actual or eventual in the estate of
Francisco de Borja and Josefa Tangco. There is no stipulation as to any other claimant, creditor or
legatee. And as a hereditary share in a decedent's estate is transmitted or vested immediately from the
moment of the death of such causante or predecessor in interest (Civil Code of the Philippines, Art.
777)3 there is no legal bar to a successor (with requisite contracting capacity) disposing of her or his
hereditary share immediately after such death, even if the actual extent of such share is not determined
until the subsequent liquidation of the estate.4 Of course, the effect of such alienation is to be deemed
limited to what is ultimately adjudicated to the vendor heir. However, the aleatory character of the
contract does not affect the validity of the transaction; neither does the coetaneous agreement that the
numerous litigations between the parties (the approving order of the Rizal Court enumerates fourteen of
them, Rec. App. pp. 79-82) are to be considered settled and should be dismissed, although such
stipulation, as noted by the Rizal Court, gives the contract the character of a compromise that the law
favors, for obvious reasons, if only because it serves to avoid a multiplicity of suits.
It is likewise worthy of note in this connection that as the surviving spouse of Francisco de Borja,
Tasiana Ongsingco was his compulsory heir under article 995 et seq. of the present Civil Code.
Wherefore, barring unworthiness or valid disinheritance, her successional interest existed independent of
Francisco de Borja's last will and testament and would exist even if such will were not probated at all.
Thus, the prerequisite of a previous probate of the will, as established in the Guevara and analogous
cases, can not apply to the case of Tasiana Ongsingco Vda. de de Borja.
Since the compromise contract Annex A was entered into by and between "Jose de Borja personally and
as administrator of the Testate Estate of Josefa Tangco" on the one hand, and on the other, "the heir and
surviving spouse of Francisco de Borja by his second marriage, Tasiana Ongsingco Vda. de de Borja", it
is clear that the transaction was binding on both in their individual capacities, upon the perfection of the
contract, even without previous authority of the Court to enter into the same. The only difference
between an extrajudicial compromise and one that is submitted and approved by the Court, is that the
latter can be enforced by execution proceedings. Art. 2037 of the Civil Code is explicit on the point:
8. Art. 2037. A compromise has upon the parties the effect and authority of res
judicata; but there shall be no execution except in compliance with a judicial
compromise.
It is argued by Tasiana Ongsingco that while the agreement Annex A expressed no
definite period for its performance, the same was intended to have a resolutory
period of 60 days for its effectiveness. In support of such contention, it is averred
that such a limit was expressly stipulated in an agreement in similar terms entered
into by said Ongsingco with the brothers and sister of Jose de Borja, to wit, Crisanto,
Matilde and Cayetano, all surnamed de Borja, except that the consideration was
fixed at P600,000 (Opposition, Annex/Rec. of Appeal, L-28040, pp. 39- 46) and
which contained the following clause:
III. That this agreement shall take effect only upon the consummation of the sale of
the property mentioned herein and upon receipt of the total and full payment of the
proceeds of the sale by the herein owner heirs-children of Francisco de Borja,
namely, Crisanto, Cayetano and Matilde, all surnamed de Borja; Provided that if no
sale of the said property mentioned herein is consummated, or the non-receipt of the
purchase price thereof by the said owners within the period of sixty (60) days from
the date hereof, this agreement will become null and void and of no further effect.
Ongsingco's argument loses validity when it is considered that Jose de Borja was not a party to this
particular contract (Annex 1), and that the same appears not to have been finalized, since it bears no
date, the day being left blank "this — day of October 1963"; and while signed by the parties, it was not
notarized, although plainly intended to be so done, since it carries a proposed notarial ratification clause.
Furthermore, the compromise contract with Jose de Borja (Annex A), provides in its par. 2 heretofore
transcribed that of the total consideration of P800, 000 to be paid to Ongsingco, P600,000 represent the
"prorata share of the heirs Crisanto, Cayetano and Matilde all surnamed de Borja" which corresponds to
the consideration of P600,000 recited in Annex 1, and that circumstance is proof that the duly notarized
contract entered into wit Jose de Borja under date 12 October 1963 (Annex A), was designed to absorb
and supersede the separate unformalize agreement with the other three Borja heirs. Hence, the 60 days
resolutory term in the contract with the latter (Annex 1) not being repeated in Annex A, can not apply to
the formal compromise with Jose de Borja. It is moreover manifest that the stipulation that the sale of
the Hacienda de Jalajala was to be made within sixty days from the date of the agreement with Jose de
Borja's co-heirs (Annex 1) was plainly omitted in Annex A as improper and ineffective, since the
Hacienda de Jalajala (Poblacion) that was to be sold to raise the P800,000 to be paid to Ongsingco for
her share formed part of the estate of Francisco de Borja and could not be sold until authorized by the
Probate Court. The Court of First Instance of Rizal so understood it, and in approving the compromise it
fixed a term of 120 days counted from the finality of the order now under appeal, for the carrying out by
the parties for the terms of the contract.
