Spec Pro Nos. 1-2.1 Cases

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 133000 October 2, 2001

PATRICIA NATCHER, petitioner, vs.HON. COURT OFAPPEALS AND THE HEIR OF GRACIANO DEL ROSARIO – LETICIA DEL ROSARIO, EMILIA DEL RESORIO – MANANGAN, ROSALINDA FUENTES LLANA, RODOLFO FUENTES, ALBERTO FUENTES, EVELYN DEL ROSARIO, and EDUARDO DEL ROSARIO, respondent..

BUENA, J.:

May a Regional Trial Court, acting as a court of general jurisdiction in an action for reconveyance annulment of title with damages, adjudicate matters relating to the settlement of the estate of a deceased person particularly on questions as to advancement of property made by the decedent to any of the heirs?

Sought to be reversed in this petition for review on certiorari under Rule 45 is the decision1 of public respondent Court of Appeals, the decretal portion of which declares:

"Wherefore in view of the foregoing considerations, judgment appealed from is reversed and set aside and another one entered annulling the Deed of Sale executed by Graciano Del Rosario in favor of defendant-appellee Patricia Natcher, and ordering the Register of Deeds to Cancel TCT No. 186059 and reinstate TCT No. 107443 without prejudice to the filing of a special proceeding for the settlement of the estate of Graciano Del Rosario in a proper court. No costs.

"So ordered."

Spouses Graciano del Rosario and Graciana Esguerra were registered owners of a parcel of land with an area of 9,322 square meters located in Manila and covered by Transfer Certificate of Title No. 11889. Upon the death of Graciana in 1951, Graciano, together with his six children, namely: Bayani, Ricardo, Rafael, Leticia, Emiliana and Nieves, entered into an extrajudicial settlement of Graciana's estate on 09 February 1954 adjudicating and dividing among themselves the real property subject of TCT No. 11889. Under the agreement, Graciano received 8/14 share while each of the six children received 1/14 share of the said property. Accordingly, TCT No. 11889 was cancelled, and in lieu thereof, TCT No. 35980 was issued in the name of Graciano and the Six children. 1âwphi1.nêt

Further, on 09 February 1954, said heirs executed and forged an "Agreement of Consolidation-Subdivision of Real Property with Waiver of Rights" where they subdivided among themselves the parcel of land covered by TCT No. 35980 into several lots. Graciano then donated to his children, share and share alike, a portion of his interest in the land amounting to 4,849.38 square meters leaving only 447.60 square meters registered under Graciano's name, as covered by TCT No. 35988. Subsequently, the land subject of TCT No. 35988 was further subdivided into two separate lots where the first lot with a land area of 80.90 square meter was registered under TCT No. 107442 and the second lot with a land area of 396.70 square meters was registered under TCT No. 107443. Eventually, Graciano sold the first lot2 to a third person but retained ownership over the second lot.3

On 20 March 1980, Graciano married herein petitioner Patricia Natcher. During their marriage, Graciano sold the land covered by TCT No. 107443 to his wife Patricia as a result of which TCT No. 1860594 was issued in the latter's name. On 07 October 1985,Graciano died leaving his second wife Patricia and his six children by his first marriage, as heirs.

In a complaint5 filed in Civil Case No. 71075 before the Regional Trial Court of Manila, Branch 55, herein private respondents alleged that

upon Graciano's death, petitioner Natcher, through the employment of fraud, misrepresentation and forgery, acquired TCT No. 107443, by making it appear that Graciano executed a Deed of Sale dated 25 June 19876 in favor herein petitioner resulting in the cancellation of TCT No. 107443 and the issuance of TCT no. 186059 in the name of Patricia Natcher. Similarly, herein private respondents alleged in said complaint that as a consequence of such fraudulent sale, their legitimes have been impaired.

In her answer7 dated 19 August 1994, herein petitioner Natcher averred that she was legally married to Graciano in 20 March 1980 and thus, under the law, she was likewise considered a compulsory heir of the latter. Petitioner further alleged that during Graciano's lifetime, Graciano already distributed, in advance, properties to his children, hence, herein private respondents may not anymore claim against Graciano's estate or against herein petitioner's property.

After trial, the Regional Trial Court of Manila, Branch 55, rendered a decision dated 26 January 1996 holding:8

"1) The deed of sale executed by the late Graciano del Rosario in favor of Patricia Natcher is prohibited by law and thus a complete nullity. There being no evidence that a separation of property was agreed upon in the marriage settlements or that there has been decreed a judicial separation of property between them, the spouses are prohibited from entering (into) a contract of sale;

"2) The deed as sale cannot be likewise regarded as a valid donation as it was equally prohibited by law under Article 133 of the New Civil Code;

"3) Although the deed of sale cannot be regarded as such or as a donation, it may however be regarded as an extension of advance inheritance of Patricia Natcher being a compulsory heir of the deceased."

On appeal, the Court of Appeals reversed and set aside the lower court's decision ratiocinating, inter alia:

"It is the probate court that has exclusive jurisdiction to make a just and legal distribution of the estate. The court a quo, trying an ordinary action for reconveyance / annulment of title, went beyond its jurisdiction when it performed the acts proper only in a special proceeding for the settlement of estate of a deceased person. XXX

"X X X Thus the court a quo erred in regarding the subject property as advance inheritance. What the court should have done was merely to rule on the validity of (the) sale and leave the issue on advancement to be resolved in a separate proceeding instituted for that purpose. XXX"

Aggrieved, herein petitioner seeks refuge under our protective mantle through the expediency of Rule 45 of the Rules of Court and assails the appellate court's decision "for being contrary to law and the facts of the case."

We concur with the Court of Appeals and find no merit in the instant petition.

Section 3, Rule 1 of the 1997 Rules of Civil Procedure defines civil action and special proceedings, in this wise:

"XXX a) A civil action is one by which a party sues another for the enforcement or protection of a right, or the prevention or redress of a wrong.

"A civil action may either be ordinary or special. Both are government by the rules for ordinary civil actions, subject to specific rules prescribed for a special civil action.

"XXX

"c) A special proceeding is a remedy by which a party seeks to establish a status, a right or a particular fact."

As could be gleaned from the foregoing, there lies a marked distinction between an action and a special proceeding. An action is a formal demand of one's right in a court of justice in the manner prescribed by the court or by the law. It is the method of applying legal remedies according to definite established rules. The term "special proceeding" may be defined as an application or proceeding to establish the status or right of a party, or a particular fact. Usually, in special proceedings, no formal pleadings are required unless the statute expressly so provides. In special proceedings, the remedy is granted generally upon an application or motion."9

Citing American Jurisprudence, a noted authority in Remedial Law expounds further:

"It may accordingly be stated generally that actions include those proceedings which are instituted and prosecuted according to the ordinary rules and provisions relating to actions at law or suits in equity, and that special proceedings include those proceedings which are not ordinary in this sense, but is instituted and prosecuted according to some special mode as in the case of proceedings commenced without summons and prosecuted without regular pleadings, which are characteristics of ordinary actions. XXX A special proceeding must therefore be in the nature of a distinct and independent proceeding for particular relief, such as may be instituted independently of a pending action, by petition or motion upon notice."10

Applying these principles, an action for reconveyance and annulment of title with damages is a civil action, whereas matters relating to settlement of the estate of a deceased person such as advancement of property made by the decedent, partake of the nature of a special proceeding, which concomitantly requires the application of specific rules as provided for in the Rules of Court.

Clearly, matters which involve settlement and distribution of the estate of the decedent fall within the exclusive province of the probate court in the exercise of its limited jurisdiction.

Thus, under Section 2, Rule 90 of the Rules of Court, questions as to advancement made or alleged to have been made by the deceased to any heir may be heard and determined by the court having jurisdiction of the estate proceedings;and the final order of the court thereon shall be binding on the person raising the questions and on the heir.

While it may be true that the Rules used the word "may", it is nevertheless clear that the same provision11 contemplates a probate court when it speaks of the "court having jurisdiction of the estate proceedings".

Corollarily, the Regional Trial Court in the instant case, acting in its general jurisdiction, is devoid of authority to render an adjudication and resolve the issue of advancement of the real property in favor of herein petitioner Natcher, inasmuch as Civil Case No. 471075 for reconveyance and annulment of title with damages is not, to our mind, the proper vehicle to thresh out said question. Moreover, under the present circumstances, the RTC of Manila, Branch 55 was not properly constituted as a probate court so as to validly pass upon the question of advancement made by the decedent Graciano Del Rosario to his wife, herein petitioner Natcher.

At this point, the appellate court's disquisition is elucidating:

"Before a court can make a partition and distribution of the estate of a deceased, it must first settle the estate in a special proceeding instituted for the purpose. In the case at hand, the court a quo determined the respective legitimes of the plaintiffs-appellants and assigned the subject property owned by the estate of the deceased to defendant-appellee without observing the proper proceedings provided (for) by the Rules of Court. From the aforecited discussions, it is clear that trial courts trying an ordinary action cannot resolve to perform acts

pertaining to a special proceeding because it is subject to specific prescribed rules. Thus, the court a quo erred in regarding the subject property as an advance inheritance."12

In resolving the case at bench, this Court is not unaware of our pronouncement in Coca vs. Borromeo13 and Mendoza vs. Teh14 that whether a particular matter should be resolved by the Regional Trial Court (then Court of First Instance) in the exercise of its general jurisdiction or its limited probate jurisdiction is not a jurisdictional issue but a mere question of procedure. In essence, it is procedural question involving a mode of practice "which may be waived".15

Notwithstanding, we do not see any waiver on the part of herein private respondents inasmuch as the six children of the decedent even assailed the authority of the trail court, acting in its general jurisdiction, to rule on this specific issue of advancement made by the decedent to petitioner.

Analogously, in a train of decisions, this Court has consistently enunciated the long standing principle that although generally, a probate court may not decide a question of title or ownership, yet if the interested parties are all heirs, or the question is one of collation or advancement, or the parties consent to the assumption of jurisdiction by the probate court and the rights of third parties are not impaired, then the probate court is competent to decide the question of ownership.16

Similarly in Mendoza vs. Teh, we had occasion to hold:

"In the present suit, no settlement of estate is involved, but merely an allegation seeking appointment as estate administratrix which does not necessarily involve settlement of estate that would have invited the exercise of the limited jurisdiction of a probate court.17 (emphasis supplied)

Of equal importance is that before any conclusion about the legal share due to a compulsory heir may be reached, it is necessary that certain steps be taken first.18 The net estate of the decedent must be ascertained, by deducting all payable obligations and charges from the value of the property owned by the deceased at the time of his death; then, all donations subject to collation would be added to it. With the partible estate thus determined, the legitime of the compulsory heir or heirs can be established; and only thereafter can it be ascertained whether or not a donation had prejudiced the legitimes.19

A perusal of the records, specifically the antecedents and proceedings in the present case, reveals that the trial court failed to observe established rules of procedure governing the settlement of the estate of Graciano Del Rosario. This Court sees no cogent reason to sanction the non-observance of these well-entrenched rules and hereby holds that under the prevailing circumstances, a probate court, in the exercise of its limited jurisdiction, is indeed the best forum to ventilate and adjudge the issue of advancement as well as other related matters involving the settlement of Graciano Del Rosario's estate. 1âwphi1.nêt

WHEREFORE, premises considered, the assailed decision of the Court of Appeals is hereby AFFIRMED and the instant petition is DISMISSED for lack of merit.

SO ORDERED.

Bellosillo, Mendoza, Quisumbing, De Leon, Jr., Davide, Jr., JJ., concur.


Manila

SECOND DIVISION

G.R. No. 109373 March 20, 1995

PACIFIC BANKING CORPORATION EMPLOYEES ORGANIZATION, PAULA S. PAUG, and its officers and members, petitioners, vs.THE HONORABLE COURT OF APPEALS and VITALIANO N. NAÑAGAS II, as Liquidator of Pacific Banking Corporation, respondents.

G.R. No. 112991 March 20, 1995

THE PRESIDENT OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, as Liquidator of the Pacific Banking Corporation , petitioner, vs.COURT OF APPEALS, HON. JUDGE REGINO T. VERIDIANO II, DEPUTY SHERIFF RAMON ENRIQUEZ and ANG ENG JOO, ANG KEONG LAN and E.J ANG INT'L. LTD., represented by their Attorney-in-fact, GONZALO C. SY, respondents.

MENDOZA, J.:

These cases have been consolidated because the principal question involved is the same: whether a petition for liquidation under §29 of Rep. Act No. 265, otherwise known as the Central

Bank Act, is a special proceeding or an ordinary civil action. The Fifth and the Fourteenth Divisions of the Court of Appeals reached opposite results on this question and consequently applied different periods for appealing.

The facts are as follows:

I.

Proceedings in the CB and the RTC

On July 5, 1985, the Pacific Banking Corporation (PaBC) was placed under receivership by the Central Bank of the Philippines pursuant to Resolution No. 699 of its Monetary Board. A few months later, it was placed under liquidation 1 and a Liquidator was appointed. 2

On April 7, 1986, the Central Bank filed with the Regional Trial Court of Manila Branch 31, a petition entitled "Petition for Assistance in the Liquidation of Pacific Banking Corporation." 3 The petition was approved, after which creditors filed their claims with the court.

On May 17, 1991, a new Liquidator, Vitaliano N. Nañagas, 4 President of the Philippine Deposit Insurance Corporation (PDIC), was appointed by the Central Bank.

On March 13, 1989 the Pacific Banking Corporation Employees Organization (Union for short), petitioner in G.R. No. 109373, filed a complaint-in-intervention seeking payment of holiday pay, 13th month pay differential, salary increase differential, Christmas bonus, and cash equivalent of Sick Leave Benefit due its members as employees of PaBC. In its order dated September 13, 1991, the trial court ordered payment of the principal claims of the Union. 5

The Liquidator received a copy of the order on September 16, 1991. On October 16, 1991, he filed a Motion for Reconsideration and Clarification of the order. In his order of December 6, 1991, the judge modified his September 13, 1991 6 but in effect denied the Liquidator's motion for reconsideration. This order was received by the Liquidator on December 9, 1991. The following day, December 10, 1991, he filed a Notice of Appeal and a Motion for Additional Time to Submit Record on Appeal. On December 23, 1991, another Notice of Appeal was filed by the Office of the Solicitor General in behalf of Nañagas.

