Bonilla v Barcena

Facts:
1. On March 31, 1975 Fortunata Barcena,
mother of minors Rosalio Bonilla and Salvacion
Bonilla and wife of Ponciano Bonilla, instituted
a civil action in the Court of First Instance of
Abra, to quiet title over certain parcels of land
located in Abra.
2.On August 4, 1975, the defendants filed
another motion to dismiss the complaint on
the ground that Fortunata Barcena is dead
and, therefore, has no legal capacity to sue.
- Said motion to dismiss was heard on
August 14, 1975. In said hearing,
counsel for the plaintiff confirmed the
death of Fortunata Barcena,
- and asked for substitution by her minor
children and her husband, the petitioners
herein;
- but the court after the hearing
immediately dismissed the case on the
ground that a dead person cannot be a
real party in interest and has no legal
personality to sue.
3. On August 28, 1975, the court denied the
motion for reconsideration filed by counsel for
the plaintiff for lack of merit.

4. On September 1, 1975, counsel for

deceased plaintiff filed a written manifestation
praying that the minors Rosalio Bonilla and
Salvacion Bonilla be allowed to substitute their
deceased mother,
- but the court denied the counsel's prayer for
lack of merit. From the order, counsel for the
deceased plaintiff filed a second motion for
reconsideration of the order dismissing the
complaint claiming that the same is in
violation of Sections 16 and 17 of Rule 3 of the
Rules of Court but the same was denied.
Issue/held:
WON the court erred in denying minors Rosalio
Bonilla and Salvacion Bonilla be to substitute
their deceased mother? YES
Rationale:
1. While it is true that a person who is dead
cannot sue in court, yet he can be substituted
by his heirs in pursuing the case up to its
completion.
2. The records of this case show that the
death of Fortunata Barcena took place on July
9, 1975 while the complaint was filed on
March 31, 1975.
3. This means that when the complaint was

filed on March 31, 1975, Fortunata Barcena

was still alive, and therefore, the court had
acquired jurisdiction over her person.
- If thereafter she died, the Rules of
Court prescribes the procedure whereby
a party who died during the pendency of
the proceeding can be substituted.
- Under Section 16, Rule 3 of the Rules of
Court "whenever a party to a pending
case dies ... it shall be the duty of his
attorney to inform the court promptly of
such death ... and to give the name and
residence of his executor, administrator,
guardian or other legal representatives."
- This duty was complied with by the
counsel for the deceased plaintiff when
he manifested before the respondent
Court that Fortunata Barcena died on
July 9, 1975 and asked for the proper
substitution of parties in the case.
- The respondent Court, however,
instead of allowing the substitution,
dismissed the complaint on the ground
that a dead person has no legal
personality to sue. This is a grave error.
- Article 777 of the Civil Code provides
"that the rights to the succession are
transmitted from the moment of the

death of the decedent.

- " From the moment of the death of the
decedent, the heirs become the absolute
owners of his property, subject to the
rights and obligations of the decedent,
and they cannot be deprived of their
rights thereto except by the methods
provided for by law
4. The moment of death is the determining
factor when the heirs acquire a definite right
to the inheritance whether such right be pure
or contingent.
- The right of the heirs to the property of
the deceased vests in them even before
judicial declaration of their being heirs in
the testate or intestate proceedings.
- When Fortunata Barcena, therefore,
died her claim or right to the parcels of
land in litigation in Civil Case No. 856,
was not extinguished by her death but
was transmitted to her heirs upon her
death.
- Her heirs have thus acquired interest in
the properties in litigation and became
parties in interest in the case. There is,
therefore, no reason for the respondent
Court not to allow their substitution as
parties in interest for the deceased

plaintiff.
5. Under Section 17, Rule 3 of the Rules of
Court "after a party dies and the claim is not
thereby extinguished, the court shall order,
upon proper notice, the legal representative of
the deceased to appear and be substituted for
the deceased, within such time as may be
granted ... ."
-The question as to whether an action
survives or not depends on the nature of
the action and the damage sued for.
- In the causes of action which survive
the wrong complained affects primarily
and principally property and property
rights, the injuries to the person being
merely incidental,
- while in the causes of action which do
not survive the injury complained of is to
the person, the property and rights of
property affected being incidental.
6. It is, therefore, the duty of the respondent
Court to order the legal representative of the
deceased plaintiff to appear and to be
substituted for her.
7. But what the respondent Court did, upon
being informed by the counsel for the
deceased plaintiff that the latter was dead,
was to dismiss the complaint.

-This should not have been done for

under the same Section 17, Rule 3 of the
Rules of Court, it is even the duty of the
court, if the legal representative fails to
appear, to order the opposing party to
procure the appointment of a legal
representative of the deceased
- In the instant case the respondent
Court did not have to bother ordering the
opposing party to procure the
appointment of a legal representative of
the deceased because her counsel has
not only asked that the minor children be
substituted for her
- but also suggested that their uncle be
appointed as guardian ad litem for them
because their father is busy in Manila
earning a living for the family.
-But the respondent Court refused the
request for substitution on the ground
that the children were still minors and
cannot sue in court.
-This is another grave error because the
respondent Court ought to have known
that under the same Section 17, Rule 3
of the Rules of Court, the court is
directed to appoint a guardian ad litem
for the minor heirs.