This brings us to the plea that the Court of First Instance of Rizal had no jurisdiction to approve the
compromise with Jose de Borja (Annex A) because Tasiana Ongsingco was not an heir in the estate of
Josefa Tangco pending settlement in the Rizal Court, but she was an heir of Francisco de Borja, whose
estate was the object of Special Proceeding No. 832 of the Court of First Instance of Nueva Ecija. This
circumstance is irrelevant, since what was sold by Tasiana Ongsingco was only her eventual share in the
estate of her late husband, not the estate itself; and as already shown, that eventual share she owned from
the time of Francisco's death and the Court of Nueva Ecija could not bar her selling it. As owner of her
undivided hereditary share, Tasiana could dispose of it in favor of whomsoever she chose. Such
alienation is expressly recognized and provided for by article 1088 of the present Civil Code:
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the
partition, any or all of the co-heirs may be subrogated to the rights of the purchaser
by reimbursing him for the price of the sale, provided they do so within the period of
one month from the time they were notified in writing of the sale of the vendor.
If a sale of a hereditary right can be made to a stranger, then a fortiori sale thereof to a coheir could not
be forbidden.
Tasiana Ongsingco further argues that her contract with Jose de Borja (Annex "A") is void because it
amounts to a compromise as to her status and marriage with the late Francisco de Borja. The point is
without merit, for the very opening paragraph of the agreement with Jose de Borja (Annex "A")
describes her as "the heir and surviving spouse of Francisco de Borja by his second marriage, Tasiana
Ongsingco Vda. de de Borja", which is in itself definite admission of her civil status. There is nothing in
the text of the agreement that would show that this recognition of Ongsingco's status as the surviving
spouse of Francisco de Borja was only made in consideration of the cession of her hereditary rights.
It is finally charged by appellant Ongsingco, as well as by the Court of First Instance of Nueva Ecija in
its order of 21 September 1964, in Special Proceedings No. 832 (Amended Record on Appeal in L-
28568, page 157), that the compromise agreement of 13 October 1963 (Annex "A") had been
abandoned, as shown by the fact that, after its execution, the Court of First Instance of Nueva Ecija, in
its order of 21 September 1964, had declared that "no amicable settlement had been arrived at by the
parties", and that Jose de Borja himself, in a motion of 17 June 1964, had stated that the proposed
amicable settlement "had failed to materialize".
It is difficult to believe, however, that the amicable settlement referred to in the order and motion above-
mentioned was the compromise agreement of 13 October 1963, which already had been formally signed
and executed by the parties and duly notarized. What the record discloses is that some time after its
formalization, Ongsingco had unilaterally attempted to back out from the compromise agreement,
pleading various reasons restated in the opposition to the Court's approval of Annex "A" (Record on
Appeal, L-20840, page 23): that the same was invalid because of the lapse of the allegedly intended
resolutory period of 60 days and because the contract was not preceded by the probate of Francisco de
Borja's will, as required by this Court's Guevarra vs. Guevara ruling; that Annex "A" involved a
compromise affecting Ongsingco's status as wife and widow of Francisco de Borja, etc., all of which
objections have been already discussed. It was natural that in view of the widow's attitude, Jose de Borja
should attempt to reach a new settlement or novatory agreement before seeking judicial sanction and
enforcement of Annex "A", since the latter step might ultimately entail a longer delay in attaining final
remedy. That the attempt to reach another settlement failed is apparent from the letter of Ongsingco's
counsel to Jose de Borja quoted in pages 35-36 of the brief for appellant Ongsingco in G.R. No. 28040;
and it is more than probable that the order of 21 September 1964 and the motion of 17 June 1964
referred to the failure of the parties' quest for a more satisfactory compromise. But the inability to reach
a novatory accord can not invalidate the original compromise (Annex "A") and justifies the act of Jose
de Borja in finally seeking a court order for its approval and enforcement from the Court of First
Instance of Rizal, which, as heretofore described, decreed that the agreement be ultimately performed
within 120 days from the finality of the order, now under appeal.
We conclude that in so doing, the Rizal court acted in accordance with law, and, therefore, its order
should be upheld, while the contrary resolution of the Court of First Instance of Nueva Ecija should be,
and is, reversed.
In her brief, Tasiana Ongsingco also pleads that the time elapsed in the appeal has affected her
unfavorably, in that while the purchasing power of the agreed price of P800,000 has diminished, the
value of the Jalajala property has increased. But the fact is that her delay in receiving the payment of the
agreed price for her hereditary interest was primarily due to her attempts to nullify the agreement
(Annex "A") she had formally entered into with the advice of her counsel, Attorney Panaguiton. And as
to the devaluation de facto of our currency, what We said in Dizon Rivera vs. Dizon, L-24561, 30 June
1970, 33 SCRA 554, that "estates would never be settled if there were to be a revaluation with every
subsequent fluctuation in the values of currency and properties of the estate", is particularly opposite in
the present case.
