Rule 86 Case 1 At any rate, we find no merit to petitioners’ contention that

they are not real parties-in-interest since they are not parties
G.R. No. 147999 February 27, 2004 nor signatories to the contract and hence should not have been
impleaded as defendants. It is undeniable that petitioner Chan
SUI MAN HUI CHAN and GONZALO CO, petitioners 
 is an heir of Ramon Chan and, together with petitioner Co,
vs.
 was a successor-in-interest to the restaurant business of the
H O N . C O U RT O F A P P E A L S a n d O S C A R D . late Ramon Chan. Both continued to operate the business after
MEDALLA, respondents. the death of Ramon. Thus, they are real parties-in-interest in
QUISUMBING, J.: the case filed by private respondent, notwithstanding that they
are not signatories to the Contract of Lease.
Facts:
A lease contract is not essentially personal in character. Thus,
On March 30, 1999, private respondent Oscar Medalla filed a
the rights and obligations therein are transmissible to the heirs.
complaint before the RTC of Mandaluyong City, for collection 11 The general rule, therefore, is that heirs are bound by
of a sum of money arising from breach of a contract of lease
contracts entered into by their predecessors-in-interest except
and damages, against petitioners Sui Man Hui Chan and
when the rights and obligations arising therefrom are not
Gonzalo Co.
transmissible by (1) their nature, (2) stipulation or (3)
Napoleon C. Medalla as lessor and Ramon Chan as lessee provision of law.12 In the subject Contract of Lease, not only
entered into a Lease Contract3 over a hotel building located at were there no stipulations prohibiting any transmission of
No. 29 Abanao Street, Baguio City. Chan would use the leased rights, but its very terms and conditions explicitly provided for
premises as a restaurant named "Cypress Inn". Pertinently, the the transmission of the rights of the lessor and of the lessee to
parties agreed on the following: their respective heirs and successors. The contract is the law
1. The period of lease shall be for ten (10) years or between the parties. The death of a party does not excuse
from 15 July 1988 to 15 July 1998. nonperformance of a contract, which involves a property right,
and the rights and obligations thereunder pass to the
2. The payment of the realty taxes due to the successors or representatives of the deceased. Similarly,
government on the leased premises shall be for the nonperformance is not excused by the death of the party when
account of the Lessee. the other party has a property interest in the subject matter of
3. The agreement is binding upon the heirs and/or the contract.13
successors-in-interest of the Lessor and the Lessee. Finally, as to petitioners’ contention that any claim should
Petitioner Gonzalo Co was employed by Ramon Chan as the have been filed before the estate proceeding of Ramon
general manager of "Cypress Inn" and acted as his agent in all Chan pursuant to Section 5 of Rule 86, the trial court
his dealings with Napoleon Medalla. found that the unpaid rentals sought to be claimed were
for the period April 1993 to December 1998. Note that
On August 5, 1989, Ramon Chan died. He was survived by his Ramon Chan, the original lessee, died on August 5, 1989.
wife, petitioner Sui Man Hui Chan, who continued to operate In other words, as the unpaid rentals did not accrue
the restaurant. during the lifetime of Ramon Chan, but well after his
On July 17, 1996, Napoleon Medalla died. Among his heirs is death, his estate might not be held liable for them. Hence,
private respondent Oscar Medalla, who succeeded him as there is no indubitable basis to apply Section 5, Rule 86, of
owner and lessor of the leased premises. Petitioners Chan and the Revised Rules of Court as petitioners urge respondents
Co, the latter, in his capacity as agent and general manager, to do.
continued to deal with private respondent Medalla in all
transactions pertaining to the contract.
Petitioners failed to pay the monthly rentals due on the leased
premises. Despite several Statements of Accounts sent by
Medalla, petitioners failed to pay the rentals due but,
nonetheless, continued to use and occupy the leased premises.
Medalla then sent demand letters to petitioners, but the latter
still failed to pay the unpaid rentals. He also found out that
petitioners had not paid the realty taxes due on the leased
premises since 1991, amounting to ₱610,019.11. Medalla then
asked petitioners to settle the unpaid rentals, pay the unpaid
real estate taxes, and vacate the leased premises.
On January 1999, petitioners vacated the premises but without
paying their unpaid rentals and realty taxes. Aggrieved by
petitioners’ refusal to pay the amounts owing, which had
reached ₱4,147,901.80 by March 1999, private respondent
Medalla instituted Civil Case No. MC99-666.
Issue: WON any claim for unpaid rentals should be made
against the estate of Ramon Chan pursuant to Section 5, Rule
86 of the Revised Rules of Court.
Held:
Rule 86 Case # 1: Sui Man Hui Chan vs. CA

Facts:

Ramon Chan, lessee, entered into a contract of lease

with Napoleon Medalla, lessor. The agreement stipulated,
among other things, that the contract shall be valid for 10
years from July 15, 1988 to July 15, 1998; that the lessee shall
pay the realty taxes; and that the agreement shall be binding
upon their heirs and successors-in-interest.

Both Chan and Medalla died during the effectivity of

the contract. Their heirs, herein petitioners and private
respondent respectively, continued the contract.

Petitioners, however, failed to pay the monthly

rentals and realty taxes on the property, which prompted
private respondent to send demand letters to petitioners. The
latter vacated the premises but did not pay the unpaid rentals
and realty taxes, prompting private respondent to file a case
for collection of sum of money. The RTC and the CA decided
the case for the private respondent. Petitioners, after filing
and answer to the complaint, moved for the dismissal of the
case claiming that the case should be filed against the estate of
Ramon Chan in an estate proceeding pursuant to Section 5,
Rule 86 of the Rules of Court and claiming further that they
are not parties-in-interest.

Issue:

W/N the CA erred in affirming the judgment of the

RTC denying petitioner’s motion to dismiss.

Held:

No. Petitioners are parties-in-interest. Petitioner

Chan is an heir of Ramon Chan and successor-in-interest of
the business, continuing to operate the business after the death
of Ramon Chan. Moreover, a lease contract is not essentially
personal in character. The rights and obligations therein are
transmissible to the heirs, except when the rights and
obligations are not transmissible by a) their nature; b)
stipulation; or c) provision of law. Moreover, as to
petitioner’s contention that the claim should be filed against
the estate of Ramon Chan pursuant to Section 5 of Rule 86,
the Court found that the unpaid rentals sought to be claimed
did not accrue during the lifetime of Ramon Chan, but after
his death. His estate might not be held liable for them.
Section 5 Rule 86 does not apply in this case.
Rule 86 Case # 2: Martinez vs NLRC

Facts:

Raul Martinez is a taxi operator with private

respondents working for him as drivers. When Raul died, his
mother, herein petitioner, took over the business, securing new
drivers for said taxi units. Respondents filed a claim with the
Labor Arbiter for illegal dismissal and violation of PD 851,
specifically on non-payment of the 13th month pay.

The Labor Arbiter dismissed the complaint on the

following grounds: a) private respondents’ claims being
personal were extinguished upon the death of Raul; b)
petitioner was a mere housewife who did not possess
competence to manage the business; and c) private
respondents were not entitled to 13th month pay because the
existence of employer-employee relationship was doubtful on
account of the boundary system adopted by the parties.

The NLRC reversed the decision of the LA claiming

that a) private respondents were regular drivers because of
payment of wages; b) the management of the business passed
on to petitioner; and c) the claim of private respondents
survived the death of Raul considering that the business did
not cease operation but continued presumably.

Issue:

W/N the NLRC acted with grave abuse of discretion

in reversing the LA’s decision.

Held:

Yes. Petitioner’s claim that the 13th month pay

pertains to the personal obligation of Raul which did not
survive his death is well-taken. Unless expressly assumed,
labor contracts are not enforceable against the transferee of an
enterprise, being contracts in personam. The claim of private
respondents should have been filed instead in an intestate
proceeding involving the estate of Raul Martinez in
accordance with Section 5, Rule 86 of the Rules of Court.
Under this rule, upon the death of the decedent, a testate or
intestate proceeding shall be instituted in the proper court
wherein all his creditors must appear and file their claims
which shall be paid proportionately out of the property left by
the deceased. This, private respondents failed to do, hence,
their claim must be dismissed.
Rule 86 Case # 3: Barredo vs CA

Facts:

The heirs of the late Fausto Barredo filed a belated

claim to collect the face value of a promissory note for Php
20,000.00 plus 12% interest per annum from December 21,
1949 to the date of its maturity from the intestate estate of
Charles McDonough.

Upon Fausto’s death on October 8, 1942, his heirs, in

a deed of extrajudicial partition, adjudicated unto themselves
the secured credit of the deceased, and had the same recorded
on the certificate of title. The annotation was, however,
cancelled, by an order of the Japanese Imperial Army and with
payment of Japanese war notes to Fausto.

McDonough died on March 15, 1945. An intestate

proceeding was instituted thereafter with the requisite
publication. On October 22, 1947, herein petitioners filed
their belated claim against the estate of McDonough. The
claim was opposed by the administrator. The lower court
allowed the claim, but the CA reversed the allowance. Hence,
this appeal.

Issue:

W/N the CA erred in reversing the allowance of the

belated claim filed by herein petitioners.

Held:

No. The probate court previously fixed the period of

filing claims at 6 months reckoned from the date of first
publication. Said notice to creditors was first published on
August 23, 1945. The present claim was filed on October 22,
1947. There is no doubt therefore that the present claim was
filed outside of the period previously fixed. But, a tardy claim
may be allowed at the discretion of the court, upon showing of
cause for failure to present said claim on time, which herein
petitioners failed to substantiate, their ground being due to the
recent recovery of Fausto’s papers from the possession of his
lawyer who is now deceased. The ground is insufficient due
to the knowledge of petitioners of the annotation at the back of
the certificate of title. The order of the trial court allowing the
late claim without justification should be reversed because
under Section 2, Rule 86 of the Rules of Court, said court has
no authority to admit a belated claim for no cause or for an
insufficient cause.
Rule 86 Case # 4: Sheker vs Estate of Alice O. Sheker

Facts:

The RTC admitted to probate the holographic will of

Alice O. Sheker, and thereafter issued an order for all creditors
to file their respective claims against the estate. In compliance
therewith, herein petitioner filed a contingent claim for agent’s
commission and reimbursement for expenses incurred in
negotiating the sale of realties belonging to the estate. The
executrix moved for the dismissal of said money claim against
the estate on the grounds that, among other things, petitioner
failed to attach a certification against non-forum shopping.

Issue:

W/N the RTC erred in dismissing petitioner’s

contingent money claim against respondent estate for failure
of petitioner to attach to his motion a certification against non-
forum shopping.

Held:

Yes. The certification for non-forum shopping is

required only for complaints and other initiatory pleadings.
The RTC erred in ruling that a contingent money claim against
the estate of a decedent is an initiatory pleading. In the
present case, the whole probate proceeding was initiated upon
the filing of the petition for allowance of the decedent’s will.
Under Sections 1 & 5, Rule 86 of the Rules of Court, after
granting letters testamentary or administration, all persons
having money claims against the decedent are mandated to file
or notify the court and the estate administrator of their
respective money claims.

A money claim is only an incidental matter in the

main action for the settlement of the decedent’s estate; more
so if the claim is contingent since the claimant cannot even
institute a separate action for a mere contingent claim. Hence,
herein petitioner’s contingent money claim, not being an
initiatory pleading, does not require a certification against
non-forum shopping.
G.R. No. L-46095 November 23, 1977
PHILIPPINE NATIONAL BANK, petitioner, vs.
HONORABLE ELIAS B. ASUNCION, FABAR
INCORPORATED, JOSE MA. BARREDO, CARMEN B.
BORROMEO and TOMAS L. BORROMEO, respondents.
MAKASIAR, J.:
Philippine National Bank (hereafter referred to as the
petitioner), on January 16, 1963, granted in favor of
respondent Fabar Incorporated various credit accommodations
and advances in the form of a discounting line, overdraft line,
temporary overdraft line and letters of credit covering the
importation of machinery and equipment. Petitioner likewise
made advances by way of insurance premiums covering the
chattels subject matter of a mortgage securing the
aforementioned credit accommodations. Said credit
accommodations had an outstanding balance of P8,449,169.98
as of May 13, 1977.
All of the above credit accommodations are secured by the
joint and several signatures of Jose Ma. Barredo, Carmen B.
Borromeo and Tomas L. Borromeo (private respondents
herein) and Manuel H. Barredo- For failure of private
respondents to pay their obligations notwithstanding repeated
demands, petitioner instituted a case for collection against all
private respondents and Manuel H. Barredo in a complaint
dated October 31, 1972, and which was filed before the sala of
the Honorable Elias B. Asuncion, Judge of the Court of First
Instance of Manila, Branch XII (hereafter referred to as the
respondent Court).
It is evident from the foregoing that Section 6 of Rule 87 (of
the Old Rules of Court) provides the procedure should the
creditor desire to go against the deceased debtor, but there is
certainly nothing in the said provision making compliance
with such procedure a condition precedent before an ordinary
action against the surviving debtors, should the creditor
choose to demand payment from the latter, could be
entertained to the extent that failure to observe the same would
deprive the court jurisdiction to 'take cognizance of the action
against the surviving debtors. Upon the other hand, the Civil
Code expressly allow the creditor to proceed against any one
of the solidary debtors or some or all of them simultaneously.
It is crystal clear that Article 1216 of the New Civil Code is
the applicable provision in this matter. Said provision gives
the creditor the night to "proceed against anyone of the
solidary debtors or some or all of them simultaneously. "
As correctly argued by petitioner, if Section 6, Rule 86 of the
Revised Rules of Court were applied literally, Article 1216 of
the New Civil Code would, in effect, be repealed since under
the Rules of Court, petitioner has no choice but to proceed
against the estate of Manuel Barredo only. Obviously, this
provision diminishes the Bank's right under the New Civil
Code to proceed against any one, some or all of the solidary
debtors. Such a construction is not sanctioned by the principle,
which is too well settled to require citation, that a substantive
law cannot be amended by a procedural rule. Otherwise stated,
Section 6, Rule 86 of the Revised Rules of Court cannot be
made to prevail over Article 1216 of the New Civil Code, the
former being merely procedural, while the latter, substantive.