-Precisely in the instant case, the

counsel for the deceased plaintiff has
suggested to the respondent Court that 4.
the uncle of the minors be appointed to
act as guardian ad litem for them.
- Unquestionably, the respondent Court 5.
has gravely abused its discretion in not
complying with the clear provision of the
Rules of Court in dismissing the
6.
complaint of the plaintiff in Civil Case No.
856 and refusing the substitution of
parties in the case.
Salvador v Sta. Maria
7.

1.
2.
3.

Doctrine: Right of heirs to specific, distributive

shares of inheritance does not become finally
determinable until all the debts of the estate
are paid.
Facts:
Seven parcels of titled land and two parcels of
untitled land were owned by Celestino
Salvador.
He executed a deed of sale over them in favor
of the spouses Alfonso Salvador and Anatolia
Halili.
Hel later filed Alleging that the sale was void
for lack of consideration, he filed on May

12,1955, against said vendees, a suit for

reconveyance of said parcels of land.
Celestino Salvador died, testate. As his
alleged heirs, twenty-one persons substituted
as plaintiffs in the action for reconveyance.
Meanwhile, special proceedings for the
probate of his will and for letters testamentary
was instituted.
About three years later, pursuant to an order
of the CFI of Bulacan, Br. II, in the testacy
proceedings, , one of the parcels of land
involved, Lot 6, was sold so that with its
proceeds debtors who filed claims may be
paid.
The Philippine National Bank bought it at
P41,184.00. Said amount was then deposited
in the same bank by the administrator, subject
to Court order.
8. The present special civil action for certiorari
with preliminary injunction assails the order to
pay the debts of the estate with the
P41,184.00 proceeds of the sale of Lot 6
Issue:
Are the parcels of land and the proceeds of
the sale of one of them, properties of the
estate or not?

Held:
1. YES. Right of heirs to specific, distributive
shares of inheritance does not become
finally determinable until all the debts of
the estate are paid. Until then, in the
face of said claims, their rights cannot be
enforced, are inchoate, and subject to
the existence of a residue after payment
of the debts.
2.

Petitioners rely for their rights on their alleged

character as heirs of Celestino; as such, they
were substituted in the reconveyance case;
a. the reconveyance to them was
reconveyance to them as heirs of
Celestino Salvador. It follows that
the properties they claim are, even
by their own reasoning, part of
Celestino's estate.
b. The right thereto as allegedly his
heirs would arise only if said
parcels of land are part of the
estate of Celestino, not otherwise.
c. Their having received the same,
therefore, in the reconveyance

action, was perforce in trust for the

estate, subject to its obligations.
They cannot distribute said
properties among themselves as
substituted heirs without the debts
of the estate being first satisfied.
Decision: Petition for certiorari is denied
Ramirez v Baltazar
DOCTRINE: No.2 of the Ration
Facts:
1. It appears that on 6 January 1959,
Victoriana Eguaras single, made and executed
a real estate mortgage over a parcel of land,
owned by her in fee simple, as security for a
loan of P2,170.00 in favor of the spouses
Artemio Baltazar and Susana Flores.
2. Upon the demise of the mortgagor, the
mortgagees, as creditors of the deceased, on
16 September 1960 filed a petition for the
intestate proceedings of her estate,
- as petitioners, they alleged that
Filemon Ramirez and Monica Ramirez are
the heirs of the deceased.

- Filemon Ramirez was appointed

administrator of the estate;

days from finality of the decision, the

obligation was not fully paid.

- however, having failed to qualify, on 16

January 1961, the court appointed
Artemio Diawan, then a deputy clerk of
court, administrator of the estate who, in
due time, qualified for the office.

6. The judgment not having been satisfied, a

writ of execution was issued for the sale of the
mortgaged property, and after compliance
with the requirements of the law regarding the
sending, posting and publication of the notice
of sale, the Sheriff sold the property at public
auction to the highest bidder, who happened
to be the plaintiffs themselves,

3. On 19 April 1961, the mortgagees, Artemio

Baltazar and Susana Flores, filed a complaint
for foreclosure of the aforesaid mortgage,
against Artemio Diawan, in his capacity as
administrator of the estate
4. The defendant-administrator was duly
served with summons but he failed to answer,
whereupon, on petition of the plaintiffs said
defendant was declared in default.
- The case was referred to a
commissioner to receive the evidence for
the plaintiffs, and defendantadministrator, as deputy clerk of court,
acted as such hearing commissioner.
5. On 16 August 1961, decision was rendered
decreeing the foreclosure of the mortgaged
property and the sale thereof, if, within ninety

