Legal Acctng Cases

7/15/2019 Legal Acctng Cases

http://slidepdf.com/reader/full/legal-acctng-cases 1/108

1. WILLIAM LI YAO vs. COLLECTOR OF INTERNAL REVENUE, G.R. No. L-11875, Dec. 28, 19632. DR. LUCAS G. ADAMSON and ADAMSON MANAGEMENT CORP. vs. CA and APAC HOLDINGS LIMITED,

G.R. No. 106879, May 27, 19943. PRESIDENTIAL ANTI-GRAFT COMMISSION (PAGC) and THE OFFICE OF THE PRESIDENT vs. SALVADOR

A. PLEYTO, G.R. No. L-17715, July 31, 19634. JOSE AVELINO vs. COLLECTOR OF INTERNAL REVENUE, G.R. No. 176058, March 23, 20115. CHIEF JUSTICE RENATO C. CORONA vs. SENATE OF THE PHILIPPINES sitting as an IMPEACHMENT

COURT, BANK OF THE PHILIPPINE ISLANDS, PHILIPPINE SAVINGS BANK, ARLENE "KAKA" BAG-AO,GIORGIDI AGGABAO, MARILYN PRIMICIAS-AGABAS, NIEL TUPAS, RODOLFO FARINAS, SHERWIN

TUGNA, RAUL DAZA, ELPIDIO BARZAGA, REYNALDO UMALI, NERI COLMENARES (ALSO KNOWN AS THEPROSECUTORS FROM THE HOUSE OF REPRESENTATIVES), G.R. No. 200242, July 17, 20126. PCIB vs. VENICIO ESCOLIN, Presiding Judge of the CFI Iloilo, Branch II, and AVELINA A. MAGNO, G.R. Nos. L-

27860 and L-27896 March 29, 1974 / TESTATE ESTATE OF THE LATE LINNIE JANE HODGES vs. LORENZOCARLES, et. al., G.R. Nos. L-27936 & L-27937 March 29, 1974

7. OCA vs. JUDGE UYAG P. USMAN, Judge, Shari'a Circuit Court, Pagadian City, A.M. No. SCC-08-12, October 19, 2011 (Formerly OCA I.P.I. No. 08-29-SCC)

8. BRIGIDO B. QUIAO vs. RITA C. QUIAO, KITCHIE C. QUIAO, LOTIS C. QUIAO, PETCHIE C. QUIAO, rep bytheir mother RITA QUIAO, G.R. No 176556, July 4, 2012

9. WONDER BOOK CORP. vs. PHIL. BANK OF COMMUNICATIONS, G.R. No. 187316, July 16, 201210. FERDINAND R. MARCOS, JR. vs. REPUBLIC rep. by the PCGG, G.R. No. 189434, April 25, 2012 IMELDA

ROMUALDEZ-MARCOS vs. REPUBLIC, G.R. No. 18950511. COLLECTOR OF INTERNAL REVENUE vs. DOUGLAS FISHER AND BETTINA FISHER, CA, G.R. No. L-11622,

January 28, 1961 / DOUGLAS FISHER AND BETTINA FISHER vs.COLLECTOR OF INTERNAL REVENUE, and the CA, G.R. No. L-11668, January 28, 196112. SAMHWA COMPANY LTD., and LOTUS EXPORTS SPECIALISTS, INC. vs. IAC, LOUIS SHEFF and

HERSCHELL SWIRYN, G.R. No. 74305, January 31, 199213. COMMISSIONER OF INTERNAL REVENUE vs. CA, R.O.H. AUTO PRODUCTS PHILIPPINES, INC. and CTA,

G.R. No. 108358, January 20, 199514. TOMAS CALASANZ, ET AL. vs. COMM. INTERNAL REVENUE & CTA, G.R. No. L-26284, 10-8-86 15. HEIRS OF TAN ENG KEE vs. CA and BENGUET LUMBER COMPANY, G.R. No. 126881, Oct 3, 2000

WILLIAM LI YAO vs. COLLECTOR OF INTERNAL REVENUE, G.R. No. L-11875, December 28, 1963

LABRADOR, J.:This is a petition filed by William Li Yao for the review of a decision of the Court of Tax Appeals in C.T.A. Case No. 30,

entitled "William Li Yao, petitioner, vs. Collector of Internal Revenue, respondent." The record discloses that petitioner is anaturalized Filipino of Chinese parents, the eldest son of a prosperous local businessman by the name of Li Chay Too,who died sometime in 1948. In 1945 petitioner organized the Li Yao and Company and made himself managing partner;from 1948 to February 1955 he was president of, and owned shares in, the Li Chay Too and Sons, Inc.; and in 1950 heorganized a corporation known as the Far East Realty and Investment Co. (known as FERIN for short) of which he wasalso stockholder and president. Petitioner filed his income tax returns for the years 1945 to 1951, paying the followingtaxes:

YEAR AMOUNT OF TAX

1945 P 918.31

1946 1,393.42

1947 5,923.57

1948 700.34

1949 538.07

1950 3,837.00

1951 2,971.00

In 1948 a verification of his income tax returns for the years 1945 to 1947 was made and a deficiency income tax in theamount of P5,470.98 was assessed against him, which he paid.In 1952 the Collector of Internal Revenue, believing that petitioner had not reported his true incomes for the previousyears, appointed a team to examine his books, on July 30, 1952 an additional assessment of P898,794.02 was madeagainst him for the years 1945 to 1951, inclusive. A second team of investigators was appointed on June 30, 1953 thisteam recommended a deficiency income tax assessment of P2,722,030.33. This team employed what is known as the net

worth or inventory method. A third team was appointed, headed by BIR Examiner Quesada. This team recommended anassessment of P1,505,768.54 against petitioner; the inventory method was also used in making this assessment. Demandwas made for the collection of said assessment on August 10, 1954, so petitioner herein presented a petition with theCourt of Tax Appeal for the review of the said assessment.

