Wednesday, October 1, 2014

what is brought to collation is not the donated property itself, but the value of the property at the time it was donated.



THIRD DIVISION
[ G.R. No. 112483, October 08, 1999 ]
ELOY IMPERIAL, PETITIONER  VS. COURT OF APPEALS, REGIONAL TRIAL COURT OF LEGASPI CITY, CESAR VILLALON, JR., TERESA VILLALON, ANTONIO VILLALON, AUGUSTO VILLALON, ROBERTO VILLALON, RICARDO VILLALON AND ESTHER VILLALON, RESPONDENTS.

D E C I S I O N

GONZAGA-REYES, J.:
Petitioner seeks to set aside the Decision of the Court of Appeals in C.A.-G.R. CV No. 31976[1], affirming the Decision of the Regional Trial Court of Legazpi City[2], which rendered inofficious the donation made by Leoncio Imperial in favor of herein petitioner, to the extent that it impairs the legitime of Victor Imperial, and ordering petitioner to convey to herein private respondents, heirs of said Victor Imperial, that portion of the donated land proportionate to Victor Imperial’s legitime.
Leoncio Imperial was the registered owner of a 32,837-square meter parcel of land covered by Original Certificate of Title No. 200, also known as Lot 45 of the Cadastral Survey of Albay. On July 7, 1951, Leoncio sold the said lot for P1.00 to his acknowledged natural son, petitioner herein, who then acquired title over the land and proceeded to subdivide it into several lots. Petitioner and private respondents admit that despite the contract’s designation as one of “Absolute Sale”, the transaction was in fact a donation.
On July 28, 1953, or barely two years after the donation, Leoncio filed a complaint for annulment of the said Deed of Absolute Sale, docketed as Civil Case No. 1177, in the then Court of First Instance of Albay, on the ground that he was deceived by petitioner herein into signing the said document. The dispute, however, was resolved through a compromise agreement, approved by the Court of First Instance of Albay on November 3, 1961[3], under which terms: (1) Leoncio recognized the legality and validity of the rights of petitioner to the land donated; and (2) petitioner agreed to sell a designated 1,000-square meter portion of the donated land, and to deposit the proceeds thereof in a bank, for the convenient disposal of Leoncio. In case of Leoncio’s death, it was agreed that the balance of the deposit will be withdrawn by petitioner to defray burial costs.
On January 8, 1962, and pending execution of the above judgment, Leoncio died, leaving only two heirs --- the herein petitioner, who is his acknowledged natural son, and an adopted son, Victor Imperial. On March 8, 1962, Victor was substituted in place of Leoncio in the above-mentioned case, and it was he who moved for execution of judgment. On March 15, 1962, the motion for execution was duly granted.
Fifteen years thereafter, or on July 26, 1977, Victor died single and without issue, survived only by his natural father, Ricardo Villalon, who was a lessee of a portion of the disputed land. Four years hence, or on September 25, 1981, Ricardo died, leaving as his only heirs his two children, Cesar and Teresa Villalon.
Five years thereafter, or sometime in 1986, Cesar and Teresa filed a complaint for annulment of the donation with the Regional Trial Court of Legazpi City, docketed as Civil Case No. 7646. Petitioner moved to dismiss on the ground of res judicata, by virtue of the compromise judgment rendered by the Court of First Instance of Albay. The trial court granted the motion to dismiss, but the Court of Appeals reversed the trial court’s order and remanded the case for further proceedings.
On October 18, 1989, Cesar and Teresa filed an amended complaint in the same case, Civil Case No. 7646, for “Annulment of Documents, Reconveyance and Recovery of Possession” with the Regional Trial Court of Legazpi City, seeking the nullification of the Deed of Absolute Sale affecting the above property, on grounds of fraud, deceit and inofficiousness. In the amended complaint, it was alleged that petitioner caused Leoncio to execute the donation by taking undue advantage of the latter’s physical weakness and mental unfitness, and that the conveyance of said property in favor of petitioner impaired the legitime of Victor Imperial, their natural brother and predecessor-in-interest.[4]
In his Answer, petitioner: (1) alleged that Leoncio had conveyed sufficient property to Victor to cover his legitime, consisting of 563 hectares of agricultural land in Manito, Albay; (2) reiterated the defense of res judicata, and (3) raised the additional defenses of prescription and laches.
Plaintiff Cesar Villalon died on December 26, 1989, while the case was pending in the Regional Trial Court, and was substituted in this action by his sons, namely, Antonio, Roberto, Augusto, Ricardo and Cesar, Jr., all surnamed Villalon, and his widow, Esther H. Villalon.
The RTC held the donation to be inofficious and impairing the legitime of Victor, on the basis of its finding that at the time of Leoncio’s death, he left no property other than the 32,837-square meter parcel of land which he had donated to petitioner. The RTC went on further to state that petitioner’s allegation that other properties existed and were inherited by Victor was not substantiated by the evidence.[5]
The legitime of Victor was determined by the trial court in this manner:
Considering that the property donated is 32,837 square meters, one half of that or 16,418 square meters becomes the free portion of Leoncio which could be absorbed in the donation to defendant. The other half, which is also 16,418 square meters is where the legitime of the adopted son Victor Imperial has to be taken.
The proportion of the legitime of the legitimate child (including the adopted child) in relation to the acknowledged natural child (defendant) is 10 is to 5[,] with the acknowledged natural child getting ½ of the legitime of the legitimate (adopted) child, in accordance with Art. 895 of the New Civil Code which provides:
“The legitime of each of the acknowledged natural children and each of the natural children by legal fiction shall consist of one-half of the legitime of each of the legitimate children or descendants.”
From the 16,418 square meters left (after the free portion has been taken) plaintiffs are therefore entitled to 10,940 square meters while defendant gets 5,420 square meters.[6]
The trial court likewise held that the applicable prescriptive period is 30 years under Article 1141 of the Civil Code[7], reckoned from March 15, 1962, when the writ of execution of the compromise judgment in Civil Case 1177 was issued, and that the original complaint having been filed in 1986, the action has not yet prescribed. In addition, the trial court regarded the defense of prescription as having been waived, this not being one of the issues agreed upon at pre-trial.
Thus, the dispositive portion of the RTC’s Decision of December 13, 1990 reads:
WHEREFORE, premises considered, the Deed of Absolute Sale otherwise known as Doc. No. 8; Book No. 14; Page No. 1; Series of 1951 of the Notarial file of Pompeyo B. Calleja which is considered a donation, is hereby reduced proportionately insofar as it affected the legitime of the late Victor Imperial, which share is inherited by the plaintiffs herein, to the extent that plaintiffs are ordered to be given by defendant a portion of 10,940 square meters thereof.
In order to avoid further conflict, the 10,940 share to be given to plaintiffs should include the portion which they are presently occupying, by virtue of the extended lease to their father Ricardo Villalon, where the bungalow in question stands.
The remaining portion to be given to plaintiffs may come from any other portion that may be agreed upon by the parties, otherwise, this court will appoint a commissioner to undertake the partition.
The other 21,897 square meters should go to the defendant as part of his legitime and by virtue of the reduced donation.
No pronouncement as to damages as they were not sufficiently proved.
SO ORDERED.[8]
The Court of Appeals affirmed the RTC Decision in toto.
Before us, petitioner questions the following findings of respondent court: (1) that there was no res judicata, there being no identity of parties and cause of action between the instant case and Civil Case No. 1177; (2) that private respondents had a right to question the donation; (3) that private respondents’ action is barred by prescription, laches and estoppel; and (4) that the donation was inofficious and should be reduced.
It is an indispensable requirement in res judicata that there be, between the first and second action, identity of parties, of subject matter and of cause of action.[9] A perusal of the records leads us to conclude that there is no identity of parties and of cause of action as between Civil Case No. 1177 and Civil Case No. 7646. Civil Case No. 1177 was instituted by Leoncio in his capacity as donor of the questioned donation. While it is true that upon his death, Victor was substituted as plaintiff of the action, such does not alter the fact that Victor’s participation in the case was in representation of the interests of the original plaintiff, Leoncio. The purpose behind the rule on substitution of parties is to ensure that the deceased party would continue to be properly represented in the suit through the duly appointed legal representative of the estate[10], or his heir, as in this case, for which no court appointment is required.[11] Petitioner’s argument, therefore, that there is substantial identity between Leoncio and private respondents, being heirs and successors-in-interest of Victor, is unavailing.
Moreover, Leoncio’s cause of action as donor of the property was fraud, purportedly employed upon him by petitioner in the execution of the donation. While the same circumstances of fraud and deceit are alleged in private respondents’ complaint, it also raises the additional ground of inofficiousness of donation.
Contrary to petitioner’s contentions, inofficiousness of donation does not, and could not, form part of Leoncio’s cause of action in Civil Case No. 1177. Inofficiousness as a cause of action may arise only upon the death of the donor, as the value of the donation will then be contrasted with the net value of the estate of the donor-deceased.[12]
Consequently, while in Civil Case No. 1177, Leoncio sought the revocation in full of the donation on ground of fraud, the instant case actually has two alternative causes of action. First, for fraud and deceit, under the same circumstances as alleged in Leoncio’s complaint, which seeks the annulment in full of the donation, and which the trial court correctly dismissed because the compromise agreement in Civil Case No. 1177 served as a ratification and waiver on the part of Leoncio of whatever defects in voluntariness and consent may have been attendant in the making of the donation. The second cause of action is the alleged inofficiousness of the donation, resulting in the impairment of Victor’s legitime, which seeks the annulment, not of the entire donation, but only of that portion diminishing the legitime.[13] It is on the basis of this second cause of action that private respondents prevailed in the lower courts.
Petitioner next questions the right of private respondents to contest the donation. Petitioner sources his argument from Article 772 of the Civil Code, thus:
Only those who at the time of the donor’s death have a right to the legitime and their heirs and successors in interest may ask for the reduction of inofficious donations. xxx
As argued by petitioner, when Leoncio died on January 8, 1962, it was only Victor who was entitled to question the donation. However, instead of filing an action to contest the donation, Victor asked to be substituted as plaintiff in Civil Case No. 1177 and even moved for execution of the compromise judgment therein.