Coming now to Case G.R. No. L-28611, the issue is whether the Hacienda de Jalajala (Poblacion),
concededly acquired by Francisco de Borja during his marriage to his first wife, Josefa Tangco, is the
husband's private property (as contended by his second spouse, Tasiana Ongsingco), or whether it forms
part of the conjugal (ganancial) partnership with Josefa Tangco. The Court of First Instance of Rizal
(Judge Herminio Mariano, presiding) declared that there was adequate evidence to overcome the
presumption in favor of its conjugal character established by Article 160 of the Civil Code.
We are of the opinion that this question as between Tasiana Ongsingco and Jose de Borja has become
moot and academic, in view of the conclusion reached by this Court in the two preceding cases (G.R.
No. L-28568), upholding as valid the cession of Tasiana Ongsingco's eventual share in the estate of her
late husband, Francisco de Borja, for the sum of P800,000 with the accompanying reciprocal quit-claims
between the parties. But as the question may affect the rights of possible creditors and legatees, its
resolution is still imperative.
It is undisputed that the Hacienda Jalajala, of around 4,363 hectares, had been originally acquired jointly
by Francisco de Borja, Bernardo de Borja and Marcelo de Borja and their title thereto was duly
registered in their names as co-owners in Land Registration Case No. 528 of the province of Rizal,
G.L.R.O. Rec. No. 26403 (De Barjo vs. Jugo, 54 Phil. 465). Subsequently, in 1931, the Hacienda was
partitioned among the co-owners: the Punta section went to Marcelo de Borja; the Bagombong section to
Bernardo de Borja, and the part in Jalajala proper (Poblacion) corresponded to Francisco de Borja (V.
De Borja vs. De Borja 101 Phil. 911, 932).
The lot allotted to Francisco was described as —
Una Parcela de terreno en Poblacion, Jalajala: N. Puang River; E. Hermogena
Romero; S. Heirs of Marcelo de Borja O. Laguna de Bay; containing an area of
13,488,870 sq. m. more or less, assessed at P297,410. (Record on Appeal, pages 7
and 105)
On 20 November 1962, Tasiana O. Vda. de Borja, as Administratrix of the Testate Estate of Francisco
de Borja, instituted a complaint in the Court of First Instance of Rizal (Civil Case No. 7452) against Jose
de Borja, in his capacity as Administrator of Josefa Tangco (Francisco de Borja's first wife), seeking to
have the Hacienda above described declared exclusive private property of Francisco, while in his answer
defendant (now appellant) Jose de Borja claimed that it was conjugal property of his parents (Francisco
de Borja and Josefa Tangco), conformably to the presumption established by Article 160 of the
Philippine Civil Code (reproducing Article 1407 of the Civil Code of 1889), to the effect that:
Art. 160. All property of the marriage is presumed to belong to the conjugal
partnership, unless it be proved that it pertains exclusively to the husband or to the
wife.
Defendant Jose de Borja further counterclaimed for damages, compensatory, moral and exemplary, as
well as for attorney's fees.
After trial, the Court of First Instance of Rizal, per Judge Herminio Mariano, held that the plaintiff had
adduced sufficient evidence to rebut the presumption, and declared the Hacienda de Jalajala (Poblacion)
to be the exclusive private property of the late Francisco de Borja, and his Administratrix, Tasiana
Ongsingco Vda. de Borja, to be entitled to its possession. Defendant Jose de Borja then appealed to this
Court.
The evidence reveals, and the appealed order admits, that the character of the Hacienda in question as
owned by the conjugal partnership De Borja-Tangco was solemnly admitted by the late Francisco de
Borja no less than two times: first, in the Reamended Inventory that, as executor of the estate of his
deceased wife Josefa Tangco, he filed in the Special Proceedings No. 7866 of the Court of First Instance
of Rizal on 23 July 1953 (Exhibit "2"); and again, in the Reamended Accounting of the same date, also
filed in the proceedings aforesaid (Exhibit "7"). Similarly, the plaintiff Tasiana O. Vda. de Borja,
herself, as oppositor in the Estate of Josefa Tangco, submitted therein an inventory dated 7 September
1954 (Exhibit "3") listing the Jalajala property among the "Conjugal Properties of the Spouses Francisco
de Borja and Josefa Tangco". And once more, Tasiana Ongsingco, as administratrix of the Estate of
Francisco de Borja, in Special Proceedings No. 832 of the Court of First Instance of Nueva Ecija,
submitted therein in December, 1955, an inventory wherein she listed the Jalajala Hacienda under the
heading "Conjugal Property of the Deceased Spouses Francisco de Borja and Josefa Tangco, which are
in the possession of the Administrator of the Testate Estate of the Deceased Josefa Tangco in Special
Proceedings No. 7866 of the Court of First Instance of Rizal" (Exhibit "4").