After hearing the Court of Tax Appeals, after revising the various items contained in the assessment of BIR Examiner Quesada, made various findings of fact on the issues presented by the parties and thereafter rendered a decision in whichit found that the amount of the income tax deficiency due from petitioner P424,536.77. The resume of the assessmentmade in the decision of the Court of Tax Appeals is as follows:

1945

Assets admitted by parties Add assets established at trial:

P 41,538.50143,910.89



Funds held in trust by father, Li Chay TooNet Worth as of December 31, 1945Less Net Worth as of January 1, 1945:

P 185,449.39

Assets admitted by Parties Add assets proven at trialFunds held in trust by father, Li Chay Too

P 500.00159,910.89160,410.89

Increase in net worth in 1945 Add non-deductible expenditures:

Personal living and family expenses

P 25,038.503,500.00

28,538.50

Less personal exemptions 3,500.00

Amount subject to tax 25,038.50

Tax due thereon 1,082.31

Less tax already paid 1,111.74

No deficiency tax due(29.43)

=================

1946

Assets admitted by both parties Add assets established at trial:cash funds from loansTotal assets

P 148,326.7790,032.43

P 238,359.20

Liabilities established at trial 100,000.00

Net worth as of December 31, 1946Less net worth as of Jan. 1, 1946 185,449.39

Decrease in net worth in 1946 (P 47,090.19)

Add non-deductible expenditures:Personal living and family expenses 3,500.00

Income tax paid in previous year 918.91

Net loss(P 42,671.88)=================

1947

Assets admitted by parties P 184,453.45

Add assets established at trial:Cash funds from loans P 78,036.52

Total assets P 262,489.97


Net worth as of December 31, 1947 P 162,489.97

Less net worth as of Jan. 1, 1947 138,359.20

Increase in net worth in 1947 P 24,130.77

Add: non-deductible expenditures:

Personal, living and familyexpenses 3,500.00

Income tax paid in previous year 1,393.42

Net Income P 29,024.19







No deficiency tax due(P 6,260.46)=============

1948

Assets admitted by parties

176,933.76 Add assets established at trial:Cash funds from loans 50,384.93

Investments in Tan Pee Cu Yek Chim and Co 30,000.00

Total assets 257,318.69

Less liabilities established at trial 100,000.00

Net worth as of December 31, 1948 157,318.69


Decrease in net worth in 1948 (P 5,171.28)

Add non-deductible expenditures:

Personal, living and family expenses 20,000.00


Net Income 26,223.27




Less tax already paid 700.00

Deficiency tax 2,478.77

Add: 50% surcharge 1,239.38

Total tax due3,718.15

========

1949


Add assets established at trial:China Banking CorporationTime Deposit 60,000.00

Investment in Tan Pee Cu YekChim and Co 30,000.00

Total assets P 525,405.83


Net worth as of December 31,1949 P 362,405.83

Less net worth as of Jan. 1,1949 157,318.69


Add non-deductible



expenditures:


Income tax paid in previousyear 700.34



Net income before deductionof inheritance P 222,287.48

Less inheritance 72,392.91



Less tax already paid 538.07

Deficiency tax P 46,599.75


Total tax dueP 69,899.62=============

1950


Add assets established at trial:Investments in Tan Pee CuYek Chim and Co 30,000.00

Investments in FERIN throughothers 170,000.00

Race Horses 11,500.00

Total Assets P1,053,773.50


Net worth as of Dec. 31, 1950 608,273.50

Less net worth as of Jan. 1,

1950 362,405.83


Add: non-deductibleexpenditures:


Income tax paid in previousyear 538.07

Net Income 266,405.74


Amount subject to tax P 262,205.74





Total tax due P 183,210.00



=============

1951

Assets admitted by partiesP1,630,658.94

Add assets established at trial:Investments in Tan Pee Cu Yek Chim

and Co 30,000.00Investments in FERIN through others 200,000.00

Race Horses 11,500.00

Total Assets 1,872,158.94

Liabilities established at trial 1,040,500.00

Net worth as of Dec. 31, 1951 831,658.94


Increase in net worth 223,385.44

Add: non-deductiblePersonal, living and family expenses 20,000.00





Tax due thereon P 114,777.00


Deficiency tax 111,806.00

Add: 50 % surcharge 55,903.00

Total tax dueP 167,709.00===========

Summary of Tax Due

1945 None

1946 None

1947 None

1948 P 3,718.15

1949 69,899.62

1950 183,210.00

1951 167,709.00

Total tax due P 424,536.77===========

Petitioner Li Yao sought to reconsider the decision and the assessment, alleging that the sum of P5,470.98 paid by him asadditional tax for the years 1945 to 1947 should be credited against his deficiency income taxes, so that instead of P424,536.77 this sum due should be only P411,294.12, following the decision in the case of University of Santo Tomas

vs. Collector of Internal Revenue, C.T.A. Case No. 10, dated June 4, 1956, in which the doctrine of equitable recoupmentwas applied provided the two requirements for its applicability are met. The court approved this petition for recoupmentand reduced the assessment to P411,293.80.Both petitioner and respondent appealed from the decision of the Court of Tax Appeals — petitioner's appeal is within thecase G.R. No. L-11875 and the respondent's appeal is case G.R. No. L-11861. This decision deals with Li Yao's appeal.Two principal questions are raised by petitioner Li Yao before Us, the first of which questions the validity of the net worthmethod of inventory used against him, and the second assails the Court of Tax Appeals, refusal to grant petitioner'srequest that the deficiency income assessed be distributed evenly over the taxable years. We will leave these questionsfor the present until after We have decided the appeal raised against various items of the assessment.The first issue relates to the disapproval of various items, claimed by petitioner to be his obligations, which are as follows:

J. Crisostomo Chavez P100,000.00



Li Chick Eng 50,000.00

Ong Tiao Seng 20,000.00

Li Chiu Ka 20,000.00

Li Tong Na 20,000.00

Ko Chiu Seng 10,000.00

Carlos M. Go 10,000.00

Dee Mong @ Lim Sing 25,000.00

Arturo Mercado 10,000.00

Go Hoc 20,000.00

Ong Chin P 30,000.00

T O T A L P 315,000.00===========

The procedure adopted by the Court of Tax Appeal in passing upon the first of these alleged obligations is as follows:

. . . that when a taxpayer claims he owes money to another for the purpose of reducing his tax liability, particularly the NetWorth Expenditure (Inventory) Method of investigation is employed against him, his admission (claim) must corroboratedby other evidence independent of the admission itself. For example, the promissory note, if there be any, should beproduced for the inspection of the Court and government counsel. The alleged creditor must be produced in Court toconfirm the taxpayer's admission and to give government's counsel an opportunity to cross-examine him, unless he isdead, outside of the Philippines, or unable to testify for one reason or another. If the taxpayer is in business, his books asrequired of him by the National Internal Revenue Code should be produced showing the corresponding entry or entries of his alleged liabilities. If for one reason or another the alleged creditor is not available as a witness, his financial capacity toextend the loan should at least be established.

Attacking the above procedure counsel for petitioner argues that in the inventory method the burden of proof lies with theGovernment; that the taxpayer completes his obligation if he furnishes the lead by presenting the evidence of theobligation, and it is thereafter incumbent the Government to follow the lead to determine if the alleged liabilities actually or really existed.

We find no merit or sense in the above contention. The taxpayer has no means of proving the existence of the obligationand it is he that must produce such proof. The obligation and it is he that must produce such proof. The procedurefollowed by the Court of Tax Appeals is that laid down by the rules on evidence; that is, that the taxpayer who allegesthereof by preponderance of evidence. This rule is not only a legal one. In the nature of things, the obligor or taxpayer hasthe means of proving that the obligation does not exist or has been paid; the Government collecting the tax cannot beexpected to find the evidence itself, because it is natural that the taxpayer would try to suppress such evidence as mayprove that the obligation still exists. The court below ruled, in relation to the obligation or the supposed loan given byCrisostomo Chavez, as follows:

Although this loan is evidenced by a duplicate promissory note, Exhibit JJJJ, we find the explanation of petitioner regarding the reproduction of the original note marked Exhibit 55-A from which Exhibit JJJJ was taken, to be highlyfantastic. This alleged creditor was seen by the Court on several occasions loitering in the Court promises during the earlystages of the trial of this case. However, when his turn came to testify as witness for the respondent, he could not beserved with a summons. He was cited by respondent's counsel precisely to confirm or repudiate the contents of an

affidavit which he executed dated July 6, 1955 denying having made such a loan. Considering the past criminal record of this alleged creditor, his failure to testify before this Court upon being cited to do so and the explanation of petitioner regarding the two controversial promissory notes Exhibits 55 and JJJJ, which we believe to be much too strained andfantastic, we cannot give credit to this alleged liability of petitioner.We agree with the court below; the supposed duplicate of the promissory note could well have been fabricated.Furthermore, the supposed creditor had denied the existence of the loan in an affidavit and the taxpayer failed to producehim in evidence. Lastly the taxpayer suppressed the evidence to show that the obligation still exists and if he did so it isbecause the same would be unfavorable to his claim.In connection with the loans of Ong Tiao Seng for P20,000.00, Li Chiu Ka for P20,000.00, Li Tong Na for P20,000.00, KoChiu Seng for P10,000.00, Carlos M. Go for P10,000.00 and Lim Siong for P25,000.00, We, also agree with the courtbelow that as petitioner had not presented the supposed creditors to confirm the existence of the loans, and noexplanation had been given for such failure to present them, the existence of these loans cannot be considered asproven. The petitioner suppressed evidence which should favor him, and his suppression of such evidence proves thatsaid evidence would be unfavorable to him if produced. As to the other loans that had been disapproved for the same

reason, we find the ruling of the court below correct.One of the items subject of the appeal is the P30,000.00 investment in the Tan Pee, Cu Yek Chim and Co., Inc. The saidamount represent shares of stocks issued in the name of Li Yao, petitioner, now contending that Tan Pee transferred theshares to Li Yao in 1948, as he felt ill and was in danger of death, and that when he recovered in the year 1952 hedecided to recall the shares and so requested Li Yao to endorse the certificates of stock back to him, which Li Yao did.Thereafter the shares were again placed in the name of Tan Pee. After analyzing the evidence submitted to support theclaim of petitioner that Tan Pee did not intend ultimately to transfer his stocks to his son-in-law Li Yao, the court belowdeclared that the explanation was not sufficient to refute the presumption that the transfer of said stocks was made for avalid consideration, in the ordinary course of business, so that it considered the item an unreported asset of petitioner for the years 1948 to 1951. After reading the arguments presented by petitioner and considering that the witnesses for petitioner herein are his father-in-law and his wife and their testimonies failed to convince the judges of the court below,this Court finds no potent reason why the findings of the court below that heard the evidence should be disturbed.



Another item subject of the appeal is the amount of P60,000.00 deposited with the China Banking Corporation in thename of petitioner as of the end of the year 1949. Petitioner claims that one by the name of James Li, a friend of his,came to the Philippines from Hongkong 1949 bringing with him $30,000.00 in cash which he intended to invest in the localtextile business, so petitioner alleges he deposited this sum with the China Banking Corporation in his name; that the sumwas withdrawn 1949 upon instruction of James Li and delivered to an emissary of the latter by the name of Chen Heng.

