SUCCESSION 1

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-770

April 27, 1948

ANGEL T. LIMJOCO, petitioner,

vs.
INTESTATE ESTATE OF PEDRO O. FRAGRANTE,
deceased, respondent.
Angel Limjoco, Jr. and Delfin L. Gonzales for petitioner.
Bienvenido A. Tan for respondent.
HILADO, J.:
Under date of May 21, 1946, the Public Service Commission,
through Deputy Commissioner Fidel Ibaez, rendered its decision
in case No. 4572 of Pedro O. Fragante, as applicant for a certificate
of public convenience to install, maintain and operate an ice plant in
San Juan, Rizal, whereby said commission held that the evidence
therein showed that the public interest and convenience will be
promoted in a proper and suitable manner "by authorizing the
operation and maintenance of another ice plant of two and one-half
(2-) tons in the municipality of San Juan; that the original
applicant Pedro O. Fragante was a Filipino Citizen at the time of his
death; and that his intestate estate is financially capable of
maintaining the proposed service". The commission, therefore,
overruled the opposition filed in the case and ordered "that under
the provisions of section 15 of Commonwealth Act No. 146, as
amended a certificate of public convenience be issued to the
Intestate Estate of the deceased Pedro Fragante, authorizing said
Intestate Estate through its Special or Judicial Administrator,
appointed by the proper court of competent jurisdiction, to maintain
and operate an ice plant with a daily productive capacity of two and
one-half (2-1/2) tons in the Municipality of San Juan and to sell the
ice produced from said plant in the said Municipality of San Juan
and in the Municipality of Mandaluyong, Rizal, and in Quezon City",
subject to the conditions therein set forth in detail (petitioner's brief,
pp. 33-34).
Petitioner makes four assignments of error in his brief as follows:
1. The decision of the Public Service Commission is not in
accordance with law.
2. The decision of the Public Service Commission is not
reasonably supported by evidence.
3. The Public Service Commission erred in not giving
petitioner and the Ice and Cold Storage Industries of the
Philippines, Inc., as existing operators, a reasonable
opportunity to meet the increased demand.
4. The decision of the Public Service Commission is an
unwarranted departure from its announced policy with
respect to the establishment and operation of ice plant.
(Pp. 1-2, petitioner's brief.)
In his argument petitioner contends that it was error on the part of
the commission to allow the substitution of the legal representative
of the estate of Pedro O. Fragante for the latter as party applicant in
the case then pending before the commission, and in subsequently
granting to said estate the certificate applied for, which is said to be
in contravention of law.

If Pedro O. Fragante had not died, there can be no question that he

would have had the right to prosecute his application before the
commission to its final conclusion. No one would have denied him
that right. As declared by the commission in its decision, he had
invested in the ice plant in question P 35,000, and from what the
commission said regarding his other properties and business, he
would certainly have been financially able to maintain and operate
said plant had he not died. His transportation business alone was
netting him about P1,440 a month. He was a Filipino citizen and
continued to be such till his demise. The commission declared in its
decision, in view of the evidence before it, that his estate was
financially able to maintain and operate the ice plant. The aforesaid
right of Pedro O. Fragante to prosecute said application to its
conclusion was one which by its nature did not lapse through his
death. Hence, it constitutes a part of the assets of his estate, for
which a right was property despite the possibility that in the end the
commission might have denied application, although under the
facts of the case, the commission granted the application in view of
the financial ability of the estate to maintain and operate the ice
plant. Petitioner, in his memorandum of March 19, 1947, admits
(page 3) that the certificate of public convenience once granted "as
a rule, should descend to his estate as an asset". Such certificate
would certainly be property, and the right to acquire such a
certificate, by complying with the requisites of the law, belonged to
the decedent in his lifetime, and survived to his estate and judicial
administrator after his death.
If Pedro O. Fragrante had in his lifetime secured an option to buy a
piece of land and during the life of the option he died, if the option
had been given him in the ordinary course of business and not out
of special consideration for his person, there would be no doubt
that said option and the right to exercise it would have survived to
his estate and legal representatives. In such a case there would
also be the possibility of failure to acquire the property should he or
his estate or legal representative fail to comply with the conditions
of the option. In the case at bar Pedro O. Fragrante's undoubted
right to apply for and acquire the desired certificate of public
convenience the evidence established that the public needed the
ice plant was under the law conditioned only upon the requisite
citizenship and economic ability to maintain and operate the
service. Of course, such right to acquire or obtain such certificate of
public convenience was subject to failure to secure its objective
through nonfulfillment of the legal conditions, but the situation here
is no different from the legal standpoint from that of the option in the
illustration just given.
Rule 88, section 2, provides that the executor or administrator may
bring or defend actions, among other cases, for the protection of
the property or rights of the deceased which survive, and it says
that such actions may be brought or defended "in the right of the
deceased".
Rule 82, section 1, paragraph (a), mentions among the duties of the
executor or administrator, the making of an inventory of all goods,
chattels, rights, credits, and estate of the deceased which shall
come to his possession or knowledge, or to the possession of any
other person for him.
In his commentaries on the Rules of Court (Volume II, 2nd ed.,
pages 366, 367) the present chief Justice of this Court draws the
following conclusion from the decisions cited by him:
Therefore, unless otherwise expressly provided by law,
any action affecting the property or rights(emphasis
supplied) of a deceased person which may be brought by
or against him if he were alive, may likewise be instituted
and prosecuted by or against the administrator, unless the
action is for recovery of money, debt or interest thereon, or
unless, by its very nature, it cannot survive, because death
extinguishes the right . . . .
It is true that a proceeding upon the application for a certificate of
public convenience before the Public Service Commission is not an
"action". But the foregoing provisions and citations go to prove that
the decedent's rights which by their nature are not extinguished by

death go to make up a part and parcel of the assets of his estate

which, being placed under the control and management of the
executor or administrator, can not be exercised but by him in
representation of the estate for the benefit of the creditors, devisees
or legatees, if any, and the heirs of the decedent. And if the right
involved happens to consist in the prosecution of an unfinished
proceeding upon an application for a certificate of public
convenience of the deceased before the Public Service
Commission, it is but logical that the legal representative be
empowered and entitled in behalf of the estate to make the right
effective in that proceeding.
Manresa (Vol. III, 6th ed., p. 11) says that No. 10 of article 334 and
article 336 of the Civil Code, respectively, consider
as immovable and movable things rights which are not material.
The same eminent commentator says in the cited volume (p. 45)
that article 336 of the Civil Code has been deficiently drafted in that
it is not sufficiently expressive of all incorporeal rights which are
also property for juridical purposes.
Corpus Juris (Vol. 50, p. 737) states that in the broad sense of the
term, property includes, among other things, "an option", and "the
certificate of the railroad commission permitting the operation of a
bus line", and on page 748 of the same volume we read:
However, these terms (real property, as estate or interest) have
also been declared to include every species of title, inchoate or
complete, and embrace rights which lie in contract, whether
executory or executed. (Emphasis supplied.)
Another important question raised by petitioner is whether the
estate of Pedro O. Fragrante is a "person" within the meaning of
the Public Service Act.
Words and Phrases, First Series, (Vol. 6, p, 5325), states the
following doctrine in the jurisdiction of the State of Indiana:
As the estate of the decedent is in law regarded as a person, a
forgery committed after the death of the man whose name
purports to be signed to the instrument may be prosecuted as
with the intent to defraud the estate. Billings vs. State, 107 Ind.,
54, 55, 6 N. E. 914, 7 N. E. 763, 57 Am. Rep. 77.
The Supreme Court of Indiana in the decision cited above had
before it a case of forgery committed after the death of one Morgan
for the purpose of defrauding his estate. The objection was urged
that the information did not aver that the forgery was committed
with the intent to defraud any person. The Court, per Elliott, J.,
disposed of this objection as follows:
. . . The reason advanced in support of this proposition is that
the law does not regard the estate of a decedent as a person.
This intention (contention) cannot prevail. The estate of the
decedent is a person in legal contemplation. "The word "person"
says Mr. Abbot, "in its legal signification, is a generic term, and
includes artificial as well as natural persons," 2 Abb. Dict. 271;
Douglas vs. Pacific, etc. Co., 4 Cal. 304; Planters', etc.,
Bank vs. Andrews, 8 Port. (Ala.) 404. It said in another work that
'persons are of two kinds: natural and artificial. A natural person
is a human being. Artificial persons include (1) a collection or
succession of natural persons forming a corporation; (2) a
collection of property to which the law attributes the capacity of
having rights and duties. The latter class of artificial persons is
recognized only to a limited extent in our law. "Examples are the
estate of a bankrupt or deceased person." 2 Rapalje & L. Law
Dict. 954. Our own cases inferentially recognize the correctness
of the definition given by the authors from whom we have
quoted, for they declare that it is sufficient, in pleading a claim
against a decedent's estate, to designate the defendant as the
estate of the deceased person, naming him. Ginn vs. Collins, 43
Ind. 271. Unless we accept this definition as correct, there
would be a failure of justice in cases where, as here, the forgery
is committed after the death of a person whose name is forged;
and this is a result to be avoided if it can be done consistent

with principle. We perceive no difficulty in avoiding such a result;