Notwithstanding the four statements aforesaid, and the fact that they are plain admissions against interest
made by both Francisco de Borja and the Administratrix of his estate, in the course of judicial
proceedings in the Rizal and Nueva Ecija Courts, supporting the legal presumption in favor of the
conjugal community, the Court below declared that the Hacienda de Jalajala (Poblacion) was not
conjugal property, but the private exclusive property of the late Francisco de Borja. It did so on the
strength of the following evidences: (a) the sworn statement by Francis de Borja on 6 August 1951
(Exhibit "F") that —
He tomado possession del pedazo de terreno ya delimitado (equivalente a 1/4 parte,
337 hectareas) adjunto a mi terreno personal y exclusivo (Poblacion de Jalajala,
Rizal).
and (b) the testimony of Gregorio de Borja, son of Bernardo de Borja, that the entire Hacienda had been
bought at a foreclosure sale for P40,100.00, of which amount P25,100 was contributed by Bernardo de
Borja and P15,000. by Marcelo de Borja; that upon receipt of a subsequent demand from the provincial
treasurer for realty taxes the sum of P17,000, Marcelo told his brother Bernardo that Francisco (son of
Marcelo) wanted also to be a co-owner, and upon Bernardo's assent to the proposal, Marcelo issue a
check for P17,000.00 to pay the back taxes and said that the amount would represent Francisco's
contribution in the purchase of the Hacienda. The witness further testified that —
Marcelo de Borja said that that money was entrusted to him by Francisco de
Borja when he was still a bachelor and which he derived from his business
transactions. (Hearing, 2 February 1965, t.s.n., pages 13-15) (Emphasis supplied)
The Court below, reasoning that not only Francisco's sworn statement overweighed the admissions in the
inventories relied upon by defendant-appellant Jose de Borja since probate courts can not finally
determine questions of ownership of inventoried property, but that the testimony of Gregorio de Borja
showed that Francisco de Borja acquired his share of the original Hacienda with his private funds, for
which reason that share can not be regarded as conjugal partnership property, but as exclusive property
of the buyer, pursuant to Article 1396(4) of Civil Code of 1889 and Article 148(4) of the Civil Code of
the Philippines.
The following shall be the exclusive property of each spouse:
xxx xxx xxx
(4) That which is purchased with exclusive money of the wife or of the husband.
We find the conclusions of the lower court to be untenable. In the first place, witness Gregorio de
Borja's testimony as to the source of the money paid by Francisco for his share was plain hearsay, hence
inadmissible and of no probative value, since he was merely repeating what Marcelo de Borja had told
him (Gregorio). There is no way of ascertaining the truth of the statement, since both Marcelo and
Francisco de Borja were already dead when Gregorio testified. In addition, the statement itself is
improbable, since there was no need or occasion for Marcelo de Borja to explain to Gregorio how and
when Francisco de Borja had earned the P17,000.00 entrusted to Marcelo. A ring of artificiality is
clearly discernible in this portion of Gregorio's testimony.
As to Francisco de Borja's affidavit, Exhibit "F", the quoted portion thereof (ante, page 14) does not
clearly demonstrate that the "mi terreno personal y exclusivo (Poblacion de Jalajala, Rizal) " refers
precisely to the Hacienda in question. The inventories (Exhibits 3 and 4) disclose that there were two
real properties in Jalajala owned by Francisco de Borja, one of 72.038 sq. m., assessed at P44,600, and a
much bigger one of 1,357.260.70 sq. m., which is evidently the Hacienda de Jalajala (Poblacion). To
which of these lands did the affidavit of Francisco de Borja (Exhibit "F") refer to? In addition,
Francisco's characterization of the land as "mi terreno personal y exclusivo" is plainly self-serving, and
not admissible in the absence of cross examination.
It may be true that the inventories relied upon by defendant-appellant (Exhibits "2", "3", "4" and "7") are
not conclusive on the conjugal character of the property in question; but as already noted, they are clear
admissions against the pecuniary interest of the declarants, Francisco de Borja and his executor-widow,
Tasiana Ongsingco, and as such of much greater probative weight than the self-serving statement of
Francisco (Exhibit "F"). Plainly, the legal presumption in favor of the conjugal character of the Hacienda
de Jalajala (Poblacion) now in dispute has not been rebutted but actually confirmed by proof. Hence, the
appealed order should be reversed and the Hacienda de Jalajala (Poblacion) declared property of the
conjugal partnership of Francisco de Borja and Josefa Tangco.
No error having been assigned against the ruling of the lower court that claims for damages should be
ventilated in the corresponding special proceedings for the settlement of the estates of the deceased, the
same requires no pro announcement from this Court.
IN VIEW OF THE FOREGOING, the appealed order of the Court of First Instance of Rizal in Case No.
L-28040 is hereby affirmed; while those involved in Cases Nos. L-28568 and L-28611 are reversed and
set aside. Costs against the appellant Tasiana Ongsingco Vda. de Borja in all three (3) cases.