In his order of February 10, 1992, respondent judge disallowed the Liquidator's Notice of Appeal on the ground that it was late, i.e., more than 15 days after receipt of the decision. The judge declared his September 13, 1991 order and subsequent orders to be final and executory and denied reconsideration. On March 27, 1992, he granted the Union's Motion for issuance of a writ of Execution.

Ang Keong Lan and E.J. Ang Int'l., private respondents in G.R. No. 112991, likewise filed claims for the payment of investment in the PaBC allegedly in the form of shares of stocks amounting to US$2,531,632.18. The shares of stocks, consisting of 154,462 common shares, constituted 11% of the total subscribed capital stock of the PaBC. They alleged that their claim constituted foreign exchange capital investment entitled to preference in payment under the Foreign Investments Law.

In his order dated September 11, 1992, respondent judge of the RTC directed the Liquidator to pay private respondents the total amount of their claim as preferred creditors. 7

The Liquidator received the order on September 16, 1992. On September 30, 1992 he moved for reconsideration, but his motion was denied by the court on October 2, 1992. He received the order denying his Motion for Reconsideration on October 5, 1992. On October 14, 1992 he filed a Notice of Appeal from the orders of September 16, 1992 and October 2, 1992. As in the case of

the Union, however, the judge ordered the Notice of Appeal stricken off the record on the ground that it had been filed without authority of the Central Bank and beyond 15 days. In his order of October 28, 1992, the judge directed the execution of his September 11, 1992 order granting the Stockholders/ Investors' claim.

II.

Proceedings in the Court of Appeals

The Liquidator filed separate Petitions for Certiorari, Prohibition and Mandamus in the Court of Appeals to set aside the orders of the trial court denying his appeal from the orders granting the claims of Union and of the Stockholders/Investors. The two Divisions of the Court of Appeals, to which the cases were separately raffled, rendered conflicting rulings.

In its decision of November 17, 1992 in CA-G.R. SP No. 27751 (now G.R. No. 09373) the Fifth Division 8 held in the case of the Union that the proceeding before the trial court was a special proceeding and, therefore, the period for appealing from any decision or final order rendered therein is 30 days. Since the notice of appeal of the Liquidator was filed on the 30th day of his receipt of the decision granting the Union's claims, the appeal was brought on time. The Fifth Division, therefore, set aside the orders of the lower court and directed the latter to give due course to the appeal of the Liquidator and set the Record on Appeal he had filed for hearing.

On the other hand, on December 16, 1993, the Fourteenth Division 9 ruled in CA-G.R. SP No. 29351 (now G.R. No. 112991) in the case of the Stockholders/Investors that a liquidation proceeding is an ordinary action. Therefore, the period for appealing from any decision or final order rendered therein is 15 days and that since the Liquidator's appeal notice was filed on the 23rd day of his receipt of the order appealed from, deducting the period during which his motion for reconsideration was pending, the notice of appeal was

filed late. Accordingly, the Fourteenth Division dismissed the Liquidator's petition.

III.

Present Proceedings

The Union and the Liquidator then separately filed petitions before this Court.

In G.R. No. 109373 the Union contends that:

1. The Court of Appeals acted without jurisdiction over the subject matter or nature of the suit.

2. The Court of Appeals gravely erred in taking cognizance of the petition for certiorari filed by Nañagas who was without any legal authority to file it.

3. The Court of Appeals erred in concluding that the case is a special proceeding governed by Rules 72 to 109 of the Revised Rules of Court.

4. The Court of Appeals erred seriously in concluding that the notice of appeal filed by Nañagas was filed on time.

5. The Court of Appeals erred seriously in declaring that the second notice of appeal filed on December 23, 1991 by the Solicitor General is a superfluity.

On the other hand, in G.R. No. 112991 the Liquidator contends that:

1. The Petition for Assistance in the Liquidation of the Pacific Banking Corporation s a Special Proceeding case and/or one which allows multiple appeals, in which case the period of appeal is 30 days and not 15 days from receipt of the order/judgment appealed from.

2. Private respondents are not creditors of PaBC but are plain stockholders whose right to receive payment as such would accrue only after all the creditors of the insolvent bank have been paid.

3. The claim of private respondents in the amount of US$22,531,632.18 is not in the nature of foreign investment as it is understood in law.

4. The claim of private respondents has not been clearly established and proved.

5. The issuance of a writ of execution against the assets of PaBC was made with grave abuse of discretion.

The petitions in these cases must be dismissed.

First. As stated in the beginning, the principal question in these cases is whether a petition for liquidation under §29 of Rep. Act No. 265 is in the nature of a special proceeding. If it is, then the period of appeal is 30 days and the party appealing must, in addition to a notice of appeal, file with the trial court a record on appeal in order to perfect his appeal. Otherwise, if a liquidation proceeding is an ordinary action, the period of appeal is 15 days from notice of the decision or final order appealed from.

BP Blg. 129 provides:

§39. Appeals. — The period for appeal from final orders, resolutions, awards, judgments, or decisions of any court in all cases shall be fifteen (15) days counted from the notice of the final order, resolution, award, judgment or decision appealed from: Provided, however, that in habeas corpus cases the period for appeal shall be forty-eight (48) hours from the notice of the judgment appealed from.

No record on appeal shall be required to take an appeal. In lieu thereof, the entire record shall be transmitted with all the pages prominently numbered consecutively, together with an index of the contents thereof.

This section shall not apply in appeals in special proceedings and in other cases wherein multiple appeals are allowed under applicable provisions of the Rules of Court.

The Interim Rules and Guidelines to implement BP Blg. 129 provides:

19. Period of Appeals. —

(a) All appeals, except in habeas corpus cases and in the cases referred to in paragraph (b) hereof, must be taken within fifteen (15) days from notice of the judgment, order, resolution or award appealed from.

(b) In appeals in special proceedings in accordance with Rule 109 of the Rules of Court and

other cases wherein multiple appeals are allowed, the period of appeals shall be thirty (30) days, a record on appeal being required.

The Fourteenth Division of the Court of Appeals held that the proceeding is an ordinary action similar to an action for interpleader under Rule 63. 10 The Fourteenth Division stated:

The petition filed is akin to an interpleader under Rule 63 of the Rules of Court where there are conflicting claimants or several claims upon the same subject matter, a person who claims no interest thereon may file an action for interpleader to compel the claimants to "interplead" and litigate their several claims among themselves. (Section I Rule 63).

An interpleader is in the category of a special civil action under Rule 62 which, like an ordinary action, may be appealed only within fifteen (15) days from notice of the judgment or order appealed from. Under Rule 62, the preceding rules covering ordinary civil actions which are not inconsistent with or may serve to supplement the provisions of the rule relating to such civil actions are applicable to special civil actions. This embraces Rule 41 covering appeals from the regional trial court to the Court of Appeals.

xxx xxx xxx

Thus, under Section 1 Rule 2 of the Rules of Court, an action is defined as "an ordinary suit in a court of justice by which one party prosecutes another for the enforcement or protection of a right or the prevention or redress of a wrong." On

the other hand, Section 2 of the same Rule states that "every other remedy including one to establish the status or right of a party or a particular fact shall be by special proceeding."

To our mind, from the aforequoted definitions of an action and a special proceeding, the petition for assistance of the court in the liquidation of an asset of a bank is not "one to establish the status or right of a party or a particular fact." Contrary to the submission of the petitioner, the petition is not intended to establish the fact of insolvency of the bank. The insolvency of the bank had already been previously determined by the Central Bank in accordance with Section 9 of the CB Act before the petition was filed. All that needs to be done is to liquidate the assets of the bank and thus the assistance of the respondent court is sought for that purpose.

It should be pointed out that this petition filed is not among the cases categorized as a special proceeding under Section 1, Rule 72 of the Rules of Court, nor among the special proceedings that may be appealed under Section 1, Rule 109 of the Rules.

We disagree with the foregoing view of the Fourteenth Division. Rule 2 of the Rules of Court provide:

§1. Action defined. — Action means an ordinary suit in a court of justice, by which the party prosecutes another for the enforcement or protection of a right, or the prevention or redress of a wrong.

§2. Special Proceeding Distinguished. — Every other remedy, including one to establish the status or right of a party or a particular fact, shall be by special proceeding.

Elucidating the crucial distinction between an ordinary action and a special proceeding, Chief Justice Moran states:" 11

Action is the act by which one sues another in a court of justice for the enforcement or protection of a right, or the prevention or redress of a wrong while special proceeding is the act by which one seeks to establish the status or right of a party, or a particular fact. Hence, action is distinguished from special proceeding in that the former is a formal demand of a right by one against another, while the latter is but a petition for a declaration of a status, right or fact. Where a party litigant seeks to recover property from another, his remedy is to file an action. Where his purpose is to seek the appointment of a guardian for an insane, his remedy is a special proceeding to establish the fact or status of insanity calling for an appointment of guardianship.

Considering this distinction, a petition for liquidation of an insolvent corporation should be classified a special proceeding and not an ordinary action. Such petition does not seek the enforcement or protection of a right nor the prevention or redress of a wrong against a party. It does not pray for affirmative relief for injury arising from a party's wrongful act or omission nor state a cause of action that can be enforced against any person.

What it seeks is merely a declaration by the trial court of the corporation's insolvency so that its creditors may be able to file their claims in the settlement of the corporation's debts and obligations. Put in another way, the petition only seeks a declaration of the corporation's debts and obligations. Put in

another way, the petition only seeks a declaration of the corporation's state of insolvency and the concomitant right of creditors and the order of payment of their claims in the disposition of the corporation's assets.

Contrary to the rulings of the Fourteenth Division, liquidation proceedings do not resemble petitions for interpleader. For one, an action for interpleader involves claims on a subject matter against a person who has no interest therein. 12 This is not the case in a liquidation proceeding where the Liquidator, as representative of the corporation, takes charge of its assets and liabilities for the benefit of the creditors. 13 He is thus charged with insuring that the assets of the corporation are paid only to rightful claimants and in the order of payment provided by law.

Rather, a liquidation proceeding resembles the proceeding for the settlement of state of deceased persons under Rules 73 to 91 of the Rules of Court. The two have a common purpose: the determination of all the assets and the payment of all the debts and liabilities of the insolvent corporation or the estate. The Liquidator and the administrator or executor are both charged with the assets for the benefit of the claimants. In both instances, the liability of the corporation and the estate is not disputed. The court's concern is with the declaration of creditors and their rights and the determination of their order of payment.

Furthermore, as in the settlement of estates, multiple appeals are allowed in proceedings for liquidation of an insolvent corporation. As the Fifth Division of the Court of Appeals, quoting the Liquidator, correctly noted:

A liquidation proceeding is a single proceeding which consists of a number of cases properly classified as "claims." It is basically a two-phased proceeding. The first phase is concerned with the approval and disapproval of claims. Upon the approval of the petition seeking the assistance of the proper court in the liquidation of a close entity,

all money claims against the bank are required to be filed with the liquidation court. This phase may end with the declaration by the liquidation court that the claim is not proper or without basis. On the other hand, it may also end with the liquidation court allowing the claim. In the latter case, the claim shall be classified whether it is ordinary or preferred, and thereafter included Liquidator. In either case, the order allowing or disallowing a particular claim is final order, and may be appealed by the party aggrieved thereby.

The second phase involves the approval by the Court of the distribution plan prepared by the duly appointed liquidator. The distribution plan specifies in detail the total amount available for distribution to creditors whose claim were earlier allowed. The Order finally disposes of the issue of how much property is available for disposal. Moreover, it ushers in the final phase of the liquidation proceeding — payment of all allowed claims in accordance with the order of legal priority and the approved distribution plan.

Verily, the import of the final character of an Order of allowance or disallowance of a particular claim cannot be overemphasized. It is the operative fact that constitutes a liquidation proceeding a "case where multiple appeals are allowed by law." The issuance of an Order which, by its nature, affects only the particular claims involved, and which may assume finality if no appeal is made therefrom, ipso facto creates a situation where multiple appeals are allowed.

A liquidation proceeding is commenced by the filing of a single petition by the Solicitor General with a court of competent jurisdiction entitled,

"Petition for Assistance in the Liquidation of e.g., Pacific Banking Corporation. All claims against the insolvent are required to be filed with the liquidation court. Although the claims are litigated in the same proceeding, the treatment is individual. Each claim is heard separately. And the Order issued relative to a particular claim applies only to said claim, leaving the other claims unaffected, as each claim is considered separate and distinct from the others. Obviously, in the event that an appeal from an Order allowing or disallowing a particular claim is made, only said claim is affected, leaving the others to proceed with their ordinary course. In such case, the original records of the proceeding are not elevated to the appellate court. They remain with the liquidation court. In lieu of the original record, a record of appeal is instead required to be prepared and transmitted to the appellate court.

Inevitably, multiple appeals are allowed in liquidation proceedings. Consequently, a record on appeal is necessary in each and every appeal made. Hence, the period to appeal therefrom should be thirty (30) days, a record on appeal being required. (Record pp. 162-164).

In G.R. No. 112991 (the case of the Stockholders/Investors), the Liquidator's notice of appeal was filed on time, having been filed on the 23rd day of receipt of the order granting the claims of the Stockholders/Investors. However, the Liquidator did not file a record on appeal with the result that he failed to perfect his appeal. As already stated a record on appeal is required under the Interim Rules and Guidelines in special proceedings and for cases where multiple appeals are allowed. The reason for this is that the several claims are actually separate ones and a decision or final order with respect to any claim can be appealed.

Necessarily the original record on appeal must remain in the trial court where other claims may still be pending.

Because of the Liquidator's failure to perfect his appeal, the order granting the claims of the Stockholders/Investors became final. Consequently. the Fourteenth Division's decision dismissing the Liquidator's Petition for Certiorari,Prohibition and Mandamus must be affirmed albeit for a different reason.

On the other hand, in G.R. No. 109373 (case of the Labor Union), we find that the Fifth Division correctly granted the Liquidator's Petition for Certiorari. Prohibition and Mandamus. As already noted, the Liquidator filed a notice of appeal and a motion for extension to file a record on appeal on December 10, 1991, i.e., within 30 days of his receipt of the order granting the Union's claim. Without waiting for the resolution of his motion for extension, he filed on December 20, 1991 within the extension sought a record on appeal. Respondent judge thus erred in disallowing the notice on appeal and denying the Liquidator's motion for extension to file a record on appeal.

