[G.R. No. 149926.

February 23, 2005]

UNION BANK OF THE PHILIPPINES, petitioner, vs. EDMUND

SANTIBAEZ and FLORENCE SANTIBAEZ ARIOLA, respondents.

DECISION
CALLEJO, SR., J.:

Before us is a petition for review on certiorari under Rule 45 of the Revised

Rules of Court which seeks the reversal of the Decision [1] of the Court of
Appeals dated May 30, 2001 in CA-G.R. CV No. 48831 affirming the
dismissal[2] of the petitioners complaint in Civil Case No. 18909 by the Regional
Trial Court (RTC) of Makati City, Branch 63.
The antecedent facts are as follows:
On May 31, 1980, the First Countryside Credit Corporation (FCCC) and
Efraim M. Santibaez entered into a loan agreement[3] in the amount
of P128,000.00. The amount was intended for the payment of the purchase
price of one (1) unit Ford 6600 Agricultural All-Purpose Diesel Tractor. In view
thereof, Efraim and his son, Edmund, executed a promissory note in favor of
the FCCC, the principal sum payable in five equal annual amortizations
of P43,745.96 due on May 31, 1981 and every May 31st thereafter up to May
31, 1985.
On December 13, 1980, the FCCC and Efraim entered into another loan
agreement,[4] this time in the amount of P123,156.00. It was intended to pay the
balance of the purchase price of another unit of Ford 6600 Agricultural All-
Purpose Diesel Tractor, with accessories, and one (1) unit Howard Rotamotor
Model AR 60K. Again, Efraim and his son, Edmund, executed a promissory
note for the said amount in favor of the FCCC. Aside from such promissory
note, they also signed a Continuing Guaranty Agreement[5] for the loan dated
December 13, 1980.
Sometime in February 1981, Efraim died, leaving a holographic
will.[6] Subsequently in March 1981, testate proceedings commenced before the
RTC of Iloilo City, Branch 7, docketed as Special Proceedings No. 2706. On
April 9, 1981, Edmund, as one of the heirs, was appointed as the special
administrator of the estate of the decedent.[7] During the pendency of the testate
proceedings, the surviving heirs, Edmund and his sister Florence Santibaez
Ariola, executed a Joint Agreement[8] dated July 22, 1981, wherein they agreed
to divide between themselves and take possession of the three (3) tractors; that
is, two (2) tractors for Edmund and one (1) tractor for Florence. Each of them
was to assume the indebtedness of their late father to FCCC, corresponding to
the tractor respectively taken by them.
On August 20, 1981, a Deed of Assignment with Assumption of
Liabilities[9] was executed by and between FCCC and Union Savings and
Mortgage Bank, wherein the FCCC as the assignor, among others, assigned
all its assets and liabilities to Union Savings and Mortgage Bank.
Demand letters[10] for the settlement of his account were sent by petitioner
Union Bank of the Philippines (UBP) to Edmund, but the latter failed to heed the
same and refused to pay. Thus, on February 5, 1988, the petitioner filed a
Complaint[11] for sum of money against the heirs of Efraim Santibaez, Edmund
and Florence, before the RTC of Makati City, Branch 150, docketed as Civil
Case No. 18909. Summonses were issued against both, but the one intended
for Edmund was not served since he was in the United States and there was
no information on his address or the date of his return to the
Philippines.[12] Accordingly, the complaint was narrowed down to respondent
Florence S. Ariola.
On December 7, 1988, respondent Florence S. Ariola filed her
Answer[13] and alleged that the loan documents did not bind her since she was
not a party thereto. Considering that the joint agreement signed by her and her
brother Edmund was not approved by the probate court, it was null and void;
hence, she was not liable to the petitioner under the joint agreement.
On January 29, 1990, the case was unloaded and re-raffled to the RTC of
Makati City, Branch 63.[14] Consequently, trial on the merits ensued and a
decision was subsequently rendered by the court dismissing the complaint for
lack of merit. The decretal portion of the RTC decision reads:

WHEREFORE, judgment is hereby rendered DISMISSING the complaint for lack of

merit.[15]

The trial court found that the claim of the petitioner should have been filed
with the probate court before which the testate estate of the late Efraim
Santibaez was pending, as the sum of money being claimed was an obligation
incurred by the said decedent. The trial court also found that the Joint
Agreement apparently executed by his heirs, Edmund and Florence, on July
22, 1981, was, in effect, a partition of the estate of the decedent. However, the
said agreement was void, considering that it had not been approved by the
probate court, and that there can be no valid partition until after the will has
been probated. The trial court further declared that petitioner failed to prove that
it was the now defunct Union Savings and Mortgage Bank to which the FCCC
had assigned its assets and liabilities. The court also agreed to the contention
of respondent Florence S. Ariola that the list of assets and liabilities of the FCCC
assigned to Union Savings and Mortgage Bank did not clearly refer to the
decedents account. Ruling that the joint agreement executed by the heirs was
null and void, the trial court held that the petitioners cause of action against
respondent Florence S. Ariola must necessarily fail.
The petitioner appealed from the RTC decision and elevated its case to the
Court of Appeals (CA), assigning the following as errors of the trial court:
1. THE COURT A QUO ERRED IN FINDING THAT THE JOINT AGREEMENT
(EXHIBIT A) SHOULD BE APPROVED BY THE PROBATE COURT.
2. THE COURT A QUO ERRED IN FINDING THAT THERE CAN BE NO VALID
PARTITION AMONG THE HEIRS UNTIL AFTER THE WILL HAS BEEN
PROBATED.
3. THE COURT A QUO ERRED IN NOT FINDING THAT THE DEFENDANT HAD
WAIVED HER RIGHT TO HAVE THE CLAIM RE-LITIGATED IN THE ESTATE
PROCEEDING.[16]