for, to our minds, it seems reasonable that the estate of a
decedent should be regarded as an artificial person. It is the
creation of law for the purpose of enabling a disposition of the
assets to be properly made, and, although natural persons as
heirs, devises, or creditors, have an interest in the property, the
artificial creature is a distinct legal entity. The interest which
natural persons have in it is not complete until there has been a
due administration; and one who forges the name of the
decedent to an instrument purporting to be a promissory note
must be regarded as having intended to defraud the estate of
the decedent, and not the natural persons having diverse
interests in it, since ha cannot be presumed to have known who
those persons were, or what was the nature of their respective
interest. The fraudulent intent is against the artificial person,
the estate and not the natural persons who have direct or
contingent interest in it. (107 Ind. 54, 55, 6 N.E. 914-915.)
In the instant case there would also be a failure of justice unless the
estate of Pedro O. Fragrante is considered a "person", for quashing
of the proceedings for no other reason than his death would entail
prejudicial results to his investment amounting to P35,000.00 as
found by the commission, not counting the expenses and
disbursements which the proceeding can be presumed to have
occasioned him during his lifetime, let alone those defrayed by the
estate thereafter. In this jurisdiction there are ample precedents to
show that the estate of a deceased person is also considered as
having legal personality independent of their heirs. Among the most
recent cases may be mentioned that of "Estate of Mota vs.
Concepcion, 56 Phil., 712, 717, wherein the principal plaintiff was
the estate of the deceased Lazaro Mota, and this Court gave
judgment in favor of said estate along with the other plaintiffs in
these words:
. . . the judgment appealed from must be affirmed so far as
it holds that defendants Concepcion and Whitaker are
indebted to he plaintiffs in the amount of P245,804.69 . . . .
Under the regime of the Civil Code and before the enactment of the
Code of Civil Procedure, the heirs of a deceased person were
considered in contemplation of law as the continuation of his
personality by virtue of the provision of article 661 of the first Code
that the heirs succeed to all the rights and obligations of the
decedent by the mere fact of his death. It was so held by this Court
in Barrios vs. Dolor, 2 Phil., 44, 46. However, after the enactment of
the Code of Civil Procedure, article 661 of the Civil Code was
abrogated, as held in Suiliong & Co. vs. Chio-Taysan, 12 Phil., 13,
22. In that case, as well as in many others decided by this Court
after the innovations introduced by the Code of Civil Procedure in
the matter of estates of deceased persons, it has been the constant
doctrine that it is the estate or the mass of property, rights and
assets left by the decedent, instead of the heirs directly, that
becomes vested and charged with his rights and obligations which
survive after his demise.
The heirs were formerly considered as the continuation of the
decedent's personality simply by legal fiction, for they might not
have been flesh and blood the reason was one in the nature of a
legal exigency derived from the principle that the heirs succeeded
to the rights and obligations of the decedent. Under the present
legal system, such rights and obligations as survive after death
have to be exercised and fulfilled only by the estate of the
deceased. And if the same legal fiction were not indulged, there
would be no juridical basis for the estate, represented by the
executor or administrator, to exercise those rights and to fulfill those
obligations of the deceased. The reason and purpose for indulging
the fiction is identical and the same in both cases. This is why
according to the Supreme Court of Indiana in Billings vs.
State, supra, citing 2 Rapalje & L. Dictionary, 954, among the
artificial persons recognized by law figures "a collection of property
to which the law attributes the capacity of having rights and duties",
as for instance, the estate of a bankrupt or deceased person.
Petitioner raises the decisive question of whether or not the estate
of Pedro O. Fragrante can be considered a "citizen of the

Philippines" within the meaning of section 16 of the Public Service

Act, as amended, particularly the proviso thereof expressly and
categorically limiting the power of the commission to issue
certificates of public convenience or certificates of public
convenience and necessity "only to citizens of the Philippines or of
the United States or to corporations, copartnerships, associations,
or joint-stock companies constituted and organized under the laws
of the Philippines", and the further proviso that sixty per centum of
the stock or paid-up capital of such entities must belong entirely to
citizens of the Philippines or of the United States.
Within the Philosophy of the present legal system, the underlying
reason for the legal fiction by which, for certain purposes, the estate
of the deceased person is considered a "person" is the avoidance
of injustice or prejudice resulting from the impossibility of exercising
such legal rights and fulfilling such legal obligations of the decedent
as survived after his death unless the fiction is indulged.
Substantially the same reason is assigned to support the same rule
in the jurisdiction of the State of Indiana, as announced in
Billings vs. State, supra, when the Supreme Court of said State
said:
. . . It seems reasonable that the estate of a decedent
should be regarded as an artificial person. it is the creation
of law for the purpose of enabling a disposition of the
assets to be properly made . . . .
Within the framework and principles of the constitution itself, to cite
just one example, under the bill of rights it seems clear that while
the civil rights guaranteed therein in the majority of cases relate to
natural persons, the term "person" used in section 1 (1) and (2)
must be deemed to include artificial or juridical persons, for
otherwise these latter would be without the constitutional guarantee
against being deprived of property without due process of law, or
the immunity from unreasonable searches and seizures. We take it
that it was the intendment of the framers to include artificial or
juridical, no less than natural, persons in these constitutional
immunities and in others of similar nature. Among these artificial or
juridical persons figure estates of deceased persons. Hence, we
hold that within the framework of the Constitution, the estate of
Pedro O. Fragrante should be considered an artificial or juridical
person for the purposes of the settlement and distribution of his
estate which, of course, include the exercise during the judicial
administration thereof of those rights and the fulfillment of those
obligations of his which survived after his death. One of those rights
was the one involved in his pending application before the Public
Service Commission in the instant case, consisting in the
prosecution of said application to its final conclusion. As stated
above, an injustice would ensue from the opposite course.
How about the point of citizenship? If by legal fiction his personality
is considered extended so that any debts or obligations left by, and
surviving, him may be paid, and any surviving rights may be
exercised for the benefit of his creditors and heirs, respectively, we
find no sound and cogent reason for denying the application of the
same fiction to his citizenship, and for not considering it as likewise
extended for the purposes of the aforesaid unfinished proceeding
before the Public Service Commission. The outcome of said
proceeding, if successful, would in the end inure to the benefit of
the same creditors and the heirs. Even in that event petitioner could
not allege any prejudice in the legal sense, any more than he could
have done if Fragrante had lived longer and obtained the desired
certificate. The fiction of such extension of his citizenship is
grounded upon the same principle, and motivated by the same
reason, as the fiction of the extension of personality. The fiction is
made necessary to avoid the injustice of subjecting his estate,
creditors and heirs, solely by reason of his death to the loss of the
investment amounting to P35,000, which he has already made in
the ice plant, not counting the other expenses occasioned by the
instant proceeding, from the Public Service Commission of this
Court.
We can perceive no valid reason for holding that within the intent of
the constitution (Article IV), its provisions on Philippine citizenship
exclude the legal principle of extension above adverted to. If for

reasons already stated our law indulges the fiction of extension of

personality, if for such reasons the estate of Pedro O. Fragrante
should be considered an artificial or juridical person herein, we can
find no justification for refusing to declare a like fiction as to the
extension of his citizenship for the purposes of this proceeding.
Pedro O. Fragrante was a Filipino citizen, and as such, if he had
lived, in view of the evidence of record, he would have obtained
from the commission the certificate for which he was applying. The
situation has suffered but one change, and that is, his death. His
estate was that of a Filipino citizen. And its economic ability to
appropriately and adequately operate and maintain the service of
an ice plant was the same that it received from the decedent
himself. In the absence of a contrary showing, which does not exist
here, his heirs may be assumed to be also Filipino citizens; and if
they are not, there is the simple expedient of revoking the certificate
or enjoining them from inheriting it.
Upon the whole, we are of the opinion that for the purposes of the
prosecution of said case No. 4572 of the Public Service
Commission to its final conclusion, both the personality and
citizenship of Pedro O. Fragrante must be deemed extended, within
the meaning and intent of the Public Service Act, as amended, in
harmony with the constitution: it is so adjudged and decreed.
Decision affirmed, without costs. So ordered.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-5064

February 27, 1953

BIENVENIDO A. IBARLE, plaintiff-appellant,

vs.
ESPERANZA M. PO, defendant-appellant.
Quirico del Mar for appellant.
Daniel P. Tumulak and Conchita F. Miel appellee.
TUASON, J.:
This action commenced in the Court of First Instance of Cebu to
annul a deed of sale conveying to the defendant, in consideration of
P1,700, one undivided half of a parcel of land which previously had
been sold, along with the other half, by the same vendor to the
plaintiff's grantors. judgment was against the plaintiff.
The case was submitted for decision upon an agreed statement of
facts, the pertinent parts of which are thus summarized in the
appealed decision:
1st. That Leonard j. Winstanley and Catalina Navarro were
husband and wife, the former having died on June 6, 1946
leaving heir the surviving spouse and some minor children;
2nd. hat upon the death of L.J. Winstanley, he left a parcel
of land described under Transfer Certificate of title No. 2391
of the Registry of Deeds of the Province of Cebu;
3rd. That the above mentioned property was a conjugal
property;
4th. That on April 15, 1946, the surviving spouse Catalina
Navarro Vda. de Winstanley sold the entire parcel of land to
the spouses Maria Canoy, alleging among other things, that
she needed money for the support of her children;

5th. That on May 24, 1947, the spouses Maria Canoy and
Roberto Canoy sold the same parcel of land to the plaintiff in
this case named Bienvenido A. Ebarle;
6th. That the two deeds of sale referred to above were not
registered and have never been registered up to the date;
7th. That on January 17, 1948 surviving spouse Catalina
Navarro Vda. de Winstanley, after her appointment as
guardian of her children by this court (Special proceeding no.
212-R) sold one-half of the land mentioned above to
Esperanza M. Po, defendant in the instant case, which portion
belongs to the children of the above named spouses.
As stated by the trial Judge, the sole question for determination is
the validity of the sale to Esperanza M. Po, the last purchaser. This
question in turn depends upon the validity of the prior ale to Maria
Canoy and Roberto Canoy.
Article 657 of the old Civil Code provides: "The rights to the
succession of a person are transmitted from the moment of his
death." in a slightly different language, this article is incorporated in
the new Civil Code as article 777.
Manresa, commending on article 657 of the Civil Code of Spain,
says:
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. It is immaterial whether a
short or long period of time lapses between the death of
the predecessor and the entry into possession of the
property of the inheritance because the right is always
deemed to be retroactive from the moment of death. (5
Manresa, 317.)
The above provision and comment make it clear that when Catalina
Navarro Vda. de Winstanley sold the entire parcel to the Canoy
spouses, one-half of it already belonged to the seller's children. No
formal or judicial declaration being needed to confirm the children's
title, it follows that the first sale was null and void in so far as it
included the children's share.
On the other hand, the sale to the defendant having been made by
authority of the competent court was undeniably legal and effective.
The fact that it has not been recorded is of no consequence. If
registration were necessary, still the non-registration would not avail
the plaintiff because it was due to no other cause than his own
opposition.
The decision will be affirmed subject to the reservation, made in
said decision, of the right of the plaintitff and/or the Canoy spouses
to bring such action against Catalina Navarro Vda. de Winstanley
as may be appropriate for such damages as they may have
incurred by reason of the voiding of the sale in their favor.

