[G.R. No. 106755. February 1, 2002] APOLINARIA AUSTRIA-MAGAT, petitioner, vs. HON.

COURT OF APPEALS and FLORENTINO LUMUBOS, DOMINGO COMIA, TEODORA CARAMPOT, ERNESTO APOLO, SEGUNDA SUMPELO, MAMERTO SUMPELO and RICARDO SUMPELO, respondents. DECISION DE LEON, JR., J.: FACTS Basilisa Comerciante is a mother of five (5) children, namely, Rosario Austria, Consolacion Austria, herein petitioner Apolinaria Austria-Magat, Leonardo, and one of herein respondents, Florentino Lumubos. In 1953, Basilisa bought a parcel of residential land together with the improvement thereon covered and described in Transfer Certificate of Title No. RT-4036 (T-3268) and known as Lot 1, Block 1, Cavite Beach Subdivision, with an area of 150 square meters, located in Bagong Pook, San Antonio, Cavite City. On December 17, 1975, Basilisa executed a document designated as Kasulatan sa Kaloobpala (Donation). Basilisa and her said children likewise executed another notarized document denominated as Kasulatan which is attached to the deed of donation. On February 6, 1979, Basilisa executed a Deed of Absolute Sale of the subject house and lot in favor of herein petitioner Apolinaria Austria-Magat for Five Thousand Pesos (P5,000.00). As the result of the registration of that sale, the transfer certificate title in the name of the donor was cancelled and in lieu thereof a new TCT was issued by the Register of Deeds of Cavite City in favor of petitioner Apolinaria Austria-Magat on February 8, 1979. On September 21, 1983, herein respondents Teodora Carampot, Domingo Comia, and Ernesto Apolo (representing their deceased mother Consolacion Austria), Ricardo, Mamerto and Segunda, all surnamed Sumpelo (representing their deceased mother Rosario Austria) and Florentino Lumubos filed before the Regional Trial Court of Cavite an action, against the petitioner for annulment of her TCT and other relevant documents, and for reconveyance and damages. On August 15, 1986, the trial court dismissed their action. According to the trial court, the donation is a donation mortis causa pursuant to Article 728 of the New Civil Code inasmuch as the same expressly provides that it would take effect upon the death of the donor; that the provision stating that the donor reserved the right to revoke the donation is a feature of a donation mortis causa which must comply with the formalities of a will; and that inasmuch as the donation did not follow the formalities pertaining to wills, the same is void and produced no effect whatsoever. On appeal, the decision of the trial court was reversed by the Court of Appeals in its subject decision stating that the donation was intervivos. ISSUE Whether the donation made is a donation mortis causa. HELD NO. While the document indeed stated that the donation was irrevocable, that must be interpreted in the light of the provisions providing that the donation cannot be encumbered, alienated or sold by anyone, that the property donated shall remain in the possession of the donor while she is alive, and that the donation shall take effect only when she dies. It has been held that whether the donation is inter vivos or mortis causa depends on whether the donor intended to transfer ownership over the properties upon the execution of the deed (Gestopa v. Court of Appeals) In Bonsato v. Court of Appeals, this Court enumerated the characteristics of a donation mortis causa, to wit:
(1) It conveys no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive; (2) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed; (3) That the transfer should be void if the transferor should survive the transferee.

Significant to the resolution of this issue is the irrevocable character of the donation in the case at bar. In Cuevas v. Cuevas, we ruled that when the deed of donation provides that the donor will not dispose or take away the property donated (thus making the donation irrevocable), he in effect is making a donation inter vivos. He parts away with his naked title but maintains beneficial ownership while he lives.

It remains to be a donation inter vivos despite an express provision that the donor continues to be in possession and enjoyment of the donated property while he is alive. In the Bonsato case, we held that:
(W)hat is most significant [in determining the type of donation] is the absence of stipulation that the donor could revoke the donations; on the contrary, the deeds expressly declare them to be irrevocable, a quality absolutely incompatible with the idea of conveyances mortis causa where revocability is of the essence of the act, to the extent that a testator can not lawfully waive or restrict his right of revocation (Old Civil Code, Art.737; New Civil Code, Art. 828).

Construing together the provisions of the deed of donation, we find and so hold that in the case at bar the donation is inter vivos. The express irrevocability of the same (hindi na mababawi) is the distinctive standard that identifies that document as a donation inter vivos. The other provisions therein which seemingly make the donation mortis causa do not go against the irrevocable character of the subject donation. According to the petitioner, the provisions which state that the same will only take effect upon the death of the donor and that there is a prohibition to alienate, encumber, dispose, or sell the same, are proofs that the donation is mortis causa. We disagree. The said provisions should be harmonized with its express irrevocability. In Bonsato where the donation per the deed of donation would also take effect upon the death of the donor with reservation for the donor to enjoy the fruits of the land, the Court held that the said statements only mean that after the donors death, the donation will take effect so as to make the donees the absolute owners of the donated property, free from all liens and encumbrances; for it must be remembered that the donor reserved for himself a share of the fruits of the land donated. In Gestopa v. Court of Appeals, this Court held that the prohibition to alienate does not necessarily defeat the inter vivos character of the donation. It even highlights the fact that what remains with the donor is the right of usufruct and not anymore the naked title of ownership over the property donated. In the case at bar, the provision in the deed of donation that the donated property will remain in the possession of the donor just goes to show that the donor has given up his naked title of ownership thereto and has maintained only the right to use (jus utendi) and possess (jus possidendi) the subject donated property. Another indication in the deed of donation that the donation is inter vivos is the acceptance clause therein of the donees. We have ruled that an acceptance clause is a mark that the donation is inter vivos. Acceptance is a requirement for donations inter vivos. On the other hand, donations mortis causa, being in the form of a will, are not required to be accepted by the donees during the donors lifetime (Alejandro v. Geraldez).

G.R. No. L-6600

July 30, 1954

HEIRS OF JUAN BONSATO and FELIPE BONSATO, petitioners, vs. COURT OF APPEALS and JOSEFA UTEA, ET AL., respondents. REYES, J.B.L., J.: FACTS The case was initiated in the Court of First Instance of Pangasinan on June 27, 1945, by respondents Josefa Utea and other heirs of Domingo Bonsato and his wife Andrea Nacario, both deceased. Their