The petitioner asserted before the CA that the obligation of the deceased
had passed to his legitimate children and heirs, in this case, Edmund and
Florence; the unconditional signing of the joint agreement marked as Exhibit A
estopped respondent Florence S. Ariola, and that she cannot deny her liability
under the said document; as the agreement had been signed by both heirs in
their personal capacity, it was no longer necessary to present the same before
the probate court for approval; the property partitioned in the agreement was
not one of those enumerated in the holographic will made by the deceased; and
the active participation of the heirs, particularly respondent Florence S. Ariola,
in the present ordinary civil action was tantamount to a waiver to re-litigate the
claim in the estate proceedings.
On the other hand, respondent Florence S. Ariola maintained that the
money claim of the petitioner should have been presented before the probate
court.[17]
The appellate court found that the appeal was not meritorious and held that
the petitioner should have filed its claim with the probate court as provided
under Sections 1 and 5, Rule 86 of the Rules of Court. It further held that the
partition made in the agreement was null and void, since no valid partition may
be had until after the will has been probated. According to the CA, page 2,
paragraph (e) of the holographic will covered the subject properties (tractors) in
generic terms when the deceased referred to them as all other properties.
Moreover, the active participation of respondent Florence S. Ariola in the case
did not amount to a waiver. Thus, the CA affirmed the RTC decision, viz.:

WHEREFORE, premises considered, the appealed Decision of the Regional Trial

Court of Makati City, Branch 63, is hereby AFFIRMED in toto.

SO ORDERED.[18]

In the present recourse, the petitioner ascribes the following errors to the
CA:
I.

THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE

JOINT AGREEMENT SHOULD BE APPROVED BY THE PROBATE COURT.

II.

THE COURT OF APPEALS ERRED IN FINDING THAT THERE CAN BE NO

VALID PARTITION AMONG THE HEIRS OF THE LATE EFRAIM SANTIBAEZ
UNTIL AFTER THE WILL HAS BEEN PROBATED.

III.

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE

RESPONDENT HAD WAIVED HER RIGHT TO HAVE THE CLAIM RE-
LITIGATED IN THE ESTATE PROCEEDING.

IV.

RESPONDENTS CAN, IN FACT, BE HELD JOINTLY AND SEVERALLY

LIABLE WITH THE PRINCIPAL DEBTOR THE LATE EFRAIM SANTIBAEZ
ON THE STRENGTH OF THE CONTINUING GUARANTY AGREEMENT
EXECUTED IN FAVOR OF PETITIONER-APPELLANT UNION BANK.

V.

THE PROMISSORY NOTES DATED MAY 31, 1980 IN THE SUM

OF P128,000.00 AND DECEMBER 13, 1980 IN THE AMOUNT OF P123,000.00
CATEGORICALLY ESTABLISHED THE FACT THAT THE RESPONDENTS
BOUND THEMSELVES JOINTLY AND SEVERALLY LIABLE WITH THE
LATE DEBTOR EFRAIM SANTIBAEZ IN FAVOR OF PETITIONER UNION
BANK.[19]
 The petitioner claims that the obligations of the deceased were transmitted
to the heirs as provided in Article 774 of the Civil Code; there was thus no need
for the probate court to approve the joint agreement where the heirs partitioned
the tractors owned by the deceased and assumed the obligations related
thereto. Since respondent Florence S. Ariola signed the joint agreement without
any condition, she is now estopped from asserting any position contrary thereto.
The petitioner also points out that the holographic will of the deceased did not
include nor mention any of the tractors subject of the complaint, and, as such
was beyond the ambit of the said will. The active participation and resistance of
respondent Florence S. Ariola in the ordinary civil action against the petitioners
claim amounts to a waiver of the right to have the claim presented in the probate
proceedings, and to allow any one of the heirs who executed the joint
agreement to escape liability to pay the value of the tractors under consideration
would be equivalent to allowing the said heirs to enrich themselves to the
damage and prejudice of the petitioner.
The petitioner, likewise, avers that the decisions of both the trial and
appellate courts failed to consider the fact that respondent Florence S. Ariola
and her brother Edmund executed loan documents, all establishing
the vinculum juris or the legal bond between the late Efraim Santibaez and his
heirs to be in the nature of a solidary obligation. Furthermore, the Promissory
Notes dated May 31, 1980 and December 13, 1980 executed by the late Efraim
Santibaez, together with his heirs, Edmund and respondent Florence, made the
obligation solidary as far as the said heirs are concerned. The petitioner also
proffers that, considering the express provisions of the continuing guaranty
agreement and the promissory notes executed by the named respondents, the
latter must be held liable jointly and severally liable thereon. Thus, there was
no need for the petitioner to file its money claim before the probate court. Finally,
the petitioner stresses that both surviving heirs are being sued in their
respective personal capacities, not as heirs of the deceased.
In her comment to the petition, respondent Florence S. Ariola maintains that
the petitioner is trying to recover a sum of money from the deceased Efraim
Santibaez; thus the claim should have been filed with the probate court. She
points out that at the time of the execution of the joint agreement there was
already an existing probate proceedings of which the petitioner knew about.
However, to avoid a claim in the probate court which might delay payment of
the obligation, the petitioner opted to require them to execute the said
agreement.
According to the respondent, the trial court and the CA did not err in
declaring that the agreement was null and void. She asserts that even if the
agreement was voluntarily executed by her and her brother Edmund, it should
still have been subjected to the approval of the court as it may prejudice the
estate, the heirs or third parties. Furthermore, she had not waived any rights,
as she even stated in her answer in the court a quo that the claim should be
filed with the probate court. Thus, the petitioner could not invoke or claim that
she is in estoppel.
Respondent Florence S. Ariola further asserts that she had not signed any
continuing guaranty agreement, nor was there any document presented as
evidence to show that she had caused herself to be bound by the obligation of
her late father.
The petition is bereft of merit.
The Court is posed to resolve the following issues: a) whether or not the
partition in the Agreement executed by the heirs is valid; b) whether or not the
heirs assumption of the indebtedness of the deceased is valid; and c) whether
the petitioner can hold the heirs liable on the obligation of the deceased.
At the outset, well-settled is the rule that a probate court has the jurisdiction
to determine all the properties of the deceased, to determine whether they
should or should not be included in the inventory or list of properties to be
administered.[20] The said court is primarily concerned with the administration,
liquidation and distribution of the estate.[21]
In our jurisdiction, the rule is that there can be no valid partition among the
heirs until after the will has been probated:

