FIRST DIVISION

LUISA KHO MONTAER, ALEJANDRO MONTAER, JR., LILLIBETH MONTAER-BARRIOS, AND RHODORA
ELEANOR MONTAER-DALUPAN,

Petitioners,

- versus -

SHARIA DISTRICT COURT, FOURTH SHARIA JUDICIAL DISTRICT, MARAWI CITY, LILING DISANGCOPAN,
AND ALMAHLEEN LILING S. MONTAER,

Respondents.

G.R. No. 174975

Promulgated:

JANUARY 20, 2009

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

DECISION

PUNO, C.J.:

This Petition for Certiorari and Prohibition seeks to set aside the Orders of the Sharia District Court,
Fourth Sharia Judicial District, Marawi City, dated August 22, 2006[1] and September 21, 2006.[2]

On August 17, 1956, petitioner Luisa Kho Montaer, a Roman Catholic, married Alejandro Montaer, Sr. at
the Immaculate Conception Parish in Cubao, Quezon City.[3] Petitioners Alejandro Montaer, Jr., Lillibeth
Montaer-Barrios, and Rhodora Eleanor Montaer-Dalupan are their children.[4] On May 26, 1995,
Alejandro Montaer, Sr. died.[5]

On August 19, 2005, private respondents Liling Disangcopan and her daughter, Almahleen Liling S.
Montaer, both Muslims, filed a Complaint for the judicial partition of properties before the Sharia
District Court.[6] The said complaint was entitled Almahleen Liling S. Montaer and Liling M. Disangcopan
v. the Estates and Properties of Late Alejandro Montaer, Sr., Luisa Kho Montaer, Lillibeth K. Montaer,
Alejandro Kho Montaer, Jr., and Rhodora Eleanor K. Montaer, and docketed as Special Civil Action No. 7-
05.[7] In the said complaint, private respondents made the following allegations: (1) in May 1995,
Alejandro Montaer, Sr. died; (2) the late Alejandro Montaer, Sr. is a Muslim; (3) petitioners are the first
family of the decedent; (4) Liling Disangcopan is the widow of the decedent; (5) Almahleen Liling S.
Montaer is the daughter of the decedent; and (6) the estimated value of and a list of the properties
comprising the estate of the decedent.[8] Private respondents prayed for the Sharia District Court to
order, among others, the following: (1) the partition of the estate of the decedent; and (2) the
appointment of an administrator for the estate of the decedent.[9]
Petitioners filed an Answer with a Motion to Dismiss mainly on the following grounds: (1) the Sharia
District Court has no jurisdiction over the estate of the late Alejandro Montaer, Sr., because he was a
Roman Catholic; (2) private respondents failed to pay the correct amount of docket fees; and (3) private
respondents complaint is barred by prescription, as it seeks to establish filiation between Almahleen
Liling S. Montaer and the decedent, pursuant to Article 175 of the Family Code.[10]

On November 22, 2005, the Sharia District Court dismissed the private respondents complaint. The
district court held that Alejandro Montaer, Sr. was not a Muslim, and its jurisdiction extends only to the
settlement and distribution of the estate of deceased Muslims.[11]

On December 12, 2005, private respondents filed a Motion for Reconsideration.[12] On December 28,
2005, petitioners filed an Opposition to the Motion for Reconsideration, alleging that the motion for
reconsideration lacked a notice of hearing.[13] On January 17, 2006, the Sharia District Court denied
petitioners opposition.[14] Despite finding that the said motion for reconsideration lacked notice of
hearing, the district court held that such defect was cured as petitioners were notified of the existence
of the pleading, and it took cognizance of the said motion.[15] The Sharia District Court also reset the
hearing for the motion for reconsideration.[16]

In its first assailed order dated August 22, 2006, the Sharia District Court reconsidered its order of
dismissal dated November 22, 2005.[17] The district court allowed private respondents to adduce
further evidence.[18] In its second assailed order dated September 21, 2006, the Sharia District Court
ordered the continuation of trial, trial on the merits, adducement of further evidence, and pre-trial
conference.[19]

Seeking recourse before this Court, petitioners raise the following issues:

I.

RESPONDENT SHARIA DISTRICT COURT MARAWI CITY LACKS JURISDICTION OVER PETITIONERS WHO ARE
ROMAN CATHOLICS AND NON-MUSLIMS.

II.

RESPONDENT SHARIA DISTRICT COURT MARAWI CITY DID NOT ACQUIRE JURISDICTION OVER THE
ESTATES AND PROPERTIES OF THE LATE ALEJANDRO MONTAER, SR. WHICH IS NOT A NATURAL OR
JURIDICAL PERSON WITH CAPACITY TO BE SUED.

III.

RESPONDENT SHARIA DISTRICT COURT DID NOT ACQUIRE JURISDICTION OVER THE COMPLAINT OF
PRIVATE RESPONDENTS AGAINST PETITIONERS DUE TO NON-PAYMENT OF THE FILING AND DOCKETING
FEES.

IV.
RESPONDENT SHARIA DISTRICT COURTMARAWI CITY COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION WHEN IT DENIED THE OPPOSITION OF PETITIONERS AND THEN
GRANTED THE MOTION FOR RECONSIDERATION OF RESPONDENTS LILING DISANGCOPAN, ET AL. WHICH
WAS FATALLY DEFECTIVE FOR LACK OF A NOTICE OF HEARING.

V.

RESPONDENT SHARIA DISTRICT COURTMARAWI CITY COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OF JURISDICTION WHEN IT SET SPL. CIVIL ACTION 7-05 FOR TRIAL EVEN IF THE
COMPLAINT PLAINLY REVEALS THAT RESPONDENT ALMAHLEEN LILING S. MONTAER SEEKS
RECOGNITION FROM ALEJANDRO MONTAER, SR. WHICH CAUSE OF ACTION PRESCRIBED UPON THE
DEATH OF ALEJANDRO MONTAER, SR. ON MAY 26, 1995.

In their Comment to the Petition for Certiorari, private respondents stress that the Sharia District Court
must be given the opportunity to hear and decide the question of whether the decedent is a Muslim in
order to determine whether it has jurisdiction.[20]

Jurisdiction: Settlement of the Estate of Deceased Muslims

Petitioners first argument, regarding the Sharia District Courts jurisdiction, is dependent on a question
of fact, whether the late Alejandro Montaer, Sr. is a Muslim. Inherent in this argument is the premise
that there has already been a determination resolving such a question of fact. It bears emphasis,
however, that the assailed orders did not determine whether the decedent is a Muslim. The assailed
orders did, however, set a hearing for the purpose of resolving this issue.

Article 143(b) of Presidential Decree No. 1083, otherwise known as the Code of Muslim Personal Laws of
the Philippines, provides that the Sharia District Courts have exclusive original jurisdiction over the
settlement of the estate of deceased Muslims:

ARTICLE 143. Original jurisdiction. (1) The Shari'a District Court shall have exclusive original jurisdiction
over:

xxxx

(b) All cases involving disposition, distribution and settlement of the estate of deceased Muslims,
probate of wills, issuance of letters of administration or appointment of administrators or executors
regardless of the nature or the aggregate value of the property.

The determination of the nature of an action or proceeding is controlled by the averments and character
of the relief sought in the complaint or petition.[21] The designation given by parties to their own
pleadings does not necessarily bind the courts to treat it according to the said designation. Rather than
rely on a falsa descriptio or defective caption, courts are guided by the substantive averments of the
pleadings.[22]

Although private respondents designated the pleading filed before the Sharia District Court as a
Complaint for judicial partition of properties, it is a petition for the issuance of letters of administration,
settlement, and distribution of the estate of the decedent. It contains sufficient jurisdictional facts
required for the settlement of the estate of a deceased Muslim,[23] such as the fact of Alejandro
Montaer, Sr.s death as well as the allegation that he is a Muslim. The said petition also contains an
enumeration of the names of his legal heirs, so far as known to the private respondents, and a probable
list of the properties left by the decedent, which are the very properties sought to be settled before a
probate court. Furthermore, the reliefs prayed for reveal that it is the intention of the private
respondents to seek judicial settlement of the estate of the decedent.[24] These include the following:
(1) the prayer for the partition of the estate of the decedent; and (2) the prayer for the appointment of
an administrator of the said estate.

We cannot agree with the contention of the petitioners that the district court does not have jurisdiction
over the case because of an allegation in their answer with a motion to dismiss that Montaer, Sr. is not a
Muslim. Jurisdiction of a court over the nature of the action and its subject matter does not depend
upon the defenses set forth in an answer[25] or a motion to dismiss.[26] Otherwise, jurisdiction would
depend almost entirely on the defendant[27] or result in having a case either thrown out of court or its
proceedings unduly delayed by simple stratagem.[28] Indeed, the defense of lack of jurisdiction which is
dependent on a question of fact does not render the court to lose or be deprived of its jurisdiction.[29]

The same rationale applies to an answer with a motion to dismiss.[30] In the case at bar, the Sharia
District Court is not deprived of jurisdiction simply because petitioners raised as a defense the allegation
that the deceased is not a Muslim. The Sharia District Court has the authority to hear and receive
evidence to determine whether it has jurisdiction, which requires an a priori determination that the
deceased is a Muslim. If after hearing, the Sharia District Court determines that the deceased was not in
fact a Muslim, the district court should dismiss the case for lack of jurisdiction.

Special Proceedings

The underlying assumption in petitioners second argument, that the proceeding before the Sharia
District Court is an ordinary civil action against a deceased person, rests on an erroneous understanding
of the proceeding before the court a quo. Part of the confusion may be attributed to the proceeding
before the Sharia District Court, where the parties were designated either as plaintiffs or defendants
and the case was denominated as a special civil action. We reiterate that the proceedings before the
court a quo are for the issuance of letters of administration, settlement, and distribution of the estate of
the deceased, which is a special proceeding. Section 3(c) of the Rules of Court (Rules) defines a special
proceeding as a remedy by which a party seeks to establish a status, a right, or a particular fact. This
Court has applied the Rules, particularly the rules on special proceedings, for the settlement of the
estate of a deceased Muslim.[31] In a petition for the issuance of letters of administration, settlement,
and distribution of estate, the applicants seek to establish the fact of death of the decedent and later to
be duly recognized as among the decedents heirs, which would allow them to exercise their right to
participate in the settlement and liquidation of the estate of the decedent.[32] Here, the respondents
seek to establish the fact of Alejandro Montaer, Sr.s death and, subsequently, for private respondent
Almahleen Liling S. Montaer to be recognized as among his heirs, if such is the case in fact.

Petitioners argument, that the prohibition against a decedent or his estate from being a party defendant
in a civil action[33] applies to a special proceeding such as the settlement of the estate of the deceased,
is misplaced. Unlike a civil action which has definite adverse parties, a special proceeding has no definite
adverse party. The definitions of a civil action and a special proceeding, respectively, in the Rules
illustrate this difference. A civil action, in which a party sues another for the enforcement or protection
of a right, or the prevention or redress of a wrong[34] necessarily has definite adverse parties, who are
either the plaintiff or defendant.[35] On the other hand, a special proceeding, by which a party seeks to
establish a status, right, or a particular fact,[36] has one definite party, who petitions or applies for a
declaration of a status, right, or particular fact, but no definite adverse party. In the case at bar, it bears
emphasis that the estate of the decedent is not being sued for any cause of action. As a special
proceeding, the purpose of the settlement of the estate of the decedent is to determine all the assets of
the estate,[37] pay its liabilities,[38] and to distribute the residual to those entitled to the same.[39]

Docket Fees

Petitioners third argument, that jurisdiction was not validly acquired for non-payment of docket fees, is
untenable. Petitioners point to private respondents petition in the proceeding before the court a quo,
which contains an allegation estimating the decedents estate as the basis for the conclusion that what
private respondents paid as docket fees was insufficient. Petitioners argument essentially involves two
aspects: (1) whether the clerk of court correctly assessed the docket fees; and (2) whether private
respondents paid the correct assessment of the docket fees.

Filing the appropriate initiatory pleading and the payment of the prescribed docket fees vest a trial court
with jurisdiction over the subject matter.[40] If the party filing the case paid less than the correct
amount for the docket fees because that was the amount assessed by the clerk of court, the
responsibility of making a deficiency assessment lies with the same clerk of court.[41] In such a case, the
lower court concerned will not automatically lose jurisdiction, because of a partys reliance on the clerk
of courts insufficient assessment of the docket fees.[42] As every citizen has the right to assume and
trust that a public officer charged by law with certain duties knows his duties and performs them in
accordance with law, the party filing the case cannot be penalized with the clerk of courts insufficient
assessment.[43] However, the party concerned will be required to pay the deficiency.[44]

In the case at bar, petitioners did not present the clerk of courts assessment of the docket fees.
Moreover, the records do not include this assessment. There can be no determination of whether
private respondents correctly paid the docket fees without the clerk of courts assessment.

Exception to Notice of Hearing

Petitioners fourth argument, that private respondents motion for reconsideration before the Sharia
District Court is defective for lack of a notice of hearing, must fail as the unique circumstances in the
present case constitute an exception to this requirement. The Rules require every written motion to be
set for hearing by the applicant and to address the notice of hearing to all parties concerned.[45] The
Rules also provide that no written motion set for hearing shall be acted upon by the court without proof
of service thereof.[46] However, the Rules allow a liberal construction of its provisions in order to
promote [the] objective of securing a just, speedy, and inexpensive disposition of every action and
proceeding.[47] Moreover, this Court has upheld a liberal construction specifically of the rules of notice
of hearing in cases where a rigid application will result in a manifest failure or miscarriage of justice
especially if a party successfully shows that the alleged defect in the questioned final and executory
judgment is not apparent on its face or from the recitals contained therein.[48] In these exceptional
cases, the Court considers that no party can even claim a vested right in technicalities, and for this
reason, cases should, as much as possible, be decided on the merits rather than on technicalities.[49]

The case at bar falls under this exception. To deny the Sharia District Court of an opportunity to
determine whether it has jurisdiction over a petition for the settlement of the estate of a decedent
alleged to be a Muslim would also deny its inherent power as a court to control its process to ensure
conformity with the law and justice. To sanction such a situation simply because of a lapse in fulfilling
the notice requirement will result in a miscarriage of justice.

In addition, the present case calls for a liberal construction of the rules on notice of hearing, because the
rights of the petitioners were not affected. This Court has held that an exception to the rules on notice
of hearing is where it appears that the rights of the adverse party were not affected.[50] The purpose
for the notice of hearing coincides with procedural due process,[51] for the court to determine whether
the adverse party agrees or objects to the motion, as the Rules do not fix any period within which to file
a reply or opposition.[52] In probate proceedings, what the law prohibits is not the absence of previous
notice, but the absolute absence thereof and lack of opportunity to be heard.[53] In the case at bar, as
evident from the Sharia District Courts order dated January 17, 2006, petitioners counsel received a
copy of the motion for reconsideration in question. Petitioners were certainly not denied an opportunity
to study the arguments in the said motion as they filed an opposition to the same. Since the Sharia
District Court reset the hearing for the motion for reconsideration in the same order, petitioners were
not denied the opportunity to object to the said motion in a hearing. Taken together, these
circumstances show that the purpose for the rules of notice of hearing, procedural process, was duly
observed.

Prescription and Filiation

Petitioners fifth argument is premature. Again, the Sharia District Court has not yet determined whether
it has jurisdiction to settle the estate of the decedent. In the event that a special proceeding for the
settlement of the estate of a decedent is pending, questions regarding heirship, including prescription in
relation to recognition and filiation, should be raised and settled in the said proceeding.[54] The court,
in its capacity as a probate court, has jurisdiction to declare who are the heirs of the decedent.[55] In
the case at bar, the determination of the heirs of the decedent depends on an affirmative answer to the
question of whether the Sharia District Court has jurisdiction over the estate of the decedent.

IN VIEW WHEREOF, the petition is DENIED. The Orders of the Sharia District Court, dated August 22,
2006 and September 21, 2006 respectively, are AFFIRMED. Cost against petitioners.

SO ORDERED.
G.R. No. 42108 December 29, 1989

OSCAR D. RAMOS and LUZ AGUDO, petitioners,

vs.

HON. COURT OF APPEALS, ADELAIDA RAMOS and LAZARO E. MENESES, respodents.

Godofredo V. Magbiray for petitioners.

Joselito Lim for private respondents.

REGALADO, J.:

The instant petition for review on certiorari impugns the decision of the Court of Appeals dated October
7, 1975, 1 which affirmed in toto the decision of the Court of First Instance of Tarlac in Civil Case No.
4168, entitled "Adelaida Ramos, et al. vs. Oscar D. Ramos, et al.," holding that the contracts between the
parties are not ventas con pacto de retro but are equitable mortgages.

Sometime in January 1959, private respondent Adelaida Ramos borrowed from her brother, petitioner
Oscar D. Ramos, the amounts of P 5,000.00 and P 9,000.00 in connection with her business transaction
with one Flor Ramiro, Fred Naboa and Atty. Ruperto Sarandi involving the recovery of a parcel of land in
Tenejeros, Malabon. The said amount was used to finance the trip to Hawaii of Ramiro, Naboa and Atty.
Sarandi. As security for said loan, private respondent Adelaida Ramos executed in favor of petitioners
two (2) deeds of conditional sale dated May 27, 1959 and August 30, 1959, of her rights, shares,
interests and participation respectively over Lot No. 4033 covered by Original Certificate of Title No.
5125 registered in the name of their parents, Valente Ramos and Margarita Denoga, now deceased; 2
and Lot No. 4221 covered by Transfer Certificate of Title No. 10788 then registered in the names of
Socorro Ramos, Josefina Ramos and Adelaida Ramos, 3 said properties being of the Cadastral Survey of
Paniqui, Tarlac.

Upon the failure of said private respondent as vendor a retro to exercise her right of repurchase within
the redemption period, aforenamed petitioner filed a petition for consolidation and approval of the
conditional sale of Lot No. 4033 in Special Proceedings No. 5174, entitled "Intestate Estate of the late
Margarita Denoga," 4 and a petition for approval of the pacto de retro sale of Lot No. 4221 in the former
Court of First Instance of Tarlac acting as a cadastral court. 5 On January 22, 1960, the said probate court
issued an order with the following disposition:

WHEREFORE, the deed of CONDITIONAL SALE executed on May 27, 1959, by Adelaida Ramos in favor of
spouses Oscar D. Ramos and Luz Agudo, conveying to the latter by way of pacto de retro sale whatever
rights and interests the former may have in Lot No. 4033 of the Cadastral Survey of Paniqui, which deed
of conditional sale is known as Document No. 14, Page 26, Book VI, Series of 1959, of the notarial
register of Notary Public Jose P. Sibal, is hereby approved. 6

The cadastral Court also issued a similar order dated April 18, 1960, the dispositive portion of which
reads:

WHEREFORE, by way of granting the petition, the Court orders the consolidation of ownership and
dominion in petitioners-spouses Oscar D. Ramos and Luz Agudo over the rights, shares and interests of
Adelaida Ramos in Lot No. 4221 of the Cadastral Survey of Paniqui, Tarlac, which the latter sold to the
former under a pacto de retro sale executed in a public instrument known as Document No. 22, Page 28,
Book No. VI. Series of 1959, of the Notarial Registry of Notary Public Jose P. Sibal but which she failed to
repurchase within the period specified in said Document. 7

Private respondents had been and remained in possession of these properties until sometime in 1964
when petitioner took possession thereof.

On February 28, 1968, private respondent filed Civil Case No. 4168 with the then Court of First Instance
of Tarlac for declaration of nullity of orders, reformation of instrument, recovery of possession with
preliminary injunction and damages. The complaint therein alleged that the deeds of conditional sale,
dated May 27, 1959 and August 30, 1959, are mere mortgages and were vitiated by misrepresentation,
fraud and undue influence and that the orders dated January 22, 1960 and April 18, 1960, respectively
issued by the probate and cadastral courts, were null and void for lack of jurisdiction. Petitioners, in
their answer to the complaint, specifically deny the allegations of fraud and misrepresentation and
interposed as defense the fact that the questioned conditional sales of May 27, 1959 and August 30,
1959 were voluntarily executed by private respondent Adelaida Ramos and truly expressed the intention
of the parties; that the action, if any, has long prescribed; that the questioned orders of January 22,
1960 and April 18, 1960, approving the consolidation of ownership of the lands in question in favor of
petitioner were within the jurisdiction of the lower court, in its capacity as a probate court insofar as Lot
No. 4033 is concerned, and acting as a cadastral court with respect to Lot No. 4221; and that said lands
subject of the conditional sales were in custodia legis in connection with the settlement of the
properties of the late Margarita Denoga, the predecessor in interest of both petitioners and private
respondents.
On January 7, 1970, the court below issued a pre-trial order to the effect that petitioners admit the
genuineness and due execution of the promissory notes marked as Exhibits "F" and "F-1 " and that the
principal triable issue is whether or not the documents purporting to be deeds of conditional sale,
marked as Exhibits "B", "B-1" and "G" were in fact intended to be equitable mortgages. 8 In its order
dated February 17, 1971, the trial court also declared: "Both parties agreed and manifested in open
court the principal obligation in the transaction reflected in Exhibits 'B' and 'B-l' and 'G' is one of loan.
The parties differ, however, on the nature of the security described therein. 9

On May 17, 1971, the court a quo rendered a decision the decretal part of which reads:

WHEREFORE, judgment is hereby rendered:

1) Denying defendants' motion to dismiss of February 23, 1970;

2) Declaring Exhibits 'B', 'B-I' and 'G' as loan transaction secured by real estate mortgages;

3) Annulling and setting aside Exhibits 'D', 'D-l', 'I', 'I-l' and 'I-2';

4) Ordering plaintiffs, jointly and severally to pay (within ninety [90] days from receipt of a copy of
this judgment) defendants the sum of P 5,000.00 specified in Exhibit 'B', with interest thereon at the
legal rate from November 28, 1959 until full payment together with the sum of P 9,308.00 specified in
Exhibit 'G' with interest thereon at the legal rate from December 1, 1959 until full payment, and in
default of such payment, let the properties mortgaged under Exhibits 'B', 'B-1' and 'G' be sold to realize
the mortgage debt and costs; and

5) Dismissing defendants' counter-claim.

With costs against defendants. 10

On June 14, 1971, petitioners appealed said decision to the Court of Appeals which, on October 7, 1975;
affirmed in all respects the judgment of the trial court. Petitioners' motion for reconsideration of said
decision was denied on November 27, 1975. 11
On January 8, 1976, petitioners filed the petition at bar anchored on the following assignments of errors:

1. The Hon. Court of Appeals erred in not applying the correct provisions of law interpreting the
conditional sales dated May 27, 1959 and August 30, 1959, Exhibits 'B' and 'G' as equitable mortgages.

2. That as a consequence of its ruling that the conditional sales, Exhibits 'B' and 'G', are equitable
mortgages, the Hon. Court of Appeals erred in ordering the reformation of the same.

3. The Honorable Court of Appeals erred in holding that the order dated January 22, 1960, Exhibit
C or 2, and the order dated April 18, 1960, Exhibit H or 6, issued by the probate court in Sp. Proc. No.
5174 and by the cadastral court in G.L.R.O. Rec. No. 395, respectively, are null and void for lack of
jurisdiction.

4. The Hon. Court of Appeals erred in not applying the applicable provisions of law on the
prescription of action and in not dismissing the complaint filed in the lower court. 12

We find the petition devoid of merit.

Article 1602 of the Civil Code provides:

The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits or other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be subject to the usury laws.

The Court of Appeals, in holding that the two (2) deeds purporting to be pacto de retro sale contracts
are equitable mortgages, relied on the following factual findings of the trial court, to wit:

Several undisputed circumstances persuade this Court (that) the questioned deeds should be construed
as equitable mortgages as contemplated in Article 1602 of the Civil Code, namely: (1) plaintiff vendor
remained in possession until 1964 of the properties she allegedly sold in 1959 to defendants; (2) the
sums representing the alleged purchase price were actually advanced to plaintiff by way of loans, as
expressly admitted by the parties at the hearing of February 17, 1971, reflected in an Order of the same
date: and (3) the properties allegedly purchased by defendant Oscar Ramos and his wife have never
been declared for taxation purposes in their names. Exhibits K, K-1, L and L-1. 13

Even if we indulge the petitioners in their contention that they are justified in not taking possession of
the lots considering that what were allegedly sold to them were only the rights, shares, interests and
participation of private respondent Adelaida Ramos in the said lots which were under administration, 14
however, such fact will not justify a reversal of the conclusion reached by respondent court that the
purported deeds of sale con pacto de retro are equitable mortgages. Such a conclusion is buttressed by
the other circumstances catalogued by respondent court especially the undisputed fact that the two
deeds were executed by reason of the loan extended by petitioner Oscar Ramos to private respondent
Adelaida Ramos and that the purchase price stated therein was the amount of the loan itself.