complaint (for annulment and damages) charged that on the first day of December, 1949, Domingo Bonsato, then already a widower, had been induced and deceived into signing two notarial deeds of donations in favor of his brother Juan Bonsato and of his nephew Felipe Bonsato, respectively, transferring to them several parcels of land covered by Tax Declaration Nos. 5652, 12049, and 12052, situated in the municipalities of Mabini and Burgos, Province of Pangasinan, both donations having been duly accepted in the same act and documents. Plaintiffs likewise charged that the donations were mortis causa and void for lack of the requisite formalities. The defendants, Juan Bonsato and Felipe Bonsato, answered averring that the donations made in their favor were voluntarily executed in consideration of past services rendered by them to the late Domingo Bonsato; that the same were executed freely without the use of force and violence, misrepresentation or intimidation; and prayed for the dismissal of the case and for damages in the sum of P2,000. After trial, the Court of First Instance rendered its decision on November 13, 1949, finding that the deeds of donation were executed by the donor while the latter was of sound mind, without pressure or intimidation; that the deeds were of donation inter vivos without any condition making their validity or efficacy dependent upon the death of the donor; but as the properties donated were presumptively conjugal, having been acquired during the coverture of Domingo Bonsato and his wife Andrea Nacario, the donations were only valid as to an undivided one-half share in the three parcels of land described therein. Thereupon the plaintiffs duly appealed to the Court of Appeals, assigning as primary error the holding of the court below that the donations are inter vivos; appellants contending that they were mortis causa donations, and invalid because they had not been executed with the formalities required for testamentary disposition. A division of five of the Court of Appeals took the case under consideration, and on January 12, 1953, the majority rendered judgment holding the aforesaid donations to be null and void, because they were donations mortis causa and were executed without the testamentary formalities prescribed by law, and ordered the defendants-appellees Bonsato to surrender the possession of the properties in litigation to the plaintiffs-appellants. ISSUE Whether the donation made is a donation mortis causa. HELD NO. If [it was a donation mortis causa], then the documents should reveal any or all of the following characteristics: (1) Convey no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive (Vidal vs. Posadas, 58 Phil., 108; Guzman vs. Ibea, 67 Phil., 633); (2) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed (Bautista vs. Sabiniano, G. R. L-4326, November 18, 1952); (3) That the transfer should be void if the transferor should survive the transferee. None of these characteristics is discernible in the deeds of donation, executed by the late Domingo Bonsato. The donor only reserved for himself, during his lifetime, the owner's share of the fruits or produce, a reservation that would be unnecessary if the ownership of the donated property remained with the donor. Most significant is the absence of stipulation that the donor could revoke the donations; on the contrary, the deeds expressly declare them to be "irrevocable", a quality absolutely incompatible with the idea of conveyances mortis causa where revocability is of the essence of the act, to the extent that a testator can not lawfully waive or restrict his right of revocation (Old Civil Code, Art. 737; New Civil Code, Art. 828). It is true that the last paragraph in each donation contains the phrase "that after the death of the donor the aforesaid donation shall become effective. Any other interpretation of this paragraph would cause it to conflict with the irrevocability of the donation and its consummated character, as expressed in the first part of the deeds of donation, a conflict that should be avoided (Civ. Code of 1889, Art. 1285; New Civil Code, Art. 1374; Rule 123, sec. 59, Rules of Court). In the cases held by this Court to be transfers mortis causa and declared invalid for not having been executed with the formalities of testaments, the circumstances clearly indicated the transferor's intention to defer the passing of title until after his death. Thus, in Cario vs. Abaya, 70 Phil., 182, not only were the properties not to be given until thirty days after the death of the last of the donors, but the deed also referred to the donees as "those who had been mentioned to inherit from us", the verb "to inherit" clearly implying the acquisition of property only from and after the death of the alleged donors. In Bautista vs. Sabiniano, 49 Off. Gaz., 549; 92 Phil., 244, the alleged donor expressly reserved the right to dispose of

the properties conveyed at any time before his death, and limited the donation "to whatever property or properties left undisposed by me during my lifetime", thus clearly retaining their ownership until his death. Gaz. (Dec, 1946) 3155, the donor not only reserved for herself all the fruits of the property allegedly conveyed, but what is even more important, specially provided that "without the knowledge and consent of the donor, the donated properties could not be disposed of in any way", thereby denying to the transferees the most essential attribute of ownership, the power to dispose of the properties. No similar restrictions are found in the deeds of donation involved in this appeal. That the conveyance was due to the affection of the donor for the donees and the services rendered by the latter, is of no particular significance in determining whether the deeds constitute transfers inter vivos or not, because a legacy may have identical motivation. Nevertheless, the existence of such consideration corroborates the express irrevocability of the transfers and the absence of any reservation by the donor of title to, or control over, the properties donated, and reinforces the conclusion that the act was inter vivos. As the properties involved were conjugal, the Court of First Instance correctly decided that the donations could not affect the half interest inherited by the respondents Josefa Utea, et al. from the predeceased wife of the donor.

G.R. No. L-45262 July 23, 1990 RUPERTO REYES and REYNALDO C. SAN JUAN, in his capacity as Special Administrator, petitioners, vs. HON. LORENZO R. MOSQUEDA, Judge of CFI, Pampanga (Branch VII), and URSULA D. PASCUAL, respondents. G.R. No. L-45394 July 23, 1990 PEDRO DALUSONG, petitioner, vs HON. LORENZO R. MOSQUEDA, JUDGE, BRANCH VII, COURT OF FIRST INSTANCE OF PAMPANGA, and URSULA D. PASCUAL, respondents. G.R. Nos. 73241-42 July 23, 1990 OFELIA D. PARUNGAO and ROSARIO DUNCIL, petitioners, vs. THE HON. INTERMEDIATE APPELLATE COURT, (Third Civil Cases Division), BENJAMIN P. REYES and OSCAR REYES, respondents.

GUTIERREZ, JR., J.: FACTS The instant petitions have been consolidated as they arose from the same facts and involve similar issues. Dr. Emilio Pascual died intestate and without issue on November 18,1972. He was survived by his sister, Ursula Pascual and the children of his late sisters as follows: (1) Maria Pascual Reyes- Ruperto Reyes and Jose Reyes; (2) Ines Pascual Reyes-Jose P. Reyes, Benito Reyes, and Manna Reyes Manalastas; (3) Josefa Pascual Reyes-Augusto Reyes and Benjamin Reyes; and (4) Escolastica Pascual Dalusong (half- blood Pedro Dalusong. On December 3, 1973, the heirs of Dr. Pascual filed Special Proceedings No. 73-30-M in the then Court of First Instance of Pampanga for the administration of his estate. On February 12, 1976, Ursula Pascual filed a motion to exclude some properties from the inventory of Pascual's estate and to deliver the titles thereto to her. Ursula alleged that Dr. Pascual during his lifetime or on November 2, 1966 executed a "Donation Mortis Causa" in her favor covering properties which are included in the estate of Dr. Pascual (subject of Special Proceedings No. 73-30-M) and therefore should be excluded from the inventory. On August 1, 1976; the trial court issued an order excluding from the inventory of the estate the properties donated to Ursula. Among the properties included in the "donation mortis causa" in favor of Ursula was Lot 24, Block No. 15 of the subdivision plan Psd-3231, located at 1109-1111 R. Papa St., Tondo, Manila as evidenced by Transfer Certificate of Title No. 17854. The records show that on May 15, 1969, Emilio Pascual executed a deed of donation of real property inter vivos over the abovementioned lot in Manila in favor of Ofelia D. Parungao, petitioner in G.R. Nos. 73241-42 a minor with her mother, Rosario Duncil, accepting the gift and donation for and in her behalf. When Parungao reached the age of majority or on December 20, 1976, she tried to have the donation registered. However, she found out that the certificate of title was missing from where it was supposed to be kept, prompting her to file a petition for reconstitution of title with the Court of First Instance of Manila. The petition was granted in October 1977. Parungao registered the deed of donation with the Register of Deeds of Manila who cancelled Transfer Certificate of Title No. 17854 and issued in lieu thereof Transfer Certificate of Title No. 129092 in the name of Ofelia Parungao. She then filed a motion for exclusion in Special Proceedings No. 73-30-M. In the meantime, on September 23, 1976, Ursula Pascual executed a deed of absolute sale over the Tondo property in favor of Benjamin, Oscar, Jose and Emmanuel, all surnamed Reyes. On May 2, 1978, Benjamin Reyes, private respondent in G.R. Nos. 73241-42 filed a complaint for declaration of nullity of Transfer Certificate of Title No. 129092, Register of Deeds of Manila and/or reconveyance of deed of title against Ofelia Parungao and Rosario Duncil, with the then Court of First Instance of Manila. In their answer with compulsory counterclaim Parungao and Duncil, denied Reyes' assertion of ownership over the Tondo property. On November 6, 1978, Ofelia Parungao filed a complaint for recovery of possession over the Tondo property against Benjamin Reyes and his nephew Oscar Reyes with the Court of First Instance of Manila. In her complaint, Parungao also alleged that as early as 1973, the defendants occupied two (2) doors of the apartment situated at the Tondo property by mere tolerance of the previous owner, Dr. Emilio Pascual, and later by her until April 8, 1978 when she formally demanded that the defendants vacate the premises. Parungao prayed that the defendants be evicted from the premises. The two cases were consolidated. On June 3, 1982, the then Court of First Instance, Branch 8 rendered a joint decision, declaring the TCT in the name of Ofelia Parungao as null and void and ordered the Registry of Deeds to restore in the name of Emilio D. Pascual. Parungao appealed the decision to the then Intermediate Appellate Court. The decision was, however, affirmed, with costs against the appellant. ISSUE Whether the donation made by Emilio Pascual in favor of his sister Ursula Pascual is a donation intervivos. HELD YES. It is, now a settled rule that the title given to a deed of donation is not the determinative factor which makes the donation "inter vivos" or "mortis causa". As early as the case of Laureta v. Manta, et al., (44 Phil. 668 [1928]) this Court ruled that the dispositions in a deed of donation-whether "inter vivos" or "mortis causa" do not depend on the title or term used in the deed of donation but on the provisions stated in such deed. This Court explained in Concepcion v. Concepcion (91 Phil. 823 [1952]). In the later case of Bonsato et al. v. Court of appeals, et al. (95 Phil. 481 [1954]) this Court, distinguished the characteristics of a donation inter vivos and "mortis causa" in this wise:

Did the late Domingo Bonsato, make donations inter vivos or dispositions post mortem in favor of the petitioners herein? If the latter, then the documents should reveal any or all of the following characteristics: (1) Convey no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor should retain the ownership (fun or naked) and control of the property while alive (Vidal v. Posadas, 58 Phil., 108; Guzman v. Ibea 67 Phil., 633); (2) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed (Bautista v. Sabiniano, G.R. No. L- 4326, November 18, 1952); (3) That the transfer should be void if the transferor should survive the transferee.

These principles were repeated in the case of Castro v. Court of Appeals (27 SCRA 1076 [1969]), to wit:
Whether a donation is inter vivos or mortis causa depends upon the nature of the disposition made. 'Did the donor intend to transfer the ownership of the property donated upon the execution of the donation? If this is so, as reflected from the provisions contained in the donation, then it is inter vivos; otherwise, it is merely mortis causa, or made to take effect after death.' (Howard v. Padilla and Court of Appeals, G.R. No. L-7064 and L-7098, April 22, 1955).

Applying the above principles to the instant petitions, there is no doubt that the so-called DONATION MORTIS CAUSA is really a donation inter vivos. The donation was executed by Dr. Pascual in favor of his sister Ursula Pascual out of love and affection as well as a recognition of the personal services rendered by the donee to the donor. The transfer of ownership over the properties donated to the donee was immediate and independent of the death of the donor. The provision as regards the reservation of properties for the donor's subsistence in relation to the other provisions of the deed of donation confirms the intention of the donor to give naked ownership of the properties to the donee immediately after the execution of the deed of donation.

[G.R. No. 129008. January 13, 2004] TEODORA A. RIOFERIO, VERONICA O. EVANGELISTA assisted by her husband ZALDY EVANGELISTA, ALBERTO ORFINADA, and ROWENA O. UNGOS, assisted by her husband BEDA UNGOS, petitioners, vs. COURT OF APPEALS, ESPERANZA P. ORFINADA, LOURDES P. ORFINADA, ALFONSO ORFINADA, NANCY P. ORFINADA, ALFONSO JAMES P. ORFINADA, CHRISTOPHER P. ORFINADA and ANGELO P. ORFINADA, respondents. TINGA, J.: FACTS On May 13, 1995, Alfonso P. Orfinada, Jr. died without a will in Angeles City leaving several personal and real properties located in Angeles City, Dagupan City and Kalookan City. He also left a widow, respondent Esperanza P. Orfinada, whom he married on July 11, 1960 and with whom he had seven children who are the herein respondents. On November 14, 1995, respondents Alfonso James and Lourdes Orfinada discovered that on June 29, 1995, petitioner Teodora Rioferio and her children executed an Extrajudicial Settlement of Estate of a Deceased Person with Quitclaim involving the properties of the estate of the decedent located in Dagupan City and that accordingly, the Registry of Deeds in Dagupan issued Certificates of Titles Nos. 63983, 63984 and 63985 in favor of petitioners Teodora Rioferio, Veronica Orfinada-Evangelista, Alberto Orfinada and Rowena Orfinada-Ungos. Respondents also found out that petitioners were able to obtain a loan of P700,000.00 from the Rural Bank of Mangaldan Inc. by executing a Real Estate Mortgage over the properties subject of the extra-judicial settlement. On December 1, 1995, respondent Alfonso Clyde P. Orfinada III filed a Petition for Letters of Administration, before the Regional Trial Court of Angeles City, praying that letters of administration encompassing the estate of Alfonso P. Orfinada, Jr. be issued to him. On December 4, 1995, respondents filed a Complaint for the Annulment/Rescission of Extra Judicial Settlement of Estate of a Deceased Person with Quitclaim, Real Estate Mortgage and Cancellation of Transfer Certificate of Titles with Nos. 63983, 63985 and 63984 and Other Related Documents with Damages against petitioners, the Rural Bank of Mangaldan, Inc. and the Register of Deeds of Dagupan City before the Regional Trial Court, Branch 42, Dagupan City. On April 29, 1996, petitioners filed a Motion to Set Affirmative Defenses for Hearing on the aforesaid