Concepcion, C.J., Makalintal, Zaldivar, Castro, Teehankee, Barredo, Makasiar, Antonio and Esguerra,
JJ., concur.
Fernando, J., took no part.
5. Bonilla vs Barcena
G.R. No. L-41715 June 18, 1976
ROSALIO BONILLA (a minor) SALVACION BONILLA (a minor) and PONCIANO BONILLA
(their father) who represents the minors, petitioners,  that a person who is dead cannot sue in court, yet he can be substituted by his heirs in pursuing the case
vs. LEON BARCENA, MAXIMA ARIAS BALLENA, ESPERANZA BARCENA, MANUEL
BARCENA, AGUSTINA NERI, widow of JULIAN TAMAYO and HON. LEOPOLDO
GIRONELLA of the Court of First Instance of Abra, respondents.
MARTIN, J:
This is a petition for review 1 of the Order of the Court of First Instance of Abra in Civil Case No. 856,
entitled Fortunata Barcena vs. Leon Barcena, et al., denying the motions for reconsideration of its order
dismissing the complaint in the aforementioned case.
On March 31, 1975 Fortunata Barcena, mother of minors Rosalio Bonilla and Salvacion Bonilla and
wife of Ponciano Bonilla, instituted a civil action in the Court of First Instance of Abra, to quiet title
over certain parcels of land located in Abra.
On May 9, 1975, defendants filed a written motion to dismiss the complaint, but before the hearing of
the motion to dismiss, the counsel for the plaintiff moved to amend the complaint in order to include
certain allegations therein. The motion to amend the complaint was granted and on July 17, 1975,
plaintiffs filed their amended complaint.
On August 4, 1975, the defendants filed another motion to dismiss the complaint on the ground that
Fortunata Barcena is dead and, therefore, has no legal capacity to sue. Said motion to dismiss was heard
on August 14, 1975. In said hearing, counsel for the plaintiff confirmed the death of Fortunata Barcena,
and asked for substitution by her minor children and her husband, the petitioners herein; but the court
after the hearing immediately dismissed the case on the ground that a dead person cannot be a real party
in interest and has no legal personality to sue.
On August 19, 1975, counsel for the plaintiff received a copy of the order dismissing the complaint and
on August 23, 1975, he moved to set aside the order of the dismissal pursuant to Sections 16 and 17 of
Rule 3 of the Rules of Court. 2
On August 28, 1975, the court denied the motion for reconsideration filed by counsel for the plaintiff for
lack of merit. On September 1, 1975, counsel for deceased plaintiff filed a written manifestation praying
that the minors Rosalio Bonilla and Salvacion Bonilla be allowed to substitute their deceased mother,
but the court denied the counsel's prayer for lack of merit. From the order, counsel for the deceased
plaintiff filed a second motion for reconsideration of the order dismissing the complaint claiming that
the same is in violation of Sections 16 and 17 of Rule 3 of the Rules of Court but the same was denied.
Hence, this petition for review.
The Court reverses the respondent Court and sets aside its order dismissing the complaint in Civil Case
No. 856 and its orders denying the motion for reconsideration of said order of dismissal. While it is true
up to its completion. The records of this case show that the death of Fortunata Barcena took place on
July 9, 1975 while the complaint was filed on March 31, 1975. This means that when the complaint was
filed on March 31, 1975, Fortunata Barcena was still alive, and therefore, the court had acquired
jurisdiction over her person. If thereafter she died, the Rules of Court prescribes the procedure whereby
a party who died during the pendency of the proceeding can be substituted. Under Section 16, Rule 3 of
the Rules of Court "whenever a party to a pending case dies ... it shall be the duty of his attorney to
inform the court promptly of such death ... and to give the name and residence of his executor,
administrator, guardian or other legal representatives." This duty was complied with by the counsel for
the deceased plaintiff when he manifested before the respondent Court that Fortunata Barcena died on
July 9, 1975 and asked for the proper substitution of parties in the case. The respondent Court, however,
instead of allowing the substitution, dismissed the complaint on the ground that a dead person has no
legal personality to sue. This is a grave error. Article 777 of the Civil Code provides "that the rights to
the succession are transmitted from the moment of the death of the decedent." From the moment of the
death of the decedent, the heirs become the absolute owners of his property, subject to the rights and
obligations of the decedent, and they cannot be deprived of their rights thereto except by the methods
provided for by law. 3 The moment of death is the determining factor when the heirs acquire a definite
right to the inheritance whether such right be pure or contingent. 4 The right of the heirs to the property
of the deceased vests in them even before judicial declaration of their being heirs in the testate or
intestate proceedings. 5 When Fortunata Barcena, therefore, died her claim or right to the parcels of land
in litigation in Civil Case No. 856, was not extinguished by her death but was transmitted to her heirs
upon her death. Her heirs have thus acquired interest in the properties in litigation and became parties in
interest in the case. There is, therefore, no reason for the respondent Court not to allow their substitution
as parties in interest for the deceased plaintiff.