As the supposed owner of the fund, James Li was not presented to corroborate petitioner's claim that he owned themoney, nor any other circumstances proved to corroborate petitioner's explanation, the court below held that the evidencewas insufficient and declared the sum as an asset of the petitioner. We also find no reason for disturbing the conclusion of fact and of law made by the court below. It is strange that no evidence of any kind was ever presented to corroborate thestory that the sum belonged to petitioner's friend James Li; no written or testimonial evidence was also presented to provethat the amount, after it was withdrawn from the bank, was actually sent to the supposed owner. Counsel for petitioner contends that there is no prima faciepresumption in favor of the correctness of the assessment made by the respondent.This is true, but the question now involved is not the correctness of the assessment but whether or not the amount of P60,000.00 deposited with the China Banking Corporation belong to Li Yao, petitioner herein. There being no credibleevidence presented that the said amount belongs to James Li and not to Li Yao, then the only reasonable inference is thatthe money must belong to petitioner. The Court of Tax Appeals therefore correctly included it among the assets of thepetitioner. The next items also disallowed by the Court of Tax Appeals are the amounts of P100,000.00 each, belonging totaxpayers Vicente Duazo and Delfin Fulay. The findings of the Court of Tax Appeals on these items are as follows:Of the five, Gloria Pineda and Delfin Fulay are the two persons upon whom suspicion could rest because of their closeassociation with petitioner. As we have said, Gloria Pineda is the private secretary and accountant of petitioner and DelfinFulay is his driver and bodyguard. However, with respect to Gloria Pineda, who is single, her income tax returns Exhibits58, 59, 60, 61 and 62 for 1946 to 1951, inclusive, show that she had a total net income of P25,299.50 during those years.From these returns, it is quite apparent that the investment of P25,000.00 attributed to her in 1950 which was increased to

P40,000.00 in 1951 is not far beyond her reach. The relations of employer and employee between petitioner and GloriaPineda cannot be considered, therefore, as a decisive factor in determining whether she could well afford to investP40,000.00 in the corporation headed by her employer.The case of Delfin Fulay, who is admittedly a bodyguard and driver of petitioner, is quite different. The books of FERINshow that Delfin Fulay invested P85,000.00 in said corporation in 1950, which he increased to P100,000.00 in 1951. Hisincome tax return for the years 1949, Exhibit 66, and his return for 1951, Exhibit 67, show that he had a total net incomeof only P8,500.00 during those years. Could it be possible for a mere hireling like Delfin Fulay, with such a moderateincome to have invested such an enormous amount as P100,000.00 in FERIN? The investment of Fulay in FERIN is sohighly disproportionate to his income, that we find it impossible to believe the investment to be his own. And if theinvestment did not come from his own personal funds with his meager salary as driver and bodyguard, from who elsecould it have come but petitioner, considering the latter's admission that he purposely saw to it that the incorporators of FERIN were his close friends and persons whom he could trust. From all appearance, the petitioner could not havechosen a person more trustworthy than Delfin Fulay the "Man Friday" entrusted with the protection of his life and

limb.lawphil.net The case of Vicente Duazo who is admittedly a bodyguard and driver of petitioner's mother would seem at first blush to beentirely different from that of Delfin Fulay as far as relationship with petitioner is concerned. It appears from the evidencefor the respondent that Vicente Duazo declared a net come in his return for 1948, Exhibit 63, the amount of P2,345.00; for 1949, Exhibit 64, the amount of P1,640.00 and for 1950, Exhibit 65, the amount of P3,480.00 or a total of P7,465.00. Hisinvestment in FERIN in 1950 was P85,000.00 and in 1951, it was increased to P100,000.00. It will be noted that the netincome of Vicente Duazo for three years (1948, 1949, 1950) much less than that of Delfin Fulay for two years (1949,1951). Yet, far from being just a mere coincidence, they invested P25,000.00 each in FERIN in August 25, 1950.... Thisstriking similarity in the amounts invested at the same time, let alone the disparity in the amounts of their respectiveincomes, has led us to the conclusion that the investments of these two persons in said corporation came from only onesource. And the evidence on record indubitably point to petitioner as the source considering his admission that after thedeath of his father, he was entrusted with the business affairs of his family he being the eldest son and favorite of thedeceased.We find no flaw in the facts and in the conclusion arrived at that the two supposed stockholders in FERIN, Duazo andFulay, are mere dummies and said facts an conclusion are hereby affirmed.The last item questioned by petitioner is the sum of P30,000.00 alleged to be his obligation to one Ong Chiu. To supportpetitioner's claim is a copy of a complaint in court against petitioner for the amount. Respondent found one Benjamin OngChiu, who was presented by respondent to show that he had no claim or had filed no such action at the trial that hiscreditor is not the one that respondent presented at the trial, but petitioner did not present the one whom he claims to bethe real creditor. Assuming for the sake of argument that the one presented by respondent is not the real creditor, why didnot petitioner present the supposed real creditor? If there are nine Ong Chiu's well may he have conceived of presenting afictitious action in court in the name of one of them. The case is the same as the other cases above explained - one wherepetitioner has failed to present corroborative evidence, or the real creditor, to prove the existence of the debt in dispute.Failure to adduce the proof required, the petitioner' own testimony may not be held sufficient in law to prove his claim of the existence of the obligation.We next come to the question of the use of the inventory method in assessing the income taxes due from petitioner. Theuse of the inventory method is authorized under Section 15 of the National Internal Revenue Code (Com. Act No. 466), as