ground. Petitioners moved for its reconsideration but the motion was likewise denied. This prompted petitioners to file before the Court of Appeals their Petition for Certiorari under Rule 65 of the Rules of Court. Petitioners averred that the RTC committed grave abuse of discretion in issuing the assailed order which denied the dismissal of the case on the ground that the proper party to file the complaint for the annulment of the extrajudicial settlement of the estate of the deceased is the estate of the decedent and not the respondents. The Court of Appeals rendered the assailed Decision dated January 31, 1997, stating that it discerned no grave abuse of discretion amounting to lack or excess of jurisdiction by the public respondent judge when he denied petitioners motion to set affirmative defenses for hearing in view of its discretionary nature. ISSUE Whether the heirs may bring suit to recover property of the estate pending the appointment of an administrator is the issue in this case. HELD YES. Petitioners vehemently fault the lower court for denying their motion to set the case for preliminary hearing on their affirmative defense that the proper party to bring the action is the estate of the decedent and not the respondents. Just as no blame of abuse of discretion can be laid on the lower courts doorstep for not hearing petitioners affirmative defense, it cannot likewise be faulted for recognizing the legal standing of the respondents as heirs to bring the suit. Pending the filing of administration proceedings, the heirs without doubt have legal personality to bring suit in behalf of the estate of the decedent in accordance with the provision of Article 777 of the New Civil Code that (t)he rights to succession are transmitted from the moment of the death of the decedent. Even if administration proceedings have already been commenced, the heirs may still bring the suit if an administrator has not yet been appointed. This is the proper modality despite the total lack of advertence to the heirs in the rules on party representation. In fact, in the case of Gochan v. Young this Court recognized the legal standing of the heirs to represent the rights and properties of the decedent under administration pending the appointment of an administrator. Even if there is an appointed administrator, jurisprudence recognizes two exceptions, viz: (1) if the executor or administrator is unwilling or refuses to bring suit (Pascual v. Pascual); and (2) when the administrator is alleged to have participated in the act complained of (Velasquez v. George) and he is made a party defendant (Borromeo v. Borromeo). Evidently, the necessity for the heirs to seek judicial relief to recover property of the estate is as compelling when there is no appointed administrator, if not more, as where there is an appointed administrator but he is either disinclined to bring suit or is one of the guilty parties himself. As the appellate court did not commit an error of law in upholding the order of the lower court, recourse to this Court is not warranted. The assailed decision and resolution of the Court of Appeals are hereby AFFIRMED.

[G.R. No. 126334. November 23, 2001] EMILIO EMNACE, petitioner, vs. COURT OF APPEALS, ESTATE OF VICENTE TABANAO, SHERWIN TABANAO, VICENTE WILLIAM TABANAO, JANETTE TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA, ROSELA TABANAO and VINCENT TABANAO, respondents. YNARES-SANTIAGO, J.: FACTS Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a business concern known as Ma. Nelma Fishing Industry. Sometime in January of 1986, they decided to dissolve their partnership and executed an agreement of partition and distribution of the partnership properties among them, consequent to Jacinto Divinagracias withdrawal from the partnership. Among the assets to be distributed were five (5) fishing boats, six (6) vehicles, two (2) parcels of land located at Sto. Nio and Talisay, Negros Occidental, and cash deposits in the local branches of the Bank of the Philippine Islands and Prudential Bank. Throughout the existence of the partnership, and even after Vicente Tabanaos untimely demise in 1994, petitioner failed to submit to Tabanaos heirs any statement of assets and liabilities of the partnership, and to render an accounting of the partnerships finances. Consequently, Tabanaos heirs, respondents herein, filed against petitioner an action for accounting, payment of shares, division of assets and damages. Petitioner filed a motion to dismiss the complaint on the grounds of improper venue, lack of jurisdiction over the nature of the action or suit, and lack of capacity of the estate of Tabanao to sue. On August 30, 1994, the trial court denied the motion to dismiss. As regards petitioners argument of lack of jurisdiction over the action because the prescribed docket fee was not paid considering the huge amount involved in the claim, the trial court noted that a request for accounting was made in order that the exact value of the partnership may be ascertained and, thus, the correct docket fee may be paid. The following day, respondents filed an amended complaint, incorporating the additional prayer that petitioner be ordered to sell all (the partnerships) assets and thereafter pay/remit/deliver/surrender/yield to the plaintiffs their corresponding share in the proceeds thereof. In due time, petitioner filed a manifestation and motion to dismiss, arguing that the trial court did not acquire jurisdiction over the case due to the plaintiffs failure to pay the proper docket fees. On June 15, 1995, the trial court issued an Order, denying the motion to dismiss inasmuch as the grounds raised therein were basically the same as the earlier motion to dismiss which has been denied. Anent the issue of prescription, the trial court ruled that prescription begins to run only upon the dissolution of the partnership when the final accounting is done. Moreover, an action based on a written contract prescribes in ten years from the time the right of action accrues. Petitioner filed a petition for certiorari before the Court of Appeals. On August 8, 1996, the Court of Appeals rendered the assailed decision, dismissing the petition for certiorari, upon a finding that no grave abuse of discretion amounting to lack or excess of jurisdiction was committed by the trial court in issuing

the questioned orders denying petitioners motions to dismiss. ISSUE Whether the heirs of Vicente Tabanao lack the capacity to sue. HELD NO. The surviving spouse does not need to be appointed as executrix or administratrix of the estate before she can file the action. She and her children are complainants in their own right as successors of Vicente Tabanao. From the very moment of Vicente Tabanaos death, his rights insofar as the partnership was concerned were transmitted to his heirs, for rights to the succession are transmitted from the moment of death of the decedent (Coronel v. Court of Appeals). Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were transmitted to respondents by operation of law, more particularly by succession, which is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance of a person are transmitted (Civil Code, Art. 774). Moreover, respondents became owners of their respective hereditary shares from the moment Vicente Tabanao died (Opulencia v. Court of Appeals). A prior settlement of the estate, or even the appointment of Salvacion Tabanao as executrix or administratrix, is not necessary for any of the heirs to acquire legal capacity to sue. As successors who stepped into the shoes of their decedent upon his death, they can commence any action originally pertaining to the decedent (Heirs of Ignacio Conti v. Court of Appeals) From the moment of his death, his rights as a partner and to demand fulfillment of petitioners obligations as outlined in their dissolution agreement were transmitted to respondents. They, therefore, had the capacity to sue and seek the courts intervention to compel petitioner to fulfill his obligations.

G.R. No. L-28067 BASILIA ARAYATA, plaintiff-appellant, vs. FLORENTINO JOYA, ET AL., defendants-appellants. VILLA-REAL, J.: FACTS

March 10, 1928

Cecilio Joya, during his lifetime, inherited from his deceased parents the right of lease to six lots of the friar lands at Santa Crus de Malabon, municipality of Tanza, Province of Cavite. On June 4, 1906, Cecilio Joya married the herein plaintiff, Basilia Arayata. When the Insular Government acquired the said land, Cecilio Joya continued his lease in accordance with the provisions of the Act of Congress of July 1, 1902 and Act No. 1120 of the Philippine Commission. While married to the herein plaintiff-appellant, Cecilio Joya purchase the lots he had been leasing, on installments, from the Government, under said Act No. 1120, which were designated as lots Nos. 1031, 1058, 1086, 1153, 2352 and 547. As the number of lots which a purchaser could acquire under the law was limited, lots Nos. 1153 and 2352 were excluded and put up for sale. In order not to lose them, Cecilio Joya had Pedro Tiongco buy them, supplying him with the necessary funds. Subsequently, Pedro Tiongco transferred his right to said lots to Cecilio Joya by donation. These transfers were approved by the Director of Lands and noted in the proper registry book. On April 24 1919, Cecilio Joya conveyed his right to lot No. 1058 to Florentino Joya consideration of the sum of P2,000 said conveyance having been approved by the Director of Lands and registered in the proper registry book. On May 11, 1919, Cecilio Joya conveyed his right to lot No. 547 to Marcelina Joya and Francisco Joya in consideration of the sum of P450, conveyance having been approved by the Director of Lands and registered in the proper registry book. On April 27, 1919, Cecilio Joya executed a will devising lot No. 1058 to Florentino Joya, lot No. 1086 to Pablo Joya, lot No. 1031 to Delfin and Felicisima Blancaflor, lot No. 1153 to the brothers Agustin and Pedro Joya, lot No. 2352 to Feliciano and Asuncion Bobadilla, and lot No. 547 to Marcelina and Francisca Joya. At the time of his death, Cecilio Joya had not yet completed the payment of the price of the lots mentioned above to the Insular Government. All the lots in question except lot No. 547, are in the possession of the defendants, who enjoy their products. On May 10, 1920 lots Nos. 2352, 1086, 1153 and 1031, were transferred to Florentino Joya as administrator of the estate of the deceased Cecilio Joya. On May 26, 1919, Cecilio Joya died, and on June 9, 1919, his executor, the herein defendant Florentino Joya, presented said will for probate to the Court of First Instance of Cavite, which was probated after the proper proceedings. In March, 1920, in the course of the testamentary proceedings, the executor Florentino Joya presented an alleged agreement of partition by the legatees, which agreement was disapproved by the court in view of the herein plaintiff's opposition, who alleged that her signature had been obtained by fraud. ISSUES (1)Has the plaintiff-appellant, as the surviving spouse, exclusive right to all the lots in question? (2) In case she has, is she entitled to the possession and products thereof? HELD (1) YES. [H]older[s] of a certificate of sale of friar lands, who has not fully paid the purchase price may transfer and convey his rights, but that the transferee or grantee is not subrogated to all the transferor's right until the transfer has been approved by the Director of Lands and registered in the