Under Section 17, Rule 3 of the Rules of Court "after a party dies and the claim is not thereby
extinguished, the court shall order, upon proper notice, the legal representative of the deceased to appear
and be substituted for the deceased, within such time as may be granted ... ." The question as to whether
an action survives or not depends on the nature of the action and the damage sued for. 6 In the causes of
action which survive the wrong complained affects primarily and principally property and property
rights, the injuries to the person being merely incidental, while in the causes of action which do not
survive the injury complained of is to the person, the property and rights of property affected being
incidental. 7 Following the foregoing criterion the claim of the deceased plaintiff which is an action to
quiet title over the parcels of land in litigation affects primarily and principally property and property
rights and therefore is one that survives even after her death. It is, therefore, the duty of the respondent
Court to order the legal representative of the deceased plaintiff to appear and to be substituted for her.
But what the respondent Court did, upon being informed by the counsel for the deceased plaintiff that
the latter was dead, was to dismiss the complaint. This should not have been done for under the same
Section 17, Rule 3 of the Rules of Court, it is even the duty of the court, if the legal representative fails
to appear, to order the opposing party to procure the appointment of a legal representative of the
deceased. In the instant case the respondent Court did not have to bother ordering the opposing party to
procure the appointment of a legal representative of the deceased because her counsel has not only asked
that the minor children be substituted for her but also suggested that their uncle be appointed as
guardian ad litem for them because their father is busy in Manila earning a living for the family. But the
respondent Court refused the request for substitution on the ground that the children were still minors
and cannot sue in court. This is another grave error because the respondent Court ought to have known
that under the same Section 17, Rule 3 of the Rules of Court, the court is directed to appoint a
guardian ad litem for the minor heirs. Precisely in the instant case, the counsel for the deceased plaintiff
has suggested to the respondent Court that the uncle of the minors be appointed to act as guardian ad
litem for them. Unquestionably, the respondent Court has gravely abused its discretion in not complying
with the clear provision of the Rules of Court in dismissing the complaint of the plaintiff in Civil Case
No. 856 and refusing the substitution of parties in the case.
IN VIEW OF THE FOREGOING, the order of the respondent Court dismissing the complaint in Civil
Case No. 856 of the Court of First Instance of Abra and the motions for reconsideration of the order of
dismissal of said complaint are set aside and the respondent Court is hereby directed to allow the
substitution of the minor children, who are the petitioners therein for the deceased plaintiff and to
appoint a qualified person as guardian ad litem for them. Without pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Esguerra and Muñoz Palma, JJ., concur.
Footnotes
1 Which this Court treats as special civil action as per its Resolution dated February
11, 1976.
2 Section 16. Duty of Attorney upon which death, incapacity or incompetency of
party. - Whenever a party to a pending case dies, becomes incapacitated or
incompetent, it shall be the duty of his attorney to inform the court promptly of such
death, incapacity or incompetency, and to give the name and residence of his
executor, administrator, guardian or other legal representative.
Section 17. Death of party.—After a party dies and the claim is not thereby
extinguished, the court shall order, upon proper notice, the legal representative of the
deceased to appear and to be substituted for deceased, within a period of thirty (30)
days, or within such time as may be granted. If the legal representative fails to
appear within said time, the court may order the opposing party to procure the
appointment of a legal representative of the within a time to be specified by the
court, and the representative shall immediately appear for and on behalf of the
interest of the deceased. The court charges involved in procuring such appointment,
if defrayed by the opposing party, may be recovered as costs. The heirs of the
deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator and the court may appoint guardian ad
litemfor the minor heirs.
6. Balus vs Balus
G.R. No. 168970               January 15, 2010
CELESTINO BALUS, Petitioner, 
vs. SATURNINO BALUS and LEONARDA BALUS VDA. DE CALUNOD, Respondents.
DECISION
PERALTA, J.:
Assailed in the present petition for review on certiorari under Rule 45 of the Rules of Court is the
Decision1 of the Court of Appeals (CA) dated May 31, 2005 in CA-G.R. CV No. 58041 which set aside
the February 7, 1997 Decision of the Regional Trial Court (RTC) of Lanao del Norte, Branch 4 in Civil
Case No. 3263.
The facts of the case are as follows:
Herein petitioner and respondents are the children of the spouses Rufo and Sebastiana Balus. Sebastiana
died on September 6, 1978, while Rufo died on July 6, 1984.