On May 19, 1975, before the case could be decided, Manuel

H. Barredo died. In a Manifestation dated June 6, 1975,
counsel for private respondents informed the respondent Court
of said death.

Subsequently, respondent Court issued an Order of dismissal

dated November 29, 1976.

Petitioner, in its lone assignment of error, alleged that the

respondent Court erred in dismissing the case against all the
defendants, instead of dismissing the case only as against the
deceased defendant and thereafter proceeding with the hearing
as against the other defendants, private respondents herein.

Petitioner's contention is well taken. Respondent Court's

reliance on Section 6, Rule 86 of the Revised Rules of Court
was erroneous.

A cursory perusal of Section 6, Rule 86 of the Revised Rules

of Court reveals that nothing therein prevents a creditor from
proceeding against the surviving solidary debtors. Said
provision merely sets up the procedure in enforcing collection
in case a creditor chooses to pursue his claim against the estate
of the deceased solidary debtor. The rule has been set forth
that a creditor (in a solidary obligation) has the option whether
to file or not to file a claim against the estate of the solidary
debtor. In construing Section 6, Rule 87 of the old Rules of
Court, which is the precursor of Section 6, Rule 86 of the
Revised Rules of Court, this Court said, in the case of Manila
Surety & Fidelity Co., Inc. vs. Villarama, et al. (107 Phil. 891)
that:
[G.R. No. 135216. August 19, 1999]
TOMASA VDA. DE JACOB, as Special Administratrix of
the Intestate Estate of Deceased Alfredo E. Jacob,
petitioner, vs. COURT OF APPEALS, PEDRO PILAPIL,
THE REGISTER OF DEEDS for the Province of
Camarines Sur, and JUAN F. TRIVINO as publisher of
Balalong, respondents.
J. Panganiban
FACTS:
Plaintiff-appellant [petitioner herein] claimed to be the
surviving spouse of deceased Dr. Alfredo E. Jacob and was
appointed Special Administratix for the various estates of the
deceased by virtue of a reconstructed Marriage Contract
between herself and the deceased.
Defendant-appellee on the other hand, claimed to be the
legally-adopted son of Alfredo. In support of his claim, he
presented an Order dated 18 July 1961 issued by then
Presiding Judge Jose L. Moya, CFI, Camarines Sur, granting
the petition for adoption filed by deceased Alfredo in favor of
Pedro Pilapil.
We disagree. As a rule, the factual findings of the trial court
are accorded great weight and respect by appellate courts,
because it had the opportunity to observe the demeanor of
witnesses and to note telltale signs indicating the truth or the
falsity of a testimony. The rule, however, is not applicable to
the present case, because it was Judge Augusto O. Cledera, not
the ponente, who heard the testimonies of the two expert
witnesses. Thus, the Court examined the records and found
that the Court of Appeals and the trial court failed to notice
certain relevant facts which, if properly considered, will
justify a different conclusion.[36] Hence, the present case is an
exception to the general rule that only questions of law may be
reviewed in petitions under Rule 45.
Central to the present question is the authenticity of Judge
Moyas signature on the questioned Order of Adoption. In his
Deposition, however, Judge Moya declared that he did not
dictate decisions in adoption cases. The only decisions he
made in open court were criminal cases, in which the accused
pleaded guilty.[45] Moreover, Judge Moya insisted that the
branch where he was assigned was always indicated in his
decisions and orders; yet the questioned Order did not contain
this information.

During the proceeding for the settlement of the estate of the The burden of proof in establishing adoption is upon the
deceased Alfredo in Case No. T-46 (entitled Tomasavda. de person claiming such relationship.[50] This Respondent
Jacob v. Jose Centenera, et al) herein defendant-appellee Pilapil failed to do. Moreover, the evidence presented by
Pedro sought to intervene therein claiming his share of the petitioner shows that the alleged adoption is a sham.
deceaseds estate as Alfredos adopted son and as his sole
surviving heir. Pedro questioned the validity of the marriage
between appellant Tomasa and his adoptive father Alfredo.

Appellant Tomasa opposed the Motion for Intervention and

filed a complaint for injunction with damages (Civil Case No.
T-83) questioning appellees claim as the legal heir of Alfredo.

ISSUES:
1) Whether or not the marriage between the plaintiff
TomasaVda. De Jacob and deceased Alfredo E. Jacob was
valid.
2) Whether defendant Pedro Pilapil is the legally adopted son
of Alfredo E. Jacob.

RULING:
1.) To start with, Respondent Pedro Pilapil argues that the
marriage was void because the parties had no marriage
license. This argument is misplaced, because it has been
established that Dr. Jacob and petitioner lived together as
husband and wife for at least five years.[10] An affidavit to
this effect was executed by Dr. Jacob and petitioner.[11]
Clearly then, the marriage was exceptional in character and
did not require a marriage license under Article 76 of the Civil
Code.[12] The Civil Code governs this case, because the
questioned marriage and the assailed adoption took place prior
the effectivity of the Family Code.

2.) In ruling that Respondent Pedro Pilapil was adopted by Dr.

Jacob and that the signature of Judge Moya appearing on the
Adoption Order was valid, the Court of Appeals relied on the
presumption that the judge had acted in the regular
performance of his duties. The appellate court also gave
credence to the testimony of respondents handwriting expert,
for the assessment of the credibility of such expert witness
rests largely on the discretion of the trial court x x x.[35]
[G.R. No. 121597. June 29, 2001]
PHILIPPINE NATIONAL BANK, petitioner, vs. HON.
COURT OF APPEALS, ALLAN M. CHUA as Special
Administrator of the Intestate Estate of the late ANTONIO
M. CHUA and Mrs. ASUNCION M. CHUA, respondents.
QUISUMBING, J.:
FACTS: The spouses Chua were the owners of a parcel of land
covered by a TCT and registered in their names. Upon the
husband’s death, the probate court appointed his son, private
respondent Allan as special administrator of the deceased’s
intestate estate. The court also authorized Allan to obtain a
loan accommodation from PNB to be secured by a real estate
mortgage over the above-mentioned parcel of land, which
Allan did for P450,000.00 with interest.
For failure to pay the loan in full, the bank extrajudicially
foreclosed the real estate mortgage. During the auction, PNB
was the highest bidder. However, the loan having a payable
balance, to claim this deficiency, PNB instituted an action with
the RTC, Balayan, Batangas, against both Mrs. Chua and
Allan.
The RTC rendered its decision, ordering the dismissal of
PNB’s complaint. On appeal, the CA affirmed the RTC
decision by dismissing PNB’s appeal for lack of merit.
Hence, the present petition for review on certiorari under Rule
45 of the Rules of Court.
ISSUE: The WON it was error for the CA to rule that
petitioner may no longer pursue by civil action the recovery of
the balance of indebtedness after having foreclosed the
property securing the same.
HELD: Petition is DENIED. The assailed decision of the CA
is AFFIRMED.
No
Petitioner relies on Prudential Bank v. Martinez, 189 SCRA
612, 615 (1990), holding that in extrajudicial foreclosure of
mortgage, when the proceeds of the sale are insufficient to pay
the debt, the mortgagee has the right to recover the deficiency
from the mortgagor.
However, it must be pointed out that petitioner’s cited cases
involve ordinary debts secured by a mortgage. The case at bar,
we must stress, involves a foreclosure of mortgage arising out
of a settlement of estate, wherein the administrator mortgaged
a property belonging to the estate of the decedent, pursuant to
an authority given by the probate court. As the CA correctly
stated, the Rules of Court on Special Proceedings comes into
play decisively. The applicable rule is Section 7 of Rule 86 of
the Revised Rules of Court ( which PNB contends is not.)
In the present case it is undisputed that the conditions under
the aforecited rule have been complied with [see notes]. It
follows that we must consider Sec. 7 of Rule 86, appropriately
applicable to the controversy at hand, which in summary [and
case law as well] grants to the mortgagee three distinct,
independent and mutually exclusive remedies that can be
alternatively pursued by the mortgage creditor for the
satisfaction of his credit in case the mortgagor dies, among
them:
(1) to waive the mortgage and claim the entire debt from the
estate of the mortgagor as an ordinary claim;
(2) to foreclose the mortgage judicially and prove any
deficiency as an ordinary claim; and
(3) to rely on the mortgage exclusively, foreclosing the same
at any time before it is barred by prescription without right to
file a claim for any deficiency.
Clearly petitioner herein has chosen the mortgage-creditor’s
option of extrajudicially foreclosing the mortgaged property of
the Chuas. This choice now bars any subsequent deficiency
claim against the estate of the deceased. Petitioner may no
longer avail of the complaint for the recovery of the balance of
indebtedness against said estate, after petitioner foreclosed the
property securing the mortgage in its favor. It follows that in
this case no further liability remains on the part of respondents
and the deceased’s estate.
NOTES:
Section 7, Rule 86 of the Rules of Court, which states that:
Sec. 7. Rule 86. Mortgage debt due from estate. — A creditor
holding a claim against the deceased secured by mortgage or
other collateral security, may abandon the security and
prosecute his claim in the manner provided in this rule, and
share in the general distribution of the assets of the estate; or
he may foreclose his mortgage or realize upon his security, by
action in court, making the executor or administrator a party
defendant, and if there is a judgment for a deficiency, after the
sale of the mortgaged premises, or the property pledged, in the
foreclosure or other proceeding to realize upon the security, he
may claim his deficiency judgment in the manner provided in
the preceding section; or he may rely upon his mortgage or
other security alone and foreclose the same at any time within
the period of the statute of limitations, and in that event he
shall not be admitted as a creditor, and shall receive no share
in the distribution of the other assets of the estate; but nothing
herein contained shall prohibit the executor or administrator
from redeeming the property mortgaged or pledged by paying
the debt for which it is hold as security, under the direction of
the court if the court shall adjudge it to be for the interest of
the estate that such redemption shall be made.
To begin with, it is clear from the text of Section 7, Rule 89,
that once the deed of real estate mortgage is recorded in the
proper Registry of Deeds, together with the corresponding
court order authorizing the administrator to mortgage the
property, said deed shall be valid as if it has been executed by
the deceased himself. Section 7 provides in part:
Sec. 7.Rule 89. Regulations for granting authority to sell,
mortgage, or otherwise encumber estate – The court having
jurisdiction of the estate of the deceased may authorize the
executor or administrator to sell personal estate, or to sell,
mortgage, or otherwise encumber real estate, in cases provided
by these rules when it appears necessary or beneficial under
the following regulations:
x xx
(f) There shall be recorded in the registry of deeds of the
province in which the real estate thus sold, mortgaged, or
otherwise encumbered is situated, a certified copy of the order
of the court, together with the deed of the executor or
administrator for such real estate, which shall be valid as if the
deed had been executed by the deceased in his lifetime.
G.R. No. 118655. April 12, 2000]
HEIRS OF ELIAS LORILLA, Namely: FE, ELIAS, JR.
and SERVANDO, ALL SURNAMED LORILLA,
petitioners, vs. COURT OF APPEALS, COMMERCIAL
CREDIT CORPORATION, HON. FRANCISCO
VILLANUEVA and SHERIFF HONORIO P. SANTOS,
respondents.
DECISION
QUISUMBING, J.:
On September 10, 1983, private respondent Commercial
Credit Corporation (now known as Pentacapital Finance
Corporation and hereinafter referred to as PENCAPITAL)
filed a complaint with the Regional Trial Court of Makati,
Metro Manila, (hereinafter referred to as the Makati Court) for
a sum of money against Sanyu Machineries Agencies, Inc.,
Sanyu Chemical Corporation, and several other defendants,
among whom was Elias Lorilla, (now deceased) who had
acted as sureties for the two corporate debtors. The complaint
was docketed as Civil Case No. 5262 and was assigned by
raffle to Branch 58 of said court.
PENCAPITAL sought for, and obtained from the Makati
Court, a writ of attachment on the real property of defendant
Elias L. Lorilla covered by Transfer Certificate of Title No.
298986, and which levy was duly annotated on the certificate
of title concerned.
During the pendency of Civil Case No. 5262, Elias L. Lorilla
executed a dacion en pago over the property attached in favor
of the Joint Resources Management Development Corporation
(hereinafter referred to as JRMDC) by reason of which
Transfer Certificate of Title No. 298986 in the name of Elias
L. Lorilla was cancelled and replaced by Transfer Certificate
of Title No. 114067 in the name of JRMDC. But the levy
caused to be made by PENCAPITAL over the property was
carried over to the new certificate of title.
On June 9, 1986, JRMDC filed suit against PENCAPITAL for
the cancellation of the latters levy on the property in question
with the Regional Trial Court of Pasig, Metro Manila
(hereinafter referred to as the Pasig Court), which was
docketed therein as Civil Case No. 63757 and assigned by
raffle to its Branch 153.
On April 5, 1989, the Makati Court, after due hearing,
rendered judgment in Civil Case No. 5262 in favor of
PENCAPITAL and against the defendants therein
On September 15, 1993, petitioners herein as heirs of Elias L.
Lorilla, filed a motion in Civil Case No. 5262 to quash the
writ of execution issued by the Makati Court, arguing that
since defendant Elias L. Lorilla passed away on January 15,
1988, or one year and three months before the Makati Court
rendered decision in Civil Case No. 5262 on April 5, 1989, the
case should have been dismissed insofar as Elias L. Lorilla is
concerned, in keeping with Section 21, Rule 3 of the Rules of
Court which provides:
Sec. 21.Where claim does not survive. - When the action is for
recovery of money, debt, or interest therein, and the defendant
dies before final judgment in the Court of First Instance, it
shall be dismissed to be presented in the manner especially
provided in these rules.
In our view, the main issue for resolution now is whether the
respondent appellate court erred and gravely abused its
discretion in denying petitioners action for annulment of
judgment of the RTC of Makati, Branch 58, concerning the
deceased defendant Elias Lorilla. Pertinently, we have to
consider whether Section 21 of Rule 3 and Sections 5 and 7of
Rule 86 of the Revised Rules of Court are applicable in the
present case. Similarly, we have to inquire whether petitioners,
heirs of Elias Lorilla, were deprived of their right to due
process of law.
Section 21 of Rule 3 provides that upon the defendants death,
the action "shall be dismissed to be presented in the manner
especially provided in these rules." Petitioners argue that this
manner is provided for in Sections 5 and 7 of Rule 86 of the
Revised Rules of Court.[6] As contemplated in Section 21 of
Rule 3, the action has to be dismissed without prejudice to the
plaintiff thereafter presenting his claim as a money claim in
the settlement of the estate of the deceased defendant.[7] The
claim becomes a mere incident in the testamentary or intestate
proceedings of the deceased where the whole matter may be
fully terminated jointly with the settlement and distribution of
the estate.[8] Supreme
In the present case, however, the records do not show if any
notice of death was filed by Atty. Alfredo Concepcion, counsel
of record of Elias Lorilla in Civil Case No. 5262 before the
Makati Court. Thus, neither the Makati Court nor
PENTACAPITAL were made aware of the death of Elias
Lorilla. The trial court could not be expected to know or take
judicial notice of the death of Lorilla, absent such notice.
Neither could the petitioners have been made aware of the trial
courts judgment adverse to their father, for all notices and
orders of the court were sent to Lorillas counsel of record,
who did not bother to inform the parties concerned of Elias
Lorillas death. Apparently, Lorillas counsel failed in his duty
to promptly inform the court of the death of his client, as the
Rules require.[9]
As far as the Makati Court was concerned, until the Writ of
Execution was issued and the levy thereof on August 5, 1993,
Lorilla continued to be represented by counsel of record, Atty.
Concepcion; and that upon service of a copy of the decision on
said counsel at the latters address, Lorilla was deemed to have
been validly served notice of the judgment.[10] The failure of
Atty. Concepcion to serve notice on the court and the adverse
parties regarding his clients death binds herein petitioners as
much as the client himself could be so bound. Jurisprudence
teems with pronouncements that a client is bound by the
conduct, negligence and mistakes of his counsel.
Section 21 of Rule 3 of the Revised Rules of Court sets out the
procedure that should be followed after the death of the
defendant in a case. If he died "before final judgment in the
Court of First Instance," the action should be dismissed
without prejudice to the plaintiff presenting his claim in the
settlement of the estate of the deceased in accordance with and
as required by Section 5 of Rule 86 of the Revised Rules of
Court.[15] Here, however, the property in question had
already been taken out of the estate of Elias Lorilla, even
before judgment in Civil Case No. 5262 was rendered, and it
was transferred to JRMDC by virtue of the dacion en pago
executed by Elias Lorilla. For this reason, Section 5 of Rule 86
loses its pertinence to the case at bar.
G.R. No. L-18403 September 30, 1961
 The appellant PNB, after more than four (4) Years after the
IN RE ADMINISTRATION OF THE ESTATE OF PASCUAL opposition of the claim presented by the administrator, filed a
VILLANUEVA. MAURICIA G. DE VILLANUEVA, pleading captioned "Petition for an Extension of time within
petitioner, 
 which to File the Claim of Philippine National Bank",
vs.
 alleging, among others, that Sec. 2, Rule 87 of the Rules,
PHILIPPINE NATIONAL BANK, defendant-appellant.
 allows the filing of claims even if the period stated in the
Ramon B. de los Reyes for defendant-appellant.
 notice to creditors elapsed, upon cause shown and on such
Marcos M. Calo for petitioners. terms as equitable; that its failure to present the claiming with
the period stated in the notice, was its lack of knowledge of
PAREDES, J.: administration proceedings, for while said maintains a branch
For the administration of the estate of her deceased Pascual office in Agusan, the employees did not come to know of the
Villanueva, Atty. Teodulo R. Ricaforte, was suggested by the proceedings, the notice has been published in the Morning
heirs and all the parties agreed.
 Times, a newspaper very limited circulation.
Letters of administration having been issued in the above
The CFI issued the following Order —