In testate succession, there can be no valid partition among the heirs until after the
will has been probated. The law enjoins the probate of a will and the public requires it,
because unless a will is probated and notice thereof given to the whole world, the right
of a person to dispose of his property by will may be rendered nugatory. The
authentication of a will decides no other question than such as touch upon the capacity
of the testator and the compliance with those requirements or solemnities which the
law prescribes for the validity of a will.[22]

This, of course, presupposes that the properties to be partitioned are the

same properties embraced in the will.[23] In the present case, the deceased,
Efraim Santibaez, left a holographic will[24] which contained, inter alia, the
provision which reads as follows:

(e) All other properties, real or personal, which I own and may be discovered later
after my demise, shall be distributed in the proportion indicated in the immediately
preceding paragraph in favor of Edmund and Florence, my children.
 We agree with the appellate court that the above-quoted is an all-
encompassing provision embracing all the properties left by the decedent which
might have escaped his mind at that time he was making his will, and other
properties he may acquire thereafter. Included therein are the three (3) subject
tractors. This being so, any partition involving the said tractors among the heirs
is not valid. The joint agreement[25] executed by Edmund and Florence,
partitioning the tractors among themselves, is invalid, specially so since at the
time of its execution, there was already a pending proceeding for the probate
of their late fathers holographic will covering the said tractors.
It must be stressed that the probate proceeding had already acquired
jurisdiction over all the properties of the deceased, including the three (3)
tractors. To dispose of them in any way without the probate courts approval is
tantamount to divesting it with jurisdiction which the Court cannot allow.[26] Every
act intended to put an end to indivision among co-heirs and legatees or
devisees is deemed to be a partition, although it should purport to be a sale, an
exchange, a compromise, or any other transaction.[27] Thus, in executing any
joint agreement which appears to be in the nature of an extra-judicial partition,
as in the case at bar, court approval is imperative, and the heirs cannot just
divest the court of its jurisdiction over that part of the estate. Moreover, it is
within the jurisdiction of the probate court to determine the identity of the heirs
of the decedent.[28] In the instant case, there is no showing that the signatories
in the joint agreement were the only heirs of the decedent. When it was
executed, the probate of the will was still pending before the court and the latter
had yet to determine who the heirs of the decedent were. Thus, for Edmund
and respondent Florence S. Ariola to adjudicate unto themselves the three (3)
tractors was a premature act, and prejudicial to the other possible heirs and
creditors who may have a valid claim against the estate of the deceased.
The question that now comes to fore is whether the heirs assumption of the
indebtedness of the decedent is binding. We rule in the negative. Perusing the
joint agreement, it provides that the heirs as parties thereto have agreed to
divide between themselves and take possession and use the above-described
chattel and each of them to assume the indebtedness corresponding to the
chattel taken as herein after stated which is in favor of First Countryside Credit
Corp.[29] The assumption of liability was conditioned upon the happening of an
event, that is, that each heir shall take possession and use of their respective
share under the agreement. It was made dependent on the validity of the
partition, and that they were to assume the indebtedness corresponding to the
chattel that they were each to receive. The partition being invalid as earlier
discussed, the heirs in effect did not receive any such tractor. It follows then
that the assumption of liability cannot be given any force and effect.
 The Court notes that the loan was contracted by the decedent. The
petitioner, purportedly a creditor of the late Efraim Santibaez, should have thus
filed its money claim with the probate court in accordance with Section 5, Rule
86 of the Revised Rules of Court, which provides:

Section 5. Claims which must be filed under the notice. If not filed barred; exceptions.
All claims for money against the decedent, arising from contract, express or implied,
whether the same be due, not due, or contingent, all claims for funeral expenses for
the last sickness of the decedent, and judgment for money against the decedent, must
be filed within the time limited in the notice; otherwise they are barred forever, except
that they may be set forth as counterclaims in any action that the executor or
administrator may bring against the claimants. Where an executor or administrator
commences an action, or prosecutes an action already commenced by the deceased in
his lifetime, the debtor may set forth by answer the claims he has against the decedent,
instead of presenting them independently to the court as herein provided, and mutual
claims may be set off against each other in such action; and if final judgment is
rendered in favor of the defendant, the amount so determined shall be considered the
true balance against the estate, as though the claim had been presented directly before
the court in the administration proceedings. Claims not yet due, or contingent, may be
approved at their present value.

The filing of a money claim against the decedents estate in the probate court
is mandatory.[30] As we held in the vintage case of Py Eng Chong v. Herrera:[31]

This requirement is for the purpose of protecting the estate of the deceased by
informing the executor or administrator of the claims against it, thus enabling him to
examine each claim and to determine whether it is a proper one which should be
allowed. The plain and obvious design of the rule is the speedy settlement of the
affairs of the deceased and the early delivery of the property to the distributees,
legatees, or heirs. `The law strictly requires the prompt presentation and disposition of
the claims against the decedent's estate in order to settle the affairs of the estate as
soon as possible, pay off its debts and distribute the residue.[32]