The above-stated circumstances are more than sufficient to show that the true intention of the parties is
that the transaction shall secure the payment of said debt and, therefore, shall be presumed to be an
equitable mortgage under Paragraph 6 of Article 1602 hereinbefore quoted. Settled is the rule that to
create the presumption enunciated by Article 1602, the existence of one circumstance is enough.15 The
said article expressly provides therefor "in any of the following cases," hence the existence of any of the
circumstances enumerated therein, not a concurrence nor an overwhelming number of such
circumstances, suffices to give rise to the presumption that the contract with the right of repurchase is
an equitable mortgage. As aptly stated by the Court of Appeals:
Thus, it may be fairly inferred that the real intention of the parties is that the transactions in question
were entered into to secure the payment of the loan and not to sell the property (Article 1602, Civil
Code). Under Article 1603 of the Civil Code it is provided that 'in case of doubt, a contract purporting to
be a sale with right to repurchase shall be construed as an equitable mortgage' in this case, we have no
doubt that the transaction between the parties is that of a loan secured by said properties by way of
mortgage. Hence, we find that Exhibits B and G do not reflect the true and real intention of the parties
and should accordingly be reformed and construed as equitable mortgages. 16

Equally puerile is the other contention of petitioners that respondent court erred in not applying the
exclusionary parol evidence rule in ascertaining the true intendment of the contracting parties. The
present case falls squarely under one of the exceptions to said rule as provided in then Section 7 of Rule
130, thus:

xxx xxx xxx

(a) Where a mistake or imperfection of the writing or its failure to express the true intent and
agreement of the parties, or the validity of the agreement is put in issue by the pleadings;17

xxx xxx xxx

Moreover, it is a well entrenched principle in the interpretation of contracts that if the terms thereof are
clear and leave no doubt as to the intention of the contracting parties the literal meaning of the
stipulation shall control but when the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former.18

The admission of parol testimony to prove that a deed, absolute in form, was in fact given and accepted
as a mortgage does not violate the rule against the admission of oral evidence to vary or contradict the
terms of a written instrument.19 Sales with a right to repurchase, as defined by the Civil Code, are not
favored. We will not construe instruments to be sales with a right to repurchase, with the stringent and
onerous effects which follow, unless the terms of the document and the surrounding circumstances
require it. Whenever, under the terms of the writing, any other construction can fairly and reasonably
be made, such construction will be adopted and the contract will be construed as a mere loan unless the
court can see that, if enforced according to its terms, it is not an unconscionable one. 20
On the faces thereof, the contracts purport to be sales with pacto de retro; however, since the same
were actually executed in consideration of the aforesaid loans said contracts are indubitably equitable
mortgages. The rule is firmly settled that whenever it is clearly shown that a deed of sale with pacto de
retro, regular on its face, is given as security for a loan, it must be regarded as an equitable mortgage. 21

With respect to the orders dated January 22, 1960 and April 18, 1960, issued by the Court below acting
as a probate court and cadastral court, respectively, the same could not preclude the institution of the
case now under review.

A reading of the order of the probate court will show that it is merely an approval of the deed of
conditional sale dated May 27, 1959 executed by petitioner Adelaida Ramos in favor of petitioners.
There is nothing in said order providing for the consolidation of ownership over the lots allegedly sold to
petitioners nor was the issue of the validity of said contract discussed or resolved therein. "To give
approval" means in its essential and most obvious meaning, to confirm, ratify, sanction or consent to
some act or thing done by another. 22 The approval of the probate court of the conditional sale is not a
conclusive determination of the intrinsic or extrinsic validity of the contract but a mere recognition of
the right of private respondent Adelaida Ramos as an heir, to dispose of her rights and interests over her
inheritance even before partition. 23 As held in Duran, et al., vs. Duran 24 the approval by the
settlement court of the assignment pendente lite, made by one heir in favor of the other during the
course of the settlement proceedings, is not deemed final until the estate is closed and said order can
still be vacated, hence the assigning heir remains an interested person in the proceeding even after said
approval.

Moreover, the probate jurisdiction of the former court of first instance or the present regional trial court
relates only to matters having to do with the settlement of the estate and probate of wills of deceased
persons, and the appointment and removal of administrators, executors, guardians and trustees.
Subject to settled exceptions not present in this case, the law does not extend the jurisdiction of a
probate court to the determination of questions of ownership that arise during the proceeding. The
parties concerned may choose to bring a separate action as a matter of convenience in the preparation
or presentation of evidence. 25 Obviously, the approval by the probate court of the conditional sale was
without prejudice to the filing of the proper action for consolidation of ownership and/or reformation of
instrument in the proper court within the statutory period of prescription.

The same jurisdictional flaw obtains in the order of consolidation issued by the cadastral court. The
court of first instance or the regional trial court, acting as cadastral court, acts with limited competence.
It has no jurisdiction to take cognizance of an action for consolidation of ownership, much less to issue
an order to that effect, such action must have been filed in the former court of first instance, now in the
regional trial court, in the exercise of its general jurisdiction. That remedy, and the procedure therefor,
is now governed by Rule 64 of the Rules of Court as a special civil action cognizable by the regional trial
court in the exercise of original general jurisdiction.
Antecedent thereto, Article 1607 of the Civil Code provided for consolidation as follows:

In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the
vendor to comply with the provisions of article 1616 shall not be recorded in the Registry of Property
without a judicial order, after the vendor has been duly heard.

Hence in Crisologo, et al. vs. Centeno, et al., 26 we ruled that said Article 1607 contemplates a
contentious proceeding wherein the vendor a retro must be named respondent in the caption and title
of the petition for consolidation of ownership and duly summoned and heard. An order granting the
vendee's petition for consolidation of ownership, without the vendor a retro being named as
respondent, summoned and heard, is a patent nullity for want of jurisdiction of the court over the
person of the latter.

The questioned order of consolidation issued by the cadastral court, being void for lack of jurisdiction, is
in contemplation of law non-existent and may be wholly disregarded. Such judgment may be assailed
any time, either directly or collaterally, by means of a separate action or by resisting such judgment in
any action or proceeding whenever it is invoked. 27 It is not necessary to take any step to vacate or
avoid a void judgment; it may simply be ignored. 28

On the issue of prescription, in addition to what has been said, the present case, having been filed on
February 28, 1960, approximately seven (7) years from the execution of the questioned deeds, was
seasonably instituted. The prescriptive period for actions based upon a written contract and for
reformation is ten (10) years under Article 1144 of the Civil Code. Such right to reformation is expressly
recognized in Article 1365 of the same code. 29

Article 1602 of the Civil Code is designed primarily to curtail the evils brought about by contracts of sale
with right of repurchase, such as the circumvention of the laws against usury and pactum
commissorium.30 In the present case before us, to rule otherwise would contravene the legislative
intent to accord the vendor a retro maximum safeguards for the protection of his legal rights under the
true agreement of the parties. The judicial experience in cases of this nature and the rationale for the
remedial legislation are worth reiterating, considering that such nefarious practices still persist:

It must be admitted that there are some cases where the parties really intend a sale with right to
repurchase. Although such cases are rare, still the freedom of contract must be maintained and
respected. Therefore, the contract under consideration is preserved, but with adequate safeguards and
restrictions.
One of the gravest problems that must be solved is that raised by the contract of sale with right of
repurchase or pacto de retro. The evils arising from this contract have festered like a sore on the body
politic. ...

xxx xxx xxx

It is a matter of common knowledge that in practically all of the so-called contracts of sale with right of
repurchase, the real intention of the parties is that the pretended purchase-price is money loaned, and
in order to secure the payment of the loan a contract purporting to be a sale with pacto de retro is
drawn up. It is thus that the provisions contained in articles 1859 and 1858 of the present Civil Code
which respectively prohibit the creditor from appropriating the things given in pledge or mortgage and
ordering that said things be sold or alienated when the principal obligation becomes due, are
circumvented.

Furthermore, it is well-known that the practice in these so-called contracts of sale with pacto de retro is
to draw up another contract purporting to be a lease of the property to the supposed vendor, who pays
in money or in crops a so-called rent. It is, however, no secret to anyone that this simulated rent is in
truth and in fact interest on the money loaned. In many instances, the interest is usurious. Thus, the
usury law is also circumvented.

It is high time these transgressions of the law were stopped. It is believed by the Commission that the
plan submitted for the solution of the problem will meet with the approval of an enlightened public
opinion, and in general, of everyone moved by a sense of justice.

During the deliberations of the Commission the question arose as to whether the contract of purchase
with pacto de retro should be abolished and forbidden. On first impression, this should be done, but
there is every reason to fear that in such a case the usurious money-lenders would demand of the
borrowers that, although the real agreement is one of loan secured with a mortgage, the instrument to
be signed should purport to be an absolute sale of the property involved. Should this happen, the
problem would become aggravated. Moreover, it must be admitted that there are some cases where
the parties really intend a sale with right to repurchase. Although such cases are rare, still the freedom
of contract must be maintained and respected. Therefore, the contract under consideration is preserved
in the Project of Civil Code, but with adequate safeguards and restrictions.

WHEREFORE, the instant petition is hereby DENIED and the assailed decision of the Court of Appeals is
hereby AFFIRMED.

SO ORDERED.
Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-39532 July 20, 1979

Testate Estate of Jose M. Valero, FLORA VALERO VDA. DE RODRIGUEZ and ROSIE VALERO DE
GUTIERREZ, petitioners-appellants,

vs.

COURT OF APPEALS and CARMEN VALERO-RUSTIA, respondents-appellees.

Amboriso Padilla Law Office and Iglesia & Associates for appellants.

Angel P. Purisima for appellees.

AQUINO, J.:1äwphï1.ñët

This is supposedly a case about collation. As factual background, it should be stated that the spouses,
Beatriz Bautista and Jose M. Valero, did not beget any child during their marriage In 1951 Beatriz
adopted Carmen (Carmencita) Bautista. Jose wanted also to adopt her but because, by his first marriage,
he had two children named Flora Valero Vda. de Rodriguez and Rosie Valero Gutierrez. he was
disqualified to adopt Carmen. Jose manifested in the adoption proceeding that he consented to the use
by Carmen of his surname Valero. (See Civil Case No. 12475, Manila CFI; Art. 338[1], Civil Code and art.
28, Child and Youth Welfare Code.)

On September 18, 1964, Jose M. Valero donated to Carmen B. Valero (who was already married to
Doctor Sergio Rustia) his one-half proindiviso share (apparently his inchoate share) in two conjugal lots,
with the improvements thereon, located at San Lorenzo Village, Makati, Rizal, with an area of 1,500
square meters. His wife, Beatriz, consented to the donation. However, the deed of donation was not
registered.
On January 13, 1966, Jose M. Valero, who was then seventy-three years old, executed his last will and
testament wherein he enumerated the conjugal properties of himself and his wife, including the two San
Lorenzo Village lots. In that will, he did not mention the donation. He devised to his wife properties
sufficient to constitute her legitime and bequeathed the remainder to his two children, Mrs. Rodriguez
and Mrs. Gutierrez.

About a month later, or on February 15, 1966, the Valero spouses, by means of a deed of absolute sale,
conveyed the San Lorenzo Village lots and the improvements thereon to Carmen B. Valero-Rustia for the
sum of one hundred twenty thousand pesos. The sale was registered on the following day. Transfer
Certificates of Title Nos. 163270 and 163271 were issued to the vendee, Mrs. Rustia.

On December 4, 1967 she mortgaged the two lots to the Quezon City Development Bank as security for
a loan of fifty thousand pesos (page 204, Rollo).

Beatriz B. Valero died intestate on September 12, 1972, survived by her husband and her adopted child.
Her estate is pending settlement in Special Proceeding No. 88896 of the Court of First Instance of
Manila. Mrs. Rustia was named administratrix of her adopted mother's estate.

More than a month later, or on October 18, 1972, Jose M. Valero died testate, survived by his two
children, Mrs. Rodriguez and Mrs. Gutierrez. His will was duly probated in Special Proceeding No. 88677,
also of the Court of First Instance of Manila. Lawyer Celso F. Unson, the executor, submitted an
inventory wherein, following the list of conjugal assets in the testator's will, the two San Lorenzo Village
lots were included as part of the testate estate.

That inclusion provoked Mrs. Rustia, the adopted child of Mrs. Valero, and Mrs. Rodriguez and Mrs.
Gutierrez, the legitimate children of the testator, Jose M. Valero, to file (through Mrs. Rustia's lawyer) in
the testate proceeding a motion for the exclusion of the two San Lorenzo Village lots from the testator's
inventoried estate.

Adduced as reason for the exclusion is the fact that since February 16, 1966 Mrs. Rustia has been the
registered owner of the lots as shown by two Torrens titles, copies of which were attached to the
motion.

The executor opposed the motion on the ground that the two lots were donated to Mrs. Rustia and the
donation would allegedly involve collation and the donee's title to the lots. The executor revealed that
he was informed by Mrs. Gutierrez and Mrs. Rodriguez (supposed movants) that the two lots should be
included in the inventory. Thus, the issue of collation was prematurely raised.

The probate court in its order of August 9, 1973 excluded the two lots from the inventory of the
testator's estate but with the understanding "that the same are subject to collation".

On December 4, 1973 or one hundred twelve days after Mrs. Rustia was served with a copy of that
order, she filed a motion for its reconsideration. She insisted that she is the owner of the two San
Lorenzo Village lots as indicated in the Torrens titles. No one opposed that motion. At the hearing of
that motion, Mrs. Rustia's lawyer apprised the court that the executor informed him over the phone
that he was not opposing the motion.

The probate court in its order of December 14, 1973 ruled that the two lots were unconditionally
excluded from the inventory of Jose M. Valero's estate, meaning "that they are not subject to collation".
That order is the bone of contention in this case.

Mrs. Rodriguez (without being joined by her sister, Mrs. Gutierrez) filed a motion for the reconsideration
of the order of December 14, 1973. She alleged that the two San Lorenzo Village lots were really
conveyed to Mrs. Rustia by way of donation because the consideration for the sale was allegedly only
one-fifth of the true value of the lots. Mrs. Rodriguez further contended that the order of August 9, 1973
was final in character.

In reply, Mrs. Rustia countered that the prior order was interlocutory and that in 1966 the true value of
the two lots was around P120,000 and that their value increased considerably in 1973 or 1974.
Moreover, the relatively low price of the sale could be attributed to the fact that Mrs. Rustia and her
husband lived with the Valeros and were taking care of them.

The probate court denied the motion for reconsideration. Mrs. Rodriguez and Mrs. Gutierrez, in their
petition for certiorari in the Court of Appeals, assailed the probate court's order declaring that the two
lots were not subject to collation.

The Court of Appeals held that the order of exclusion dated August 9, 1973 was interlocutory and that it
could be changed or Modified at anytime during the course of the administration proceedings.
It further held that it was immaterial whether the two lots were donated or sold to Mrs. Rustia as "a
mere subterfuge to avoid payment of the donor's and donee's taxes". According to the Appellate Court,
it was immaterial because under article 1061 of the Civil Code, only compulsory heirs are required to
make collation for the determination of their legitimes and, under section 2, Rule 90 of the Rules of
Court, only heirs are involved in questions as to advancement and Mrs. Rustia is not an heir of the
testator, Jose M. Valero (Vda. de Rodriguez vs. Valero Rustia, CA-G. R. No. SP- 02944, August 28, 1974,
per G. S. Santos, Gaviola, Jr. and De Castro, JJ.).

From that decision, an appeal was made to this Court. The appeal was not given due course. However,
upon motion for reconsideration and over Mrs. Rustia's opposition, the appeal was later allowed.

The appellants' only assignment of error is that the Court of Appeals should have held that the probate
court's order of exclusion dated August 9, 1973 was not interlocutory but was a final and appealable
order valid that the order of December 14, 1973 modifying the order of August 3 is void.

We hold that the order of exclusion dated August 9, 1973 was not a final order. It was interlocutory in
the sense that it did not settle once and for all the title to the San Lorenzo Village lots. The probate court
in the exclusion incident could not determine the question of title.

The prevailing rule is that for the purpose of determining whether a certain property should or should
not be included in the inventory, the probate court may pass upon the title thereto but such
determination is not conclusive and is subject to the final decision in a separate action regarding
ownership which may be instituted by the parties (3 Moran's Comments on the Rules of Court, 1970
Edition, pages 448-9 and 473; Lachenal vs. Salas, L-42257, June 14, 1976, 71 SCRA 262, 266).

We hold further that the dictum of the Court of Appeals and the probate court that the two disputed
lots are not subject to collation was a supererogation and was not necessary to the disposition of the
case which merely involved the issue of inclusion in, or exclusion from, the inventory of the testator's
estate. The issue of collation was not yet justifiable at that early stage of the testate proceeding. It is not
necessary to mention in the order of exclusion the controversial matter of collation.

Whether collation may exist with respect to the two lots and whether Mrs. Rustia's Torrens titles
thereto are indefeasible are matters that may be raised later or may not be raised at all. How those
issues should be resolved, if and when they are raised, need not be touched upon in the adjudication of
this appeal.
The intestate and testate proceedings for the settlement of the estates of the deceased Valero spouses
were consolidated, as ordered by the lower court on November 21, 1974, so that the conjugal estate of
the deceased spouses may be properly liquidated, as contemplated in section 2, Rule 73 of the Rules of
Court and Act No. 3176 (Pages 223 and 235-6, Rollo).

We have examined the expedientes of the two cases. We found that the proceedings have not yet
reached the stage when the question of collation or advancement to an heir may be raised and decided.
The numerous debts of the decedents are still being paid. The net remainder (remanente liquido) of
their conjugal estate has not yet been determined. On the other hand, up to this time, no separate
action has been brought by the appellants to nullify Mrs. Rustia's Torrens titles to the disputed lots or to
show that the sale was in reality a donation.

In this appeal, it is not proper to pass upon the question of collation and to decide whether Mrs. Rustia's
titles to the disputed lots are questionable. The proceedings below have not reached the stage of
partition and distribution when the legitimes of the compulsory heirs have to be determined.

WHEREFORE, we affirm the decision of the Court of Appeals and the orders of the, lower court dated
August 9 and December 14, 1973, excluding from the inventory of Jose M. Valeros estate the two San
Lorenzo Village lots now registered in the name of Carmen B. Valero-Rustia, but we delete from that
decision and the two orders any ruling regarding collation which is a matter that may be passed upon by
the probate court at the time when it is seasonably raised by the interested parties, if it is ever raised at
all. No costs.

SO ORDERED.

Fernando, C.J., Makasiar, Antonio, Concepcion, Jr., Fernandez, Guerrero, Abad Santos and Melencio-
Herrera, JJ., concur.1äwphï1.ñët

Santos and De Castro, JJ., took no part.

Separate Opinions

BARREDO, J., concurring:

For even assuming that the order of exclusion had become final insofar as the inventory is concerned,
said order could not have any final binding effect on the issue of collation.

TEEHANKEE, J., dissenting:

I vote for the unqualified affirmance of respondent appellate court's decision sustaining the exclusion
from the inventory of Jose M. Valeros estate of the two San Lorenzo Village lots registered in the name
of respondent Carmen B. Valero-Rustia by virtue of the deed of absolute sale thereof executed by him in
his lifetime on February 15, 1966 in her favor.

The question of collation of said lots is immaterial insofar as respondent and the deceased Jose M.
Valeros estate and petitioners are concerned, since respondent is not even an heir of his estate (which
he had willed to his two legitimate children, herein petitioners, his second wife Beatriz Bautista having
predeceased him in September, 1972). Under Article 1061 of the Civil Code, only a compulsory heir
succeeding with other compulsory heirs is required to collate whatever property he/she may have
received from the decedent during the decedent's lifetime by way of donation or any other gratuitous
title in order that it may be computed in the determination of the legitime of each heir, and in the
account of the partition." There can therefore be no collation here because from the documents of
record, respondent Carmen B. Valero-Rustia is not a compulsory heir who received property by donation
or gratuitous title from the deceased that would be subject to collation.

The properties in question had been transferred by deed of absolute sale to said respondent-vendee
more than six years before the vendor Jose M. Valero died in, October, 1972. The deceased having long
divested himself of title to the said properties, they were properly excluded from the inventory of his
estate.

The real question between petitioners (Children of the deceased vendor) and respondent-vendee (a
stranger to the deceased's estate) is not collation, but a question of title and ownership of the
properties. The probate court has no jurisdiction over this question and petitioners must bring a
separate action if they wish to question respondent's title and ownership. Even granting their claim that
the deed of sale should be considered a donation or gratuitous transfer, (because of the allegedly
excessively low price), their only recourse would be not collation, but a separate action for reduction of
the donation to the extent that they may show it to be inofficious (exceeding that which the deceased
may give by will) under the provisions of Articles 750 and 752 of the Civil Code.

# Separate Opinions

BARREDO, J., concurring:

For even assuming that the order of exclusion had become final insofar as the inventory is concerned,
said order could not have any final binding effect on the issue of collation.

TEEHANKEE, J., dissenting:

I vote for the unqualified affirmance of respondent appellate court's decision sustaining the exclusion
from the inventory of Jose M. Valeros estate of the two San Lorenzo Village lots registered in the name
of respondent Carmen B. Valero-Rustia by virtue of the deed of absolute sale thereof executed by him in
his lifetime on February 15, 1966 in her favor.

The question of collation of said lots is immaterial insofar as respondent and the deceased Jose M.
Valeros estate and petitioners are concerned, since respondent is not even an heir of his estate (which
he had willed to his two legitimate children, herein petitioners, his second wife Beatriz Bautista having
predeceased him in September, 1972). Under Article 1061 of the Civil Code, only a compulsory heir
succeeding with other compulsory heirs is required to collate whatever property he/she may have
received from the decedent during the decedent's lifetime by way of donation or any other gratuitous
title in order that it may be computed in the determination of the legitime of each heir, and in the
account of the partition." There can therefore be no collation here because from the documents of
record, respondent Carmen B. Valero-Rustia is not a compulsory heir who received property by donation
or gratuitous title from the deceased that would be subject to collation.

The properties in question had been transferred by deed of absolute sale to said respondent-vendee
more than six years before the vendor Jose M. Valero died in, October, 1972. The deceased having long
divested himself of title to the said properties, they were properly excluded from the inventory of his
estate.

The real question between petitioners (Children of the deceased vendor) and respondent-vendee (a
stranger to the deceased's estate) is not collation, but a question of title and ownership of the
properties. The probate court has no jurisdiction over this question and petitioners must bring a
separate action if they wish to question respondent's title and ownership. Even granting their claim that
the deed of sale should be considered a donation or gratuitous transfer, (because of the allegedly
excessively low price), their only recourse would be not collation, but a separate action for reduction of
the donation to the extent that they may show it to be inofficious (exceeding that which the deceased
may give by will) under the provisions of Articles 750 and 752 of the Civil Code.
SECOND DIVISION

CYNTHIA V. NITTSCHER,

Petitioner,

G.R. No. 160530

- versus -

DR. WERNER KARL JOHANN

Promulgated:

November 20, 2007

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

DECISION

QUISUMBING, J.:

For review on certiorari are the Decision[1] dated July 31, 2003 and Resolution[2] dated October 21,
2003 of the Court of Appeals in CA-G.R. CV No. 55330, which affirmed the Order[3] dated September 29,
1995 of the Regional Trial Court (RTC), Branch 59, Makati City, in SP Proc. No. M-2330 for the probate of
a will.

The facts are as follows.

On January 31, 1990, Dr. Werner Karl Johann Nittscher filed with the RTC of Makati City a petition for
the probate of his holographic will and for the issuance of letters testamentary to herein respondent
Atty. Rogelio P. Nogales.

On September 19, 1991, after hearing and with due notice to the compulsory heirs, the probate court
issued an order allowing the said holographic will, thus:
WHEREFORE, premises considered, the Holographic Will of the petitioner-testator Dr. Werner J.
Nittscher executed pursuant to the provision of the second paragraph of Article 838 of the Civil Code of
the Philippines on January 25, 1990 in Manila, Philippines, and proved in accordance with the provision
of Rule 76 of the Revised Rules of Court is hereby allowed.