The Fifth Division of the Court of Appeals correctly granted the Liquidator's Petition for Certiorari, Prohibition andMandamus and its decision should, therefore, be affirmed.

Second. In G.R. No. 109373, The Union claims that under §29 of Rep. Act No. 265, the court merely assists in adjudicating the claims of creditors, preserves the assets of the institution, and implements the liquidation plan approved by the Monetary Board and that, therefore, as representative of the Monetary Board, the Liquidator cannot question the order of the court or appeal from it. It contends that since the Monetary Board had previously admitted PaBC's liability to the laborers by in fact setting aside the amount of P112,234,292.44 for the payment of their claims, there was nothing else for the Liquidator to do except to comply with the order of the court.

The Union's contention is untenable. In liquidation proceedings, the function of the trial court is not limited to assisting in the implementation of the orders of the Monetary Board. Under the same section (§29) of the law invoked by the Union, the court has authority to set aside the decision of the Monetary Board "if there is a convincing proof that the action is plainly arbitrary and made in bad faith." 14 As this Court held in Rural Bank of Buhi, Inc. v. Court of Appeals: 15

There is no question, that the action of the monetary Board in this regard may be subject to judicial review. Thus, it has been held that the Court's may interfere with the Central Bank's exercise of discretion in determining whether or not a distressed bank shall be supported or liquidated. Discretion has its limits and has never been held to include arbitrariness, discrimination or bad faith (Ramos v. Central Bank of the Philippines, 41 SCRA 567 [1971]).

In truth, the Liquidator is the representative not only of the Central Bank but also of the insolvent bank. Under §§28A-29 of Rep. Act No. 265 he acts in behalf of the bank "personally or through counsel as he may retain, in all actions or proceedings or against the corporation" and he has authority "to do whatever may be necessary for these purposes." This authority includes the power to appeal from the decisions or final orders of the court which he believes to be contrary to the interest of the bank.

Finally the Union contends that the notice of appeal and motion for extension of time to file the record on appeal filed in behalf of the Central Bank was not filed by the office of the Solicitor General as counsel for the Central Bank. This contention has no merit. On October 22, 1992, as Assistant Solicitor General Cecilio O. Estoesta informed the trial court in March 27, 1992, the OSG had previously authorized lawyers of the PDIC to prepare and sign pleadings in the case. 16Conformably thereto the Notice of Appeal and the Motion for Additional Time to submit Record on

Appeal filed were jointly signed by Solicitor Reynaldo I. Saludares in behalf of the OSG and by lawyers of the PDIC. 17

WHEREFORE, in G.R. No. 109373 and G.R. No 112991, the decisions appealed from are AFFIRMED.

SO ORDERED.

Narvasa, C.J., Bidin, Regalado and Puno, JJ. concur.

Republic of the Philippines

Supreme Court

Manila

THIRD DIVISION

ALAN JOSEPH A. SHEKER, G.R. No. 157912

Petitioner,

Present:

YNARES-SANTIAGO, J.,

- versus - Chairperson,

AUSTRIA-MARTINEZ,

CHICO-NAZARIO,

NACHURA, and

ESTATE OF ALICE O. SHEKER, REYES, JJ.

VICTORIA S. MEDINA-

Administratrix, Promulgated:

Respondent. December 13, 2007

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

This resolves the Petition for Review on Certiorari seeking the reversal of the Order[1] of the Regional Trial Court of IliganCity, Branch 6 (RTC) dated January 15, 2003 and its Omnibus Order dated April 9, 2003.

The undisputed facts are as follows.

The RTC admitted to probate the holographic will of Alice O. Sheker and thereafter issued an order for all the creditors to file their respective claims against the estate. In compliance therewith, petitioner filed on October 7, 2002 a contingent claim for agent's commission due him amounting to approximately P206,250.00 in the event of the sale of certain parcels of land belonging to the estate, and the amount of P275,000.00, as reimbursement for

http://sc.judiciary.gov.ph/jurisprudence/2007/december2007/157912.htm#_ftn1

expenses incurred and/or to be incurred by petitioner in the course of negotiating the sale of said realties.

The executrix of the Estate of Alice O. Sheker (respondent) moved for the dismissal of said money claim against the estate on the grounds that (1) the requisite docket fee, as prescribed in Section 7(a), Rule 141 of the Rules of Court, had not been paid; (2) petitioner failed to attach a certification against non-forum shopping; and (3) petitioner failed to attach a written explanation why the money claim was not filed and served personally.

On January 15, 2003, the RTC issued the assailed Order dismissing without prejudice the money claim based on the grounds advanced by respondent. Petitioner's motion for reconsideration was denied per Omnibus Order dated April 9, 2003.

Petitioner then filed the present petition for review on certiorari, raising the following questions:

(a) must a contingent claim filed in the probate proceeding contain a certification against non-forum shopping, failing which such claim should be dismissed?

(b) must a contingent claim filed against an estate in a probate proceeding be dismissed for failing to pay the docket fees at the time of its filing thereat?

(c) must a contingent claim filed in a probate proceeding be dismissed because of its failure to contain a written explanation on the service and filing by registered mail?[2]

Petitioner maintains that the RTC erred in strictly applying to a probate proceeding the rules requiring a certification of non-forum shopping, a written explanation for non-personal filing, and the payment of docket fees upon filing of the claim. He insists that Section 2, Rule 72 of the Rules of Court provides that rules in ordinary actions are applicable to special proceedings only in asuppletory manner.

The Court gave due course to the petition for review on certiorari although directly filed with this Court, pursuant to Section 2(c), Rule 41 of the Rules of Court.[3]

The petition is imbued with merit.



However, it must be emphasized that petitioner's contention that rules in ordinary actions are only supplementary to rules in special proceedings is not entirely correct.

Section 2, Rule 72, Part II of the same Rules of Court provides:

Sec. 2. Applicability of rules of Civil Actions. - In the absence of special provisions, the rules provided for in ordinary actions shall be, as far as practicable, applicable in special proceedings.

Stated differently, special provisions under Part II of the Rules of Court govern special proceedings; but in the absence of special provisions, the rules provided for in Part I of the Rules governing ordinary civil actions shall be applicable to special proceedings, as far as practicable.

The word “practicable” is defined as: possible to practice or perform; capable of being put into practice, done or accomplished.[4] This means that in the absence of special provisions, rules in ordinary actions may be applied in special proceedings as much as possible and where doing so would not pose an obstacle to said proceedings. Nowhere in the Rules of Court does it categorically say that rules in ordinary actions are inapplicable or merely suppletory to special proceedings. Provisions of the Rules of Court requiring a certification of non-forum shopping for

complaints and initiatory pleadings, a written explanation for non-personal service and filing, and the payment of filing fees for money claims against an estate would not in any way obstruct probate proceedings, thus, they are applicable to special proceedings such as the settlement of the estate of a deceased person as in the present case.

Thus, the principal question in the present case is: did the RTC err 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?

The Court rules in the affirmative.

The certification of 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 and 5, Rule 86 of the Rules of Court, after granting letters of testamentary or of 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; otherwise, they would be barred, subject to certain exceptions.[5]



Such being the case, a money claim against an estate is more akin to a motion for creditors' claims to be recognized and taken into consideration in the proper disposition of the properties of the estate. In Arquiza v. Court of Appeals,[6] the Court explained thus:

x x x The office of a motion is not to initiate new litigation, but to bring a material but incidental matter arising in the progress of the case in which the motion is filed. A motion is not an independent right or remedy, but is confined to incidental matters in the progress of a cause. It relates to some question that is collateral to the main object of the action and is connected with and dependent upon the principal remedy.[7] (Emphasis supplied)

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.

On the issue of filing fees, the Court ruled in Pascual v. Court of Appeals,[8] that the trial court has jurisdiction to act on a money claim (attorney's fees) against an estate for services rendered by a lawyer to the administratrix to assist her in fulfilling her duties to

the estate even without payment of separate docket fees because the filing fees shall constitute a lien on the judgment pursuant to Section 2, Rule 141 of the Rules of Court, or the trial court may order the payment of such filing fees within a reasonable time.[9] After all, the trial court had already assumed jurisdiction over the action for settlement of the estate. Clearly, therefore, non-payment of filing fees for a money claim against the estate is not one of the grounds for dismissing a money claim against the estate.

With regard to the requirement of a written explanation, Maceda v. De Guzman Vda. de Macatangay[10] is squarely in point. Therein, the Court held thus:

In Solar Team Entertainment, Inc. v. Ricafort, this Court, passing upon Section 11 of Rule 13 of the Rules of Court, held that a court has the discretion to consider a pleading or paper as not filed if said rule is not complied with.

Personal service and filing are preferred for obvious reasons. Plainly, such should expedite action or resolution on a pleading, motion or other paper; and conversely, minimize, if not eliminate, delays likely to be incurred if service or filing is done by mail, considering the inefficiency of the postal service. Likewise, personal service will do away with the practice of some lawyers who, wanting to appear clever, resort to the following less than ethical practices: (1) serving or filing pleadings by mail to catch opposing counsel off-






guard, thus leaving the latter with little or no time to prepare, for instance, responsive pleadings or an opposition; or (2) upon receiving notice from the post office that the registered mail containing the pleading of or other paper from the adverse party may be claimed, unduly procrastinating before claiming the parcel, or, worse, not claiming it at all, thereby causing undue delay in the disposition of such pleading or other papers.

If only to underscore the mandatory nature of this innovation to our set of adjective rules requiring personal service whenever practicable, Section 11 of Rule 13 then gives the court the discretion to consider a pleading or paper as not filed if the other modes of service or filing were not resorted to and no written explanation was made as to why personal service was not done in the first place. The exercise of discretion must, necessarily consider the practicability of personal service, for Section 11 itself begins with the clause “whenever practicable”.

We thus take this opportunity to clarify that under Section 11, Rule 13 of the 1997 Rules of Civil Procedure, personal service and filing is the general rule, and resort to other modes of service and filing, the exception. Henceforth, whenever personal service or filing is practicable, in the light of the circumstances of time, place and person, personal service or filing is mandatory. Only when personal service or filing is not practicable may resort to other modes be had, which must then be accompanied by a written explanation as to why personal service or

filing was not practicable to begin with. In adjudging the plausibility of an explanation, a court shall likewise consider the importance of the subject matter of the case or the issues involved therein, and the prima facie merit of the pleading sought to be expunged for violation of Section 11. (Emphasis and italics supplied)

In Musa v. Amor, this Court, on noting the impracticality of personal service, exercised its discretion and liberally applied Section 11 of Rule 13:

“As [Section 11, Rule 13 of the Rules of Court] requires, service and filing of pleadings must be done personally whenever practicable. The court notes that in the present case, personal service would not be practicable. Considering the distance between the Court of Appeals and Donsol, Sorsogon where the petition was posted, clearly, service by registered mail [sic] would have entailed considerable time, effort and expense. A written explanation why service was not done personally might have been superfluous. In any case, as the rule is so worded with the use of “may”, signifying permissiveness, a violation thereof gives the court discretion whether or not to consider the paper as not filed. While it is true that procedural rules are necessary to secure an orderly and speedy administration of justice, rigid application of Section 11, Rule 13 may be relaxed in this case in the interest of substantial justice. (Emphasis and italics supplied)

In the case at bar, the address of respondent’s counsel is Lopez, Quezon, while petitioner Sonia’s counsel’s is Lucena City. Lopez, Quezonis 83 kilometers away from Lucena City. Such distance makes personal service impracticable. As in Musa v. Amor, a written explanation why service was not done personally “might have been superfluous.”

As this Court held in Tan v. Court of Appeals, liberal construction of a rule of procedure has been allowed where, among other cases, “theinjustice to the adverse party is not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed.”[11] (Emphasis supplied)

In the present case, petitioner holds office in Salcedo Village, Makati City, while counsel for respondent and the RTC which rendered the assailed orders are both in Iligan City. The lower court should have taken judicial notice of the great distance between said cities and realized that it is indeed not practicable to serve and file the money claim personally. Thus, following Medina v. Court of Appeals,[12] the failure of petitioner to submit a written explanation why service has not been done personally, may be considered as superfluous and the RTC should have exercised its discretion under Section 11, Rule 13, not to dismiss the money claim of petitioner, in the interest of substantial justice.

The ruling spirit of the probate law is the speedy settlement of estates of deceased persons for the benefit of creditors and those entitled to residue by way of inheritance or legacy after the debts and expenses of administration have been paid.[13] The ultimate purpose for the rule on money claims was further explained in Union Bank of the Phil. v. Santibañez,[14] thus:

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 Py Eng Chongv. Herrera:

x x x 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.[15] (Emphasis supplied)

The RTC should have relaxed and liberally construed the procedural rule on the requirement of a written explanation for non-personal service, again in the interest of substantial justice.






WHEREFORE, the petition is GRANTED. The Orders of the Regional Trial Court of Iligan City, Branch 6 dated January 15, 2003 and April 9, 2003, respectively, are REVERSED and SET ASIDE. The Regional Trial Court of Iligan City, Branch 6, is hereby DIRECTED to give due course and take appropriate action on petitioner's money claim in accordance with Rule 82 of the Rules of Court.

No pronouncement as to costs.

SO ORDERED.


Manila

FIRST DIVISION

G.R. No. L-33172 October 18, 1979

ERNESTO CEASE, CECILIA CEASE, MARION CEASE, TERESA CEASE-LACEBAL and the F.L. CEASE PLANTATION CO., INC. as Trustee of properties of the defunct TIAONG MILLING & PLANTATION CO.,petitioners, vs.HONORABLE COURT OF APPEALS, (Special Seventh Division), HON. MANOLO L. MADDELA, Presiding Judge, Court of First Instance of Quezon, BENJAMIN CEASE and FLORENCE CEASE, respondents.

GUERRERO, J:

Appeal by certiorari from the decision of the Court of Appeals in CA-G.R. No. 45474, entitled "Ernesto Cease, et al. vs. Hon. Manolo L. Maddela, Judge of the Court of First Instance of Quezon, et al." 1 which dismissed the petition for certiorari, mandamus, and prohibition instituted by the petitioners against the respondent judge and the private respondents.