Perusing the records of the case, nothing therein could hold private
respondent Florence S. Ariola accountable for any liability incurred by her late
father. The documentary evidence presented, particularly the promissory notes
and the continuing guaranty agreement, were executed and signed only by the
late Efraim Santibaez and his son Edmund. As the petitioner failed to file its
money claim with the probate court, at most, it may only go after Edmund as
co-maker of the decedent under the said promissory notes and continuing
guaranty, of course, subject to any defenses Edmund may have as against the
petitioner. As the court had not acquired jurisdiction over the person of Edmund,
we find it unnecessary to delve into the matter further.
We agree with the finding of the trial court that the petitioner had not
sufficiently shown that it is the successor-in-interest of the Union Savings and
Mortgage Bank to which the FCCC assigned its assets and liabilities.[33] The
petitioner in its complaint alleged that by virtue of the Deed of Assignment dated
August 20, 1981 executed by and between First Countryside Credit Corporation
and Union Bank of the Philippines[34] However, the documentary
evidence[35] clearly reflects that the parties in the deed of assignment with
assumption of liabilities were the FCCC, and the Union Savings and Mortgage
Bank, with the conformity of Bancom Philippine Holdings, Inc. Nowhere can the
petitioners participation therein as a party be found. Furthermore, no
documentary or testimonial evidence was presented during trial to show that
Union Savings and Mortgage Bank is now, in fact, petitioner Union Bank of the
Philippines. As the trial court declared in its decision:

[T]he court also finds merit to the contention of defendant that plaintiff failed to prove
or did not present evidence to prove that Union Savings and Mortgage Bank is now
the Union Bank of the Philippines. Judicial notice does not apply here. The power to
take judicial notice is to [be] exercised by the courts with caution; care must be taken
that the requisite notoriety exists; and every reasonable doubt upon the subject should
be promptly resolved in the negative. (Republic vs. Court of Appeals, 107 SCRA
504).[36]

This being the case, the petitioners personality to file the complaint is
wanting. Consequently, it failed to establish its cause of action. Thus, the trial
court did not err in dismissing the complaint, and the CA in affirming the same.
IN LIGHT OF ALL THE FOREGOING, the petition is hereby DENIED. The
assailed Court of Appeals Decision is AFFIRMED. No costs.
SO ORDERED.

SPS. VIRGILIO F. SANTOS & G.R. No. 169129

ESPERANZA LATI SANTOS, Present:
SPS.VICTORINO F. SANTOS, &
LAGRIMAS SANTOS, ERNESTO YNARES-SANTIAGO, J.,
F. SANTOS, and TADEO F. Chairperson,
SANTOS, AUSTRIA-MARTINEZ,
Petitioners, CALLEJO, SR.,*
CHICO-NAZARIO, and
 NACHURA, JJ.
- versus -

Promulgated:
SPS. JOSE LUMBAO and
PROSERFINA LUMBAO, March 28, 2007
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997
Revised Rules of Civil Procedure seeking to annul and set aside the Decision [1] and
Resolution[2] of the Court of Appeals in CA-G.R. CV No. 60450 entitled, Spouses
Jose Lumbao and Proserfina Lumbao v. Spouses Virgilio F. Santos and Esperanza
Lati, Spouses Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and
Tadeo F. Santos, dated 8 June 2005 and 29 July 2005, respectively, which granted
the appeal filed by herein respondents Spouses Jose Lumbao and Proserfina Lumbao
(Spouses Lumbao) and ordered herein petitioners Spouses Virgilio F. Santos and
Esperanza Lati, Spouses Victorino F. Santos and Lagrimas F. Santos, Ernesto F.
Santos and Tadeo F. Santos to reconvey to respondents Spouses Lumbao the subject
property and to pay the latter attorneys fees and litigation expenses, thus, reversing
the Decision[3] of the Regional Trial Court (RTC) of Pasig City, dated 17 June 1998
which dismissed the Complaint for Reconveyance with Damages filed by
respondents Spouses Lumbao for lack of merit.

Herein petitioners Virgilio, Victorino, Ernesto and Tadeo, all surnamed Santos, are
the legitimate and surviving heirs of the late Rita Catoc Santos (Rita), who died
on 20 October 1985. The other petitioners Esperanza Lati and Lagrimas Santos are
the daughters-in-law of Rita.
Herein respondents Spouses Jose Lumbao and Proserfina Lumbao are the alleged
owners of the 107-square meter lot (subject property), which they purportedly
bought from Rita during her lifetime.

The facts of the present case are as follows:

On two separate occasions during her lifetime, Rita sold to respondents Spouses
Lumbao the subject property which is a part of her share in the estate of her deceased
mother, Maria Catoc (Maria), who died intestate on 19 September 1978. On the first
occasion, Rita sold 100 square meters of her inchoate share in her mothers estate
through a document denominated as Bilihan ng Lupa, dated 17 August
1979.[4]Respondents Spouses Lumbao claimed the execution of the aforesaid
document was witnessed by petitioners Virgilio and Tadeo, as shown by their
signatures affixed therein. On the second occasion, an additional seven square
meters was added to the land as evidenced by a document also denominated as
Bilihan ng Lupa, dated 9 January 1981.[5]

After acquiring the subject property, respondents Spouses Lumbao took actual
possession thereof and erected thereon a house which they have been occupying as
exclusive owners up to the present. As the exclusive owners of the subject property,
respondents Spouses Lumbao made several verbal demands upon Rita, during her
lifetime, and thereafter upon herein petitioners, for them to execute the necessary
documents to effect the issuance of a separate title in favor of respondents Spouses
Lumbao insofar as the subject property is concerned. Respondents Spouses Lumbao
alleged that prior to her death, Rita informed respondent Proserfina Lumbao she
could not deliver the title to the subject property because the entire property inherited
by her and her co-heirs from Maria had not yet been partitioned.

On 2 May 1986, the Spouses Lumbao claimed that petitioners, acting fraudulently
and in conspiracy with one another, executed a Deed of Extrajudicial
Settlement,[6] adjudicating and partitioning among themselves and the other heirs,
the estate left by Maria, which included the subject property already sold to
respondents Spouses Lumbao and now covered by TCT No. 81729[7] of the Registry
of Deeds of Pasig City.
 On 15 June 1992, respondents Spouses Lumbao, through counsel, sent a
formal demand letter[8] to petitioners but despite receipt of such demand letter,
petitioners still failed and refused to reconvey the subject property to the respondents
Spouses Lumbao. Consequently, the latter filed a Complaint for Reconveyance with
Damages[9] before the RTC of Pasig City.

