G.R. No.

13910

September 17, 1919

SOCIEDAD
DE
LIZARRAGA
HERMANOS, plaintiffs-appellants,
vs.
FELICISIMA
ABADA,
ET
AL., defendantsappellants.
Charles C. Cohn for plaintiff and appellant.
Crossfield and O'Brien for defendants and
appellants.
MOIR, J.:
This case is before the court on appeal by plaintiffs
from a judgment of the Court of First Instance of
Occidental Negros, Honorable Norberto Romualdez,
judge.
For a better understanding of the facts the history of
the case is given.
Francisco Caponong died in October, 1906, owing
the plaintiffs a sum of money which was then less
than the amount allowed by the commissioners.
His widow, Felicisima Abada, was appointed
administratrix of the estate, commissioners to
appraise the estate and to pass on the claims
against the estate were duly appointed, and plaintiffs
presented their claim which was allowed by the

commissioners in the sum of P12,783.74. The

commissioner's report was dated in February, 1909.
The administratrix leased the hacienda [farm] known
as "Coronacion" to Hilario Zayco for a term of years,
but afterwards she married Vicente Alvarez, one of
the defendants, and the lease was transferred to
Alvarez by Zayco, October 2, 1908.
On the 11th of April, 1913, nearly seven years after
the death of Caponong, the plaintiffs herein filed a
suit in the Court of First Instance of Occidental
Negros against Felicisima Abada personally and as
administratrix of the estate of Francisco Caponong,
alleging that Francisco Caponong owed plaintiffs
P12,783.74, and that Felicisima Abada in her own
name and as administratrix, had been receiving from
the plaintiffs money and effects from 1908 to 1912
which money and effects were used by the
defendant in "the expense of cultivation and the
exploitation of the Hacienda 'Coronacion,' "and that
defendant had delivered to plaintiffs the sugar
produced until the last crop which she refused to
deliver to them. And that due to "los contratiempos
agricolas y a la poca produccion de la
hacienda [drought and poor crops of the farm],' and
after deducting for the sugar delivered, the account
of the defendant showed a balance in favor of
plaintiffs on the 27th of August, 1912, of P62,437.15;
that of this amount they were informed the defendant
recognized as due from the estate only "about

P14,000" which however had not been paid; that it

had been agreed by Francisco Caponong that the
"amounts" taken should draw interest at the rate of
12 per cent from the date of each, and that in case it
was necessary to bring suit P1,500 would be paid by
defendant to plaintiffs for their expenses and
attorney's fees, and they asked for judgment for
P62,437.15 with interest at 12 per cent and P1,500
for attorney's fee.
A copy of the account of the administratrix, dated
August 27, 1912, showing the same balance due
plaintiffs, seems to have been filed with that suit.
The defendant's answer in that case (No. 969, Neg.
Occi.) admits she owed P8,555.78 as administratrix,
and alleges that the balance was due by her
personally.
The guardian of the minor children of Francisco
Caponong asked permission of the court to intervene
in that suit, and this being granted, he denied the
claim under oath, and alleged that the estate of
Francisco Caponong did not owe plaintiffs anything.
On the 25th of August, 1914, the parties, including
the guardian of the minors, presented a motion in
court stating that they had made an amicable
settlement of the litigation, and prayed the court to
dismiss the action, which was done.

The record shows that the plaintiffs in that suit had a

motion pending in the intestate proceedings of
Francisco Caponong, petitioning the court to the
same effect as the complaint in suit No. 969.
The settlement agreed upon was, briefly, that the
defendants, including the guardian of the minor
children, "recognized that the deceased Francisco
Caponong's estate was indebted to the plaintiffs,
according to a liquidation of the accounts on the 30th
of June, 1913, in the sum of P68,611.01, which was
to be paid with 10 per cent interest in seven equal
annual installments;" and to secure this debt, the
defendants agreed to give plaintiffs a first mortgage
on all the property of Francisco Caponong, except
the growing sugar cane, and on all the property
belonging exclusively to Felicisima Abada, and the
defendants agreed to secure judicial approval of the
settlement. The defendants also agreed to mortgage
the carabaos then on the hacienda to plaintiffs.
The contract is dated the 27th of April, 1914.
The mortgage of the hacienda was duly executed by
Felicisima Abada for herself and as administratrix,
and the guardian of the children and Vicente Alvarez,
the husband of Felicisima Abada, signed the
mortgage which is also dated the 27th of April, 1914.
The carabaos were not mortgaged.