registry book in the Bureau of Public Lands. In other words, in order that a transfer of the rights of a holder of a certificate of sale of friar lands may be legally effective, it is necessary that a formal certificate of transfer be drawn up and submitted to the Chief of the Bureau of Public Lands for his approval and registration. The law authorizes no other way of transferring the rights of a holder of a certificate of sale of friar lands. If, as it was held in the case of Jocson vs. Soriano, the right conferred by Act No. 1120 on the holder of a certificate of sale of friar lands in similar to that conferred on the holder of a "homestead," and if the latter has no right to dispose of said certificate by will to the prejudice of his surviving spouse and for his children (29 C. J., 930, par. 342), then by analogy, the holder of a certificate of sale of friar lands cannot dispose of his rights to said lands by will to the prejudice of his widow and children. (2) YES. The defendants, who are in possession of the said lands, cannot invoke the provisions of the Civil Code relative to possession in good faith, inasmuch as the principle on which the right of a holder in good faith is based is the belief that his possession is with just title under claim of ownership. While a deceased heirs or legatees acquire the ownership of the property given them in the will and may taken possession of their respective portions upon the death of their predecessor, yet upon the appointment of an administrator, the latter, by virtue of his appointment, acquires a right to the possession of the property of estate, subject to the orders of the court, unless he consents to the heirs continuing in possession thereof. (Pimentel vs. Palanca; Fernandez vs. Tria). Being a matter of law, the defendants-appellants cannot plead ignorance of the fact that until a judicial partition of the property left by Cecilio Joya is made, said property belongs to the lather's estate and it together with its products, is subject to the payment of the testator's debts, if any. Only after judicial partition has been made do they acquire the title to their respective legacies, if the latter are valid. (Santos vs. Roman Catholic Bishop of Nueva Caceres, 45 Phil., 895.) In conclusion, the defendants are not entitled to the possession of the lands in question or their products, and they are bound to return them to the herein plaintiff-appellant, after deducting the necessary expenses for cultivation and preservation. (Art 453, Civil Code.)

[G.R. No. 121940. December 4, 2001] JESUS SAN AGUSTIN, petitioner, vs. HON. COURT OF APPEALS and MAXIMO MENEZ, JR., respondents. QUISUMBING, J.: FACTS On February 11, 1974, the Government Service Insurance System (GSIS) sold to a certain Macaria Vda. de Caiquep, a parcel of residential land with an area of 168 square meters located in Rosario, Pasig City and denominated as Lot 13, Block 7, Pcs-5816 of the Government Service and Insurance System Low Cost Housing Project (GSIS-LCHP). The sale is evidenced by a Deed of Absolute Sale. On February 19, 1974, the Register of Deeds of Rizal issued in the name of Macaria Vda. de Caiquep, Transfer Certificate of Title (TCT) No. 436465 with the encumbrance, among others that vendee must not sell or lease the property within five (5) years after full ownership over the said property is vested on the vendee. A day after the issuance of TCT No. 436465, or on February 20, 1974, Macaria Vda. de Caiquep sold the subject lot to private respondent, Maximo Menez, Jr., as evidenced by a Deed of Absolute Sale. The said deed was lost when military men ransacked his house in Cainta, Rizal. Upon consulting a new counsel, an Affidavit of Loss was filed with the Register of Deeds of Pasig and a certified copy of TCT No. 436465 was issued. Private respondent also declared the property for tax purposes and obtained a certification thereof from the Assessors Office. Private respondent sent notices to the registered owner at her address appearing in the title and in the Deed of Sale. And, with his counsel, he searched for the registered owner in Metro Manila and Rizal and as far as Samar, Leyte, Calbayog City, Tacloban City, and in Eastern and Northern Samar. However, their search proved futile. On July 8, 1992, private respondent filed a petition docketed as LRC Case No. R-4659 with the RTC, Branch 154, Pasig, Metro Manila for the issuance of owners duplicate copy of TCT No. 436465 to replace the lost one. On September 18, 1992, there being no opposition, Menez presented his evidence ex-parte. The trial court granted his petition in its decision dated September 30, 1992. On October 13, 1992, herein petitioner, Jesus San Agustin, received a copy of the abovecited decision. He claimed this was the first time he became aware of the case of her aunt, Macaria Vda. de Caiquep who, according to him, died sometime in 1974. Claiming that he was the present occupant of the property and the heir of Macaria, he filed his Motion to Reopen Reconstitution Proceedings October 27, 1992. On December 3, 1992, RTC issued an order denying said motion. Petitioner filed an appeal with the Court of Appeals which was denied in its decision of May 19, 1995. Petitioner moved for a reconsideration, but it was denied in a resolution dated September 11, 1995.

ISSUE Whether petitioner can legally assail the deed of absolute sale, executed by and between his aunt and private respondent. HELD
NO. As far as the violation of the 5-year restrictive condition imposed by GSIS in its contract with petitioners predecessor-in-interest is concerned, it is the GSIS and not petitioner who had a cause of action against private respondent. Vide the instructive case of Sarmiento vs. Salud. In this case, the GSIS has not filed any action for the annulment, nor for the forfeiture of the lot in question. In our view, the contract of sale remains valid between the parties, unless and until annulled in the proper suit filed by the rightful party, the GSIS. For now, the said contract of sale is binding upon the heirs of Macaria Vda. de Caiquep, including petitioner who alleges to be one of her heirs, in line with the rule that heirs are bound by contracts entered into by their predecessors-in-interest

2004 Feb 23 G.R. No. 146006 JOSE C. LEE AND ALMA AGGABAO, in their capacities as President and Corporate Secretary, respectively, of Philippines International Life Insurance Company, and FILIPINO LOAN ASSISTANCE GROUP, petitioners, vs.