amended, which authorizes the Collector of Internal Revenue to assess taxes due a taxpayer from any other availablefact or evidence. If a taxpayer commits a violation of the law, hiding his income to evade payment of taxes, theGovernment must be permitted to resort to all evidence or sources available to determine his said income, so that the taxmay be collected for public purposes. There is and there should be a presumption of regularity accorded this action of theCollector of Internal Revenue in assessing the tax on the best evidence obtainable, otherwise it would be impossible toassess taxes due from a dishonest taxpayer.This form of assessment has also been adopted by the Collector of Internal Revenue with the approval of this Court inthree cases, Perez vs. Collector , G.R. No. L-10507, May 30, 1958; Collector vs. Reyes, G.R. Nos. L-115534 and L-11558,Nov. 25, 1958; and Avelino vs. Collector , No. L-17715, July 31, 1963. In the case at bar the existence of assets or properties appearing in the name of the taxpayer or in the name of his dummies or friends, without the taxpayer beingable to give a definite reasonable explanation for their existence, justifies the Court of Tax Appeals and this Court to resortto the inventory method of assessment, such being necessary and at the same time just and equitable.



The last important legal question raised is petitioner's claim that the unreported incomes which appeared during the lastyears of the period of assessment should not be considered as having been earned during the years in which saidincomes appeared but should be spread throughout the whole period covered by the assessment, that is, from 1945 to1951. As authority for this claim the case of U.S. v. Ridley, 120 Fed. Supp. 530 is cited. In the said case Claude Ridleywas assessed for the years through 1951, including taxes, penalties and interests amounting to $106,674.37. Thespouses Claude Ridley were a frugal couple, living in a small farm in which they resided and kept a small store. Norecords were kept of the amount of income earned and of the business transactions entered into from time to time, and itwas possible to determine accurately not only the amount of income received by Claude Ridley, but also to determineaccurately the years in which such income was received. The purchases and expenditures made by the spousesappeared through the years 1937 to 1951, without any specific amount for any particular year. The District Court held thatinasmuch as the oral testimony as well as the oral circumstances indicate that the investment purchases were made fromaccumulated savings rather than from current income and there being no evidence to indicate greater income in one year than in another, the income should be distributed evenly through the years 1937 to 1951, inclusive.The above decision does not sustain the argument adduced by counsel for petitioner. The facts found in the case at bar do not justify the petitioner's claim. Petitioner does not claim that the amounts appearing in the last period of theassessment were acquired through savings or accumulated savings or accumulated savings or any slow and continuousprocess, such that the incomes cannot be distributed to any particular year of the period of assessment.On the other hand, Section 39 of the National Internal Revenue Code requires the taxpayer to report yearly to theCollector of Internal Revenue the income that he gets during the year from whatever source and include the same in thetaxable year in which the income was received by him. It is to be presumed that the income was earned at the time that itappeared in the possession or control of the taxpayer, in accordance with the rule that the law has been followed. [Rule123, Section 69 (q), Rules of Court] Were we to sanction the use of the spreading method claimed, We would betolerating a violation of the law or rule that the taxpayer must report his income in the year it was earned. Under the

practice advocated, a taxpayer would be encouraged to hide his income because in any case, if his unreported incomewould be discovered afterwards the said income, although appearing in one year, would be distributed over a period of years. In other words, we will have a rule, as advocated by petitioner's counsel, that would be discourage the hiding of taxable income because any discovery of any unreported income could always be allowed to be distributed over a periodof years. In the case at bar, the distribution over a period of years demanded by petitioner would bring about a reductionof the tax assessed by the Court of Tax Appeals from P424,536.77 to P232,416.59 (see computation attached to Motionfor Reconsideration, Annex K of Petition for Review), or about one-half of the assessment made by the Court of Appeals.We are not prepared to permit such unauthorized reduction in public taxes favorable to a dishonest taxpayer andprejudicial to the interests of the State.WHEREFORE, finding no merit in the various supposed errors attributed to the Court of Tax Appeals in its decision, Wehereby find that the decision is justified by law and the evidence. Wherefore, the decision appealed from is herebyaffirmed, with costs against the petitioner. So ordered.Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal,

JJ., concur. DR. LUCAS G. ADAMSON and ADAMSON MANAGEMENT CORPORATION vs. HON. COURT OF APPEALS andAPAC HOLDINGS LIMITED, G.R. No. 106879 May 27, 1994

ROMERO, J.:Before us is a petition for review on certiorari

of a decision of the Court of Appeals, the dispositive portion of which isquoted hereunder:WHEREFORE, judgment is hereby rendered setting aside respondent judge's questioned order dated 23 August 1991and confirming the subject arbitration award. Costs against private respondents.SO ORDERED.The antecedents of this case are as follows:On June 15, 1990, the parties, Adamson Management Corporation and Lucas Adamson on the one hand, and APAC