No renunciation of legitime may be presumed from the foregoing acts. It must be remembered that at the time of the substitution, the judgment approving the compromise agreement has already been rendered. Victor merely participated in the execution of the compromise judgment. He was not a party to the compromise agreement.
More importantly, our law on succession does not countenance tacit repudiation of inheritance. Rather, it requires an express act on the part of the heir. Thus, under Article 1051 of Civil Code:
The repudiation of an inheritance shall be made in a public or authentic instrument, or by petition presented to the court having jurisdiction over the testamentary or intestate proceedings.
Thus, when Victor substituted Leoncio in Civil Case No. 1177 upon the latter’s death, his act of moving for execution of the compromise judgment cannot be considered an act of renunciation of his legitime. He was, therefore, not precluded or estopped from subsequently seeking the reduction of the donation, under Article 772. Nor are Victor’s heirs, upon his death, precluded from doing so, as their right to do so is expressly recognized under Article 772, and also in Article 1053:
If the heir should die without having accepted or repudiated the inheritance, his right shall be transmitted to his heirs.
Be that as it may, we find merit in petitioner’s other assignment of errors. Having ascertained this action as one for reduction of an inofficious donation, we cannot sustain the holding of both the trial court and the Court of Appeals that the applicable prescriptive period is thirty years, under Article 1141 of the Civil Code. The sense of both courts that this case is a “real action over an immovable” allots undue credence to private respondents’ description of their complaint, as one for “Annulment of Documents, Reconveyance and Recovery of Possession of Property”, which suggests the action to be, in part, a real action enforced by those with claim of title over the disputed land.
Unfortunately for private respondents, a claim for legitime does not amount to a claim of title. In the recent case of Vizconde vs. Court of Appeals[14], we declared that what is brought to collation is not the donated property itself, but the value of the property at the time it was donated. The rationale for this is that the donation is a real alienation which conveys ownership upon its acceptance, hence, any increase in value or any deterioration or loss thereof is for the account of the heir or donee.[15]
What, then, is the prescriptive period for an action for reduction of an inofficious donation? The Civil Code specifies the following instances of reduction or revocation of donations: (1) four years, in cases of subsequent birth, appearance, recognition or adoption of a child;[16] (2) four years, for non-compliance with conditions of the donation;[17] and (3) at any time during the lifetime of the donor and his relatives entitled to support, for failure of the donor to reserve property for his or their support.[18] Interestingly, donations as in the instant case,[19] the reduction of which hinges upon the allegation of impairment of legitime, are not controlled by a particular prescriptive period, for which reason we must resort to the ordinary rules of prescription.
Under Article 1144 of the Civil Code, actions upon an obligation created by law must be brought within ten years from the time the right of action accrues. Thus, the ten-year prescriptive period applies to the obligation to reduce inofficious donations, required under Article 771 of the Civil Code, to the extent that they impair the legitime of compulsory heirs.
From when shall the ten-year period be reckoned? The case of Mateo vs. Lagua, 29 SCRA 864, which involved the reduction for inofficiousness of a donation propter nuptias, recognized that the cause of action to enforce a legitime accrues upon the death of the donor-decedent. Clearly so, since it is only then that the net estate may be ascertained and on which basis, the legitimes may be determined.
It took private respondents 24 years since the death of Leoncio to initiate this case. The action, therefore, has long prescribed.
As for the trial court’s holding that the defense of prescription had been waived, it not being one of the issues agreed upon at pre-trial, suffice it to say that while the terms of the pre-trial order bind the parties as to the matters to be taken up in trial, it would be the height of injustice for us to adhere to this technicality when the fact of prescription is manifest in the pleadings of the parties, as well as the findings of fact of the lower courts.[20]
A perusal of the factual antecedents reveals that not only has prescription set in, private respondents are also guilty of estoppel by laches. It may be recalled that Leoncio died on January 8, 1962. Fifteen years later, Victor died, leaving as his sole heir Ricardo Villalon, who also died four years later. While Victor was alive, he gave no indication of any interest to contest the donation of his deceased father. As we have discussed earlier, the fact that he actively participated in Civil Case No. 1177 did not amount to a renunciation of his inheritance and does not preclude him from bringing an action to claim his legitime. These are matters that Victor could not possibly be unaware of, considering that he is a lawyer[21]. Ricardo Villalon was even a lessee of a portion of the donated property, and could have instituted the action as sole heir of his natural son, or at the very least, raised the matter of legitime by way of counterclaim in an ejectment case[22] filed against him by petitioner in 1979. Neither does it help private respondents’ cause that five years have elapsed since the death of Ricardo in 1981 before they filed their complaint with the RTC.
Estoppel by laches is the failure or neglect for an unreasonable or unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier, warranting a presumption that the person has abandoned his right or declined to assert it.[23] We find the necessity for the application of the principle of estoppel by laches in this case, in order to avoid an injustice.
A final word on collation of donations. We observe that after finding the donation to be inofficious because Leoncio had no other property at the time of his death, the RTC computed the legitime of Victor based on the area of the donated property. Hence, in its dispositive portion, it awarded a portion of the property to private respondents as Victor’s legitime. This was upheld by the Court of Appeals.
Our rules of succession require that before any conclusion as to the legal share due to a compulsory heir may be reached, the following steps must be taken: (1) the net estate of the decedent must be ascertained, by deducting all the payable obligations and charges from the value of the property owned by the deceased at the time of his death; (2) the value of all donations subject to collation would be added to it.[24]
Thus, it is the value of the property at the time it is donated, and not the property itself, which is brought to collation. Consequently, even when the donation is found inofficious and reduced to the extent that it impaired Victor’s legitime, private respondents will not receive a corresponding share in the property donated. Thus, in this case where the collatable property is an immovable, what may be received is: (1) an equivalent, as much as possible, in property of the same nature, class and quality;[25] (2) if such is impracticable, the equivalent value of the impaired legitime in cash or marketable securities;[26] or (3) in the absence of cash or securities in the estate, so much of such other property as may be necessary, to be sold in public auction.[27]
We believe this worth mentioning, even as we grant the petition on grounds of prescription and laches.
ACCORDINGLY, the decision of the Court of Appeals in C.A. G.R. CV No. 31976, affirming in toto the decision of the Regional Trial Court in Civil Case No. 7646, is reversed and set aside. No costs.
SO ORDERED.
Melo, Vitug, Panganiban, and Purisima, JJ., concur.
[1] Rendered by the Seventh Division. Penned by Associate Justice Nathanael P. De Pano, Jr., and concurred in by Associate Justices Nicolas P. Lapeña, Jr. and Ma. Alicia Austria-Martinez.
[2] Branch 10; presided by Judge Antonio A. Arcangel.
[3] Annex “B” of Petition; Rollo, 43.
[4] Annex C-1 of Petition; Rollo, 52-53.
[5] Ibid., 66-67.
[6] RTC Decision; Rollo, 68-69.
[7] Article 1141 of the Civil Code provides: “Real actions over immovables prescribe after thirty years. xxx”
[8] RTC Decision; Rollo, 69-70.
[9] Casil vs Court of Appeals, 285 SCRA 264; Municipality of San Juan vs. Court of Appeals,279 SCRA711; Cartlet vs. Court of Appeals, 275 SCRA 97.
[10] Torres, Jr. vs. Court of Appeals, 278 SCRA 793.
[11] Revised Rules of Court, Rule 3, Sec. 16.
[12] Under Article 771 of the Civil Code, “(d)onations which in accordance with the provisions of Article 752, are inofficious bearing in mind the estimated net value of the donor’s property at the time of his death, shall be reduced with regard to the excess, but this reduction shall not prevent the donations from taking effect during the life of the donor, nor shall it bar the donee from appropriating the fruits. xxx.”
[13] See Mateo vs. Lagua, 29 SCRA 864.
[14] 286 SCRA 217; see also Civil Code, Art. 1071.
[15] Vizconde vs. Court of Appeals, op. cit.
[16] Civil Code, Art. 763.
[17] Id., Art. 764.
[18] Id., Art. 750.
[19] Governed by Articles 752 and 771 of the Civil Code, which read thus:
Art. 752. xxx (N)o person may give or receive, by way of donation, more than what he may give or receive by will.
The donation shall be inofficious in all that it may exceed this limitation.
Art.771. Donations which in accordance with the provisions of Article 752, are inofficious bearing in mind the estimated net value of the donor’s property at the time of his death, shall be reduced with regard to the excess, but this reduction shall not prevent the donations from taking effect during the life of the donor, nor shall it bar the donee from appropriating the fruits. xxx
[20] See Revised Rules of Court, Rule 118; Sec. 3 and Rule 9, Sec. 1 which respectively provide:
Pre-trial order. --- After the pre-trial conference, the court shall issue an order reciting the actions taken, the facts stipulated, and evidence marked. Such order shall bind the parties, limit the trial to matters not disposed of and control the course of the action during the trial, unless modified by the court to prevent manifest injustice. (Emphasis supplied)
Defenses and objections not pleaded. --- xxx (W)hen it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is an action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim.
[21] Amended Complaint, Annex C-1 of Petition; Rollo, 52.
[22] Motion to Dismiss Complaint, Annex “D” of Petition; Rollo, 56-57.
[23] Madeja vs. Patcho, 132 SCRA 540.
[24] Civil Code, Art. 908; Vizconde vs. Court of Appeals, supra; Mateo vs. Lagua, supra.
[25] Civil Code, Article 1073, which provides:
“The donee’s share of the estate shall be reduced by an amount equal to that already received by him; and his co-heirs shall receive an equivalent, as much as possible, in property of the same nature, class and quality.”
[26] Civil Code, Art. 1074:
“Should the provisions of the preceding article be impracticable, if the property donated was immovable, the co-heirs shall be entitled to receive its equivalent in cash or securities, at the rate of quotation; and should there be neither cash nor marketable securities in the estate, so much of the other property as may be necessary shall be sold at public auction. xxx ”
[27] Id.