REGIONAL TRIAL COURT OF QUEZON CITY BRANCH 85 presided by JUDGE PEDRO M. AREOLA, BRANCH CLERK OF COURT JANICE Y. ANTERO, DEPUTY SHERIFFS ADENAUER G. RIVERA and PEDRO L. BORJA, all of the Regional Trial Court of Quezon City Branch 85, MA. DIVINA ENDERES claiming to be Special Administratrix, and other persons/ public officers acting for and in their behalf, respondents. CORONA, J.: FACTS On July 21, 1980, Dr. Ortaez died. He left behind a wife (Juliana Salgado Ortaez), three legitimate children (Rafael, Jose and Antonio Ortaez) and five illegitimate children by Ligaya Novicio (herein private respondent Ma. Divina Ortaez-Enderes and her siblings Jose, Romeo, Enrico Manuel and Cesar, all surnamed Ortaez). On September 24, 1980, Rafael Ortaez filed before the Court of First Instance of Rizal, Quezon City Branch (now Regional Trial Court of Quezon City) a petition for letters of administration of the intestate estate of Dr. Ortaez, docketed as SP Proc. Q-30884 (which petition to date remains pending at Branch 85 thereof). Private respondent Ma. Divina Ortaez-Enderes and her siblings filed an opposition to the petition for letters of administration and, in a subsequent urgent motion, prayed that the intestate court appoint a special administrator. On March 10, 1982, Judge Ernani Cruz Pao, then presiding judge of Branch 85, appointed Rafael and Jose Ortaez joint special administrators of their fathers estate. As ordered by the intestate court, special administrators Rafael and Jose Ortaez submitted an inventory of the estate of their father which included, among other properties, 2,029 shares of stock in Philippine International Life Insurance Company (hereafter Philinterlife), representing 50.725% of the companys outstanding capital stock. On April 15, 1989, the decedents wife, Juliana S. Ortaez, claiming that she owned 1,014 Philinterlife shares of stock as her conjugal share in the estate, sold said shares with right to repurchase in favor of herein petitioner Filipino Loan Assistance Group (FLAG), represented by its president, herein petitioner Jose C. Lee. Juliana Ortaez failed to repurchase the shares of stock within the stipulated period, thus ownership thereof was consolidated by petitioner FLAG in its name. On October 30, 1991, Special Administrator Jose Ortaez, acting in his personal capacity and claiming that he owned the remaining 1,011 Philinterlife shares of stocks as his inheritance share in the estate, sold said shares with right to repurchase also in favor of herein petitioner FLAG, represented by its president, herein petitioner Jose C. Lee. After one year, petitioner FLAG consolidated in its name the ownership of the Philinterlife shares of stock when Jose Ortaez failed to repurchase the same. On July 12, 1995, herein private respondent Ma. Divina OrtaezEnderes and her siblings (hereafter referred to as private respondents Enderes et al.) filed a motion for appointment of special administrator of Philinterlife shares of stock. This move was opposed by Special Administrator Jose Ortaez. On November 8, 1995, the intestate court granted the motion of private respondents Enderes et al. and appointed private respondent Enderes special administratrix of the Philinterlife shares of stock. On December 20, 1995, Special Administratrix Enderes filed an urgent motion to declare void ab initio the memorandum of agreement dated March 4, 1982. On March 22, 1996, Special Administratrix Enderes filed an urgent motion to declare void ab initio the deeds of sale of Philinterlife shares of stock, which move was again opposed by Special Administrator Jose Ortaez. On February 4, 1997, Jose Ortaez filed an omnibus motion for (1) the approval of the deeds of sale of the Philinterlife shares of stock and (2) the release of Ma. Divina Ortaez-Enderes as special administratrix of the Philinterlife shares of stock on the ground that there were no longer any shares of stock for her to administer. On August 11, 1997, the intestate court denied the omnibus motion of Special Administrator Jose Ortaez for the approval of the deeds of sale. Aggrieved by the orders of the intestate court, Jose Ortaez filed, on December 22, 1997, a petition for certiorari in the Court of Appeals. Consequently, the sale made by Jose Ortaez and his mother Juliana Ortaez to FLAG of the shares of stock they invalidly appropriated for themselves, without approval of the intestate court, was void. Special Administrator Jose Ortaez filed a motion for reconsideration of the Court of Appeals decision but it was denied. He elevated the case to the Supreme Court via petition for review under Rule 45 which the Supreme Court dismissed on October 5, 1998, on a technicality. Thereafter, various cases were filed by Jose Lee as president of Philinterlife and Juliana Ortaez and her sons against private respondent-Special Administratrix Enderes in the SEC and civil courts. Somehow, all these cases were connected to the core dispute on the legality of the sale of decedent Dr. Ortaezs Philinterlife shares of

stock to petitioner FLAG, represented by its president, herein petitioner Jose Lee who later became the president of Philinterlife after the controversial sale. On May 2, 2000, private respondent-Special Administratrix Enderes and her siblings filed a motion for execution of the Orders of the intestate court dated August 11 and August 29, 1997 because the orders of the intestate court nullifying the sale (upheld by the Court of Appeals and the Supreme Court) had long became final. Respondent-Special Administratrix Enderes served a copy of the motion to petitioners Jose Lee and Alma Aggabao as president and secretary, respectively, of Philinterlife, but petitioners ignored the same. On July 6, 2000, the intestate court granted the motion for execution. Petitioners Lee and Aggabao subsequently filed before the Court of Appeals a petition for certiorari, docketed as CA G.R. SP No. 59736. On July 26, 2000, the Court of Appeals dismissed the petition outright. On October 30, 2000, the intestate court granted the motion, ruling that there was no prohibition for the intestate court to execute its orders inasmuch as the appellate court did not issue any TRO or writ of preliminary injunction. On December 3, 2000, petitioners Lee and Aggabao filed a petition for certiorari in the Court of Appeals, docketed as CA-G.R. SP No. 62461, questioning this time the October 30, 2000 order of the intestate court directing the branch clerk of court to issue the stock certificates. They also questioned in the Court of Appeals the order of the intestate court nullifying the sale made in their favor by Juliana Ortaez and Jose Ortaez. On November 20, 2002, the Court of Appeals denied their petition and upheld the power of the intestate court to execute its order. Petitioners Lee and Aggabao then filed motion for reconsideration which at present is still pending resolution by the Court of Appeals. ISSUE Whether the decedents heir could dispose off the decedents estate without approval of the intestate court. HELD NO. It is clear that Juliana Ortaez, and her three sons, Jose, Rafael and Antonio, all surnamed Ortaez, invalidly entered into a memorandum of agreement extrajudicially partitioning the intestate estate among themselves, despite their knowledge that there were other heirs or claimants to the estate and before final settlement of the estate by the intestate court. Since the appropriation of the estate properties by Juliana Ortaez and her children (Jose, Rafael and Antonio Ortaez) was invalid, the subsequent sale thereof by Juliana and Jose to a third party (FLAG), without court approval, was likewise void. An heir can sell his right, interest, or participation in the property under administration under Art. In the present case, Juliana Ortaez and Jose Ortaez sold specific properties of the estate (1,014 and 1,011 shares of stock in Philinterlife) in favor of petitioner FLAG. This they could not lawfully do pending the final adjudication of the estate by the intestate court because of the undue prejudice it would cause the other claimants to the estate, as what happened in the present case. Juliana Ortaez and Jose Ortaez sold specific properties of the estate, without court approval. It is well-settled that court approval is necessary for the validity of any disposition of the decedents estate. In the early case of Godoy vs. Orellano, [the Court] laid down the rule that the sale of the property of the estate by an administrator without the order of the probate court is void and passes no title to the purchaser. More emphatic is the declaration made in Estate of Olave vs. Reyes where [the Court] stated that when the estate of the deceased person is already the subject of a testate or intestate proceeding, the administrator cannot enter into any transaction involving it without prior approval of the probate court. Our jurisprudence is therefore clear that (1) any disposition of estate property by an administrator or prospective heir pending final adjudication requires court approval and (2) any unauthorized disposition of estate property can be annulled by the probate court, there being no need for a separate action to annul the unauthorized disposition. The intestate court has the power to execute its order with regard to the nullity of an unauthorized sale of estate property; otherwise its power to annul the unauthorized or fraudulent disposition of estate property would be meaningless. In other words, enforcement is a necessary adjunct of the intestate or probate courts power to annul unauthorized or fraudulent transactions to prevent the dissipation of estate property before final adjudication. Moreover, in this case, the order of the intestate court nullifying the sale was affirmed by the appellate courts (the Court of Appeals in CA-G.R. SP No. 46342 dated June 23, 1998 and subsequently by the Supreme Court in G.R. No. 135177 dated October 9, 1998). Considering the finality of the order of the intestate court nullifying the sale, as affirmed by the appellate courts, it was correct for private respondent-Special Administratrix Enderes to thereafter move for a writ of execution and for the intestate court to grant it.