SO ORDERED.[4]

On September 26, 1994, Dr. Nittscher died. Hence, Atty. Nogales filed a petition for letters testamentary
for the administration of the estate of the deceased. Dr. Nittschers surviving spouse, herein petitioner
Cynthia V. Nittscher, moved for the dismissal of the said petition. However, the court in its September
29, 1995 Order denied petitioners motion to dismiss, and granted respondents petition for the issuance
of letters testamentary, to wit:

In view of all the foregoing, the motion to dismiss is DENIED. The petition for the issuance of Letters
Testamentary, being in order, is GRANTED.

Section 4, Rule 78 of the Revised Rules of Court, provides when a will has been proved and allowed, the
court shall issue letters testamentary thereon to the person named as executor therein, if he is
competent, accepts the trust and gives a bond as required by these rules. In the case at bar, petitioner
Atty. Rogelio P. Nogales of the R.P. Nogales Law Offices has been named executor under the
Holographic Will of Dr. Werner J. Nittscher. As prayed for, let Letters Testamentary be issued to Atty.
Rogelio P. Nogales, the executor named in the Will, without a bond.

SO ORDERED.[5]

Petitioner moved for reconsideration, but her motion was denied for lack of merit. On May 9, 1996,
Atty. Nogales was issued letters testamentary and was sworn in as executor.

Petitioner appealed to the Court of Appeals alleging that respondents petition for the issuance of letters
testamentary should have been dismissed outright as the RTC had no jurisdiction over the subject
matter and that she was denied due process.

The appellate court dismissed the appeal, thus:

WHEREFORE, the foregoing considered, the appeal is hereby DISMISSED and the assailed Order is
AFFIRMED in toto. The court a quo is ordered to proceed with dispatch in the proceedings below.

SO ORDERED.[6]

Petitioners motion for reconsideration of the aforequoted decision was denied for lack of merit. Hence,
the present petition anchored on the following grounds:

I.

BOTH THE CA AND THE LOWER COURT ERRED IN NOT DISMISSING OUTRIGHT THE PETITION FOR
LETTERS TESTAMENTARY FILED BY ATTY. NOGALES WHEN, OBVIOUSLY, IT WAS FILED IN VIOLATION OF
REVISED CIRCULAR NO. 28-91 AND ADMINISTRATIVE CIRCULAR NO. 04-94 OF THIS HONORABLE COURT.

II.

THE CA ERRED IN NOT DECLARING THAT THE LOWER COURT [HAS] NO JURISDICTION OVER THE SUBJECT
MATTER OF THE PRESENT SUIT.

III.

THE CA ERRED IN CONCLUDING THAT SUMMONS WERE PROPERLY ISSUED TO THE PARTIES AND ALL
PERSONS INTERESTED IN THE PROBATE OF THE HOLOGRAPHIC WILL OF DR. NITTSCHER.

IV.

THE CA ERRED IN CONCLUDING THAT THE PETITIONER WAS NOT DEPRIVED OF DUE PROCESS OF LAW BY
THE LOWER COURT.[7]

Petitioner contends that respondents petition for the issuance of letters testamentary lacked a
certification against forum-shopping. She adds that the RTC has no jurisdiction over the subject matter
of this case because Dr. Nittscher was allegedly not a resident of the Philippines; neither did he leave
real properties in the country. Petitioner claims that the properties listed for disposition in her husbands
will actually belong to her. She insists she was denied due process of law because she did not receive by
personal service the notices of the proceedings.

Respondent Atty. Nogales, however, counters that Dr. Nittscher did reside and own real properties in
Las Pias, Metro Manila. He stresses that petitioner was duly notified of the probate proceedings.
Respondent points out that petitioner even appeared in court to oppose the petition for the issuance of
letters testamentary and that she also filed a motion to dismiss the said petition. Respondent maintains
that the petition for the issuance of letters testamentary need not contain a certification against forum-
shopping as it is merely a continuation of the original proceeding for the probate of the will.

We resolve to deny the petition.

As to the first issue, Revised Circular No. 28-91[8] and Administrative Circular No. 04-94[9] of the Court
require a certification against forum-shopping for all initiatory pleadings filed in court. However, in this
case, the petition for the issuance of letters testamentary is not an initiatory pleading, but a mere
continuation of the original petition for the probate of Dr. Nittschers will. Hence, respondents failure to
include a certification against forum-shopping in his petition for the issuance of letters testamentary is
not a ground for outright dismissal of the said petition.

Anent the second issue, Section 1, Rule 73 of the Rules of Court provides:

SECTION 1. Where estate of deceased persons settled. If the decedent is an inhabitant of the Philippines
at the time of his death, whether a citizen or an alien, his will shall be proved, or letters of
administration granted, and his estate settled, in the Court of First Instance (now Regional Trial Court) in
the province in which he resides at the time of his death, and if he is an inhabitant of a foreign country,
the Court of First Instance (now Regional Trial Court) of any province in which he had estate. (Emphasis
supplied.)

In this case, the RTC and the Court of Appeals are one in their finding that Dr. Nittscher was a resident of
Las Pias, Metro Manila at the time of his death. Such factual finding, which we find supported by
evidence on record, should no longer be disturbed. Time and again we have said that reviews on
certiorari are limited to errors of law. Unless there is a showing that the findings of the lower court are
totally devoid of support or are glaringly erroneous, this Court will not analyze or weigh evidence all
over again.[10]
Hence, applying the aforequoted rule, Dr. Nittscher correctly filed in the RTC of Makati City, which then
covered Las Pias, Metro Manila, the petition for the probate of his will and for the issuance of letters
testamentary to respondent.

Regarding the third and fourth issues, we note that Dr. Nittscher asked for the allowance of his own will.
In this connection, Section 4, Rule 76 of the Rules of Court states:

SEC. 4. Heirs, devisees, legatees, and executors to be notified by mail or personally.

If the testator asks for the allowance of his own will, notice shall be sent only to his compulsory heirs.

In this case, records show that petitioner, with whom Dr. Nittscher had no child, and Dr. Nittschers
children from his previous marriage were all duly notified, by registered mail, of the probate
proceedings. Petitioner even appeared in court to oppose respondents petition for the issuance of
letters testamentary and she also filed a motion to dismiss the said petition. She likewise filed a motion
for reconsideration of the issuance of the letters testamentary and of the denial of her motion to
dismiss. We are convinced petitioner was accorded every opportunity to defend her cause. Therefore,
petitioners allegation that she was denied due process in the probate proceedings is without basis.

As a final word, petitioner should realize that the allowance of her husbands will is conclusive only as to
its due execution.[11] The authority of the probate court is limited to ascertaining whether the testator,
being of sound mind, freely executed the will in accordance with the formalities prescribed by law.[12]
Thus, petitioners claim of title to the properties forming part of her husbands estate should be settled in
an ordinary action before the regular courts.

WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated July 31, 2003 and
Resolution dated October 21, 2003 of the Court of Appeals in CA-G.R. CV No. 55330, which affirmed the
Order dated September 29, 1995 of the Regional Trial Court, Branch 59, Makati City, in SP Proc. No. M-
2330 are AFFIRMED.

No pronouncement as to costs.

SO ORDERED.
SECOND DIVISION

OSCAR C. REYES,

Petitioner,

- versus -

HON. REGIONAL TRIAL COURT OF MAKATI, Branch 142, ZENITH INSURANCE CORPORATION, and
RODRIGO C. REYES,

Respondents.

August 11, 2008

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

DECISION

BRION, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to set aside the Decision
of the Court of Appeals (CA)[1] promulgated on May 26, 2004 in CA-G.R. SP No. 74970. The CA Decision
affirmed the Order of the Regional Trial Court (RTC), Branch 142, Makati City dated November 29,
2002[2] in Civil Case No. 00-1553 (entitled "Accounting of All Corporate Funds and Assets, and
Damages") which denied petitioner Oscar C. Reyes (Oscar) Motion to Declare Complaint as Nuisance or
Harassment Suit.

BACKGROUND FACTS

Oscar and private respondent Rodrigo C. Reyes (Rodrigo) are two of the four children of the spouses
Pedro and Anastacia Reyes. Pedro, Anastacia, Oscar, and Rodrigo each owned shares of stock of Zenith
Insurance Corporation (Zenith), a domestic corporation established by their family. Pedro died in 1964,
while Anastacia died in 1993. Although Pedros estate was judicially partitioned among his heirs
sometime in the 1970s, no similar settlement and partition appear to have been made with Anastacias
estate, which included her shareholdings in Zenith. As of June 30, 1990, Anastacia owned 136,598 shares
of Zenith; Oscar and Rodrigo owned 8,715,637 and 4,250 shares, respectively.[3]

On May 9, 2000, Zenith and Rodrigo filed a complaint[4] with the Securities and Exchange Commission
(SEC) against Oscar, docketed as SEC Case No. 05-00-6615. The complaint stated that it is a derivative
suit initiated and filed by the complainant Rodrigo C. Reyes to obtain an accounting of the funds and
assets of ZENITH INSURANCE CORPORATION which are now or formerly in the control, custody, and/or
possession of respondent [herein petitioner Oscar] and to determine the shares of stock of deceased
spouses Pedro and Anastacia Reyes that were arbitrarily and fraudulently appropriated [by Oscar] for
himself [and] which were not collated and taken into account in the partition, distribution, and/or
settlement of the estate of the deceased spouses, for which he should be ordered to account for all the
income from the time he took these shares of stock, and should now deliver to his brothers and sisters
their just and respective shares.[5] [Emphasis supplied.]

In his Answer with Counterclaim,[6] Oscar denied the charge that he illegally acquired the shares of
Anastacia Reyes. He asserted, as a defense, that he purchased the subject shares with his own funds
from the unissued stocks of Zenith, and that the suit is not a bona fide derivative suit because the
requisites therefor have not been complied with. He thus questioned the SECs jurisdiction to entertain
the complaint because it pertains to the settlement of the estate of Anastacia Reyes.

When Republic Act (R.A.) No. 8799[7] took effect, the SECs exclusive and original jurisdiction over cases
enumerated in Section 5 of Presidential Decree (P.D.) No. 902-A was transferred to the RTC designated
as a special commercial court.[8] The records of Rodrigos SEC case were thus turned over to the RTC,
Branch 142, Makati, and docketed as Civil Case No. 00-1553.

On October 22, 2002, Oscar filed a Motion to Declare Complaint as Nuisance or Harassment Suit.[9] He
claimed that the complaint is a mere nuisance or harassment suit and should, according to the Interim
Rules of Procedure for Intra-Corporate Controversies, be dismissed; and that it is not a bona fide
derivative suit as it partakes of the nature of a petition for the settlement of estate of the deceased
Anastacia that is outside the jurisdiction of a special commercial court. The RTC, in its Order dated
November 29, 2002 (RTC Order), denied the motion in part and declared:

A close reading of the Complaint disclosed the presence of two (2) causes of action, namely: a) a
derivative suit for accounting of the funds and assets of the corporation which are in the control,
custody, and/or possession of the respondent [herein petitioner Oscar] with prayer to appoint a
management committee; and b) an action for determination of the shares of stock of deceased spouses
Pedro and Anastacia Reyes allegedly taken by respondent, its accounting and the corresponding delivery
of these shares to the parties brothers and sisters. The latter is not a derivative suit and should properly
be threshed out in a petition for settlement of estate.

Accordingly, the motion is denied. However, only the derivative suit consisting of the first cause of
action will be taken cognizance of by this Court.[10]

Oscar thereupon went to the CA on a petition for certiorari, prohibition, and mandamus[11] and prayed
that the RTC Order be annulled and set aside and that the trial court be prohibited from continuing with
the proceedings. The appellate court affirmed the RTC Order and denied the petition in its Decision
dated May 26, 2004. It likewise denied Oscars motion for reconsideration in a Resolution dated October
21, 2004.

Petitioner now comes before us on appeal through a petition for review on certiorari under Rule 45 of
the Rules of Court.

ASSIGNMENT OF ERRORS

Petitioner Oscar presents the following points as conclusions the CA should have made:

1. that the complaint is a mere nuisance or harassment suit that should be dismissed under the
Interim Rules of Procedure of Intra-Corporate Controversies; and
2. that the complaint is not a bona fide derivative suit but is in fact in the nature of a petition for
settlement of estate; hence, it is outside the jurisdiction of the RTC acting as a special commercial court.

Accordingly, he prays for the setting aside and annulment of the CA decision and resolution, and the
dismissal of Rodrigos complaint before the RTC.

THE COURTS RULING

We find the petition meritorious.

The core question for our determination is whether the trial court, sitting as a special commercial court,
has jurisdiction over the subject matter of Rodrigos complaint. To resolve it, we rely on the judicial
principle that jurisdiction over the subject matter of a case is conferred by law and is determined by the
allegations of the complaint, irrespective of whether the plaintiff is entitled to all or some of the claims
asserted therein.[12]

JURISDICTION OF SPECIAL COMMERCIAL COURTS

P.D. No. 902-A enumerates the cases over which the SEC (now the RTC acting as a special commercial
court) exercises exclusive jurisdiction:

SECTION 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnership, and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear
and decide cases involving:

a) Devices or schemes employed by or any acts of the board of directors, business associates,
its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the
interest of the public and/or of the stockholders, partners, members of associations or organizations
registered with the Commission.

b) Controversies arising out of intra-corporate or partnership relations, between and among

stockholders, members, or associates; between any or all of them and the corporation, partnership or
association of which they are stockholders, members, or associates, respectively; and between such
corporation, partnership or association and the State insofar as it concerns their individual franchise or
right to exist as such entity; and

c) Controversies in the election or appointment of directors, trustees, officers, or managers

of such corporations, partnerships, or associations.

The allegations set forth in Rodrigos complaint principally invoke Section 5, paragraphs (a) and (b) above
as basis for the exercise of the RTCs special court jurisdiction. Our focus in examining the allegations of
the complaint shall therefore be on these two provisions.

Fraudulent Devices and Schemes

The rule is that a complaint must contain a plain, concise, and direct statement of the ultimate facts
constituting the plaintiffs cause of action and must specify the relief sought.[13] Section 5, Rule 8 of the
Revised Rules of Court provides that in all averments of fraud or mistake, the circumstances constituting
fraud or mistake must be stated with particularity.[14] These rules find specific application to Section
5(a) of P.D. No. 902-A which speaks of corporate devices or schemes that amount to fraud or
misrepresentation detrimental to the public and/or to the stockholders.

In an attempt to hold Oscar responsible for corporate fraud, Rodrigo alleged in the complaint the
following:

3. This is a complaintto determine the shares of stock of the deceased spouses Pedro and Anastacia
Reyes that were arbitrarily and fraudulently appropriated for himself [herein petitioner Oscar] which
were not collated and taken into account in the partition, distribution, and/or settlement of the estate
of the deceased Spouses Pedro and Anastacia Reyes, for which he should be ordered to account for all
the income from the time he took these shares of stock, and should now deliver to his brothers and
sisters their just and respective shares with the corresponding equivalent amount of P7,099,934.82 plus
interest thereon from 1978 representing his obligations to the Associated Citizens Bank that was paid
for his account by his late mother, Anastacia C. Reyes. This amount was not collated or taken into
account in the partition or distribution of the estate of their late mother, Anastacia C. Reyes.

3.1. Respondent Oscar C. Reyes, through other schemes of fraud including misrepresentation,
unilaterally, and for his own benefit, capriciously transferred and took possession and control of the
management of Zenith Insurance Corporation which is considered as a family corporation, and other
properties and businesses belonging to Spouses Pedro and Anastacia Reyes.

4.1. During the increase of capitalization of Zenith Insurance Corporation, sometime in 1968, the
property covered by TCT No. 225324 was illegally and fraudulently used by respondent as a collateral.

5. The complainant Rodrigo C. Reyes discovered that by some manipulative scheme, the shareholdings
of their deceased mother, Doa Anastacia C. Reyes, shares of stocks and [sic] valued in the corporate
books at P7,699,934.28, more or less, excluding interest and/or dividends, had been transferred solely in
the name of respondent. By such fraudulent manipulations and misrepresentation, the shareholdings of
said respondent Oscar C. Reyes abruptly increased to P8,715,637.00 [sic] and becomes [sic] the majority
stockholder of Zenith Insurance Corporation, which portion of said shares must be distributed equally
amongst the brothers and sisters of the respondent Oscar C. Reyes including the complainant herein.

9.1 The shareholdings of deceased Spouses Pedro Reyes and Anastacia C. Reyes valued at P7,099,934.28
were illegally and fraudulently transferred solely to the respondents [herein petitioner Oscar] name and
installed himself as a majority stockholder of Zenith Insurance Corporation [and] thereby deprived his
brothers and sisters of their respective equal shares thereof including complainant hereto.

10.1 By refusal of the respondent to account of his [sic] shareholdings in the company, he illegally and
fraudulently transferred solely in his name wherein [sic] the shares of stock of the deceased Anastacia C.
Reyes [which] must be properly collated and/or distributed equally amongst the children, including the
complainant Rodrigo C. Reyes herein, to their damage and prejudice.

11.1 By continuous refusal of the respondent to account of his [sic] shareholding with Zenith Insurance
Corporation[,] particularly the number of shares of stocks illegally and fraudulently transferred to him
from their deceased parents Sps. Pedro and Anastacia Reyes[,] which are all subject for collation and/or
partition in equal shares among their children. [Emphasis supplied.]
Allegations of deceit, machination, false pretenses, misrepresentation, and threats are largely
conclusions of law that, without supporting statements of the facts to which the allegations of fraud
refer, do not sufficiently state an effective cause of action.[15] The late Justice Jose Feria, a noted
authority in Remedial Law, declared that fraud and mistake are required to be averred with particularity
in order to enable the opposing party to controvert the particular facts allegedly constituting such fraud
or mistake.[16]

Tested against these standards, we find that the charges of fraud against Oscar were not properly
supported by the required factual allegations. While the complaint contained allegations of fraud
purportedly committed by him, these allegations are not particular enough to bring the controversy
within the special commercial courts jurisdiction; they are not statements of ultimate facts, but are
mere conclusions of law: how and why the alleged appropriation of shares can be characterized as illegal
and fraudulent were not explained nor elaborated on.

Not every allegation of fraud done in a corporate setting or perpetrated by corporate officers will bring
the case within the special commercial courts jurisdiction. To fall within this jurisdiction, there must be
sufficient nexus showing that the corporations nature, structure, or powers were used to facilitate the
fraudulent device or scheme. Contrary to this concept, the complaint presented a reverse situation. No
corporate power or office was alleged to have facilitated the transfer of the shares; rather, Oscar, as an
individual and without reference to his corporate personality, was alleged to have transferred the shares
of Anastacia to his name, allowing him to become the majority and controlling stockholder of Zenith,
and eventually, the corporations President. This is the essence of the complaint read as a whole and is
particularly demonstrated under the following allegations:

5. The complainant Rodrigo C. Reyes discovered that by some manipulative scheme, the shareholdings
of their deceased mother, Doa Anastacia C. Reyes, shares of stocks and [sic] valued in the corporate
books at P7,699,934.28, more or less, excluding interest and/or dividends, had been transferred solely in
the name of respondent. By such fraudulent manipulations and misrepresentation, the shareholdings of
said respondent Oscar C. Reyes abruptly increased to P8,715,637.00 [sic] and becomes [sic] the majority
stockholder of Zenith Insurance Corporation, which portion of said shares must be distributed equally
amongst the brothers and sisters of the respondent Oscar C. Reyes including the complainant herein.

9.1 The shareholdings of deceased Spouses Pedro Reyes and Anastacia C. Reyes valued at P7,099,934.28
were illegally and fraudulently transferred solely to the respondents [herein petitioner Oscar] name and
installed himself as a majority stockholder of Zenith Insurance Corporation [and] thereby deprived his
brothers and sisters of their respective equal shares thereof including complainant hereto. [Emphasis
supplied.]

In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute a ground for
dismissal since such defect can be cured by a bill of particulars. In cases governed by the Interim Rules of
Procedure on Intra-Corporate Controversies, however, a bill of particulars is a prohibited pleading.[17] It
is essential, therefore, for the complaint to show on its face what are claimed to be the fraudulent
corporate acts if the complainant wishes to invoke the courts special commercial jurisdiction.
We note that twice in the course of this case, Rodrigo had been given the opportunity to study the
propriety of amending or withdrawing the complaint, but he consistently refused. The courts function in
resolving issues of jurisdiction is limited to the review of the allegations of the complaint and, on the
basis of these allegations, to the determination of whether they are of such nature and subject that they
fall within the terms of the law defining the courts jurisdiction. Regretfully, we cannot read into the
complaint any specifically alleged corporate fraud that will call for the exercise of the courts special
commercial jurisdiction. Thus, we cannot affirm the RTCs assumption of jurisdiction over Rodrigos
complaint on the basis of Section 5(a) of P.D. No. 902-A.[18]

Intra-Corporate Controversy

A review of relevant jurisprudence shows a development in the Courts approach in classifying what
constitutes an intra-corporate controversy. Initially, the main consideration in determining whether a
dispute constitutes an intra-corporate controversy was limited to a consideration of the intra-corporate
relationship existing between or among the parties.[19] The types of relationships embraced under
Section 5(b), as declared in the case of Union Glass & Container Corp. v. SEC,[20] were as follows:

a) between the corporation, partnership, or association and the public;

b) between the corporation, partnership, or association and its stockholders, partners, members, or
officers;

c) between the corporation, partnership, or association and the State as far as its franchise, permit or
license to operate is concerned; and

d) among the stockholders, partners, or associates themselves. [Emphasis supplied.]

The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction to the
SEC, regardless of the subject matter of the dispute. This came to be known as the relationship test.

However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc.,[21] the Court
introduced the nature of the controversy test. We declared in this case that it is not the mere existence
of an intra-corporate relationship that gives rise to an intra-corporate controversy; to rely on the
relationship test alone will divest the regular courts of their jurisdiction for the sole reason that the
dispute involves a corporation, its directors, officers, or stockholders. We saw that there is no legal
sense in disregarding or minimizing the value of the nature of the transactions which gives rise to the
dispute.

Under the nature of the controversy test, the incidents of that relationship must also be considered for
the purpose of ascertaining whether the controversy itself is intra-corporate.[22] The controversy must
not only be rooted in the existence of an intra-corporate relationship, but must as well pertain to the
enforcement of the parties correlative rights and obligations under the Corporation Code and the
internal and intra-corporate regulatory rules of the corporation. If the relationship and its incidents are
merely incidental to the controversy or if there will still be conflict even if the relationship does not
exist, then no intra-corporate controversy exists.
 The Court then combined the two tests and declared that jurisdiction should be determined by
considering not only the status or relationship of the parties, but also the nature of the question under
controversy.[23] This two-tier test was adopted in the recent case of Speed Distribution, Inc. v. Court of
Appeals:[24]

To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by
the branches of the RTC specifically designated by the Court to try and decide such cases, two elements
must concur: (a) the status or relationship of the parties; and (2) the nature of the question that is the
subject of their controversy.

The first element requires that the controversy must arise out of intra-corporate or partnership relations
between any or all of the parties and the corporation, partnership, or association of which they are
stockholders, members or associates; between any or all of them and the corporation, partnership, or
association of which they are stockholders, members, or associates, respectively; and between such
corporation, partnership, or association and the State insofar as it concerns their individual franchises.
The second element requires that the dispute among the parties be intrinsically connected with the
regulation of the corporation. If the nature of the controversy involves matters that are purely civil in
character, necessarily, the case does not involve an intra-corporate controversy.

Given these standards, we now tackle the question posed for our determination under the specific
circumstances of this case:

Application of the Relationship Test

Is there an intra-corporate relationship between the parties that would characterize the case as an intra-
corporate dispute?

We point out at the outset that while Rodrigo holds shares of stock in Zenith, he holds them in two
capacities: in his own right with respect to the 4,250 shares registered in his name, and as one of the
heirs of Anastacia Reyes with respect to the 136,598 shares registered in her name. What is material in
resolving the issues of this case under the allegations of the complaint is Rodrigos interest as an heir
since the subject matter of the present controversy centers on the shares of stocks belonging to
Anastacia, not on Rodrigos personally-owned shares nor on his personality as shareholder owning these
shares. In this light, all reference to shares of stocks in this case shall pertain to the shareholdings of the
deceased Anastacia and the parties interest therein as her heirs.