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THIRD DIVISION
[ G.R. NO. 154942, August 16, 2005 ]
ROLANDO SANTOS, PETITIONER, VS. CONSTANCIA SANTOS ALANA, RESPONDENT.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision[1] dated March 7, 2002 and Resolution dated July 24, 2002 of the Court of Appeals in C.A.-G.R. CV No. 40728.

A brief narration of the factual antecedents follows:

Rolando Santos, petitioner, and Constancia Santos Alana, respondent, are half-blood siblings both asserting their claim over a 39-square meter lot located at 1339-B Andalucia St., Sta. Cruz, Manila. It was registered in the name of their father, Gregorio Santos, under Transfer Certificate of Title (TCT) No. 14278 of the Registry of Deeds of Manila. He died intestate on March 10, 1986.

During his lifetime, or on January 16, 1978, Gregorio donated the lot to petitioner which the latter accepted on June 30, 1981. The deed of donation ("Pagsasalin ng Karapatan at Pag-aari") was annotated on Gregorio's title.

On April 8, 1981, Gregorio sold the lot to petitioner as per a Deed of Absolute Sale.

On June 26, 1981, by virtue of the annotated deed of donation, TCT No. 14278 in Gregorio's name was cancelled and in lieu thereof, TCT No. 144706 was issued by the Registry of Deeds of Manila in petitioner's name.

On January 11, 1991, respondent Constancia Santos filed with the Regional Trial Court of Manila, Branch 15, a complaint for partition and reconveyance against petitioner. She alleged that during his lifetime, her father Gregorio denied having sold the lot to petitioner; that she learned of the donation in 1978; and that the donation is inofficious as she was deprived of her legitime.

In his answer, petitioner countered that respondent's suit is barred by prescription considering that she is aware that he has been in possession of the lot as owner for more than ten (10) years; and that the lot was sold to him by his father, hence, respondent can no longer claim her legitime.

The trial court found that the Deed of Absolute Sale was not signed by the parties nor was it registered in the Registry of Deeds. Thus, it is not a valid contract. What is valid is the deed of donation as it was duly executed by the parties and registered.

The trial court then held that since Gregorio did not own any other property, the donation to petitioner is inofficious because it impaired respondent's legitime.

The dispositive portion of the trial court's Decision reads:
"WHEREFORE, premises considered, judgment is hereby rendered declaring the Deed of Donation inofficious insofar as it impair the legitime of the plaintiff which is ½ the of the subject property.

The Registry of Deeds of Manila is hereby ordered to cancel the entry in TCT No. 14278 of the Deed of Donation dated January 16, 1978 and to cancel TCT No. 144706 issued based on said entry.