Petitioners filed their Answer denying the allegations that the subject property
had been sold to the respondents Spouses Lumbao. They likewise denied that the
Deed of Extrajudicial Settlement had been fraudulently executed because the same
was duly published as required by law. On the contrary, they prayed for the dismissal
of the Complaint for lack of cause of action because respondents Spouses Lumbao
failed to comply with the Revised Katarungang Pambarangay Law under Republic
Act No. 7160, otherwise known as the Local Government Code of 1991, which
repealed Presidential Decree No. 1508[10] requiring first resort to barangay
conciliation.

Respondents Spouses Lumbao, with leave of court, amended their Complaint

because they discovered that on 16 February 1990, without their knowledge,
petitioners executed a Deed of Real Estate Mortgage in favor of Julieta S. Esplana
for the sum of P30,000.00. The said Deed of Real Estate Mortgage was annotated at
the back of TCT No. PT-81729 on 26 April 1991. Also, in answer to the allegation
of the petitioners that they failed to comply with the mandate of the Revised
Katarungang Pambarangay Law, respondents Spouses Lumbao said that the
Complaint was filed directly in court in order that prescription or the Statute of
Limitations may not set in.

During the trial, respondents Spouses Lumbao presented Proserfina Lumbao

and Carolina Morales as their witnesses, while the petitioners presented only the
testimony of petitioner Virgilio.

The trial court rendered a Decision on 17 June 1998, the dispositive portion
of which reads as follows:

Premises considered, the instant complaint is hereby denied for lack

of merit.
 Considering that [petitioners] have incurred expenses in order to
protect their interest, [respondents spouses Lumbao] are hereby directed
to pay [petitioners], to wit: 1) the amount of P30,000.00 as attorneys fees
and litigation expenses, and 2) costs of the suit.[11]

Aggrieved, respondents Spouses Lumbao appealed to the Court of Appeals. On 8

June 2005, the appellate court rendered a Decision, thus:

WHEREFORE, premises considered, the present appeal is hereby

GRANTED. The appealed Decision dated June 17, 1998 of the Regional
Trial Court of Pasig City, Branch 69 in Civil Case No. 62175 is hereby
REVERSED and SET ASIDE. A new judgment is hereby entered
ordering [petitioners] to reconvey 107 square meters of the subject
[property] covered by TCT No. PT-81729 of the Registry of Deeds of
Pasig City, Metro Manila, and to pay to [respondents spouses Lumbao]
the sum of P30,000.00 for attorneys fees and litigation expenses.

No pronouncement as to costs.[12]

Dissatisfied, petitioners filed a Motion for Reconsideration of the aforesaid

Decision but it was denied in the Resolution of the appellate court dated 29 July
2005 for lack of merit.

Hence, this Petition.

The grounds relied upon by the petitioners are the following:

I. THE APPELLATE COURT COMMITTED A REVERSIBLE

ERROR IN REVERSING THE DECISION OF THE TRIAL
COURT, THEREBY CREATING A VARIANCE ON THE
FINDINGS OF FACTS OF TWO COURTS.

II. THE APPELLATE COURT COMMITTED A REVERSIBLE

ERROR IN ORDERING THE PETITIONERS TO RECONVEY
THE SUBJECT [PROPERTY] TO THE RESPONDENTS
[SPOUSES LUMBAO] AND IN NOT RULING THAT THEY
 ARE GUILTY OF LACHES, HENCE THEY CANNOT
RECOVER THE LOT ALLEGEDLY SOLD TO THEM.

III. THE APPELLATE COURT COMMITTED A REVERSIBLE

ERROR IN NOT FINDING HEREIN PETITIONER[S] TO BE IN
GOOD FAITH IN EXECUTING THE DEED OF
EXTRAJUDICIAL SETTLEMENT DATED [2 MAY 1986].

IV. THE APPELLATE COURT COMMITTED A REVERSIBLE

ERROR IN NOT FINDING THAT PETITIONERS ARE NOT
LEGALLY BOUND TO COMPLY WITH THE SUPPOSED
BILIHAN NG LUPA DATED [17 AUGUST 1979] AND [9
JANUARY 1981] THAT WERE SUPPOSEDLY EXECUTED BY
THE LATE RITA CATOC.

V. THE APPELLATE COURT COMMITTED A REVERSIBLE

ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES
LUMBAOS] ACTION FOR RECONVEYANCE WITH
DAMAGES CANNOT BE SUPPORTED WITH AN
UNENFORCEABLE DOCUMENTS, SUCH AS THE BILIHAN
NG LUPA DATED [17 AUGUST 1979] AND [9 JANUARY
1981].

VI. THE APPELLATE COURT COMMITTED A REVERSIBLE

ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES
LUMBAOS] COMPLAINT FOR RECONVEYANCE IS
DISMISSABLE (SIC) FOR NON COMPLIANCE OF THE
MANDATE OF [P.D. NO.] 1508, AS AMENDED BY Republic
Act No. 7160.

VII. THE APPELLATE COURT COMMITTED A REVERSIBLE

ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES
LUMBAO] SHOULD BE HELD LIABLE FOR PETITIONERS
CLAIM FOR DAMAGES AND ATTORNEY[]S FEES.

Petitioners ask this Court to scrutinize the evidence presented in this case,
because they claim that the factual findings of the trial court and the appellate court
are conflicting. They allege that the findings of fact by the trial court revealed that
petitioners Virgilio and Tadeo did not witness the execution of the documents known
as Bilihan ng Lupa; hence, this finding runs counter to the conclusion made by the
appellate court. And even assuming that they were witnesses to the aforesaid
documents, still, respondents Spouses Lumbao were not entitled to the reconveyance
of the subject property because they were guilty of laches for their failure to assert
their rights for an unreasonable length of time. Since respondents Spouses Lumbao
had slept on their rights for a period of more than 12 years reckoned from the date
of execution of the second Bilihan ng Lupa, it would be unjust and unfair to the
petitioners if the respondents will be allowed to recover the subject property.