On January 3, 1979, Rufo mortgaged a parcel of land, which he owns, as security for a loan he obtained
from the Rural Bank of Maigo, Lanao del Norte (Bank). The said property was originally covered by
Original Certificate of Title No. P-439(788) and more particularly described as follows:
A parcel of land with all the improvements thereon, containing an area of 3.0740 hectares, more or less,
situated in the Barrio of Lagundang, Bunawan, Iligan City, and bounded as follows: Bounded on the
NE., along line 1-2, by Lot 5122, Csd-292; along line 2-12, by Dodiongan River; along line 12-13 by
Lot 4649, Csd-292; and along line 12-1, by Lot 4661, Csd-292. x x x 2
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 Sale3 was executed by the sheriff in favor of the Bank. The property was not redeemed
within the period allowed by law. More than two years after the auction, or on January 25, 1984, the
sheriff executed a Definite Deed of Sale4 in the Bank's favor. Thereafter, a new title was issued in the
name of the Bank.
On October 10, 1989, herein petitioner and respondents executed an Extrajudicial Settlement of
Estate5adjudicating 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.
Three years after the execution of the Extrajudicial Settlement, herein respondents bought the subject
property from the Bank. On October 12, 1992, a Deed of Sale of Registered Land 6 was executed by the
Bank in favor of respondents. Subsequently, Transfer Certificate of Title (TCT) No. T-39,484(a.f.) 7 was
issued in the name of respondents. Meanwhile, petitioner continued possession of the subject lot.
On June 27, 1995, respondents filed a Complaint8 for Recovery of Possession and Damages against
petitioner, contending that they had already informed petitioner of the fact that they were the new
owners of the disputed property, but the petitioner still refused to surrender possession of the same to
them. Respondents claimed that they had exhausted all remedies for the amicable settlement of the case,
but to no avail.
On February 7, 1997, the RTC rendered a Decision9 disposing as follows:
WHEREFORE, judgment is hereby rendered, ordering the plaintiffs to execute a Deed of Sale in favor
of the defendant, the one-third share of the property in question, presently possessed by him, and
described in the deed of partition, as follows:
A one-third portion of Transfer Certificate of Title No. T-39,484 (a.f.), formerly Original Certificate of
Title No. P-788, now in the name of Saturnino Balus and Leonarda B. Vda. de Calunod, situated at
Lagundang, Bunawan, Iligan City, bounded on the North by Lot 5122; East by shares of Saturnino Balus
and Leonarda Balus-Calunod; South by Lot 4649, Dodiongan River; West by Lot 4661, consisting of
10,246 square meters, including improvements thereon.
and dismissing all other claims of the parties.
The amount of ₱6,733.33 consigned by the defendant with the Clerk of Court is hereby ordered
delivered to the plaintiffs, as purchase price of the one-third portion of the land in question.
Plaintiffs are ordered to pay the costs.
SO ORDERED.10
The RTC held that the right of petitioner to purchase from the respondents his share in the disputed
property was recognized by the provisions of the Extrajudicial Settlement of Estate, which the parties
had executed before the respondents bought the subject lot from the Bank.
Aggrieved by the Decision of the RTC, herein respondents filed an appeal with the CA.
On May 31, 2005, the CA promulgated the presently assailed Decision, reversing and setting aside the
Decision of the RTC and ordering petitioner to immediately surrender possession of the subject property
to the respondents. The CA ruled that when petitioner and respondents did not redeem the subject
property within the redemption period and allowed the consolidation of ownership and the issuance of a
new title in the name of the Bank, their co-ownership was extinguished.
Hence, the instant petition raising a sole issue, to wit:
WHETHER OR NOT CO-OWNERSHIP AMONG THE PETITIONER AND THE RESPONDENTS
OVER THE PROPERTY PERSISTED/CONTINUED TO EXIST (EVEN AFTER THE TRANSFER
OF TITLE TO THE BANK) BY VIRTUE OF THE PARTIES' AGREEMENT PRIOR TO THE
REPURCHASE THEREOF BY THE RESPONDENTS; THUS, WARRANTING THE PETITIONER'S
ACT OF ENFORCING THE AGREEMENT BY REIMBURSING THE RESPONDENTS OF HIS
(PETITIONER'S) JUST SHARE OF THE REPURCHASE PRICE.11
The main issue raised by petitioner is whether co-ownership by him and respondents over the subject
property persisted even after the lot was purchased by the Bank and title thereto transferred to its name,
and even after it was eventually bought back by the respondents from the Bank.
Petitioner insists that despite respondents' full knowledge of the fact that the title over the disputed
property was already in the name of the Bank, they still proceeded to execute the subject Extrajudicial
Settlement, having in mind the intention of purchasing back the property together with petitioner and of
continuing their co-ownership thereof.
Petitioner posits that the subject Extrajudicial Settlement is, in and by itself, a contract between him and
respondents, because it contains a provision whereby the parties agreed to continue their co-ownership
of the subject property by "redeeming" or "repurchasing" the same from the Bank. This agreement,
petitioner contends, is the law between the parties and, as such, binds the respondents. As a result,
petitioner asserts that respondents' act of buying the disputed property from the Bank without notifying
him inures to his benefit as to give him the right to claim his rightful portion of the property, comprising
1/3 thereof, by reimbursing respondents the equivalent 1/3 of the sum they paid to the Bank.