The parties are enjoined to institute the proper action for the settlement of the Estate of Gregorio Santos and for the eventual partition of the estate."[2]
On appeal, the Court of Appeals affirmed the trial court's Decision, holding that:
"There are in the instant case two documents by which the subject property was purportedly transferred to the defendant - a deed of donation and a deed of sale.
x x x

There can, therefore, be no way by which the appellant may successfully convince us that Gregorio Santos sold the property in dispute to him and such sale can bind the appellee so as to remove the case from the realm of the law on donations.

Moreover, as aptly put by the trial court:
'In general one who has disposed his property would not and could not have disposed the same again unless the previous act was rendered invalid or ineffective.

The validity of the Deed of Donation was never assailed by the defendant. In fact, it was impliedly recognized as valid by defendant by registering the same to the Registry of Deeds.

It is the honest belief of this Court, given the circumstances, i.e., the existence of the vendor and the vendee in the Deed of Absolute Sale and the registration of the Deed of Donation despite the supposed previous execution of (the) Deed of Absolute Sale, that there was no valid deed of sale executed and that the true and real agreement between Gregorio Santos and Rolando Santos was that of a donation.

Furthermore, considering that defendant himself registered the Deed of Donation, he cannot now close his eyes and deny the existence of the same by alleging that there had been a deed of sale executed previously." (Appealed Decision, supra, at pp. 238-239)
x x x

While a person may dispose of his property by donation, there is a limitation to the same. The law provides that no person may give or receive, by way of donation, more than he may give or receive by will, and any donation which may exceed the foregoing is considered inofficious. x x x The donation shall be inofficious in all that it may exceed this limitation. (Article 752, Civil Code) The said donation may correspondingly be reduced insofar as it exceeds the portion that may be freely disposed of by will (ART. 761).
x x x

It has been undisputedly shown that the subject property was the only property of the deceased Gregorio Santos at the time of his death on March 10, 1986 (Exhibit "K", Original Record, p. 163); and that he made no reservation for the legitime of the plaintiff-appellee, his daughter (See paragraph 2, Complaint and paragraph 2, Answer, Ibid., at pp 1 and 12) and compulsory heir. Clearly, the rule on officiousness applies. x x x

x x x

Defendant-appellant finally argues that since plaintiff-appellee knew of the donation since 1978, while the donor Gregorio Santos was still alive, her assailing the said donation only on January 11, 1991 or thirteen years after, has effectively barred her from instituting the present action. The foregoing is apparently groundless and without merit.

The inofficiousness of a donation cannot be determined until after the death of the donor because prior to his death, the value of his estate cannot be determined or computed. Determination of the value of the deceased's estate will require the collation of all properties or rights, donated or conveyed by gratuitous title to the compulsory heirs in order that they may be included in the computation for the determination of the legitime of each heir and for the account of partition (Art. 1061, Civil Code)."[3]
Hence, the instant petition.

The findings of the courts below that (1) Gregorio donated to petitioner the subject lot; (2) the Deed of Absolute Sale is void; and (3) Gregorio's only property is the said lot - are all factual in nature which are not within the domain of this Court for it is not a trier of facts.[4] Basic is it that findings of fact by the trial court, especially when affirmed on appeal, as in this case, are conclusive and binding upon this Court. [5]

The issues which involve questions of law are: (1) whether the donation is inofficious; and (2) whether the respondent's action has prescribed.

I. Whether the donation is inofficious.

It bears reiterating that under Article 752 of the Civil Code, the donation is inofficoius if it exceeds this limitation - no person may give or receive, by way of donation, more than he may give or receive by will. In Imperial vs. Court of Appeals,[6] we held that inofficiousness may arise only upon the death of the donor as the value of donation may then be contrasted with the net value of the estate of the donor deceased.

At this point, we emphasize that as found by the trial court, Gregorio did not sell the lot to petitioner. He donated it. The trial court also found that the donation is inofficious as it impairs respondent's legitime; that at the time of Gregorio's death, he left no property other than the lot now in controversy he donated to petitioner; and that the deceased made no reservation for the legitime of respondent, his daughter and compulsory heir. These findings were affirmed by the Court of Appeals.

Pursuant to Article 752 earlier cited, Gregorio could not donate more than he may give by will. Clearly, by donating the entire lot to petitioner, we agree with both lower courts that Gregorio's donation is inofficious as it deprives respondent of her legitime, which, under Article 888 of the Civil Code, consists of one-half (1/2) of the hereditary estate of the father and the mother. Since the parents of both parties are already dead, they will inherit the entire lot, each being entitled to one-half (1/2) thereof.

II. Whether respondent's suit is barred by prescription.

In Imperial vs. Court of Appeals,[7] we held that "donations, the reduction of which hinges upon the allegation of impairment of legitime (as in this case), are not controlled by a particular prescriptive period, for which reason, we must resort to the ordinary rules of prescription. Under Article 1144 of the Civil Code, actions upon an obligation created by law must be brought within ten years from the time the right of action accrues. Thus, the ten-year prescriptive period applies to the obligation to reduce inofficious donations, required under Article 771 of the Civil Code,[8] to the extent that they impair the legitime of compulsory heirs.

From when shall the ten-year period be reckoned? In Mateo vs. Lagua,[9] involving the reduction, for inofficiousness, of a donation propter nuptias, we held that the cause of action to enforce a legitime accrues upon the death of the donor-decedent. Clearly so, since it is only then that the net estate may be ascertained and on which basis, the legitimes may be determined.

Here, Gregorio died in 1986. Consequently, respondent had until 1996 within which to file the action. Records show that she filed her suit in 1992, well within the prescriptive period.

WHEREFORE, the petition is DENIED. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 40728 are hereby AFFIRMED, with modification in the sense that the subject deed of donation being inofficious, one half (1/2) of the lot covered by TCT No. 14278 of the Registry of Deeds of Manila is awarded to Constancia Santos Alana, respondent, the same being her legitime. The remaining one-half (1/2) shall be retained by petitioner, Rolando Santos, as his legitime and by virtue of the donation.

Costs against petitioner.

SO ORDERED.

Panganiban, (Chairman), Corona, Carpio Morales, and Garcia JJ., concur.

[1] Penned by Associate Justice Salvador J. Valdez, Jr. and concurred in by Associate Justices Mercedes Gozo-Dadole and Juan Q. Enriquez, Jr.

[2] Rollo at 41-42.

[3] Rollo at 76.

[4] Barbacina vs. Court of Appeals, G.R. No. 135365, August 31, 2004, 437 SCRA 300.

[5] Bordalba vs. Court of Appeals, G.R. No. 112443, January 25, 2002, 374 SCRA 555; Ocampo-Paule vs. Court of Appeals, G.R. No. 145872, February 4, 2002, 376 SCRA 83.

[6] G.R. No. 112483, October 8, 1999, 316 SCRA 393.

[7] Supra.

[8] "Art. 771. Donations which in accordance with the provisions of Article 752, are inofficious bearing in mind the estimated net value of the donor's property at the time of his death, shall be reduced with regard to the excess, but this reduction shall not prevent the donations from taking effect during the life of the donor, nor shall it bar the donee from appropriating the fruits.

For the reduction of donations the provisions of this Chapter and Articles 911 and 912 of this Code shall govern."

[9] L-26270, October 30, 1969, 29 SCRA 864.


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THIRD DIVISION
[ G.R. No. 189776, December 15, 2010 ]
AMELIA P. ARELLANO, REPRESENTED BY HER DULY APPOINTED GUARDIANS, AGNES P. ARELLANO AND NONA P. ARELLANO, PETITIONER, VS. FRANCISCO PASCUAL AND MIGUEL PASCUAL, RESPONDENTS.