7. On 6 February 1962, Filemon Ramirez,

Monica Ramirez and Jose Eguaras, the first two
being the heirs named in the petition for
intestate proceedings, filed a complaint
designated "For the Annulment of all
Proceedings in said Civil Case No. SC-292 for
the Foreclosure of the Mortgage", against the
spouses Artemio Baltazar and Susana Flores,
and Artemio Diawan, in his capacity as
administrator of the estate of Victoriana
Eguaras, deceased,
- and Silverio Talabis, in his capacity as
deputy provincial sheriff of Laguna,
8. the defendants spouses, Artemio Baltazar
and Susana Flores, filed a motion to dismiss

the complaint
- on the ground that the plaintiffs have
no legal capacity to sue;
- defendant Diawan likewise moved to
dismiss on two grounds: that plaintiffs
have no legal capacity to sue and that
the complaint states no cause of action.
9. The lower court dismiss the complaint. The
ff reasons:
- upon consideration of the evidence,
said defendant could not have offered
any evidence to avoid the foreclosure of
the mortgage which the Court found to
be in order.
-Under the circumstances and with the
apparent disinterestedness of Filemon
and Rolando to qualify as administrator
when appointed, there could not have
been any connivance and/or collusion
between plaintiffs in this case and
Artemio Diawan as administrator";
- and that plaintiffs have no legal

capacity to sue since their status as legal

heirs of the deceased has yet to be
determined precisely in Special
Proceeding No. SC-99, and until such
status is so fixed by the Court, they have
no cause of action against defendants.
10. The lower court also denied plaintiffs
petition for the issuance of a writ of
preliminary injunction to enjoin defendants
from entering and taking physical possession
of the land
- On the ground that possession was
effected and delivered by provincial
sheriff of Artemio Baltazar and Susana
Flores on Feb. 1962

Issue/held:
WON the court erred in:
(1) in holding that plaintiffs-appellants have no
legal capacity to sue until their
status as legal heirs of the deceased is
determined in Special Proceeding No.

SC-99? YES
(2) in ruling that there was no collusion or
connivance among the defendantsappellees, despite the fact that the issue in
the motion to dismiss is purely
legal, not factual? YES
(3) in denying the petition for a writ of
preliminary injunction?YES
Rationale:

st

issue:

1. let it be remembered that the defendantsappellees, in availing themselves of the

defense that the plaintiffs-appellants had not
been declared to be the heirs of the deceased
Victoriana Eguaras, have overlooked the fact
that the (defendants-appellees) themselves in
their petition for intestate proceedings (Case
SC-99) have alleged that Filemon Ramirez and
Monica Ramirez,

- two of herein plaintiffs-appellants, are

the heirs of the deceased. Insofar as
defendants-appellees are concerned, it is
our opinion that they are estopped from
questioning the heirship of these two
named persons to the estate of the
deceased.
2. There is no question that the rights to
succession are automatically transmitted to
the heirs from the moment of the death of the
decedent.
- GENERAL RULE: While, as a rule, the
formal declaration or recognition to such
successional rights needs judicial
confirmation, this Court has, under
special circumstances, protected these
rights from encroachments made or
attempted before the judicial
declaration.
- EXCEPTION:In Pascual vs. Pascual, it
was ruled that although heirs have no
legal standing in court upon the
commencement of testate or intestate
proceedings, this rule admits of an
exception as "when the administrator
fails or refuses to act in which event the

heirs may act in his place."

3. A similar situation obtains in the case at
bar. The administrator is being charged to
have been in collusion and connivance with
the mortgagees of a property of the deceased,
allowing its foreclosure without notifying the
heirs, to the prejudice of the latter.
- Since the ground for the present action
to annul the aforesaid foreclosure
proceedings is the fraud resulting from
such insidious machinations and
collusion in which the administrator has
allegedly participated, it would be
farfetched to expect the said
administrator himself to file the action in
behalf of the estate.
- And who else but the heirs, who have
an interest to assert and to protect,
would bring the action?
- Inevitably, this case should fall under
the exception, rather than the general
rule that pending proceedings for the
settlement of the estate,
- the heirs have no right to commence

an action arising out of the rights

belonging to the deceased.
2nd issue:
4. We fully agree with the plaintiffs-appellants
that the lower court had gone too far in
practically adjudicating the case on the merits
when it made the observation
- that "there could not have been any
connivance and/or collusion between
plaintiffs in this case and Artemio
Diawan as administrator."
- A thorough scrutiny of the allegations
in the motions to dismiss filed by
defendants-appellees does not indicate
that that question was ever put at issue
therein. On the other hand,
- the controversy on the existence or
inexistence of collusion between the
parties as a result of which judgment
was rendered against the estate is the
very core of the complaint that was
dismissed. Undoubtedly, the cause of
action is based on Section 30, Rule 132
of the Rules of Court.

3rd Issue:
5. the denial of the motion for the issuance of
preliminary injunction for it puts at issue
the factual finding made by the lower court
that the defendants had already been placed
in possession of the property.
6. At this stage of the proceeding, and
considering the nature of the case before Us,
such a question is, at this time, beyond the
competence of the Court.