The antecedents of the case, as found by the appellate court, are as follows:

IT RESULTING: That the antecedents are not difficult to understand; sometime in June 1908, one Forrest L. Cease common predecessor in interest of the parties together with five (5) other

American citizens organized the Tiaong Milling and Plantation Company and in the course of its corporate existence the company acquired various properties but at the same time all the other original incorporators were bought out by Forrest L. Cease together with his children namely Ernest, Cecilia, Teresita, Benjamin, Florence and one Bonifacia Tirante also considered a member of the family; the charter of the company lapsed in June 1958; but whether there were steps to liquidate it, the record is silent; on 13 August 1959, Forrest L. Cease died and by extrajudicial partition of his shares, among the children, this was disposed of on 19 October 1959; it was here where the trouble among them came to arise because it would appear that Benjamin and Florence wanted an actual division while the other children wanted reincorporation; and proceeding on that, these other children Ernesto, Teresita and Cecilia and aforementioned other stockholder Bonifacia Tirante proceeded to incorporate themselves into the F.L. Cease Plantation Company and registered it with the Securities and Exchange Commission on 9 December, 1959; apparently in view of that, Benjamin and Florence for their part initiated a Special Proceeding No. 3893 of the Court of First Instance of Tayabas for the settlement of the estate of Forest L. Cease on 21 April, 1960 and one month afterwards on 19 May 1960 they filed Civil Case No. 6326 against Ernesto, Teresita and Cecilia Cease together with Bonifacia Tirante asking that the Tiaong Milling and Plantation Corporation be declared Identical to F.L. Cease and that its properties be divided among his children as his intestate heirs; this Civil Case was resisted by aforestated defendants and

notwithstanding efforts of the plaintiffs to have the properties placed under receivership, they were not able to succeed because defendants filed a bond to remain as they have remained in possession; after that and already, during the pendency of Civil Case No. 6326 specifically on 21 May, 1961 apparently on the eve of the expiry of the three (3) year period provided by the law for the liquidation of corporations, the board of liquidators of Tiaong Milling executed an assignment and conveyance of properties and trust agreement in favor of F.L. Cease Plantation Co. Inc. as trustee of the Tiaong Milling and Plantation Co. so Chat upon motion of the plaintiffs trial Judge ordered that this alleged trustee be also included as party defendant; now this being the situation, it will be remembered that there were thus two (2) proceedings pending in the Court of First Instance of Quezon namely Civil Case No. 6326 and Special Proceeding No. 3893 but both of these were assigned to the Honorable Respondent Judge Manolo L. Maddela p. 43 and the case was finally heard and submitted upon stipulation of facts pp, 34-110, rollo; and trial Judge by decision dated 27 December 1969 held for the plaintiffs Benjamin and Florence, the decision containing the following dispositive part:

VIEWED IN THE LIGHT OF ALL THE FOREGOING, judgment is hereby rendered in favor of plaintiffs and against the defendants declaring that:

1) The assets or properties of the defunct Tiaong Milling and Plantation Company now appearing under the name of F.L.

Cease Plantation Company as Trustee, is the estate also of the deceased Forrest L. Cease and ordered divided, share and share alike, among his six children the plaintiffs and the defendants in accordance with Rule 69, Rules of Court;

2) The Resolution to Sell dated October 12, 1959 and the Transfer and Conveyance with Trust Agreement is hereby set aside as improper and illegal for the purposes and effect that it was intended and, therefore, null and void;

3) That F.L. Cease Plantation Company is removed as 'Trustee for interest against the estate and essential to the protection of plaintiffs' rights and is hereby ordered to deliver and convey all the properties and assets of the defunct Tiaong Milling now under its name, custody and control to whomsoever be appointed as Receiver - disqualifying and of the parties herein - the latter to act accordingly upon proper assumption of office; and

4) Special Proceedings No. 3893 for administration is terminated and dismissed; the instant case to proceed but on issues of damages

only and for such action inherently essential for partition.

SO ORDERED.

Lucena City, December 27, 1969., pp. 122-a-123, rollo.

upon receipt of that, defendants there filled a notice of appeal p. 129, rollo together with an appeal bond and a record on appeal but the plaintiffs moved to dismiss the appeal on the ground that the judgment was in fact interlocutory and not appealable p. 168 rollo and this position of defendants was sustained by trial Judge, His Honor ruling that

IN VIEW OF THE FOREGOING, the appeal interposed by plaintiffs is hereby dismissed as premature and the Record on Appeal is necessarily disapproved as improper at this stage of the proceedings.

SO ORDERED.

Lucena City, April 27, 1970.

and so it was said defendants brought the matter first to the Supreme Court, on mandamus on 20 May, 1970 to compel the appeal and certiorari and prohibition to annul the order of 27 April, 1970 on the ground that the decision was "patently erroneous" p. 16, rollo; but the Supreme Court remanded the case to this Court of Appeals by resolution of 27 May 1970, p. 173, and this Court

of Appeals on 1 July 1970 p. 175 dismissed the petition so far as the mandamus was concerned taking the view that the decision sought to be appealed dated 27 December, 1969 was interlocutory and not appealable but on motion for reconsideration of petitioners and since there was possible merit so far as its prayer for certiorari and prohibition was concerned, by resolution of the Court on 19 August, 1970, p. 232, the petition was permitted to go ahead in that capacity; and it is the position of petitioners that the decision of 27 December, 1969 as well as the order of 27 April, 1970 suffered of certain fatal defects, which respondents deny and on their part raise the preliminary point that this Court of Appeals has no authority to give relief to petitioners because not

in aid of its appellate jurisdiction,

and that the questions presented cannot be raised for the first time before this Court of Appeals;

Respondent Court of Appeals in its decision promulgated December 9, 1970 dismissed the petition with costs against petitioners, hence the present petition to this Court on the following assignment of errors:

THE COURT OF APPEALS ERRED -

I. IN SANCTIONING THE WRONGFUL EXERCISE OF JURISDICTION BEYOND THE LIMITS OF AUTHORITY CONFERRED BY LAW UPON THE LOWER COURT, WHEN IT PROCEEDED TO HEAR, ADJUDGE AND ADJUDICATE -

(a) Special Proceedings No. 3893 for the settlement of the Estate of Forrest L. Cease, simultaneously and concurrently with -

(b) Civil Case No. 6326, wherein the lower Court ordered Partition under Rule 69, Rules of Court -

THE ISSUE OF LEGAL OWNERSHIP OF THE PROPERTIES COMMONLY INVOLVED IN BOTH ACTIONS HAVING BEEN RAISED AT THE OUTSET BY THE TIAONG MILLING AND PLANTATION COMPANY, AS THE REGISTERED OWNER OF SUCH PROPERTIES UNDER ACT 496.

II. IN AFFIRMING - UNSUPPORTED BY ANY EVIDENCE WHATSOEVER NOR CITATION OF ANY LAW TO JUSTIFY - THE UNWARRANTED CONCLUSION THAT SUBJECT PROPERTIES, FOUND BY THE LOWER COURT AND THE COURT OF APPEALS AS ACTUALLY REGISTERED IN THE NAME OF PETITIONER CORPORATION AND/OR ITS PREDECESSOR IN INTEREST, THE TIAONG MILLING AND PLANTATION COMPANY, DURING ALL THE 50 YEARS OF ITS CORPORATE EXISTENCE "ARE ALSO PROPERTIES OF THE ESTATE OF FOREST L. CEASE."

III. IN AFFIRMING THE ARBITRARY CONCLUSION OF THE LOWER COURT THAT ITS DECISION OF DECEMBER 27,1969 IS AN "INTERLUCUTORY DECISION." IN DISMISSED NG THE PETITION FOR WRIT OF MANDAMUS, AND IN AFFIRMING THE MANIFESTLY UNJUST JUDGMENT RENDERED WHICH CONTRADICTS THE FINDINGS OF ULTIMATE FACTS THEREIN CONTAINED.

During the period that ensued after the filing in this Court of the respective briefs and the subsequent submission of the case for decision, some incidents had transpired, the summary of which may be stated as follows:

1. Separate from this present appeal, petitioners filed a petition for certiorari and prohibition in this Court, docketed as G.R. No. L-35629 (Ernesto Cease, et al. vs. Hon. Manolo L. Maddela, et al.) which challenged the order of respondent judge dated September

27, 1972 appointing his Branch Clerk of Court, Mr. Eleno M. Joyas, as receiver of the properties subject of the appealed civil case, which order, petitioners saw as a virtual execution of the lower court's judgment (p. 92, rollo). In Our resolution of November 13, 1972, issued in G.R. No. L-35629, the petition was denied since respondent judge merely appointed an auxilliary receiver for the preservation of the properties as well as for the protection of the interests of all parties in Civil Case No. 6326; but at the same time, We expressed Our displeasure in the appointment of the branch clerk of court or any other court personnel for that matter as receiver. (p. 102, rollo).

2. Meanwhile, sensing that the appointed receiver was making some attempts to take possession of the properties, petitioners filed in this present appeal an urgent petition to restrain proceedings in the lower court. We resolved the petition on January 29, 1975 by issuing a corresponding temporary restraining order enjoining the court a quo from implementing its decision of December 27, 1969, more particularly, the taking over by a receiver of the properties subject of the litigation, and private respondents Benjamin and Florence Cease from proceeding or taking any action on the matter until further orders from this Court (pp. 99-100, rollo). Private respondents filed a motion for reconsideration of Our resolution of January 29, 1975. After weighing the arguments of the parties and taking note of Our resolution in G.R. No. L-35629 which upheld the appointment of a receiver, We issued another resolution dated April 11, 1975 lifting effective immediately Our previous temporary restraining order which enforced the earlier resolution of January 29, 1975 (pp. 140-141, rollo).

3. On February 6, 1976, private respondents filed an urgent petition to restrain proceedings below in view of the precipitate replacement of the court appointed receiver Mayor Francisco Escueta (vice Mr. Eleno M. Joyas) and the appointment of Mr. Guillermo Lagrosa on the eve of respondent Judge Maddela's retirement (p. 166, rollo). The urgent petition was denied in Our resolution of February 18, 1976 (p. 176, rollo).

4. Several attempts at a compromise agreement failed to materialize. A Tentative Compromise Agreement dated July 30, 1975 was presented to the Court on August 6, 1976 for the signature of the parties, but respondents "unceremoniously" repudiated the same by leaving the courtroom without the permission of the court (Court of First Instance of Quezon, Branch 11) as a result of which respondents and their counsel were cited for contempt (p. 195, 197, rollo) that respondents' reason for the repudiation appears to be petitioners' failure to render an audited account of their administration covering the period from May 31, 1961 up to January 29, 1974, plus the inclusion of a provision on waiver and relinquishment by respondents of whatever rights that may have accrued to their favor by virtue of the lower court's decision and the affirmative decision of the appellate court.

We go now to the alleged errors committed by the respondent Court of Appeals.

As can be gleaned from petitioners' brief and the petition itself, two contentions underlie the first assigned error. First, petitioners argue that there was an irregular and arbitrarte termination and dismissal of the special proceedings for judicial administration simultaneously ordered in the lower court . s decision in Civil Case No. 6326 adjudicating the partition of the estate, without categorically, reasoning the opposition to the petition for administration Second, that the issue of ownership had been raised in the lower court when Tiaong Milling asserted title over the properties registered in its corporate name adverse to Forrest L. Cease or his estate, and that the said issue was erroneously disposed of by the trial court in the partition proceedings when it concluded that the assets or properties of the defunct company is also the estate of the deceased proprietor.

The propriety of the dismissal and termination of the special proceedings for judicial administration must be affirmed in spite of its rendition in another related case in view of the established jurisprudence which favors partition when judicial administration

become, unnecessary. As observed by the Court of Appeals, the dismissal at first glance is wrong, for the reason that what was actually heard was Civil Case No. 6326. The technical consistency, however, it is far less importance than the reason behind the doctrinal rule against placing an estate under administration. Judicial rulings consistently hold the view that where partition is possible, either judicial or extrajudicial, the estate should not be burdened with an administration proceeding without good and compelling reason. When the estate has no creditors or pending obligations to be paid, the beneficiaries in interest are not bound to submit the property to judicial administration which is always long and costly, or to apply for the appointment of an administrator by the court, especially when judicial administration is unnecessary and superfluous. Thus -

When a person dies without leaving pending obligations to be paid, his heirs, whether of age or not, are bound to submit the property to a judicial administration, which is always long and costly, or to apply for the appointment of an administrator by the court. It has been uniformly held that in such case the judicial administration and the appointment of an administrator are superfluous and unnecessary proceedings (Ilustre vs. Alaras Frondosa, 17 Phil., 321; Malahacan vs. Ignacio, 19 Phil, 434; Bondad vs. Bondad, 34 Phil., 232; Baldemor vs. Malangyaon, 34 Phil., 367; Fule vs. Fule, 46 Phil., 317). Syllabus, Intestate estate of the deceased Luz Garcia. Pablo G. Utulo vs. Leona Pasion Viuda de Garcia, 66 Phil. 302.

Where the estate has no debts, recourse may be had to an administration proceeding only if the heirs have good reasons for not resorting to an action for partition. Where partition is possible, either in or out of court, the estate should not be burdened with an administration proceeding

without good and compelling reasons. (Intestate Estate of Mercado vs. Magtibay, 96 Phil. 383)

In the records of this case, We find no indication of any indebtedness of the estate. No creditor has come up to charge the estate within the two-year period after the death of Forrest L. Cease, hence, the presumption under Section 1, Rule 74 that the estate is free from creditors must apply. Neither has the status of the parties as legal heirs, much less that of respondents, been raised as an issue. Besides, extant in the records is the stipulation of the parties to submit the pleadings and contents of the administration proceedings for the cognizance of the trial judge in adjudicating the civil case for partition (Respondents' Brief, p, 20, rollo). As respondents observe, the parties in both cases are the same, so are the properties involved; that actual division is the primary objective in both actions; the theory and defense of the respective parties are likewise common; and that both cases have been assigned to the same respondent judge. We feel that the unifying effect of the foregoing circumstances invites the wholesome exception to the structures of procedural rule, thus allowing, instead, room for judicial flexibility. Respondent judge's dismissal of the administration proceedings then, is a judicious move, appreciable in today's need for effective and speedy administration of justice. There being ample reason to support the dismissal of the special proceedings in this appealed case, We cannot see in the records any compelling reason why it may not be dismissed just the same even if considered in a separate action. This is inevitably certain specially when the subject property has already been found appropriate for partition, thus reducing the petition for administration to a mere unnecessary solicitation.

