THELMA M. ARANAS vs. TERESITA V. MERCADO [G.R. No. 156407.

January
15, 2014]

FACTS: The decedent, Emigdio S. Mercado, died intestate on January 12, 1991. He
was survived by his second wife, Teresita V. Mercado, respondent, and their five
children; and his two children by his first marriage, namely: respondent Franklin L.
Mercado and petitioner Thelma M. Aranas.

Emigdio inherited and acquired real properties during his lifetime. He owned
corporate shares in Mervir Realty and Cebu Emerson. He assigned his real
properties in exchange for corporate stocks of Mervir Realty, and sold his real
property in Badian, Cebu to Mervir Realty.

Petitioner filed in the RTC in Cebu City a petition for the appointment of Teresita as
the administrator of Emigdio's estate. The RTC granted the petition considering that
there was no opposition. The letters of administration was granted in favor of
Teresita.

As the administrator, Teresita submitted an inventory of the decedents estate for

the consideration and approval by the RTC. She indicated in the inventory that at
the time of the decedents death that the latter "left no real properties but only
personal properties".

Petitioner claimed that the decedent owned other properties which are excluded
from the inventory and moved that the RTC direct Teresita to amend the inventory,
and be examined regarding it. Teresita filed a compliance with the order of January
8, 1993, supporting her inventory with copies of three certificates of stocks covering
the 44,806 Mervir Realty shares of stock; the deed of assignment executed by
Emigdio on January 10, 1991 involving real properties with the market value of
P4,440,651.10 in exchange for 44,407 Mervir Realty shares of stock with total par
value of P4,440,700.00; 5 and the certificate of stock issued on January 30, 1979 for
300 shares of stock of Cebu Emerson worth P30,000.00.

Again, petitioner moved to require Teresita to be examined under oath on the

inventory. The RTC issued an order expressing the need for the parties to present
evidence and for Teresita to be examined to enable the court to resolve the motion
for approval of the inventory. Thelma opposed the approval of the inventory, and
asked, with leave of court, to examine Teresita on the inventory.

The RTC issued on March 14, 2001 an order finding and holding that the inventory
submitted by Teresita had excluded properties that should be included. The RTC
denied the motion for approval of inventory and orders the Teresite, the
administratrix, to re-do the inventory of properties which are supposed to constitute
as the estate of the late Emigdio S. Mercado. The RTC also directed the
administratrix to render an account of her administration of the estate of the
decedent which had come to her possession.

Teresita, joined by other heirs of Emigdio, timely sought the reconsideration of the
order of March 14, 2001 on the ground that one of the real properties affected, Lot
No. 3353 located in Badian, Cebu, had already been sold to Mervir Realty,
On appeal, the CA reversed the RTC decision insofar as the inclusion of parcels of
land that are the subject matter of the Deed of Absolute Sale dated, and the various
parcels of land that are the subject matter of the Deeds of Assignment in the
revised inventory to be submitted by the administratrix is concerned.

ISSUE: Whether or not the RTC committed grave abuse of discretion in directing the
inclusion of certain properties in the inventory by the decedent during his lifetime?

RULING: No. The CA's conclusion of grave abuse of discretion on the part of the
RTC was unwarranted and erroneous.

RATIO: The probate court is authorized to determine the issue of ownership of

properties for purposes of their inclusion or exclusion from the inventory to be
submitted by the administrator, but its determination shall only be provisional
unless the interested parties are all heirs of the decedent, or the question is one of
collation or advancement, or the parties consent to the assumption of jurisdiction by
the probate court and the rights of third parties are not impaired. Its jurisdiction
extends to matters incidental or collateral to the settlement and distribution of the
estate, such as the determination of the status of each heir and whether property
included in the inventory is the conjugal or exclusive property of the deceased
spouse.

Under Section 6 (a), Rule 78 of the Rules of Court, the letters of administration may
be granted at the discretion of the court to the surviving spouse, who is competent
and willing to serve when the person dies intestate. Upon issuing the letters of
administration to the surviving spouse, the RTC becomes duty-bound to direct the
preparation and submission of the inventory of the properties of the estate, and the
surviving spouse, as the administrator, has the duty and responsibility to submit the
inventory within three months from the issuance of letters of administration
pursuant to Rule 83 of the Rules of Court, viz.:

Section 1. Inventory and appraisal to be returned within

three months. Within three (3) months after his
appointment every executor or administrator shall return
to the court a true inventory and appraisal of all the real
and personal estate of the deceased which has come into
his possession or knowledge. In the appraisement of such
estate, the court may order one or more of the
inheritance tax appraisers to give his or their assistance.

The usage of the word all in Section 1, supra, demands the inclusion of all the real
and personal properties of the decedent in the inventory. However, the word all is
qualified by the phrase which has come into his possession or knowledge, which
signifies that the properties must be known to the administrator to belong to the
decedent or are in her possession as the administrator. Section 1 allows no
exception, for the phrase true inventory implies that no properties appearing to
belong to the decedent can be excluded from the inventory, regardless of their
being in the possession of another person or entity.
The objective of the Rules of Court in requiring the inventory and appraisal of the
estate of the decedent is "to aid the court in revising the accounts and determining
the liabilities of the executor or the administrator, and in malting a final and
equitable distribution (partition) of the estate and otherwise to facilitate the
administration of the estate." Hence, the RTC that presides over the administration
of an estate is vested with wide discretion on the question of what properties should
be included in the inventory. According to Peralta v. Peralta, the CA cannot impose
its judgment in order to supplant that of the RTC on the issue of which properties
are to be included or excluded from the inventory in the absence of "positive abuse
of discretion," for in the administration of the estates of deceased persons, "the
judges enjoy ample discretionary powers and the appellate courts should not
interfere with or attempt to replace the action taken by them, unless it be shown
that there has been a positive abuse of discretion." As long as the RTC commits no
patently grave abuse of discretion, its orders must be respected as part of the
regular performance of its judicial duty.

There is no dispute that the jurisdiction of the trial court as an intestate court is
special and limited. The trial court cannot adjudicate title to properties claimed to
be a part of the estate but are claimed to belong to third parties by title adverse to
that of the decedent and the estate, not by virtue of any right of inheritance from
the decedent. All that the trial court can do regarding said properties is to
determine whether or not they should be included in the inventory of properties to
be administered by the administrator. Such determination is provisional and may be
still revised.

The inventory of the estate of Emigdio must be prepared and submitted for the
important purpose of resolving the difficult issues of collation and advancement to
the heirs. Article 1061 of the Civil Code required every compulsory heir and the
surviving spouse, herein Teresita herself, to "bring into the mass of the estate any
property or right which he (or she) 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." Section 2, Rule 90 of the Rules of Court also provided
that any advancement by the decedent on the legitime of an heir "may be heard
and determined by the court having jurisdiction of the estate proceedings, and the
final order of the court thereon shall be binding on the person raising the questions
and on the heir." Rule 90 thereby expanded the special and limited jurisdiction of
the RTC as an intestate court about the matters relating to the inventory of the
estate of the decedent by authorizing it to direct the inclusion of properties donated
or bestowed by gratuitous title to any compulsory heir by the decedent.

The determination of which properties should be excluded from or included in the

inventory of estate properties was well within the authority and discretion of the
RTC as an intestate court. In making its determination, the RTC acted with
circumspection, and proceeded under the guiding policy that it was best to include
all properties in the possession of the administrator or were known to the
administrator to belong to Emigdio rather than to exclude properties that could turn
out in the end to be actually part of the estate. As long as the RTC commits no
patent grave abuse of discretion, its orders must be respected as part of the regular
performance of its judicial duty.