Republic of the Philippines

SUPREME COURT
Manila

CALLEJO, SR., J.:

This is a petition for review of the Decision 1 of the Court of Appeals
in CA-G.R. No. 52214 (CV) reversing the November 21, 1995
Order2 of the Regional Trial Court of Quezon City, Branch 222,
dismissing the complaint in Civil Case No. Q-95-24588, and its
August 8, 2001 Resolution denying the Motion for Reconsideration
of the aforesaid decision.
The Antecedents
On September 20, 1953, Pastor Y. Lim married private respondent
Rufina Luy Lim.3 During the early part of their marriage, Pastor
organized some family corporations using their conjugal funds.
Among these corporations was Skyline International Corporation
(Skyline, for brevity) which was engaged in the importation and sale
of Hankook Brand Korean Tires and the acquisition of real estate.
The couple were incorporators and major stockholders of the
corporation and were also employed therein.
Pastor and the private respondent did not have a child. They
decided to "adopt" Leonard Lim and petitioner Lita Lim Marcelo,
who were children of their distant poor relatives in Zamboanga City.
There was, however, no formal court adoption. Sometime
thereafter, marital problems arose, as a result of which the private
respondent stopped working at Skyline. As the domestic problems
remained unresolved, Pastor and the private respondent jointly filed
on August 13, 1968 a Petition before the Juvenile and Domestic
Relations Court of Quezon City, for voluntary dissolution of conjugal
properties. As their differences worsened, the private respondent
filed on January 27, 1971 a petition for legal separation against
Pastor on the ground of infidelity before the then Juvenile and
Domestic Relations Court of Quezon City. The petition was
amended into one for Support with Alimony and the case was
docketed as Civil Case No. QE-0030.
On February 17, 1972, the court rendered a decision, awarding
P3,000 monthly support to the private respondent and the children,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered:
1. Ordering defendant to pay plaintiff monthly
support of P3,000.00 effective as of February,
1971;
2. Ordering defendant to pay plaintiff attorneys
fees in the sum of P2,000.00, plus the cost of this
suit. 4
On June 24, 1975, the private respondent filed a motion for
execution. The court issued an order granting the motion and the
sheriff levied on the properties of Skyline. The latter filed, on
December 19, 1975, a third-party claim, alleging that the properties
levied were its personal properties and not those of Pastor, who
was only one of its stockholders. The private respondent filed a
motion to quash Skylines claim, which the court granted.
Skyline filed a petition for certiorari with prayer for temporary
restraining order before the Court of Appeals for the nullification of
the order of the trial court quashing the third-party claim. The case
was docketed as CA-G.R. No. 05312 (SP). The appellate court
issued a temporary restraining order on April 27, 1976. On June 23,
1976, the Court of Appeals rendered a decision dismissing the
petition, thus, lifting the restraining order.5 The appellate court ruled
as follows:

SECOND DIVISION
G.R. No. 149351

March 17, 2004

SPEED DISTRIBUTING CORP., LITA MARCELO, IRENEO

MARCELO and PEDRO AQUINO, petitioners,
vs.
COURT OF APPEALS and RUFINA LIM, respondents.

DECISION

While it is recognized as "lawful to obtain a corporation charter,

even with a single substantial stockholder, to engage in a
specific activity, and such activity may co-exist with other
private activities of the stockholder" (Liddel & Co., Inc. vs.
Collector of Internal Revenue, L-9687, June 30, 1961, 2 SCRA
632), the corporations distinct personality will be disregarded
when it is so "controlled and its affairs so conducted as to
make it merely an instrumentality, agency or conduit of
another" (NAMARCO vs. Associated Finance Company,
supra).

It is not disputed that petitioner Skyline International, Inc. was a

conjugal enterprise (p. 2, Decision) before its incorporation in
December 1970 (p. 10, id.), when it was still a proprietorship.
Petitioner Skyline International, Inc. is still engaged in the sale
of automotive parts and dealership of Firestone Rubber and
Tires which business it was already doing when it was still a
proprietorship. Respondent Court found that the only assets of
petitioner corporation are the conjugal properties. Thus,
respondent Court concludes that "it is safe to assume that
Skyline International Corporation is another name for Mr. and
Mrs. Pastor Y. Lim in person." In fact, Pastor Y. Lim admitted
that the other incorporators are their former employees and
their respective shares are nominal (Decision, pp. 14-15).
The above facts are more than enough justification for
respondent Court to pierce the veil of corporate fiction.
Consequently, we find the questioned orders to be in order.6

Larry S. Lim

100

10,000.00

Lina L. Lim

100

10,000.00

95,700

9,570,000.00

120,000

P12,000,000.00

Pastor Y. Lim

Skyline, then, filed a petition for review before this Court, but the
petition was dismissed in a Resolution dated August 6, 1976.7
On August 21, 1987, the Speed Distributing Corporation (Speed, for
brevity), was registered with the Securities and Exchange
Commission, with Pastor Lim as one of the incorporators. He
owned ten shares, valued at P100.00 per share. The following were
the names of the incorporators, the number of shares respectively
subscribed to by them and the amount paid up:

The following persons have paid on the shares of the capital stock
for which they have subscribed the amount set after their names
respectively:

Name
Shares

Subscribed

Teresa T. Lim
Lita T. Lim

11,200

P 1,120,000.00

P 280,000.00

1,000

100,000.00

25,000.00

Lina S. Lim

150

15,000.00

3,750.00

Larry S. Lim

140

14,000.00

3,500.00

Pastor Y. Lim

10

1,000.00

250.00

P1,250,000.00

Leonard L. Lim

Amount Paid

Paid
P600,000.00

Leonard L. Lim

2,500.00

Larry S. Lim

2,500.00

Lina L. Lim

2,500.00

Pastor Y. Lim

P2,392,500.00

P3,000,000.009
12,500

P 312,500.00

Petitioner Lita Lim-Marcelo was elected treasurer of the

corporation.
On June 21, 1991, the Leslim Corporation (Leslim, for brevity), was
registered with the Securities and Exchange Commission with a
capital stock of P12,000,000.00, divided into 120,000 shares at par
value of P100.00 per share. Pastor Lim subscribed to 95,700
shares valued at P9,570,000.00. The incorporators, the number of
shares they subscribed to and the amounts paid for were indicated
in the articles of incorporation as follows:

Name

Teresa T. Lim

Leonard L. Lim

No. of Share

24,000

100

Amount Subscribed

Under the articles of incorporation, Pastor Lim was the treasurer-intrust of the corporation.10 The Vice-President and Treasurer of the
corporation was petitioner Lita Lim-Marcelo, now married to
petitioner Ireneo Marcelo.
On August 26, 1994, Leslim Corporation executed a deed of
absolute sale in favor of the Speed, represented by its VicePresident, petitioner Ireneo Marcelo, over the parcel of lot located
at Diliman Quezon City, covered by TCT No. 36617 for the price of
P3,900,000.00.11 Petitioner Lita Lim-Marcelo, the Vice-President of
Leslim12signed in the deed for and in behalf of the corporation. She
was authorized by the Board of Directors in a Resolution August 19,
1994 to sign the said deed and to receive the purchase price for
and in behalf of Leslim. The said Resolution was certified by
corporate
secretary
Pedro
Aquino
on
August
22,
1994.13 Consequently, TCT No. 36617 which was in the name of
Leslim, was cancelled and a new one, TCT No. T-116716, was
issued to and in the name of Speed.14

P2,400,000.00

10,000.00

On June 11, 1994, Pastor Lim died intestate and was survived by
his wife, the private respondent. On March 17, 1995, the private
respondent, through her nephew and attorney-in-fact George Luy,
filed a petition for the administration of the estate of her deceased

husband before the Regional Trial Court of Quezon City, docketed

as Special Proceedings No. Q-95-23334.15 The case was raffled to
Branch 93. The private respondent filed a motion praying for the
annotation of a notice of lis pendens at the dorsal portion of all titles
over the properties in the name of Pastor. Included in the said
properties were those registered in the name of other corporations
of which Pastor was a stockholder, including that parcel of land
covered by TCT No. T-116717 registered under the name of Speed.
The court granted the motion. The affected corporations, including
Speed, filed motions to cancel the notices of lis pendens and
motions for exclusion of certain properties from Pastors estate. On
June 8, 1995, the Court granted the motions and ordered the
exclusion of certain properties from the estate of Pastor and the
cancellation of the notices of lis pendens on properties registered in
the name of the said corporations, including that covered by TCT
No. T-116716 under the name of Speed.
On June 27, 1995, the private respondent filed a verified amended
petition in SP No. Q-95-23334 alleging, among others, that during
his lifetime, Pastor substantially owned the following business
entities: Skyline Sales Corporation, Speed Distributing, Inc., and
Leslim Corporation:
5. That the following real properties, although registered in
the name of the above entities, were actually acquired by
Pastor Y. Lim during his marriage with petitioner, to wit:

CORPORATION

b. Leslim Corp.