The Court is not persuaded.
Petitioner and respondents are arguing on the wrong premise that, at the time of the execution of the
Extrajudicial Settlement, the subject property formed part of the estate of their deceased father to which
they may lay claim as his heirs.
At the outset, it bears to emphasize that there is no dispute with respect to the fact that the subject
property was exclusively owned by petitioner and respondents' father, Rufo, at the time that it was
mortgaged in 1979. This was stipulated by the parties during the hearing conducted by the trial court on
October 28, 1996.12 Evidence shows that a Definite Deed of Sale13 was issued in favor of the Bank on
January 25, 1984, after the period of redemption expired. There is neither any dispute that a new title
was issued in the Bank's name before Rufo died on July 6, 1984. Hence, there is no question that the
Bank acquired exclusive ownership of the contested lot during the lifetime of Rufo.
The rights to a person's succession are transmitted from the moment of his death. 14 In addition, 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. 15 In
the present case, since 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.
Petitioner and respondents, therefore, were wrong in assuming that they became co-owners of the
subject lot. Thus, any issue arising from the supposed right of petitioner as co-owner of the contested
parcel of land is negated by the fact that, in the eyes of the law, the disputed lot did not pass into the
hands of petitioner and respondents as compulsory heirs of Rufo at any given point in time.
The foregoing notwithstanding, the Court finds a necessity for a complete determination of the issues
raised in the instant case to look into petitioner's argument that the Extrajudicial Settlement is an
independent contract which gives him the right to enforce his right to claim a portion of the disputed lot
bought by respondents.1avvphi1
It is true that under Article 1315 of the Civil Code of the Philippines, contracts are perfected by mere
consent; and from that moment, the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which, according to their nature, may be in keeping
with good faith, usage and law.
Article 1306 of the same Code also provides that the contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided these are not contrary to law,
morals, good customs, public order or public policy.
In the present case, however, there is nothing in the subject Extrajudicial Settlement to indicate any
express stipulation for petitioner and respondents to continue with their supposed co-ownership of the
contested lot.
On the contrary, a plain reading of the provisions of the Extrajudicial Settlement would not, in any way,
support petitioner's contention that it was his and his sibling's intention to buy the subject property from
the Bank and continue what they believed to be co-ownership thereof. It is a cardinal rule in the
interpretation of contracts that the intention of the parties shall be accorded primordial consideration. 16 It
is the duty of the courts to place a practical and realistic construction upon it, giving due consideration to
the context in which it is negotiated and the purpose which it is intended to serve. 17 Such intention is
determined from the express terms of their agreement, as well as their contemporaneous and subsequent
acts.18 Absurd and illogical interpretations should also be avoided. 19
For petitioner to claim that the Extrajudicial Settlement is an agreement between him and his siblings to
continue what they thought was their ownership of the subject property, even after the same had been
bought by the Bank, is stretching the interpretation of the said Extrajudicial Settlement too far.
In the first place, as earlier discussed, there is no co-ownership to talk about and no property to partition,
as the disputed lot never formed part of the estate of their deceased father.
Moreover, petitioner's asseveration of his and respondents' intention of continuing with their supposed
co-ownership is negated by no less than his assertions in the present petition that on several occasions he
had the chance to purchase the subject property back, but he refused to do so. In fact, he claims that after
the Bank acquired the disputed lot, it offered to re-sell the same to him but he ignored such offer. How
then can petitioner now claim that it was also his intention to purchase the subject property from the
Bank, when he admitted that he refused the Bank's offer to re-sell the subject property to him?

In addition, it appears from the recitals in the Extrajudicial Settlement that, at the time of the execution
thereof, the parties were not yet aware that the subject property was already exclusively owned by the
Bank. Nonetheless, the lack of knowledge on the part of petitioner and respondents that the mortgage
was already foreclosed and title to the property was already transferred to the Bank does not give them
the right or the authority to unilaterally declare themselves as co-owners of the disputed property;
otherwise, the disposition of the case would be made to depend on the belief and conviction of the party-
litigants and not on the evidence adduced and the law and jurisprudence applicable thereto.

Furthermore, petitioner's contention that he and his siblings intended to continue their supposed co-
ownership of the subject property contradicts the provisions of the subject Extrajudicial Settlement
where they clearly manifested their intention of having the subject property divided or partitioned by
assigning to each of the petitioner and respondents a specific 1/3 portion of the same. Partition calls for
the segregation and conveyance of a determinate portion of the property owned in common. It seeks a
severance of the individual interests of each co-owner, vesting in each of them a sole estate in a specific
property and giving each one a right to enjoy his estate without supervision or interference from the
other.20 In other words, the purpose of partition is to put an end to co-ownership, 21 an objective which
negates petitioner's claims in the present case.

WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals, dated
May 31, 2005 in CA-G.R. CV No. 58041, is AFFIRMED.

SO ORDERED