Petitioners allege they are in good faith in executing the Deed of Extrajudicial
Settlement because even respondents Spouses Lumbaos witness, Carolina Morales,
testified that neither petitioner Virgilio nor petitioner Tadeo was present during the
execution of the Bilihan ng Lupa, dated 17 August 1979 and 9 January
1981. Petitioners affirm that the Deed of Extrajudicial Settlement was published in
a newspaper of general circulation to give notice to all creditors of the estate subject
of partition to contest the same within the period prescribed by law.Since no claimant
appeared to interpose a claim within the period allowed by law, a title to the subject
property was then issued in favor of the petitioners; hence, they are considered as
holders in good faith and therefore cannot be barred from entering into any
subsequent transactions involving the subject property.

Petitioners also contend that they are not bound by the documents
denominated as Bilihan ng Lupa because the same were null and void for the
following reasons: 1) for being falsified documents because one of those documents
made it appear that petitioners Virgilio and Tadeo were witnesses to its execution
and that they appeared personally before the notary public, when in truth and in fact
they did not; 2) the identities of the properties in the Bilihan ng Lupa, dated 17
August 1979 and 9 January 1981 in relation to the subject property in litigation were
not established by the evidence presented by the respondents Spouses Lumbao; 3)
the right of the respondents Spouses Lumbao to lay their claim over the subject
property had already been barred through estoppel by laches; and 4) the respondents
Spouses Lumbaos claim over the subject property had already prescribed.

Finally, petitioners claim that the Complaint for Reconveyance with Damages
filed by respondents Spouses Lumbao was dismissible because they failed to comply
with the mandate of Presidential Decree No. 1508, as amended by Republic Act No.
7160, particularly Section 412 of Republic Act No. 7160.

Given the foregoing, the issues presented by the petitioners may be restated
as follows:

I. Whether or not the Complaint for Reconveyance with Damages

filed by respondents spouses Lumbao is dismissible for their failure
to comply with the mandate of the Revised Katarungang
Pambarangay Law under R.A. No. 7160.

II. Whether or not the documents known as Bilihan ng Lupa are

valid and enforceable, thus, they can be the bases of the respondents
spouses Lumbaos action for reconveyance with damages.

III. Whether or not herein petitioners are legally bound to comply

with the Bilihan ng Lupa dated 17 August 1979 and 9 January
1981 and consequently, reconvey the subject property to herein
respondents spouses Lumbao.

It is well-settled that in the exercise of the Supreme Courts power of review,

the court is not a trier of facts and does not normally undertake the re-examination
of the evidence presented by the contending parties during the trial of the case
considering that the findings of fact of the Court of Appeals are conclusive and
binding on the Court.[13] But, the rule is not without exceptions. There are several
recognized exceptions[14] in which factual issues may be resolved by this Court. One
of these exceptions is when the findings of the appellate court are contrary to those
of the trial court. This exception is present in the case at bar.

Going to the first issue presented in this case, it is the argument of the petitioners
that the Complaint for Reconveyance with Damages filed by respondents Spouses
Lumbao should be dismissed for failure to comply with the barangay conciliation
proceedings as mandated by the Revised Katarungang Pambarangay Law under
Republic Act No. 7160. This argument cannot be sustained.

Section 408 of the aforesaid law and Administrative Circular No. 14-93[15] provide
that all disputes between parties actually residing in the same city or municipality
are subject to barangay conciliation. A prior recourse thereto is a pre-condition
before filing a complaint in court or any government offices. Non-compliance with
the said condition precedent could affect the sufficiency of the plaintiffs cause of
action and make his complaint vulnerable to dismissal on ground of lack of cause of
action or prematurity; but the same would not prevent a court of competent
jurisdiction from exercising its power of adjudication over the case before it, where
the defendants failed to object to such exercise of jurisdiction.[16]

While it is true that the present case should first be referred to the Barangay Lupon
for conciliation because the parties involved herein actually reside in the same city
(Pasig City) and the dispute between them involves a real property, hence, the said
dispute should have been brought in the city in which the real property, subject
matter of the controversy, is located, which happens to be the same city where the
contending parties reside. In the event that respondents Spouses Lumbao failed to
comply with the said condition precedent, their Complaint for Reconveyance with
Damages can be dismissed. In this case, however, respondents Spouses Lumbaos
non-compliance with the aforesaid condition precedent cannot be considered
fatal. Although petitioners alleged in their answer that the Complaint for
Reconveyance with Damages filed by respondents spouses Lumbao should be
dismissed for their failure to comply with the condition precedent, which in effect,
made the complaint prematurely instituted and the trial court acquired no jurisdiction
to hear the case, yet, they did not file a Motion to Dismiss the said complaint.

Emphasis must be given to the fact that the petitioners could have prevented
the trial court from exercising jurisdiction over the case had they filed a Motion to
Dismiss. However, instead of doing so, they invoked the very same jurisdiction by
filing an answer seeking an affirmative relief from it. Worse, petitioners actively
participated in the trial of the case by presenting their own witness and by cross-
examining the witnesses presented by the respondents Spouses Lumbao. It is
elementary that the active participation of a party in a case pending against him
before a court is tantamount to recognition of that courts jurisdiction and a
willingness to abide by the resolution of the case which will bar said party from later
on impugning the courts jurisdiction.[17] It is also well-settled that the non-referral of
a case for barangay conciliation when so required under the law is not jurisdictional
in nature and may therefore be deemed waived if not raised seasonably in a motion
to dismiss.[18] Hence, herein petitioners can no longer raise the defense of non-
compliance with the barangay conciliation proceedings to seek the dismissal of the
complaint filed by the respondents Spouses Lumbao, because they already waived
the said defense when they failed to file a Motion to Dismiss.

As regards the second issue, petitioners maintain that the Bilihan ng Lupa,
dated 17 August 1979 and 9 January 1981 are null and void for being falsified
documents as it is made to appear that petitioners Virgilio and Tadeo were present
in the execution of the said documents and that the identities of the properties in
those documents in relation to the subject property has not been established by the
evidence of the respondents Spouses Lumbao. Petitioners also claim that the
enforceability of those documents is barred by prescription of action and laches.