Holdings Limited on the other, entered into a contract whereby the former sold 99.97% of outstanding common shares of stocks of Adamson and Adamson, Inc. to the latter for P24,384,600.00 plus the Net Asset Value (NAV) of Adamson and Adamson, Inc. as of June 19, 1990. But the parties failed to agree on a reasonable Net Asset Value. This prompted themto submit the case for arbitration in accordance with Republic Act No. 876, otherwise known as the Arbitration Law.On May 15, 1991, the Arbitration Committee rendered a decision finding the Net Asset Value of the Company to beP167,118.00 which was computed on the basis of a pro-forma balance sheet submitted by SGV and which was thedifference between the total assets of the Company amounting to P65,554,258.00 (the sum of the balance sheet assetamounting to P65,413,978.00 and the increase in Cuevo appraisal amounting to P140,280.00) and total liabilitiesamounting to P65,387,140.00 (the difference between current liabilities and long term debt amounting to P68,356,132.00and Tax Savings for 1987 amounting to P2,968,992).In so holding that NAV equals P167,118.00, the Arbitration Committee disregarded petitioners' argument that there was afixed NAV amounting to P5,146,000.00 as of February 28, 1990 to which should be added the value of intangible assets(P19,116,000.00), the increment of tangible assets excluding land (P17,003,976.00), the 1987 tax savings(P2,968,992.00), and estimated net income from February 28, 1990 to June 19, 1990 (P1,500,000.00, later increased toP3,949,772.00). According to the Committee, however, the amount of P5,146,000.00 which was claimed as initial NAV bypetitioners, was merely an estimate of the Company's NAV as of February 28, 1990 which was still subject to financialdevelopments until June 19, 1990, the cut-off date. The basis for this ruling was Clause 3(B) of the Agreement which fixedthe said amount; Clause 1(A) which defined NAV and provided that it should be computed in accordance with Clause7(A); Clause 7(A) which directed the auditors to prepare in accordance with good accounting principles a balance sheetas of cut-off date which would include the goodwill and intangible assets (P19,116,000.00), the value of tangible assetsexcluding the land as per Cuervo appraisal, the adjustment agreed upon by the parties, and the cost of redeemingpreferred shares; and Clause 5(E). Furthermore, the Committee held that the parties used the figures in the pro-formabalance sheet to arrive at the said amount of P5,146,000.00; that the same had already included the value of theintangible assets and of the Cuervo appraisal of the tangible assets so that the latter items could not be added again towhat Vendor claimed to be the initial NAV; and that apart from being an estimate, the amount of P5,146,000.00 was



tentative as it was still subject to the adjustments to be made thereto to reflect subsequent financial events up to the cut-off date.In the computation of the NAV, the Committee deemed it proper to appreciate in favor of petitioners the 1987 tax savingsbecause as of the date of the proceedings, no assessment was ever made by the BIR and the three-year prescriptiveperiod had already expired. However, it did not consider the estimated net income for the period beginning February 28,1990 to June 19, 1990 as part of the NAV because it found that as of June 1990, the books of the company carried a netloss of P4,678,627.00 which increased to P8,547,868.00 after the proposed adjustments were included in the computationof the NAV. The Committee pointed out that although petitioners herein contested the adjustments, they were, however,not able to prove that these were not valid, except with respect to the tax savings.

Aside from deciding the amount of NAV, the Committee also held that any ambiguity in the contract should not necessarilybe interpreted against herein private respondents because the parties themselves had stipulated that the draft of theagreement was submitted to petitioners for approval and that the latter even proposed changes which were eventuallyincorporated in the final form of the Agreement.Thereafter, APAC Holdings Ltd. filed a petition for confirmation of the arbitration award before the Regional Trial Court of Makati. Herein petitioners opposed the petition and prayed for the nullification, modification and/or correction of the same,alleging that the arbitrators committed evident partiality and grave abuse of discretion as shown by the following errors:a. In creating an entirely new contract for the parties that contradicts the essence of their agreement and results in theabsurd situation where a seller incurs enormous expense to sell his property;b. In treating the provisions in the Agreement independently of one another and thereby nullifying the simple, clear andexpress stipulations therein;c. In interpreting the Agreement although it is couched in plain, simple and clear language, contrary to the well establishedprinciple that if the terms of a contract are clear, the literal meaning of its stipulations shall control;d. In accepting SGV's proposed adjustments, contrary to the parties' stipulation that the final adjustment items shall

pertain to a specific period and subject to their agreement; and in giving full reliance on SGV report despiteSGV's disclosure of its lack of independence because it acted solely to assist petitioner and its report was intended solelyfor petitioner's information;e. In not applying the "suppressed evidence" rule against petitioner inspite of its refusal to present the Company's incomestatement or any other similar report for the adjustment period; and in disregarding respondent's estimate of the netincome for the period as "Adjustment" using SGV's figures and ratios;f. In not awarding damages and attorney's fee to respondents despite petitioner's bad faith in violating the contract. 1

The Regional Trial Court rendered a decision vacating the arbitration award. The dispositive portion of the decision readsas follows:WHEREFORE, the Decision/Arbitration Award in question is hereby VACATED, and APAC (herein petitioner) is herebyordered to pay ADAMSON (herein respondents) the final NAV of Forty-seven Million One Hundred Twenty-One ThousandFour Hundred Sixty-Eight Pesos (P47,121,468.00), Philippine Currency, in accordance with the pertinent stipulationsexpressed in the Agreement as discussed above, plus twelve (12) percent interest on the above amount

which ADAMSON should have earned had the balance of the final NAV been paid to the Escrow Agent after offset on August 2, 1990. ADAMSON's claim for moral and exemplary damages and attorney's fees are (sic) dismissed for lack of sufficient merit.SO ORDERED. 2

On appeal, the above decision was reversed and a petition for review was filed in this Court. Petitioners allege that theCourt of Appeals erred and acted in excess of jurisdiction or with grave abuse of discretion in holding that: (a) the trial

judge reversed the arbitration award solely on the basis of the pleadings submitted by the parties; (b) petitioners failed tosubstantiate with proofs their imputation of partiality to the members of the arbitration committee; (c) the nullification by thetrial court of the award was not based on any of the grounds provided by law; (d) to allow the trial judge to substitute hisown findings in lieu of the arbitrators' would defeat the object of arbitration which is to avoid litigation; and (e) if there reallywas a ground for vacating the award, it was improper for trial judge to reverse the decision because it contravenedSection 25 of R.A. No. 876.Did the Court of Appeals err in affirming the arbitration award and in reversing the decision of the trial court?The Court of Appeals, in reversing the trial court's decision held that the nullification of the decision of the ArbitrationCommittee was not based on the grounds provided by the Arbitration Law and that ". . . private respondents [petitionersherein] have failed to substantiate with any evidence their claim of partiality. Significantly, even as respondent judge ruledagainst the arbitrators' award, he could not find fault with their impartiality and integrity. Evidently, the nullification of theaward rendered at the case at bar was made not on the basis of any of the grounds provided by law." 3