entitled case in favor of Teodulo R. Ricaforte for the settle of
It appearing that the claim of the Philippine National Bank
the intestate of Pascual Villanueva, deceased;

against the estate of the deceased Pascual Villanueva already
Notice is hereby given to all persons having claims for money
barred by the statute of limitations because the claim was due
against the decedent, the said Pascual Villanueva, arising from
and demandable since December 20, 1940, but filed on July
contract, express or implied, whether the same be due, not due
20, 1953, after the expiration of ten years, considering that
or contingent, for funeral expenses and expenses of last
said filing was furthermore not present court within the period
sickness of the deceased, and Judgment for money against
fixed by Sec. 2, Rule 87 of the Rules of Court, and no reason
him, requiring them to file their claims with the clerk of court
having been shown to justify the tension of time for its filing,
within six but not beyond twelve months after date of the first
the Court resolves to deny it as it hereby denies the petition for
publication of this notice, serving copies of such claims upon
an extension of time for filing of the claim by the Philippine
administrator, the said Teodulo R. Ricaforte.

National Bank. The failure of the Bank to present on time the
The above notice contained the usual order for publication
claim was due its own fault and can hardly be considered
thereof which was effected, thru the Morning Times of City.
excusable negligence.
On July 20, 1953, the defendant-appellant Philippine National
In disposing the motion for reconsideration, the lower court,
Bank filed in the administration proceedings, Creditor's Claim
on March 3,1959, said —

of the following tenor —

The Court believes that the filing of money claim on July 20,
The Philippine National Bank, Creditor of Pascual Villanueva,
1953 in the Office of the Clerk of Court did not suspend
deceased, respectfully presents its claim against the estate of
running of the period of prescription because said claim was
the said deceased for Approval with Total due as of June 5,
filed out of time and therefore invalid for all legal purposes. A
1953 the amount of P1,347.45.

careful revision of the record shows that the Philippine
That the said obligation has been due demandable since Dec.
National Bank, contrary to the pretension of its counsel, had
20, 1940; that the same is true and just claim and that it is still
knowledge of the present administration proceedings long
unpaid without any set-off.
before July 20, 1953, because the second payment of the claim
On October 12, 1954, the Philippine National Bank filed a due to the deceased Pascual Villanueva from the Philippine
Motion for Admission of claim, stating —
 War Damage Commission in the amount of P6,441.30, was
1. That the Philippine National Bank filed its claim dated July deposited in the Agusan Agency of the Bank in June, 1951.
20, 1953;
 And in the inventory filed by the new administrator Francisco
2. That the last action taken on the claim was an ordered this S. Conde, on February 27, 1957, the following item appears:

Honorable Court issued on March 20, 1954, transferring the Money belonging to the said deceased which came into the
hearing of the claim until the next calendar of the court, hands of the administrator on December 1, 1951, appearing
without objection of the administrator;
 Agusan Agency deposited by the late administrator Teodulo R.
3. That the administrator has not answered the claim nor Ricaforte. — P6,897.52.

denied the same.1awphîl.nèt WHEREFORE, the motion for reconsideration is denied for
WHEREFORE, it is respectfully prayed that an order be lack of merits.
issued admitting and approving the claim and ordering the Issue:The important issue presented is whether or not the in
administrator to pay the Bank the amount of the claim.
 question is already barred.
The administrator, opposed the alleging that he had no Ruling: Admittedly, the claim was filed outside of the period
knowledge or information sufficient to form a belief as to the provided for in the Order of the lower court, within which to
truth of the allegations therein. As special defenses, he present claims against the estate. The period fixed in the notice
interposed that the same indebtedness, if it existed, has already lapsed on November 16, 1951 and the claim was filed on July
been paid;
 20, 1953 or about 1 year and 8 months late. This
That the caused action for the recovery of the aforesaid notwithstanding, appellant contends that it did not know of
amount of P1,847.45 is barred by the statute of limitations, for such administration proceedings, not even its employees in the
more than ten (10) Years have elapsed since the cause of Branch Office in Butuan City, Agusan. It is to be noted that the
action accrued up to present time; petition for Letters of Administration and the Notice to
That the said claim is barred forever on the ground that notice Creditors were duly published in the Manila Daily Bulletin
to creditors having been published in the MORNING TIMES and in the Morning Times, respectively, which was a full
of Cebu City, a newspaper of general circulation and the compliance with the requirements of the Rules. Moreover, the
Philippine National Bank failed to file its claim within the supposed lack of knowledge of the proceedings on the part of
time limited in the notice. appellant and its employees had been belied by uncontested
and eloquent evidence, consisting of a deposit of an amount of
money by the administrator Of the estate in said Bank
(Agusan Agency). The deposit was made on December 1,
1951, inspite of which the appellant Bank only filed its claim
on July 20, 1953. It is quite true that the Courts can extend the
period within Which to present claims against the estate, even
after the period limited has elapsed; but such extension should
be granted under special circumstances. The lower did not find
any justifiable reason to give the extension and for one thing,
there was no period to extend, the same had elapsed.

Having reached the above conclusions, We deem it necessary
to determine the question as to whether or not the Moratorium
Law had suspended the prescriptive period for filing of the
claim under consideration.

WHEREFORE, the order subject of the appeal is hereby
affirmed, with costs against appellant Philippine National
Bank, in both instances.
G.R. No. 147561 June 22, 2006
 impossible because of the death of Santos, who as such can no
STRONGHOLD INSURANCE COMPANY, INC., Petitioner, 
 longer participate in any liquidation. The unilateral liquidation
vs.
 on the party (sic) of [respondent] of the work
REPUBLIC-ASAHI GLASS CORPORATION, Respondent.
 accomplishments did not bind SICI for being violative of
D E C I S I O N
 procedural due process. The claim of [respondent] for the
PANGANIBAN, CJ: forfeiture of the performance bond in the amount of
A surety company’s liability under the performance bond it P795,000.00 had no factual and legal basis, as payment of said
issues is solidary. The death of the principal obligor does not, bond was conditioned on the payment of damages whic

as a rule, extinguish the obligation and the solidary nature of SICI was not informed by [respondent] of the death of Santos.
that liability. SICI was not informed by [respondent] of the unilateral
rescission of its contract with JDS, thus SICI was deprived of
The Facts its right to protect its interests as surety under the performance
Republic-Asahi Glass Corporation (Republic-Asahi) entered bond, and therefore it was released from all liability.
into a contract withJose D. Santos, Jr., the proprietor of JDS On August 16, 1991, the lower court issued an order
Construction (JDS), for the construction of roadways and a dismissing the complaint of [respondent] against x x x JDS
drainage system in Republic-Asahi’s compound in Barrio and SICI, on the ground that the claim against JDS did not
Pinagbuhatan, Pasig City, where [respondent] was to pay JDS survive the death of its sole proprietor, Jose D. Santos, Jr. The
P5,300,000.00 for said construction, completed within a dispositive portion of the [O]rder reads as follows:

period of 240 days. JDS, shall post a performance bond of ‘ACCORDINGLY, the complaint against the defendants Jose
P795,000.00. JDS executed, jointly and severally with D. Santos, Jr., doing business under trade and style, ‘JDS
[petitioner] Stronghold Insurance Co., Inc. (SICI).
 Construction’ and Stronghold Insurance Company, Inc. is
Respondent] paid to JDS P795,000.00 by way of ordered DISMISSED.

downpayment.
 Ruling of the Court of Appeals

"Two progress billings the total amount of P274,621. were The CA ruled that SICI’s obligation under the surety
submitted by JDS to [respondent], which the latter paid. agreement was not extinguished by the death of Jose D.
According to [respondent],
 Santos, Jr. Consequently, Republic-Asahi could still go after
Respondent’s] engineers called the attention of JDS to the SICI for the bond.

alleged alarmingly slow pace of the construction, which The appellate court also found that the lower court had erred
resulted in the fear that the construction will not be finished in pronouncing that the performance of the Contract in
within the stipulated 240-day period. However, said reminders question had become impossible by respondent’s act of
went unheeded.
 rescission. The Contract was rescinded because of the
Dissatisfied with the progress of the work undertaken by JDS, dissatisfaction of respondent with the slow pace of work and
[respondent] Republic-Asahi extrajudicially rescinded the pursuant to Article XIII of its Contract with JDS.
contract and wrote a letter to x x x JDS informing the latter of
such rescission. Such rescission, according to Article XV of issue: Whether petitioner’s liability under the performance
the contract shall not be construed as a waiver of bond was automatically extinguished by the death of Santos,
[respondent’s] right to recover damages from x x x JDS and the principal.
the latter’s sureties.
 Ruling”:

“[Respondent had to hire another contractor to finish the Sole Issue:

project, for which it incurred an additional expense of Effect of Death on the Surety’s Liability

P3,256,874.00.
 Petitioner contends that the death of Santos, the bond
Respondent] then filed a complaint against JDS and SICI. It principal, extinguished his liability under the surety bond.
sought from JDS payment of P3,256,874.00 representing the Consequently, it says, it is automatically released from any
additional expenses incurred by [respondent] for the liability under the bond.

completion of the project using another contractor, and from x As a general rule, the death of either the creditor or the debtor
x x JDS and SICI, jointly and severally, payment of does not extinguish the obligation.8 Obligations are
P750,000.00 as damages in accordance with the performance transmissible to the heirs, except when the transmission is
bond; exemplary damages in the amount of P100,000.00 and prevented by the law, the stipulations of the parties, or the
attorney’s fees in the amount of at least P100,000.0
 nature of the obligation.9 Only obligations that are personal10
h [respondent] may sustain in the event x x x JDS failed to or are identified with the persons themselves are extinguished
complete the contracted works.
 by death.11

"According to the Sheriff’s Return summons were duly served Section 5 of Rule 8612 of the Rules of Court expressly allows
on defendant-appellee SICI. However, Jose D. Santos, Jr. died the prosecution of money claims arising from a contract
the previous year (1990), and JDS Construction was no longer against the estate of a deceased debtor. Evidently, those claims
at its address and its whereabouts were unknown. are not actually extinguished.13 What is extinguished is only
SICI filed its answer, alleging that the [respondent’s] money the obligee’s action or suit filed before the court, which is not
claims against [petitioner and JDS] have been extinguished by then acting as a probate court.14

the death of Jose D. Santos, Jr. Even if this were not the case, In the present case, whatever monetary liabilities or
[petitioner] SICI had been released from its liability under the obligations Santos had under his contracts with respondent
performance bond because there was no liquidation, with the were not intransmissible by their nature, by stipulation, or by
active participation and/or involvement, pursuant to provision of law. Hence, his death did not result in the
procedural due process, of herein surety and contractor Jose D. extinguishment of those obligations or liabilities, which
Santos, Jr., hence, there was no ascertainment of the merely passed on to his estate.15 Death is not a defense that he
corresponding liabilities of Santos and SICI under the or his estate can set up to wipe out the obligations under the
performance bond. At this point in time, said liquidation was performance bond. Consequently, petitioner as surety cannot
use his death to escape its monetary obligation under its
performance bond.