It is the petitioners incessant barking that the Bilihan ng Lupa documents

dated 17 August 1979 and 9 January 1981 were falsified because it was made to
appear that petitioners Virgilio and Tadeo were present in the executions thereof,
and their allegation that even respondents Spouses Lumbaos witness Carolina
Morales proved that said petitioners were not present during the execution of the
aforementioned documents. This is specious.

Upon examination of the aforesaid documents, this Court finds that in the
Bilihan ng Lupa, dated 17 August 1979, the signatures of petitioners Virgilio and
Tadeo appeared thereon. Moreover, in petitioners Answer and Amended Answer to
the Complaint for Reconveyance with Damages, both petitioners Virgilio and Tadeo
made an admission that indeed they acted as witnesses in the execution of the
Bilihan ng Lupa, dated 17 August 1979.[19] However, in order to avoid their
obligations in the said Bilihan ng Lupa, petitioner Virgilio, in his cross-examination,
denied having knowledge of the sale transaction and claimed that he could not
remember the same as well as his appearance before the notary public due to the
length of time that had passed. Noticeably, petitioner Virgilio did not categorically
deny having signed the Bilihan ng Lupa, dated 17 August 1979 and in support
thereof, his testimony in the cross-examination propounded by the counsel of the
respondents Spouses Lumbao is quoted hereunder:

ATTY. CHIU:
 Q. Now, you said, Mr. WitnessVirgilio Santos, that you dont know about
this document which was marked as Exhibit A for the [respondents
spouses Lumbao]?

ATTY. BUGARING:

The question is misleading, your Honor. Counsel premised the question

that he does not have any knowledge but not that he does not know.

ATTY. CHIU:
Q. Being you are one of the witnesses of this document? [I]s it not?

WITNESS:

A. No, sir.
Q. I am showing to you this document, there is a signature at the left hand
margin of this document Virgilio Santos, will you please go over
the same and tell the court whose signature is this?

A. I dont remember, sir, because of the length of time that had passed.

Q. But that is your signature?

A. I dont have eyeglasses My signature is different.

Q. You never appeared before this notary public Apolinario Mangahas?

A. I dont remember.[20]

As a general rule, facts alleged in a partys pleading are deemed admissions of

that party and are binding upon him, but this is not an absolute and inflexible rule. An
answer is a mere statement of fact which the party filing it expects to prove, but it is
not evidence.[21] And in spite of the presence of judicial admissions in a partys
pleading, the trial court is still given leeway to consider other evidence
presented.[22]However, in the case at bar, as the Court of Appeals mentioned in its
Decision, [herein petitioners] had not adduced any other evidence to override the
admission made in their [A]nswer that [petitioners Virgilio and Tadeo] actually
signed the [Bilihan ng Lupa dated 17 August 1979] except that they were just misled
as to the purpose of the document, x x x.[23] Virgilios answers were unsure and
quibbled. Hence, the general rule that the admissions made by a party in a pleading
are binding and conclusive upon him applies in this case.

On the testimony of respondents Spouses Lumbaos witness Carolina Morales,

this Court adopts the findings made by the appellate court. Thus -
[T]he trial court gave singular focus on her reply to a question during
cross-examination if the [petitioners Virgilio and Tadeo] were not with
her and the vendor [Rita] during the transaction. It must be pointed out
that earlier in the direct examination of said witness, she confirmed that
[respondents spouses Lumbao] actually bought the lot from [Rita]
(nagkabilihan). Said witness positively identified and confirmed the two
(2) documents evidencing the sale in favor of [respondents spouse
Lumbao]. Thus, her subsequent statement that the [petitioners Virgilio
and Tadeo] were not with them during the transaction does not
automatically imply that [petitioners Virgilio and Tadeo] did not at any
time sign as witnesses as to the deed of sale attesting to their mothers
voluntary act of selling a portion of her share in her deceased mothers
property. The rule is that testimony of a witness must be considered and
calibrated in its entirety and not by truncated portions thereof or isolated
passages therein.[24]

Furthermore, both Bilihan ng Lupa documents dated 17 August 1979 and 9

January 1981 were duly notarized before a notary public. It is well-settled that a
document acknowledged before a notary public is a public document[25] that enjoys
the presumption of regularity. It is a prima facie evidence of the truth of the facts
stated therein and a conclusive presumption of its existence and due execution.[26] To
overcome this presumption, there must be presented evidence that is clear and
convincing. Absent such evidence, the presumption must be upheld.[27]In addition,
one who denies the due execution of a deed where ones signature appears has the
burden of proving that contrary to the recital in the jurat, one never appeared before
the notary public and acknowledged the deed to be a voluntary act. Nonetheless, in
the present case petitioners denials without clear and convincing evidence to support
their claim of fraud and falsity were not sufficient to overthrow the above-mentioned
presumption; hence, the authenticity, due execution and the truth of the facts stated
in the aforesaid Bilihan ng Lupa are upheld.
 The defense of petitioners that the identities of the properties described in the
Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981 in relation to the subject
property were not established by respondents Spouses Lumbaos evidence is likewise
not acceptable.