The compromise was approved by the court as well

as the mortgage.
The mortgage given was not recorded in the registry
of property up to time of the institution of this suit,
June 24, 1916.
Coming now to the present action, the plaintiffs
allege in the complaint in this suit, the former suit
and its settlement with judicial approval; the amount
due thereunder; i. e., P68,611.01; that defendants
had let two installments go by without paying
anything; that the amount due them with accrued
interest was P90,383.49; that besides the property
mortgaged, as per Exhibit B, another parcel of land
was mortgaged, and that defendants promised to
mortgage
the
carabaos
on
the
hacienda 'Coronacion," and that this promise was
one of the motives and considerations including the
plaintiffs to accept the compromise agreement, but
that defendants refused to sign the agreement
mortgaging the carabaos with the object and intent of
reducing the security of plaintiffs; that defendants
were about to transfer their property not mortgaged,
and they prayed for an attachment on property of
defendants not to exceed P20,000 in value, and for
judgment for P90, 383.49 with interest, and that if
this amount should not be paid that the mortgaged
property be sold, and if not sufficient to pay the
debts, that the property levied on under the
attachment be sold.

The court granted the attachment order the 24th of

July, 1916, and the provincial sheriff attached one
parcel of land, the growing crops, certain products of
the soil, and various animals.
On the 16th of February, 1917, the plaintiffs filed a
motion in court alleging that the property mortgaged
to secure their debt was not sufficient to secure the
debt; that defendants, with the intention of
prejudicing the interest of the plaintiffs, were
negligent in the conservation and care of the
property, and they asked the court to appoint a
receiver for the property that was mortgaged. The
court granted this motion on the 20th of February,
1917, as to all the property attached, and on the 26th
of February, extended the receivership to all
the mortgaged property.
The receiver took charge of the property and the
defendants were ousted from the house they had
beenoccupying on the premises.
The defendants, Felicisima Abada, administratrix,
and Januario Granada, the guardian, filed an
amended answer in which they allege their
representative capacity; that the claim of the plaintiffs
against the intestate proceedings of Francisco
Caponong had been allowed in the sum of
P12,783.74 by the commissioners; that the property
belonged to the children of the deceased; that the
only interest of Felicisima Abada personally was her

usufructuary interest in one-sixth of the property; that

all the property was in custodia legis, and could not
lawfully be attached; that the administratrix had not
contracted any other obligation, and that, if any
existed, it was the personal debt of her present
husband, Vicente Alvarez; that Exhibits A and B, (the
compromise agreement and the mortgage executed
in conformity therewith) made a part of the
complaint, were obtained through fraud and false
representation; that the approval of the court was
obtained through fraud and deceit, and was illegal
and of no value; that defendants have never
attempted to sell or conceal their property, and
prayed the court to declare Exhibits A and B null and
void; and that the attachment was malicious and
illegal, and they presented a counterclaim based on
the wrongful issuance, on false affidavits of the
attachment, laying their damages in the sum of
P89,960 for which they asked judgment. And a
second counterclaim was presented based on the
unwarranted appointment of a receiver for property
already in custody of the court, through the
administratrix and they alleged their damages in this
count in the sum of P28,120.
The Honorable Norberto Romualdez, judge, in his
decision largely sustained defendants' claim, and
declared that plaintiffs should pay as damages
For improperly causing the appointment of a

receiver
For the attachment of carabaos, etc

500.00

For damages to the sugar because of the 4,462.50

attachment and the appointment of a receiver

For damages to land by reason of being left to 5,000.00

grow up in bushes
For damages to palay crop

2,800.00

13,262.5
A further sum of P1,000 damages was awarded to
Felicisima Abada for having been put out of her
house when the receiver was appointed.
The attachment was dissolved and the receiver
discharged, and he was ordered to return the
property to defendants.
Judgment was given for the plaintiffs to recover from
defendant administratrix the sum of P8,555.78 with
interest which, added to the principal, brought the
amount to P11,392.99 with 10 per cent interest on
that sum till paid.
A personal judgment was also given plaintiffs against
the defendants Abada and Alvarez for P79,970.21.

The plaintiffs' claim against the guardian of the

children was dismissed.

appointment of a receiver for the properties

which are the subject-matter of this action.

From this judgment Felicisima Abada appealed

personally and as administratrix alleging that the trial
court should have granted greater damages. The
questions presented by her appeal will be sufficiently
treated in the appeal of plaintiffs.

10. The court erred in finding that the

defendants, or either or any of them, were
damaged in the sum of P5,000 by reason of
injury to the sugar lands which are the subjectmatter of this action.

The plaintiffs allege nineteen different errors of the

trial court. It seems that all the questions are
involved in errors Nos. 1, 2, 4, 5, 10, 12, 13 and 18,
which are as follows:

12. The court erred in declining and refusing to

foreclose the mortgages which are the subjectmatter of the present action.