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

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

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

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

x x x x x x x x x

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

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

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

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

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

SO ORDERED.
G.R. No. 146989 February 7, 2007
 On 1996, Labor Arbiter Ricardo C. Nora, ordered the parties
MELENCIO GABRIEL, represented by surviving spouse, to file their respective memoranda within ten days, after which
FLORDELIZA V. GABRIEL, Petitioner, 
 the case was deemed submitted for resolution.
vs.
 On March 1997, the Labor Arbiter (Hon. Ricardo C. Nora)
NELSON BILON, ANGEL BRAZIL AND ERNESTO handed down his decision declaring the illegality of
PAGAYGAY, Respondents.
 [respondents’] dismissal and ordering [petitioner] Melencio
D E C I S I O N
 Gabriel to pay the [respondents] the total amount of ONE
AZCUNA, J.: MILLION THIRTY FOUR THOUSAND PESOS
The facts3 are as follows:
 [₱1,034,000,] representing [respondents’] backwages and
On November 15, 1995, respondents filed their separate separation pay.

complaints for illegal dismissal, illegal deductions, and [Petitioner] Melencio Gabriel is likewise ordered to pay
separation pay against petitioner with the National Labor attorney’s fees equivalent to five percent (5%) of the judgment
Relations Commission (NLRC). award or the amount of ₱51,700 within ten (10) days from
On December 15, 1995, the complaint was amended, receipt of this Decision.
impleading as party respondent the Bacoor Transport Service On April 4, 1997, petitioner passed away. A copy of the above
Cooperative, Inc., as both parties are members of the decision was delivered personally to petitioner’s house.
cooperative.
 According to respondents, petitioner’s surviving spouse,
Respondents alleged the following: Flordeliza Gabriel, and their daughter, after reading the
1) That they were regular drivers of Gabriel Jeepney, driving contents of the decision and after they had spoken to their
their respective units under a boundary system of ₱400 per counsel, refused to receive the same.The labor arbiter’s
day, plying Baclaran to Divisoria via Tondo, driving five days decision was subsequently served by registered mail at
a week, with average daily earnings of ₱400;
 petitioner’s residence and the same was received on May 28,
2) That they were required/forced to pay additional ₱55.00 per 1997.
day for the following: a) ₱20.00 police protection; b) ₱20.00 On May 16, 1997, counsel for petitioner filed an entry of
washing; c) ₱10.00 deposit; and [d)] ₱5.00 garage fees;
 appearance with motion to dismiss the case for the reason that
4) That on April 30, 1995, petitioner told them not to drive petitioner passed away last April 4, 1997.
anymore, and when they went to the garage to report for work On July 3, 1997, respondents filed a motion to dismiss
the next day, they were not given a unit to drive; and
 petitioner’s appeal on the ground that the "surety bond is
5) That the boundary drivers of passenger jeepneys are defective" and the appeal was "filed out of time," which move
considered regular employees of the jeepney operators. Being was opposed by petitioner.

such, they are entitled to security of tenure. Petitioner, Subsequently, on April 28, 1998, the NLRC promulgated its
however, dismissed them without factual and legal basis, and first decision, the dispositive portion of which reads:

without due process. WHEREFORE, premises considered, the appealed decision is
On his part, petitioner contended that:
 hereby reversed and set aside. The above-entitled case is
1) He does not remember if the respondents were ever under hereby dismissed for lack of employer-employee relationship.
his employ as drivers of his passenger jeepneys. Certain, NLRC rendered its second decision on October 29, 1998,
however, is the fact that neither the respondents nor other petitioner Melencio Gabriel was not represented by counsel
drivers who worked for him were ever dismissed by him. As a during the pendency of the case. A decision was rendered by
matter of fact, some of his former drivers just stopped the Labor Arbiter a quo on March 17, 1997 while Mr. Gabriel
reporting for work, either because they found some other passed away on April 4, 1997 without having received a copy
employment or drove for other operators, and like the thereof during his lifetime. The decision was only served on
respondents, the next time he heard from them was when they April 18, 1997 when he was no longer around to receive the
started fabricating unfounded complaints against him;
 same. His surviving spouse and daughter cannot automatically
2) He made sure that none of the jeepneys would stay idle substitute themselves as party respondents. The decision of the
even for a day so he could collect his earnings; hence, it had labor arbiter has not become final because there was no proper
been his practice to establish a pool of drivers. Had service of copy thereof to [petitioner] ….
respondents manifested their desire to drive his units, it would
have been immaterial whether they were his former drivers or Undoubtedly, this case is for recovery of money which does
not. As long as they obtained the necessary licenses and not survive, and considering that the decision has not become
references, they would have been accommodated and placed final, the case should have been dismissed and the appeal no
on schedule; longer entertained….

WHEREFORE, in view of the foregoing, the Decision of April
4) Respondents’ claim that certain amounts, as enumerated in 28, 1998 is set aside and vacated. Furthermore, the instant case
the complaint, were deducted from their day’s earnings is is dismissed and complainants are directed to pursue their
preposterous. Indeed, there were times when deductions were claim against the proceedings for the settlement of the estate
made from the day’s earnings of some drivers, but such were of the deceased Melencio Gabriel.

installment payments for the amount previously advanced to SO ORDERED.10
them. Most drivers, when they got involved in accidents or
violations of traffic regulations, managed to settle them, and in In the instant case, the decision (dated March 17, 1997) of the
the process they had to spend some money, but most of the Labor Arbiter became final and executory on account of the
time they did not have the needed amount so they secured cash failure of the private respondent to perfect his appeal on
advances from him, with the understanding that the same time….

should be paid back by installments through deductions from Thus, we disagree with the ratiocination of the NLRC that the
their daily earnings or boundary. death of the private respondent on April 4, 1997 ipso facto
negates recovery of the money claim against the successors-
in-interest …. Rather, this situation comes within the aegis of claimants….

Section 3, Rule III of the NLRC Manual on Execution of Thus, in accordance with the above Rules, the money claims
Judgment, which provides: of respondents must be filed against the estate of petitioner
SECTION 3. Execution in Case of Death of Party. – Where a Melencio Gabriel.25

party dies after the finality of the decision/entry of judgment WHEREFORE, the petition is DENIED. The Decision and
of order, execution thereon may issue or one already issued Resolution of the Court of Appeals dated August 4, 2000 and
may be enforced in the following cases:
 February 7, 2001, respectively, in CA-G.R. SP No. 52001 are
a) x x x ;
 AFFIRMED but with the MODIFICATION that the money
b) In case of death of the losing party, against his successor-in- claims of respondents should be filed against the estate of
interest, executor or administrator;
 Melencio Gabriel, within such reasonable time from the
c) In case of death of the losing party after execution is finality of this Decision as the estate court may fix.\

actually levied upon any of his property, the same may be sold SO ORDERED.
for the satisfaction thereof, and the sheriff making the sale
shall account to his successor-in-interest, executor or
administrator for any surplus in his hands.

Notwithstanding the foregoing disquisition though, We are not
entirely in accord with the labor arbiter’s decision awarding
separation pay in favor of the petitioners. In this regard, it [is]
worth mentioning that in Kiamco v. NLRC,11 citing Globe-
Mackay Cable and Radio Corp. v. NLRC,12 the Supreme
Court qualified the application of the "strained relations"
principle when it held --

"If in the wisdom of the Court, there may be a ground or
grounds for the non-application of the above-cited provision
(Art. 279, Labor Code) this should be by way of exception,
such as when the reinstatement may be inadmissible due to
ensuing strained relations between the employer and
employee.

No strained relations should arise from a valid legal act of
asserting one’s right; otherwise, an employee who shall assert
his right could be easily separated from the service by merely
paying his separation pay on the pretext that his relationship
with his employer had already become strained."
WHEREFORE, the petition is GRANTED, the decision of the
Labor Arbiter, dated March 17, 1997, is hereby
REINSTATED, subject to the MODIFICATION that the
private respondent is ORDERED to immediately REINSTATE
petitioners in their former jobs. Petitioner filed a motion for
reconsideration but the same was denied by the CA. Hence,
this petition.
Issue: Whether the claim survives.
Ruling: With regard to respondents’ monetary claim, the same
shall be governed by Section 20 (then Section 21), Rule 3 of
the Rules of Court which provides:

SEC. 20. Action on contractual money claims. – When the
action is for recovery of money arising from contract, express
or implied, and the defendant dies before entry of final
judgment in the court in which the action was pending at the
time of such death, it shall not be dismissed but shall instead
be allowed to continue until entry of final judgment. A
favorable judgment obtained by the plaintiff therein shall be
enforced in the manner provided in these Rules for
prosecuting claims against the estate of a deceased person.
(21a)

In relation to this, Section 5, Rule 86 of the Rules of Court
states:

SEC. 5. Claims which must be filed under the notice. If not
filed, barred ; exceptions. – All claims for money against the
decedent arising from contract, express or implied, whether
the same be due, not due, or contingent, ... 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
#13
G.R. No. 102007 September 2, 1994
PEOPLE OF THE PHILIPPINES, plaintiff-appellee vs.
ROGELIO BAYOTAS y CORDOVA, accused-appellant.
ROMERO, J.:
FACTS:
✓ Rogelio Bayotas y Cordova was charged with Rape and
eventually convicted thereof.
✓ Pending appeal of his conviction, Bayotas died on February
4, 1992 at the National Bilibid Hospital due to cardio
respiratory arrest.
✓ Consequently, the Supreme Court in its Resolution of May
20, 1992 dismissed the criminal aspect of the appeal, but
required the Solicitor General to file its comment with
regard to Bayotas' civil liability arising from his commission
of the offense charged.
✓ In his comment, the Solicitor General expressed his view
that the death of accused-appellant did not extinguish his
civil liability as a result of his commission of the offense
charged.
✓ Counsel for the accused-appellant, on the other hand,
opposed the view of the Solicitor General arguing that the
death of the accused while judgment of conviction is
pending appeal extinguishes both his criminal and civil
penalties.
ISSUE:
WON death of the accused pending appeal of his conviction
extinguish his civil liability. YES
HELD:
Accordingly, we rule: if the private offended party, upon
extinction of the civil liability ex delicto desires to recover
damages from the same act or omission complained of, he
must subject to Section 1, Rule 111 (1985 Rules on Criminal
Procedure as amended) file a separate civil action, this time
predicated not on the felony previously charged but on other
sources of obligation. The source of obligation upon which the
separate civil action is premised determines against whom the
same shall be enforced.
If the same act or omission complained of also arises from
quasi-delict or may, by provision of law, result in an injury to
person or property (real or personal), the separate civil action
must be filed against the executor or administrator of the
estate of the accused pursuant to Sec. 1, Rule 87 of the Rules
of Court:
Sec. 1. Actions which may and which may not be brought
against executor or administrator. — No action upon a
claim for the recovery of money or debt or interest
thereon shall be commenced against the executor or
administrator; but actions to recover real or personal
property, or an interest therein, from the estate, or to
enforce a lien thereon, and actions to recover damages for
an injury to person or property, real or personal, may be
commenced against him.
This is in consonance with our ruling in Belamala where we
held that, in recovering damages for injury to persons thru an
independent civil action based on Article 33 of the Civil Code,
the same must be filed against the executor or administrator of
the estate of deceased accused and not against the estate under
Sec. 5, Rule 86 because this rule explicitly limits the claim to
those for funeral expenses, expenses for the last sickness of
the decedent, judgment for money and claims arising from
contract, express or implied. Contractual money claims, we
stressed, refers only to purely personal obligations other than
those which have their source in delict or tort.
Conversely, if the same act or omission complained of also
arises from contract, the separate civil action must be filed
against the estate of the accused, pursuant to Sec. 5, Rule 86 of
the Rules of Court.
From this lengthy disquisition, we summarize our ruling
herein:
1. Death of the accused pending appeal of his conviction
extinguishes his criminal liability as well as the civil liability
based solely thereon. As opined by Justice Regalado, in this
regard, "the death of the accused prior to final judgment
terminates his criminal liability and only the civil liability
directly arising from and based solely on the offense
committed, i.e., civil liability ex delicto in sensostrictiore."
2. Corollarily, the claim for civil liability survives
notwithstanding the death of accused, if the same may also be
predicated on a source of obligation other than delict. Article
1157 of the Civil Code enumerates these other sources of
obligation from which the civil liability may arise as a result
of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
d) . . .
e) Quasi-delicts
3. Where the civil liability survives, as explained in Number 2
above, an action for recovery therefor may be pursued but
only by way of filing a separate civil action and subject to
Section 1, Rule 111 of the 1985 Rules on Criminal Procedure
as amended. This separate civil action may be enforced either
against the executor/administrator or the estate of the accused,
depending on the source of obligation upon which the same is
based as explained above.
4. Finally, the private offended party need not fear a forfeiture
of his right to file this separate civil action by prescription, in
cases where during the prosecution of the criminal action and
prior to its extinction, the private-offended party instituted
together therewith the civil action. In such case, the statute of
limitations on the civil liability is deemed interrupted during
the pendency of the criminal case, conformably with
provisions of Article 1155 of the Civil Code, that should
thereby avoid any apprehension on a possible privation of
right by prescription.
Applying this set of rules to the case at bench, we hold that the
death of appellant Bayotas extinguished his criminal liability
and the civil liability based solely on the act complained of,
i.e., rape. Consequently, the appeal is hereby dismissed
without qualification.
#14 extinguished inasmuch as there is no longer a defendant to
stand as the accused; the civil action instituted therein for
G.R. No. 200302 recovery of civil liability ex delicto is ipso facto extinguished,
PEOPLE OF THE PHILIPPINES, Appellee vs. GERRY grounded as it is on the criminal act."
LIPATA y ORTIZA Appellant. We also ruled that "if the private offended party, upon
CARPIO, J.: extinction of the civil liability ex delicto desires to recover
damages from the same act oromission complained of, he must
The Facts subject to Section 1, Rule 111 ([of the then applicable] 1985
Rules on Criminal Procedure as amended) file a separate civil
✓Appellant was charged with the crime of Murder for
action, this time predicated not on the felony previously
conspiring, confederating with two (2) other persons by
charged but on other sources of obligation. The source of
stabbing repeatedly with bladed weapons Ronaldo Cueno y
obligation upon which the separate civil action is premised
Bonifacio.
determines against whom the same shall be enforced."
✓Appellant was arraigned on 11 October 2005, and entered a Upon examination of the submitted pleadings, we found that
plea of not guilty to the charge. Pre-trial conference was there was no separate civil case instituted prior to the criminal
terminated on 26 October 2005, and trial on the merits case. Neither was there any reservation for filing a separate
ensued. civil case for the cause of action arising from quasi-delict.
✈RTC’s decision rendered judgment finding the accused Under the present Rules, the heirs of Cueno should file a
GERRY LIPATA Y ORTIZA guilty beyond reasonable doubt separate civil case in order to obtain financial retribution for
of the crime of Murder and sentenced him to suffer the their loss. The lack of a separate civil case for the cause of
penalty of imprisonment of reclusion perpetuaand adjudged action arising from quasi-delict leads us to the conclusion that,
to pay the heirs of Rolando Cueno the civil indemnity ex a decade after Cueno’s death, his heirs cannot recover even a
delicto of the accused, actual, moral and exemplary centavo from the amounts awarded by the CA.
damages.
✈The CA dismissed appellant’s appeal and affirmed the
decision of the RTC. The CA agreed with the RTC’s ruling
that appellant’s claim of defense of a relative must fail.
There was no actual or imminent threat on the life of
appellant or of his brother Larry. There was also no reason
for appellant to stab Cueno. Cueno was outnumbered by the
Lipata brothers, three to one. The requirement of lack of
provocation on the part of appellant is negated by the
multiple stab wounds that Cueno sustained.
✓The Quezon City Jail Warden, in a letter dated 22 October
2012, informed this Court that appellant passed away on 13
February 2011. In a Resolution dated 7 January 2013, this
Court required the parties to submit their supplemental
briefs on the civil aspect of the case if they so desire.
✓In view of appellant’s death prior to the promulgation of the
CA’s decision, this Court issued a Resolution dated 25
September 2013 which ordered the PAO "(1) to
SUBSTITUTE the legal representatives of the estate of the
deceased appellant as party; and (2) to COMMENT on the
civil liability of appellant within ten (10) days from receipt
of this Resolution."
✈On 9 July 2014, this Court issued a Resolution which
declared that "the PAO shall continue as the legal
representative of the estate of the deceased appellant for
purposes of representing the estate in the civil aspect of this
case."