Puno v Puno Enterprises Inc

Doctrine: 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.
FACTS:
1) Carlos L. Puno, who died was an
incorporator of respondent Puno Enterprises,
Inc.
2) 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 commonlaw wife, Amelia Puno.
3) As surviving heir, he claimed entitlement to
the rights and privileges of his late father as
stockholder of respondent.
4) 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.
5) Court of Appeals ordered the dismissal of
the complaint because petitioner was not able
to establish the paternity of and his filiation to
Carlos L. Puno.
ISSUE: WON petitioner as heir is entitled to the
reliefs demanded (inspection of corporate
book and giving him the profits earned from
the shares of Carlos Puno).
RULING: 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.
a) 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.
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.
b) 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. Such right
rests upon the stockholders underlying
ownership of the corporations assets and
property.
Similarly, only stockholders of record

are entitled to receive dividends

declared by the corporation, a right
inherent in the ownership of the shares.
c) 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.
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. Until a
settlement and division of the estate is
effected, the stocks of the decedent are

held by the administrator or executor.

Consequently, during such time, it is
the administrator or executor who is
entitled to exercise the rights of the
deceased as stockholder.
d) 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.
Reyes V RTC of Makati
Facts:
1. Oscar and private respondent Rodrigo C.
Reyes are two of the four children of the
spouses Pedro and Anastacia Reyes.

A) Pedro, Anastacia, Oscar, and Rodrigo

each owned shares of stock of Zenith
Insurance Corporation (Zenith), a
domestic corporation established by
their family.
B) Pedro died in 1964, while Anastacia
died in 1993.
C) Although Pedro's estate was judicially
partitioned among his heirs sometime in
the 1970s, no similar settlement and
partition appear to have been made with
Anastacia's estate, which included her
shareholdings in Zenith.
D) Anastacia owned 136,598 shares of
Zenith; Oscar and Rodrigo owned
8,715,637 and 4,250 shares,
respectively.
2. Zenith and Rodrigo filed a complaint with
the Securities and Exchange Commission
(SEC) against Oscar
A) 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]
B) to determine the shares of stock of
deceased spouses Pedro and Anastacia
Reyes that were arbitrarily and
fraudulently appropriated [by Oscar] for
himself
3. Oscar denied the charge that he illegally
acquired the shares of Anastacia Reyes.
A) 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.
4. Oscar filed a Motion to declare Complaint as
nuisance or harassment suit.
A) He claimed that the complaint is a
mere nuisance or harassment suit
5. RTC: denied the motion
6. CA: affirmed RTC decision.

Issue:
Whether the complaint is a bona fide
derivative suit but or a petition for settlement
of estate
Argument: If it is the latter, it is outside
the jurisdiction of RTC acting as special
commercial court
Held:
the RTC - sitting as special commercial court has no jurisdiction to hear Rodrigo's complaint
since what is involved is the determination
and distribution of successional rights to the
shareholdings of Anastacia Reyes.
Ratio:
1. 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

(b) the nature of the question that is the

subj
2. Article 777 of the Civil Code declares that
the successional rights are transmitted from
the moment of death of the decedent.
Accordingly, upon Anastacia's death, her
children acquired legal title to her estate
(which title includes her shareholdings in
Zenith), and they are, prior to the estate's
partition, deemed co-owners thereof.
(a) This status as co-owners, however,
does not immediately and necessarily
make them stockholders of the
corporation.
(b) 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.
(c) The transfer of title by means of
succession, though effective and valid
between the parties involved (i.e.,
between the decedent's 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.
3. The complaint is about the protection and
enforcement of successional rights.
(a) 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
(b) Worth noting are this Court's
statements in the case of Natcher v. CA
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
(c) xxxx
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.
4. Rodrigo's 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 intracorporate 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
[34]
suit.
d) 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 remedieswithin 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.
Lastly, we find no injury, actual or
threatened, alleged to have been done
to the corporation due to Oscar's acts. If
indeed he illegally and fraudulently

transferred Anastacia's 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.

De Borja v Vda. De Borja

Facts:
1. Francisco de Borja, upon the death of his
wife Josefa Tangco on 6 October 1940,
filed a petition for the probate of her will
a. The will was probated on 2 April
1941
b. Francisco de Borja was appointed
executor and administrator:
c. Their son, Jose de Borja, was
appointed co-administrator.
2. When Francisco died, Jose became the
sole administrator of the testate estate
of his mother, Josefa Tangco.

a. While a widower Francisco de Borja

allegedly took unto himself a
second wife, Tasiana Ongsingco.
b. Upon Francisco's death, Tasiana
instituted testate proceedings in
the Court of First Instance of Nueva
Ecija, where, in 1955, she was
appointed special administratrix.
3. The testate estate of Josefa Tangco alone
has been unsettled for more than a
quarter of a century. In order to put an
end to all these litigations, a compromise
agreement was entered into.
4. Jose de Borja submitted for Court
approval the agreement of 12 October
1963 to the Court of First Instance of
Rizal, in Special Proceeding No. R-7866;
and again, on 8 August 1966, to the
Court of First Instance of Nueva Ecija, in
Special Proceeding No. 832

a. The Rizal court approved the

compromise agreement, but the
Nueva Ecija court declared it void
and unenforceable.