TITLE

LOCATION

TCT
No.
36617

Quezon City

but now illegally transferred to and registered in the name

of Speed Distributing, Inc. under TCT No. 116716.16
On July 4, 1995, the probate court issued an Order setting aside its
June 8, 1995 Order and directed the Register of Deeds to reinstate
the notice of lis pendens on TCT No. T-116716. The court denied
the motion for the reconsideration of the said order.
Speed filed a petition for certiorari with the Court of Appeals for the
nullification of the July 4, 1995 and September 12, 1995 Orders of
the trial court, docketed as CA-G.R. No. 38617 (SP).
Meanwhile, on August 1, 1995, the private respondent filed a
complaint against Speed, and the petitioners with the RTC of
Quezon City, for the nullification of the Deed of Absolute Sale
executed by Leslim in favor of Speed over the property covered by
TCT No. T-36617, and the cancellation of TCT No. T-11676, with
damages before the RTC of Quezon City. The case was raffled to
Branch 222, and was docketed as Q-95-24588. The private
respondent alleged, inter alia, that:
...
6. Plaintiff is the surviving spouse of the late Pastor Y. Lim who
died intestate on June 11, 1994, but leaving several properties,
real and personal, situated in Quezon City, Makati City, Rizal
Province, Las Pias, Valenzuela, Manila, Cavite, Masbate and
other parts of the country.
7. During the existence of the marriage of plaintiff and Pastor Y.
Lim, the latter formed, among others, Leslim Corporation, and
he actually owned the same as in fact he had in his name
95,700 out of the 120,000 shares of the authorized capital
stock. The remaining shares of stocks were listed in the name
of some persons who were actually his dummies, and were
made to appear as stockholders of Leslim Corporation only for
purposes of registration with the Securities and Exchange
Commission.

8. Leslim Corporation, in turn, is a registered owner of a certain

parcel of land located in Diliman, Quezon City, as evidenced by
TCT No. 36617, issued by defendant Register of Deeds, copy
of which is hereto attached as Annex "C."
9. Plaintiff initiated an intestate proceedings on the estate of
her deceased husband in order to lay claim on her conjugal
share thereon. She then started to verify the various TCTs of
the real property in the name of her deceased husband,
including those in the name of Leslim Corporation, and she
discovered that TCT No. 36617 had already been canceled
and in lieu thereof, TCT No. 116716 was issued by defendant
Register of Deeds in the name of defendant Corporation
10. Upon further verification, plaintiff discovered that the basis
of the cancellation of TCT No. 36617 in favor of TCT No.
116716 is a Deed of Sale signed and executed by defendant
Lita Marcelo who misrepresented herself as Vice President of
Leslim Corporation and as such she was purportedly
authorized to dispose of the property in question in favor of
defendant corporation, which latter corporation was allegedly
represented in the transaction by her husband, herein
defendant Ireneo Marcelo who claimed himself as the Vice
President of defendant corporation.
11. To give a semblance of legality to the feigned transaction of
sale, defendant Pedro Aquino, misrepresenting himself as the
corporate secretary of Leslim Corporation, executed a
simulated/falsified secretarys certificate, wherein he stated
that in an alleged special meeting of the Board of Directors of
Leslim Corporation held on August 19, 1994 in its office at
1006 Quezon Avenue, Quezon City, defendant Lita Marcelo
was allegedly authorized by the Board to enter into the
transaction in question.
12. The transfer of the property from Leslim to defendant
corporation is imaginary, the deed of sale and the secretarys
certificate are simulated, hence, null and void, as shown below:
13. First of all, there was no such special meeting of the board
of directors of Leslim Corporation on August 19, 1994, contrary
to the allegation in the secretarys certificate. No notices to that
effect were ever sent to Pastor Lim, a director and owner of
79.75 per cent of the capital stock of Leslim Corporation.
Secondly, there was never a meeting of the stockholders
wherein more than two-thirds of the stocks were present in
order to approve the sale of all or substantially all of the assets
consisting of real properties of Leslim Corporation. Indeed, no
such meeting could have been held because Pastor Lim, who
owned practically two-thirds of the total capital stock, had
already died on June 11, 1994. The last meeting of
stockholders of Leslim Corporation was held in January, 1994.
Since then up to the present, no other stockholders meeting,
special or otherwise, was ever held by Leslim Corporation.
14. Thirdly, the place of the alleged special stockholders
meeting could not have occurred in the place where it was
purportedly held, namely, 1006 Quezon Avenue, Quezon City.
This place is the address of Accurate Distributing, Inc., which
had been under the control of the group of Estrelita Cabarles
since August 1994 up to the present. On the other hand,
defendants Lita Marcelo, Ireneo Marcelo, and Pedro Aquino
and their cohorts are the adversaries of Estrelita Cabarles in
several cases, civil and criminal, pending before various courts
in Metro Manila and suburbs. The control and possession by
the group of Cabarles of the premises ineluctably shows that
no meeting was ever held thereon by their adversaries.
Fourthly, there was never any payment made to Leslim
Corporation respecting the alleged purchase price.
15. As a consequence of the above, defendant Lita Marcelo
could not have been the Vice President of Leslim Corporation
at the time the simulated deed of sale in question was
executed, contrary to her claim thereon. Besides, defendant
Lita Marcelo has never been a stockholder, much less a
director of Leslim Corporation. Hence, it follows that the
subject deed of absolute sale and the secretarys certificate are
both simulated, and TCT No. 116716 of no force and effect,
necessitating as it does its cancellation. The imaginary

transaction of sale was clearly resorted to by defendants after

the August 19, 1994 special stockholders meeting of Accurate
Distributing Inc., where in the ground of Estrelita Cabarles
were elected as Board of Directors and corporate officers and
in order to deprive plaintiff of her conjugal share and the other
heirs of Pastor Y. Lim of their shares in his estate. In fact, all
the real property registered in the name of Leslim Corporation
and in Nellmart Corporation wherein Pastor Lim is also the
majority stockholder had been transferred by defendants and
their cohorts to themselves or to entities controlled by them, all
at practically the same time. Thus:
a. TCT No. 36617 Deed of Sale dated August 22, 1994
from Leslim to defendant Corporation. Amount
P3,400,000.00.
b. TCT No. 66001 Deed of Sale dated August 26, 1994
from Leslim to Auto Truck TBA. Amount
P10,500,000.00.
c. TCT No. 101730 Deed of Sale dated August 26,
1994 from Leslim to Skyline Sales Corporation. Amount
P15,500,00.00.
d. TCT No. T-48028 in the name of Nellmart but illegally
transferred to defendant corporation under TCT No.
116718.
e. TCT No. 236236 in the name of Nellmart but illegally
transferred to Alliance Marketing, Inc., under TCT No.
285400.
f. TCT No. 236237 in the name of Nellmart but illegally
transferred to Alliance Marketing, Inc. under TCT No.
285399.
16. The same scheme was resorted to by defendants and their
cohorts in divesting other corporations of all real property,
where Pastor Lim is the stockholder. Thus, the motives of
defendants in conspiracy with each other and with several
other persons and entities are one and the same, namely: to
monopolize the control, possession, enjoyment and ownership
of all the estate of Pastor Lim, thereby depriving plaintiff of her
conjugal share as well as her own share in her husbands own
estate.
17. By reason of these acts of defendants, plaintiff was
constrained to hire the services of counsel for a fee of
P50,000.00 and appearance fee of P1,500.00 per hearing. She
likewise suffered sleepless nights and wounded feelings, which
if converted into its monetary equivalent would be
P100,000.00, more or less.
18. In order to prevent defendants from repeating the unlawful
acts, they should be condemned by pay exemplary damages in
the amount of P100,000.00.17
The private respondent prayed that, after due proceedings,
judgment be rendered in her favor, thus :
WHEREFORE, premises considered, it is respectfully prayed
of this Honorable Court that after notice and hearing,
judgment be rendered:
a. declaring the secretarys certificate and the deed of sale
under question null and void;
b. cancelling TCT No. 116716 issued in the name of
defendant Speed Distributing Corporation for being without
basis in fact and in law;
c. ordering defendants to pay jointly and severally the amount
of P100,000.00 exemplary damages;

