GENATO v. BAYHON | G.R. No. 171035 | Aug.

24, 2009

TOPIC: Rule 86: Claims against the Estate; Rule 3, Sec. 20 (ROC)

FACTS:

 (This is a petition for review assailing the CA decision and Resolution denying Petitioner’s MR)
 Consolidated case stemming from 2 civil cases before the RTC
 (Civil Case #1)
 On Oct. 18, 1990, the Bayhons (Respondents) filed an action in RTC-QC seeking the declaration of
nullity of a dacion en pago executed by Benjamin Bayhon (one of the Resps.) in favor of Petitioner
Genato
 Benjamin alleged that:
o He obtained from Petitioner a loan amounting to P1M;
o To cover the loan, he executed a Deed of REM over the property covered by TCT No. 38052;
o However, the execution of the Deed of REM was conditioned upon the personal assurance of
Petitioner that the said instrument is only a private memorandum of indebtedness and that it would
neither be notarized nor enforced according to its tenor.
 Benjamin further alleged that he filed a separate proceeding for the reconstitution of TCT No. 38052 before
the RTC-QC (diff. branch)
 Genato filed an Answer in Intervention and attached a copy of an alleged dacion en pago covering said lot
 Benjamin assailed the dacion en pago as a forgery alleging that neither he nor his wife (who died 3 years
earlier) had executed it
 Genato denied the claim of Benjamin regarding the death of the latter’s wife. He alleged that on the date that
the REM was to be signed, Benjamin introduced to him a woman as his wife. He alleged that Benjamin
signed the dacion and that the execution of the instrument was above-board
 (Civil Case #2)
 On Dec. 20, 1990, Genato filed an action for specific performance before the RTC-QC (another diff.
branch)
o Alleged that Benjamin obtained a loan from him in the amount of P1M; that he failed to pay the
loan and executed a dacion in favor of Genato
o Alleged that the dacion was inscribed and recorded with the Registry of Deeds of QC
 [RTC Decision on the consolidated cases]
o It found that Respondent obtained a loan of P1M
o With respect to the dacion, RTC held that the parties have novated the agreement
 Found novation from the subsequent payments made by Respondent to Petitioner
 All such payments were made after the purported execution of the dacion
o At the time of execution of REM, wife of Respondent was already dead. The property covered by
the RTC was owned in common by the Resps. And not by Benjamin alone
o In sum, it upheld Respondent’s [bayhon] liability to Petitioner [genato] and ordered the latter
to pay P5M~ (including principal and stipulated interest)
 [CA Decision]
o Reversed the RTC decision. (pending appeal, Benjamin died)
o The REM and dacion were BOTH VOID. At the time they were executed, the wife of Benjamin
already died. Thus, she could not have participated in the execution of the said docs.
o While the principal obligation is valid, the death of Benjamin extinguished it
 Petitioner contends that the CA erred in declaring the REM and Dacion, null and void

ISSUE:

Whether the CA erred in extinguishing the obligation of Benjamin? – YES

HELD:

(preliminary) On the nullity of the dacion en pago

 SC affirmed the ruling of CA that the subject dacion en pago is a simulated or fictitious contract, and hence,
void.
o The evidence shows that at the time it was allegedly signed by the wife of the respondent, his wife
was already dead. This finding of fact cannot be reversed

On the CA ruling extinguishing the obligation of Benjamin Bayhon

 As a GR, obligations derived from a contract are transmissible

o Art. 1311 (1) of the CC provides: “Contracts take effect only between the parties, their assigns and
heirs, except in case where the rights and obligations arising from the contract are not transmissible
by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of
the property he received from the decedent.”
 In Estate of Hemady v. Luzon Surety, the Court held that while in our successional system the responsibility
of the heirs for the debts of their decedent cannot exceed the value of the inheritance they receive from him,
the principle remains intact that these heirs succeed not only to the rights of the deceased but also to
his obligations.
 Under our law, therefore, the general rule is that a party's contractual rights and obligations are
transmissible to the successors. The rule is a consequence of the progressive "depersonalization" of
patrimonial rights and duties that, as observed by Victorio Polacco, has characterized the history of these
institutions.
o From the Roman concept of a relation from person to person, the obligation has evolved into a
relation from patrimony to patrimony, with the persons occupying only a representative position,
barring those rare cases where the obligation is strictly personal, i.e., is contracted intuitu personae,
in consideration of its performance by a specific person and by no other. The transition is marked
by the disappearance of the imprisonment for debt.
 Application to the case:
o The loan in this case was contracted by respondent. He died while the case was pending before the
CA. While he may no longer be compelled to pay the loan, the debt subsists against his estate.
No property or portion of the inheritance may be transmitted to his heirs unless the debt has first
been satisfied. Notably, throughout the appellate stage of this case, the estate has been amply
represented by the heirs of the deceased, who are also his co-parties in Civil Case #1.

RELEVANT TO THE TOPIC:

 Proceeding from the application of the law to the case, the SC also provided that the procedure in
vindicating monetary claims involving a defendant who dies before final judgment is governed by
RULE 3, SECTION 20 of the ROC, to wit:
o “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 especially provided in these Rules for prosecuting claims against the estate of a deceased
person.”
 Pursuant to the provision, petitioner’s remedy lies in filing a claim against the estate of the deceased
Respondent.

SC affirmed the CA decision modifying only the amount of interest.