ISSUE:
WON death of the accused pending appeal of his conviction
extinguish his civil liability. YES
The Court’s Ruling
In 1994, this Court, in People v. Bayotas, reconciled the
differing doctrines on the issue of whether the death of the
accused pending appeal of his conviction extinguishes his civil
liability. We concluded that "upon death of the accused
pending appeal of his conviction, the criminal action is
#15
G.R. No. 149926 February 23, 2005
UNION BANK OF THE PHILIPPINES vs. EDMUND
SANTIBAÑEZ and FLORENCE SANTIBAÑEZ ARIOLA
CALLEJO, SR., J.:
FACTS:
✓First Countryside Credit Corporation (FCCC) and Efraim M.
Santibañez entered into two loan agreements. The amounts
were intended for the payment of the purchase of Tractors.
In view thereof, Efraim and his son, Edmund, executed a
promissory note in favor of the FCCC. Aside from such
promissory note, they also signed a Continuing Guaranty
Agreementfor the loan.
✓Sometime in February 1981, Efraim died, leaving a
holographic will.
✓Subsequently in March 1981, testate proceedings
commenced before the RTC of Iloilo City. Edmund, as one
of the heirs, was appointed as the special administrator of
the estate of the decedent.
✓During the pendency of the testate proceedings, the
surviving heirs, Edmund and his sister Florence
SantibañezAriola, executed a Joint Agreement, 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 Liabilitieswas 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 lettersfor 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, petitioner filed a Complaintfor sum of money against
the heirs of EfraimSantibañez, Edmund and Florence, before
the RTC of Makati City. Summonses were issued against
both, but the one intended for Edmund was not served since
he was in the United States and there was no information on
his address or the date of his return to the Philippines.
Accordingly, the complaint was narrowed down to
respondent Florence S. Ariola.
✓Respondent Florence S. Ariola filed her Answerand 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.
✈ RTC of Makati City dismissed the complaint for lack of
merit. 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 EfraimSantibañez was pending,
as the sum of money being claimed was an obligation
incurred by the said decedent.
✈ Court of Appeals 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.
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.
HELD:
The petition is bereft of merit.
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.
This being so, any partition involving the said tractors among
the heirs is not valid. The joint agreementexecuted by Edmund
and Florence, partitioning the tractors among themselves, is
invalid, specially so since at the time of its execution, there
was already a pending proceeding for the probate of their late
father’s holographic will covering the said tractors.
The assumption of liability was conditioned upon the
happening of an event, that is, that each heir shall take
possession and use of their respective share under the
agreement. It was made dependent on the validity of the
partition, and that they were to assume the indebtedness
corresponding to the chattel that they were each to receive.
The partition being invalid as earlier discussed, the heirs in
effect did not receive any such tractor. It follows then that the
assumption of liability cannot be given any force and effect.
The Court notes that the loan was contracted by the decedent.
The petitioner, purportedly a creditor of the late
EfraimSantibañez, 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. As we held in the vintage case
of PyEng Chong v. Herrera:
… 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.
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 EfraimSantibañez 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.
#16 (see #2 R82)
G.R. No. 164108 May 8, 2009
ALFREDO HILADO, LOPEZ SUGAR CORPORATION,
FIRST FARMERS HOLDING CORPORATION vs. THE
HONORABLE COURT OF APPEALS, THE
HONORABLE AMOR A. REYES, Presiding Judge,
Regional Trial Court of Manila, Branch 21 and
ADMINISTRATRIX JULITA CAMPOS BENEDICTO
TINGA, J.:
Nonetheless, it is not immediately evident that intervention
under the Rules of Civil Procedure necessarily comes into
operation in special proceedings. The settlement of estates of
deceased persons fall within the rules of special proceedings
under the Rules of Court,not the Rules on Civil Procedure.
We can readily conclude that notwithstanding Section 2 of
Rule 72, intervention as set forth under Rule 19 does not
extend to creditors of a decedent whose credit is based on a
contingent claim. The definition of "intervention" under Rule
19 simply does not accommodate contingent claims.

FACTS: Had the claims of petitioners against Benedicto been based on

contract, whether express or implied, then they should have
✓The well-known sugar magnate Roberto S. Benedicto died filed their claim, even if contingent, under the aegis of the
intestate on 15 May 2000. He was survived by his wife, notice to creditors to be issued by the court immediately after
private respondent Julita Campos Benedicto granting letters of administration and published by the
(administratrix), and his only daughter, Francisca administrator immediately after the issuance of such notice.
Benedicto-Paulino. Civil actions for tort or quasi-delict do not fall within the class
of claims to be filed under the notice to creditors required
✓At the time of his death, there were two pending civil under Rule 86. These actions, being as they are civil, survive
caseswith the RTC of Bacolod City against Benedicto the death of the decedent and may be commenced against the
involving the petitioners: Civil Case No. 95-9137, with administrator pursuant to Section 1, Rule 87.
petitioner Alfredo Hilado as one of the plaintiffs and Civil
Case No. 11178, with petitioners Lopez Sugar Corporation Evidently, the merits of petitioners’ claims against Benedicto
and First Farmers Holding Corporation as plaintiffs. are to be settled in the civil cases where they were raised, and
not in the intestate proceedings. In the event the claims for
✓On 25 May 2000, private respondent Julita Campos damages of petitioners are granted, they would have the right
Benedicto filed with the RTC of Manila a petition for the to enforce the judgment against the estate.
issuance of letters of administration in her favor. Said
petition acknowledged the value of the assets of the
decedent to be ₱5 Million, "net of liabilities."
✈ Manila RTC issued an order appointing private respondent
as administrator of the estate of her deceased husband, and
issuing letters of administration in her favor.
✓Private respondent submitted an Inventory of the Estate,
Lists of Personal and Real Properties, and Liabilities of the
Estate of her deceased husband. In the List of Liabilities
attached to the inventory, private respondent included as
among the liabilities, the two pending claims then being
litigated before the Bacolod City courts.
✓ Petitioners filed with the Manila RTC a Manifestation/
Motion Ex AbundantiCautela, praying that they be furnished
with copies of all processes and orders pertaining to the
intestate proceedings, which theprivate respondent opposed,
disputing the personality of petitioners to intervene in the
intestate proceedings of her husband.
✈RTC issued an order denying the manifestation/motion, on
the ground that petitioners are not interested parties within
the contemplation of the Rules of Court to intervene in the
intestate proceedings.
✓ Petition for certiorari was filed with the Court of Appeals,
arguing in general that petitioners had the right to intervene
in the intestate proceedings of Roberto Benedicto, the latter
being the defendant in the civil cases they lodged with the
Bacolod RTC, which was dismissed by the CA.

ISSUE:
WON the contingent claims of the petitioners can be claimed
against the estate of the decedent.

HELD: NO
CASE DIGEST #17 legis, which continues until said properties
Rule 86: CLAIMS AGAINST ESTATE have been distributed among the heirs.

Domingo vs. Garlitos Court having jurisdiction also found that the claim of
the estate has been recognized by the gov’t and has
GR L-18993 already appropriated the corresponding amount.
29 June 1963

 Claim of the Gov’t for inheritance taxes
Petitioner: Melecio Domingo as Commissioner of Internal against the estate is due and demandable. The claim
Revenue of the estate against the Gov’t is also due,
Respondent: Hon. Lorenzo Garlitos, CFI Leyte demandable and is fully liquidated. Compensation,
therefore, takes place by operation of law, in
FACTS: accordance with the provisions of Articles 1279 and
In Domingo vs. Moscoso (106 PHIL 1138), the Supreme 1290 of the Civil Code, and both debts are
Court declared as final and executory the order of the Court of extinguished to the concurrent amount.
First Instance of Leyte for the payment of estate and
inheritance taxes, charges and penalties amounting to
P40,058.55 by the Estate of the late Walter Scott Price. The
petition for execution filed by the fiscal, however, was denied
by the lower court. The Court held that the execution is
unjustified as the Government itself is indebted to the Estate
for 262,200; and ordered the amount of inheritance taxes be
deducted from the Government’s indebtedness to the Estate.

ISSUE:
1. Whether a tax and a debt may be compensated.
2. WON the set-off/deferment of the claim of CIR is proper.

HELD:
1. The court having jurisdiction of the Estate had found that
the claim of the Estate against the Government has been
recognized and an amount of P262,200 has already been
appropriated by a corresponding law (RA 2700). Under the
circumstances, both the claim of the Government for
inheritance taxes and the claim of the intestate for services
rendered have already become overdue and demandable as
well as fully liquidated. Compensation, therefore, takes place
by operation of law, in accordance with Article 1279 and 1290
of the Civil Code, and both debts are extinguished to the
concurrent amount.

2. It is proper. Compensation/set-off of taxes may happen by

operation of law when both debts are due and demandable.

The ordinary procedure to settle claims before an estate is not

a petition for execution, but by presenting a claim before the
probate court.
a. Aldamiz vs. Judge of CFI Mindoro-
Execution may issue only where the
devisees, legatees or heirs have entered into
possession of their respective portions in the
estate prior to settlement and payment of the
debts and expenses of administration and it
is later ascertained that there are such debts
and expenses to be paid, in which case "the
court having jurisdiction of the estate may,
by order for that purpose, after hearing,
settle the amount of their several liabilities,
and order how much and in what manner
each person shall contribute, and may issue
execution if circumstances require" (Rule
89, section 6; see also Rule 74, Section 4;
Emphasis supplied.)
b. Legal basis is the fact that the properties
belonging to the state are under custodia
CASE DIGEST #18
Rule 86: CLAIMS AGAINST ESTATE
G.R. No. L-30453 December 4, 1989
ANGELINA PUENTEVELLA ECHAUS, in her own
behalf and as Administratrix of the Estate of Luis
Puentevella, assisted by her husband, RENE
ECHAUS, petitioner, 

vs.