d. ordering defendants to play (sic) plaintiff jointly and

severally the amount of P50,000.00 attorneys fees and
P1,000.00 appearance fee per hearing.
e. Ordering defendants to pay the cost of suit.18
In their answer with compulsory counterclaim, the petitioners
specifically denied the material allegations of the complaint, and by
way of special and affirmative defenses, alleged that the private
respondent (the plaintiff therein), was not privy to the deed of sale
executed by Leslim and Speed. As such, she was not the real
party-in-interest and had no cause of action against the defendants.
Pursuant to Presidential Decree No. 902-A, the SEC, not the RTC,
had jurisdiction over the complaint, as it was evident that the
complaint involved an intra-corporate controversy.19
In her reply, the private respondent alleged that even if she was not
privy to the deed of sale over the subject property, she was entitled
to its income, and her right accrued at the time of Pastors death on
June 11, 1994.
On September 4, 1995, the RTC issued an Order in Special
Proceedings No. 95-2334 granting the petition and appointed the
private respondent as the co-administrator of Miguel Lim, with Atty.
Donald Lee as special administrator.20
The court held a hearing on the special and affirmative defenses of
the defendants (the petitioners herein) in Civil Case No. 95-24588.
On November 25, 1995, the RTC issued an order dismissing the
complaint, real party-in-interest. According to the court, she had no
cause of action against the petitioners as she was not privy to the
contract of sale between Leslim and Speed. Neither was she a
stockholder of the defendant corporation; as such, she could not
sue for the corporation. According to the court, the private
respondent could not file the complaint in behalf of her deceased
husband Pastor as she was unable to show that she was the
authorized representative of his estate; even if she was so
authorized, her claim was limited to the shares owned by Pastor,
which could not extend to the properties of Leslim. The court also
ruled that the action involved intra-corporate controversies over
which the SEC had original and exclusive jurisdiction.
Aggrieved, the private respondent filed a motion for reconsideration
of the order which was denied on February 9, 1996. 21 Dissatisfied,
she appealed the order to the Court of Appeals,22 docketed as CAG.R. CV No. 52214. She ascribed the following errors to the court a
quo:
I
THE LOWER COURT ERRED IN RULING THAT THE
PLAINTIFF-APPELLANT IS NOT A REAL PARTY-ININTEREST TO FILE THE "COMPLAINT" BEFORE THE
COURT A QUO.
II
THE LOWER COURT ERRED IN RULING THAT IT HAD
NO JURISDICTION OVER THE "COMPLAINT" IN CIVIL
CASE NO. Q-95-24588.
III.
THE LOWER COURT ERRED IN DISMISSING THE
PLAINTIFF-APPELLANTS "COMPLAINANT" IN CIVIL
CASE NO. Q-95-24588.23
On April 18, 1996, the Court of Appeals rendered judgment in CAG.R. SP No. 38617 nullifying the assailed orders. The CA ruled that
the private respondent failed to prove that Pastor Lim, not Speed,
owned the property. It also ruled that the finding of the probate
court that the property belonged to Pastor Lim was only provisional
in nature. The private respondent then filed a petition for review on
certiorari with this Court, docketed as G.R. No. 124715. On January
24, 2000, this Court rendered a Decision dismissing the petition.

On September 15, 2000, the CA rendered a decision in CA-G.R.

CV No. 52214 setting aside the assailed orders and ordering the
RTC to hear Civil Case No. Q-95-24588, thus:

therein.28 It cannot depend on the defenses set forth in the answer,

in a motion to dismiss, or in a motion for reconsideration by the
defendant.29

WHEREFORE, premises considered, the Regional Trial

Court, National Capital Judicial Region, Quezon City,
Branch 222 is hereby ORDERED to try Civil Case No. Q95-24588 without costs to plaintiff-appellant.24

Section 5 of P.D. No. 902-A provides that the SEC shall have
original and exclusive jurisdiction over complaints, to hear and
decide cases involving the following:

The CA ruled that, as gleaned from the pleadings of the parties, the
action involved intra-corporate controversies as defined in Section
5 of Presidential Decree (PD) No. 902-A; as such, the RTC had no
jurisdiction over the action. However, in light of Rep. Act No. 8799
which transferred to courts of general jurisdiction or the appropriate
RTC cases over which the SEC had jurisdiction, the CA ordered the
remand of the case to the RTC, for the determination, among
others, of the resolution of the issue of whether or not the private
respondent was the real party-in-interest. The Court of Appeals
stated, thus:
However, viewed in the light of Republic Act No. 8799,
otherwise known as the Securities Regulation Code,
approved on July 19, 2000 which has effectively divested
the Securities and Exchange Commission of its quasijudicial functions and transferred them to the Regional
Trial Court, We rule that the latter may take cognizance of
the instant case so as not to roundabout the judicial
process, without prejudiced (sic) to its being ventilated as
to whether or not appellant The private respondent Lim is
a real party in interest to be determined during the trial on
the merits before the appropriate court who has now the
jurisdiction over the case at bar.25
The motion for reconsideration of the petitioners was denied by the
CA, per its Resolution dated August 8, 2001.

(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
stockholders, partners, members of associations
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 and the State
insofar as it concerns their individual franchise or right as
such entity;
(c) Controversies in the election or appointment of
directors, trustees, officers or managers of such
corporations, partnership or associations;
(d) Petitioners of corporations, partnerships or
associations to be declared in the state of suspension of
payment in cases where the corporation, partnership or
association possesses sufficient property to cover all its
debts but foresees the impossibility of meeting them when
they fall due or in cases where the corporation,
partnership or assciation has no sufficient assets to cover
its liabilities but is under the management of a
rehabilitation receiver or management committee created
pursuant to this Decree.30

In their petition at bar, the petitioners argue that

The petitioners contend that the RTC had no jurisdiction over the
private respondents complaint because the case involved intracorporate controversies. Since Rep. Act No. 8799 took effect only
on August 8, 2000, while the private respondents appeal in the CA
was pending, it should not be given retroactive effect. Furthermore,
Section 5.2 of RA 8799 proscribes the transfer of cases to the RTC;
as such, the CA should have dismissed the private respondents
appeal without prejudice to her right to refile her complaint in the
RTC. The petitioners argue that the CA cannot order the case
remanded to the RTC for the sake of convenience.

However, Section 5.231 of Rep. Act No. 8799, transferred the

erstwhile exclusive and original jurisdiction of the SEC over actions
involving intra-corporate controversies to the courts of general
jurisdiction, or the appropriate RTC. All intra-corporate cases
pending in the SEC were to be transferred to the appropriate RTC.
Congress thereby recognized the expertise and competence of the
RTC to take cognizance of and resolve cases involving intracorporate controversies. In compliance with the law, the Court
issued, on November 21, 2000 a Resolution designating certain
branches of the RTC in the National Capital Region to try and
decide cases enumerated in Section 5 of P.D. No. 902-A. For
Quezon City cases, the Court designated Branches 46 and 93 of
the RTC. Branch 222 of the Quezon City RTC, which dismissed the
complaint of the private respondent, was not so designated by the
Court. On March 13, 2001, the Court approved the Interim Rules of
Procedure for Intra-Corporate Controversies, which took effect on
April 1, 2001.

For her part, the private respondent asserts that the complaint does
not involve intra-corporate controversies and the RTC had
jurisdiction over the action and the issues raised by the parties in
their pleadings. The private respondent, likewise, opines that there
is nothing wrong with the CAs ruling directing the RTC to hear the
case to avoid any consequent delay.

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.32

The sole issue in this case is whether or not the CA erred in

remanding the case to the RTC and directing it to decide and hear
the complaint on its merits, in view of Rep. Act No. 8799 which took
effect on August 8, 2000, during the pendency of the case before it,
effectively transferring jurisdiction over cases involving intracorporate controversies from the SEC to the RTC.

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. 33 If the nature of
the controversy involves matters that are purely civil in character,
necessarily, the case does not involve an intra-corporate
controversy. The determination of whether a contract is simulated
or not is an issue that could be resolved by applying pertinent
provisions of the Civil Code.34

THE HONORABLE COURT OF APPEALS ERRED IN

HOLDING
THAT
THE
TRIAL
COURT
HAS
JURISDICTION OVER THE SUBJECT CASE BY VIRTUE
OF THE EFFECTIVITY OF RA 8799 KNOWN AS
SECURITIES REGULATION CODE.26

The Private Respondents Action in the RTC Does Not Involve

an Intra- Corporate Dispute.
Jurisdiction over the subject matter is conferred by law.27 The
nature of an action, as well as which court or body has jurisdiction
over it, is determined based on the allegations contained in the
complaint of the plaintiff, irrespective of whether or not plaintiff is
entitled to recover upon all or some of the claims asserted

In the present recourse, it is clear that the private respondents

complaint in the RTC is not an intra-corporate case. For one thing,
the private respondent has never been a stockholder of Leslim, or
of Speed for that matter. The complaint is one for the nullification of
the deed of absolute sale executed by Leslim in favor of Speed
over the property covered by TCT No. T-36617 in the name of
Leslim, the cancellation of TCT No. T-116716 in the name of
Speed, as well as the Secretarys Certificate dated August 22,
1994. The private respondent alleged that since her deceased
husband, Pastor Lim, acquired the property during their marriage,
the said property is conjugal in nature, although registered under
the name of Leslim under TCT No. T-36617. She asserted that the
petitioners connived to deprive the estate of Pastor Lim and his
heirs of their possession and ownership over the said property
using a falsified Secretarys Certificate stating that the Board of
Directors of Leslim had a meeting on August 19, 1995, when, in
fact, no such meeting was held. Petitioner Lita Lim was never a
stockholder of Leslim or a member of its Board of Directors; her
husband, petitioner Ireneo Marcelo was the Vice-President of
Speed; and, petitioner Pedro Aquino was Leslims corporate
secretary. The private respondent further averred that the amount
of P3,900,000.00, the purchase price of the property under the
deed of absolute sale, was not paid to Leslim, and that petitioners
Spouses Marcelo and petitioner Pedro Aquino contrived the said
deed to consummate their devious scheme and chicanery. The
private respondent concluded that the Deed of Absolute Sale was
simulated; hence, null and void.
We are convinced that on the basis of the material allegations of
the complaint, the court a quo had jurisdiction over the case.
The Private Respondent is a Real Party-in-Interest as Plaintiff.
Rule 3, Section 2 of the Rules of Court, as amended, provides as
follows:
SEC. 2. Parties in interest. A real party in interest is the
party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of
the suit. Unless otherwise authorized by law or these
Rules, every action must be prosecuted or defended in the
name of the real party in interest.
The private respondent filed the complaint as one of the heirs of
Pastor Lim, who died intestate on June 11, 1994. She was, in fact,
the surviving spouse of the deceased, a compulsory heir by
operation of law. The general rule under the law on succession is
that successional rights are transmitted from the moment of death
of the decedent and compulsory heirs are called upon to succeed
by operation of law to the inheritance without the need of further
proceedings. Under Article 776 of the New Civil Code, inheritance
includes all the properties, rights and obligations of a party, not
extinguished by his death.35 Although the private respondent was
appointed by the probate court as a special administratrix of the
estate of Pastor Lim, she had the right, apart from her being a
special administratrix, to file the complaint against the petitioners
for the nullification of the deed of absolute sale, and TCT Nos. T36617 and T-116716. Indeed, in Emnace vs. Court of Appeals, et
al.,36 we held that:
On the third issue, petitioner asserts that the surviving spouse
of Vicente Tabanao has no legal capacity to sue since she was
never appointed as administratrix or executrix of his estate.
Petitioners objection in this regard is misplaced. The surviving
spouse does not need to be appointed as executrix or
administratrix of the estate before she can file the action. She
and her children are complainants in their own right as
successors of Vicente Tabanao. From the very moment of
Vicente Tabanaos death, his rights insofar as the partnership
was concerned were transmitted to his heirs, for rights to the
succession are transmitted from the moment of death of the
decedent.
Whatever claims and rights Vicente Tabanao had against the
partnership and petitioner were transmitted to respondents by
operation of law, more particularly by succession, which is a
mode of acquisition by virtue of which the property, rights and
obligations to the extent of the value of the inheritance of a
person are transmitted. Moreover, respondents became