1. The court erred in holding that the obligation

set forth in Exhibits A and B should be
understood as limited to the sum of P8,555.78,
instead of the sum of P68, 611.01 therein
stated.
2. The court erred in reducing the amount of
the mortgage, Exhibit B, from P68,611.01 to
P8,555,78.
4. The court erred in finding that just and
sufficient grounds did not exist for the
attachment of the properties which are the
subject-matter of this action.
5. The court erred in finding that just and
sufficient grounds did not exist for the

13. The court erred in reducing the

indebtedness of the Estate of Francisco
Caponong from P90,383.49 to P11,392.99.
18. The court erred in absolving from the
complaint herein the defendant Januario
Granada as guardian of the minors, Juan
Buenaventura, Jose, Nicanor and Carlos
Caponong y Abada.
As to the first error. Exhibit A was the compromise
agreement made in action No. 969, Lizarraga
Hermanos against Felicisima Abada personally and
as administratrix, in which the guardian of the minor
children intervened, as defendant, by permission of
the court. Exhibit B was the mortgage given to
secure the amount agreed upon in that settlement.

The claim of the plaintiffs herein against the estate of

Francisco Caponong had been fixed by the
commissioners. The amount so determined was all
the estate owed plaintiffs. The court says in its
decision that in approving the settlement of action
No. 969, its approval was meant to include only the
amount actually due by the estate, and that the
balance of the claim was intended to be approved as
against Felicisima Abada personally.
It is argued that "this is sheer and unequivocal
repudiation of a solemn and formal act" of the court.
The record in case No. 969 is presented as Exhibit C
by plaintiffs. In their complaint in that action (which
suit should never have been filed as all the property
was in the custody of the court), plaintiffs allege that
their original claim against the estate of Francisco
Caponong was only P12,783.74, and that the
balance of the claim was due from Felicisima Abada
as administratrix and personally without stating how
much was owed by her personally and how much
was owed by her as administratrix.
Whether the court in approving the compromise
intended to hold the defendant estate liable only for
the original debt, and defendant Abada for the
balance, is not material. The language used by the
court is very clear and seems to be an outright
approval of the "transaccion" (compromise), and
would, so far as the language goes, leave no room

for doubt of the court's approval of the agreement in

full and as written.
But could the court approve such an agreement?
Could the court authorize a mortgage of the state?
The law declares that commissioners shall pass
upon all claims against the estate. They had done so
in this case. The law fixed the limit of the estate's
liability. The court could not charge it with debts that
were never owed by it. The administratrix could only
charge the estate with the reasonable and proper
expenses of administration.
The estate owed plaintiffs less than P13,000 when
the commissioners passed on their claim. Part of this
has been paid, and there was a balance due
plaintiffs of P8,555.78 at the time of the trial, plus
interest. The plaintiffs, after their claim had been
presented and allowed by the commissioners, made
advances to the administratrix till their claim was
more than P68,000.
It is urged that the major part of this debt of P68,000
is administration expenses, and as such is
chargeable against the assets of the estate. No
reason is given why the expense of administration
should be so great, and the evidence fails to sustain
this position.

The administration expense would be the necessary

expenses of handling the property, of protecting it
against destruction or deterioration, and possibly
producing a crop, but if plaintiffs, holding a claim
originally for less than P13,000 against the estate, let
the administratrix have money and effects till their
claim grow to P68,000 they can not be permitted to
charge
this
amount
as expense
of
administration. They might be allowed to charge it
against the current revenue from the hacienda or the
net proceeds of the "exploitation of the hacienda" for
which it was obtained and used, as plaintiffs allege,
but it cannot relate back to the presenting of their
claim to the commissioners, and be a charge against
the inheritance of the heirs, or even a claim to
prorate with other creditors' claims allowed by the
commissioners. By expense of administration we
understand to be the reasonable and necessary
expense of caring for the property and managing it
till the debts are paid, as provided by law, and of
dividing it, if necessary, so as to partition it and
deliver to the heirs.

The contract was clearly a dead letter, and the

approval of the court could not breathe the breath of
life into it.

The court could not approve a settlement saddling

upon the estate debts it never owed, and if it did, its
approval would be a nullity.

The argument on behalf of appellants seems

to proceed upon the supposition that an
administrator may bind the heirs by his
mortgage of real estate for the purpose of
raising money with which to pay the debts of
the ancestors, and that a court of equity will
sustain the mortgage, or a title derived under
it, if it be shown that the borrowed money was

To give effect to the compromise as written would

result in great wrong, and destroy every chance the
minor children had to participate in the inheritance of
their father.