Assailing the above conclusion, petitioners argue that ". . . evident partiality is a state of mind that need not be proved bydirect evidence but may be inferred from the circumstances of the case (citations omitted). It is related to intention whichis a mental process, an internal state of mind that must be judged by the person's conduct and acts which are the bestindex of his intention (citations omitted)." 4 They pointed out that from the following circumstances may be inferred thearbitrators' evident partiality:1. the material difference between the results of the arbitrators' computation of the NAV and that of petitioners;2. the alleged piecemeal interpretation by the arbitrators of the Agreement which went beyond the clear provisions of thecontract and negated the obvious intention of the parties;3. reliance by the arbitrators on the financial statements and reports submitted by SGV which, according to petitioners,

acted solely for the interests of private respondents; and4. the finding of the trial court that "the arbitration committee has advanced no valid justification to warrant a departurefrom the well-settled rule in contract interpretation that if the terms of the contract are clear and leave no doubt upon theintention of the contracting parties the literal meaning of its interpretation shall control." 5

We find no reason to depart from the Court of Appeal's conclusion.Section 24 of the Arbitration Law provides as follows:Sec. 24. Grounds for vacating award . — In any one of the following cases, the court must make an order vacating theaward upon the petition of any party to the controversy when such party proves affirmatively that in thearbitration proceedings:(a) The award was procured by corruption, fraud or other undue means; or (b) That there was evident partiality or corruption in the arbitrators or any of them; or



(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or more of the arbitrators was disqualifiedto act as such under section nine hereof, and willfully refrained from disclosing such disqualifications or any other misbehavior by which the rights of any party have been materially prejudiced; or (d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite awardupon the subject matter submitted to them was not made. . . .Petitioners herein failed to prove their allegation of partiality on the part of the arbitrators. Proofs other than mereinferences are needed to establish evident partiality. That they were disadvantaged by the decision of the ArbitrationCommittee does not prove evident partiality.Too much reliance has been accorded by petitioners on the decision of the trial court. However, we find that the same isbut an adaptation of the arguments of petitioners to defeat the petition for confirmation of the arbitral award in the trialcourt by herein private respondent. The trial court itself stated as follows:In resolving the issues in favor of respondents, the Court has no alternative but to agree with the contention of said party,as supported by their exhaustive and very convincing arguments contained in more than twenty-one (21) pages, doubled-spaced, which are adopted and reproduced herein by reference. Said arguments may be CAPSULIZED as follows:The penultimate paragraph of its decision reads, thus:To allay any fear of petitioner that its reply and opposition, dated 11 June 1991, has not been taken into account inresolving this case, it will be well to state that the court has carefully read the same and, what is more, it has also readrespondents' comment, dated 19 June 1991, wherein they made convincing arguments which are likewise adopted andincorporated herein by reference. 6

The justifications advanced by the trial court for vacating the arbitration award are the following: (a) ". . . that the arbitrationcommittee had advanced no valid justification to warrant a departure from the well-settled rule in contract interpretationthat if the terms of the contract are clear and leave no doubt upon the intention of the contracting parties the literal

meaning of its interpretation shall control; (b) that the final NAV of P47,121,468.00 as computed by herein petitioners waswell within APAC's normal investment level which was at least US$1 million and to say that the NAV was merelyP167,118.00 would negate Clause 6 of the Agreement which provided that the purchaser would deposit in escrowP5,146,000.00 to be held for two (2) years and to be used to satisfy any actual or contingent liability of the vendor under the Agreement; (c) that the provision for an escrow account negated any idea of the NAV being less than P5,146,000.00;and (d) that herein private respondent, being the drafter of the Agreement could not avoid performance of its obligationsby raising ambiguity of the contract, or its failure to express the intention of the parties, or the difficulty of performing thesame.It is clear therefore, that the award was vacated not because of evident partiality of the arbitrators but because the latter interpreted the contract in a way which was not favorable to herein petitioners and because it considered that hereinprivate respondents, by submitting the controversy to arbitration, was seeking to renege on its obligations under thecontract.That the award was unfavorable to petitioners herein did not prove evident partiality. That the arbitrators resorted to

contract interpretation neither constituted a ground for vacating the award because under the circumstances, the samewas necessary to settle the controversy between the parties regarding the amount of the NAV. In any case, this Courtfinds that the interpretation made by the arbitrators did not create a new contract, as alleged by herein petitioners but wasa faithful application of the provisions of the Agreement. Neither was the award arbitrary for it was based on thestatements prepared by the SGV which was chosen by both parties to be the "auditors."The trial court held that herein private respondent could not shirk from performing its obligations on account of thedifficulty of complying with the terms of the contract. It said further that the contract may be harsh but private respondentcould not excuse itself from performing its obligations on account of the ambiguity of the contract because as its drafter,private respondent was well aware of the implications of the Agreement. We note herein that during the arbitrationproceedings, the parties agreed that the contract as prepared by private respondent, was submitted to petitioners for approval. Petitioners, therefore, are presumed to have studied the provisions of the Agreement and agreed to its importwhen they approved and signed the same. When it was submitted to arbitration to settle the issue regarding thecomputation of the NAV, petitioners agreed to be bound by the judgment of the arbitration committee, except in caseswhere the grounds for vacating the award existed. Petitioners cannot now refuse to perform its obligation after realizingthat it had erred in its understanding of the Agreement.Petitioners also assailed the arbitrator's reliance upon the financial statements submitted by SGV as they allegedly servedthe interests of private respondents and did not reflect the true intention of the parties. We agree with the observationmade by the arbitrators that SGV, being a reputable firm, it should be presumed to have prepared the statements inaccordance with sound accounting principles. Petitioners have presented no proof to establish that SGV's computationwas erroneous and biased.Petitioners likewise pointed out that the computation of the arbitrators leads to the absurd result of petitioners incurringgreat expense just to sell its properties. In arguing that the NAV could not be less than P5,146,000, petitioners quoteClause (B) of the Agreement as follows:CLAUSE 3(B)The consideration for the purchase of the Sale Shares by the Purchaser shall be equivalent to the Net Asset Value of theCompany, . . . which the parties HAVE FIXED at P5,146,000.00 prior to Adjustments . . .However, such quotation is incomplete and, therefore, misleading. The full text of the above provision as quoted by the