owners of their respective hereditary shares from the moment

Vicente Tabanao died.
A prior settlement of the estate, or even the appointment of
Salvacion Tabanao as executrix or administratrix, is not
necessary for any of the heirs to acquire legal capacity to sue.
As successors who stepped into the shoes of their decedent
upon his death, they can commence any action originally
pertaining to the decedent. From the moment of his death, his
rights as a partner and to demand fulfillment of petitioners
obligations as outlined in their dissolution agreement were
transmitted to respondents. They, therefore, had the capacity
to sue and seek the courts intervention to compel petitioner to
fulfill his obligations.37
All the Compulsory Heirs of the Decedent and Leslim
Corporation are Indispensable Parties.
In her complaint, the private respondent sought the nullification of
the Deed of Absolute Sale executed by Leslim Corporation in favor
of Speed, as well as TCT No. T-36617 under its name. Thus,
Leslim Corporation is an indispensable party, and should be
impleaded as a party-defendant conformably to Section 7, Rule 3 of
the Rules of Court, as amended.
SEC. 7. Compulsory joinder of indispensable parties.
Parties in interest without whom no final determination can
be had of an action shall be joined either as plaintiffs or
defendants.
As Leslim Corporation was a party to the deed, its interests in the
subject of the action and the outcome thereof is such that the trial
court could not proceed without its presence. All actuations of the
trial court subsequent to the filing of the complaint are null and void,
not only as to Leslim Corporation, but also as to the present
parties.38 All the compulsory heirs of the deceased must also be
impleaded as plaintiffs, being indispensable parties.39 Thus, the
private respondent needs to amend her complaint in the court a
quo to include all indispensable parties; otherwise, her claim would
be dismissed.
IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED.
The records are remanded to the Regional Trial Court of Quezon
City, Branch 222, for further proceedings on the merits of the case.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 122249

January 29, 2004

REYNALDO, TELESFORO, REMEDIOS, ALFREDO and BELEN,

all surnamed AGUIRRE, VICENTA, HORACIO and FLORENCIO,
all surnamed MAGTIBAY and LEONILA, CECILIA, ANTONIO,
and VENANCIO, all surnamed MEDRANO, and ZOSIMA
QUIAMBAO, Petitioners,
vs.
COURT OF APPEALS and ELIAS, JOSE, ARSENIA and
ROGELIO, all surnamed BALITAAN, and MARIA
ROSALES, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking the reversal of the Decision 1 dated July 26,
1995 rendered by the Court of Appeals in CA-G.R. CV No. 42350
which set aside the Decision 2 dated April 28, 1992 of the Regional

Trial Court of Batangas City (Branch 2) in Civil Case No. 202, 3 and
declared private respondents Heirs of Tiburcio Balitaan, as owners
of the parcel of unregistered land with an approximate area of
1,695 square meters, located at Aplaya, Bauan, Batangas.
The facts of the case are as follows:
In his lifetime, Leocadio Medrano was the owner and possessor of
a parcel of residential land, situated in Aplaya, Bauan, Batangas,
containing an area of 2,611 square meters.4 The parcel of land was
conjugal property, having been acquired by Leocadio during his first
marriage with one Emiliana Narito. Their union begot four children,
namely: (a) Gertrudes Medrano, now deceased, represented in this
case by her children, herein petitioners Telesforo, Reynaldo,
Remedios, Alfredo, and Belen, all surnamed Aguirre; (b) Isabel
Medrano, likewise deceased, represented by her children, herein
petitioners Vicenta, Horacio, and Florencio, all surnamed Magtibay;
(c) Placido Medrano, also deceased, represented by his only child,
herein petitioner Zosima Quiambao; and (d) Sixto Medrano.
After the death of his first wife, Leocadio contracted a second
marriage with Miguela Cario. Their union bore four children, herein
co-petitioners, namely: Venancio, Leonila, Antonio and Cecilia, all
surnamed Medrano.
Upon the death of Leocadio on March 19, 1945, the surviving heirs
agreed that Sixto should manage and administer the subject
property.
Sixto died on May 17, 1974. It was only after his death that
petitioners heard rumors that Sixto had, in fact, sold significant
portions of the estate of Leocadio. It appears that on September 7,
1953, Sixto, without the knowledge and consent of the petitioners,
executed an Affidavit of Transfer of Real Property stating therein
that he was the only heir of Leocadio. 5 Sixto declared that Leocadio
died on September 16, 1949, instead of the actual date of his death
on March 19, 1945. With the use of said affidavit and a survey
plan,6 Tax Declaration No. 40105 in the name of Leocadio was
cancelled and Tax Declaration No. 44984 was issued in the name
of Sixto.7 On August 29, 1957, Sixto sold to Maria Bacong a 160square meter portion of the subject land. 8 On September 28, 1959,
Sixto sold to Tiburcio Balitaan a 1,695 square meter portion of the
same land.9 Sometime in November 1967, Maria Bacong sold her
property to Rosendo Bacong.10
Petitioners demanded the reconveyance of the portions sold by
Sixto but Tiburcio Balitaan, Maria Bacong and Rosendo Bacong
refused to do so. Hence, petitioners filed against them before the
Regional Trial Court of Batangas (Branch 2), a complaint for
Declaration of Nullity of Documents, Partition, Malicious
Prosecution and Damages, docketed as Civil Case No. 202.11
In their Answer, Maria Bacong and Rosendo Bacong contend that
petitioners have no cause of action because they acquired their
property thru a valid deed of sale dated August 29, 1957, executed
by Sixto and, alternatively, petitioners' cause of action, if any, was
barred by prescription and laches.12

On July 28, 1989, petitioners and Rosendo Bacong, for himself and
as attorney-in-fact of the heirs of Maria Bacong, entered into a
compromise agreement to settle the case between them. 16 The
compromise agreement, as approved by the trial court, provided
that Rosendo Bacong and the heirs of Maria Bacong agreed to
payP30,000.00 to petitioners in recognition of petitioners' ownership
of a 269-square meter portion17 and in consideration of which,
petitioners recognized the full ownership, rights, interest and
participation of the former over said land.18 The area of the subject
land is thus reduced to 2,342 square meters (2,611 square
meters minus 269 square meters).
After trial on the merits, the trial court rendered judgment dated
April 28, 1992, ruling that private respondents did not dispute, by
any evidence, the falsity of the Affidavit of Transfer, as well as the
fact that Sixto had co-owners to the property. It found that private
respondents' affirmative defense of laches and/or prescription are
unavailing against a property held in co-ownership as long as the
state of co-ownership is recognized. Consequently, the trial court
upheld the sale made by Sixto in favor of private respondents only
to the extent that Sixto is entitled to by virtue of his being a coowner.19
In determining the area that Sixto could have validly sold to private
respondents, the trial court, in its decision, provided for the manner
of partition among the parties, based on the memorandum
submitted by petitioners, thus:
For the four (4) children of the first marriage, namely:
(1) Gertrudes, who is already dead represented by her
children Tefesforo, Reynaldo, Remedios, Alfredo and
Belen, all surnamed Aguirre - 399.42 square meters;
(2) Isabel Medrano, who is already dead, represented by
the plaintiffs, her children Vicenta, Horacio and Florencio,
all surnamed Magtibay - 399.42 square meters;
(3) Placido Medrano (dead), represented by his only child
Zosima Medrano - 399.42 square meters; and
(4) Sixto Medrano - 399.42 square meters only which
he had the right to dispose of in favor of Tiburcio
Balitaan and Maria Rosales.
The above consist of undivided interest, shares and participations
from the inheritance or succession to the conjugal estate of
Leocadio Medrano and Emiliana Narito.
For the children of the second marriage their shares in the
inheritance from the property of Leocadio Medrano are as follows:
(1) To Venancio Medrano - 138.32 square meters
(2) To Leonila Medrano - 138.32 square meters
(3) To Antonio Medrano - 138.32 square meters

In his Answer, Tiburcio Balitaan contends that petitioners have no

cause of action since petitioners were well-aware of the sale of the
property to him by Sixto; and that he was an innocent purchaser for
value, in possession and enjoyment of the land in the concept of
absolute owner, peacefully and publicly. He further echoed the
contention of Maria and Rosendo Bacong that any cause of action
petitioners may have was barred by prescription and laches.13
Maria Bacong died during the pendency of the suit in the trial court
and she was substituted by her surviving heirs, namely, Lorenza,
Elena, Felipa, Manuel, Marilou, Ricardo, Medel, Monchito and
Milag, all surnamed Medrano.14 Tiburcio Balitaan also died and was
substituted by his heirs, herein private respondents, namely: his
wife, Maria Rosales and their four children: Elias, Jose, Arsenia and
Rogelio, all surnamed Balitaan.15