Article 777 of the Civil Code declares that the successional rights are transmitted from the moment of
death of the decedent. Accordingly, upon Anastacias death, her children acquired legal title to her
estate (which title includes her shareholdings in Zenith), and they are, prior to the estates partition,
deemed co-owners thereof.[25] This status as co-owners, however, does not immediately and
necessarily make them stockholders of the corporation. Unless and until there is compliance with
Section 63 of the Corporation Code on the manner of transferring shares, the heirs do not become
registered stockholders of the corporation. Section 63 provides:

Section 63. Certificate of stock and transfer of shares. The capital stock of stock corporations shall be
divided into shares for which certificates signed by the president or vice-president, countersigned by the
secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in
accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by
delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person
legally authorized to make the transfer. No transfer, however, shall be valid, except as between the
parties, until the transfer is recorded in the books of the corporation so as to show the names of the
parties to the transaction, the date of the transfer, the number of the certificate or certificates, and the
number of shares transferred. [Emphasis supplied.]

No shares of stock against which the corporation holds any unpaid claim shall be transferable in the
books of the corporation.

Simply stated, the transfer of title by means of succession, though effective and valid between the
parties involved (i.e., between the decedents estate and her heirs), does not bind the corporation and
third parties. The transfer must be registered in the books of the corporation to make the transferee-
heir a stockholder entitled to recognition as such both by the corporation and by third parties.[26]

We note, in relation with the above statement, that in Abejo v. Dela Cruz[27] and TCL Sales Corporation
v. Court of Appeals[28] we did not require the registration of the transfer before considering the
transferee a stockholder of the corporation (in effect upholding the existence of an intra-corporate
relation between the parties and bringing the case within the jurisdiction of the SEC as an intra-
corporate controversy). A marked difference, however, exists between these cases and the present one.

In Abejo and TCL Sales, the transferees held definite and uncontested titles to a specific number of
shares of the corporation; after the transferee had established prima facie ownership over the shares of
stocks in question, registration became a mere formality in confirming their status as stockholders. In
the present case, each of Anastacias heirs holds only an undivided interest in the shares. This interest, at
this point, is still inchoate and subject to the outcome of a settlement proceeding; the right of the heirs
to specific, distributive shares of inheritance will not be determined until all the debts of the estate of
the decedent are paid. In short, the heirs are only entitled to what remains after payment of the
decedents debts;[29] whether there will be residue remains to be seen. Justice Jurado aptly puts it as
follows:

No succession shall be declared unless and until a liquidation of the assets and debts left by the
decedent shall have been made and all his creditors are fully paid. Until a final liquidation is made and
all the debts are paid, the right of the heirs to inherit remains inchoate. This is so because under our
rules of procedure, liquidation is necessary in order to determine whether or not the decedent has left
any liquid assets which may be transmitted to his heirs.[30] [Emphasis supplied.]

Rodrigo must, therefore, hurdle two obstacles before he can be considered a stockholder of Zenith with
respect to the shareholdings originally belonging to Anastacia. First, he must prove that there are
shareholdings that will be left to him and his co-heirs, and this can be determined only in a settlement of
the decedents estate. No such proceeding has been commenced to date. Second, he must register the
transfer of the shares allotted to him to make it binding against the corporation. He cannot demand that
this be done unless and until he has established his specific allotment (and prima facie ownership) of the
shares. Without the settlement of Anastacias estate, there can be no definite partition and distribution
of the estate to the heirs. Without the partition and distribution, there can be no registration of the
transfer. And without the registration, we cannot consider the transferee-heir a stockholder who may
invoke the existence of an intra-corporate relationship as premise for an intra-corporate controversy
within the jurisdiction of a special commercial court.
In sum, we find that insofar as the subject shares of stock (i.e., Anastacias shares) are concerned Rodrigo
cannot be considered a stockholder of Zenith. Consequently, we cannot declare that an intra-corporate
relationship exists that would serve as basis to bring this case within the special commercial courts
jurisdiction under Section 5(b) of PD 902-A, as amended. Rodrigos complaint, therefore, fails the
relationship test.

Application of the Nature of Controversy Test

The body rather than the title of the complaint determines the nature of an action.[31] Our examination
of the complaint yields the conclusion that, more than anything else, the complaint is about the
protection and enforcement of successional rights. The controversy it presents is purely civil rather than
corporate, although it is denominated as a complaint for accounting of all corporate funds and assets.

Contrary to the findings of both the trial and appellate courts, we read only one cause of action alleged
in the complaint. The derivative suit for accounting of the funds and assets of the corporation which are
in the control, custody, and/or possession of the respondent [herein petitioner Oscar] does not
constitute a separate cause of action but is, as correctly claimed by Oscar, only an incident to the action
for determination of the shares of stock of deceased spouses Pedro and Anastacia Reyes allegedly taken
by respondent, its accounting and the corresponding delivery of these shares to the parties brothers and
sisters. There can be no mistake of the relationship between the accounting mentioned in the complaint
and the objective of partition and distribution when Rodrigo claimed in paragraph 10.1 of the complaint
that:

10.1 By refusal of the respondent to account of [sic] his shareholdings in the company, he illegally and
fraudulently transferred solely in his name wherein [sic] the shares of stock of the deceased Anastacia C.
Reyes [which] must be properly collated and/or distributed equally amongst the children including the
complainant Rodrigo C. Reyes herein to their damage and prejudice.

We particularly note that the complaint contained no sufficient allegation that justified the need for an
accounting other than to determine the extent of Anastacias shareholdings for purposes of distribution.

Another significant indicator that points us to the real nature of the complaint are Rodrigos repeated
claims of illegal and fraudulent transfers of Anastacias shares by Oscar to the prejudice of the other heirs
of the decedent; he cited these allegedly fraudulent acts as basis for his demand for the collation and
distribution of Anastacias shares to the heirs. These claims tell us unequivocally that the present
controversy arose from the parties relationship as heirs of Anastacia and not as shareholders of Zenith.
Rodrigo, in filing the complaint, is enforcing his rights as a co-heir and not as a stockholder of Zenith. The
injury he seeks to remedy is one suffered by an heir (for the impairment of his successional rights) and
not by the corporation nor by Rodrigo as a shareholder on record.

More than the matters of injury and redress, what Rodrigo clearly aims to accomplish through his
allegations of illegal acquisition by Oscar is the distribution of Anastacias shareholdings without a prior
settlement of her estate an objective that, by law and established jurisprudence, cannot be done. The
RTC of Makati, acting as a special commercial court, has no jurisdiction to settle, partition, and distribute
the estate of a deceased. A relevant provision Section 2 of Rule 90 of the Revised Rules of Court that
contemplates properties of the decedent held by one of the heirs declares:
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. [Emphasis
supplied.]

Worth noting are this Courts statements in the case of Natcher v. Court of Appeals:[32]

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.

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. [Emphasis supplied.]

That an accounting of the funds and assets of Zenith to determine the extent and value of Anastacias
shareholdings will be undertaken by a probate court and not by a special commercial court is completely
consistent with the probate courts limited jurisdiction. It has the power to enforce an accounting as a
necessary means to its authority to determine the properties included in the inventory of the estate to
be administered, divided up, and distributed. Beyond this, the determination of title or ownership over
the subject shares (whether belonging to Anastacia or Oscar) may be conclusively settled by the probate
court as a question of collation or advancement. We had occasion to recognize the courts authority to
act on questions of title or ownership in a collation or advancement situation in Coca v. Pangilinan[33]
where we ruled:

It should be clarified that whether a particular matter should be resolved by the Court of First Instance
in the exercise of its general jurisdiction or of its limited probate jurisdiction is in reality not a
jurisdictional question. In essence, it is a procedural question involving a mode of practice "which may
be waived."

As a general rule, the question as to title to property should not be passed upon in the testate or
intestate proceeding. That question should be ventilated in a separate action. That general rule has
qualifications or exceptions justified by expediency and convenience.

Thus, the probate court may provisionally pass upon in an intestate or testate proceeding the question
of inclusion in, or exclusion from, the inventory of a piece of property without prejudice to its final
determination in a separate action.

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, the probate court is competent to decide the question of ownership. [Citations omitted.
Emphasis supplied.]

In sum, we hold that the nature of the present controversy is not one which may be classified as an
intra-corporate dispute and is beyond the jurisdiction of the special commercial court to resolve. In
short, Rodrigos complaint also fails the nature of the controversy test.
DERIVATIVE SUIT

Rodrigos bare claim that the complaint is a derivative suit will not suffice to confer jurisdiction on the
RTC (as a special commercial court) if he cannot comply with the requisites for the existence of a
derivative suit. These requisites are:

a. the party bringing suit should be a shareholder during the time of the act or transaction
complained of, the number of shares not being material;

b. the party has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of
directors for the appropriate relief, but the latter has failed or refused to heed his plea; and

c. the cause of action actually devolves on the corporation; the wrongdoing or harm having been or
being caused to the corporation and not to the particular stockholder bringing the suit.[34]

Based on these standards, we hold that the allegations of the present complaint do not amount to a
derivative suit.

First, as already discussed above, Rodrigo is not a shareholder with respect to the shareholdings
originally belonging to Anastacia; he only stands as a transferee-heir whose rights to the share are
inchoate and unrecorded. With respect to his own individually-held shareholdings, Rodrigo has not
alleged any individual cause or basis as a shareholder on record to proceed against Oscar.

Second, in order that a stockholder may show a right to sue on behalf of the corporation, he must allege
with some particularity in his complaint that he has exhausted his remedies within the corporation by
making a sufficient demand upon the directors or other officers for appropriate relief with the
expressed intent to sue if relief is denied.[35] Paragraph 8 of the complaint hardly satisfies this
requirement since what the rule contemplates is the exhaustion of remedies within the corporate
setting:

8. As members of the same family, complainant Rodrigo C. Reyes has resorted [to] and exhausted all
legal means of resolving the dispute with the end view of amicably settling the case, but the dispute
between them ensued.

Lastly, we find no injury, actual or threatened, alleged to have been done to the corporation due to
Oscars acts. If indeed he illegally and fraudulently transferred Anastacias shares in his own name, then
the damage is not to the corporation but to his co-heirs; the wrongful transfer did not affect the capital
stock or the assets of Zenith. As already mentioned, neither has Rodrigo alleged any particular cause or
wrongdoing against the corporation that he can champion in his capacity as a shareholder on
record.[36]

In summary, whether as an individual or as a derivative suit, the RTC sitting as special commercial court
has no jurisdiction to hear Rodrigos complaint since what is involved is the determination and
distribution of successional rights to the shareholdings of Anastacia Reyes. Rodrigos proper remedy,
under the circumstances, is to institute a special proceeding for the settlement of the estate of the
deceased Anastacia Reyes, a move that is not foreclosed by the dismissal of his present complaint.
WHEREFORE, we hereby GRANT the petition and REVERSE the decision of the Court of Appeals dated
May 26, 2004 in CA-G.R. SP No. 74970. The complaint before the Regional Trial Court, Branch 142,
Makati, docketed as Civil Case No. 00-1553, is ordered DISMISSED for lack of jurisdiction.

SO ORDERED.
SECOND DIVISION

[G.R. No. 117417. September 21, 2000]

MILAGROS A. CORTES, petitioner, vs. COURT OF APPEALS and MENANDRO A. RESELVA, respondents.

DECISION

BUENA, J.:

This is a petition for review on certiorari seeking a reversal of the decision dated September 9, 1994 of
the Court of Appeals[1] in C.A.-G.R. SP. No. 33826;

"IN VIEW OF THE FOREGOING, the petition is GIVEN DUE COURSE and the assailed order of October 18,
1993, issued by the respondent court in Special Proceeding No. 90-54955 is hereby SET ASIDE and
declared NULL and VOID. With costs against the private respondent."[2]

and the reinstatement of the order of the probate court, thus:

"WHEREFORE, Menandro Reselva and all those acting for or through him, is/are ordered to vacate
forthwith the house and lot of the estate situated in 173 Ilaw St., Balut, Tondo, Manila, and to deliver to
the executrix Milagros R. Cortes the possession thereof as well as the owner's duplicate certificate of the
title thereof."[3]

The following facts, as found by the Court of Appeals, are undisputed:

"Herein petitioner Menandro A. Reselva, private respondent (petitioner in this petition) Milagros R.
Cortes, and Florante Reselva are brothers and sister and children - heirs of the late spouses Teodoro T.
Reselva and Lucrecia Aguirre Reselva, who died on April 11, 1989 and May 13, 1987, respectively. During
their lifetime, they acquired a property particularly a house and lot consisting of 100 square meters,
more or less, with address at 173 Ilaw St., Balut, Tondo, Manila. As can be gleaned from the records,
Lucrecia Aguirre Reselva died ahead of Teodoro T. Reselva. The latter executed a holographic will which
was probated in this case on July 31, 1991, with Milagros R. Cortes, as the appointed Executrix. After
having been appointed and qualified as Executrix, she filed a motion before respondent probate court
praying that Menandro A. Reselva, the occupant of the property, be ordered to vacate the property at
No. 173 Ilaw St., Balut, Tondo, Manila and turn over to said Executrix the possession thereof (Annex 'D').
This is the motion which the respondent court granted in the assailed order of October 18, 1993."[4]

In the Appellate Court, the Regional Trial Court's order was set aside for having been issued beyond the
latter's limited jurisdiction as a probate court.[5]

The long standing rule is that probate courts, or those in charge of proceedings whether testate or
intestate, cannot adjudicate or determine title to properties claimed to be part of the estate and which
are claimed to belong to outside parties.[6] Stated otherwise, "claims for title to, or right of possession
of, personal or real property, made by the heirs themselves, by title adverse to that of the deceased, or
made by third persons, cannot be entertained by the (probate) court."[7]

In the present case, however, private respondent Menandro A. Reselva, who refused to vacate the
house and lot being eyed as part of the estate of the late Teodoro T. Reselva, cannot be considered an
"outside party" for he is one of the three compulsory heirs of the former. As such, he is very much
involved in the settlement of Teodoro's estate.[8] By way of exception to the above-mentioned rule,
"when the parties are all heirs of the decedent, it is optional upon them to submit to the probate court
the question of title to property."[9] Here, the probate court is competent to decide the question of
ownership. More so, when the opposing parties belong to the poor stratum of society and a separate
action would be most expensive and inexpedient.[10]

In addition, Menandro's claim is not at all adverse to, or in conflict with that of, the decedent since the
former's theory merely advances co-ownership with the latter.[11] In the same way, when the
controversy is whether the property in issue belongs to the conjugal partnership or exclusively to the
decedent, the same is properly within the jurisdiction of the probate court, which necessarily has to
liquidate the conjugal partnership in order to determine the estate of the decedent which is to be
distributed among the heirs.[12]

More importantly, the case at bar falls squarely under Rule 73, Section 2 of the Revised Rules of Court,
thus:

"RULE 73

"SEC. 2. Where estate upon dissolution of marriage. - When the marriage is dissolved by the death of
the husband or wife, the community property shall be inventoried, administered, and liquidated, and
the debts thereof paid, in the testate or intestate proceedings of the deceased spouse. If both spouses
have died, the conjugal partnership shall be liquidated in the testate or intestate proceedings of either."

Hence, in the 1991 case of Vita vs. Montanano we ruled:

"(I)t is not necessary to file a separate proceeding in court for the proper disposition of the estate of
Isidra Montanano. Under Rule 73, Section 2 of the Rules of Court, if both spouses have died, the
conjugal partnership shall be liquidated in the testate or intestate proceedings of either. In the present
case, therefore, the conjugal partnership of Isidra Montanano and Edilberto Vita should be liquidated in
the testate proceedings of the latter."[13]

Consequently, this case before us should be returned to the probate court for the liquidation of the
conjugal partnership of Teodoro and Lucrecia Reselva prior to the settlement of the estate of Teodoro.

WHEREFORE, without reinstating the assailed order of the trial court, the questioned decision of the
Court of Appeals dated September 9, 1994 in CA-G.R. SP No. 33826 is hereby SET ASIDE and the case
REMANDED to the court of origin for further proceedings. No pronouncement as to costs.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Quisumbing, and De Leon, Jr., JJ., concur.

G.R. No. L-23445 June 23, 1966

REMEDIOS NUGUID, petitioner and appellant,

vs.

FELIX NUGUID and PAZ SALONGA NUGUID, oppositors and appellees.

Custodio O. Partade for petitioner and appellant.

Beltran, Beltran and Beltran for oppositors and appellees.

SANCHEZ, J.:

Rosario Nuguid, a resident of Quezon City, died on December 30, 1962, single, without descendants,
legitimate or illegitimate. Surviving her were her legitimate parents, Felix Nuguid and Paz Salonga
Nuguid, and six (6) brothers and sisters, namely: Alfredo, Federico, Remedios, Conrado, Lourdes and
Alberto, all surnamed Nuguid.

On May 18, 1963, petitioner Remedios Nuguid filed in the Court of First Instance of Rizal a holographic
will allegedly executed by Rosario Nuguid on November 17, 1951, some 11 years before her demise.
Petitioner prayed that said will be admitted to probate and that letters of administration with the will
annexed be issued to her.

On June 25, 1963, Felix Nuguid and Paz Salonga Nuguid, concededly the legitimate father and mother of
the deceased Rosario Nuguid, entered their opposition to the probate of her will. Ground therefor, inter
alia, is that by the institution of petitioner Remedios Nuguid as universal heir of the deceased,
oppositors — who are compulsory heirs of the deceased in the direct ascending line — were illegally
preterited and that in consequence the institution is void.

On August 29, 1963, before a hearing was had on the petition for probate and objection thereto,
oppositors moved to dismiss on the ground of absolute preterition.

On September 6, 1963, petitioner registered her opposition to the motion to dismiss.1äwphï1.ñët

The court's order of November 8, 1963, held that "the will in question is a complete nullity and will
perforce create intestacy of the estate of the deceased Rosario Nuguid" and dismissed the petition
without costs.

A motion to reconsider having been thwarted below, petitioner came to this Court on appeal.

1. Right at the outset, a procedural aspect has engaged our attention. The case is for the probate of a
will. The court's area of inquiry is limited — to an examination of, and resolution on, the extrinsic validity
of the will. The due execution thereof, the testatrix's testamentary capacity, and the compliance with
the requisites or solemnities by law prescribed, are the questions solely to be presented, and to be
acted upon, by the court. Said court at this stage of the proceedings — is not called upon to rule on the
intrinsic validity or efficacy of the provisions of the will, the legality of any devise or legacy therein.1

A peculiar situation is here thrust upon us. The parties shunted aside the question of whether or not the
will should be allowed probate. For them, the meat of the case is the intrinsic validity of the will.
Normally, this comes only after the court has declared that the will has been duly authenticated.2 But
petitioner and oppositors, in the court below and here on appeal, travelled on the issue of law, to wit: Is
the will intrinsically a nullity?

We pause to reflect. If the case were to be remanded for probate of the will, nothing will be gained. On
the contrary, this litigation will be protracted. And for aught that appears in the record, in the event of
probate or if the court rejects the will, probability exists that the case will come up once again before us
on the same issue of the intrinsic validity or nullity of the will. Result: waste of time, effort, expense, plus
added anxiety. These are the practical considerations that induce us to a belief that we might as well
meet head-on the issue of the validity of the provisions of the will in question.3 After all, there exists a
justiciable controversy crying for solution.

2. Petitioner's sole assignment of error challenges the correctness of the conclusion below that the will
is a complete nullity. This exacts from us a study of the disputed will and the applicable statute.

Reproduced hereunder is the will:

Nov. 17, 1951

I, ROSARIO NUGUID, being of sound and disposing mind and memory, having amassed a certain amount
of property, do hereby give, devise, and bequeath all of the property which I may have when I die to my
beloved sister Remedios Nuguid, age 34, residing with me at 38-B Iriga, Q.C. In witness whereof, I have
signed my name this seventh day of November, nineteen hundred and fifty-one.

(Sgd.) Illegible

T/ ROSARIO NUGUID

The statute we are called upon to apply in Article 854 of the Civil Code which, in part, provides:

ART. 854. The preterition or omission of one, some, or all of the compulsory heirs in the direct line,
whether living at the time of the execution of the will or born after the death of the testator, shall annul
the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious. ...

Except for inconsequential variation in terms, the foregoing is a reproduction of Article 814 of the Civil
Code of Spain of 1889, which is similarly herein copied, thus —

Art. 814. The preterition of one or all of the forced heirs in the direct line, whether living at the time of
the execution of the will or born after the death of the testator, shall void the institution of heir; but the
legacies and betterments4 shall be valid, in so far as they are not inofficious. ...

A comprehensive understanding of the term preterition employed in the law becomes a necessity. On
this point Manresa comments:

La pretericion consiste en omitar al heredero en el testamento. O no se le nombra siquiera o aun

nombrandole como padre, hijo, etc., no se le instituya heredero ni se le deshereda expresamente ni se
le asigna parte alguna de los bienes, resultando privado de un modo tacito de su derecho a legitima.

Para que exista pretericion, con arreglo al articulo 814, basta que en el testamento omita el testador a
uno cualquiera de aquellos a quienes por su muerte corresponda la herencia forzosa.
Se necesita, pues, a) Que la omision se refiera a un heredero forzoso. b) Que la omision sea completa;
que el heredero forzoso nada reciba en el testamento.

It may now appear trite bat nonetheless helpful in giving us a clear perspective of the problem before
us, to have on hand a clear-cut definition of the word annul:

To "annul" means to abrogate, to make void ... In re Morrow's Estate, 54 A. 342, 343, 204 Pa. 484.6

The word "annul" as used in statute requiring court to annul alimony provisions of divorce decree upon
wife's remarriage means to reduce to nothing; to annihilate; obliterate; blot out; to make void or of no
effect; to nullify; to abolish. N.J.S.A. 2:50 — 38 (now N.J.S. 2A:34-35). Madden vs. Madden, 40 A. 2d 611,
614, 136 N..J Eq. 132.7

ANNUL. To reduce to nothing; annihilate; obliterate; to make void or of no effect; to nullify; to abolish;
to do away with. Ex parte Mitchell, 123 W. Va. 283, 14 S.E. 2d. 771, 774.8

And now, back to the facts and the law. The deceased Rosario Nuguid left no descendants, legitimate or
illegitimate. But she left forced heirs in the direct ascending line her parents, now oppositors Felix
Nuguid and Paz Salonga Nuguid. And, the will completely omits both of them: They thus received
nothing by the testament; tacitly, they were deprived of their legitime; neither were they expressly
disinherited. This is a clear case of preterition. Such preterition in the words of Manresa "anulara
siempre la institucion de heredero, dando caracter absoluto a este ordenamiento referring to the
mandate of Article 814, now 854 of the Civil Code.9 The one-sentence will here institutes petitioner as
the sole, universal heir — nothing more. No specific legacies or bequests are therein provided for. It is in
this posture that we say that the nullity is complete. Perforce, Rosario Nuguid died intestate. Says
Manresa:

En cuanto a la institucion de heredero, se anula. Lo que se anula deja de existir, en todo o en parte? No
se añade limitacion alguna, como en el articulo 851, en el que se expresa que se anulara la institucion de
heredero en cuanto prejudique a la legitima del deseheredado Debe, pues, entenderse que la anulacion
es completa o total, y que este articulo como especial en el caso que le motiva rige con preferencia al
817. 10

The same view is expressed by Sanchez Roman: —

La consecuencia de la anulacion o nulidad de la institucion de heredero por pretericion de uno, varios o
todos los forzosos en linea recta, es la apertura de la sucesion intestada total o parcial. Sera total,
cuando el testador que comete la pretericion, hubiese dispuesto de todos los bienes por titulo universal
de herencia en favor de los herederos instituidos, cuya institucion se anula, porque asi lo exige la
generalidad del precepto legal del art. 814, al determinar, como efecto de la pretericion, el de que
"anulara la institucion de heredero." ... 11

Really, as we analyze the word annul employed in the statute, there is no escaping the conclusion that
the universal institution of petitioner to the entire inheritance results in totally abrogating the will.
Because, the nullification of such institution of universal heir — without any other testamentary
disposition in the will — amounts to a declaration that nothing at all was written. Carefully worded and
in clear terms, Article 854 offers no leeway for inferential interpretation. Giving it an expansive meaning
will tear up by the roots the fabric of the statute. On this point, Sanchez Roman cites the "Memoria
annual del Tribunal Supreme, correspondiente a 1908", which in our opinion expresses the rule of
interpretation, viz:

... El art. 814, que preceptua en tales casos de pretericion la nulidad de la institucion de heredero, no
consiente interpretacion alguna favorable a la persona instituida en el sentido antes expuesto aun
cuando parezca, y en algun caso pudiera ser, mas o menos equitativa, porque una nulidad no significa en
Derecho sino la suposicion de que el hecho o el acto no se ha realizado, debiendo por lo tanto
procederse sobre tal base o supuesto, y consiguientemente, en un testamento donde falte la institucion,
es obligado llamar a los herederos forzosos en todo caso, como habria que llamar a los de otra clase,
cuando el testador no hubiese distribudo todos sus bienes en legados, siendo tanto mas obligada esta
consecuencia legal cuanto que, en materia de testamentos, sabido es, segun tiene declarado la
jurisprudencia, con repeticion, que no basta que sea conocida la voluntad de quien testa si esta voluntad
no aparece en la forma y en las condiciones que la ley ha exigido para que sea valido y eficaz, por lo que
constituiria una interpretacion arbitraria, dentro del derecho positivo, reputar como legatario a un
heredero cuya institucion fuese anulada con pretexto de que esto se acomodaba mejor a la voluntad del
testador, pues aun cuando asi fuese, sera esto razon para modificar la ley, pero no autoriza a una
interpretacion contraria a sus terminos y a los principios que informan la testamentifaccion, pues no
porque parezca mejor una cosa en el terreno del Derecho constituyente, hay razon para convereste
juicio en regla de interpretacion, desvirtuando y anulando por este procedimiento lo que el legislador
quiere establecer. 12

3. We should not be led astray by the statement in Article 854 that, annullment notwithstanding, "the
devises and legacies shall be valid insofar as they are not inofficious". Legacies and devises merit
consideration only when they are so expressly given as such in a will. Nothing in Article 854 suggests
that the mere institution of a universal heir in a will — void because of preterition — would give the heir
so instituted a share in the inheritance. As to him, the will is inexistent. There must be, in addition to
such institution, a testamentary disposition granting him bequests or legacies apart and separate from
the nullified institution of heir. Sanchez Roman, speaking of the two component parts of Article 814,
now 854, states that preterition annuls the institution of the heir "totalmente por la pretericion"; but
added (in reference to legacies and bequests) "pero subsistiendo ... todas aquellas otras disposiciones
que no se refieren a la institucion de heredero ... . 13 As Manresa puts it, annulment throws open to
intestate succession the entire inheritance including "la porcion libre (que) no hubiese dispuesto en
virtud de legado, mejora o donacion. 14

As aforesaid, there is no other provision in the will before us except the institution of petitioner as
universal heir. That institution, by itself, is null and void. And, intestate succession ensues.