The second point raised by petitioners in their first assigned error is equally untenable. In effect, petitioners argue that the action for partition should not have prospered in view of the repudiation of the co-ownership by Tiaong Milling and Plantation Company when, as early in the trial court, it already asserted ownership and corporate title over the properties adverse to the right of

ownership of Forrest L. Cease or his estate. We are not unmindful of the doctrine relied upon by petitioners inRodriguez vs. Ravilan, 17 Phil. 63 wherein this Court held that in an action for partition, it is assumed that the parties by whom it is prosecuted are all co-owners or co-proprietors of the property to be divided, and that the question of common ownership is not to be argued, not the fact as to whether the intended parties are or are not the owners of the property in question, but only as to how and in what manner and proportion the said property of common ownership shall be distributed among the interested parties by order of the Court. Consistent with this dictum, it has been field that if any party to a suit for partition denies the pro-indiviso character of the estate whose partition is sought, and claims instead, exclusive title thereto the action becomes one for recovery of property cognizable in the courts of ordinary jurisdiction. 2

Petitioners' argument has only theoretical persuasion, to say the least, rather apparent than real. It must be remembered that when Tiaong Milling adduced its defense and raised the issue of ownership, its corporate existence already terminated through the expiration of its charter. It is clear in Section 77 of Act No. 1459 (Corporation Law) that upon the expiration of the charter period, the corporation ceases to exist and is dissolved ipso facto except for purposes connected with the winding up and liquidation. The provision allows a three year, period from expiration of the charter within which the entity gradually settles and closes its affairs, disposes and convey its property and to divide its capital stock, but not for the purpose of continuing the business for which it was established. At this terminal stage of its existence, Tiaong Milling may no longer persist to maintain adverse title and ownership of the corporate assets as against the prospective distributees when at this time it merely holds the property in trust, its assertion of ownership is not only a legal contradiction, but more so, to allow it to maintain adverse interest would certainly thwart the very purpose of liquidation and the final distribute loll of the assets to the proper, parties.

We agree with the Court of Appeals in its reasoning that substance is more important than form when it sustained the dismissal of Special Proceedings No. 3893, thus -

a) As to the dismissal of Special Proceedings No. 3893, of course, at first glance, this was wrong, for the reason that the case trial had been heard was Civil Case No. 6326; but what should not be overlooked either is Chat respondent Judge was the same Judge that had before him in his own sala, said Special Proceedings No. 3893, p. 43 rollo, and the parties to the present Civil Case No. 6326 had themselves asked respondent Judge to take judicial notice of the same and its contents page 34, rollo; it is not difficult to see that when respondent Judge in par. 4 of the dispositive part of his decision complained of, ordered that,

4) Special Proceedings No. 3893 for administration is terminated and dismissed; the instant case to proceed but on issues of damages only and for such action inherently essential or partition. p. 123, rollo,

in truth and in fact, His Honor was issuing that order also within Civil Case No. 632 but in connection with Special Proceedings No. 389:3: for substance is more important Chan form, the contending par ties in both proceedings being exactly the same, but not only this, let it not be forgotten that when His Honor dismissed Special Proceedings No. 3893, that dismissal precisely was a dismissal that petitioners herein had themselves sought and solicited from respondent Judge as petitioners themselves are in their present petition pp. 5-6, rollo; this Court must find difficulty in reconciling petitioners' attack with the

fact that it was they themselves that had insisted on that dismissal; on the principle that not he who is favored but he who is hurt by a judicial order is he only who should be heard to complain and especially since extraordinary legal remedies are remedies in extermies granted to parties ' who have been the victims not merely of errors but of grave wrongs, and it cannot be seen how one who got what he had asked could be heard to claim that he had been the victim of a wrong, petitioners should not now complain of an order they had themselves asked in order to attack such an order afterwards; if at all, perhaps, third parties, creditors, the Bureau of Internal Revenue, might have been prejudiced, and could have had the personality to attack that dismissal of Special Proceedings No. 3893, but not petitioners herein, and it is not now for this Court of Appeals to protect said third persons who have not come to the Court below or sought to intervene herein;

On the second assigned error, petitioners argue that no evidence has been found to support the conclusion that the registered properties of Tiaong Milling are also properties of the estate of Forrest L. Cease; that on the contrary, said properties are registered under Act No. 496 in the name of Tiaong Milling as lawful owner and possessor for the last 50 years of its corporate existence.

We do not agree. In reposing ownership to the estate of Forrest L. Cease, the trial court indeed found strong support, one that is based on a well-entrenched principle of law. In sustaining respondents' theory of "merger of Forrest L. Cease and The Tiaong Milling as one personality", or that "the company is only the business conduit and alter ego of the deceased Forrest L. Cease and the registered properties of Tiaong Milling are actually properties of Forrest L. Cease and should be divided equally, share and share alike among his six children, ... ", the trial court

did aptly apply the familiar exception to the general rule by disregarding the legal fiction of distinct and separate corporate personality and regarding the corporation and the individual member one and the same. In shredding the fictitious corporate veil, the trial judge narrated the undisputed factual premise, thus:

While the records showed that originally its incorporators were aliens, friends or third-parties in relation of one to another, in the course of its existence, it developed into a close family corporation. The Board of Directors and stockholders belong to one family the head of which Forrest L. Cease always retained the majority stocks and hence the control and management of its affairs. In fact, during the reconstruction of its records in 1947 before the Security and Exchange Commission only 9 nominal shares out of 300 appears in the name of his 3 eldest children then and another person close to them. It is likewise noteworthy to observe that as his children increase or perhaps become of age, he continued distributing his shares among them adding Florence, Teresa and Marion until at the time of his death only 190 were left to his name. Definitely, only the members of his family benefited from the Corporation.

The accounts of the corporation and therefore its operation, as well as that of the family appears to be indistinguishable and apparently joined together. As admitted by the defendants (Manifestation of Compliance with Order of March 7, 1963 [Exhibit "21"] the corporation 'never' had any account with any banking institution or if any account was carried in a bank on its behalf, it was in the name of Mr. Forrest L. Cease. In brief, the operation of the Corporation is merged with those of the majority stockholders, the latter using the

former as his instrumentality and for the exclusive benefits of all his family. From the foregoing indication, therefore, there is truth in plaintiff's allegation that the corporation is only a business conduit of his father and an extension of his personality, they are one and the same thing. Thus, the assets of the corporation are also the estate of Forrest L. Cease, the father of the parties herein who are all legitimate children of full blood.

A rich store of jurisprudence has established the rule known as the doctrine of disregarding or piercing the veil of corporate fiction. Generally, a corporation is invested by law with a personality separate and distinct from that of the persons composing it as well as from that of any other legal entity to which it may be related. By virtue of this attribute, a corporation may not, generally, be made to answer for acts or liabilities of its stockholders or those of the legal entities to which it may be connected, and vice versa. This separate and distinct personality is, however, merely a fiction created by law for convenience and to promote the ends of justice (Laguna Transportation Company vs. Social Security System, L-14606, April 28, 1960; La Campana Coffee Factory, Inc. vs. Kaisahan ng mga Manggagawa sa La Campana, L-5677, May 25, 1953). For this reason, it may not be used or invoked for ends subversive of the policy and purpose behind its creation (Emiliano Cano Enterprises, Inc. vs. CIR, L-20502, Feb. 26, 1965) or which could not have been intended by law to which it owes its being McConnel vs. Court of Appeals, L- 10510, March 17, 1961, 1 SCRA 722). This is particularly true where the fiction is used to defeat public convenience, justify wrong, protect fraud, defend crime (Yutivo Sons Hardware Company vs. Court of Tax Appeals, L-13203, Jan. 28, 1961, 1 SCRA 160), confuse legitimate legal or judicial issues (R. F. Sugay & Co. vs. Reyes, L-20451, Dec. 28, 1964), perpetrate deception or otherwise circumvent the law (Gregorio Araneta, Inc. vs. reason de Paterno, L-2886, Aug. 22, 1952, 49 O.G. 721). This is likewise true where the corporate entity is being used as an

alter ego, adjunct, or business conduit for the sole benefit of the stockholders or of another corporate entity (McConnel vs. Court of Appeals, supra; Commissioner of Internal Revenue vs. Norton Harrison Co., L-7618, Aug. 31, 1964).

In any of these cases, the notion of corporate entity will be pierced or disregarded, and the corporation will be treated merely as an association of persons or, where there are two corporations, they will be merged as one, the one being merely regarded as part or the instrumentality of the otter (Koppel [Phil.] Inc. vs. Yatco, 77 Phil. 496, Yutivo Sons Hardware Company vs. Court of Tax Appeals, supra).

So must the case at bar add to this jurisprudence. An indubitable deduction from the findings of the trial court cannot but lead to the conclusion that the business of the corporation is largely, if not wholly, the personal venture of Forrest L. Cease. There is not even a shadow of a showing that his children were subscribers or purchasers of the stocks they own. Their participation as nominal shareholders emanated solely from Forrest L. Cease's gratuitous dole out of his own shares to the benefit of his children and ultimately his family.

Were we sustain the theory of petitioners that the trial court acted in excess of jurisdiction or abuse of discretion amounting to lack of jurisdiction in deciding Civil Case No. 6326 as a case for partition when the defendant therein, Tiaong Milling and Plantation Company, Inc. as registered owner asserted ownership of the assets and properties involved in the litigation, which theory must necessarily be based on the assumption that said assets and properties of Tiaong Milling and Plantation Company, Inc. now appearing under the name of F. L. Cease Plantation Company as Trustee are distinct and separate from the estate of Forrest L. Cease to which petitioners and respondents as legal heirs of said Forrest L. Cease are equally entitled share and share alike, then that legal fiction of separate corporate personality shall have been used to delay and ultimately deprive and defraud the respondents of their

successional rights to the estate of their deceased father. For Tiaong Milling and Plantation Company shall have been able to extend its corporate existence beyond the period of its charter which lapsed in June, 1958 under the guise and cover of F. L, Cease Plantation Company, Inc. as Trustee which would be against the law, and as Trustee shall have been able to use the assets and properties for the benefit of the petitioners, to the great prejudice and defraudation. of private respondents. Hence, it becomes necessary and imperative to pierce that corporate veil.

Under the third assigned error, petitioners claim that the decision of the lower court in the partition case is not interlocutory but rather final for it consists of final and determinative dispositions of the contentions of the parties. We find no merit in petitioners' stand.

Under the 1961 pronouncement and ruling of the Supreme Court in Vda. de Zaldarriaga vs. Enriquez, 1 SCRA 1188 (and the sequel case of Vda. de Zaldarriaga vs. Zaldarriaga, 2 SCRA 356), the lower court's dismissal of petitioners' proposed appeal from its December 27, 1969 judgment as affirmed by the Court of Appeals on the ground of prematurity in that the judgment was not final but interlocutory was in order. As was said in said case:

It is true that in Africa vs. Africa, 42 Phil. 934 and other cases it was held - contrary to the rule laid down inRon vs. Mojica, 8 Phil. 328; Rodriguez vs. Ravilan, 17 Phil. 63 - that in a partition case where defendant relies on the defense of exclusive ownership, the action becomes one for title and the decision or order directing partition is final, but the ruling to this effect has been expressly reversed in the Fuentebella case which, in our opinion, expresses the correct view, considering that a decision or order directing partition is not final because it leaves something more to be done in the trial court for the complete disposition of the case, namely, the appointment

of commissioners, the proceedings to be had before them, the submission of their report which, according to law, must be set for hearing. In fact, it is only after said hearing that the court may render a final judgment finally disposing of the action (Rule 71, section 7, Rules of Court). (1 SCRA at page 1193).

It should be noted, however, that the said ruling in Zaldarriaga as based on Fuentebella vs. Carrascoso, XIV Lawyers Journal 305 (May 27, 1942), has been expressly abandoned by the Court in Miranda vs. Court of Appeals, 71 SCRA 295; 331-333 (June 18, 1976) wherein Mr. Justice Teehankee, speaking for the Court, laid down the following doctrine:

The Court, however, deems it proper for the guidance of the bench and bar to now declare as is clearly indicated from the compelling reasons and considerations hereinabove stated:

- that the Court considers the better rule to be that stated in H. E. Heacock Co. vs. American Trading Co., to wit, that where the primary purpose of a case is to ascertain and determine who between plaintiff and defendant is the true owner and entitled to the exclusive use of the disputed property, "the judgment . . . rendered by the lower court [is] a judgment on the merits as to those questions, and [that] the order of the court for an accounting was based upon, and is incidental to the judgment on the merits. That is to say, that the judgment . . . [is] a final judgment ... that in this kind of a case an accounting is a mere incident to the judgment; that an appeal lies from the rendition of the judgment as rendered ... "(as is widely held by a great number of judges and members of the bar, as shown by the cases so decided and filed and still pending with the Court)

for the fundamental reasons therein stated that "this is more in harmony with the administration of justice and the spirit and intent of the [Rules]. If on appeal the judgment of the lower court is affirmed, it would not in the least work an injustice to any of the legal rights of [appellee]. On the other hand, if for any reason this court should reverse the judgment of the lower court, the accounting would be a waste of time and money, and might work a material injury to the [appellant]; and

- that accordingly, the contrary ruling in Fuentebella vs. Carrascoso which expressly reversed the Heacock case and a line of similar decisions and ruled that such a decision for recovery of property with accounting "is not final but merely interlocutory and therefore not appealable" and subsequent cases adhering to the same must be now in turn abandoned and set aside.

Fuentebella adopted instead the opposite line of conflicting decisions mostly in partition proceedings and exemplified by Ron vs. Mojica 8 Phil. 928 (under the old Code of Civil Procedure) that an order for partition of real property is not final and appealable until after the actual partition of the property as reported by the court appointed commissioners and approved by the court in its judgment accepting the report. lt must be especially noted that such rule governing partitions is now so expressly provided and spelled out in Rule 69 of the Rules of Court, with special reference to Sections 1, 2, 3, 6, 7 and 11, to wit, that there must first be a preliminar, order for partition of the real estate (section 2) and where the parties-co-owners cannot agree, the court appointed commissioners make a plan of

actual partition which must first be passed upon and accepted by the trial court and embodied in a judgment to be rendered by it (sections 6 and 11). In partition cases, it must be further borne in mind that Rule 69, section 1 refers to "a person having the right to compel the partition of real estate," so that the general rule of partition that an appeal will not lie until the partition or distribution proceedings are terminated will not apply where appellant claims exclusive ownership of the whole property and denies the adverse party's right to any partition, as was the ruling in Villanueva vs. Capistrano and Africa vs .Africa, supra, Fuentebellas express rehearsal of these cases must likewise be deemed now also abandoned in view of the Court's expressed preference for the rationale of the Heacock case.