(4) To Cecilia Medrano - 138.32 square meters

with all the above consisting of undivided shares, interest and

participation in the estate.
For the defendants Maria Rosales, surviving spouse of the
deceased Tiburcio Balitaan and their Children, an area of 399.42
square meters, the only area and extent which Sixto Medrano could
have legally dispensed of in their favor.20
Thus, the dispositive portion of the trial court's decision reads as
follows:

WHEREFORE, in view of the foregoing, the Court renders

judgment in favor of the plaintiffs and against the defendants, to wit:
(a) Ordering the partition of the property in question
among the plaintiffs and the defendants; and
(b) Ordering the parties, plaintiffs and defendants, to make
a partition among themselves by proper instruments of
conveyance and to submit before this Court a project of
partition should the parties be able to agree for the
confirmation of the Court within two (2) months upon
receipt of this decision, otherwise this Court will be
constrained to appoint commissioners to make the
partition in accordance with law.
All other claims not having been duly proved are ordered
dismissed.
SO ORDERED.21
Aggrieved, private respondents appealed to the Court of Appeals.22
On July 26, 1995, the appellate court rendered judgment
recognizing the validity of the sale only with respect to the
undivided share of Sixto Medrano as co-owner; but nonetheless,
declaring respondents as absolute owners of 1,695 square meters
of the subject property, reasoning that:
. . . Defendants-appellees have been in possession, in the concept
of owner, of the entire parcel of land sold to Tiburcio Balitaan by
Sixto Medrano for more than ten years, seventeen years to be
exact (1958-1975). Relying on the affidavit of transfer (Exhibit "B")
the tax declaration (Exhibit "C") and the survey plan (Exhibit "D")
shown to him by Sixto Medrano which indicate the latter as owner
of the property in dispute, Tiburcio Balitaan believed transfer to him
was effected. (TSN, April 17, 1991, pp. 14-17) and thus, entered
the property as owner (Ibid. at p. 13) Tiburcio Balitaan, believing
himself as the lawful transferee, in addition, caused Tax Declaration
No. 51038 to be issued in his name (Exhibits "6", "6-A", "6-B", and
"6-C"). Thus, although the sale of the co-owned property is only
valid as to the undivided share of Sixto Medrano, defendants, by
virtue of their open, adverse and uninterrupted possession from
1958 (Exhibit "G") to 1975, obtained title to the entire property and
not just Sixto's undivided share. This is pursuant to Article 1134
(1957a) of the New Civil Code which provides that:
Ownership and other real rights over immovable property are
acquired by ordinary prescription through possession of ten years.
...
Plaintiffs did not at all inquire as to the status of their property all
this time and thus have been remiss of their duties as owners of the
property. Plaintiffs waited until Sixto's death to learn more about
their property. Even though the co-ownership is to be preserved in
accordance with the wishes of the deceased, the plaintiffs should
have taken it upon themselves to look into the status of the property
once in a while, to assure themselves that it is managed well and
that they are receiving what is due them as co-owners of the parcel
of land or to at least manifest their continued interest in the property
as normal owners would do. But the plaintiffs did not show any
interest in the way Sixto Medrano was managing the property which
in effect gave the latter carte blanche powers over the same. Such
passivity is aggravated by the fact that one of the plaintiffs resides a
mere 600 meters away from the disputed property (TSN, April 17,
1991, p. 13). By not showing any interest, the plaintiffs have, in fact,
slept on their rights and thus, cannot now exercise a stale right.23
Petitioners sought reconsideration24 but the appellate court denied
it in a Resolution dated October 5, 1995.25
In their present recourse, petitioners take exception from the
appellate court's findings that respondents have been in

possession, in the concept of owner of the entire parcel of land sold

to Tiburcio Balitaan by Sixto Medrano for seventeen years (19581975), relying on the Affidavit of Transfer and Tax Declaration No.
51038 in the name of Sixto; and that Tiburcio acquired ownership of
the whole property from Sixto through ordinary prescription for ten
years.
Petitioners submit that Tiburcio Balitaan was not a purchaser in
good faith and for value since there are enough circumstances
which should have put him on guard and prompted him to be more
circumspect and inquire further about the true status of Sixto
Medrano's ownership; that during his lifetime, Tiburcio was a
neighbor of petitioners and was well-aware that Sixto had other
siblings but Tiburcio chose to rely on the Affidavit of Transfer
executed by Sixto Medrano declaring that he was the only heir of
Leocadio; that the Court of Appeals should not have faulted them
for failing to inquire about the status of the disputed property until
after the death of Sixto Medrano; that they are not guilty of laches.
It is settled that in the exercise of the Supreme Court's power of
review, the findings of facts of the Court of Appeals are conclusive
and binding on the Supreme Court.26 The exceptions to this rule
are: (1) when the findings are grounded entirely on speculation,
surmises or conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension
of facts; (5) when the findings of fact are conflicting; (6) when in
making its findings the Court of Appeals went beyond the issues of
the case, or its findings are contrary to the admissions of both the
appellant and the appellee; (7) when the findings are contrary to the
trial court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioner's main and reply
briefs are not disputed by the respondent; (10) when the findings of
fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and (11) when the Court of
Appeals manifestly overlooked certain relevant facts not disputed
by the parties, which, if properly considered, would justify a different
conclusion.27 Exceptions (4), (7), (10) and (11) are present in the
instant case.1wphi1
We find the petition meritorious.28 We agree with the petitioners that
the Court of Appeals committed a reversible error in upholding the
claim of petitioners that they acquired ownership of the subject
property through prescription.
Acquisitive prescription of real rights may be ordinary or
extraordinary. Ordinary acquisitive prescription requires possession
of things in good faith and with just title for the time fixed by
law;29 without good faith and just title, acquisitive prescription can
only be extraordinary in character. Regarding real or immovable
property, ordinary acquisitive prescription requires a period of
possession of ten years,30 while extraordinary acquisitive
prescription requires an uninterrupted adverse possession of thirty
years.31
Ordinary acquisitive prescription demands that possession be "in
good faith", which consists in the reasonable belief that the person
from whom the thing is received has been the owner thereof and
could thereby transmit that ownership.32 There is "just title" when
the adverse claimant comes into possession of the property
through any of the modes recognized by law for the acquisition of
ownership or other real rights, but that the grantor is neither the
owner nor in a position to transmit the right.33
Article 1130 of the Civil Code states that the "title for prescription
must be true and valid." In Doliendo vs. Biarnesa,34 we elucidated
on this provision, thus:
We think that this contention is based on a misconception of the
scope and effect of the provisions of this article of the Code in its
application to "ordinary prescription." It is evident that by a "titulo
verdadero y valido" in this connection we are not to understand a
"titulo que por si solo tiene fuerza de transferir el dominio sin

necesidad de la prescricion" (a title which of itself is sufficient to

transfer the ownership without the necessity of the lapse of the
prescription period); and we accept the opinion of a learned
Spanish law writer who holds that the "titulo verdadero y valido" as
used in this article of the code prescribes a "titulo Colorado" and
not merely "putativo;" a "titulo Colorado" being one 'which a person
has when he buys a thing, in good faith, from one whom he
believes to be the owner,' and a "titulo putativo" "being one which is
supposed to have preceded the acquisition of a thing, although in
fact it did not, as might happen when one is in possession of a thing
in the belief that it had been bequeathed to him." (Viso Derecho
Civil, Parte Segunda, p. 541)35
The requirements for ordinary acquisitive prescription
hereinabove described have not been met in this case.

Thus, in order that a co-owner's possession may be deemed

adverse to the cestui que trust or the other co-owners, the following
elements must concur: (1) that he has performed unequivocal
acts of repudiation amounting to an ouster of the cestui que
trust or the other co-owners; (2) that such positive acts of
repudiation have been made known to the cestui que trust or
the other co-owners; and (3) that the evidence thereon must be
clear and convincing.39 (Emphasis supplied)
Tested against these guidelines, respondents failed to present
competent evidence that the acts of Sixto adversely and clearly
repudiated the existing co-ownership among the heirs of Leocadio
Medrano.

as

It must be remembered that the burden of proving the status of a

purchaser in good faith lies upon him who asserts that status. It is
not sufficient to invoke the ordinary presumption of good faith, that
is, that everyone is presumed to have acted in good faith, since the
good faith that is here essential is integral with the very status that
must be established.36
After a careful examination of the records, we find that private
respondents failed to discharge the burden of proof that Tiburcio
Balitaan was a purchaser in good faith. It is undisputed that Tiburcio
practically lived his entire lifetime in the area where the property in
dispute is located and had been a neighbor of petitioners. He knew
that Sixto Medrano had other siblings because his son, Dr. Elias
Balitaan, is the godson by baptism of spouses Jose Aguirre and
Gertrudes Medrano, the latter being a deceased sister of Sixto.
Thus, Tiburcio was not a complete stranger to the Medrano clan.
Yet, he deliberately chose to close his eyes to said facts and
despite his personal knowledge to the contrary, he purchased the
disputed property from Sixto on the basis of the misrepresentation
of the latter in his Affidavit of Transfer that he is the sole surviving
heir of Leocadio. A purchaser cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that
he acted in good faith under the belief that there was no defect in
the title of the vendor.37
Since the disputed property is an unregistered land, Tiburcio as
buyer thereof did so at his peril. Private respondents' claim that
Tiburcio bought the land in good faith, that is, without notice that
some other person has a right to or interest in the property, would
not protect them if it turns out, as it actually did in this case, that the
seller, Sixto Medrano, did not own the entire property at the time of
the sale, but only an undivided portion of the land as a co-owner.
Private respondents failed to show that the petitioners were notified
of the subject sale or that respondents gave their consent to the
sale. Not being in "good faith", the ten-year period required for
ordinary acquisitive prescription does not apply.
Even the thirty-year period under extraordinary acquisitive
prescription has not been met in this case. Private respondents
claim to have been in possession, in the concept of owner, of the
entire parcel of land sold to Tiburcio Balitaan by Sixto Medrano for
only seventeen years (1958-1975).
In addition, as we have enunciated in Salvador vs. Court of
Appeals,38 to wit:
This Court has held that the possession of a co-owner is like that of
a trustee and shall not be regarded as adverse to the other coowners but in fact as beneficial to all of them. Acts which may be
considered adverse to strangers may not be considered
adverse insofar as co-owners are concerned. A mere silent
possession by a co-owner, his receipt of rents, fruits or profits
from the property, the erection of buildings and fences and the
planting of trees thereon, and the payment of land taxes,
cannot serve as proof of exclusive ownership, if it is not borne
out by clear and convincing evidence that he exercised acts of
possession which unequivocably constituted an ouster or
deprivation of the rights of the other co-owners.