HON. RAMON BLANCO, as Judge of the Court of First
Instance of Iloilo, and PHILIPPINE COMMERCIAL &
INDUSTRIAL BANK, as Administrator of the Testate
Estate of the late Charles Newton Hodges, AVELINA A.
MAGNO, as Administratrix of the Testate Estate of the
late Linnie Jane Hodges, respondents.
FACTS:
The petitioner herein, Angelina Puentevella Echaus, in her
own behalf and as Administratrix of the intestate estate of her
deceased father Luis Puentevella, assisted by her husband,
Rene Echaus filed a complaint on May 30, 1962 against
Charles Newton Hodges (C.N. Hodges) praying for an
accounting of the business covering the Ba-Ta Subdivision,
the recovery of her share in the profits and remaining assets of
their business and the payment of expenses and moral and
exemplary damages. However, C.N. Hodges died which
resulted to the filing of a petition for the settlement of his
estate. A notice to the creditors was published in “Yuhum”, a
newspaper of general circulation.
The trial court ruled in favor of the petitioner and ordered the
private respondent to pay the amount indicated in the decision.
On January 21, 1967, the same trial court issued an order
granting plaintiff's motion for the issuance of a writ of
execution (p. 43, Rollo) against PCIB. However, the writ was
not enforced as plaintiff opted to file a motion dated February
20, 1967 (pp. 44-46, Rollo) in Special Proceedings No. 1672
(estate proceedings of deceased C. N. Hodges) for the
payment of the judgment.
In a motion (pp. 66-68, Rollo) dated November 25, 1968,
Angelina P. Echaus prayed for the resolution of her previous
motion to direct payment of the judgment credit which was
held in abeyance, stating that the petition for relief from
judgment filed in Civil Case No. 6628 was dismissed by the
trial court which dismissal has become final and executory in
view of the failure of Avelina Magno to file a record on appeal
on time.
On February 26, 1969, respondent Judge Ramon Blanco
issued an Order (pp. 72-74, Rollo) reiterating his position that
the motion to direct payment of the judgment credit cannot yet
be resolved and holding in abeyance the resolution thereof in
view of the writ of preliminary injunction issued by the
Supreme Court in G.R. Nos. L-27860 and L-27896, (PCIB v.
Blanco), enjoining respondent judge from hearing Special
Proceedings Nos. 1307 and 1672, entitled "Testate Estate of
the late Linnie Jane Hodges" and "Testate Estate of Charles N.
Hodges," respectively.
Petitioner then filed the instant petition for mandamus dated
April 21, 1969 seeking: a) to set aside respondent judge's
order of February 26, 1969; and b) to order PCIB to pay the
judgment credit in Civil Case No. 6628.
It is the contention of petitioner that the judgment in Civil
Case No. 6628 is now final and executory and the execution
thereof becomes a matter of right under Rule 39, Section 1 of
the Rules of Court. The duty to order the execution of a final
and executory judgment is ministerial and the failure of
respondent judge to issue such order is a proper case for
mandamus.
On the other hand, private respondents contend that the
judgment rendered in Civil Case No. 6628 is null and void for
having been rendered without jurisdiction. Money claims
against a defendant who dies without a judgment having been
rendered in the Regional Trial Court shall be dismissed and
prosecuted as a claim in the estate proceedings as laid down
under Section 21, Rule 3 of the Rules of Court. This procedure
was not followed in Civil Case No. 6628. Also, even, if it is
assumed that the judgment in the said civil case is valid, the
claim presented in the estate proceedings is already barred by
the statute of non-claims.
ISSUE:
Whether or not the judgement sought to be enforced by the
petitioner is barred under the Rules of Court.
RULING:
No. The judgement sought to be enforced by the petitioner is
not barred under the Rules of Court.
The above argument of private respondent is not correct. The
Rules of Court allows a creditor to file his claim after the
period set by the court in the notice to creditors, provided the
conditions stated in the rules are present. The rule provides:
Sec. 2. Time within which claims shall be filed.-... . However,
at any time before an order of distribution is entered, on
application of a creditor who has failed to file his claim within
the time previously limited, the court may, for cause shown
and on such terms as are equitable, allow such claim to be
filed within a time not exceeding one (1) month. (Rule 86).
It is clear from the foregoing (Section 2 of Rule 87 [now Rule
86]) that the period prescribed in the notice to creditors is not
exclusive; that money claims against the estate may be
allowed any time before an order of distribution is entered, at
the discretion of the court for cause and upon such terms as
are equitable.
Nonetheless, the petition for the writ of Mandamus is
dismissed for lack of merit. The court stressed that the time for
paying debts (and legacies) is to be fixed by the probate court
having jurisdiction over the estate of the deceased (Sec. 15,
Rule 18). In the absence of any showing that respondent judge
who is taking cognizance of the estate proceedings had already
allowed the administrator to dispose of the estate and to pay
the debts and legacies of the deceased, a writ of mandamus
will not issue to compel him to order payment of petitioner's
claim.
CASE DIGEST #19 the debt or had anything to do with the creation of the liability.
Rule 86: CLAIMS AGAINST ESTATE As far as the debt is concerned, there is no allegation or
showing that the petitioner had acted in violation of Mr.
Japitana's rights with consequential injury or damage to the
NACAR vs. NISTAL latter as would create a cause of action against the former.
G.R. No. L-33006
December 8, 1982

Facts: Respondent Ildefonso Japitana filed the complaint

in Civil Case No. 65 and entitled it “Claim against the
estate of the late Isabelo Nacar with Preliminary
Attahment” to recover an outstanding debt of the late Nacar
due respondent. He further alleged that Nicanor Nacar is
about to remove and dispose the property (seven
carabaos) with intent to defraud him. Considering that Mr.
Japitana had given security according to the Rules of
Court, Judge Nistal issued the order commanding the
provincial sheriff to attach the 7 cattles in the posession of
petitioner Nicanor Nacar. Actually only 4 carabaos were
attached because 3 carabaos had earlier been slaughtered
during the rites preceding the burial of the late Isabelo Nacar.
Nicanor Nacar filed a motion to dismiss but it was denied by
the court. Hence, this petition.

Issue:
1. WON the respondent judge erred in not dismissing the
claim against the estate of
the late Isabelo Nacar.
2. Whether or not a complaint against an heir of a decedent,
who incurred indebtedness, is the correct action for the
collection of money?

Held:
1. Yes. Indeed, although respondent Japitana may have a legal
right to recover an indebtedness due him, petitioner Nicanor
Nacar has no correlative legal duty to pay debt for the simple
reason that there is nothing in the complaint to show that he
incurred the debt or had anything to do with the creation of his
liability. It is also patent from the complaint that rspondent
Japitana filed the case against petitioner Nacar tp rcover 7
carabaos allegedly belonging to Isabelo Nacar which Japitana
wanted to recover from the possession of the petitioner to
answer for the outstanding debt of the late Isabelo Nacar. This
matter, however, is only ancillary to the main action. The
ancillary matter does not cure a fatal defect in the complaint
for the main action is for the recovery of an outstanding debt
of the late lsabelo Nacar due respondent Japitana, a cause of
action about which petitioner Nacar has nothing to do.

2. The Court held in the negative. Under the circumstances of

this case, respondent Japitana has no cause of action against
petitioner Nacar. The Court said that, a cause of action is an
act or omission of one party in violation of the legal right of
the other. Its essential elements are, namely: (1) the existence
of a legal right in the plaintiff, (2) a correlative legal duty in
the defendant, and (3) an act or omission of the defendant in
violation of plaintiff's right with consequential injury or
damage to the plaintiff for which he may maintain an action
for the recovery of damages or other appropriate relief.

Indeed, although respondent Japitana may have a legal right to

recover an indebtedness due him, petitioner Nicanor Nacar has
no correlative legal duty to pay the debt for the simple reason
that there is nothing in the complaint to show that he incurred
CASE DIGEST #20 Under Section 13 of the same Rule, the action of the court on
Rule 86: CLAIMS AGAINST ESTATE a claim against the estate “is appealable as in ordinary cases.”
Hence, by the express terms of the Rules, the ruling on the
G.R. No. 159130 August 22, 2008 extent of the Special Administrator’s commission –
ATTY. GEORGE S. BRIONES, petitioner, vs. LILIA J. effectively, a claim by the special administrator against the
HENSON-CRUZ, RUBY J. HENSON, and ANTONIO J. estate – is the lower court’s last word on the matter and one
HENSON respondents. that is appealable.

Facts:

Ruby J. Henson filed a petition for the allowance

of the will of her late mother, Luz J. Henson, with the RTC of
Manila. Lilia Henson-Cruz, one of the deceased’s daughters
and also a respondent in this petition, opposed Ruby’s petition.
She alleged that Ruby understated the value of their late
mother’s estate and acted with “unconscionable bad faith” in
the management thereof. Lilia prayed that her mother's
holographic will be disallowed and that she be appointed as
the Intestate Administratrix. An Interim Special Administrator
of the estate was appointed, however, Ferro, declined the
appointment. The trial court then designated petitioner Atty.
George S. Briones as Special Administrator of the estate. Atty.
Briones accepted the appointment, took his oath of office, and
started the administration of the estate. The court ordered the
accounting firm of Messrs. Alba, Romeo & Co. to
immediately conduct an audit of the administration, and
suspends the approval of the report of the special administrator
except the payment of his commission, which is hereby fixed
at 1.8% of the value of the estate.

A Petition for Certiorari, Prohibition, and

Mandamus was filed by the respondents to CA. The petition
assailed the Order dated March 12, 2002 which appointed
accounting firm Alba, Romeo & Co. as auditors and the Order
dated April 3, 2002 which reiterated the appointment.
Prior the filing of the petition for certiorari, the heirs of Luz
Henzon filed a Notice of Appeal with the RTC assailing the
Order insofar as it directed the payment of Atty. Briones’
commission. They subsequently filed their record on appeal.
The trial court, however, denied the appeal and disapproved
the record on appeal on the ground of forum shopping.
Respondents’ motion for reconsideration was likewise denied.
Hence, this petition.

Issue:

WON petition for certiorari is the proper remedy in

assailing the commission of executor.

Held:

No. From an estate proceeding perspective, the

Special Administrator’s commission is no less a claim against
the estate than a claim that third parties may make. Section 8,
Rule 86 of the Rules recognizes this when it provides for
“Claim of Executor or Administrator Against an Estate.”
 SECOND DIVISION
G.R. No. 170498 : January 9, 2013
METROPOLITAN BANK & TRUST
COMPANY, Petitioner, v. ABSOLUTE MANAGEMENT
CORPORATION, Respondent.
DECISION
BRION, J.:
Factual Antecedents
On October 5, 2000, Sherwood Holdings Corporation, Inc.
(SHCI) filed a complaint for sum of money against Absolute
Management Corporation (AMC). The complaint was
docketed as Civil Case No. Q-00-42105 and was assigned to
the RTC of Quezon City, Branch 80.
SHCI alleged in its complaint that it made advance payments
to AMC for the purchase of 27,000 pieces of plywood and
16,500 plyboards in the sum of P12,277,500.00, covered by
Metrobank Check Nos. 1407668502, 140768507, 140768530,
140768531, 140768532, 140768533 and 140768534. These
checks were all crossed, and were all made payable to AMC.
They were given to Chua, AMCs General Manager, in 1998.
Chua died in 1999, 8 and a special proceeding for the
settlement of his estate was commenced before the RTC of
Pasay City. This proceeding was pending at the time AMC
filed its answer with counterclaims and third-party complaint.9
SHCI made demands on AMC, after Chuas death, for
allegedly undelivered items worth P8,331,700.00. According
to AMC, these transactions could not be found in its records.
Upon investigation, AMC discovered that in 1998, Chua
received from SHCI 18 Metrobank checks
worth P31,807,500.00. These were all payable to AMC and
were crossed or "for payees account only."
In its answer with counterclaims and third-party complaint,
11 AMC averred that it had no knowledge of Chuas
transactions with SHCI and it did not receive any money from
the latter. AMC also asked the RTC to hold Metrobank liable
for the subject checks in case it is adjudged liable to SHCI.
Metrobank filed a motion for bill of particulars,12 seeking to
clarify certain ambiguous statements in AMCs answer. The
RTC granted the motion but AMC failed to submit the
required bill of particulars. Hence, Metrobank filed a motion
to strike out the third-party complaint.13
In the meantime, Metrobank filed a motion to
dismiss14 against AMC on the ground that the latter engaged in
prohibited forum shopping. According to Metrobank, AMCs
claim against it is the same claim that it raised against Chuas
estate in Special Proceedings No. 99-0023 before the RTC of
Pasay City, Branch 112. The RTC subsequently denied this
motion.15
The RTC of Quezon City opted to defer consideration16 of
Metrobanks motion to strike out third-party complaint17 and it
instead granted AMCs motion for leave to serve written
interrogatories on the third-party defendant.18 In its
answer23 dated December 1, 2003, Metrobank admitted that it
deposited the checks in question to the account of Ayala
Lumber and Hardware, a sole proprietorship Chua owned and
managed. The deposit was allegedly done with the knowledge
and consent of AMC. According to Metrobank, Chua then
gave the assurance that the arrangement for the handling of the
checks carried AMCs consent. Chua also submitted documents
showing his position and interest in AMC. These documents,
as well as AMCs admission in its answer that it allowed Chua
to manage AMC with a relative free hand, show that it knew
of Chuas arrangement with Metrobank. Further, Chuas records
show that the proceeds of the checks were remitted to AMC
which cannot therefore now claim that it did not receive these
proceeds.
Metrobank also raised the defense of estoppel. According to
Metrobank, AMC had knowledge of its arrangements with
Chua for several years. Despite this arrangement, AMC did
not object to nor did it call the attention of Metrobank about
Chuas alleged lack of authority to deposit the checks in Ayala
Lumber and Hardwares account. At this point, AMC is already
estopped from questioning Chuas authority to deposit these
checks in Ayala Lumber and Hardwares account.
Lastly, Metrobank asserted that AMC gave Chua unbridled
control in managing AMCs affairs. This measure of control
amounted to gross negligence that was the proximate cause of
the loss that AMC must now bear.
Subsequently, Metrobank filed a motion for leave to admit
fourth-party complaint24 against Chuas estate. It alleged that
Chuas estate should reimburse Metrobank in case it would be
held liable in the third-party complaint filed against it by
AMC.
The RTCs Ruling
In an order25 dated May 7, 2004, the RTC denied Metrobanks
motion. It likewise denied Metrobanks motion for
reconsideration in an order26 dated July 7, 2004.
The RTC categorized Metrobanks allegation in the fourth-
party complaint as a "cobro de lo indebido"27a kind of quasi-
contract that mandates recovery of what has been improperly
paid. Quasi-contracts fall within the concept of implied
contracts that must be included in the claims required to be
filed with the judicial settlement of the deceaseds estate under
Section 5, Rule 86 of the Rules of Court. As such claim, it
should have been filed in Special Proceedings No. 99-0023,
not before the RTC as a fourth-party complaint. The RTC,
acting in the exercise of its general jurisdiction, does not have
the authority to adjudicate the fourth-party complaint. As a
trial court hearing an ordinary action, it cannot resolve matters
pertaining to special proceedings because the latter is subject
to specific rules.
The CAs Ruling
The CA affirmed the RTCs ruling that Metrobanks fourth-
party complaint should have been filed in Special Proceedings
No. 99-0023.29 According to the CA, the relief that Metrobank
prayed for was based on a quasi-contract and was a money
claim categorized as an implied contract that should be filed
under Section 5, Rule 86 of the Rules of Court.
Based on the statutory construction principle of lex specialis
derogat generali, the CA held that Section 5, Rule 86 of the
Rules of Court is a special provision that should prevail over
the general provisions of Section 11, Rule 6 of the Rules of
Court. The latter applies to money claims in ordinary actions
while a money claim against a person already deceased falls
under the settlement of his estate that is governed by the rules
on special proceedings. If at all, rules for ordinary actions only
apply suppletorily to special proceedings.
The Present Petition
In its present petition for review on certiorari,30 Metrobank
asserts that it should be allowed to file a fourth-party
complaint against Chuas estate in the proceedings before the
RTC; its fourth-party complaint was filed merely to enforce its
right to be reimbursed by Chuas estate in case Metrobank is
held liable to AMC. Hence, Section 11, Rule 6 of the Rules of
Court should apply.
AMC, in its comment,31 maintains the line that the CA and the
RTC rulings should be followed, i.e., that Metrobanks claim is
a quasi-contract that should be filed as a claim under Section
5, Rule 86 of the Rules of Court.
ISSUE
The main issue poses to us two essential points that must be
addressed. First, are quasi-contracts included in claims that
should be filed pursuant to Rule 86, Section 5 of the Rules of
Court? Second, if so, is Metrobanks claim against the Estate of
Jose Chua based on a quasi-contract?
RULING
Quasi-contracts are included
in claims that should be filed
under Rule 86, Section 5 of the
Rules of Court.
In Maclan v. Garcia,39 Gabriel Maclan filed a civil case to
recover from Ruben Garcia the necessary expenses he spent as
possessor of a piece of land. Garcia acquired the land as an
heir of its previous owner. He set up the defense that this claim
should have been filed in the special proceedings to settle the
estate of his predecessor. Maclan, on the other hand,
contended that his claim arises from law and not from
contract, express or implied. Thus, it need not be filed in the
settlement of the estate of Garcias predecessor, as mandated
by Section 5, Rule 87 of the Rules of Court (now Section 5,
Rule 86).
The Court held under these facts that a claim for necessary
expenses spent as previous possessor of the land is a kind of
quasi-contract. Citing Leung Ben v. OBrien,40 it explained that
the term "implied contracts," as used in our remedial law,
originated from the common law where obligations derived
from quasi-contracts and from law are both considered as
implied contracts. Thus, the term quasi-contract is included in
the concept "implied contracts" as used in the Rules of Court.
Accordingly, liabilities of the deceased arising from quasi-
contracts should be filed as claims in the settlement of his
estate, as provided in Section 5, Rule 86 of the Rules of Court.
41
Metrobanks fourth-party complaint
is based on quasi-contract.
Both the RTC and the CA described Metrobanks claim against
Chuas estate as one based on quasi-contract. A quasi-contract
involves a juridical relation that the law creates on the basis of
certain voluntary, unilateral and lawful acts of a person, to
avoid unjust enrichment.42 The Civil Code provides an
enumeration of quasi-contracts,43 but the list is not exhaustive
and merely provides examples.44
In its fourth-party complaint, Metrobank claims that Chuas
estate should reimburse it if it becomes liable on the checks
that it deposited to Ayala Lumber and Hardwares account
upon Chuas instructions.
This fulfills the requisites of solutio indebiti. First, Metrobank
acted in a manner akin to a mistake when it deposited the
AMC checks to Ayala Lumber and Hardwares account;
because of Chuas control over AMCs operations, Metrobank
assumed that the checks payable to AMC could be deposited
to Ayala Lumber and Hardwares account. Second, Ayala
Lumber and Hardware had no right to demand and receive the
checks that were deposited to its account; despite Chuas
control over AMC and Ayala Lumber and Hardware, the two
entities are distinct, and checks exclusively and expressly
payable to one cannot be deposited in the account of the other.
This disjunct created an obligation on the part of Ayala
Lumber and Hardware, through its sole proprietor, Chua, to
return the amount of these checks to Metrobank.
Metrobanks fourth-party complaint, as a contingent claim,
falls within
the claims that should be filed under Section 5, Rule 86
of the Rules of Court.
A distinctive character of Metrobanks fourth-party
complaint is its contingent nature the claim depends on the
possibility that Metrobank would be adjudged liable to
AMC, a future event that may or may not happen. This
characteristic unmistakably marks the complaint as a
contingent one that must be included in the claims falling
under the terms of Section 5, Rule 86 of the Rules of
Court:
Sec. 5. Claims which must be filed under the notice. If not
filed, barred; exceptions. All claims for money against the
decedent, arising from contract, express or implied,
whether the same be due, not due, or contingent, all claims
for funeral expenses and expenses for the last sickness of
the decedent, and judgment for money against the
decedent, must be filed within the time limited in the
notice. [italics ours]
Specific provisions of Section 5, Rule 86 of the Rules of
Court prevail over