4. Petitioner's mainstay is that the present is "a case of ineffective disinheritance rather than one of
preterition". 15 From this, petitioner draws the conclusion that Article 854 "does not apply to the case
at bar". This argument fails to appreciate the distinction between pretention and disinheritance.

Preterition "consists in the omission in the testator's will of the forced heirs or anyone of them, either
because they are not mentioned therein, or, though mentioned, they are neither instituted as heirs nor
are expressly disinherited." 16 Disinheritance, in turn, "is a testamentary disposition depriving any
compulsory heir of his share in the legitime for a cause authorized by law. " 17 In Manresa's own words:
"La privacion expresa de la legitima constituye la desheredacion. La privacion tacita de la misma se
denomina pretericion." 18 Sanchez Roman emphasizes the distinction by stating that disinheritance "es
siempre voluntaria"; preterition, upon the other hand, is presumed to be "involuntaria". 19 Express as
disinheritance should be, the same must be supported by a legal cause specified in the will itself. 20

The will here does not explicitly disinherit the testatrix's parents, the forced heirs. It simply omits their
names altogether. Said will rather than be labeled ineffective disinheritance is clearly one in which the
said forced heirs suffer from preterition.

On top of this is the fact that the effects flowing from preterition are totally different from those of
disinheritance. Preterition under Article 854 of the Civil Code, we repeat, "shall annul the institution of
heir". This annulment is in toto, unless in the will there are, in addition, testamentary dispositions in the
form of devises or legacies. In ineffective disinheritance under Article 918 of the same Code, such
disinheritance shall also "annul the institution of heirs", put only "insofar as it may prejudice the person
disinherited", which last phrase was omitted in the case of preterition. 21 Better stated yet, in
disinheritance the nullity is limited to that portion of the estate of which the disinherited heirs have
been illegally deprived. Manresa's expressive language, in commenting on the rights of the preterited
heirs in the case of preterition on the one hand and legal disinheritance on the other, runs thus:
"Preteridos, adquiren el derecho a todo; desheredados, solo les corresponde un tercio o dos tercios, 22
el caso. 23
5. Petitioner insists that the compulsory heirs ineffectively disinherited are entitled to receive their
legitimes, but that the institution of heir "is not invalidated," although the inheritance of the heir so
instituted is reduced to the extent of said legitimes. 24

This is best answered by a reference to the opinion of Mr. Chief Justice Moran in the Neri case
heretofore cited, viz:

But the theory is advanced that the bequest made by universal title in favor of the children by the
second marriage should be treated as legado and mejora and, accordingly, it must not be entirely
annulled but merely reduced. This theory, if adopted, will result in a complete abrogation of Articles 814
and 851 of the Civil Code. If every case of institution of heirs may be made to fall into the concept of
legacies and betterments reducing the bequest accordingly, then the provisions of Articles 814 and 851
regarding total or partial nullity of the institution, would. be absolutely meaningless and will never have
any application at all. And the remaining provisions contained in said article concerning the reduction of
inofficious legacies or betterments would be a surplusage because they would be absorbed by Article
817. Thus, instead of construing, we would be destroying integral provisions of the Civil Code.

The destructive effect of the theory thus advanced is due mainly to a failure to distinguish institution of
heirs from legacies and betterments, and a general from a special provision. With reference to article
814, which is the only provision material to the disposition of this case, it must be observed that the
institution of heirs is therein dealt with as a thing separate and distinct from legacies or betterments.
And they are separate and distinct not only because they are distinctly and separately treated in said
article but because they are in themselves different. Institution of heirs is a bequest by universal title of
property that is undetermined. Legacy refers to specific property bequeathed by a particular or special
title. ... But again an institution of heirs cannot be taken as a legacy. 25

The disputed order, we observe, declares the will in question "a complete nullity". Article 854 of the Civil
Code in turn merely nullifies "the institution of heir". Considering, however, that the will before us solely
provides for the institution of petitioner as universal heir, and nothing more, the result is the same. The
entire will is null.

Upon the view we take of this case, the order of November 8, 1963 under review is hereby affirmed. No
costs allowed. So ordered.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P. and Zaldivar, JJ., concur
THIRD DIVISION

ANITA REYESMESUGAS, G.R. No. 174835

Petitioner,

-versus

ALEJANDRO AQUINO REYES,

Respondent. Promulgated:

March 22, 2010

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

DECISION

CORONA, J.:

This is a petition for review on certiorari[1] seeking to reverse the June 23, 2006 and September 21,
2006 orders[2] of the Regional Trial Court of Makati (RTC), Branch 62 denying the petitioners motion to
cancel a notice of lis pendens.

Petitioner Anita Reyes-Mesugas and respondent Alejandro A. Reyes are the children of Lourdes Aquino
Reyes and Pedro N. Reyes. Lourdes died intestate, leaving to her heirs, among others, three parcels of
land, including a lot covered by Transfer Certificate of Title (TCT) No. 24475.

On February 3, 2000, respondent filed a petition for settlement of the estate of Lourdes,[3] praying for
his appointment as administrator due to alleged irregularities and fraudulent transactions by the other
heirs. Petitioner, her father Pedro and Arturo, a sibling of the petitioner, opposed the petition.

On August 30, 2000, a compromise agreement[4] was entered into by the parties whereby the estate of
Lourdes was partitioned. A decision[5] dated September 13, 2000 was rendered by the RTC pursuant to
the said compromise agreement. The compromise agreement with respect to TCT No. 24475 is
reproduced below:

5. That the parties hereto hereby agree to recognize, acknowledge and respect:

5.1. the improvements found on the parcel of land covered under TCT No. 24475 of the Registry of
Deeds of Rizal consisting of two lots namely Lot 4-A and Lot 4-B of the new survey with two (2)
residential houses presently occupied and possessed as owners thereof by Antonio Reyes and Anita
Reyes-Mesugas to constitute part of their shares in the estate of Lourdes Aquino Reyes;

5.2 further, the improvement consisting of a bakery-store under lease to a third party. The proceeds
thereof shall be shared by Antonio Reyes and Pedro N. Reyes;

5.3 that the expenses for the partition and titling of the property between Antonio Reyes and Anita
Reyes-Mesugas shall be equally shared by them.

On December 7, 2004, petitioner filed a motion to cancel lis pendens annotation for TCT No. 24475[6] in
the RTC in view of the finality of judgment in the settlement of the estate. Petitioner argued that the
settlement of the estate proceeding had terminated; hence, the annotation of lis pendens could already
be cancelled since it had served its purpose.

Respondent opposed the motion and claimed that the parties, in addition to the compromise
agreement, executed side agreements which had yet to be fulfilled. One such agreement was executed
between petitioner[7] and respondent granting respondent a one-meter right of way on the lot covered
by TCT No. 24475. However, petitioner refused to give the right of way and threatened to build a
concrete structure to prevent access. He argued that, unless petitioner permitted the inscription of the
right of way on the certificate of title pursuant to their agreement, the notice of lis pendens in TCT No.
24475 must remain.

In its order[8] dated January 26, 2006, the RTC denied the motion to cancel the notice of lis pendens
annotation for lack of sufficient merit. It found that the cancellation of the notice of lis pendens was
unnecessary as there were reasons for maintaining it in view of petitioner's non-compliance with the
alleged right of way agreement between the parties. It stated that:

A careful perusal of the compromise agreement dated September 13, 2000 revealed that one of the
properties mentioned is a parcel of land with improvements consisting [of] two hundred nine (209)
square meters situated in Makati covered under TCT No. 24475 of the Registry of Deeds [of] Rizal in the
name of Pedro N. Reyes married to Lourdes Aquino Reyes and form[s] part of the notarized right of way
agreement on TCT No. 24475, considering that the movant Anita Reyes is still bound by the right of way
agreement, the same should be complied with before the cancellation of the subject annotation.[9]
(Citations omitted)

Petitioner filed a notice of appeal.[10] Because the denial of a motion to cancel the notice of lis pendens
annotation was an interlocutory order, the RTC denied the notice of appeal as it could not be appealed
until the judgment on the main case was rendered.[11] A motion for reconsideration was filed by
petitioner but the same was also denied.[12]

Hence, this petition.

We find for petitioner.

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid litigation or
put an end to one already commenced.[13] Once submitted to the court and stamped with judicial
approval, it becomes more than a mere private contract binding upon the parties; having the sanction of
the court and entered as its determination of the controversy, it has the force and effect of any
judgment.[14]

Consequently, a judgment rendered in accordance with a compromise agreement is immediately

executory as there is no appeal from such judgment.[15] When both parties enter into an agreement to
end a pending litigation and request that a decision be rendered approving said agreement, such action
constitutes an implied waiver of the right to appeal against the said decision.[16]

In this instance, the case filed with the RTC was a special proceeding for the settlement of the estate of
Lourdes. The RTC therefore took cognizance of the case as a probate court.
 Settled is the rule that a probate court is a tribunal of limited jurisdiction. It acts on matters pertaining
to the estate but never on the rights to property arising from the contract.[17] It approves contracts
entered into for and on behalf of the estate or the heirs to it but this is by fiat of the Rules of Court.[18]
It is apparent therefore that when the RTC approved the compromise agreement on September 13,
2000, the settlement of the estate proceeding came to an end.

Moreover, a notice of lis pendens may be cancelled when the annotation is not necessary to protect the
title of the party who caused it to be recorded.[19] The compromise agreement did not mention the
grant of a right of way to respondent. Any agreement other than the judicially approved compromise
agreement between the parties was outside the limited jurisdiction of the probate court. Thus, any
other agreement entered into by the petitioner and respondent with regard to a grant of a right of way
was not within the jurisdiction of the RTC acting as a probate court. Therefore, there was no reason for
the RTC not to cancel the notice of lis pendens on TCT No. 24475 as respondent had no right which
needed to be protected. Any alleged right arising from the side agreement on the right of way can be
fully protected by filing an ordinary action for specific performance in a court of general jurisdiction.

More importantly, the order of the probate court approving the compromise had the effect of directing
the delivery of the residue of the estate of Lourdes to the persons entitled thereto under the
compromise agreement. As such, it brought to a close the intestate proceedings[20] and the probate
court lost jurisdiction over the case, except only as regards to the compliance and the fulfillment by the
parties of their respective obligations under the compromise agreement.

Having established that the proceedings for the settlement of the estate of Lourdes came to an end
upon the RTCs promulgation of a decision based on the compromise agreement, Section 4, Rule 90 of
the Rules of Court provides:

Sec. 4. Recording the order of partition of estate. - Certified copies of final orders and judgments of the
court relating to the real estate or the partition thereof shall be recorded in the registry of deeds of the
province where the property is situated.

In line with the recording of the order for the partition of the estate, paragraph 2, Section 77 of
Presidential Decree (PD) No. 1529[21] provides:

Section 77. Cancellation of Lis Pendens xxx xxx xxx

xxx xxx

At any time after final judgment in favor of the defendant, or other disposition of the action such as to
terminate finally all rights of the plaintiff in and to the land and/or buildings involved, in any case in
which a memorandum or notice of lis pendens has been registered as provided in the preceding section,
the notice of lis pendens shall be deemed cancelled upon the registration of a certificate of the clerk of
court in which the action or proceeding was pending stating the manner of disposal thereof. (emphasis
supplied)

Thus, when the September 13, 2000 decision was recorded in the Registry of Deeds of Rizal pursuant to
Section 4, Rule 90 of the Rules of Court, the notice of lis pendens inscribed on TCT No. 24475 was
deemed cancelled by virtue of Section 77 of PD No. 1529.
WHEREFORE, the petition is hereby GRANTED. The Orders of the Regional Trial Court of Makati, Branch
62 dated June 23, 2006 and September 21, 2006 are SET ASIDE. The notice of lis pendens annotated on
TCT No. 24475 is hereby declared CANCELLED pursuant to Section 77 of the PD No. 1529 in relation to
Section 4, Rule 90 of the Rules of Court.

SO ORDERED.
Republic of the Philippines

Supreme Court

Baguio City

SECOND DIVISION

LEO C. ROMERO and DAVID AMANDO C. ROMERO,

Petitioners,

- versus -

HON. COURT OF APPEALS, AURORA C. ROMERO and VITTORIO C. ROMERO,

Respondents.

G.R. No. 188921

DECISION

SERENO, J.:

This is a Petition filed under Rule 45 of the 1997 Rules of Civil Procedure, praying for the reversal of the
Decision[1] of the Court of Appeals dated 14 April 2009 and the subsequent Resolution[2] dated 21 July
2009.

The Court of Appeals (CA) dismissed the Petition for Certiorari filed by petitioners which alleged grave
abuse of discretion in the Resolutions dated 14 December 2007 and 29 January 2008 issued by Judge
Maria Susana T. Baua in her capacity as presiding judge of the Regional Trial Court (RTC) of Lingayen,
Pangasinan. The said

Resolutions dismissed petitioners complaint against private respondents Aurora C. Romero and Vittorio
C. Romero.

Petitioners allege that upon their fathers death on 18 October 1974, their mother, respondent Aurora
Romero, was appointed as legal guardian who held several real and personal properties in trust for her
children.[3] Since that year until the present, she continues to be the administrator of the properties,
businesses, and investments comprising the estate of her late husband.

Sometime in 2006, petitioners Leo and Amando discovered that several Deeds of Sale were registered
over parcels of land that are purportedly conjugal properties of their parents. These included the
following real and personal properties:

1. A parcel of land identified as Lot 3-G of Subdivision Plan Psd-67995 situated in Barrio Pogon-
lomboy, Mangatarem, Pangasinan, containing an area of one thousand square meters under Declaration
of Real Property No. 16142 and Transfer Certificate of Title (TCT) No. 290013 in the name of Vittorio C.
Romero. A warehouse stands on the lot, covered by Declaration of Real Property No. 16142.
2. A parcel of land identified as Lot 3-D of Subdivision Plan Psd-67995 situated in Barrio Pogon-
lomboy, Mangatarem, Pangasinan, containing an area of one thousand square meters under Declaration
of Real Property No. 405, and TCT No. 77223 in the name of Spouses Dante Y. Romero and Aurora Cruz-
Romero.

3. A parcel of land identified as Lot 3-E of Subdivision Plan Psd-67995 situated in Barrio Pogon-lomboy,
Mangatarem, Pangasinan, containing an area of one thousand square meters under Declaration of

Real Property No. 407 and TCT No. 77224 in the names of Spouses Dante Y. Romero and Aurora Cruz-
Romero.

4. A parcel of land identified as Lot 3-H of Subdivision Plan Psd-67995 situated in Barrio Pogon-
lomboy, Mangatarem, Pangasinan, containing an area of one thousand square meters under Declaration
of Real Property No. 406, and TCT No. 77225 in the name of Spouses Dante Y. Romero and Aurora Cruz-
Romero.

5. A parcel of land identified as Lot 3815-A of Subdivision Plan Psd-227224 situated in Barrio Pogon-
lomboy, Mangatarem, Pangasinan, containing an area of four hundred ninety-four square meters under
TCT No. 113514 in the name of Aurora Cruz vda. de Romero.

6. A parcel of land located in Barangay Burgos, Mangatarem, Pangasinan, containing an area of more
or less three hundred seventy-nine square meters under Declaration of Real Property No. 16136. It is
not yet registered under Act 496 or the Old Spanish Mortgage Law, but registrable under Act 3344 as
amended. The improvement thereon, a building classified as a warehouse, is covered by Declaration of
Real Property No. 16136 A.

7. A parcel of land located in Brgy. Burgos, Mangatarem, Pangasinan, containing an area of more or
less two hundred four square meters under Declaration of Real Property No. 16139. It is not yet
registered under Act 496 or Act 3344 as amended. The improvement thereon is covered by Declaration
of Real Property No. 16140.

8. A parcel of land located in Brgy. Pogon-lomboy, Mangatarem, Pangasinan, containing an area of

more or less eleven thousand six hundred forty-six square meters under Declaration of Real Property
No. 724 and TCT No. 284241 in the name of Aurora P. Cruz vda. de Romero.

9. A parcel of land located in Brgy. Pogon-lomboy, Mangatarem, Pangasinan, containing an area of

more or less one thousand two hundred fifty-six square meters under Declaration of Real Property No.
725 and TCT No. 284242 in the name of Aurora P. Cruz vda. de Romero.[4]

Petitioners claim that sometime in August of 2005, their brother Vittorio through fraud,
misrepresentation and duress succeeded in registering the above-mentioned properties in his name
through of Deeds of Sale executed by their mother, Aurora.[5] Vittorio allegedly employed force and
threat upon her, and even administered drugs that rendered her weak and vulnerable. Thus, Aurora
signed the Deeds of Sale without reading or knowing their contents.
On 18 December 2006, petitioners filed a Complaint for Annulment of Sale, Nullification of Title, and
Conveyance of Title (Amended)[6] against private respondents Aurora C. Romero and Vittorio C.
Romero. Respondents filed their Answer, arguing that the properties in question were acquired long
after the death of their father, Judge Dante Romero; hence, the properties cannot be considered
conjugal. They allege that the lots covered by TCT Nos. 290010, 290011, 113514, and Tax Declaration
Nos. 16136 and 11639 were paraphernal properties of Aurora which she had mortgaged. Vittorio
purportedly had to shell out substantial amounts in order to redeem them. The lots covered by TCT Nos.
77223, 77224, and 77225 were sold by Aurora herself as attorney-in-fact of her children on 23
November 2006, since her authority to do so had never been revoked or modified.

On 14 December 2007, the RTC rendered its Resolution dismissing petitioners complaint, stating thus:

xxx(T)he case under Special Proceedings No. 5185 remains pending in that no distribution of the assets
of the estate of the late Dante Y. Romero, nor a partition, has been effected among his compulsory
heirs. Thus, the contending claims of plaintiffs and defendants in this case could not be adjudicated nor
passed upon by this Court without first getting a definitive pronouncement from the intestate court as
to the share of each of the heirs of the late Dante Y. Romero in his estate.

Even the claim of defendant Aurora C. Romero that some of the properties being claimed by plaintiffs in
this case are her own, the same being paraphernal, is an issue which must be taken up and established
in the intestate proceedings.[7] (Emphasis supplied.)

The RTC denied their Motion for Reconsideration, citing Section 3, Rule 87 of the Rules of Court which
bars an heir or a devisee from maintaining an action to recover the title or possession of lands until such
lands have actually been assigned. The court ruled that plaintiffs must first cause the termination of
Special Proceedings No. 5185 to its logical conclusion before this case could be entertained by the
Court.[8]

Alleging grave abuse of discretion on the part of the trial court in rendering the said Resolutions,
petitioners filed for certiorari under Rule 65 with the CA. On 14 April 2009, the CA rendered the assailed
judgment dismissing the Petition, ruling that the properties involved in this case are part of the estate
left to the heirs of Judge Romero, the partition of which is already subject of an intestate proceeding
filed on 6 January 1976 in the then Court of First Instance (CFI).[9] The CA based its judgment on the
findings of the RTC that the inventory of the estate of Judge Romero submitted to the CFI included the
same parties, properties, rights and interests as in the case before it.

Petitioners now come to us on a Rule 45 Petition, arguing that the probate court may rule on issues
pertaining to title over property only in a provisional capacity. They assert that the CA erred in
dismissing their appeal, just because the intestate proceeding has not yet terminated. Petitioners, as
heirs, are purportedly allowed to exercise their option of filing a separate civil action in order to protect
their interests.

Thus, the singular issue in the case at bar is whether or not petitioners in this case may file a separate
civil action for annulment of sale and reconveyance of title, despite the pendency of the settlement
proceedings for the estate of the late Judge Dante Y. Romero.
Ruling of the Court

The probate court has jurisdiction to determine the issues in the present case

Petitioners assert that the jurisdiction of the RTC sitting as a probate or intestate court relates only to
matters having to do with the settlement of the estate of deceased persons or the appointment of
executors, but does not extend to the determination of questions of ownership that arise during the
proceedings.[10] They cite Ongsingco v. Tan,[11] Baybayan v. Aquino[12] and several cases which state
that when questions arise as to ownership of property alleged to be part of the estate of a deceased
person, but claimed by some other person to be his property, not by virtue of any right of inheritance
from the deceased but by title adverse to that of the deceased and his estate, the intestate court has no
jurisdiction to adjudicate these questions. Petitioners conclude that the issue of ownership of the
properties enumerated in their Petition and included in the inventory submitted by respondent Aurora
Romero to the intestate court, must be determined in a separate civil action to resolve title.[13]

The rulings in Ongsingco and Baybayan are wholly inapplicable, as they both arose out of facts different
from those in the case at bar. Baybayan involved a summary settlement for the estate of the decedent,
in which a parcel of land representing the share of decedents nephews and nieces was already covered
by a TCT under the name of a third party. To defeat the writ of partition issued by the probate court, the
third party, petitioners Baybayan et al., had to file a separate civil action for quieting of their title and for
damages. The issue before the Court then devolved upon the propriety of the probate courts order to
amend the Complaint for quieting of title before the regular court. More importantly, Baybayan
pertained to a civil action involving third parties who were not heirs, and not privy to the intestate
proceedings in the probate court. The present action was instituted precisely by heirs of Judge Romero,
against their brother, who is also an heir, and their mother, who is the administrator of the estate.

In Coca v. Borromeo,[14] this Court allowed the probate court to provisionally pass upon the issue of
title, precisely because the only interested parties are all heirs to the estate, subject of the proceeding,
viz:

It should be clarified that whether a particular matter should be resolved by the Court of First Instance
in the exercise of its general jurisdiction or of its limited probate jurisdiction is in reality not a
jurisdictional question. In essence, it is a procedural question involving a mode of practice "which may
be waived."

As a general rule, the question as to title to property should not be passed upon in the testate or
intestate proceeding. That question should be ventilated in a separate action. That general rule has
qualifications or exceptions justified by expediency and convenience.

Thus, the probate court may provisionally pass upon in an intestate or testate proceeding the question
of inclusion in, or exclusion from, the inventory of a piece of property without prejudice to its final
determination in a separate action.

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.
We hold that the instant case may be treated as an exception to the general rule that questions of title
should be ventilated in a separate action.

Here, the probate court had already received evidence on the ownership of the twelve-hectare portion
during the hearing of the motion

for its exclusion from (the) inventory. The only interested parties are the heirs who have all appeared in
the intestate proceeding.[15] (Citations omitted.)