D E C I S I O N

CARPIO MORALES, J.:
Angel N. Pascual Jr. died intestate on January 2, 1999 leaving as heirs his siblings, namely:  petitioner Amelia P. Arellano who is represented by her daughters[1] Agnes P. Arellano (Agnes) and Nona P. Arellano, and respondents Francisco Pascual and Miguel N. Pascual.[2]

In a petition for "Judicial Settlement of Intestate Estate and Issuance of Letters of Administration," docketed as Special Proceeding Case No. M-5034, filed by respondents on April 28, 2000 before the Regional Trial Court (RTC) of Makati, respondents alleged, inter alia, that a parcel of land (the donated property) located in Teresa Village, Makati, which was, by Deed of Donation, transferred by the decedent to petitioner the validity of which donation respondents assailed, "may be considered as an advance legitime" of petitioner.

Respondent's nephew Victor was, as they prayed for, appointed as Administrator of the estate by Branch 135 of the Makati RTC.[3]

Respecting the donated property, now covered in the name of petitioner by Transfer Certificate of Title No. 181889 of the Register of Deeds of Makati, which respondents assailed but which they, in any event, posited that it "may be considered as an advance legitime" to petitioner, the trial court, acting as probate court, held that it was precluded from determining the validity of the donation.

Provisionally passing, however, upon the question of title to the donated property only for the purpose of determining whether it formed part of the decedent's estate,[4] the probate court found the Deed of Donation valid in light of the presumption of validity of notarized documents.  It thus went on to hold that it is subject to collation following Article 1061 of the New Civil Code which reads:[5]
Every compulsory heir, who succeeds with other compulsory heirs, must bring into the mass of the estate any property or right which he may have received from the decedent, during the lifetime of the latter, by way of donation, or any other gratuitous title in order that it may be computed in the determination of the legitime of each heir, and in the account of the partition.

The probate court thereafter partitioned the properties of the intestate estate.   Thus it disposed:
WHEREFORE, premises considered, judgment is hereby rendered declaring that:
  1. The property covered by TCT No. 181889 of the Register of Deeds of Makati as part of the estate of Angel N. Pascual;
  2. The property covered by TCT No. 181889 to be subject to collation;
  3. 1/3 of the rental receivables due on the property at the mezzanine and the 3rd floor of Unit 1110 Tanay St., Makati City form part of the estate of Angel N. Pascual;
  4. The following properties form part of the estate of Angel N. Pascual:
    1. 1/3 share in the House and Lot at 1110 Tanay St., Rizal Village Makati TCT No. 348341 and 1/3 share in the rental income thereon;
    2. 1/3 share in the Vacant Lot with an area of 271 square meters located at Tanay St., Rizal Village, Makati City, TCT No. 119063;
    3. Agricultural land with an area of 3.8 hectares located at Puerta Galera Mindoro covered by OCT No. P-2159;
    4. Shares of stocks in San Miguel Corporation covered by the following Certificate Numbers:  A0011036, A006144, A082906, A006087, A065796, A11979, A049521, C86950, C63096, C55316, C54824, C120328, A011026, C12865, A10439, A021401, A007218, A0371, S29239, S40128, S58308, S69309;
    5. Shares of stocks in Paper Industries Corp. covered by the following Certificate Numbers: S29239, S40128, S58308, S69309, A006708, 07680, A020786, S18539, S14649;
    6. ¼ share in Eduardo Pascual's shares in Baguio Gold Mining Co.;
    7. Cash in Banco De Oro Savings Account No. 2 014 12292 4 in the name of Nona Arellano;
    8. Property previously covered by TCT No. 119053 now covered by TCT No. 181889, Register of Deeds of Makati City;
    9. Rental receivables from Raul Arellano per Order issued by Branch 64 of the Court on November 17, 1995.

  1. AND the properties are partitioned as follows:
    1. To heir Amelia P. Arellano-the property covered by TCT No. 181889;
    2. To heirs Francisco N. Pascual and Miguel N. Pascual-the real properties covered by TCT Nos. 348341 and 119063 of the Register of Deeds of Makati City and the property covered by OCT No. 2159, to be divided equally between them up to the extent that each of their share have been equalized with the actual value of the property in 5(a) at the time of donation, the value of which shall be determined by an independent appraiser to be designated by Amelia P. Arellano, Miguel N. Pascual and Francisco N. Pascual.  If the real properties are not sufficient to equalize the shares, then Francisco's and Miguel's shares may be satisfied from either in cash property or shares of stocks, at the rate of quotation.  The remaining properties shall be divided equally among Francisco, Miguel and Amelia.  (emphasis and underscoring supplied)

Before the Court of Appeals, petitioner faulted the trial court in holding that
I

. . . THE PROPERTY DONATED TO APPELLANT AMELIA PASCUAL ARELLANO IS PART OF THE ESTATE OF ANGEL PASCUAL, JR.
II

. . . THE PROPERTY DONATED TO APPELLANT IS SUBJECT TO COLLATION UNDER ARTICLE 1061 OF THE NEW CIVIL CODE.
III

. . . APPELLEES WHO ARE MERELY COLLATERAL RELATIVES OF DECEASED ANGEL N. PASCUAL JR. AS HIS COMPULSORY HEIRS ENTITLED TO LEGITIMES.

x x x x
and
V

. . . IN NOT PARTITIONING THE ESTATE OF ANGEL N. PASCUAL JR. EQUALLY AMONG HIS LEGAL OR INTESTATE HEIRS.[6]  (underscoring supplied)

By Decision[7] of July 20, 2009, the Court of Appeals found petitioner's appeal "partly meritorious."  It sustained the probate court's ruling that the property donated to petitioner is subject to collation in this wise:
Bearing in mind that in intestate succession, what governs is the rule on equality of division, We hold that the property subject of donation inter vivos in favor of Amelia is subject to collation.  Amelia cannot be considered a creditor of the decedent and we believe that under the circumstances, the value of such immovable though not strictly in the concept of advance legitime, should be deducted from her share in the net hereditary estate.  The trial court therefore committed no reversible error when it included the said property as forming part of the estate of Angel N. Pascual.[8]  (citation omitted; emphasis and underscoring supplied)

The appellate court, however, held that, contrary to the ruling of the probate court, herein petitioner "was able to submit prima facie evidence of shares of stocks owned by the [decedent] which have not been included in the inventory submitted by the administrator."

Thus, the appellate court disposed, quoted verbatim:
WHEREFORE, premises considered, the present appeal is hereby PARTLY GRANTED.  The Decision dated January 29, 2008 of the Regional Trial Court of Makati City, Branch 135 in Special Proceeding Case No. M-5034 is hereby REVERSED and SET ASIDE insofar as the order of inclusion of properties of the Intestate Estate of Angel N. Pascual, Jr. as well as the partition and distribution of the same to the co-heirs are concerned.

The case is hereby REMANDED to the said court for further proceedings in accordance with the disquisitions herein.[9]  (underscoring supplied)

Petitioner's Partial Motion for Reconsideration[10] having been denied by the appellate court by Resolution[11] of October 7, 2009, the present petition for review on certiorari was filed, ascribing as errors of the appellate court its ruling
I

. . . THAT THE PROPERTY DONATED BY ANGEL N. PASCUAL, JR. TO PETITIONER AMELIA PASCUAL ARELLANO IS PART OF HIS ESTATE AT THE TIME OF HIS DEATH.
II

. . . THAT THE PROPERTY DONATED TO PETITIONER IS SUBJECT TO COLLATION UNDER ARTICLE 1061 OF THE NEW CIVIL CODE.
III

. . .  THAT RESPONDENTS ARE COMPULSORY HEIRS OF THEIR DECEASED BROTHER ANGEL N. PASCUAL JR. AND ARE ENTITLED TO LEGITIMES.
IV

. . . IN NOT PARTITIONING THE ESTATE OF ANGEL N. PASCUAL, JR. EQUALLY AMONG PETITIONER AND RESPONDENTS, AS HIS LEGAL OR INTESTATE HEIRS.[12]  (underscoring supplied)

Petitioners thus raise the issues of whether the property donated to petitioner is subject to collation; and whether the property of the estate should have been ordered equally distributed among the parties.