The Court's considered opinion is that imperative considerations of public policy and of sound practice in the courts and adherence to the constitutional mandate of simplified, just, speedy and inexpensive determination of every action call for considering such judgments for recovery of property with accounting as finaljudgments which are duly appealable (and would therefore become final and executory if not appealed within the reglementary period) with the accounting as a mere incident of the judgment to be rendered during the course of the appeal as provided in Rule 39, section 4 or to be implemented at the execution stage upon final affirmance on appeal of the judgment (as in Court of Industrial Relations unfair labor practice cases ordering the reinstatement of the worker with accounting, computation and payment of his backwages less earnings elsewhere during his layoff) and that the only reason given in

Fuentebelia for the contrary ruling, viz, "the general harm that would follow from throwing the door open to multiplicity of appeals in a single case" of lesser import and consequence. (Emphasis copied).

The miranda ruling has since then been applied as the new rule by a unanimous Court in Valdez vs. Bagasao, 82 SCRA 22 (March 8, 1978).

If there were a valid genuine claim of Exclusive ownership of the inherited properties on the part of petitioners to respondents' action for partition, then under the Miranda ruling, petitioners would be sustained, for as expressly held therein " the general rule of partition that an appeal will not lie until the partition or distribution proceedings are terminated will not apply where appellant claims exclusive ownership of the whole property and denies the adverse party's right to any partition."

But this question has now been rendered moot and academic for the very issue of exclusive ownership claimed by petitioners to deny and defeat respondents' right to partition - which is the very core of their rejected appeal - has been squarely resolved herein against them, as if the appeal had been given due course. The Court has herein expressly sustained the trial court's findings, as affirmed by the Court of Appeals, that the assets or properties of the defunct company constitute the estate of the deceased proprietor (supra at page 7) and the defunct company's assertion of ownership of the properties is a legal contradiction and would but thwart the liquidation and final distribution and partition of the properties among the parties hereof as children of their deceased father Forrest L. Cease. There is therefore no further hindrance to effect the partition of the properties among the parties in implementation of the appealed judgment.

One last consideration. Parties are brothers and sisters, legal heirs of their deceased father, Forrest L. Cease. By all rights in law and jurisprudence, each is entitled to share and share alike in

the estate, which the trial court correctly ordained and sustained by the appellate court. Almost 20 years have lapsed since the filing of Special Proceedings No. 3893 for the administration of the Estate of Forrest L. Cease and Civil Case No. 6326 for liquidation and partition of the assets of the defunct Tiaong Milling and Plantation Co., Inc. A succession of receivers were appointed by the court to take, keep in possession, preserve and manage properties of the corporation which at one time showed an income of P386,152.90 and expenses of P308,405.01 for the period covering January 1, 1960 to August 31, 1967 as per Summary of Operations of Commissioner for Finance appointed by the Court (Brief for Respondents, p. 38). In the meantime, ejectment cases were filed by and against the heirs in connection with the properties involved, aggravating the already strained relations of the parties. A prudent and practical realization of these circumstances ought and must constrain the parties to give each one his due in law and with fairness and dispatch that their basic rights be enjoyed. And by remanding this case to the court a quo for the actual partition of the properties, the substantial rights of everyone of the heirs have not been impaired, for in fact, they have been preserved and maintained.

WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby AFFIRMED with costs against the petitioners.

SO ORDERED.


Manila

FIRST DIVISION

G.R. No. L-81147 June 20, 1989

VICTORIA BRINGAS PEREIRA, petitioner, vs.THE HONORABLE COURT OF APPEALS and RITA PEREIRA NAGAC, respondents.

Benjamin J. Quitoriano for petitioner.

Linzag-Arcilla & Associates Law Offices for private respondent.

GANCAYCO, J.:

Is a judicial administration proceeding necessary when the decedent dies intestate without leaving any debts? May the probate court appoint the surviving sister of the deceased as the administratrix of the estate of the deceased instead of the surviving spouse? These are the main questions which need to be resolved in this case.

Andres de Guzman Pereira, an employee of the Philippine Air Lines, passed away on January 3, 1983 at Bacoor, Cavite without a will. He was survived by his legitimate spouse of ten months, the herein petitioner Victoria Bringas Pereira, and his sister Rita Pereira Nagac, the herein private respondent.

On March 1, 1983, private respondent instituted before Branch 19 of the Regional Trial Court of Bacoor, Cavite, Special Proceeding

No. RTC-BSP-83-4 for the issuance of letters of administration in her favor pertaining to the estate of the deceased Andres de Guzman Pereira. 1 In her verified petition, private respondent alleged the following: that she and Victoria Bringas Pereira are the only surviving heirs of the deceased; that the deceased left no will; that there are no creditors of the deceased; that the deceased left several properties, namely: death benefits from the Philippine Air Lines (PAL), the PAL Employees Association (PALEA), the PAL Employees Savings and Loan Association, Inc. (PESALA) and the Social Security System (SSS), as well as savings deposits with the Philippine National Bank (PNB) and the Philippine Commercial and Industrial Bank (PCIB), and a 300 square meter lot located at Barangay Pamplona, Las Pinas, Rizal and finally, that the spouse of the deceased (herein petitioner) had been working in London as an auxiliary nurse and as such one-half of her salary forms part of the estate of the deceased.

On March 23,1983, petitioner filed her opposition and motion to dismiss the petition of private respondent 2 alleging that there exists no estate of the deceased for purposes of administration and praying in the alternative, that if an estate does exist, the letters of administration relating to the said estate be issued in her favor as the surviving spouse.

In its resolution dated March 28, 1985, the Regional Trial Court, appointed private respondent Rita Pereira Nagac administratrix of the intestate estate of Andres de Guzman Pereira upon a bond posted by her in the amount of Pl,000.00. The trial court ordered her to take custody of all the real and personal properties of the deceased and to file an inventory thereof within three months after receipt of the order. 3

Not satisfied with the resolution of the lower court, petitioner brought the case to the Court of Appeals. The appellate court affirmed the appointment of private respondent as administratrix in its decision dated December 15, 1987. 4

Hence, this petition for review on certiorari where petitioner raises the following issues: (1) Whether or not there exists an estate of the deceased Andres de Guzman Pereira for purposes of administration; (2) Whether or not a judicial administration proceeding is necessary where there are no debts left by the decedent; and, (3) Who has the better right to be appointed as administratrix of the estate of the deceased, the surviving spouse Victoria Bringas Pereira or the surviving sister Rita Pereira Nagac?

Anent the first issue, petitioner contends that there exists no estate of the deceased for purposes of administration for the following reasons: firstly, the death benefits from PAL, PALEA, PESALA and the SSS belong exclusively to her, being the sole beneficiary and in support of this claim she submitted letter-replies from these institutions showing that she is the exclusive beneficiary of said death benefits; secondly, the savings deposits in the name of her deceased husband with the PNB and the PCIB had been used to defray the funeral expenses as supported by several receipts; and, finally, the only real property of the deceased has been extrajudicially settled between the petitioner and the private respondent as the only surviving heirs of the deceased.

Private respondent, on the other hand, argues that it is not for petitioner to decide what properties form part of the estate of the deceased and to appropriate them for herself. She points out that this function is vested in the court in charge of the intestate proceedings.

Petitioner asks this Court to declare that the properties specified do not belong to the estate of the deceased on the basis of her bare allegations as aforestated and a handful of documents. Inasmuch as this Court is not a trier of facts, We cannot order an unqualified and final exclusion or non-exclusion of the property involved from the estate of the deceased. 5

The resolution of this issue is better left to the probate court before which the administration proceedings are pending. The trial court is in the best position to receive evidence on the discordant contentions of the parties as to the assets of the decedent's estate, the valuations thereof and the rights of the transferees of some of the assets, if any. 6 The function of resolving whether or not a certain property should be included in the inventory or list of properties to be administered by the administrator is one clearly within the competence of the probate court. However, the court's determination is only provisional in character, not conclusive, and is subject to the final decision in a separate action which may be instituted by the parties. 7

Assuming, however, that there exist assets of the deceased Andres de Guzman Pereira for purposes of administration, We nonetheless find the administration proceedings instituted by private respondent to be unnecessary as contended by petitioner for the reasons herein below discussed.

The general rule is that when a person dies leaving property, the same should be judicially administered and the competent court should appoint a qualified administrator, in the order established in Section 6, Rule 78, in case the deceased left no will, or in case he had left one, should he fail to name an executor therein. 8 An exception to this rule is established in Section 1 of Rule 74. 9 Under this exception, when all the heirs are of lawful age and there are no debts due from the estate, they may agree in writing to partition the property without instituting the judicial administration or applying for the appointment of an administrator.

Section 1, Rule 74 of the Revised Rules of Court, however, does not preclude the heirs from instituting administration proceedings, even if the estate has no debts or obligations, if they do not desire to resort for good reasons to an ordinary action for partition. While Section 1 allows the heirs to divide the estate among themselves as they may see fit, or to resort to an ordinary action for partition, the said provision does not compel them to do so if they have good reasons to take a different course of action. 10 It should be

noted that recourse to an administration proceeding even if the estate has no debts is sanctioned only if the heirs have good reasons for not resorting to an action for partition. Where partition is possible, either in or out of court, the estate should not be burdened with an administration proceeding without good and compelling reasons.11

Thus, it has been repeatedly held that when a person dies without leaving pending obligations to be paid, his heirs, whether of age or not, are not bound to submit the property to a judicial administration, which is always long and costly, or to apply for the appointment of an administrator by the Court. It has been uniformly held that in such case the judicial administration and the appointment of an administrator are superfluous and unnecessary proceedings . 12

Now, what constitutes "good reason" to warrant a judicial administration of the estate of a deceased when the heirs are all of legal age and there are no creditors will depend on the circumstances of each case.

In one case, 13 We said:

Again the petitioner argues that only when the heirs do not have any dispute as to the bulk of the hereditary estate but only in the manner of partition does section 1, Rule 74 of the Rules of Court apply and that in this case the parties are at loggerheads as to the corpus of the hereditary estate because respondents succeeded in sequestering some assets of the intestate. The argument is unconvincing, because, as the respondent judge has indicated, questions as to what property belonged to the deceased (and therefore to the heirs) may properly be ventilated in the partition proceedings, especially where such property is in the hands of one heir.

In another case, We held that if the reason for seeking an appointment as administrator is merely to avoid a multiplicity of suits since the heir seeking such appointment wants to ask for the annulment of certain transfers of property, that same objective could be achieved in an action for partition and the trial court is not justified in issuing letters of administration. 14In still another case, We did not find so powerful a reason the argument that the appointment of the husband, a usufructuary forced heir of his deceased wife, as judicial administrator is necessary in order for him to have legal capacity to appear in the intestate proceedings of his wife's deceased mother, since he may just adduce proof of his being a forced heir in the intestate proceedings of the latter. 15

We see no reason not to apply this doctrine to the case at bar. There are only two surviving heirs, a wife of ten months and a sister, both of age. The parties admit that there are no debts of the deceased to be paid. What is at once apparent is that these two heirs are not in good terms. The only conceivable reason why private respondent seeks appointment as administratrix is for her to obtain possession of the alleged properties of the deceased for her own purposes, since these properties are presently in the hands of petitioner who supposedly disposed of them fraudulently. We are of the opinion that this is not a compelling reason which will necessitate a judicial administration of the estate of the deceased. To subject the estate of Andres de Guzman Pereira, which does not appear to be substantial especially since the only real property left has been extrajudicially settled, to an administration proceeding for no useful purpose would only unnecessarily expose it to the risk of being wasted or squandered. In most instances of a similar nature, 16 the claims of both parties as to the properties left by the deceased may be properly ventilated in simple partition proceedings where the creditors, should there be any, are protected in any event.

We, therefore, hold that the court below before which the administration proceedings are pending was not justified in issuing letters of administration, there being no good reason for

burdening the estate of the deceased Andres de Guzman Pereira with the costs and expenses of an administration proceeding.

With the foregoing ruling, it is unnecessary for us to delve into the issue of who, as between the surviving spouse Victoria Bringas Pereira and the sister Rita Pereira Nagac, should be preferred to be appointed as administratrix.

WHEREFORE, the letters of administration issued by the Regional Trial Court of Bacoor to Rita Pereira Nagac are hereby revoked and the administration proceeding dismissed without prejudice to the right of private respondent to commence a new action for partition of the property left by Andres de Guzman Pereira. No costs.

SO ORDERED.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

THIRD DIVISION

[G.R. No. 155555. August 16, 2005]

ISABEL P. PORTUGAL and JOSE DOUGLAS PORTUGAL JR., petitioners, vs. LEONILA PORTUGAL-BELTRAN, respondent.

D E C I S I O N

CARPIO MORALES, J.:

Petitioners Isabel P. Portugal and her son, Jose Douglas Portugal Jr., assail the September 24, 2002[1] Decision of the Court of Appeals affirming that of the Regional Trial Court (RTC) of Caloocan City, Branch 124[2] which dismissed, after trial, their complaint for annulment of title for failure to state a cause of action and lack of jurisdiction.

From the records of the case are gathered the following material allegations claims of the parties which they sought to prove by testimonial and documentary evidence during the trial of the case:

On November 25, 1942, Jose Q. Portugal (Portugal) married Paz Lazo.[3]

On May 22, 1948, Portugal married petitioner Isabel de la Puerta.[4]

On September 13, 1949, petitioner Isabel gave birth to a boy whom she named Jose Douglas Portugal Jr., her herein co-petitioner.[5]

On April 11, 1950, Paz gave birth to a girl, Aleli,[6] later baptized as Leonila Perpetua Aleli Portugal, herein respondent.[7]

On May 16, 1968, Portugal and his four (4) siblings executed a Deed of Extra-Judicial Partition and Waiver of Rights[8] over the estate of their father, Mariano Portugal, who died intestate on November 2, 1964.[9] In the deed, Portugal’s siblings waived their rights, interests, and participation over a 155 sq. m. parcel of land located in Caloocan in his favor.[10]

On January 2, 1970, the Registry of Deeds for Caloocan City issued Transfer Certificate of Title (TCT) No. 34292 covering the Caloocan parcel of land in the name of “Jose Q. Portugal, married to Paz C. Lazo.”[11]

On February 18, 1984, Paz died.