not applicable to the case at bar.

b. Special administratrix Tasiana
Ongsingco Vda. de de Borja
appealed the Rizal Court's order of
approval (now Supreme Court G.R.
case No. L-28040), while
administrator Jose de Borja
appealed the order of disapproval
(G.R. case No. Lc. 28568) by the Court of First
Instance of Nueva Ecija.
Issue: WON the compromise agreement is
valid, even if the will of Francisco has not yet
been probated
Tasiana argues: that it was not valid
because the heirs cannot enter into such kind
of agreement without first probating the will of
Francisco, and at the time the agreement was
made, the will was still being probated with
the CFI of Nueva Ecija.
Held: YES, the compromise agreement is valid.
Ratio:
1. Doctrine of Guevara vs. Guevara, ante, is

a. Guevara vs. Guevara. 74 Phil. 479,

(Court's majority held the view that the
presentation of a will for probate is
mandatory and that the settlement and
distribution of an estate on the basis of
intestacy when the decedent left a will,
is against the law and public policy.)
b. There was here no attempt to settle or
distribute the estate of Francisco de
Borja among the heirs thereto before the
probate of his will.
c. The clear object of the contract was
merely the conveyance by Tasiana
Ongsingco of any and all her individual
share and interest, actual or eventual in
the estate of Francisco de Borja and
Josefa Tangco.
d. There is no stipulation as to any other
claimant, creditor or legatee.
e. And as a hereditary share in a
decedent's estate is transmitted or
vested immediately from the moment of
the death of such causante or

predecessor in interest (Civil Code of the

Philippines, Art. 777) there is no legal
bar to a successor (with requisite
contracting capacity) disposing of her or
his hereditary share immediately after
such death, even if the actual extent of
such share is not determined until the
subsequent liquidation of the estate.
2. Tasiana Ongsingco was his compulsory heir
under article 995 et seq. of the present Civil
Code.
a. Wherefore, barring unworthiness or
valid disinheritance, her successional
interest existed independent of Francisco
de Borja's last will and testament and
would exist even if such will were not
probated at all.
b. Thus, the prerequisite of a previous
probate of the will, as established in the
Guevara and analogous cases, can not
apply to the case of Tasiana Ongsingco
Vda. de de Borja.
3. Since the compromise contract Annex A
was entered into by and between "Jose de
Borja personally and as administrator of the

Testate Estate of Josefa Tangco" on the one

hand, and on the other, "the heir and
surviving spouse of Francisco de Borja by his
second marriage, Tasiana Ongsingco Vda. de
de Borja", it is clear that the transaction was
binding on both in their individual capacities,
upon the perfection of the contract, even
without previous authority of the Court to
enter into the same.
a. The only difference between an
extrajudicial compromise and one that is
submitted and approved by the Court, is
that the latter can be enforced by
execution proceedings.

Lee v RTC of QC
FACTS:
1. Dr. Juvencio P. Ortaez incorporated the
Philippine International Life Insurance
Company, Inc.
a. At the time of the companys
incorporation, Dr. Ortaez owned ninety
percent (90%) of the subscribed capital

stock.
2. On July 21, 1980, Dr. Ortaez died
a. He left behind a wife (Juliana Salgado
Ortaez), three legitimate children
(Rafael, Jose and Antonio Ortaez) and
five illegitimate children by Ligaya
Novicio (herein private respondent Ma.
Divina Ortaez-Enderes and her siblings
Jose, Romeo, Enrico Manuel and Cesar,
all surnamed Ortaez).
3. Judge Ernani Cruz Pao appointed Rafael
and Jose Ortaez joint special administrators
of their fathers estate
a. special administrators Rafael and Jose
Ortaez submitted an inventory of the
estate of their father which included
3
2,029 shares of stock in Philinterlife,
representing 50.725% of the companys
outstanding capital stock.
4. The decedents wife, Juliana S. Ortaez,
claiming that she owned 1,014 Philinterlife
shares of stock as her conjugal share in the
estate, sold said shares with right to
repurchase in favor of petitioner Filipino Loan

Assistance Group (FLAG), represented by its

president Jose C. Lee.
5. Special Administrator Jose Ortaez, claiming
he owned the remaining 1,011 Philinterlife
shares of stocks as his inheritance share in the
estate, sold said shares with right to
repurchase also in favor of FLAG
6. several years before Juliana Ortaez and
her two children, Special Administrators Rafael
and Jose Ortaez, entered into a
memorandum of agreement for the
extrajudicial settlement of the estate of Dr.
Juvencio Ortaez, partitioning the estate
(including the Philinterlife shares of stock)
among themselves
a. This was the basis of the number of
shares separately sold by Juliana Ortaez
and by Jose Ortaez
7. Ma. Divina OrtaezEnderes and her
siblings filed a motion for appointment of
special administrator of Philinterlife shares of
stock.
a. the intestate court granted the motion
and appointed private respondent

Enderes special administratrix of the

Philinterlife shares of stock.
8.