Private respondents' reliance on the tax declaration in the name of

Sixto Medrano is unworthy of credit since we have held on several
occasions that tax declarations by themselves do not conclusively
prove title to land.40Further, private respondents failed to show that
the Affidavit executed by Sixto to the effect that he is the sole owner
of the subject property was known or made known to the other coheirs of Leocadio Medrano.
Neither can we subscribe to the appellate court's view that
petitioners are guilty of laches. Laches is the negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it has abandoned it or
declined to assert it.41 It does not involve mere lapse or passage of
time, but is principally an impediment to the assertion or
enforcement of a right, which has become under the circumstances
inequitable or unfair to permit.42 The rule that each co-owner may
demand at any time the partition of the common property implies
that an action to demand partition is imprescriptible or cannot be
barred by laches.43
We have consistently held that if a co-owner sells the whole
property as his, the sale will affect only his own share but not those
of the other co-owners who did not consent to the sale. 44 Article 493
of the Civil Code provides:
Art. 493. Each co-owner shall have the full ownership of his part
and the fruits and benefits pertaining thereto, and he may therefore
alienate, assign or mortgage it, and even substitute another person
in its enjoyment, except when personal rights are involved. But the
effect of the alienation or the mortgage, with respect to the coowners, shall be limited to the portion which may be allotted to him
in the division upon the termination of the co-ownership.
It clearly provides that the sale or other disposition affects only the
seller's share pro indiviso, and the transferee gets only what
corresponds to his grantor's share in the partition of the property
owned in common. Since a co-owner is entitled to sell his undivided
share, a sale of the entire property by one co-owner without the
consent of the other co-owners is not null and void; only the rights
of the co-owner/seller are transferred, thereby making the buyer a
co-owner of the property.45 Accordingly, we held in Bailon-Casilao
vs. Court of Appeals:
From the foregoing, it may be deduced that since a co-owner is
entitled to sell his undivided share, a sale of the entire property by
one-co-owner without the consent of the other co-owners is not null
and void. However, only the rights of the co-owner-seller are
transferred, thereby making the buyer a co-owner of the property.
The proper action in cases like this is not for the nullification of the
sale or for the recovery of possession of the thing owned in
common from the third person who substituted the co-owner or coowners who alienated their shares, but the DIVISION of the
common property as if it continued to remain in the possession of
the co-owners who possessed and administered it [Mainit v.
Bandoy, supra].
Thus, it is now settled that the appropriate recourse of co-owners in
cases where their consent were not secured in a sale of the entire
property as well as in a sale merely of the undivided shares of

some of the co-owners is an action for PARTITION under Rule 69

of the Revised Rules of Court. Neither recovery of possession nor
restitution can be granted since the defendant buyers are legitimate
proprietors and possessors in joint ownership of the common
property claimed [Ramirez v. Bautista, supra].46

(6) Heirs of Isabel M. Magtibay, Vicenta, Horacio and Florencio,

all surnamed Magtibay - 292.75 square meters

It is clear therefore that the deed of sale executed by Sixto

Medrano in favor of Tiburcio Balitaan is a valid conveyance only
insofar as the share of Sixto Medrano in the co-ownership is
concerned. Thus, the respondent court erred in declaring the
ownership of the entire 1,695-square meter property sold by Sixto,
in favor of the private respondents.

(8) Sixto Medrano - 292.75 square meters

The next question is what is the area of the pro indiviso share
pertaining to Sixto Medrano that was sold to private respondents?
The trial court endeavored to determine the same by ascertaining
the inheritance of each of the heirs of Leocadio. However, the
manner of partition as set out by the trial court in the text of its
decision needs to be amended so as to conform to the laws on
intestate succession under the Old Civil Code absent any allegation
or showing that Leocadio left any last will and testament.
It is not disputed that the 2,342-square meter property was a
conjugal property of Leocadio and Emiliana. Upon the death of
Emiliana, which occurred many years before the death of Leocadio
in 1945, both deaths occurring before the enactment of the New
Civil Code in 1950, all the four children of the first marriage and the
four children of the second marriage shall share equally. The
subject property should have been divided into eight equal parts,
pursuant to Articles 921 and 931 of the old Civil Code, 47 or 292.75
square meters each. The respective heirs of the now deceased
children of Leocadio inherit by way of representation the respective
shares of their respective parents, pursuant to Articles 933 and 934
of the Old Civil Code.48
At the time of death of Leocadio in 1945, Miguela was entitled only
to the usufruct of the land pursuant to Article 834 of the Old Civil
Code,49 which provides that "[i]f only one legitimate child or
descendant survives, the widower or widow shall have the usufruct
of the third available for betterment, such child or descendant to
have the naked ownership until, on the death of the surviving
spouse, the whole title is merged in him".
Thus, to recapitulate, each of the heirs of Leocadio should inherit
292.75 square meters, pro-indiviso (2,342 square meters 8 =
292.75 square meters) after deducting from the original 2,611
square meters of the subject property the 269 square meters ceded
to the heirs of Maria Bacong in a compromise agreement among
the petitioners and the heirs of Maria Bacong. The deceased
children of Leocadio are represented by their respective heirs by
right of representation under Articles 933 and 934 of the Old Civil
Code.
Accordingly, the undivided shares of Leocadio's eight children or
their heirs by right of representation, upon the death of Leocadio in
1945 are as follows:
(1) Venancio Medrano - 292.75 square meters
(2) Leonila Medrano - 292.75 square meters
(3) Antonio Medrano - 292.75 square meters
(4) Cecilia Medrano - 292.75 square meters
(5) Heirs of Gertrudes M. Aguirre, Telesforo, Reynaldo, Remedios,
Alfredo and Belen, all surnamed Aguirre- - 292.75 square meters

(7) Heirs of Placido Medrano, plaintiff Zosima Medrano Quimbao 292.75 square meters

During the pendency of the case in the trial court but after the death
of Sixto, petitioners sold 460 square meters to one Mateo Castillo.
Consequently, the 460 square meters should be charged against
the shares of petitioners only and should not affect the 292.75
square meters undivided share of Sixto Medrano which he had sold
in 1959.50 Accordingly, 460 square meters divided by 7 equals
65.71 square meters. Deducting said area from 292.75 square
meters, the final undivided share of each of the seven heirs of
Leocadio should be 227.04 square meters (292.75 - 65.71 =
227.04) and that pertaining to Sixto in 292.75 square meters.
Thus, the manner of partition set forth by the trial court in its
decision should be amended, as follows:
(1) Gertrudes M. Aguirre, deceased, represented by her children,
herein petitioners Telesforo, Reynaldo, Remedios, Alfredo and
Belen, all surnamed Aguirre - 227.04 square meters
(2) Isabel M. Magtibay, deceased, represented by her children,
herein petitioners Vicenta, Horacio and Florencio, all surnamed
Magtibay - 227.04 square meters
(3) Placido Medrano, deceased, represented by his only child,
Placido Medrano - 227.04 square meters
(4) Private respondents Maria Rosales and heirs of Tiburcio
Balitaan, namely: Elias, Jose, Arsenia and Rogelio all
surnamed Balitaan (in lieu of Sixto Medrano) - 292.75 square
meters
(5) Venancio Medrano - 227.04 square meters
(6) Leonila Medrano - 227.04 square meters
(7) Antonio Medrano - 227.04 square meters
(8) Cecilia Medrano - 227.04 square meters
(9) Rosendo Bacong - 269 square meters
(10) Mateo Castillo - 460 square meters

WHEREFORE, we GRANT the petition. The assailed decision of

the Court of Appeals in CA-G.R. CV No. 42350, dated July 26,
1995, is REVERSED and SET ASIDE. The decision of the Regional
Trial Court is REINSTATED with the following MODIFICATIONS:
The sale in favor of private respondents is declared VALID but only
insofar as the 292.75 square meters undivided share of Sixto
Medrano in the subject property is concerned.
Let the parcel of land, located at Aplaya, Bauan, Batangas,
consisting of 2,611 square meters, be partitioned and distributed as
determined by the Court in the text of herein decision. Accordingly,
let the records of the case be remanded to the Regional Trial Court
of Batangas City (Branch 2) in Civil Case No. 202 for further
appropriate proceedings under Rule 69 of the Rules of Court.
No pronouncement as to costs.
SO ORDERED.