On the first issue:

The term collation has two distinct concepts: first, it is a mere mathematical operation by the addition of the value of donations made by the testator to the value of the hereditary estate;  and second, it is the return to the hereditary estate of property disposed of by lucrative title by the testator during his lifetime.[13]

The purposes of collation are to secure equality among the compulsory heirs in so far as is possible, and to determine the free portion, after finding the legitime, so that inofficious donations may be reduced.[14]

Collation takes place when there are compulsory heirs, one of its purposes being to determine the legitime and the free portion. If there is no compulsory heir, there is no legitime to be safeguarded.[15]

The records do not show that the decedent left any primary, secondary, or concurring compulsory heirs.  He was only survived by his siblings, who are his collateral relatives and, therefore, are not entitled to any legitime - that part of the testator's property which he cannot dispose of because the law has reserved it for compulsory heirs.[16]
The compulsory heirs may be classified into (1) primary, (2) secondary, and (3) concurring. The primary compulsory heirs are those who have precedence over and exclude other compulsory heirs; legitimate children and descendants are primary compulsory heirs. The secondary compulsory heirs are those who succeed only in the absence of the primary heirs; the legitimate parents and ascendants are secondary compulsory heirs. The concurring compulsory heirs are those who succeed together with the primary or the secondary compulsory heirs; the illegitimate children, and the surviving spouse are concurring compulsory heirs.[17]

The decedent not having left any compulsory heir who is entitled to any legitime, he was at liberty to donate all his properties, even if nothing was left for his siblings-collateral relatives to inherit.  His donation to petitioner, assuming that it was valid,[18] is deemed as donation made to a "stranger," chargeable against the free portion of the estate.[19]  There being no compulsory heir, however, the donated property is not subject to collation.

On the second issue:

The decedent's remaining estate should thus be partitioned equally among his heirs-siblings-collateral relatives, herein petitioner and respondents, pursuant to the provisions of the Civil Code, viz:
Art. 1003. If there are no descendants, ascendants, illegitimate children, or a surviving spouse, the collateral relatives shall succeed to the entire estate of the deceased in accordance with the following articles.  (underscoring supplied)

Art. 1004. Should the only survivors be brothers and sisters of the full blood, they shall inherit in equal shares.  (emphasis and underscoring supplied)

WHEREFORE, the petition is GRANTED.  The Court of Appeals Decision ordering the collation of the property donated to petitioner, Amelia N. Arellano, to the estate of the deceased Angel N. Pascual, Jr. is set aside.

Let the records of the case be REMANDED to the court of origin, Branch 135 of the Makati Regional Trial Court, which is ordered to conduct further proceedings in the case for the purpose of determining what finally forms part of the estate, and thereafter to divide whatever remains of it equally among the parties.

SO ORDERED.

Peralta,* Bersamin, Mendoza,** and Sereno, JJ., concur.

* Additional member per raffle dated January 6, 2010.

**  Additional member per Special Order No. 921 dated December 13. 2010.

[1] Records (Vol. II), p. 646.

[2] Id. at 542.

[3] Records (Vol. I), p. 137.

[4] CA rollo at p. 29.

[5] Id. at 30.

[6] CA rollo at p. 47.

[7] Penned by now Supreme Court Associate Justice Martin S. Villarama, Jr., and concurred in by  Associate Justices Jose C. Reyes, Jr. and Normandie B. Pizarro, rollo, pp. 21-41.

[8] Id. at 37.

[9] Id. at 40-41.

[10]  CA rollo at p. 138.

[11]  Rollo at 43.

[12]  Id. at 13-14.

[13]  III TOLENTINO, 1992 Edition, p. 332, citing 10 Fabres 295-299 Colin & Capitant 526-528;2-11 Ruggiero 394; 5 Planiol & Ripert 67; De Buen; 8 Colin & Capitant 340.

[14]  III TOLENTINO, 1992 Edition, pp. 331-332, citing 6 Manresa 406.

[15]  III TOLENTINO, 1992 Edition, p. 337, citing 6 Manresa 413.

[16]  Article 886, Civil Code.

[17]  III TOLENTINO, 1992 Edition, p.252.

[18] It appears that its validity is in issue in Sp. Proc. No. M-3893 (for guardianship over the person and estate of Angel N. Pascual, Jr.) before Br. 139 of the Makati RTC, vide petition, par. 6, Record, pp. 1-4.

[19]  Vide III TOLENTINO, 1992 Edition, p. 341.


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FIRST DIVISION
[ G.R. No. 126376, November 20, 2003 ]
SPOUSES BERNARDO BUENAVENTURA AND CONSOLACION JOAQUIN, SPOUSES JUANITO EDRA AND NORA JOAQUIN, SPOUSES RUFINO VALDOZ AND EMMA JOAQUIN, AND NATIVIDAD JOAQUIN, PETITIONERS, VS. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN AND CONCHITA BERNARDO, SPOUSES TOMAS JOAQUIN AND SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN AND SOCORRO ANGELES, SPOUSES ALEXANDER MENDOZA AND CLARITA JOAQUIN, SPOUSES TELESFORO CARREON AND FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ AND FE JOAQUIN, AND SPOUSES GAVINO JOAQUIN AND LEA ASIS, RESPONDENTS.

D E C I S I O N

CARPIO, J.:
The Case

This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June 1996 of the Court of Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision[3] dated 18 February 1993 rendered by Branch 65 of the Regional Trial Court of Makati ("trial court") in Civil Case No. 89-5174. The trial court dismissed the case after it found that the parties executed the Deeds of Sale for valid consideration and that the plaintiffs did not have a cause of action against the defendants.
The Facts

The Court of Appeals summarized the facts of the case as follows:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in this action by their respective spouses.

Sought to be declared null and void ab initio are certain deeds of sale of real property executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the corresponding certificates of title issued in their names, to wit:
  1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395 executed on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00 (Exh. "C"), pursuant to which TCT No. [36113/T-172] was issued in her name (Exh. "C-1");
  2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration of P1[2],000.00 (Exh. "D"), pursuant to which TCT No. S-109772 was issued in her name (Exh. "D-1");
  3. Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a consideration of P54,[3]00.00 (Exh. "E"), pursuant to which TCT No. 155329 was issued to them (Exh. "E-1");
  4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a consideration of P[54,3]00.00 (Exh. "F"), pursuant to which TCT No. 155330 was issued to them (Exh. "F-1"); and
  5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395 executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration of P20,000.00 (Exh. "G"), pursuant to which TCT No. 157203 was issued in her name (Exh. "G-1").
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395 executed on 7 October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00 (Exh. "K"), pursuant to which TCT No. 157779 was issued in his name (Exh. "K-1").]
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in their complaint, aver:
- XX-

The deeds of sale, Annexes "C," "D," "E," "F," and "G," [and "K"] are simulated as they are, are NULL AND VOID AB INITIO because -
a)
Firstly, there was no actual valid consideration for the deeds of sale xxx over the properties in litis;




b)
Secondly, assuming that there was consideration in the sums reflected in the questioned deeds, the properties are more than three-fold times more valuable than the measly sums appearing therein;




c)
Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors and vendees); and




d)
Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime.