Special Administratrix Enderes filed an urgent 10.

motion to declare void ab initio the
memorandum of agreement
a.
she filed a motion to declare the
partial nullity of the extrajudicial
settlement of the decedents estate.
b. Special Administratrix Enderes filed an
urgent motion to declare void ab initio
the deeds of sale of Philinterlife shares of
stock

9.

ALL THE ABOVE-MENTIONED MOTIONS WERE

GRANTED
a.Since the sales in question were
entered into by Juliana S. Ortaez and
Jose S. Ortaez in their personal
capacity without prior approval of the
Court, the same is not binding upon
the Estate.
1 b.the Memorandum of Agreement
is partially void ab initio insofar as
the transfer/waiver/renunciation of

the Philinterlife shares of stocks are

concerned
Special Administratrix Enderes and her
siblings filed a motion for execution of the
Orders of the intestate court
a. the intestate court granted the motion
for execution
ISSUES: 1. Whether the lower court was
correct in not approving the Memorandum
Agreement and in declaring void the deeds of
sale? YES
2. Whether it correctly issued the order for
execution? YES
HELD:
1. Memorandum of Agreement was
correctly not approved. Deeds of sale are
void.
a. some of the heirs of the decedent
without securing court approval
have appropriated as their own
personal property the properties of
[the] Estate, to the exclusion and
the extreme prejudice of the other

claimant/heirs
o these heirs, without court
approval, have distributed the
asset of the estate among
themselves and proceeded to
dispose the same to third
parties even in the absence of
an order of distribution by the
Estate Court
b. no legal justification for this action
by the heirs
o no basis for demanding that
public respondent [the
intestate court] approve the
sale of the Philinterlife shares
of the Estate by Juliana and
Jose Ortaez in favor of the
Filipino Loan Assistance
Group.
parties to the Memorandum of
Agreement are not the only heirs
claiming an interest in the estate left by
Dr. Juvencio P. Ortaez.
o as early as March 3, 1981 an
Opposition to the Application for
Issuance of Letters of

Administration was filed by the

acknowledged natural children of
Dr. Juvencio P. Ortaez with Ligaya
Novicio
o claim is admittedly known to the
parties to the Memorandum of
Agreement before they executed
the same.
Since the appropriation of the estate
properties by Juliana Ortaez and her
children was invalid, the subsequent sale
thereof by Juliana and Jose to a third
party (FLAG), without court approval,
was likewise void.
An heir can sell his right, interest, or
participation in the property under
administration under Art. 533 of the Civil
Code which provides that possession of
hereditary property is deemed
transmitted to the heir without
interruption from the moment of death
of the decedent.
o However, an heir can only
alienate such portion of the estate
that may be allotted to him in the

division of the estate by the

probate or intestate court after
final adjudication, that is, after all
debtors shall have been paid or the
devisees or legatees shall have
been given their shares
o an heir may only sell his ideal or
undivided share in the estate, not
any specific property therein
Juliana Ortaez and Jose Ortaez
sold specific properties of the estate in
favor of petitioner FLAG.
o This they could not lawfully do
pending the final adjudication of
the estate by the intestate court
because of the undue prejudice it
would cause the other claimants to
the estate, as what happened in
the present case.
any disposition of estate property by
an administrator or prospective heir
pending final adjudication requires court
approval
o any unauthorized disposition of

estate property can be annulled by

the probate court, there being no
need for a separate action to annul
the unauthorized disposition.
2. The intestate or probate court can execute
its order nullifying the invalid sale.
The intestate court has the power to
execute its order with regard to the
nullity of an unauthorized sale of estate
property, otherwise its power to annul
the unauthorized or fraudulent
disposition of estate property would be
meaningless
o enforcement is a necessary
adjunct of the intestate or probate
courts power to annul
unauthorized or fraudulent
transactions to prevent the
dissipation of estate property
before final adjudication
not dealing here with the issue of
inclusion or exclusion of properties in the
inventory of the estate because there is
no question that, from the very start, the
Philinterlife shares of stock were owned

by the decedent, Dr. Juvencio Ortaez.

Rather, we are concerned here with the
effect of the sale made by the
decedents heirs, Juliana Ortaez and
Jose Ortaez, without the required
approval of the intestate court.
o contention of petitioners that the
determination of the intestate court
was merely provisional and should
have been threshed out in a
separate proceeding is incorrect.
DECISION: Petition is hereby DENIED

Heirs of Sandejas v Lina

Facts:

appointed new administrator of the estate of

Remedios.
4.The heirs of Sandejas now filed a MR for the
appointment of a new administrator.
5. Lina filed a Motion to approve the deed of
conditional sale.
ISSUES:
1. Is Elisoro legally obliged to convey title to
the property, found by the lower court to be a
contract to sell?
2. Did the Probate Court have jurisdiction over
the approval of the sale? 3. Can Lina apply to
the Court for the approval of the sale?4. Is
Elisoro in Bad faith?5. How much is Elisoros
share in the property?