While it is true that a probate courts determination of ownership over properties which may form part
of the estate is not final or ultimate in nature, this rule is applicable only as between the representatives
of the estate and strangers thereto. Indeed, as early as Bacquial v. Amihan,[16] the court stated thus:

xxx The rulings of this court have always been to the effect that in the special proceeding for the
settlement of the estate of a deceased person, persons not heirs, intervening therein to protect their
interests are allowed to do so protect the same, but not for a decision on their action. In the case of In
re Estate of the deceased Paulina Vasquez Vda. de Garcia, Teresa Garcia vs. Luisa Garcia, et al., 67 Phil.,
353, this court held:

A court which takes cognizance of testate or intestate proceedings has power and jurisdiction to
determine whether or not the properties included therein or excluded therefrom belong prima facie to
the deceased, although such a determination is not final or ultimate in nature, and without prejudice to
the right of interested parties, in a proper action, to raise the question on the ownership or existence of
the right or credit.

To this same effect are rulings in various states of the United States.

* * * That the probate court is without jurisdiction to try the title to property as between the
representatives of an estate and strangers thereto is too well established by the authorities to require
argument.

There is also authority abroad that where the court is without jurisdiction to determine questions of
title, as for example, as between the estate and persons claiming adversely, its orders and judgments
relating to the sale do not render the issue of title res judicata.[17] (Citations omitted, emphasis
supplied.)

In any case, there is no merit to petitioners claim that the issues raised in the case at bar pertain to title
and ownership and therefore need to be ventilated in a separate civil action. The issue before the court
is not really one of title or ownership, but the determination of which particular properties should be
included in the inventory of the estate. In Civil Case No. 18757, the RTC has listed the properties alleged
by petitioners to have been conjugal properties of their parents and, therefore, part of the estate that
was illegally sold to the respondent. Some of these real properties identified seem to be the same real
properties that form part of the inventory of the estate in the intestate proceedings.[18]

Not only do petitioners assert their legal interest as compulsory heirs, they also seek to be the owners,
pro indiviso, of the said properties. To anchor their claim, they argue that the properties are conjugal in
nature and hence form part of their inheritance. For his defense, Vittorio contends that the lots are the
paraphernal properties of Aurora that she had mortgaged, and that Vittorio subsequently redeemed.
In Bernardo v. Court of Appeals,[19] the Supreme Court declared that the determination of whether a
property is conjugal or paraphernal for purposes of inclusion in the inventory of the estate rests with the
probate court:

xxx (T)he jurisdiction to try controversies between heirs of a deceased person regarding the ownership
of properties alleged to belong to his estate, has been recognized to be vested in probate courts. This is
so because the purpose of an administration proceeding is the liquidation of the estate and distribution
of the residue among the heirs and legatees. Liquidation means determination of all the assets of the
estate and payment of all the debts and expenses. Thereafter, distribution is made of the decedent's
liquidated estate among the persons entitled to succeed him. The proceeding is in the nature of an
action of partition, in which each party is required to bring into the mass whatever community property
he has in his possession. To this end, and as a necessary corollary, the interested parties may introduce
proofs relative to the ownership of the properties in dispute. All the heirs who take part in the
distribution of the decedent's estate are before the court, and subject to the jurisdiction thereof, in all
matters and incidents necessary to the complete settlement of such estate, so long as no interests of
third parties are affected.

In the case now before us, the matter in controversy is the question of ownership of certain of the
properties involved whether they belong to the conjugal partnership or to the husband exclusively. This
is a matter properly within the jurisdiction of the probate court which necessarily has to liquidate the
conjugal partnership in order to determine the estate of the decedent which is to be distributed among
his heirs who are all parties to the proceedings.[20] xxx (Emphasis supplied.)

In the present case, petitioners assume that the properties subject of the allegedly illegal sale are
conjugal and constitute part of their share in the estate. To date, there has been no final inventory of
the estate or final order adjudicating the shares of the heirs. Thus, only the probate court can
competently rule on whether the properties are conjugal and form part of the estate. It is only the
probate court that can liquidate the conjugal partnership and distribute the same to the heirs, after the
debts of the estate have been paid.

Section 3, Rule 87 bars petitioners from filing the present action

Petitioners next contend that even if the probate court has the power to rule on their Complaint, the
submission of the issues in this case to the probate court is merely optional, and not mandatory upon
them. Hence, they argue, they still have the right to bring these issues in a separate civil action, if they
so choose. They argue further that Section 3, Rule 87 of the Revised Rules of Court is not applicable to
the present case.

The said provision states that:

Sec. 3. Heir may not sue until share assigned. When an executor or administrator is appointed and
assumes the trust, no action to recover the title or possession of lands or for damages done to such
lands shall be maintained against him by an heir or devisee until there is an order of the court assigning
such lands to such heir or devisee or until the time allowed for paying debts has expired.
Petitioners believe that the above rule is subject to certain exceptions. They invoke the doctrine that
while heirs have no standing in court to sue for the recovery of property of the estate represented by an
administrator, these heirs may maintain such action if the administrator is unwilling to bring the suit, or
has allegedly participated in the act complained of.

On this contention, petitioners theory must again fail. There is nothing on the record that would prove
that Aurora defied the orders of the probate court or entered into sale agreements in violation of her
trust. In fact, petitioners are really accusing a co-heir, their brother Vittorio, of having acquired certain
properties which they allege to be properties of their parents.

Even if we assume the property to be conjugal and thus, part of the estate, Aurora Romeros acts as the
administrator of the estate are subject to the sole jurisdiction of the probate court. In Acebedo v.
Abesamis,[21] the Court stated:

In the case of Dillena vs. Court of Appeals, this Court made a pronouncement that it is within the
jurisdiction of the probate court to approve the sale of properties of a deceased person by his
prospective heirs before final adjudication. Hence, it is error to say that this matter should be threshed
out in a separate action.

The Court further elaborated that although the Rules of Court do not specifically state that the sale of an
immovable property belonging to an estate of a decedent, in a special proceeding, should be made with
the approval of the court, this authority is necessarily included in its capacity as a probate court.[22]

Again, petitioners do not pose issues pertaining to title or ownership. They are, in effect, questioning the
validity of the sales made by the administrator, an issue that can only be properly threshed out by the
probate court. Paragraph 13 of petitioners Complaint alleges as follows:

13. The purported transfers and sales executed by Defendant Aurora C. Romero to and in favor of
Defendant Vittorio C. Romero are nullities since all were simulated, entered into without the intent and
volition of Defendant Aurora C. Romero, attended by force, intimidation, duress and fraud and not
supported with any valid or sufficient consideration and with the sole depraved intentions of depriving
the other

compulsory heirs of the late Judge Dante Y. Romero of their rightful share in the estate.[23] (Emphasis
omitted.)

Indeed, implicit in the requirement for judicial approval of sales of property under administration is the
recognition that the probate court has the power to rescind or nullify the disposition of a property under
administration that was effected without its authority.[24] That petitioners have the prerogative of
choosing where to file their action for nullification whether with the probate court or the regular court is
erroneous. As held in Marcos, II v. Court of Appeals:

xxx (T)he authority of the Regional Trial Court, sitting, albeit with limited jurisdiction, as a probate court
over the estate of deceased individual, is not a trifling thing. The court's jurisdiction, once invoked, and
made effective, cannot be treated with indifference nor should it be ignored with impunity by the very
parties invoking its authority.
In testament to this, it has been held that it is within the jurisdiction of the probate court to approve the
sale of properties of a deceased person by his prospective heirs before final adjudication; to determine
who are the heirs of the decedent; the recognition of a natural child; the status of a woman claiming to
be the legal wife of the decedent; the legality of disinheritance of an heir by the testator; and to pass
upon the validity of a waiver of hereditary rights.[25] (Citations omitted.)

Thus, the validity of the sales made by Aurora, allegedly orchestrated by petitioners co-heir, Vittorio, can
only be determined by the probate court, because it is the probate court which is empowered to
identify the nature of the property, and that has jurisdiction over Auroras actions and dispositions as
administrator. In Peaverde v. Peaverde,[26] the Court even adjudged the petitioners guilty of forum-
shopping for filing a separate civil action despite the pendency of the said petitioners own case seeking
that letters of administration be granted to them. Similar to the case at bar, the petitioners in Peaverde
also sought the annulment of titles in the name of their co-heir:

The two cases filed by petitioners are: (1) Sp. Proc. No. Q-94-19471, which seeks letters of
administration for the estate of Mariano Peaverde; and (2) Civil Case No. Q-95-24711, which seeks the
annulment of the Affidavit of Self-Adjudication executed by Mariano Peaverde and the annulment of
titles in his name as well as the reopening of the distribution of his estate.

Evidently, in filing Sp. Proc. No. Q-94-19471, petitioners sought to share in the estate of Mariano,
specifically the subject land previously owned in common by Mariano and his wife, Victorina.This is also
what they hoped to obtain in filing Civil Case No. Q-95-24711.

Indeed, a petition for letters of administration has for its object the ultimate distribution and partition of
a decedent's estate. This is also manifestly sought in Civil Case No. Q-95-24711, which precisely calls for
the "Reopening of Distribution of Estate" of Mariano Peaverde. In both cases, petitioners would have to
prove their right to inherit from the estate of Mariano Peaverde, albeit indirectly, as heirs of Mariano's
wife, Victorina.

Under the circumstances, petitioners are indeed guilty of forum-shopping.

xxx xxx xxx

In the case at bar, it cannot be denied that the parties to Sp. Proc. No. Q-94-19471 and Civil Case No. Q-
95-24711 are identical. There is also no question that the rights asserted by petitioners in both cases are
identical, i.e., the right of succession to the estate of their aunt, Victorina, wife of Mariano. Likewise, the
reliefs prayed for --- to obtain their share in the estate of Mariano --- are the same, such relief being
founded on the same facts ---their relationship to Mariano's deceased wife, Victorina.[27]

WHEREFORE, the instant Petition is DENIED. As the properties herein are already subject of an intestate
proceeding filed on 6 January 1976, the 14 April 2009 judgment of the Court of Appeals in CA-G.R. SP
No. 104025 finding no grave abuse of discretion on the part of the RTC is AFFIRMED.

SO ORDERED.
THIRD DIVISION

ELEUTERIO RIVERA, G.R. No. 189697

as Administrator of the Intestate

Estate of Rosita L. Rivera-Ramirez,

Petitioner, Present:

VELASCO, JR., J., Chairperson,

- versus -

RAYMOND RAMIREZ, Promulgated:

Respondents.

June 27, 2012

DECISION

ABAD, J.:

This case is about a courts adjudication of non-issues and the authority of the administrator to examine
and secure evidence from persons having knowledge of properties allegedly belonging to the decedents
estate.

The Facts and the Case

The spouses Adolfo Ramirez (Adolfo) and Rosita Rivera (Rosita) were married in 1942. Their only child
died in infancy. They acquired during their lifetime the Sta. Teresita General Hospital and other
properties. Rosita died in September 1990, followed by her husband Adolfo in December 1993.

On February 7, 1995 petitioner Eleuterio P. Rivera (Eleuterio) filed a petition for issuance of letters of
administration with the Regional Trial Court (RTC) of Quezon City covering the estate of Rosita, who
allegedly died without a will and with no direct ascendants or descendants.[1] Eleuterio claimed[2] that
he was Rositas nephew, being the son of her brother Federico. Eleuterio submitted to the intestate
court a list of the names of the decedents other nephews and nieces all of whom expressed conformity
to Eleuterios appointment as administrator of her estate.

On March 28, 1995 the RTC issued letters of administration appointing Eleuterio as Rositas estate
administrator.[3] On September 6, 1995 Eleuterio submitted an initial inventory of her properties. On
April 18, 1996 he filed in his capacity as administrator a motion with the court to compel the
examination and production of documents relating to properties believed to be a part of her estate,
foremost of which was the Sta. Teresita General Hospital that respondent Robert Ramirez (Robert) had
been managing.[4] Robert claims, together with Raymond Ramirez (Raymond) and Lydia Ramirez (Lydia),
that they were children of Adolfo by another woman. Robert opposed the issuance of the subpoena.
On joint motion of the parties, however, the RTC issued an order on March 26, 1998, suspending the
proceedings in the case pending the resolution of a separate case involving the properties of the
estate.[5] Four years later or on May 16, 2002 Eleuterio, as administrator of Rositas estate, moved for
the revival of the proceedings and requested anew the production and examination of documents in
Roberts possession relating to Rositas estate. The RTC apparently never got to act on the motion.

Meantime, on March 25, 2005 administrator Eleuterio moved for the joint settlement in the same case
of the estates of Rosita and her husband, Adolfo[6] considering that the spouses properties were
conjugal. Eleuterio expressed willingness to co-administer the late spouses estate with Adolfos heirs,
namely, Raymond, Robert, and Lydia Ramirez. Robert agreed to the joint settlement of the estate of the
deceased spouses but insisted that the court also probate the deceased Adolfos will of October 10, 1990
which Robert presented.

As a side issue, Robert initially retained the services of Atty. Antonio Pacheo to represent him in the
estate case. The lawyer had previously counseled for the late Adolfo and the hospital. But Robert and
Atty. Pacheo soon had a parting of ways, resulting in the dismissal of the lawyer. Raymond, who did not
see eye to eye with his brother Robert, subsequently retained the services of Atty. Pacheo to represent
him in the case. This created an issue because Robert wanted the lawyer inhibited from the case
considering that the latter would be working against the interest of a former client.

On July 17, 2006 Eleuterio, as administrator of Rositas estate, reiterated his motion to compel
examination and production of the hospitals documents in Roberts possession. On February 12, 2007
the RTC granted the administrators motion and ordered Robert to bring to court the books of account,
financial statements, and other documents relating to the operations of the Sta. Teresita General
Hospital. The RTC also declined to inhibit Atty. Pacheo as Raymonds counsel. Robert moved to quash the
subpoena on the grounds that the documents belonged to the hospital, which had a distinct personality;
that the hospital did not form part of Rositas estate; and that Eleuterio, as administrator only of Rositas
estate, had no right to inspect and have access to Adolfos estate. But the RTC denied Roberts motion on
June 19, 2007.

Robert filed a special civil action of certiorari before the Court of Appeals (CA),[7] imputing grave abuse
of discretion by the RTC for allowing the production and examination of the subject documents and for
not inhibiting Atty. Pacheo from the case. On February 17, 2009 the CA rendered judgment,[8] annulling
the RTCs orders insofar as they granted the production and examination of the hospitals documents.
Essentially, the CA ruled that Eleuterio and Rositas other collateral relatives were not her heirs since she
had an adopted child in Raymond and that, consequently, Eleuterio, et al. had no standing to request
production of the hospitals documents or to institute the petition for the settlement of her estate. The
CA affirmed, however, the non-inhibition of Atty. Pacheo from the case. Eleuterios motion for
reconsideration having been denied, he filed the present petition for review.

Issues Presented

The case presents two issues:

1. Whether or not the CA erred in ruling that Eleuterio and his relatives were not Rositas heirs and,
therefore, had no right to institute the petition for the settlement of her estate or to seek the
production and examination of the hospitals documents; and

2. Whether or not the CA erred in ruling that Eleuterio, et al. had no standing to subpoena the specified
documents in Roberts possession.

Ruling of the Court

One. The CA held that based on the article Women Physicians of the World[9] found in the record of the
case before it, the late Rosita, a physician, had adopted Raymond as her child. An adopted child, said the
CA, is deemed a legitimate child of the adopter. This being the case, Raymonds presence barred
Eleuterio and Rositas other collateral relatives from inheriting intestate from her.[10] A further
consequence is that they also did not have the right to seek the production and examination of the
documents allegedly in Roberts possession.

But, whether or not the late Rosita had judicially adopted Raymond as her child is a question of fact that
had neither been considered nor passed upon by the RTC in a direct challenge to the claim of Eleuterio
and Rositas other collateral relatives that they have the right to inherit from her. The relevant issue
before the RTC was only whether or not the duly appointed administrator of Rositas estate had the right
to the production and examination of the documents believed to be in Roberts possession. Indeed, one
of the reasons Robert brought the special civil action of certiorari before the CA is that Eleuterio had no
right to inspect the requested documents and have access to Adolfos estate when Eleuterios authority
as administrator extended only to Rositas estate.

The Court understands the CAs commendable desire to minimize multiple appeals. But the issues
regarding the late Rositas supposed judicial adoption of Raymond as her child and the consequent
absence of right on the part of Eleuterio, et al. to file a petition for the settlement of Rositas estate were
never raised and properly tried before the RTC. Consequently, the CA gravely abused its discretion in
adjudicating such issues and denying Eleuterio and his relatives their right to be heard on them.

Two. As for the right of the administrator of Rositas estate to the production and examination of the
specified documents believed to be in Roberts possession, Section 6, Rule 87 of the Rules of Court
provides that these can be allowed based on the administrators belief that the person named in the
request for subpoena has documents in his possession that tend to show the decedents right to real or
personal property. Thus:

Section 6. Proceedings when property concealed, embezzled, or fraudulently conveyed. If an executor or

administrator, heir, legatee, creditor, or other individual interested in the estate of the deceased,
complains to the court having jurisdiction of the estate that a person is suspected of having concealed,
embezzled, or conveyed away any of the money, goods or chattels of the deceased, or that such person
has in his possession or has knowledge of any deed, conveyance, bond, contract or other writing which
contains evidence of or tends to disclose the right, title, interest, or claim of the deceased to real or
personal estate, or the last will and testament of the deceased, the Court may cite such suspected
person to appear before it and may examine him on oath on the matter of such complaint; and if the
person so cited refuses to appear, or to answer on such examination or such interrogatories as are put
to him, the court may punish him for contempt, and may commit him to prison until he submits to the
order of the court. The interrogatories put to any such person, and his answers thereto, shall be in
writing and shall be filed in the clerks office. (Emphasis supplied)

The production and examination is nothing to be afraid of since the intestate court has no authority to
decide who the decedents heirs are in connection with such incident which is confined to the
examination of documents which may aid the administrator in determining properties believed to
belong to the decedents estate. What is more, that court has no authority to decide the question of
whether certain properties belong to the estate or to the person sought to be examined.[11]

In fact, if after the examination the court has good reason to believe that the person examined is in
possession of properties that belong to the deceased, the administrator cannot detain the property. He
has to file an ordinary action for recovery of the properties.[12] The purpose of the production and
examination of documents is to elicit information or secure evidence from persons suspected of having
possession of, or knowledge of properties suspected of belonging to the estate of the deceased. The
procedure is inquisitorial in nature, designed as an economical and efficient mode of discovering
properties of the estate.[13]

WHEREFORE, the Court GRANTS the petition, REVERSES the decision of the Court of Appeals in CA-G.R.
SP 100203 dated February 17, 2009, and REINSTATES the February 12, 2007 order of the Regional Trial
Court of Quezon City in Special Proceedings Q-95-22919 granting petitioner Eleuterio P. Riveras motion
to compel examination and production of document dated July 17, 2006.

SO ORDERED.
SECOND DIVISION

[G.R. No. 129242. January 16, 2001]

PILAR S. VDA. DE MANALO, ANTONIO S. MANALO, ORLANDO S. MANALO, and ISABELITA MANALO,
petitioners, vs. HON. COURT OF APPEALS, HON. REGIONAL TRIAL COURT OF MANILA (BRANCH 35),
PURITA S. JAYME, MILAGROS M. TERRE, BELEN M. ORILLANO, ROSALINA M. ACUIN, ROMEO S.
MANALO, ROBERTO S. MANALO, AMALIA MANALO and IMELDA MANALO, respondents.

DECISION

DE LEON, JR., J.:

This is a petition for review on certiorari filed by petitioners Pilar S. Vda. De Manalo, et. al., seeking to
annul the Resolution[1] of the Court of Appeals[2] affirming the Orders[3] of the Regional Trial Court
and the Resolution[4]which denied petitioners motion for reconsideration.

The antecedent facts[5] are as follows:

Troadio Manalo, a resident of 1966 Maria Clara Street, Sampaloc, Manila died intestate on February 14,
1992. He was survived by his wife, Pilar S. Manalo, and his eleven (11) children, namely: Purita M.
Jayme, Antonio Manalo, Milagros M. Terre, Belen M. Orillano, Isabelita Manalo, Rosalina M. Acuin,
Romeo Manalo, Roberto Manalo, Amalia Manalo, Orlando Manalo, and Imelda Manalo, who are all of
legal age.

At the time of his death on February 14, 1992, Troadio Manalo left several real properties located in
Manila and in the province of Tarlac including a business under the name and style Manalos Machine
Shop with offices at No. 19 Calavite Street, La Loma, Quezon City and at No. 45 Gen. Tinio Street, Arty
Subdivision, Valenzuela, Metro Manila.

On November 26, 1992, herein respondents, who are eight (8) of the surviving children of the late
Troadio Manalo, namely: Purita, Milagros, Belen, Rosalina, Romeo, Roberto, Amalia, and Imelda filed a
petition[6] with the respondent Regional Trial Court of Manila[7] for the judicial settlement of the estate
of their late father, Troadio Manalo, and for the appointment of their brother, Romeo Manalo, as
administrator thereof.

On December 15, 1992, the trial court issued an order setting the said petition for hearing on February
11, 1993 and directing the publication of the order for three (3) consecutive weeks in a newspaper of
general circulation in Metro Manila, and further directing service by registered mail of the said order
upon the heirs named in the petition at their respective addresses mentioned therein.

On February 11, 1993, the date set for hearing of the petition, the trial court issued an order declaring
the whole world in default, except the government, and set the reception of evidence of the petitioners
therein on March 16, 1993. However, this order of general default was set aside by the trial court upon
motion of herein petitioners (oppositors therein) namely: Pilar S. Vda. De Manalo, Antonio, Isabelita and
Orlando who were granted ten (10) days within which to file their opposition to the petition.

Several pleadings were subsequently filed by herein petitioners, through counsel, culminating in the
filing of an Omnibus Motion[8] on July 23, 1993 seeking: (1) to set aside and reconsider the Order of the
trial court dated July 9, 1993 which denied the motion for additional extension of time to file opposition;
(2) to set for preliminary hearing their affirmative defenses as grounds for dismissal of the case; (3) to
declare that the trial court did not acquire jurisdiction over the persons of the oppositors; and (4) for the
immediate inhibition of the presiding judge.

On July 30, 1993, the trial court issued an order[9] which resolved, thus:

A. To admit the so-called Opposition filed by counsel for the oppositors on July 20, 1993, only for the
purpose of considering the merits thereof;

B. To deny the prayer of the oppositors for a preliminary hearing of their affirmative defenses as ground
for the dismissal of this proceeding, said affirmative defenses being irrelevant and immaterial to the
purpose and issue of the present proceeding;

C. To declare that this court has acquired jurisdiction over the persons of the oppositors;

D. To deny the motion of the oppositors for the inhibition of this Presiding Judge;
E. To set the application of Romeo Manalo for appointment as regular administrator in the intestate
estate of the deceased Troadio Manalo for hearing on September 9, 1993 at 2:00 oclock in the
afternoon.

Herein petitioners filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of
Appeals, docketed as CA-G.R. SP. No. 39851, after their motion for reconsideration of the Order dated
July 30, 1993 was denied by the trial court in its Order[10] dated September 15, 1993. In their petition
for certiorari with the appellate court, they contend that: (1) the venue was improperly laid in SP. PROC.
No. 92-63626; (2) the trial court did not acquire jurisdiction over their persons; (3) the share of the
surviving spouse was included in the intestate proceedings; (4) there was absence of earnest efforts
toward compromise among members of the same family; and (5) no certification of non-forum shopping
was attached to the petition.

Finding the contentions untenable, the Court of Appeals dismissed the petition for certiorari in its
Resolution[11] promulgated on September 30, 1996. On May 6, 1997 the motion for reconsideration of
the said resolution was likewise dismissed.[12]

The only issue raised by herein petitioners in the instant petition for review is whether or not the
respondent Court of Appeals erred in upholding the questioned orders of the respondent trial court
which denied their motion for the outright dismissal of the petition for judicial settlement of estate
despite the failure of the petitioners therein to aver that earnest efforts toward a compromise involving
members of the same family have been made prior to the filing of the petition but that the same have
failed.

Herein petitioners claim that the petition in SP. PROC No. 92-63626 is actually an ordinary civil action
involving members of the same family. They point out that it contains certain averments which,
according to them, are indicative of its adversarial nature, to wit:

xxx

Par. 7. One of the surviving sons, ANTONIO MANALO, since the death of his father, TROADIO MANALO,
had not made any settlement, judicial or extra-judicial of the properties of the deceased father,
TROADIO MANALO.