general provisions of Section 11, Rule6 of the Rules of
Court.
Metrobank argues that Section 11, Rule 6 of the Rules of
Court should apply because it impleaded Chuas estate for
reimbursement in the same transaction upon which it has been
sued by AMC. On this point, the Court supports the
conclusion of the CA, to wit:
Notably, a comparison of the respective provisions of Section
11, Rule 6 and Section 5, Rule 86 of the Rules of Court readily
shows that Section 11, Rule 6 applies to ordinary civil actions
while Section 5, Rule 86 specifically applies to money claims
against the estate. The specific provisions of Section 5, Rule
86 x x x must therefore prevail over the general provisions of
Section 11, Rule 6.48
We read with approval the CAs use of the statutory
construction principle of lex specialis derogat generali, leading
to the conclusion that the specific provisions of Section 5,
Rule 86 of the Rules of Court should prevail over the general
provisions of Section 11, Rule 6 of the Rules of Court; the
settlement of the estate of deceased persons (where claims
against the deceased should be filed) is primarily governed by
the rules on special proceedings, while the rules provided for
ordinary claims, including Section 11, Rule 6 ofthe Rules of
Court, merely apply suppletorily.49
In sum, on all counts in the considerations material to the
issues posed, the resolution points to the affirmation of the
assailed CA decision and resolution. Metrobank's claim in its
fourth-party complaint against Chua's estate is based on quasi-
contract. It is also a contingent claim that depends on another
event. Both belong to the category of claims against a
deceased person that should be filed under Section 5, Rule 86
of the Rules of Comi and, as such, should have been so filed in
Special Proceedings No. 99-0023.
WHEREFORE, premises considered, we hereby DENY the
petition for lack of merit. The decision of the Court of Appeals
dated August 25, 2005, holding that the Regional Trial Court
of Quezon City, Branch 80, did not commit grave abuse of
discretion in denying Metropolitan Bank & Trust Company's
motion for leave to admit fourth-party complaint Is
AFFIRMED. Costs against Metropolitan Bank & Trust
Company.
SO ORDERED.
 DIVISION
[ GR No. 171206, Sep 23, 2013 ]
HEIRS OF LATE SPS. FLAVIANO MAGLASANG AND
SALUD ADAZA-MAGLASANG v. MANILA BANKING
CORPORAT ON +
DECISION
G.R. No. 171206
 The RTC Ruling and Subsequent Proceedings
PERLAS-BERNABE, J.:
The Facts


On June 16, 1975, spouses Flaviano and Salud Maglasang
(Sps. Maglasang) obtained a credit line from respondent[5] in
the amount of P350,000.00 which was secured by a real estate
mortgage[6] executed over seven of their properties[7] located
in Ormoc City and the Municipality of Kananga, Province of
Leyte.[8] They availed of their credit line by securing loans in
the amounts of P209,790.50 and P139,805.83 on October 24,
1975 and March 15, 1976, respectively,[9] both of which
becoming due and demandable within a period of one year.
Further, the parties agreed that the said loans would earn
interest at 12% per annum (p.a.) and an additional 4% penalty
would be charged upon default.[10]
 respondent under Section 7, Rule 86 of the Rules of Court


After Flaviano Maglasang (Flaviano) died intestate on
February 14, 1977, his widow Salud Maglasang (Salud) and
their surviving children, herein petitioners appointed[11] their
brother petitioner Edgar Maglasang (Edgar) as their attorney-
in-fact.[12] Thus, on March 30, 1977, Edgar filed a verified
petition for letters of administration of the intestate estate of
Flaviano before the then Court of First Instance of Leyte,
Ormoc City, Branch 5 (probate court), docketed as Sp. Proc.
No. 1604-0.[13] On August 9, 1977, the probate court issued an
Order[14] granting the petition, thereby appointing Edgar as the
administrator[15] of Flaviano's estate.

In view of the issuance of letters of administration, the probate
court, on August 30, 1977, issued a Notice to Creditors[16] for
the filing of money claims against Flaviano's estate.
Accordingly, as one of the creditors of Flaviano, respondent
notified[17] the probate court of its claim in the amount of
P382,753.19 as of October 11, 1978, exclusive of interests and
charges.
 CA, what should apply is Act No. 3135[33] which entitles


During the pendency of the intestate proceedings, Edgar and
Oscar were able to obtain several loans from respondent,
secured by promissory notes[18] which they signed.



In an Order[19] dated December 14, 1978 (December 14, 1978
Order), the probate court terminated the proceedings with the
surviving heirs executing an extra-judicial partition of the
properties of Flaviano's estate. The loan obligations owed by
the estate to respondent, however, remained unsatisfied due to
respondent's certification that Flaviano's account was
undergoing a restructuring. Nonetheless, the probate court
expressly recognized the rights of respondent under the
mortgage and promissory notes executed by the Sps.
Maglasang, specifically, its "right to foreclose the same within
the statutory period."[20]

In this light, respondent proceeded to extra-judicially foreclose
the mortgage covering the Sps. Maglasang's properties and
emerged as the highest bidder at the public auction for the
amount of P350,000.00.[21] There, however, remained a
deficiency on Sps. Maglasang's obligation to respondent.
Thus, on June 24, 1981, respondent filed a suit to recover the
deficiency amount of P250,601.05 as of May 31, 1981 against
the estate of Flaviano, his widow Salud and petitioners,
docketed as Civil Case No. 1998-0.[22]

After trial on the merits, the RTC (formerly, the probate court)
[23] rendered a Decision[24] on April 6, 1987 directing the
petitioners to pay respondent, jointly and severally, the amount
of P434,742.36 with interest at the rate of 12% p.a., plus a 4%
penalty charge, reckoned from September 5, 1984 until fully
paid.[25] The RTC found that it was shown, by a preponderance
of evidence, that petitioners, after the extra-judicial
foreclosure of all the properties mortgaged, still have an
outstanding obligation in the amount and as of the date as
above-stated. The RTC also found in order the payment of
interests and penalty charges as above-mentioned as well as
attorney's fees equivalent to 10% of the outstanding
obligation.[26]



Dissatisfied, petitioners elevated the case to the CA on appeal,
contending,[27] inter alia, that the remedies available to
(Rules) are alternative and exclusive, such that the election of
one operates as a waiver or abandonment of the others. Thus,
when respondent filed its claim against the estate of Flaviano
in the proceedings before the probate court, it effectively
abandoned its right to foreclose on the mortgage. Moreover,
even on the assumption that it has not so waived its right to
foreclose, it is nonetheless barred from filing any claim for
any deficiency amount.



During the pendency of the appeal, Flaviano's widow, Salud,
passed away on July 25, 1997.[28]



The CA Ruling


Further, the CA held that Section 7, Rule 86 of the Rules does
not apply to the present case since the same does not involve a
mortgage made by the administrator over any property
belonging to the estate of the decedent.[32] According to the
respondent to claim the deficiency amount after the extra-
judicial foreclosure of the real estate mortgage of Sps.
Maglasang's properties.[34]

The Issue Before the Court


The essential issue in this case is whether or not the CA erred
in affirming the RTC's award of the deficiency amount in
favor of respondent.



Petitioners assert[36] that it is not Act No. 3135 but Section 7,
Rule 86 of the Rules which applies in this case. The latter
provision provides alternative and exclusive remedies for the
satisfaction of respondent's claim against the estate of
Flaviano.[37] Corollarily, having filed its claim against the
estate during the intestate proceedings, petitioners argue that
respondent had effectively waived the remedy of foreclosure
and, even assuming that it still had the right to do so, it was
precluded from filing a suit for the recovery of the deficiency
obligation.[38]
 applies to cases where the administrator mortgages the


Likewise, petitioners maintain that the extra-judicial
foreclosure of the subject properties was null and void, not
having been conducted in the capital of the Province of Leyte
in violation of the stipulations in the real estate mortgage
contract.[39] They likewise deny any personal liability for the
loans taken by their deceased parents.[40]
 mortgages made by the administrator, as that in the PNB case.
The Court's Ruling


The petition is partly meritorious.
 his indebtedness. In particular, he may choose to: (a) waive


Claims against deceased persons should be filed during the
settlement proceedings of their estate.[41] Such proceedings
are primarily governed by special rules found under Rules
73 to 90 of the Rules, although rules governing ordinary
actions may, as far as practicable, apply suppletorily.[42]
 the right to file a claim for any deficiency.[45] It must,


Among these special rules, Section 7, Rule 86 of the Rules
(Section 7, Rule 86) provides the rule in dealing with secured
claims against the estate:
 others. With respect to real properties, the Court in Bank of
SEC. 7. Mortgage debt due from estate. A creditor holding a
claim against the deceased secured by a mortgage or other
collateral security, may abandon the security and prosecute
his claim in the manner provided in this rule, and share in the
general distribution of the assets of the estate; or he may
foreclose his mortgage or realize upon his security, by action
in court, making the executor or administrator a party
defendant, and if there is a judgment for a deficiency, after the
sale of the mortgaged premises, or the property pledged, in the
foreclosure or other proceeding to realize upon the security, he
may claim his deficiency judgment in the manner provided in
the preceding section; or he may rely upon his mortgage or
other security alone, and foreclose the same at any time within
the period of the statute of limitations, and in that event he
shall not be admitted as a creditor, and shall receive no share
in the distribution of the other assets of the estate; but nothing
herein contained shall prohibit the executor or administrator
from redeeming the property mortgaged or pledged, by paying
the debt for which it is held as security, under the direction of
the court, if the court shall adjudged it to be for the best
interest of the estate that such redemption shall be made.
(Emphasis and underscoring supplied)
As the foregoing generally speaks of "[a] creditor holding a
claim against the deceased secured by a mortgage or other
collateral security" as above-highlighted, it may be reasonably
concluded that the aforementioned section covers all secured
claims, whether by mortgage or any other form of collateral,
which a creditor may enforce against the estate of the
deceased debtor. On the contrary, nowhere from its language
can it be fairly deducible that the said section would as the CA
interpreted narrowly apply only to mortgages made by the
administrator over any property belonging to the estate of the
decedent. To note, mortgages of estate property executed by
the administrator, are also governed by Rule 89 of the Rules,
captioned as "Sales, Mortgages, and Other Encumbrances of
Property of Decedent."