- XXI -
Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties in litis xxx are NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as well as the requisite standing and interest to assail their titles over the properties in litis; (2) that the sales were with sufficient considerations and made by defendants parents voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale; and (3) that the certificates of title were issued with sufficient factual and legal basis.[4] (Emphasis in the original)
The Ruling of the Trial Court

Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino Joaquin and Lea Asis.[5] Instead of filing an Answer with their co- defendants, Gavino Joaquin and Lea Asis filed a Motion to Dismiss.[6] In granting the dismissal to Gavino Joaquin and Lea Asis, the trial court noted that "compulsory heirs have the right to a legitime but such right is contingent since said right commences only from the moment of death of the decedent pursuant to Article 777 of the Civil Code of the Philippines."[7]

After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial court stated:
In the first place, the testimony of the defendants, particularly that of the xxx father will show that the Deeds of Sale were all executed for valuable consideration. This assertion must prevail over the negative allegation of plaintiffs.

And then there is the argument that plaintiffs do not have a valid cause of action against defendants since there can be no legitime to speak of prior to the death of their parents. The court finds this contention tenable. In determining the legitime, the value of the property left at the death of the testator shall be considered (Art. 908 of the New Civil Code). Hence, the legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live.

All the foregoing considered, this case is DISMISSED.

In order to preserve whatever is left of the ties that should bind families together, the counterclaim is likewise DISMISSED.

No costs.

SO ORDERED.[8]
The Ruling of the Court of Appeals

The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is, whether xxx they have a cause of action against appellees.

Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their parents. However, their right to the properties of their defendant parents, as compulsory heirs, is merely inchoate and vests only upon the latter's death. While still alive, defendant parents are free to dispose of their properties, provided that such dispositions are not made in fraud of creditors.

Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to be creditors of their defendant parents. Consequently, they cannot be considered as real parties in interest to assail the validity of said deeds either for gross inadequacy or lack of consideration or for failure to express the true intent of the parties. In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al., 101 SCRA 376, thus:

The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound thereby; hence, they have no legal capacity to challenge their validity.

Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the dispositions made by their defendant parents in favor of their defendant brothers and sisters. But, as correctly held by the court a quo, "the legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live."

With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is inconsequential.

WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants.

SO ORDERED.[9]
Hence, the instant petition.
Issues

Petitioners assign the following as errors of the Court of Appeals:
  1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION HAD NO VALID CONSIDERATION.
  2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
  3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT EXPRESS THE TRUE INTENT OF THE PARTIES.
  4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER THE SUBJECT PROPERTIES.
  5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD, SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS.[10]
The Ruling of the Court

We find the petition without merit.

We will discuss petitioners' legal interest over the properties subject of the Deeds of Sale before discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the Deeds of Sale.
Whether Petitioners have a legal interest
over the properties subject of the Deeds of Sale

Petitioners' Complaint betrays their motive for filing this case. In their Complaint, petitioners asserted that the "purported sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime." Petitioners' strategy was to have the Deeds of Sale declared void so that ownership of the lots would eventually revert to their respondent parents. If their parents die still owning the lots, petitioners and their respondent siblings will then co-own their parents' estate by hereditary succession.[11]

It is evident from the records that petitioners are interested in the properties subject of the Deeds of Sale, but they have failed to show any legal right to the properties. The trial and appellate courts should have dismissed the action for this reason alone. An action must be prosecuted in the name of the real party-in-interest.[12]
[T]he question as to "real party-in-interest" is whether he is "the party who would be benefitted or injured by the judgment, or the `party entitled to the avails of the suit.'"

x x x

In actions for the annulment of contracts, such as this action, the real parties are those who are parties to the agreement or are bound either principally or subsidiarily or are prejudiced in their rights with respect to one of the contracting parties and can show the detriment which would positively result to them from the contract even though they did not intervene in it (Ibañez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) xxx.

These are parties with "a present substantial interest, as distinguished from a mere expectancy or future, contingent, subordinate, or consequential interest.... The phrase `present substantial interest' more concretely is meant such interest of a party in the subject matter of the action as will entitle him, under the substantive law, to recover if the evidence is sufficient, or that he has the legal title to demand and the defendant will be protected in a payment to or recovery by him."[13]
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the appellate court stated, petitioners' right to their parents' properties is merely inchoate and vests only upon their parents' death. While still living, the parents of petitioners are free to dispose of their properties. In their overzealousness to safeguard their future legitime, petitioners forget that theoretically, the sale of the lots to their siblings does not affect the value of their parents' estate. While the sale of the lots reduced the estate, cash of equivalent value replaced the lots taken from the estate.
Whether the Deeds of Sale are void
for lack of consideration

Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void.

A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as to the price, because the price stipulated in the contract is simulated, then the contract is void.[14] Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void.

It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract.[15]

Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove simulation, petitioners presented Emma Joaquin Valdoz's testimony stating that their father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her payment of the purchase price.[16] The trial court did not find the allegation of absolute simulation of price credible. Petitioners' failure to prove absolute simulation of price is magnified by their lack of knowledge of their respondent siblings' financial capacity to buy the questioned lots.[17] On the other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did respondents' minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent father.[18]
Whether the Deeds of Sale are void
for gross inadequacy of price

Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to invalidate the Deeds of Sale.

Articles 1355 of the Civil Code states:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (Emphasis supplied)
Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. All the respondents believed that they received the commutative value of what they gave. As we stated in Vales v. Villa: [19]
Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate not because one person has been defeated or overcome by another, but because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose money by them - indeed, all they have in the world; but not for that alone can the law intervene and restore. There must be, in addition, a violation of the law, the commission of what the law knows as an actionable wrong, before the courts are authorized to lay hold of the situation and remedy it. (Emphasis in the original)
Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater weight when they coincide with the factual findings of the trial court. This Court will not weigh the evidence all over again unless there has been a showing that the findings of the lower court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of discretion.[20] In the instant case, the trial court found that the lots were sold for a valid consideration, and that the defendant children actually paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of the purchase price by the buyer to the seller is a factual finding that is now conclusive upon us.

WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto. SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

[1] Under Rule 45 of the Rules of Court.

[2] Penned by Associate Justice Artemio G. Tuquero, with Associate Justices Cancio C. Garcia and Romeo J. Callejo, Sr., concurring.

[3] Penned by Judge Salvador S. Abad Santos.

[4] Rollo, pp. 29-31.

[5] Records, pp. 189, 204.

[6] Ibid. , pp. 170-175.

[7] Ibid. , p. 189.

[8] Ibid. , pp. 355-356.

[9] Rollo, pp. 32-33.

[10] Ibid., pp. 16-17.

[11] Article 1078 of the Civil Code of the Philippines states: "Where there are two or more heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs, subject to the payment of debts of the deceased."

[12] Section 2, Rule 3, 1997 Rules of Civil Procedure.

[13] Kilosbayan v. Morato, 316 Phil. 652 (1995).

[14] See Ladanga, et al. v. CA, et al., 216 Phil. 332 (1984). Cesar L. Villanueva, Philippine Law on Sales 54 (1998).

[15] Rido Montecillo v. Ignacia Reynes and Spouses Redemptor and Elisa Abucay, G.R. No. 138018, 26 July 2002.

[16] TSN, 17 May 1991, pp. 497-498.

[17] See Embrado v. Court of Appeals, G.R. No. 51457, 27 June 1994, 233 SCRA 335; TSN, 17 May 1991, 497-498 (Emma Joaquin Valdoz); TSN, 22 May 1991, pp. 11-12, 20-21 (Nora Joaquin Edra).

[18] TSN, 14 June 1991, p. 19 (Leonardo Joaquin); TSN, 30 October 1991, p. 6 (Fidel Joaquin); TSN, 27 November 1991, p. 10 (Felicitas Joaquin Carreon); TSN, 7 January 1992, pp. 5-6 (Artemio Joaquin); TSN, 31 January 1992, p. 12 (Clarita Joaquin Mendoza); TSN, 11 March 1992, pp. 16-17 (Tomas Joaquin).