It is noteworthy that at the time of the execution of the documents

denominated as Bilihan ng Lupa, the entire property owned by Maria, the mother of
Rita, was not yet divided among her and her co-heirs and so the description of the
entire estate is the only description that can be placed in the Bilihan ng Lupa, dated
17 August 1979 and 9 January 1981 because the exact metes and bounds of the
subject property sold to respondents Spouses Lumbao could not be possibly
determined at that time. Nevertheless, that does not make the contract of sale
between Rita and respondents Spouses Lumbao invalid because both the law and
jurisprudence have categorically held that even while an estate remains undivided,
co-owners have each full ownership of their respective aliquots or undivided shares
and may therefore alienate, assign or mortgage them.[28] The co-owner, however, has
no right to sell or alienate a specific or determinate part of the thing owned in
common, because such right over the thing is represented by an aliquot or ideal
portion without any physical division. In any case, the mere fact that the deed
purports to transfer a concrete portion does not per se render the sale void. The sale
is valid, but only with respect to the aliquot share of the selling co-
owner. Furthermore, the sale is subject to the results of the partition upon the
termination of the co-ownership.[29]

In the case at bar, when the estate left by Maria had been partitioned on 2 May
1986 by virtue of a Deed of Extrajudicial Settlement, the 107- square meter lot sold
by the mother of the petitioners to respondents Spouses Lumbao should be deducted
from the total lot, inherited by them in representation of their deceased mother,
which in this case measures 467 square meters. The 107-square meter lot already
sold to respondents Spouses Lumbao can no longer be inherited by the petitioners
because the same was no longer part of their inheritance as it was already sold during
the lifetime of their mother.

Likewise, the fact that the property mentioned in the

two Bilihan ng Lupa documents was described as a portion of a parcel of land
covered in Tax Declarations No. A-018-01674, while the subject matter of the Deed
of Extrajudicial Settlement was the property described in Transfer Certificate of
Title (TCT) No. 3216 of the Registry of Deeds of the Province of Rizal in the name
of Maria is of no moment because in the Bilihan ng Lupa, dated 17 August 1979 and
9 January 1981, it is clear that there was only one estate left by Maria upon her death.
And this fact was not refuted by the petitioners. Besides, the property described in
Tax Declaration No. A-018-01674 and the property mentioned in TCT No. 3216 are
both located in Barrio Rosario, Municipality of Pasig, Province of Rizal, and almost
have the same boundaries. It is, thus, safe to state that the property mentioned in Tax
Declaration No. A-018-01674 and in TCT No. 3216 are one and the same.

The defense of prescription of action and laches is likewise unjustifiable. In

an action for reconveyance, the decree of registration is respected as
incontrovertible. What is sought instead is the transfer of the property or its title
which has been wrongfully or erroneously registered in another persons name to its
rightful or legal owner, or to the one with a better right. It is, indeed, true that the
right to seek reconveyance of registered property is not absolute because it is subject
to extinctive prescription. However, when the plaintiff is in possession of the land
to be reconveyed, prescription cannot set in. Such an exception is based on the
theory that registration proceedings could not be used as a shield for fraud or for
enriching a person at the expense of another.[30]

In the case at bar, the right of the respondents Spouses Lumbao to seek
reconveyance does not prescribe because the latter have been and are still in actual
possession and occupation as owners of the property sought to be reconveyed, which
fact has not been refuted nor denied by the petitioners. Furthermore, respondents
Spouses Lumbao cannot be held guilty of laches because from the very start that
they bought the 107-square meter lot from the mother of the petitioners, they have
constantly asked for the transfer of the certificate of title into their names but Rita,
during her lifetime, and the petitioners, after the death of Rita, failed to do so on the
flimsy excuse that the lot had not been partitioned yet. Inexplicably, after the
partition of the entire estate of Maria, petitioners still included the 107-square meter
lot in their inheritance which they divided among themselves despite their
knowledge of the contracts of sale between their mother and the respondents Spouses
Lumbao.
 Under the above premises, this Court holds that the Bilihan
ng Lupa documents dated 17 August 1979 and 9 January 1981 are valid and
enforceable and can be made the basis of the respondents Spouses Lumbaos action
for reconveyance. The failure of respondents Spouses Lumbao to have the said
documents registered does not affect its validity and enforceability. It must be
remembered that registration is not a requirement for validity of the contract as
between the parties, for the effect of registration serves chiefly to bind third
persons. The principal purpose of registration is merely to notify other persons not
parties to a contract that a transaction involving the property had been entered
into. Where the party has knowledge of a prior existing interest which is unregistered
at the time he acquired a right to the same land, his knowledge of that prior
unregistered interest has the effect of registration as to him. [31] Hence, the Bilihan
ng Lupa documents dated 17 August 1979 and 9 January 1981, being valid and
enforceable, herein petitioners are bound to comply with their provisions. In short,
such documents are absolutely valid between and among the parties thereto.
Finally, the general rule that heirs are bound by contracts entered into by their
predecessors-in-interest applies in the present case.Article 1311[32] of the NCC is the
basis of this rule. It is clear from the said provision that whatever rights and
obligations the decedent have over the property were transmitted to the heirs by way
of succession, a mode of acquiring the property, rights and obligations of the
decedent to the extent of the value of the inheritance of the heirs.[33] Thus, the heirs
cannot escape the legal consequence of a transaction entered into by their
predecessor-in-interest because they have inherited the property subject to the
liability affecting their common ancestor. Being heirs, there is privity of interest
between them and their deceased mother. They only succeed to what rights their
mother had and what is valid and binding against her is also valid and binding as
against them. The death of a party does not excuse nonperformance of a contract
which involves a property right and the rights and obligations thereunder pass to the
personal representatives of the deceased. Similarly, nonperformance is not excused
by the death of the party when the other party has a property interest in the subject
matter of the contract.[34]

In the end, despite the death of the petitioners mother, they are still bound to
comply with the provisions of the Bilihan ng Lupa, dated 17 August 1979 and 9
January 1981. Consequently, they must reconvey to herein respondents Spouses
Lumbao the 107-square meter lot which they bought from Rita, petitioners
mother. And as correctly ruled by the appellate court, petitioners must pay
respondents Spouses Lumbao attorneys fees and litigation expenses for having been
compelled to litigate and incur expenses to protect their interest.[35] On this matter,
we do not find reasons to reverse the said findings.

WHEREFORE, premises considered, the instant Petition is

hereby DENIED. The Decision and Resolution of the Court of Appeals dated 8 June
2005 and 29 July 2005, respectively, are hereby AFFIRMED. Herein petitioners
are ordered to reconvey to respondents Spouses Lumbao the subject property and to
pay the latter attorneys fees and litigation expenses. Costs against petitioners.

SO ORDERED.