In this accord, it bears to stress that the CA's reliance
on Philippine National Bank v. CA[43] (PNB) was misplaced as
the said case did not, in any manner, limit the scope of Section
7, Rule 86. It only stated that the aforesaid section equally
property of the estate to secure the loan he obtained.
[44] Clearly, the pronouncement was a ruling of inclusion and
not one which created a distinction. It cannot, therefore, be
doubted that it is Section 7, Rule 86 which remains applicable
in dealing with a creditor's claim against the mortgaged
property of the deceased debtor, as in this case, as well as


Jurisprudence breaks down the rule under Section 7, Rule 86
and explains that the secured creditor has three remedies/
options that he may alternatively adopt for the satisfaction of
the mortgage and claim the entire debt from the estate of the
mortgagor as an ordinary claim; (b) foreclose the mortgage
judicially and prove the deficiency as an ordinary claim; and
(c) rely on the mortgage exclusively, or other security and
foreclose the same before it is barred by prescription, without
however, be emphasized that these remedies are distinct,
independent and mutually exclusive from each other; thus,
the election of one effectively bars the exercise of the
America v. American Realty Corporation[46] pronounced:

In our jurisdiction, the remedies available to the mortgage
creditor are deemed alternative and not cumulative.
Notably, an election of one remedy operates as a waiver of
the other. For this purpose, a remedy is deemed chosen upon
the filing of the suit for collection or upon the filing of the
complaint in an action for foreclosure of mortgage, pursuant to
the provision of Rule 68 of the 1997 Rules of Civil Procedure.
As to extrajudicial foreclosure, such remedy is deemed elected
by the mortgage creditor upon filing of the petition not with
any court of justice but with the Office of the Sheriff of the
province where the sale is to be made, in accordance with the
provisions of Act No. 3135, as amended by Act No. 4118.
[47] (Emphasis supplied)
Anent the third remedy, it must be mentioned that the same
includes the option of extra-judicially foreclosing the
mortgage under Act No. 3135, as availed of by respondent in
this case. However, the plain result of adopting the last mode
of foreclosure is that the creditor waives his right to recover
any deficiency from the estate.[48] These precepts were
discussed in the PNB case, citing Perez v. Philippine National
Bank[49] which overturned the earlier Pasno v. Ravina ruling:
[50]

Case law now holds that this rule grants to the mortgagee three
distinct, independent and mutually exclusive remedies that can
be alternatively pursued by the mortgage creditor for the
satisfaction of his credit in case the mortgagor dies, among
them:

(1) to waive the mortgage and claim the entire debt from the
estate of the mortgagor as an ordinary claim;



(2) to foreclose the mortgage judicially and prove any
deficiency as an ordinary claim; and



(3) to rely on the mortgage exclusively, foreclosing the same 

at any time before it is barred by prescription without right to SO ORDERED.
file a claim for any deficiency.


The plain result of adopting the last mode of foreclosure is
that the creditor waives his right to recover any deficiency
from the estate. Following the Perez ruling that the third
mode includes extrajudicial foreclosure sales, the result of
extrajudicial foreclosure is that the creditor waives any
further deficiency claim. x x x.[51]

To obviate any confusion, the Court observes that the

operation of Act No. 3135 does not entirely discount the
application of Section 7, Rule 86, or vice-versa. Rather, the
two complement each other within their respective spheres of
operation. On the one hand, Section 7, Rule 86 lays down the
options for the secured creditor to claim against the estate and,
according to jurisprudence, the availment of the third option
bars him from claiming any deficiency amount. On the other
hand, after the third option is chosen, the procedure governing
the manner in which the extra-judicial foreclosure should
proceed would still be governed by the provisions of Act No.
3135. Simply put, Section 7, Rule 86 governs the parameters
and the extent to which a claim may be advanced against the
estate, whereas Act No. 3135 sets out the specific procedure to
be followed when the creditor subsequently chooses the third
option specifically, that of extra-judicially foreclosing real
property belonging to the estate. The application of the
procedure under Act No. 3135 must be concordant with
Section 7, Rule 86 as the latter is a special rule applicable to
claims against the estate, and at the same time, since Section
7, Rule 86 does not detail the procedure for extra-judicial
foreclosures, the formalities governing the manner of availing
of the third option such as the place where the application for
extra-judicial foreclosure is filed, the requirements of
publication and posting and the place of sale must be governed
by Act No. 3135.



In this case, respondent sought to extra-judicially foreclose the
mortgage of the properties previously belonging to Sps.
Maglasang (and now, their estates) and, therefore, availed of
the third option. Lest it be misunderstood, it did not exercise
the first option of directly filing a claim against the estate, as
petitioners assert, since it merely notified[52] the probate court
of the outstanding amount of its claim against the estate of
Flaviano and that it was currently restructuring the account.
[53] Thus, having unequivocally opted to exercise the third
option of extra-judicial foreclosure under Section 7, Rule 86,
respondent is now precluded from filing a suit to recover any
deficiency amount as earlier discussed.


All told, finding that the extra-judicial foreclosure subject
of this case was properly conducted in accordance with the
formalities of Act No. 3135, the Court upholds the same as
a valid exercise of respondent's third option under Section
7, Rule 86. To reiterate, respondent cannot, however, file
any suit to recover any deficiency amount since it
effectively waived its right thereto when it chose to avail of
extra-judicial foreclosure as jurisprudence instructs.



WHEREFORE, the petition is PARTLY GRANTED. The
complaint for the recovery of the deficiency amount after
extra-judicial foreclosure filed by respondent Manila Banking
Corporation is hereby DISMISSED. The extra-judicial
foreclosure of the mortgaged properties, however, stands.

 FIRST DIVISION
[ G.R. No. 188944, July 09, 2014 ]
SPOUSES RODOLFO BEROT AND LILIA BEROT
PETITIONERS, VS. FELIPE C. SIAPNO,
RESPONDENT.
 the beneficiaries who were of legal age.[8] However, it upheld


DECISION
SERENO, C.J.:
 basis,[9]when it ruled thus: WHEREFORE, the appealed
THE FACTS
On May 23, 2002, Macaria Berot (or "Macaria") and spouses
Rodolfo A. Berot (or "appellant") and Lilia P. Berot (or
"Lilia") obtained a loan from Felipe C. Siapno (or "appellee")
in the sum of P250,000.00, payable within one year together
with interest thereon at the rate of 2% per annum from that
date until fully paid.
 impliedly by voluntary appearance;
As security for the loan, Macaria, appellant and Lilia (or
"mortgagors", when collectively) mortgaged to appellee a
portion, consisting of 147 square meters (or "contested
property"), of that parcel of land with an area of 718 square
meters, situated in Banaoang, Calasiao, Pangasinan and
covered by Tax Declaration No. 1123 in the names of Macaria
and her husband Pedro Berot (or "Pedro"), deceased. On June
23, 2003, Macaria died.
 Petitioners were correct when they argued that upon Macaria


Because of the mortgagors' default, appellee filed an action
against them for foreclosure of mortgage and damages on July
15, 2004 in the Regional Trial Court of Dagupan City (Branch
42).


In answer, appellant and Lilia (or "Berot spouses", when
collectively [referred to]) alleged that the contested property
was the inheritance of the former from his deceased father,
Pedro; that on said property is their family home; that the
mortgage is void as it was constituted over the family home
without the consent of their children, who are the beneficiaries
thereof; that their obligation is only joint; and that the lower
court has no jurisdiction over Macaria for the reason that no
summons was served on her as she was already dead.
 substitute cannot lie and should be denied by the court. An


With leave of court, the complaint was amended by
substituting the estate of Macaria in her stead. Thus, the
defendants named in the amended complaint are now the
"ESTATE OF MACARIA BEROT, represented by Rodolfo A.
Berot, RODOLFO A. BEROT and LILIA P. BEROT".
 sued is a correlative of the capacity to sue, to the same extent,
On 29 January 2009, the CA, through its Seventh Division,
promulgated a Decision that affirmed the RTC Decision but
with modification where it deleted the award of exemplary
damages, attorney's fees and expenses of litigation. The
appellate court explained in its ruling that petitioners correctly
argued that a decedent's estate is not a legal entity and thus,
cannot sue or be sued. However, it noted that petitioners failed
to object to the trial court's exercise of jurisdiction over the
estate of Macaria when the latter was impleaded by
respondents by amending the original complaint.[4]


The CA also found the action of respondent to be procedurally
correct under Section 7, Rule 86 of the Rules of Court, when it
decided to foreclose on the mortgage of petitioner and prove
his deficiency as an ordinary claim.[6] The CA did not make a
categorical finding that the nature of the obligation was joint
or solidary on the part of petitioners.[7] It neither sustained
their argument that the mortgage was invalid for having been
constituted over a family home without the written consent of
their argument that the award of exemplary damages and
attorney's fees in favor of respondent was improper for lack of
decision is AFFIRMED with MODIFICATION in that the
award of exemplary damages, attorney's fees and expenses of
litigation is DELETED. SO ORDERED.[10]
THE ISSUES
The Court of Appeals erred in:
1. Holding that the intestate estate of Macaria Berot
could be a proper party by waiver expressly or


2. In not holding that the obligation is joint[12]

THE COURT'S RULING


We DENY the Petition for lack of merit.



Berot's death on 23 June 2003, her legal personality ceased,
and she could no longer be impleaded as respondent in the
foreclosure suit. It is also true that her death opened to her
heirs the succession of her estate, which in this case was an
intestate succession. The CA, in fact, sustained petitioners'
position that a deceased person's estate has no legal
personality to be sued. Citing the Court's ruling in Ventura v.
Militante,[13] it correctly ruled that a decedent does not have
the capacity to be sued and may not be made a defendant in a
case:



A deceased person does not have such legal entity as is
necessary to bring action so much so that a motion to
action begun by a decedent's estate cannot be said to have
been begun by a legal person, since an estate is not a legal
entity; such an action is a nullity and a motion to amend the
party plaintiff will not, likewise, lie, there being nothing
before the court to amend. Considering that capacity to be
a decedent does not have the capacity to be sued and may not
be named a party defendant in a court action.


When respondent filed the foreclosure case on 15 June 2004
and impleaded Macaria Berot as respondent, the latter had
already passed away the previous year, on 23 June 2003. In
their Answer[14] to the Complaint, petitioners countered among
others, that the trial court did not have jurisdiction over
Macaria, because no summons was served on her, precisely
for the reason that she had already died. Respondent then
amended his Complaint with leave of court and substituted the
deceased Macaria by impleading her intestate estate and
identified Rodolfo Berot as the estate's representative.
Thereafter, the case proceeded on the merits at the trial, where secure a loan obligation, and given our ruling in this case that
this case originated and where the Decision was promulgated.
 the obligation is joint, her intestate estate is liable to a third of

 the loan contracted during her lifetime. Thus, the foreclosure
It can be gleaned from the records of the case that petitioners of the property may proceed, but would be answerable only to
did not object when the estate of Macaria was impleaded as the extent of the liability of Macaria to respondent.

respondent in the foreclosure case. Petitioner Rodolfo Berot 

did not object either when the original Complaint was WHEREFORE, the CA Decision in CA-G.R. CV No. 87995
amended and respondent impleaded him as the administrator sustaining the RTC Decision in Civil Case No. 2004-0246-D
of Macaria's estate, in addition to his being impleaded as an is hereby AFFIRMED with the MODIFICATION that the
individual respondent in the case. Thus, the trial and appellate obligation of petitioners and the estate of Macaria Berot is
courts were correct in ruling that, indeed, petitioners impliedly declared as joint in nature. SO ORDERED.
waived any objection to the trial court's exercise of
jurisdiction over their persons at the inception of the case. 



In an Order[20] dated 14 April 2005, the RTC noted that
petitioners received the summons and the copy of the amended
Complaint on 3 February 2005 and yet they did not file an
Answer. During the trial on the merits that followed,
petitioners failed to interpose any objection to the trial court's
exercise of jurisdiction over the estate of Macaria Berot.
Clearly, their full participation in the proceedings of the case
can only be construed as a waiver of any objection to or
defense of the trial court's supposed lack of jurisdiction over
the estate.



In Gonzales v. Balikatan Kilusang Bayan sa Panlalapi, Inc.,
[21] we held that a party's appearance in a case is equivalent to
a service of summons and that objections must be timely
raised:


In this regard, petitioners should be reminded of the provision

in the Rules of Court that a defendant's voluntary appearance
in an action shall be equivalent to service of summons.
Further, the lack of jurisdiction over the person of the
defendant may be waived either expressly or impliedly. When
a defendant voluntarily appears, he is deemed to have
submitted himself to the jurisdiction of the court. If he does
not wish to waive this defense, he must do so seasonably by
motion, and object thereto.


Rodolfo is also Macaria's co-defendant in the foreclosure
proceedings in his own capacity as co-borrower of the loan.
He participated in the proceedings of the case, from the initial
hearing of the case, and most particularly when respondent
filed his amended complaint impleading the estate of Macaria.
When respondent amended his complaint, Rodolfo did not file
an amended Answer nor raise any objection, even if he was
also identified therein as the representative of the estate of the
deceased Macaria. The lower court noted this omission by
Rodolfo in its Order dated 8 September 2006 ruling on his
Motion for Reconsideration to the said court's Decision dated
30 June 2006. Thus, his continued participation in the
proceedings clearly shows that the lower court acquired
jurisdiction over the heir of Macaria.



The CA properly upheld respondent's course of action as an
availment of the second remedy provided under Section 7,
Rule 86 of the 1997 Revised Rules of Court.[32] Under the said
provision for claims against an estate, a mortgagee has the
legal option to institute a foreclosure suit and to recover upon
the security, which is the mortgaged property.



During her lifetime, Macaria was the registered owner of the
mortgaged property, subject of the assailed foreclosure.
Considering that she had validly mortgaged the property to