On April 21, 1985, Portugal died intestate.

On February 15, 1988, respondent executed an “Affidavit of Adjudication by Sole Heir of Estate of Deceased Person”[12] adjudicating to herself the Caloocan parcel of land. TCT No. 34292/T-172[13] in Portugal’s name was subsequently cancelled and in its stead TCT No. 159813[14] was issued by the Registry of Deeds for Caloocan City on March 9, 1988 in the name of respondent, “Leonila Portugal-Beltran, married to Merardo M. Beltran, Jr.”

Later getting wind of the death in 1985 of Portugal and still later of the 1988 transfer by respondent of the title to the Caloocan property in her name, petitioners filed before the RTC of Caloocan City on July 23, 1996 a complaint[15] against respondent for annulment of the Affidavit of Adjudication executed by her and the transfer certificate of title issued in her name.

In their complaint, petitioners alleged that respondent is not related whatsoever to the deceased Portugal, hence, not entitled to inherit the Caloocan parcel of land and that she perjured herself when she made false representations in her Affidavit of Adjudication.

Petitioners accordingly prayed that respondent’s Affidavit of Adjudication and the TCT in her name be declared void and that the

Registry of Deeds for Caloocan be ordered to cancel the TCT in respondent’s name and to issue in its stead a new one in their (petitioners’) name, and that actual, moral and exemplary damages and attorney’s fees and litigation expenses be awarded to them.

Following respondent’s filing of her answer, the trial court issued a Pre-Trial Order chronicling, among other things, the issues as follows:

a. Which of the two (2) marriages contracted by the deceased Jose Q. Portugal Sr., is valid?

b. Which of the plaintiff . . . Jose Portugal Jr. and defendant Leonila P. Beltran is the legal heir of the deceased Jose Q. Portugal Sr.?

c. Whether or not TCT No. 159813 was issued in due course and can still be contested by plaintiffs.

d. Whether or not plaintiffs are entitled to their claims under the complaint.[16] (Underscoring supplied)

After trial, the trial court, by Decision of January 18, 2001,[17] after giving an account of the testimonies of the parties and their witnesses and of their documentary evidence, without resolving the issues defined during pre-trial, dismissed the case for lack of cause of action on the ground that petitioners’ status and right as putative heirs had not been established before a probate (sic) court, and lack of jurisdiction over the case, citing Heirs of Guido and Isabel Yaptinchay v. Del Rosario.[18]

In relying on Heirs of Guido and Isabel Yaptinchay, the trial court held:

The Heirs of Yaptinchay case arose from facts not dissimilar to the case at bar.

x x x

In the instant case, plaintiffs presented a Marriage Contract, a Certificate of Live Birth, pictures (sic) and testimonial evidence to establish their right as heirs of the decedent. Thus, the preliminary act of having a status and right to the estate of the decedent, was sought to be determined herein. However, the establishment of a status, a right, or a particular fact is remedied through a special proceeding (Sec. 3(c), Rule 1, 1997 Rules of Court), not an ordinary civil action whereby a party sues another for the enforcement or

protection of a right, or the protection or redress of a wrong (ibid, a). The operative term in the former is “to establish”, while in the latter, it is “to enforce”, a right. Their status and right as putative heirs of the decedent not having been established, as yet, the Complaint failed to state a cause of action.

The court, not being a probate (sic) court, is without jurisdiction to rule on plaintiffs’ cause to establish their status and right herein. Plaintiffs do not have the personality to sue (Secs. 1 and 2, Rule 3, in relation to Secs. 1 and 2, Rule 2, supra).[19] (Italics in the original; emphasis and underscoring supplied).

Petitioners thereupon appealed to the Court of Appeals, questioning the trial court’s ratio decedendi in dismissing the case as diametrically opposed to this Court’s following ruling in Cariño v. Cariño,[20] viz:

Under Article 40 of the Family Code, the absolute nullity of a previous marriage may be invoked for purposes of remarriage on the basis solely of a final judgment declaring such previous marriage void. Meaning, where the absolute nullity of a previous marriage is sought to be invoked for purposes of contracting a second marriage, the sole basis acceptable in law, for said projected marriage to be free from legal infirmity, is a final judgment declaring the previous void. (Domingo v. Court of Appeals, 226 SCRA 572, 579 [1993]) However, for purposes other than remarriage, no judicial action is

necessary to declare a marriage an absolute nullity. For other purposes, such as but not limited to the determination of heirship, legitimacy or illegitimacy of a child, settlement of estate, dissolution of property regime, or a criminal case for that matter, the court may pass upon the validity of marriage even after the death of the parties thereto, and even in a suit not directly instituted to question the validity of said marriage, so long as it is essential to the determination of the case. (Niñal, et al. v. Bayadog, GR No. 13378, March 14, 2000). In such cases, evidence must be adduced, testimonial or documentary, to prove the existence of grounds rendering such a previous marriage an absolute nullity. These need not be limited solely to an earlier final judgment of a court declaring such previous marriage void. (Domingo v. Court of Appeals, supra) (Emphasis and underscoring supplied).

Conceding that the ruling in Cariño was promulgated (in 2001) subsequent to that of Heirs of Guido and Isabel Yaptinchay (in 1999), the appellate court found Cariño to be inapplicable, however, to the case in this wise:

To be borne in mind is the fact that the main issue in the Cariño case was the validity of the two marriages contracted by the deceased SPO4 Santiago Cariño, whose death benefits was the bone of contention between the two women both named Susan (viz., Susan Nicdao Cariño and Susan Yee Cariño) both of whom he married. It is not disputed in said case that SPO4 S. Cariño contracted two marriages with said two women during his lifetime,

and the only question was: which of these two marriages was validly celebrated? The award of the death benefits of the deceased Cariño was thus, merely an incident to the question of which of the two marriages was valid. Upon the other hand, the case at bench is of a different milieu. The main issue here is the annulment of title to property. The only undisputed fact in this case is that the deceased Jose Portugal, during his lifetime, owned a parcel of land covered by Transfer Certificate of Title (TCT) No. T-34292. However, here come two contending parties, — herein plaintiffs-appellants and defendant-appellee, — both now insisting to be the legal heir(s) of the decedent. x x x. The status and rights of the parties herein have not, therefore, been definitively established, as yet. x x x. Necessarily and naturally, such questions as to such status or right must be properly ventilated in an appropriate special proceeding, not in an ordinary civil action, whereunder a party sues another for the enforcement or protection of a right, or the protection or redress of a wrong. The institution of an ordinary civil suit for that purpose in the present case is thus impermissible. For it is axiomatic that what the law prohibits or forbids directly, it cannot permit or allow indirectly. To permit, or allow, a declaration of heirship, or the establishment of the legitimacy or illegitimacy of a child to be determined in an ordinary civil action, not in an appropriate special proceeding brought for that purpose, is thus to impinge upon this axiom. x x x[21] (Emphasis in the original, underscoring supplied).

The appellate court, by Decision of September 24, 2002,[22] thus affirmed the trial court’s dismissal of the case.

Hence, the present Petition for Review on Certiorari,[23] faulting the appellate court to have erred when

I.

. . . it affirmed the RTC decision dismissing the initiatory complaint as it failed to state a cause of action.

II.

. . . (i) it applied the ruling in Heirs of Guido [and Isabel] Yaptingchay despite the existence of a later and contrary ruling in Cariño, and (ii) when the Honorable CA and the lower court failed to render judgment based on the evidence presented relative to the issues raised during pre-trial, . . .[24] (Emphasis and underscoring supplied).

Petitioners thus prayed as follows:

WHEREFORE, it is respectfully prayed of this Honorable Supreme Court that the questioned CA decision be reversed, and a new one

entered in accordance with the prayers set forth in the instant complaint based on the above disquisition and evidence adduced by petitioners in the court a quo.

IN THE ALTERNATIVE, should the Honorable Supreme Court find that the pronouncements in Cariño apply, a decision be entered remanding to the court a quo the determination of the issues of which of the two marriages is valid, and the determination of “heirship” and legitimacy of Jose Jr. and Leonila preparatory to the determination of the annulment of title issued in the name of Leonila.

Other relief and remedy just and equitable in the premises are likewise prayed for.[25] (Underscoring supplied).

Petitioners, in the main, argue that the appellate court misapplied Heirs of Guido and Isabel Yaptinchay and in effect encouraged multiplicity of suits which is discouraged by this Court as a reading of Cariño shows; that Cariño allows courts to pass on the determination of heirship and the legitimacy or illegitimacy of a child so long as it is necessary to the determination of the case; and that contrary to the appellate court’s ruling, they had established their status as compulsory heirs.

In the main, the issue in the present petition is whether petitioners have to institute a special proceeding to determine their status as heirs before they can pursue the case for annulment of respondent’s Affidavit of Adjudication and of the TCT issued in her name.

In the above-cited case of Heirs of Guido and Isabel Yaptinchay,[26] the therein petitioners executed on March 17, 1994 an extrajudicial settlement of the estate of the deceased Guido and Isabel Yaptinchay, “owners-claimants” of the two lots mentioned therein. They later discovered on August 26, 1994 that a portion, if not all, of the two lots had been titled in the name of the therein respondent Golden Bay Realty and Development Corporation which in turn sold portions thereof to the therein individual respondents. The therein petitioners Heirs thus filed a complaint for annulment of titles. The therein respondents moved to dismiss the case for failure of the therein petitioners to, inter alia, state a cause of action and prove their status as heirs. The trial court granted the motion to dismiss in this wise:

But the plaintiffs who claimed to be the legal heirs of the said Guido and Isabel Yaptinchay have not shown any proof or even a semblance of it—except the allegations that they are the legal heirs of the aforementioned Yaptinchays—that they have been declared the legal heirs of the deceased couple. Now, the determination of who are the legal heirs of the deceased couple must be made in the proper special proceedings in court, and not in an ordinary suit for

reconveyance of property. This must take precedence over the action for reconveyance . . .[27] (Italics in the original; underscoring supplied).

On petition for certiorari by the Heirs, this Court, albeit holding that the petition was an improper recourse, found that the trial court did not commit grave abuse of discretion in dismissing the case. Citing Litam et al. v. Rivera[28] and Solivio v. Court of Appeals,[29] this Court held that “the declaration of heirship can be made only in a special proceeding inasmuch as the petitioners here are seeking the establishment of a status or right.”

In the above-cited case of Litam,[30] Gregorio Dy Tam instituted a special proceeding for issuance of letters of administration before the then Court of First Instance (CFI) of Rizal, alleging in his petition that he is the son of Rafael Litam who died in Manila on January 10, 1951 and is survived by him and his therein named seven (7) siblings who are children of the decedent by his marriage to Sia Khin celebrated in China in 1911; that the decedent contracted in 1922 in the Philippines another marriage with Marcosa Rivera; and that the decedent left neither a will nor debt. Dy Tam thus prayed for the issuance of letters of administration to Marcosa Rivera, “the surviving spouse of the decedent.” The CFI granted the petition and issued letters of administration to, on Marcosa’s request, her nephew Arminio Rivera.

While the special proceeding was pending, Dy Tam and his purported siblings filed a civil case before the same court, against the estate of Rafael Litam administrator Arminio Rivera and Remedios R. Espiritu, duly appointed guardian of Marcosa. In their complaint, Dy Tam and his purported siblings substantially reproduced the allegations made in his petition in the special proceeding, with the addition of a list of properties allegedly acquired during the marriage of the decedent and Marcosa.

Finding the issue raised in the civil case to be identical to some unresolved incidents in the special proceeding, both were jointly heard by the trial court, following which it rendered a decision in the civil case dismissing it, declaring, inter alia, that the plaintiffs Dy Tam et al. are not the children of the decedent whose only surviving heir is Marcosa.

On appeal to this Court by Dy Tam et al., one of the two issues raised for determination was whether they are the legitimate children of Rafael Litam.

This Court, holding that the issue hinged on whether Rafael Litam and Sia Khin were married in 1911, and whether Rafael Litam is the father of appellants Dy Tam et al., found “substantially correct” the trial court’s findings of fact and its conclusion that, among other things, the birth certificates of Dy Tam et al. “do not establish the identity of the deceased Rafael Litam and the persons named

therein as father [and] it does not appear in the said certificates of birth that Rafael Litam had in any manner intervened in the preparation and filing thereof”; and that “[t]he other documentary evidence presented by [them] [is] entirely immaterial and highly insufficient to prove the alleged marriage between the deceased Rafael Litam and Sia Khin and [their] alleged status . . . as children of said decedent.”

This Court went on to opine in Litam, however, that “the lower court should not have declared, in the decision appealed from, that Marcosa is the only heir of the decedent, for such declaration is improper in the [civil case], it being within the exclusive competence of the court in [the] [s]pecial [p]roceeding.”

In Solivio,[31] also cited in Heirs of Guido and Isabel Yaptinchay, there was a special proceeding for the settlement of the estate of the deceased, who was a soltero, filed before the RTC of Iloilo. In the special proceeding, Branch 23 of said court declared as sole heir Celedonia Solivio, the decedent’s maternal aunt-half sister of his mother. Concordia Javellana-Villanueva, the decedent‘s paternal aunt-sister of his father, moved to reconsider the court’s order declaring Celedonia Solivio as sole heir of the decedent, she claiming that she too was an heir. The court denied the motion on the ground of tardiness. Instead of appealing the denial of her motion, Concordia filed a civil case against Celedonia before the same RTC, for partition, recovery of possession, ownership and damages. The civil case was raffled to Branch 26 of the RTC, which

rendered judgment in favor of Concordia. On appeal by Celedonia, the appellate court affirmed the said judgment.

On petition for review filed before this Court by Celedonia who posed, among other issues, “whether Branch 26 of the RTC of Iloilo had jurisdiction to entertain [the civil action] for partition and recovery of Concordia Villanueva’s share of the estate of [the deceased] while the [estate] proceedings . . . were still pending . . . in Branch 23 of the same court,” this Court held that “[i]n the interest of orderly procedure and to avoid confusing and conflicting dispositions of a decedent’s estate, a court should not interfere with [estate] proceedings pending in a co-equal court,” citing Guilas v. CFI Judge of Pampanga.[32]

This Court, however, in Solivio, upon “[c]onsidering that the estate proceedings are still pending, but nonetheless [therein private respondent-Concordia Villanueva] had lost her right to have herself declared as co-heir in said proceedings, opted to proceed to discuss the merits of her claim in the interest of justice,” and declared her an heir of the decedent.