1.Eliosoro Sandejas was appointed

administrator for the settlement of the estate
of his wife, Remedios.

HELD:

2. He eventually sold parcels of land (in

Makati) to Alex Lina, who agreed to buy it for
P1M.

NO, since the condition is the procurement of

court approval and not the payment of the
purchase price

3. Eliosoro eventually died and Alex Lina was

Second

First

YES, the Probate Court has jurisdiction over it

since it covers all matters relating to the
settlement of estates and the probate of wills
of deceased persons, including the
appointment and removal of administrators
and executors. It also extends to incidental
and collateral matters such as selling,
mortgaging or otherwise encumbering real
property belonging to the estate.

lots, and (2) he did not promise he could

obtain the approval.
Fifth
His share is 11/20 of the entire property
because he owned 12 of these lots plus a
further 1/10 of the remaining half, in his
capacity as one of the legal heirs.

Third
The stipulation requiring court approval does
not affect the validity and the effectivity of the
sale as regards the selling heirs. It merely
implies that that the property may be taken
out of custodia legis, only with courts
permission.
Because the other heirs did not consent to the
sale of their ideal shares in the disputed lots,
it is only limited to the pro-indiviso share of
Eliosoro.
Fourth
NO. SC held that he is not in bad faith
because: (1) he informed Lina of the need to
secure court approval prior to the sale of the

Santos v Lumbao
NATURE: Petition for Review on Certiorari
under Rule 45 of the 1997 Revised Rules of
Civil Procedure
FACTS:
1. Petitioners Virgilio, Victorino, Ernesto and
Tadeo, all surnamed Santos, are the legitimate
and surviving heirs of the late Rita Catoc
Santos (Rita), who died on 20 October 1985.
a. petitioners Esperanza Lati and
Lagrimas Santos are the daughters-inlaw of Rita.

2.

3.

Respondents Spouses Jose Lumbao and

Proserfina Lumbao are the alleged
owners of the 107-square meter lot
(subject property), which they
purportedly bought from Rita during her
lifetime.

On two separate occasions during her lifetime,

Rita sold to respondents Spouses Lumbao the
subject property which is a part of her share in
the estate of her deceased mother, Maria
Catoc (Maria), who died intestate on 19
September 1978.
a. first occasion: Rita sold 100 square
meters of her inchoate share in her
mothers estate through a document
denominated as "Bilihan ng Lupa," dated
17 August 1979
i. Respondents Spouses Lumbao
claimed the execution of the
aforesaid document was witnessed
by petitioners Virgilio and Tadeo, as
shown by their signatures affixed
therein.
b. second occasion: an additional seven
square meters was added to the land as

evidenced by a document also

denominated as "Bilihan ng Lupa," dated
9 January 1981
4. Spouses Lumbao took actual possession
thereof and erected thereon a house which
they have been occupying as exclusive
owners up to the present
5. Respondents Spouses Lumbao alleged that
prior to her death, Rita informed respondent
Proserfina Lumbao she could not deliver the
title to the subject property because the entire
property inherited by her and her co-heirs
from Maria had not yet been partitioned.
6. the Spouses Lumbao claimed that
petitioners executed a Deed of Extrajudicial
Settlement, adjudicating and partitioning
among themselves and the other heirs, the
estate left by Maria, which included the
subject property already sold to respondents
Spouses Lumbao
7. respondents Spouses Lumbao sent a formal
demand letter to petitioners but despite
receipt of such demand letter, petitioners still
failed and refused to reconvey the subject
property to the respondents Spouses Lumbao.

8. Consequently, the latter filed a Complaint

for Reconveyance with Damages
9. The trial court denied the petition
10.Aggrieved, respondents Spouses Lumbao
appealed to the Court of Appeals; it was
granted.
ISSUES:
1. Whether the Complaint for Reconveyance
with Damages filed by respondents spouses
Lumbao is dismissible for their failure to
comply with the mandate of the Revised
Katarungang Pambarangay Law under R.A. No.
7160? NO
2. Whether the documents known as "Bilihan
ng Lupa" are valid and enforceable, thus, they
can be the bases of the respondents spouses
Lumbaos action for reconveyance with
damages? YES
3. Whether herein petitioners are legally
bound to comply with the "Bilihan ng Lupa"
dated 17 August 1979 and 9 January 1981 and
consequently, reconvey the subject property
to herein respondents spouses Lumbao? YES