[19] 35 Phil. 769 (1916).

[20] Nazareno v. Court of Appeals, G.R. No. 138842, 18 October 2000, 343 SCRA 637.


Source: Supreme Court E-Library | Date created: 2008-11-20 08:48:15
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FIRST DIVISION
[ G.R. No. 65800, October 03, 1986 ]
PARTENZA LUCERNA VDA. DE TUPAS, PETITIONER-APPELLANT, VS. BRANCH XLIII OF THE HON. REGIONAL TRIAL COURT OF NEGROS OCCIDENTAL, RESPONDENT, AND TUPAS FOUNDATION, INC., PRIVATE RESPONDENT-APPELLEE.

D E C I S I O N

NARVASA, J.:
Involved in this appeal is the question of whether or not a donation inter vivos by a donor now deceased is inofficious and should be reduced at the instance of the donor's widow.
Epifanio R. Tupas died on August 20, 1978 in Bacolod City, childless, leaving his widow, Partenza Lucerna, as his only surviving compulsory heir.  He also left a will dated May 18, 1976, which was admitted to probate on September 30, 1980 in Special Proceedings No. 13994 of the Court of First Instance of Negros Occidental.  Among the assets listed in his will were lots Nos. 837, 838 and 839 of the Sagay Cadastre, admittedly his private capital.  However, at the time of his death, these lots were no longer owned by him, he having donated them the year before (on August 2, 1977) to the Tupas Foundation, Inc., which had thereafter obtained title to said lots.
Claiming that said donation had left her practically destitute of any inheritance, Tupas' widow brought suit against Tupas Foundation, Inc. in the same Court of First Instance of Negros Occidental (docketed as Civil Case No. 16089) to have the donation declared inofficious insofar as it prejudiced her legitime, therefore reducible "* * * by one-half or such proportion as * * * (might be deemed) justified * * *" and "* * * the resulting deduction * * *" restored and conveyed or delivered to her.  The complaint also prayed for attorney's fees and such other relief as might be proper.
The Trial Court did not see things her way.  Upon the facts above stated, on which the parties stipulated[1], said Court dismissed the complaint for lack of merit, rejecting her claim on several grounds, viz.:
"* * * (1) Article 900 relied upon by plaintiff is not applicable because the properties which were disposed of by way of donation one year before the death of Epifanio Tupas were no longer part of his hereditary estate at the time of his death on August 20, 1978; (2) the donated properties were Epifanio's capital or separate estate; and (3) Tupas Foundation, Inc. being a stranger and not a compulsory heir, the donation inter vivos made in its favor was not subject to collation under Art. 1061, C.C."[2]
The Trial Court is in error on all counts and must be reversed.
A person's prerogative to make donations is subject to certain limitations, one of which is that he cannot give by donation more than he can give by will (Art. 752, Civil Code)[3].  If he does, so much of what is donated as exceeds what he can give by will is deemed inofficious and the donation is reducible to the extent of such excess, though without prejudice to its taking effect in the donor's lifetime or the donee's appropriating the fruits of the thing donated (Art. 771, Civil Code).  Such a donation is, moreover, collationable, that is, its value is imputable into the hereditary estate of the donor at the time of his death for the purpose of determining the legitime of the forced or compulsory heirs and the freely disposable portion of the estate.  This is true as well of donations to strangers as of gifts to compulsory heirs, although the language of Article 1061 of the Civil Code would seem to limit collation to the latter class of donations.  And this has been held to be a long-established rule in Liguez vs. Honorable Court of Appeals, et al.,[4], where this Court said:
"* * * Hence, the forced heirs are entitled to have the donation set aside in so far as inofficious:  i.e., in excess of the portion of free disposal (Civil Code of 1889, Articles 636, 645), computed as provided in Articles 818 and 819, and bearing in mind that 'collationable gifts' under Article 818 should include gifts made not only in favor of the forced heirs, but even those made in favor of strangers, as decided by the Supreme Court of Spain in its decisions of 4 May 1899 and 16 June 1902.  So that in computing the legitimes, the value of the property donated to herein appellant, Conchita Liguez, should be considered part of the donor's estate.  Once again, only the court of origin has the requisite data to determine whether the donation is inofficious or not."[5]
The fact, therefore, that the donated property no longer actually formed part of the estate of the donor at the time of his death cannot be asserted to prevent its being brought to collation.  Indeed, it is an obvious proposition that collation contemplates and particularly applies to gifts inter vivos[6].  The further fact that the lots donated were admittedly capital separate property of the donor is of no moment, because a claim of inofficiousness does not assert that the donor gave what was not his, but that he gave more than what was within his power to give.
Since it is clear that the questioned donation is collationable and that, having been made to a stranger (to the donor) it is, by law[7] chargeable to the freely disposable portion of the donor's estate, to be reduced insofar as inofficious, i.e., it exceeds said portion and thus impairs the legitime of the compulsory heirs, in order to find out whether it is inofficious or not, recourse must be had to the rules established by the Civil Code for the determination of the legitime and, by extension, of the disposable portion.  These rules are set forth in Articles 908, 909 and 910 of the Code, on the basis of which the following step-by-step procedure has been correctly outlined:
(1)    determination of the value of the property which remains at the time of the testator's death;
(2)    determination of the obligations, debts, and charges which have to be paid out or deducted from the value of the property thus left;
(3)    the determination of the difference between the assets and the liabilities, giving rise to the hereditary estate;
(4)    the addition to the net value thus found, of the value, at the time they were made, of donations subject to collation; and
(5)    the determination of the amount of the legitimes by getting from the total thus found the portion that the law provides as the legitime of each respective compulsory heir.[8]
Deducting the legitimes from the net value of the hereditary estate leaves the freely disposable portion by which the donation in question here must be measured.  If the value of the donation at the time it was made does not exceed that difference, then it must be allowed to stand.  But if it does, the donation is inofficious as to the excess and must be reduced by the amount of said excess.  In this case, if any excess be shown, it shall be returned or reverted to the petitioner-appellant as the sole compulsory heir of the deceased Epifanio R. Tupas.
For obvious reasons, this determination cannot now be made, as it requires appreciation of data not before this Court and may necessitate the production of evidence in the Court a quo.
WHEREFORE, the appealed decision is reversed and petitioner-appellant Partenza Lucerna Vda. de Tupas is adjudged entitled to so much of the donated property in question, as may be found in excess of the freely disposable portion of the estate of Epifanio B. Tupas, determined in the manner above-indicated.  Let the case be remanded to the Trial Court for further appropriate proceedings in accordance with this decision.
SO ORDERED.

Yap (Chairman), Melencio-Herrera, Cruz, and Feliciano, JJ., concur.

[1] Decision in Civil Case No. 16089, p. 81 record, referring to a pre-trial order dated November 3, 1981
[2] Decision, Civil Case No. 16089, supra
[3] Other limitations are set out in Articles 750 and 751, Civil Code
[4] 102 Phil. 577, 586
[5] Articles cited are of the Old Civil Code.  Articles 818 and 819 were rewritten, with some changes, into the present Code as Articles 908 and 909
[6] Articles 1061-1069, Civil Code
[7] Article 909, second and third paragraphs, and Article 911, No. (1), Civil Code
[8] Caguioa, Comments & Cases on Civil Law, 3rd (1970) Ed., Vol. III, pp. 280-281; Tolentino, Civil Code of the Philippines 1979 ed., Vol. III, p. 341


Source: Supreme Court E-Library | Date created: January 18, 2010
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