Par. 8. xxx the said surviving son continued to manage and control the properties aforementioned,
without proper accounting, to his own benefit and advantage xxx.
xxx

Par. 12. That said ANTONIO MANALO is managing and controlling the estate of the deceased TROADIO
MANALO to his own advantage and to the damage and prejudice of the herein petitioners and their co-
heirs xxx.

xxx

Par. 14. For the protection of their rights and interests, petitioners were compelled to bring this suit and
were forced to litigate and incur expenses and will continue to incur expenses of not less than,
P250,000.00 and engaged the services of herein counsel committing to pay P200,000.00 as and for
attorneys fees plus honorarium of P2,500.00 per appearance in court xxx.[13]

Consequently, according to herein petitioners, the same should be dismissed under Rule 16, Section 1(j)
of the Revised Rules of Court which provides that a motion to dismiss a complaint may be filed on the
ground that a condition precedent for filing the claim has not been complied with, that is, that the
petitioners therein failed to aver in the petition in SP. PROC. No. 92-63626, that earnest efforts toward a
compromise have been made involving members of the same family prior to the filing of the petition
pursuant to Article 222[14] of the Civil Code of the Philippines.

The instant petition is not impressed with merit.

It is a fundamental rule that, in the determination of the nature of an action or proceeding, the
averments[15] and the character of the relief sought[16] in the complaint, or petition, as in the case at
bar, shall be controlling. A careful scrutiny of the Petition for Issuance of Letters of Administration,
Settlement and Distribution of Estate in SP. PROC. No. 92-63626 belies herein petitioners claim that the
same is in the nature of an ordinary civil action. The said petition contains sufficient jurisdictional facts
required in a petition for the settlement of estate of a deceased person such as the fact of death of the
late Troadio Manalo on February 14, 1992, as well as his residence in the City of Manila at the time of his
said death. The fact of death of the decedent and of his residence within the country are foundation
facts upon which all the subsequent proceedings in the administration of the estate rest.[17] The
petition in SP. PROC. No. 92-63626 also contains an enumeration of the names of his legal heirs
including a tentative list of the properties left by the deceased which are sought to be settled in the
probate proceedings. In addition, the reliefs prayed for in the said petition leave no room for doubt as
regard the intention of the petitioners therein (private respondents herein) to seek judicial settlement
of the estate of their deceased father, Troadio Manalo, to wit:
PRAYER

WHEREFORE, premises considered, it is respectfully prayed for of this Honorable Court:

(a) That after due hearing, letters of administration be issued to petitioner ROMEO MANALO for the
administration of the estate of the deceased TORADIO MANALO upon the giving of a bond in such
reasonable sum that this Honorable Court may fix.

(b) That after all the properties of the deceased TROADIO MANALO have been inventoried and expenses
and just debts, if any, have been paid and the legal heirs of the deceased fully determined, that the said
estate of TROADIO MANALO be settled and distributed among the legal heirs all in accordance with law.

c) That the litigation expenses o these proceedings in the amount of P250,000.00 and attorneys fees in
the amount of P300,000.00 plus honorarium of P2,500.00 per appearance in court in the hearing and
trial of this case and costs of suit be taxed solely against ANTONIO MANALO.[18]

Concededly, the petition in SP. PROC. No. 92-63626 contains certain averments which may be typical of
an ordinary civil action. Herein petitioners, as oppositors therein, took advantage of the said defect in
the petition and filed their so-called Opposition thereto which, as observed by the trial court, is actually
an Answer containing admissions and denials, special and affirmative defenses and compulsory
counterclaims for actual, moral and exemplary damages, plus attorney's fees and costs[19] in an
apparent effort to make out a case of an ordinary civil action an ultimately seek its dismissal under Rule
16, Section 1(j) of the Rules of Court vis--vis, Article 222 of the Civil Code.

It is our view that herein petitioners may not be allowed to defeat the purpose of the essentially valid
petition for the settlement of the estate of the late Troadio Manalo by raising matters that are irrelevant
and immaterial to the said petition. It must be emphasized that the trial court, sitting, as a probate
court, has limited and special jurisdiction[20] and cannot hear and dispose of collateral matters and
issues which may be properly threshed out only in an ordinary civil action. In addition, the rule has
always been to the effect that the jurisdiction of a court, as well as the concomitant nature of an action,
is determined by the averments in the complaint and not by the defenses contained in the answer. If it
were otherwise, it would not be too difficult to have a case either thrown out of court or its proceedings
unduly delayed by simple strategem.[21] So it should be in the instant petition for settlement of estate.
Herein petitioners argue that even if the petition in SP. PROC. No. 92-63626 were to be considered as a
special proceeding for the settlement of estate of a deceased person, Rule 16, Section 1(j) of the Rules
of Court vis-a-vis Article 222 of the Civil Code of the Philippines would nevertheless apply as a ground for
the dismissal of the same by virtue of Rule 1, Section 2 of the Rules of Court which provides that the
rules shall be liberally construed in order to promote their object and to assist the parties in obtaining
just, speedy and inexpensive determination of every action and proceeding. Petitioners contend that the
term proceeding is so broad that it must necessarily include special proceedings.

The argument is misplaced. Herein petitioners may not validly take refuge under the provisions of Rule
1, Section 2, of the Rules of Court to justify the invocation of Article 222 of the Civil Code of the
Philippines for the dismissal of the petition for settlement of the estate of the deceased Troadio Manalo
inasmuch as the latter provision is clear enough, to wit:

Art. 222. No suit shall be filed or maintained between members of the same family unless it should
appear that earnest efforts toward a compromise have been made, but that the same have failed,
subject to the limitations in Article 2035 (underscoring supplied).[22]

The above-quoted provision of the law is applicable only to ordinary civil actions. This is clear from the
term suit that it refers to an action by one person or persons against another or others in a court of
justice in which the plaintiff pursues the remedy which the law affords him for the redress of an injury or
the enforcement of a right, whether at law or in equity.[23] A civil action is thus an action filed in a court
of justice, whereby a party sues another for the enforcement of a right, or the prevention or redress of a
wrong.[24] Besides, an excerpt from the Report of the Code Commission unmistakably reveals the
intention of the Code Commission to make that legal provision applicable only to civil actions which are
essentially adversarial and involve members of the same family, thus:

It is difficult to imagine a sadder and more tragic spectacle than a litigation between members of the
same family. It is necessary that every effort should be made toward a compromise before a litigation is
allowed to breed hate and passion in the family. It is known that lawsuit between close relatives
generates deeper bitterness than strangers.[25]

It must be emphasized that the oppositors (herein petitioners) are not being sued in SP. PROC. No. 92-
63626 for any cause of action as in fact no defendant was impleaded therein. The Petition for Issuance
of Letters of Administration, Settlement and Distribution of Estate in SP. PROC. No. 92-63626 is a special
proceeding and, as such, it is a remedy whereby the petitioners therein seek to establish a status, a
right, or a particular fact.[26] The petitioners therein (private respondents herein) merely seek to
establish the fact of death of their father and subsequently to be duly recognized as among the heirs of
the said deceased so that they can validly exercise their right to participate in the settlement and
liquidation of the estate of the decedent consistent with the limited and special jurisdiction of the
probate court.

WHEREFORE, the petition in the above-entitled case, is DENIED for lack of merit. Costs against
petitioners.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 198680 July 8, 2013

HEIRS OF MAGDALENO YPON, NAMELY, ALVARO YPON, ERUDITA Y. BARON, CICERO YPON, WILSON
YPON, VICTOR YPON, AND HINIDINO Y. PEÑALOSA, PETITIONERS,

vs.

GAUDIOSO PONTERAS RICAFORTE A.K.A. "GAUDIOSO E. YPON," AND THE REGISTER OF DEEDS OF
TOLEDO CITY, RESPONDENTS.

RESOLUTION

PERLAS-BERNABE, J.:

This is a direct recourse to the Court from the Regional Trial Court of Toledo City, Branch 59 (RTC),
through a petition for review on certiorari1 under Rule 45 of the Rules of Court, raising a pure question
of law. In particular, petitioners assail the July 27, 20112 and August 31, 20113 Orders of the RTC,
dismissing Civil Case No. T-2246 for lack of cause of action.

The Facts

On July 29, 2010, petitioners, together with some of their cousins,4 filed a complaint for Cancellation of
Title and Reconveyance with Damages (subject complaint) against respondent Gaudioso Ponteras
Ricaforte a.k.a. "Gaudioso E. Ypon" (Gaudioso), docketed as Civil Case No. T-2246.5 In their complaint,
they alleged that Magdaleno Ypon (Magdaleno) died intestate and childless on June 28, 1968, leaving
behind Lot Nos. 2-AA, 2-C, 2-F, and 2-J which were then covered by Transfer Certificates of Title (TCT)
Nos. T-44 and T-77-A.6 Claiming to be the sole heir of Magdaleno, Gaudioso executed an Affidavit of
Self-Adjudication and caused the cancellation of the aforementioned certificates of title, leading to their
subsequent transfer in his name under TCT Nos. T-2637 and T-2638,7 to the prejudice of petitioners who
are Magdaleno’s collateral relatives and successors-in-interest.8

In his Answer, Gaudioso alleged that he is the lawful son of Magdaleno as evidenced by: (a) his
certificate of Live Birth; (b) two (2) letters from Polytechnic School; and (c) a certified true copy of his
passport.9 Further, by way of affirmative defense, he claimed that: (a) petitioners have no cause of
action against him; (b) the complaint fails to state a cause of action; and (c) the case is not prosecuted
by the real parties-in-interest, as there is no showing that the petitioners have been judicially declared
as Magdaleno’s lawful heirs.10

The RTC Ruling

On July 27, 2011, the RTC issued the assailed July 27, 2011 Order,11 finding that the subject complaint
failed to state a cause of action against Gaudioso. It observed that while the plaintiffs therein had
established their relationship with Magdaleno in a previous special proceeding for the issuance of letters
of administration,12 this did not mean that they could already be considered as the decedent’s
compulsory heirs. Quite the contrary, Gaudioso satisfactorily established the fact that he is Magdaleno’s
son – and hence, his compulsory heir – through the documentary evidence he submitted which
consisted of: (a) a marriage contract between Magdaleno and Epegenia Evangelista; (b) a Certificate of
Live Birth; (c) a Letter dated February 19, 1960; and (d) a passport.13

The plaintiffs therein filed a motion for reconsideration which was, however, denied on August 31, 2011
due to the counsel’s failure to state the date on which his Mandatory Continuing Legal Education
Certificate of Compliance was issued.14

Aggrieved, petitioners, who were among the plaintiffs in Civil Case No. T-2246,15 sought direct recourse
to the Court through the instant petition.

The Issue Before the Court

The core of the present controversy revolves around the issue of whether or not the RTC’s dismissal of
the case on the ground that the subject complaint failed to state a cause of action was proper.

The Court’s Ruling

The petition has no merit.

Cause of action is defined as the act or omission by which a party violates a right of another.16 It is well-
settled that the existence of a cause of action is determined by the allegations in the complaint.17 In
this relation, a complaint is said to assert a sufficient cause of action if, admitting what appears solely on
its face to be correct, the plaintiff would be entitled to the relief prayed for.18Accordingly, if the
allegations furnish sufficient basis by which the complaint can be maintained, the same should not be
dismissed, regardless of the defenses that may be averred by the defendants.19

As stated in the subject complaint, petitioners, who were among the plaintiffs therein, alleged that they
are the lawful heirs of Magdaleno and based on the same, prayed that the Affidavit of Self-Adjudication
executed by Gaudioso be declared null and void and that the transfer certificates of title issued in the
latter’s favor be cancelled. While the foregoing allegations, if admitted to be true, would consequently
warrant the reliefs sought for in the said complaint, the rule that the determination of a decedent’s
lawful heirs should be made in the corresponding special proceeding20 precludes the RTC, in an
ordinary action for cancellation of title and reconveyance, from granting the same. In the case of Heirs
of Teofilo Gabatan v. CA,21 the Court, citing several other precedents, held that the determination of
who are the decedent’s lawful heirs must be made in the proper special proceeding for such purpose,
and not in an ordinary suit for recovery of ownership and/or possession, as in this case:

Jurisprudence dictates that the determination of who are the legal heirs of the deceased must be made
in the proper special proceedings in court, and not in an ordinary suit for recovery of ownership and
possession of property.1âwphi1 This must take precedence over the action for recovery of possession
and ownership. The Court has consistently ruled that the trial court cannot make a declaration of
heirship in the civil action for the reason that such a declaration can only be made in a special
proceeding. Under Section 3, Rule 1 of the 1997 Revised Rules of Court, a civil action is defined as one by
which a party sues another for the enforcement or protection of a right, or the prevention or redress of
a wrong while a special proceeding is a remedy by which a party seeks to establish a status, a right, or a
particular fact. It is then decisively clear 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 early case of Litam, et al. v. Rivera, this Court ruled that the declaration of heirship must be made
in a special proceeding, and not in an independent civil action. This doctrine was reiterated in Solivio v.
Court of Appeals x x x:

In the more recent case of Milagros Joaquino v. Lourdes Reyes, the Court reiterated its ruling that
matters relating to the rights of filiation and heirship must be ventilated in the proper probate court in a
special proceeding instituted precisely for the purpose of determining such rights. Citing the case of
Agapay v. Palang, this Court held that the status of an illegitimate child who claimed to be an heir to a
decedent's estate could not be adjudicated in an ordinary civil action which, as in this case, was for the
recovery of property.22 (Emphasis and underscoring supplied; citations omitted)
By way of exception, the need to institute a separate special proceeding for the determination of
heirship may be dispensed with for the sake of practicality, as when the parties in the civil case had
voluntarily submitted the issue to the trial court and already presented their evidence regarding the
issue of heirship, and the RTC had consequently rendered judgment thereon,23 or when a special
proceeding had been instituted but had been finally closed and terminated, and hence, cannot be re-
opened.24

In this case, none of the foregoing exceptions, or those of similar nature, appear to exist. Hence, there
lies the need to institute the proper special proceeding in order to determine the heirship of the parties
involved, ultimately resulting to the dismissal of Civil Case No. T-2246.

Verily, while a court usually focuses on the complaint in determining whether the same fails to state a
cause of action, a court cannot disregard decisions material to the proper appreciation of the questions
before it.25 Thus, concordant with applicable jurisprudence, since a determination of heirship cannot be
made in an ordinary action for recovery of ownership and/or possession, the dismissal of Civil Case No.
T-2246 was altogether proper. In this light, it must be pointed out that the RTC erred in ruling on
Gaudioso’s heirship which should, as herein discussed, be threshed out and determined in the proper
special proceeding. As such, the foregoing pronouncement should therefore be devoid of any legal
effect.

WHEREFORE, the petition is DENIED. The dismissal of Civil Case No. T-2246 is hereby AFFIRMED, without
prejudice to any subsequent proceeding to determine the lawful heirs of the late Magdaleno Ypon and
the rights concomitant therewith.

SO ORDERED.

Carpio, (Chairperson), Del Castillo, Perez, and Mendoza,* JJ., concur.

JOSELITO MUSNI PUNO

(as heir of the late Carlos Puno),

Petitioner,

- versus -

PUNO ENTERPRISES, INC., represented by JESUSA PUNO,

Respondent.

DECISION

NACHURA, J.:

Upon the death of a stockholder, the heirs do not automatically become stockholders of the
corporation; neither are they mandatorily entitled to the rights and privileges of a stockholder. This, we
declare in this petition for review on certiorari of the Court of Appeals (CA) Decision[1] dated October
11, 2006 and Resolution dated March 6, 2007 in CA-G.R. CV No. 86137.

The facts of the case follow:

Carlos L. Puno, who died on June 25, 1963, was an incorporator of respondent Puno Enterprises, Inc. On
March 14, 2003, petitioner Joselito Musni Puno, claiming to be an heir of Carlos L. Puno, initiated a
complaint for specific performance against respondent. Petitioner averred that he is the son of the
deceased with the latters common-law wife, Amelia Puno. As surviving heir, he claimed entitlement to
the rights and privileges of his late father as stockholder of respondent. The complaint thus prayed that
respondent allow petitioner to inspect its corporate book, render an accounting of all the transactions it
entered into from 1962, and give petitioner all the profits, earnings, dividends, or income pertaining to
the shares of Carlos L. Puno.[2]

Respondent filed a motion to dismiss on the ground that petitioner did not have the legal personality to
sue because his birth certificate names him as Joselito Musni Muno. Apropos, there was yet a need for a
judicial declaration that Joselito Musni Puno and Joselito Musni Muno were one and the same.

The court ordered that the proceedings be held in abeyance, ratiocinating that petitioners certificate of
live birth was no proof of his paternity and relation to Carlos L. Puno.

Petitioner submitted the corrected birth certificate with the name Joselito M. Puno, certified by the Civil
Registrar of the City of Manila, and the Certificate of Finality thereof. To hasten the disposition of the
case, the court conditionally admitted the corrected birth certificate as genuine and authentic and
ordered respondent to file its answer within fifteen days from the order and set the case for pretrial.[3]

On October 11, 2005, the court rendered a Decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering Jesusa Puno and/or Felicidad Fermin to allow the
plaintiff to inspect the corporate books and records of the company from 1962 up to the present
including the financial statements of the corporation.

The costs of copying shall be shouldered by the plaintiff. Any expenses to be incurred by the defendant
to be able to comply with this order shall be the subject of a bill of costs.

SO ORDERED.[4]

On appeal, the CA ordered the dismissal of the complaint in its Decision dated October 11, 2006.
According to the CA, petitioner was not able to establish the paternity of and his filiation to Carlos L.
Puno since his birth certificate was prepared without the intervention of and the participatory
acknowledgment of paternity by Carlos L. Puno. Accordingly, the CA said that petitioner had no right to
demand that he be allowed to examine respondents books. Moreover, petitioner was not a stockholder
of the corporation but was merely claiming rights as an heir of Carlos L. Puno, an incorporator of the
corporation. His action for specific performance therefore appeared to be premature; the proper action
to be taken was to prove the paternity of and his filiation to Carlos L. Puno in a petition for the
settlement of the estate of the latter.[5]

Petitioners motion for reconsideration was denied by the CA in its Resolution[6] dated March 6, 2007.

In this petition, petitioner raises the following issues:

I. THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING THAT THE JOSELITO PUNO IS
ENTITLED TO THE RELIEFS DEMANDED HE BEING THE HEIR OF THE LATE CARLOS PUNO, ONE OF THE
INCORPORATORS [OF] RESPONDENT CORPORATION.

II. HONORABLE COURT OF APPEALS ERRED IN RULING THAT FILIATION OF JOSELITO PUNO, THE
PETITIONER[,] IS NOT DULY PROVEN OR ESTABLISHED.

III. THE HONORABLE COURT ERRED IN NOT RULING THAT JOSELITO MUNO AND JOSELITO PUNO
REFERS TO THE ONE AND THE SAME PERSON.

IV. THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING THAT WHAT RESPONDENT
MERELY DISPUTES IS THE SURNAME OF THE PETITIONER WHICH WAS MISSPELLED AND THE FACTUAL
ALLEGATION E.G. RIGHTS OF PETITIONER AS HEIR OF CARLOS PUNO ARE DEEMED ADMITTED
HYPOTHETICALLY IN THE RESPONDENT[S] MOTION TO DISMISS.

V. THE HONORABLE COURT OF APPEALS THEREFORE ERRED I[N] DECREEING THAT PETITIONER
IS NOT ENTITLED TO INSPECT THE CORPORATE BOOKS OF DEFENDANT CORPORATION.[7]

The petition is without merit. Petitioner failed to establish the right to inspect respondent corporations
books and receive dividends on the stocks owned by Carlos L. Puno.

Petitioner anchors his claim on his being an heir of the deceased stockholder. However, we agree with
the appellate court that petitioner was not able to prove satisfactorily his filiation to the deceased
stockholder; thus, the former cannot claim to be an heir of the latter.
Incessantly, we have declared that factual findings of the CA supported by substantial evidence, are
conclusive and binding.[8] In an appeal via certiorari, the Court may not review the factual findings of
the CA. It is not the Courts function under Rule 45 of the Rules of Court to review, examine, and
evaluate or weigh the probative value of the evidence presented.[9]

A certificate of live birth purportedly identifying the putative father is not competent evidence of
paternity when there is no showing that the putative father had a hand in the preparation of the
certificate. The local civil registrar has no authority to record the paternity of an illegitimate child on the
information of a third person.[10] As correctly observed by the CA, only petitioners mother supplied the
data in the birth certificate and signed the same. There was no evidence that Carlos L. Puno
acknowledged petitioner as his son.

As for the baptismal certificate, we have already decreed that it can only serve as evidence of the
administration of the sacrament on the date specified but not of the veracity of the entries with respect
to the childs paternity.[11]

In any case, Sections 74 and 75 of the Corporation Code enumerate the persons who are entitled to the
inspection of corporate books, thus

Sec. 74. Books to be kept; stock transfer agent. x x x.

The records of all business transactions of the corporation and the minutes of any meeting shall be open
to the inspection of any director, trustee, stockholder or member of the corporation at reasonable hours
on business days and he may demand, in writing, for a copy of excerpts from said records or minutes, at
his expense.

Sec. 75. Right to financial statements. Within ten (10) days from receipt of a written request of any
stockholder or member, the corporation shall furnish to him its most recent financial statement, which
shall include a balance sheet as of the end of the last taxable year and a profit or loss of statement for
said taxable year, showing in reasonable detail its assets and liabilities and the result of its
operations.[12]

The stockholders right of inspection of the corporations books and records is based upon his ownership
of shares in the corporation and the necessity for self-protection. After all, a shareholder has the right to
be intelligently informed about corporate affairs.[13] Such right rests upon the stockholders underlying
ownership of the corporations assets and property.[14]

Similarly, only stockholders of record are entitled to receive dividends declared by the corporation, a
right inherent in the ownership of the shares.[15]

Upon the death of a shareholder, the heirs do not automatically become stockholders of the corporation
and acquire the rights and privileges of the deceased as shareholder of the corporation. The stocks must
be distributed first to the heirs in estate proceedings, and the transfer of the stocks must be recorded in
the books of the corporation. Section 63 of the Corporation Code provides that no transfer shall be
valid, except as between the parties, until the transfer is recorded in the books of the corporation.[16]
During such interim period, the heirs stand as the equitable owners of the stocks, the executor or
administrator duly appointed by the court being vested with the legal title to the stock.[17] Until a
settlement and division of the estate is effected, the stocks of the decedent are held by the
administrator or executor.[18] Consequently, during such time, it is the administrator or executor who is
entitled to exercise the rights of the deceased as stockholder.

Thus, even if petitioner presents sufficient evidence in this case to establish that he is the son of Carlos
L. Puno, he would still not be allowed to inspect respondents books and be entitled to receive dividends
from respondent, absent any showing in its transfer book that some of the shares owned by Carlos L.
Puno were transferred to him. This would only be possible if petitioner has been recognized as an heir
and has participated in the settlement of the estate of the deceased.

Corollary to this is the doctrine that a determination of whether a person, claiming proprietary rights
over the estate of a deceased person, is an heir of the deceased must be ventilated in a special
proceeding instituted precisely for the purpose of settling the estate of the latter. The status of an
illegitimate child who claims to be an heir to a decedents estate cannot be adjudicated in an ordinary
civil action, as in a case for the recovery of property.[19] The doctrine applies to the instant case, which
is one for specific performance to direct respondent corporation to allow petitioner to exercise rights
that pertain only to the deceased and his representatives.

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated October
11, 2006 and Resolution dated March 6, 2007 are AFFIRMED.

SO ORDERED.
Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 118671 January 29, 1996

THE ESTATE OF HILARIO M. RUIZ, EDMOND RUIZ, Executor, petitioner,

vs.

THE COURT OF APPEALS (Former Special Sixth Division), MARIA PILAR RUIZ-MONTES, MARIA
CATHRYN RUIZ, CANDICE ALBERTINE RUIZ, MARIA ANGELINE RUIZ and THE PRESIDING JUDGE OF THE
REGIONAL TRIAL COURT OF PASIG, respondents.

DECISION

PUNO, J.:

This petition for review on certiorari seeks to annul and set aside the decision dated November 10, 1994
and the resolution dated January 5, 1995 of the Court of Appeals in CA-G.R. SP No. 33045.