HELD:
1. No, it is not dismissable.
petitioners can no longer raise the
defense of non-compliance with the
barangay conciliation proceedings to
seek the dismissal of the complaint filed
by the respondents Spouses Lumbao,
because they already waived the said
defense when they failed to file a Motion
to Dismiss.
non-referral of a case for barangay
conciliation when so required under the
law is not jurisdictional in nature and
may therefore be deemed waived if not
raised seasonably in a motion to dismiss
2. Document Bilihan ng Lupa is valid and
enforceable.
in petitioners Answer and Amended
Answer to the Complaint for
Reconveyance with Damages, both
petitioners Virgilio and Tadeo made an
admission that indeed they acted as
witnesses in the execution of the "Bilihan
ng Lupa," dated 17 August 1979

o however, petitioner Virgilio

denied having knowledge of the
sale transaction and claimed that
he could not remember the same
as well as his appearance before
the notary public due to the length
of time that had passed.
petitioner Virgilio did not
categorically deny having signed the
"Bilihan ng Lupa
o petitioners had not adduced any
other evidence to override the
admission made in their [A]nswer
o the general rule that the
admissions made by a party in a
pleading are binding and
conclusive upon him applies in this
case.
both "Bilihan ng Lupa" documents
dated 17 August 1979 and 9 January
1981 were duly notarized before a
notary public
o a document acknowledged before
a notary public is a public

document that enjoys the

presumption of regularity
at the time of the execution of the
documents denominated as "Bilihan ng
Lupa," the entire property owned by
Maria, the mother of Rita, was not yet
divided among her and her co-heirs
o exact metes and bounds of the
subject property sold to
respondents Spouses Lumbao
could not be possibly determined
at that time.
o does not make the contract of
sale between Rita and respondents
Spouses Lumbao invalid while an
estate remains undivided, coowners have each full ownership of
their respective aliquots or
undivided shares and may
therefore alienate, assign or
mortgage them
o The sale is valid, but only with
respect to the aliquot share of the
selling co-owner.

o Furthermore, the sale is subject

to the results of the partition upon
the termination of the coownership
when the estate left by Maria had
been partitioned, the 107- square meter
lot sold by the mother of the petitioners
to respondents Spouses Lumbao should
be deducted from the total lot, inherited
by them in representation of their
deceased mother, which in this case
measures 467 square meters.
o The 107-square meter lot already
sold to respondents Spouses Lumbao
can no longer be inherited by the
petitioners because the same was no
longer part of their inheritance as it was
already sold during the lifetime of their
mother.
defense of prescription of action and
laches is likewise unjustifiable
when the plaintiff is in possession of the
land to be reconveyed, prescription cannot set
ino exception is based on the theory that
registration proceedings could not be used as

a shield for fraud or for enriching a person at

the expense of another
o right of the respondents Spouses
Lumbao to seek reconveyance does not
prescribe because the latter have been
and are still in actual possession and
occupation as owners of the property
sought to be reconveyed
respondents Spouses Lumbao cannot be
held guilty of laches because from the very
start that they bought the 107-square meter
lot from the mother of the petitioners, they
have constantly asked for the transfer of the
certificate of title into their names but Rita,
during her lifetime, and the petitioners, after
the death of Rita, failed to do so on the flimsy
excuse that the lot had not been partitioned
yet
o after the partition of the entire
estate of Maria, petitioners still
included the 107-square meter lot
in their inheritance which they
divided among themselves despite
their knowledge of the contracts of
sale between their mother and the
respondents Spouses Lumbao

3. Petitioners are legally bound to comply with

the Bilihan ng Lupa documents.
Bilihan ng Lupa" documents are
valid and enforceable and can be made
the basis of the respondents Spouses
Lumbaos action for reconveyance
failure of respondents Spouses
Lumbao to have the said documents
registered does not affect its validity and
enforceability
o registration is not a requirement
for validity of the contract as
between the parties, for the effect
of registration serves chiefly to
bind third persons.
o Where the party has knowledge
of a prior existing interest which is
unregistered at the time he
acquired a right to the same land,
his knowledge of that prior
unregistered interest has the effect
of registration as to him
Hence, the "Bilihan ng Lupa"
documents dated 17 August 1979 and 9

January 1981, being valid and

enforceable, herein petitioners are
bound to comply with their provisions.
o In short, such documents are
absolutely valid between and
among the parties thereto.
general rule that heirs are bound by
contracts entered into by their
predecessors-in-interest applies in the
present case.
o Article 1311 of the NCC is the
basis of this rule: whatever rights
and obligations the decedent have
over the property were transmitted
to the heirs by way of succession, a
mode of acquiring the property,
rights and obligations of the
decedent to the extent of the value
of the inheritance of the heirs.
the heirs cannot escape the legal
consequence of a transaction entered
into by their predecessor-in-interest
because they have inherited the
property subject to the liability affecting
their common ancestor.

o Being heirs, there is privity of

interest between them and their
deceased mother.
o They only succeed to what rights
their mother had and what is valid
and binding against her is also
valid and binding as against them.
o The death of a party does not
excuse nonperformance of a
contract which involves a property
right and the rights and obligations
thereunder pass to the personal
representatives of the deceased.
Similarly, nonperformance is not
excused by the death of the party
when the other party has a
property interest in the subject
matter of the contract.
despite the death of the petitioners
mother, they are still bound to comply
with the provisions of the "Bilihan ng
Lupa"

they must reconvey to herein

respondents Spouses Lumbao the 107square meter lot which they bought from
Rita, petitioners mother.
petitioners must pay respondents
Spouses Lumbao attorneys fees and
litigation expenses for having been
compelled to litigate and incur expenses
to protect their interest.
DECISION: DENIED