[G.R. No. 129008. January 13, 2004] TEODORA A. RIOFERIO, VERONICA O. EVANGELISTA assisted by her husband ZALDY EVANGELISTA, ALBERTO ORFINADA, and ROWENA O. UNGOS, assisted by her husband BEDA UNGOS, petitioners, vs. COURT OF APPEALS, ESPERANZA P. ORFINADA, LOURDES P. ORFINADA, ALFONSO ORFINADA, NANCY P. ORFINADA, ALFONSO JAMES P. ORFINADA, CHRISTOPHER P. ORFINADA and ANGELO P. ORFINADA, respondents. TINGA, J.: FACTS On May 13, 1995, Alfonso P. Orfinada, Jr. died without a will in Angeles City leaving several personal and real properties located in Angeles City, Dagupan City and Kalookan City. He also left a widow, respondent Esperanza P. Orfinada, whom he married on July 11, 1960 and with whom he had seven children who are the herein respondents. On November 14, 1995, respondents Alfonso James and Lourdes Orfinada discovered that on June 29, 1995, petitioner Teodora Rioferio and her children executed an Extrajudicial Settlement of Estate of a Deceased Person with Quitclaim involving the properties of the estate of the decedent located in Dagupan City and that accordingly, the Registry of Deeds in Dagupan issued Certificates of Titles Nos.

63983, 63984 and 63985 in favor of petitioners Teodora Rioferio, Veronica Orfinada-Evangelista, Alberto Orfinada and Rowena Orfinada-Ungos. Respondents also found out that petitioners were able to obtain a loan of P700,000.00 from the Rural Bank of Mangaldan Inc. by executing a Real Estate Mortgage over the properties subject of the extra-judicial settlement. On December 1, 1995, respondent Alfonso Clyde P. Orfinada III filed a Petition for Letters of Administration, before the Regional Trial Court of Angeles City, praying that letters of administration encompassing the estate of Alfonso P. Orfinada, Jr. be issued to him. On December 4, 1995, respondents filed a Complaint for the Annulment/Rescission of Extra Judicial Settlement of Estate of a Deceased Person with Quitclaim, Real Estate Mortgage and Cancellation of Transfer Certificate of Titles with Nos. 63983, 63985 and 63984 and Other Related Documents with Damages against petitioners, the Rural Bank of Mangaldan, Inc. and the Register of Deeds of Dagupan City before the Regional Trial Court, Branch 42, Dagupan City. On April 29, 1996, petitioners filed a Motion to Set Affirmative Defenses for Hearing on the aforesaid ground. Petitioners moved for its reconsideration but the motion was likewise denied. This prompted petitioners to file before the Court of Appeals their Petition for Certiorari under Rule 65 of the Rules of Court. Petitioners averred that the RTC committed grave abuse of discretion in issuing the assailed order which denied the dismissal of the case on the ground that the proper party to file the complaint for the annulment of the extrajudicial settlement of the estate of the deceased is the estate of the decedent and not the respondents. The Court of Appeals rendered the assailed Decision dated January 31, 1997, stating that it discerned no grave abuse of discretion amounting to lack or excess of jurisdiction by the public respondent judge when he denied petitioners motion to set affirmative defenses for hearing in view of its discretionary nature. ISSUE Whether the heirs may bring suit to recover property of the estate pending the appointment of an administrator is the issue in this case. HELD YES. Petitioners vehemently fault the lower court for denying their motion to set the case for preliminary hearing on their affirmative defense that the proper party to bring the action is the estate of the decedent and not the respondents. Just as no blame of abuse of discretion can be laid on the lower courts doorstep for not hearing petitioners affirmative defense, it cannot likewise be faulted for recognizing the legal standing of the respondents as heirs to bring the suit. Pending the filing of administration proceedings, the heirs without doubt have legal personality to bring suit in behalf of the estate of the decedent in accordance with the provision of Article 777 of the New Civil Code that (t)he rights to succession are transmitted from the moment of the death of the decedent. Even if administration proceedings have already been commenced, the heirs may still bring the suit if an administrator has not yet been appointed. This is the proper modality despite the total lack of advertence to the heirs in the rules on party representation. In fact, in the case of Gochan v. Young this Court recognized the legal standing of the heirs to represent the rights and properties of the decedent under administration pending the appointment of an administrator. Even if there is an appointed administrator, jurisprudence recognizes two exceptions, viz: (1) if the executor or administrator is unwilling or refuses to bring suit (Pascual v. Pascual); and (2) when the administrator is alleged to have participated in the act complained of (Velasquez v. George) and he is made a party defendant (Borromeo v. Borromeo). Evidently, the necessity for the heirs to seek judicial relief to recover property of the estate is as compelling when there is no appointed administrator, if not more, as where there is an appointed administrator but he is either disinclined to bring suit or is one of the guilty parties himself. As the appellate court did not commit an error of law in upholding the order of the lower court, recourse to this Court is not warranted. The assailed decision and resolution of the Court of Appeals are hereby AFFIRMED.