The facts show that on June 27, 1987, Hilario M. Ruiz1 executed a holographic will naming as his heirs
his only son, Edmond Ruiz, his adopted daughter, private respondent Maria Pilar Ruiz Montes, and his
three granddaughters, private respondents Maria Cathryn, Candice Albertine and Maria Angeline, all
children of Edmond Ruiz. The testator bequeathed to his heirs substantial cash, personal and real
properties and named Edmond Ruiz executor of his estate.2

On April 12, 1988, Hilario Ruiz died. Immediately thereafter, the cash component of his estate was
distributed among Edmond Ruiz and private respondents in accordance with the decedent's will. For
unbeknown reasons, Edmond, the named executor, did not take any action for the probate of his
father's holographic will.
On June 29, 1992, four years after the testator's death, it was private respondent Maria Pilar Ruiz
Montes who filed before the Regional Trial Court, Branch 156, Pasig, a petition for the probate and
approval of Hilario Ruiz's will and for the issuance of letters testamentary to Edmond Ruiz,3 Surprisingly,
Edmond opposed the petition on the ground that the will was executed under undue influence.

On November 2, 1992, one of the properties of the estate — the house and lot at No. 2 Oliva Street,
Valle Verde IV, Pasig which the testator bequeathed to Maria Cathryn, Candice Albertine and Maria
Angeline4 — was leased out by Edmond Ruiz to third persons.

On January 19, 1993, the probate court ordered Edmond to deposit with the Branch Clerk of Court the
rental deposit and payments totalling P540,000.00 representing the one-year lease of the Valle Verde
property. In compliance, on January 25, 1993, Edmond turned over the amount of P348,583.56,
representing the balance of the rent after deducting P191,416.14 for repair and maintenance expenses
on the estate.5

In March 1993, Edmond moved for the release of P50,000.00 to pay the real estate taxes on the real
properties of the estate. The probate court approved the release of P7,722.00.6

On May 14, 1993, Edmond withdrew his opposition to the probate of the will. Consequently, the
probate court, on May 18, 1993, admitted the will to probate and ordered the issuance of letters
testamentary to Edmond conditioned upon the filing of a bond in the amount of P50,000.00. The letters
testamentary were issued on June 23, 1993.

On July 28, 1993, petitioner Testate Estate of Hilario Ruiz, with Edmond Ruiz as executor, filed an "Ex-
Parte Motion for Release of Funds." It prayed for the release of the rent payments deposited with the
Branch Clerk of Court. Respondent Montes opposed the motion and concurrently filed a "Motion for
Release of Funds to Certain Heirs" and "Motion for Issuance of Certificate of Allowance of Probate Will."
Montes prayed for the release of the said rent payments to Maria Cathryn, Candice Albertine and Maria
Angeline and for the distribution of the testator's properties, specifically the Valle Verde property and
the Blue Ridge apartments, in accordance with the provisions of the holographic will.

On August 26, 1993, the probate court denied petitioner's motion for release of funds but granted
respondent Montes' motion in view of petitioner's lack of opposition. It thus ordered the release of the
rent payments to the decedent's three granddaughters. It further ordered the delivery of the titles to
and possession of the properties bequeathed to the three granddaughters and respondent Montes
upon the filing of a bond of P50,000.00.
Petitioner moved for reconsideration alleging that he actually filed his opposition to respondent
Montes's motion for release of rent payments which opposition the court failed to consider. Petitioner
likewise reiterated his previous motion for release of funds.

On November 23, 1993, petitioner, through counsel, manifested that he was withdrawing his motion for
release of funds in view of the fact that the lease contract over the Valle Verde property had been
renewed for another year.7

Despite petitioner's manifestation, the probate court, on December 22, 1993, ordered the release of the
funds to Edmond but only "such amount as may be necessary to cover the expenses of administration
and allowances for support" of the testator's three granddaughters subject to collation and deductible
from their share in the inheritance. The court, however, held in abeyance the release of the titles to
respondent Montes and the three granddaughters until the lapse of six months from the date of first
publication of the notice to creditors.8 The court stated thus:

xxx xxx xxx

After consideration of the arguments set forth thereon by the parties the court resolves to allow
Administrator Edmond M. Ruiz to take possession of the rental payments deposited with the Clerk of
Court, Pasig Regional Trial Court, but only such amount as may be necessary to cover the expenses of
administration and allowances for support of Maria Cathryn Veronique, Candice Albertine and Maria
Angeli, which are subject to collation and deductible from the share in the inheritance of said heirs and
insofar as they exceed the fruits or rents pertaining to them.

As to the release of the titles bequeathed to petitioner Maria Pilar Ruiz-Montes and the above-named
heirs, the same is hereby reconsidered and held in abeyance until the lapse of six (6) months from the
date of first publication of Notice to Creditors.

WHEREFORE, Administrator Edmond M. Ruiz is hereby ordered to submit an accounting of the expenses
necessary for administration including provisions for the support Of Maria Cathryn Veronique Ruiz,
Candice Albertine Ruiz and Maria Angeli Ruiz before the amount required can be withdrawn and cause
the publication of the notice to creditors with reasonable dispatch.9

Petitioner assailed this order before the Court of Appeals. Finding no grave abuse of discretion on the
part of respondent judge, the appellate court dismissed the petition and sustained the probate court's
order in a decision dated November 10, 199410 and a resolution dated January 5, 1995.11
Hence, this petition.

Petitioner claims that:

THE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION IN AFFIRMING AND CONFIRMING THE ORDER OF RESPONDENT
REGIONAL TRIAL COURT OF PASIG, BRANCH 156, DATED DECEMBER 22, 1993, WHICH WHEN GIVEN DUE
COURSE AND IS EFFECTED WOULD: (1) DISALLOW THE EXECUTOR/ADMINISTRATOR OF THE ESTATE OF
THE LATE HILARIO M. RUIZ TO TAKE POSSESSION OF ALL THE REAL AND PERSONAL PROPERTIES OF THE
ESTATE; (2) GRANT SUPPORT, DURING THE PENDENCY OF THE SETTLEMENT OF AN ESTATE, TO CERTAIN
PERSONS NOT ENTITLED THERETO; AND (3) PREMATURELY PARTITION AND DISTRIBUTE THE ESTATE
PURSUANT TO THE PROVISIONS OF THE HOLOGRAPHIC WILL EVEN BEFORE ITS INTRINSIC VALIDITY HAS
BEEN DETERMINED, AND DESPITE THE EXISTENCE OF UNPAID DEBTS AND OBLIGATIONS OF THE
ESTATE.12

The issue for resolution is whether the probate court, after admitting the will to probate but before
payment of the estate's debts and obligations, has the authority: (1) to grant an allowance from the
funds of the estate for the support of the testator's grandchildren; (2) to order the release of the titles
to certain heirs; and (3) to grant possession of all properties of the estate to the executor of the will.

On the matter of allowance, Section 3 of Rule 83 of the Revised Rules of Court provides:

Sec. 3. Allowance to widow and family. — The widow and minor or incapacitated children of a
deceased person, during the settlement of the estate, shall receive therefrom under the direction of the
court, such allowance as are provided by law.

Petitioner alleges that this provision only gives the widow and the minor or incapacitated children of the
deceased the right to receive allowances for support during the settlement of estate proceedings. He
contends that the testator's three granddaughters do not qualify for an allowance because they are not
incapacitated and are no longer minors but of legal age, married and gainfully employed. In addition, the
provision expressly states "children" of the deceased which excludes the latter's grandchildren.

It is settled that allowances for support under Section 3 of Rule 83 should not be limited to the "minor or
incapacitated" children of the deceased. Article 18813 of the Civil Code of the Philippines, the
substantive law in force at the time of the testator's death, provides that during the liquidation of the
conjugal partnership, the deceased's legitimate spouse and children, regardless of their age, civil status
or gainful employment, are entitled to provisional support from the funds of the estate.14 The law is
rooted on the fact that the right and duty to support, especially the right to education, subsist even
beyond the age of majority.15

Be that as it may, grandchildren are not entitled to provisional support from the funds of the decedent's
estate. The law clearly limits the allowance to "widow and children" and does not extend it to the
deceased's grandchildren, regardless of their minority or incapacity.16 It was error, therefore, for the
appellate court to sustain the probate court's order granting an allowance to the grandchildren of the
testator pending settlement of his estate.

Respondent courts also erred when they ordered the release of the titles of the bequeathed properties
to private respondents six months after the date of first publication of notice to creditors. An order
releasing titles to properties of the estate amounts to an advance distribution of the estate which is
allowed only under the following conditions:

Sec. 2. Advance distribution in special proceedings. — Nothwithstanding a pending controversy or

appeal in proceedings to settle the estate of a decedent, the court may, in its discretion and upon such
terms as it may deem proper and just, permit that such part of the estate as may not be affected by the
controversy or appeal be distributed among the heirs or legatees, upon compliance with the conditions
set forth in Rule 90 of these Rules.17

And Rule 90 provides that:

Sec. 1. When order for distribution of residue made. — When the debts, funeral charges, and expenses
of administration the allowance to the widow, and inheritance tax if any, chargeable to the estate in
accordance with law, have been paid, the court, on the application of the executor or administrator, or
of a person interested in the estate, and after hearing upon notice shall assign the residue of the estate
to the persons entitled to the same, naming them and the proportions or parts, to which each is
entitled, and such persons may demand and recover their respective shares from the executor or
administrator, or any other person having the same in his possession. If there is a controversy before the
court as to who are the lawful heirs of the deceased person or as to the distributive shares to which
each person is entitled under the law, the controversy shall be heard and decided as in ordinary cases.

No distribution shall be allowed until the payment of the obligations above-mentioned has been made
or provided for, unless the distributees, or any of them, give a bond, in a sum to be fixed by the court,
conditioned for the payment of said obligations within such time as the court directs.18
In settlement of estate proceedings, the distribution of the estate properties can only be made: (1) after
all the debts, funeral charges, expenses of administration, allowance to the widow, and estate tax have
been paid; or (2) before payment of said obligations only if the distributees or any of them gives a bond
in a sum fixed by the court conditioned upon the payment of said obligations within such time as the
court directs, or when provision is made to meet those obligations.19

In the case at bar, the probate court ordered the release of the titles to the Valle Verde property and the
Blue Ridge apartments to the private respondents after the lapse of six months from the date of first
publication of the notice to creditors. The questioned order speaks of "notice" to creditors, not payment
of debts and obligations. Hilario Ruiz allegedly left no debts when he died but the taxes on his estate had
not hitherto been paid, much less ascertained. The estate tax is one of those obligations that must be
paid before distribution of the estate. If not yet paid, the rule requires that the distributees post a bond
or make such provisions as to meet the said tax obligation in proportion to their respective shares in the
inheritance.20 Notably, at the time the order was issued the properties of the estate had not yet been
inventoried and appraised.

It was also too early in the day for the probate court to order the release of the titles six months after
admitting the will to probate. The probate of a will is conclusive as to its due execution and extrinsic
validity21 and settles only the question of whether the testator, being of sound mind, freely executed it
in accordance with the formalities prescribed by law.22 Questions as to the intrinsic validity and efficacy
of the provisions of the will, the legality of any devise or legacy may be raised even after the will has
been authenticated.23

The intrinsic validity of Hilario's holographic will was controverted by petitioner before the probate
court in his Reply to Montes' Opposition to his motion for release of funds24 and his motion for
reconsideration of the August 26, 1993 order of the said court.25 Therein, petitioner assailed the
distributive shares of the devisees and legatees inasmuch as his father's will included the estate of his
mother and allegedly impaired his legitime as an intestate heir of his mother. The Rules provide that if
there is a controversy as to who are the lawful heirs of the decedent and their distributive shares in his
estate, the probate court shall proceed to hear and decide the same as in ordinary cases.26

Still and all, petitioner cannot correctly claim that the assailed order deprived him of his right to take
possession of all the real and personal properties of the estate. The right of an executor or administrator
to the possession and management of the real and personal properties of the deceased is not absolute
and can only be exercised "so long as it is necessary for the payment of the debts and expenses of
administration,"27 Section 3 of Rule 84 of the Revised Rules of Court explicitly provides:
Sec. 3. Executor or administrator to retain whole estate to pay debts, and to administer estate not
willed. — An executor or administrator shall have the right to the possession and management of the
real as well as the personal estate of the deceased so long as it is necessary for the payment of the debts
and expenses for administration.28

When petitioner moved for further release of the funds deposited with the clerk of court, he had been
previously granted by the probate court certain amounts for repair and maintenance expenses on the
properties of the estate, and payment of the real estate taxes thereon. But petitioner moved again for
the release of additional funds for the same reasons he previously cited. It was correct for the probate
court to require him to submit an accounting of the necessary expenses for administration before
releasing any further money in his favor.

It was relevantly noted by the probate court that petitioner had deposited with it only a portion of the
one-year rental income from the Valle Verde property. Petitioner did not deposit its succeeding rents
after renewal of the lease.29 Neither did he render an accounting of such funds.

Petitioner must be reminded that his right of ownership over the properties of his father is merely
inchoate as long as the estate has not been fully settled and partitioned.30 As executor, he is a mere
trustee of his father's estate. The funds of the estate in his hands are trust funds and he is held to the
duties and responsibilities of a trustee of the highest order.31 He cannot unilaterally assign to himself
and possess all his parents' properties and the fruits thereof without first submitting an inventory and
appraisal of all real and personal properties of the deceased, rendering a true account of his
administration, the expenses of administration, the amount of the obligations and estate tax, all of
which are subject to a determination by the court as to their veracity, propriety and justness.32

IN VIEW WHEREOF, the decision and resolution of the Court of Appeals in CA-G.R. SP No. 33045
affirming the order dated December 22, 1993 of the Regional Trial Court, Branch 156, Pasig in SP Proc.
No. 10259 are affirmed with the modification that those portions of the order granting an allowance to
the testator's grandchildren and ordering the release of the titles to the private respondents upon
notice to creditors are annulled and set aside.

Respondent judge is ordered to proceed with dispatch in the proceedings below.

SO ORDERED.

Regalado, Romero and Mendoza, JJ., concur.

CORNELIA BALADAD (Represented by Heinrich M. Angeles and Rex Aaron A. Baladad),

Petitioner, vs SERGIO A. RUBLICO and SPOUSES LAUREANO F. YUPANO,Respondents.

DECISION

NACHURA, J.:

Before us is a petition for review of the November 5, 2002 Decision[1] of the Court of Appeals (CA), as
well as its November 10, 2003 Resolution[2] in CA-G.R. CV No. 34979, which reversed and set aside the
September 9, 1991 Decision[3] of Branch 133 of the Regional Trial Court (RTC) of Makati City, in a
complaint for annulment of sale, cancellation of title and damages[4] filed by petitioner Cornelia
Baladad against herein respondents.

Below are the antecedent facts.

Two parcels of land located in what was then called the Municipality of Makati, Province of Rizal were
registered in the name of Julian Angeles on December 20, 1965 under Transfer Certificate of Title (TCT)
No. 155768.[5] On December 3, 1968, Julian and Corazon Rublico, after co-habiting for some time, got
married. Julian was already 65 years old then, while Corazon was already 67.[6] At that time, Corazon
already had a son, respondent Sergio A. Rublico, by Teofilo Rublico, who died sometime before the
outbreak of the Second World War.[7] After Teofilos death, Corazon cohabited with Panfilo de Jesus and
then, later, with Julian. Julian died on February 2, 1969[8] leaving no compulsory heirs[9] except his wife
and his brother, Epitacio.

On February 4, 1985, while on her death bed, Cornelia was surrounded by four individuals her niece,
petitioner Cornelia Baladad; her nephew, Vicente Angeles; a certain Rosie Francisco; and notary public
Atty. Julio Francisco who had been called, accompanied by Cornelia herself to Corazons house, to
notarize a deed entitled Extrajudicial Settlement of Estate with Absolute Sale. In his testimony, Atty.
Francisco said that Corazon imprinted her thumbmark on the document after he read and explained the
contents thereof in Tagalog to her.[10] In the said document, Corazon and Epitacio adjudicated unto
themselves the two lots registered in the name of Julian with three-fourths () of the property going to
Corazon and the remaining one-fourth () to Epitacio. The document also stated that both Corazon and
Epitacio conveyed by way of absolute sale both their shares in the said lots in favor of Cornelia, Epitacios
daughter, in exchange for the amount of P107,750.00. Corazons thumbmark was imprinted at the
bottom of the said deed, while Vicente, Epitacios son, signed in behalf of Epitacio by virtue of a power of
attorney.[11] There was no signature of Cornelia on the said document.

Two days later, Corazon passed away.

Title over the said lots remained in the name of Julian, but on July 20, 1987, more than two years after
Corazons death, respondent Sergio executed an Affidavit of Adjudication by Sole Heir of Estate of
Deceased Person[12] adjudicating unto himself the same parcels of land which had been subject of the
deed of sale between Corazon and Cornelia. On October 27, 1987, Sergio filed a petition for
reconstitution of the owners copy of TCT No. 155768 averring that after the death of Corazon, he tried
to locate the copy of the title but to no avail.[13] The petition was granted on January 11, 1988[14] and
a new owners duplicate title (TCT No. 155095) was issued in the name of Sergio on April 18, 1988.[15]

On May 31, 1988, Sergio sold the two lots to spouses Laureano and Felicidad Yupano for
P100,000.00.[16] Sergios certificate of title was cancelled and TCT No. 155338 was issued in favor of the
Yupanos. On July 26, 1988, the said title was also cancelled and TCT Nos. 156312[17] and 156313[18]
separately covering the two parcels of land were issued. On July 17, 1990, Cornelia caused the
annotation on the said TCTs of her adverse claim over the said properties.

Meanwhile, there were seven families who occupied the lots and paid rentals to Julian and, later, to
Corazon. After Corazons death, they paid rentals to Cornelia through Pacifica Alvaro, and later to
Cornelias brother, Vicente, when Cornelia transferred her residence to the United States. When the
Yupanos demanded payment of rentals from the tenants, the latter filed a complaint for interpleader on
May 19, 1989. The case was docketed as Civil Case No. 89-3947. On September 3, 1990, Branch 148 of
the Makati RTC rendered a Decision[19] declaring the Yupanos as the legal and lawful owners of the two
lots.

On August 3, 1990, a month before the promulgation of the decision, Cornelia filed a complaint for
annulment of sale, cancellation of title and damages, which is now the subject of this Rule 45 petition.
Cornelia argued that Sergio knew of the sale made by Corazon in her favor and was even given part of
the proceeds. Cornelia also averred that the Yupanos could not be considered as buyers in good faith,
because they only lived a block from the disputed properties and had knowledge that the two lots had
been sold to Cornelia prior to Corazons death.[20]

For their part, respondents argued that the Extrajudicial Settlement with Absolute Sale dated February
4, 1985 could not have been executed because at the time, Corazon was already dying. Ignacio Rublico,
Sergios son, also testified that he saw Vicente Angeles holding the hand of Corazon to affix her
thumbmark on a blank sheet of paper.[21] Sergio also argued that the property was originally bought by
his mother, but was only registered in the name of Julian in keeping with the tradition at that time.[22]

After the trial, Branch 133 of the Makati RTC ruled in favor of Cornelia.[23] Upon appeal, the CA
reversed the RTC ruling[24] prompting Cornelia to file a motion for reconsideration,[25] but the same
was denied for lack of merit.[26] Hence, this petition.

The determinative issue is the validity of the Extrajudicial Settlement of Estate with Absolute Sale
purportedly executed by Corazon prior to her death.

We find in favor of petitioner.

The Extrajudicial Settlement of Estate with Absolute Sale executed by Corazon and Epitacio through the
latters attorney-in-fact, Vicente Angeles, partakes of the nature of a contract. To be precise, the said
document contains two contracts, to wit: the extrajudicial adjudication of the estate of Julian Angeles
between Corazon and Epitacio as Julians compulsory heirs, and the absolute sale of the adjudicated
properties to Cornelia. While contained in one document, the two are severable and each can stand on
its own. Hence, for its validity, each must comply with the requisites prescribed in Article 1318 of the
Civil Code, namely (1) consent of the contracting parties; (2) object certain, which is the subject matter
of the contract; and (3) cause of the obligation which is established.
During the trial, respondents argued that the document was not valid because at the time it was
executed, Corazon was already weak and could not have voluntarily given her consent thereto. One of
the witnesses for the defense even testified that it was Vicente who placed Corazons thumbprint on a
blank document, which later turned out to be the Extrajudicial Adjudication with Absolute Sale. We are,
however, inclined to agree with the RTCs finding on this matter, viz:

Ignacio is not a reliable witness. He was very certain the event took place on February 4, 1985 and
Corazon was already dead. This was his testimony on cross-examination. He had forgotten that Corazon
died on February 6, 1985 or two days after. So, when confronted with this contradiction, he had to
change his stance and claim that Corazon was still alive when it happened.[27]

It is also noteworthy that in the course of the trial, respondents did not question Corazons mental state
at the time she executed the said document.

Respondents only focused on her physical weakness, arguing that she could not have executed the deed
because she was already dying and, thus, could not appear before a notary public.[28] Impliedly,
therefore, respondents indulged the presumption that Corazon was still of sound and disposing mind
when she agreed to adjudicate and sell the disputed properties on February 4, 1985.

Respondents also failed to refute the testimony of Atty. Francisco, who notarized the deed, that he
personally read to Corazon the contents of the Extrajudicial Settlement of Estate with Absolute Sale, and
even translated its contents to Tagalog.

And, most important of all is the fact that the subject deed is, on its face, unambiguous. When the terms
of a contract are lawful, clear and unambiguous, facial challenge cannot be allowed. We should not go
beyond the provisions of a clear and unambiguous contract to determine the intent of the parties
thereto, because we will run the risk of substituting our own interpretation for the true intent of the
parties.

It is immaterial that Cornelias signature does not appear on the Extrajudicial Settlement of Estate with
Absolute Sale. A contract of sale is perfected the moment there is a meeting of the minds upon the thing
which is the object of the contract and upon the price.[29] The fact that it was Cornelia herself who
brought Atty. Francisco to Corazons house to notarize the deed shows that she had previously given her
consent to the sale of the two lots in her favor. Her subsequent act of exercising dominion over the
subject properties further strengthens this assumption.

Based on these findings, we are constrained to uphold the validity of the disputed deed. Accordingly,
respondent Sergio Rublico never had the right to sell the subject properties to the Yupanos, because he
never owned them to begin with. Nemo dat quod non habet. Even before he could inherit any share of
the properties from his mother, Corazon, the latter had already sold them to Cornelia.

The Yupanos, for their part, cannot feign ignorance of all these, and argue that Sergios certificate of title
was clean on its face. Even prior to May 31, 1988, when they bought the properties from Sergio, it had
been widely known in the neighborhood and among the tenants residing on the said lots that ownership
of the two parcels of land had been transferred to Cornelia as, in fact, it was Cornelias brother, Vicente,
who had been collecting rentals on the said properties. The Yupanos lived only a block away from the
disputed lots.[30] The husband, Laureano Yupano, was relatively close to Julian and to Epitacio and had
known Cornelia before the latter left to live in the United States from 1979 to 1983.[31] Before he
bought the property from Sergio, Laureano himself verified that there were tenants who had been
paying rentals to Vicente.[32] All these should have alerted him to doubt the validity of Sergios title over
the said lots. Yet, the Yupanos chose to ignore these obvious indicators.

In Abad v. Guimba,[33] we explained:

[A]s a rule, the purchaser is not required to explore further than what the Certificate indicates on its
face. This rule, however, applies only to innocent purchasers for value and in good faith; it excludes a
purchaser who has knowledge of a defect in the title of the vendor, or of facts sufficient to induce a
reasonable prudent man to inquire into the status of the property.[34]

We thus declare the Affidavit of Adjudication by Sole Heir of Estate of Deceased person executed by
Sergio Rublico to be void and without any effect. The sale made by him to spouses Yupano is, likewise,
declared null and void. Respondent Sergio Rublico is ordered to return the amount of P100,000.00 paid
to him by spouses Laureano Yupano, less the amount spent on the acquisition of the invalid title
procured by him with the acquiescence of the Yupanos.

WHEREFORE, premises considered, the Decision of the Court of Appeals in CA-G.R. CV No. 34979 dated
November 5, 2002 is hereby REVERSED and SET ASIDE. Accordingly, the Decision of the Regional Trial
Court of Makati dated September 9, 1991 is REINSTATED with MODIFICATION in that:

1. the Extrajudicial Adjudication of Estate with Absolute Sale dated February 4, 1985 as
VALID;

2. the sale between respondent Sergio Rublico and Spouses Laureano Yupano is NULL and
VOID. Respondent Sergio Rublico is ordered to return the P100,000.00 paid by the Yupanos, less the
amount spent on the acquisition of the invalid title procured by him with the acquiescence of the
Yupanos; and

3. the Register of Deeds of Makati is ordered to CANCEL Transfer Certificate of Title Nos.
156312 and 156313 in the name of Laureano Yupano and, in lieu thereof, RESTORE Transfer Certificate
No. 155768.

SO ORDERED.