In Guilas[33] cited in Solivio, a project of partition between an adopted daughter, the therein petitioner Juanita Lopez Guilas (Juanita), and her adoptive father was approved in the proceedings for the settlement of the testate estate of the decedent-adoptive

mother, following which the probate court directed that the records of the case be archived.

Juanita subsequently filed a civil action against her adoptive father to annul the project of partition on the ground of lesion, preterition and fraud, and prayed that her adoptive father immediately deliver to her the two lots allocated to her in the project of partition. She subsequently filed a motion in the testate estate proceedings for her adoptive father to deliver to her, among other things, the same two lots allotted to her.

After conducting pre-trial in the civil case, the trial court, noting the parties’ agreement to suspend action or resolution on Juanita’s motion in the testate estate proceedings for the delivery to her of the two lots alloted to her until after her complaint in the civil case had been decided, set said case for trial.

Juanita later filed in the civil case a motion to set aside the order setting it for trial on the ground that in the amended complaint she, in the meantime, filed, she acknowledged the partial legality and validity of the project of partition insofar as she was allotted the two lots, the delivery of which she was seeking. She thus posited in her motion to set aside the April 27, 1966 order setting the civil case for hearing that there was no longer a prejudicial question to her motion in the testate estate proceedings for the delivery to her of

the actual possession of the two lots. The trial court, by order of April 27, 1966, denied the motion.

Juanita thereupon assailed the April 27, 1966 order before this Court.

The probate court’s approval of the project of partition and directive that the records of the case be sent to the archives notwithstanding, this Court held that the testate estate proceedings had not been “legally terminated” as Juanita’s share under the project of partition had not been delivered to her. Explained this Court:

As long as the order of the distribution of the estate has not been complied with, the probate proceedings cannot be deemed closed and terminated (Siguiong vs. Tecson, supra.); because a judicial partition is not final and conclusive and does not prevent the heir from bringing an action to obtain his share, provided the prescriptive period therefor has not elapse (Mari vs. Bonilla, 83 Phil., 137). The better practice, however, for the heir who has not received his share, is to demand his share through a proper motion in the same probate or administration proceedings, or for re-opening of the probate or administrative proceedings if it had already been closed, and not through an independent action, which would be tried by another court or Judge which may thus reverse a decision or order of the probate o[r] intestate court already final

and executed and re-shuffle properties long ago distributed and disposed of (Ramos vs. Ortuzar, 89 Phil. 730, 741-742; Timbol vs. Cano, supra,; Jingco vs. Daluz, L-5107, April 24, 1953, 92 Phil. 1082; Roman Catholic vs. Agustines, L-14710, March 29, 1960, 107 Phil., 455, 460-461).[34] (Emphasis and underscoring supplied).

This Court thus set aside the assailed April 27, 1966 order of the trial court setting the civil case for hearing, but allowed the civil case to continue because it “involves no longer” the two lots adjudicated to Juanita.

The common doctrine in Litam, Solivio and Guilas in which the adverse parties are putative heirs to the estate of a decedent or parties to the special proceedings for its settlement is that if the special proceedings are pending, or if there are no special proceedings filed but there is, under the circumstances of the case, a need to file one, then the determination of, among other issues, heirship should be raised and settled in said special proceedings. Where special proceedings had been instituted but had been finally closed and terminated, however, or if a putative heir has lost the right to have himself declared in the special proceedings as co-heir and he can no longer ask for its re-opening, then an ordinary civil action can be filed for his declaration as heir in order to bring about the annulment of the partition or distribution or adjudication of a property or properties belonging to the estate of the deceased.

In the case at bar, respondent, believing rightly or wrongly that she was the sole heir to Portugal’s estate, executed on February 15, 1988[35] the questioned Affidavit of Adjudication under the second sentence of Rule 74, Section 1 of the Revised Rules of Court.[36] Said rule is an exception to the general rule that when a person dies leaving a property, it should be judicially administered and the competent court should appoint a qualified administrator, in the order established in Sec. 6, Rule 78 in case the deceased left no will, or in case he did, he failed to name an executor therein.[37]

Petitioners claim, however, to be the exclusive heirs of Portugal. A probate or intestate court, no doubt, has jurisdiction to declare who are the heirs of a deceased.

It appearing, however, that in the present case the only property of the intestate estate of Portugal is the Caloocan parcel of land,[38] to still subject it, under the circumstances of the case, to a special proceeding which could be long, hence, not expeditious, just to establish the status of petitioners as heirs is not only impractical; it is burdensome to the estate with the costs and expenses of an administration proceeding. And it is superfluous in light of the fact that the parties to the civil case – subject of the present case, could and had already in fact presented evidence before the trial court which assumed jurisdiction over the case upon the issues it defined during pre-trial.

In fine, under the circumstances of the present case, there being no compelling reason to still subject Portugal’s estate to administration proceedings since a determination of petitioners’ status as heirs could be achieved in the civil case filed by petitioners,[39] the trial court should proceed to evaluate the evidence presented by the parties during the trial and render a decision thereon upon the issues it defined during pre-trial, which bear repeating, to wit:

1. Which of the two (2) marriages contracted by the deceased Jose Q. Portugal, is valid;

2. Which of the plaintiff, Jose Portugal Jr. and defendant Leonila P. Beltran is the legal heir of the deceased Jose Q. Portugal (Sr.);

3. Whether or not TCT No. 159813 was issued in due course and can still be contested by plaintiffs;

4. Whether or not plaintiffs are entitled to their claim under the complaint.[40]

WHEREFORE, the petition is hereby GRANTED. The assailed September 24, 2002 Decision of the Court of Appeals is hereby SET ASIDE.

Let the records of the case be REMANDED to the trial court, Branch 124 of the Regional Trial Court of Caloocan City, for it to evaluate the evidence presented by the parties and render a decision on the above-enumerated issues defined during the pre-trial.

No costs.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.


Manila

SECOND DIVISION

G.R. No. 115181 March 31, 2000

MARIA SOCORRO AVELINO, petitioner, vs.COURT OF APPEALS, ANGELINA AVELINO, SHARON AVELINO, ANTONIO AVELINO, JR., TRACY AVELINO, PATRICK MICHAEL AVELINO and MARK ANTHONY AVELINO, respondents.

R E S O L U T I O N

QUISUMBING, J.:

Before us is a petition for review on certiorari of the Decision of the Court of Appeals dated February 16, 1994 in CA-G.R. SP No. 31574 as well as its Resolution dated April 28, 1994 denying petitioner's Motion for Reconsideration. The assailed Decision affirmed the Order of the Regional Trial Court of Quezon City, Branch 78, in Sp. Proc. No. Q-91-10441 converting petitioner's petition for the issuance of letters of administration to an action for judicial partition.

Petitioner Maria Socorro Avelino is a daughter and compulsory heir of the late Antonio Avelino, Sr., and his first wife private respondent Angelina Avelino.

The other private respondents, Sharon, Antonio Jr., Tracy, Patrick and Mark Anthony all surnamed Avelino are likewise compulsory heirs of Avelino, Sr. Sharon, an American, is the second wife of

Avelino Sr. The other private respondents are siblings of petitioner Ma. Socorro.

The records reveal that on October 24, 1991, Ma. Socorro filed before the Regional Trial Court of Quezon City, Branch 78, docketed as SP Proc. No. Q-91-10441, a petition for the issuance of letters of administration of the estate of Antonio Avelino, Sr., who died intestate on April 10, 1989. She asked that she be appointed the administrator of the estate.

On December 3, 1992, Angelina, and the siblings filed their opposition by filing a motion to convert the said judicial proceedings to an action for judicial partition which petitioner duly opposed.

On February 16, 1993, public respondent judge issued the assailed Order which reads:

Acting on the "Motion to Convert Proceedings to Action for Judicial Partition", considering that the petitioner is the only heir not amenable to a simple partition, and all the other compulsory heirs manifested their desire for an expeditious settlement of the estate of the deceased Antonio Avelino, Sr., the same is granted.

WHEREFORE, the petition is converted into judicial partition of the estate of deceased Antonio Avelino, Sr. The parties are directed to submit a complete inventory of all the real and personal properties left by the deceased. Set the hearing of the judicial partition on APRIL 13, 1993, at 8:30 o'clock in the morning. Notify all the parties and their counsel of this assignment.

SO ORDERED.1

On March 17, 1993, petitioner filed a motion for reconsideration which was denied in an Order dated June 16, 1993.

http://www.lawphil.net/judjuris/juri2000/mar2000/gr_115181_2000.html#fnt1

On July 23, 1993, Ma. Socorro filed before the Court of Appeals, a petition for certiorari, prohibition, and mandamus alleging grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the trial court, in granting private respondents' motion to convert the judicial proceeding for the issuance of letters of administration to an action for judicial partition. Her petition was docketed as CA-G.R. SP No. 31574.

On February 18, 1994, the respondent appellate court rendered the assailed decision, stating that the "petition is DENIED DUE COURSE" and accordingly dismissed. 2

On March 1, 1994, petitioner duly moved for reconsideration, but it was denied on April 28, 1994.

Hence, this petition. Petitioner assigns the following errors:

THE COURT OF APPEALS ERRED IN UPHOLDING THE LOWER COURT'S FINDING THAT PARTITION IS PROPER UNDER THE PREMISES.

ADMINISTRATION SHOULD BE THE PROPER REMEDY PENDING THE DETERMINATION OF THE CHARACTER AND EXTENT OF THE DECEDENT'S ESTATE.3

For resolution, we find that given the circumstances in this case, the sole issue here is whether respondent appellate court committed an error of law and gravely abused its discretion in upholding the trial court's finding that a partition is proper.

Petitioner submits that: First, no partition of the estate is possible in the instant case as no determination has yet been made of the character and extent of the decedent's estate. She points to the Court's ruling in Arcilles v. Montejo, 26 SCRA 197 (1969), where we held that when the existence of other properties of the decedent is a matter still to be reckoned with, administration proceedings are the proper mode of resolving the same.4 In addition, petitioner contends

that the estate is in danger of being depleted for want of an administrator to manage and attend to it.

Second, petitioner insists that the Rules of Court does not provide for conversion of a motion for the issuance of letters of administration to an action for judicial partition. The conversion of the motion was, thus, procedurally inappropriate and should be struck down for lack of legal basis.

When a person dies intestate, or, if testate, failed to name an executor in his will or the executor so named is incompetent, or refuses the trust, or fails to furnish the bond required by the Rules of Court, then the decedent's estate shall be judicially administered and the competent court shall appoint a qualified administrator in the order established in Section 6 of Rule 78.5 The exceptions to this rule are found in Sections 1 and 2 of Rule 746 which provide:

Sec. 1. Extrajudicial settlement by agreement between heirs. — If the decedent left no will and no debts and the heirs are all of age or the minors are represented by their judicial or legal representatives duly authorized for the purpose, the parties may, without securing letters of administration, divide the estate among themselves as they see fit by means of a public instrument filed in the office of the register of deeds, and should they disagree, they may do so in an ordinary action of partition. . .

Sec. 2. Summary settlement of estates of small value. — Whenever the gross value of the estate of a deceased person, whether he died testate or intestate, does not exceed ten thousand pesos, and that fact if made to appear to the Regional Trial Court having jurisdiction of the estate by the petition of an interested person and upon hearing, which shall be held not less than one (1) month nor more than three (3) months from the date of the last publication of a notice which shall be published once a week for three (3) consecutive weeks in a newspaper of general circulation in the province, and after

http://www.lawphil.net/judjuris/juri2000/mar2000/gr_115181_2000.html#fnt





such other notice to interested persons as the court may direct, the court may proceed summarily, without the appointment of an executor or administrator, and without delay, to grant, if proper, allowance of the will, if any there be, to determine who are the persons legally entitled to participate in the estate and to apportion and divide it among them after the payment of such debts of the estate as the court shall then find to be due; and such persons, in their own right, if they are lawful age and legal capacity, or by their guardians or trustees legally appointed and qualified, if otherwise, shall thereupon be entitled to receive and enter into the possession of the portions of the estate so awarded to them respectively. The court shall make such order as may be just respecting the costs of the proceedings, and all orders and judgments made or rendered in the course thereof shall be recorded in the office of the clerk, and the order of partition or award, if it involves real estate, shall be recorded in the proper register's office.1awp++i1

The heirs succeed immediately to all of the rights and properties of the deceased at the moment of the latter's death.7Section 1, Rule 74 of the Rules of Court, allows heirs to divide the estate among themselves without need of delay and risks of being dissipated. When a person dies without leaving pending obligations, his heirs, are not required to submit the property for judicial administration, nor apply for the appointment of an administrator by the court.8

We note that the Court of Appeals found that in this case "the decedent left no debts and the heirs and legatees are all of age."9 With this finding, it is our view that Section 1, Rule 74 of the Rules of Court should apply.

In a last-ditch effort to justify the need for an administrator, petitioner insists that there is nothing to partition yet, as the nature and character of the estate have yet to be determined. We find, however, that a complete inventory of the estate may be done during the partition proceedings, especially since the estate has no debts. Hence, the Court of Appeals committed no reversible error when it

ruled that the lower court did not err in converting petitioner's action for letters of administration into an action for judicial partition.

Nor can we sustain petitioner's argument that the order of the trial court converting an action for letters of administration to one for judicial partition has no basis in the Rules of Court, hence procedurally infirm. The basis for the trial court's order is Section 1, Rule 74 of the Rules of Court. It provides that in cases where the heirs disagree as to the partition of the estate and no extrajudicial settlement is possible, then an ordinary action for partition may be resorted to, as in this case. We have held that where the more expeditious remedy of partition is available to the heirs, then the heirs or the majority of them may not be compelled to submit to administration proceedings. 10 The trial court appropriately converted petitioner's action for letters of administration into a suit for judicial partition, upon motion of the private respondents. No reversible error may be attributed to the Court of Appeals when it found the trial court's action procedurally in order.

WHEREFORE, the petition is DENIED for lack of merit, and the assailed decision and resolution of the Court of Appeals in CA-G.R. SP No. 31574 are AFFIRMED. Costs against petitioner.

SO ORDERED.1âwphi1.nêt

Bellosillo, Mendoza, Buena and De Leon, JJ., concur.





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