G.R. No. 141882

March 11, 2005

J.L.T. AGRO, INC., represented by its Manager, JULIAN L. TEVES, petitioner, vs. ANTONIO BALANSAG and HILARIA CADAYDAY, respondents. TINGA, J.: FACTS Don Julian L. Teves (Don Julian) contracted two marriages, first with Antonia Baena (Antonia), and after her death, with Milagros Donio Teves (Milagros Donio). Don Julian had two children with Antonia, namely: Josefa Teves Escao (Josefa) and Emilio Teves (Emilio). He had also four (4) children with Milagros Donio, namely: Maria Evelyn Donio Teves (Maria Evelyn), Jose Catalino Donio Teves (Jose Catalino), Milagros Reyes Teves (Milagros Reyes) and Pedro Reyes Teves (Pedro). When Antonia died, the land was among the properties involved in an action for partition and damages docketed as Civil Case No. 3443 entitled "Josefa Teves Escao v. Julian Teves, Emilio B. Teves, et al. Milagros Donio, the second wife of Don Julian, participated as an intervenor. Thereafter, the parties to the case entered into a Compromise Agreement which embodied the partition of all the properties of Don Julian. The CFI decision declared a tract of land known as Hacienda Medalla Milagrosa as property owned in common by Don Julian and his two (2) children of the first marriage. The property was to remain undivided during the lifetime of Don Julian. Josefa and Emilio likewise were given other properties at Bais, including the electric plant, the "movie property," the commercial areas, and the house where Don Julian was living. The remainder of the properties was retained by Don Julian, including Lot No. 63. On 16 November 1972, Don Julian, Emilio and Josefa executed a Deed of Assignment of Assets with Assumption of Liabilities in favor of J.L.T. Agro, Inc. (petitioner). This instrument which constitutes

a supplement to the earlier deed of assignment transferred ownership over Lot No. 63, among other properties, in favor of petitioner. On 14 April 1974, Don Julian died intestate. On the strength of the Supplemental Deed in its favor, petitioner sought the registration of the subject lot in its name. A court, so it appeared, issued an order cancelling OCT No. 5203 in the name of spouses Don Julian and Antonia on 12 November 1979, and on the same date a new TCT was issued. Since then, petitioner has been paying taxes assessed on the subject lot. Meanwhile, Milagros Donio and her children had immediately taken possession over the subject lot after the execution of the Compromise Agreement. Subsequently, Milagros Donio and her children executed a Deed of Extrajudicial Partition of Real Estate dated 18 March 1980. In the deed of partition, Lot No. 63 was allotted to Milagros Donio and her two (2) children, Maria Evelyn and Jose Catalino. Unaware that the subject lot was already registered in the name of petitioner in 1979, respondents bought Lot No. 63 from Milagros Donio as evidenced by the Deed of Absolute Sale of Real Estate dated 9 November 1983. At the Register of Deeds while trying to register the deed of absolute sale, respondents discovered that the lot was already titled in the name of petitioner. After hearing, the trial court dismissed the complaint filed by respondents. The trial court, among others, ordered respondents to vacate the subject land, particularly identified as Lot No. 63 registered under Transfer Certificate of Title No. It added that the direct adjudication of the properties listed in the Compromise Agreement was only in favor of Don Julian and his two children by the first marriage, Josefa and Emilio. According to the trial court, the properties adjudicated in favor of Josefa and Emilio comprised their shares in the estate of their deceased mother Antonia, as well as their potential share in the estate of Don Julian upon the latters death. Thus, upon Don Julians death, Josefa and Emilio could not claim any share in his estate, except their proper share in the Hacienda Medalla Milagrosa which was adjudicated in favor of Don Julian in the Compromise Agreement. As such, the properties adjudicated in favor of Don Julian, except Hacienda Medalla Milagrosa, were free from the forced legitimary rights of Josefa and Emilio, and Don Julian was under no impediment to allocate the subject lot, among his other properties, to Milagros Donio and her four (4) children. With Lot No. 63 being the conjugal property of Don Julian and Antonia, the trial court also declared that Milagros Donio and her children had no hereditary rights thereto except as to the conjugal share of Don Julian, which they could claim only upon the death of the latter. On appeal, the Court of Appeals, however, reversed the trial courts decision. Per the appellate court, the Compromise Agreement incorporated in CFI decision dated 31 January 1964, particularly paragraph 13 thereof, determined, adjudicated and reserved to Don Julians two sets of heirs their future legitimes in his estate except as regards his (Don Julians) share in Hacienda Medalla Milagrosa. The disposition in the CFI decision constitutes res judicata. Don Julian could have disposed of only his conjugal share in the Hacienda Medalla Milagrosa. The appellate court likewise emphasized that nobody in his right judgment would preterit his legal heirs by simply executing a document like the Supplemental Deed which practically covers all properties which Don Julian had reserved in favor of his heirs from the second marriage. Aggrieved by the appellate courts decision, petitioner elevated it to this Court via a petition for review on certiorari, raising pure questions of law. ISSUE Whether future legitime can be determined, adjudicated and reserved prior to the death of Don Julian. HELD As a general rule, no. [The Courts] declaration in Blas v. Santos is relevant, where [it] defined future inheritance as any property or right not in existence or capable of determination at the time of the contract, that a person may in the future acquire by succession. Article 1347 of the New Civil Code explicitly provides:
ART. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law.

Well-entrenched is the rule that all things, even future ones, which are not outside the commerce of man may be the object of a contract. The exception is that no contract may be entered into with respect to future inheritance, and the exception to the exception is the partition inter vivos referred to in Article 1080 (Perillo, et al v. Perillo, et al.). For the inheritance to be considered "future," the succession must not have been opened at the time of the contract. A contract may be classified as a contract upon future inheritance, prohibited under the second paragraph of Article 1347, where the following requisites concur:
(1) That the succession has not yet been opened; (2) That the object of the contract forms part of the inheritance; and

(3) That the promissor has, with respect to the object, an expectancy of a right which is purely hereditary in nature.

The first paragraph of Article 1080, which provides the exception to the exception and therefore aligns with the general rule on future things, reads:
ART. 1080. Should a person make a partition of his estate by an act inter vivos, or by will, such partition shall be respected, insofar as it does not prejudice the legitime of the compulsory heirs. ....

In interpreting this provision, Justice Edgardo Paras advanced the opinion that if the partition is made by an act inter vivos, no formalities are prescribed by the Article. The partition will of course be effective only after death. It does not necessarily require the formalities of a will for after all it is not the partition that is the mode of acquiring ownership. Neither will the formalities of a donation be required since donation will not be the mode of acquiring the ownership here after death; since no will has been made it follows that the mode will be succession (intestate succession). Besides, the partition here is merely the physical determination of the part to be given to each heir. Article 1056 of the old Civil Code (now Article 1080) authorizes a testator to partition inter vivos his property, and distribute them among his heirs, and this partition is neither a donation nor a testament, but an instrument of a special character, sui generis, which is revocable at any time by the causante during his lifetime, and does not operate as a conveyance of title until his death. It derives its binding force on the heirs from the respect due to the will of the owner of the property, limited only by his creditors and the intangibility of the legitime of the forced heirs (Albela and Aebuya v. Albela and Allones). The partition inter vivos of the properties of Don Julian is undoubtedly valid pursuant to Article 1347. However, considering that it would become legally operative only upon the death of Don Julian, the right of his heirs from the second marriage to the properties adjudicated to him under the compromise agreement was but a mere expectancy. It was a bare hope of succession to the property of their father. Being the prospect of a future acquisition, the interest by its nature was inchoate. It had no attribute of property, and the interest to which it related was at the time nonexistent and might never exist (Johnson v. Breeding). Evidently, at the time of the execution of the deed of assignment covering Lot No. 63 in favor of petitioner, Don Julian remained the owner of the property since ownership over the subject lot would only pass to his heirs from the second marriage at the time of his death. Thus, as the owner of the subject lot, Don Julian retained the absolute right to dispose of it during his lifetime. His right cannot be challenged by Milagros Donio and her children on the ground that it had already been adjudicated to them by virtue of the compromise agreement.