That the mortgage given at the same time and as a

result of the agreement was without legal warrant is
equally clear. No mortgage can be placed by an
administrator on the estate of a descendant, unless it
is specifically authorized by statute.
There is no statute in the Philippine Islands
authorizing it.
It may be stated as a general proposition, that
neither executors, unless specially authorized
by will, nor administrators, have the power to
bind the estate of the deceased by borrowing
money. (The American Law of Administration,
Woerner, Vol. 2, sec. 345.)
In the case of Johnson vs. Davidson, the Supreme
Court of Illinois (Vol. 162, at page 235) said:

honestly applied to the payment of debts.

No authority is cited in support of this position,
and none, we believe, can be found. (See
also Smith vs. Hutchinson, 108 Ill., at p. 668.)
In the case of Black vs. Dressel's Heirs, the Supreme
Court of Kansas (Vol. 20, at page 154) said:
. . . That the statute grants no power to an
administrator to borrow money upon a
mortgage of the real estate of the decedent, is
not controverted. Indeed, such an act is
foreign to the policy and purpose of
administration, which aims to close up, not to
continue an estate. . . .
In 151 N. Y. Reports, Duryea vs. Mackey, it is said at
p. 207:
The mortgage executed by the temporary
administrator in this case which purported to
bind the whole estate, was therefore
ineffectual to charge the interest of the devises
in remainder, unless the order of the surrogate
authorizing the mortgage was a lawful
exercise of his jurisdiction or unless they have
estopped themselves from questioning its
validity. It is very clear that the order of the
surrogate was without jurisdiction.

The learned counsels for appellants in their brief do

not cite a single authority for the placing of a
mortgage on an estate in administration, and none
has been found. It must be held that the mortgage
was void.
The court should have closed up the estate.
So many courts seem to violate the law on this point
that it may serve a useful purpose to call attention to
our statutes on the subject of estates.
Section 743 of the Code of Civil Procedure declares:
The court, at the time of granting letters
testamentary or of administration, shall allow
to the executor or administrator a time for
disposing of the estate and paying the debts
and legacies of the deceased person, which
time shall not, in the first instance, exceed one
year; but the court may, on application of the
executor or administrator, from time to time, as
the circumstances of the estate require,
extend the time not exceeding six months at a
time, nor so that the whole time allowed to the
original executor or administrator shall
exceedthree years.
Section 745 provides that if the executor or
administrator dies, the new administrator appointed
shall give the same notice for an extension of time

which shall not exceed six months beyond the time

which might have been allowed the first
administrator.
While these sections may be considered as only
directory, all Courts of First Instance should exert
themselves to close up estates within twelve months
from the time they are presented, and they may
refuse to allow any compensation to executors and
administrators who do not actively labor to that end,
and they may even adopt harsher measures.
The second assignment of error is that the court
should not have reduced the amount of the mortgage
(Exhibit B) from P68,611.01 to P8,555.78. The court
did err, but its error consisted in not declaring the
mortgage void.
The court was without jurisdiction to approve the
mortgage in the first place, and its approval was a
nullity. Plaintiff's claim against the estate was
P8,555.78 with interest as added by the court. This
claim should be paid pro rata with any other unpaid
claims against the estate.
The other errors of appellant need only brief
consideration.
That an attachment should not have been levied on
the carabaos in administration is too plain to need
discussion. If they were in the name and possession

of the administratrix, they were in custodia legis, and

could not be lawfully attached. The plaintiffs as
creditors of the estate could have petitioned the court
to compel the administratrix to take any steps
necessary and proper to protect the interest of all
concerned.
The appointment of a receiver was equally
unjustified and improper. The property being under
the court's control, the court should have removed
the administratrix, if necessary, and it could have
taken other means to protect the creditors and wind
up the estate.
The plaintiffs assign as error No. 10 that the court
should not have allowed the sum of P5,000 damages
for injury to the sugar lands.
The evidence as to this damage is not considered as
clear and satisfactory as it should be.
It seems this claim should have been wholly denied
by the trial court, and we think the judgment in favor
of the administratrix and against the plaintiffs should
be reduced from P13,262.50 to P8,262.50 with
interest as provided therein. The other damages
allowed by the trial court are so fully sustained by the
evidence, it is not necessary to discuss them.
With the above modification and with a declaration
that the mortgage, exhibit B, was absolutely void, the

judgment appealed from is affirmed, with costs

against the appellants. So ordered.
Arellano, C.J., Torres, Johnson, Araullo, Street,
Malcolm and Avancea, JJ., concur.