arbitration committee reads as follows:(B) The consideration for the purchase of the Sale Shares by the purchaser shall be equivalent to the Net Asset Value of the Company, without the Property, which the parties have fixed at P5,146,000 prior to Adjustments plus P24,384,600.The consideration for the sale of the Sale Shares by the Vendor, is the acquisition of the property by the Vendor, through

Aloha, from the Company at historical cost plus all Taxes due on said transfer of Property, and the release of allcollaterals of the Vendor securing the RSBS Credit Facility. However, in the implementation of this Agreement, the partiesshall designate the amounts specified in Clause 5 as the purchaser prices in the pro-forma deeds of sale andother documents required to effect the transfers contemplated in this Agreement.Thus, petitioner cannot claim that the consideration for private respondent's acquisition of the outstanding common sharesof stock was grossly inadequate. If the NAV as computed was small, the result was not due to error in the computationsmade by the arbitrators but due to the extent of the liabilities being borne by petitioners. During the arbitrationproceedings, the committee found that petitioner has been suffering losses since 1983, a fact which was not denied by



petitioner. We cannot sustain the argument of petitioners that the amount of P5,146,000.00 was an initial NAV as of February 28, 1990 to which should still be added the value of tangible assets (excluding the land) and of intangible assets.If indeed the P5,146,000.00 was the initial NAV as of February 28, 1990, then as of said date, the total assets andliabilities of the company have already been set off against each other. NET ASSET VALUE is arrived at only after deducting TOTAL LIABILITIES from TOTAL ASSETS. "TOTAL ASSETS" includes those that are tangible and intangible.If the amount of the tangible and intangible assets would still be added to the "initial NAV," this would constitute doublecounting. Unless the company acquired new assets from February 28, 1990 up to June 19, 1990, no value correspondingto tangible and intangible assets may be added to the NAV.We also note that the computation by petitioners of the NAV did not reflect the liabilities of the company. The term "netasset value" indicates the amount of assets exceeding the liabilities as differentiated from total assets which include theliabilities. If petitioners were not satisfied, they could have presented their own financial statements to rebut SGV's reportbut this, they did not do.Lastly, in assailing the decision of the Court of Appeals, petitioners would have this Court believe that the respondentcourt held that the decision of the arbitrators was not subject to review by the courts. This was not the position taken bythe respondent court.The Court of Appeals, in its decision stated, thus:It is settled that arbitration awards are subject to judicial review. In the recent case of Chung Fu Industries (Philippines),Inc., et. al. v. Court of Appeals, Hon Francisco X. Velez, et. al ., G. R. No. 96283, February 25, 1992, the Supreme Courtcategorically ruled that:It is stated expressly under Art. 2044 of the Civil Code that the finality of the arbitrators' award is not absolute andwithout exceptions. Where the conditions described in Articles 2038, 2039 and 2040 applicable to both compromises andarbitrations are obtaining, the arbitrators' award may be annulled or rescinded. Additionally, under Sections 24 and 25 of the Arbitration Law, there are grounds for vacating, modifying or rescinding anarbitrators' award. Thus, if and when the

factual circumstances referred to in the above-cited provisions are present, judicial review of the award is properlywarranted.Clearly, though recourse to the courts may be availed of by parties aggrieved by decisions or awards rendered byarbitrator/s, the extent of such is neither absolute nor all encompassing. . . . 7

It is clear then that the Court of Appeals reversed the trial court not because the latter reviewed the arbitration awardinvolved herein, but because the respondent appellate court found that the trial court had no legal basis for vacating theaward.WHEREFORE, in view of the foregoing, this petition is hereby DISMISSED and the decision of the Court of Appeals

AFFIRMED.SO ORDERED.Feliciano, Bidin, Melo and Vitug, JJ., concur.

PRESIDENTIAL ANTI-GRAFT COMMISSION (PAGC) and THE OFFICE OF THE PRESIDENT vs. SALVADOR A.

PLEYTO, G.R. No. 176058, March 23, 2011

D E C I S I O NABAD, J.:This case is about the dismissal of a department undersecretary for failure to declare in his Sworn Statement of Assets,Liabilities, and Net Worth (SALN) his wife’s business interests and financial connections.The Facts and the CaseOn December 19, 2002 the Presidential Anti-Graft Commission (PAGC) received an anonymous letter-complaint 1fromalleged employees of the Department of Public Works and Highways (DPWH). The letter accused DPWH UndersecretarySalvador A. Pleyto of extortion, illicit affairs, and manipulation of DPWH projects.In the course of the PAGC’s investigation, Pleyto submitted his 1999, 2 2000,3 and 20014 SALNs. PAGC examined theseand observed that, while Pleyto said therein that his wife was a businesswoman, he did not disclose her businessinterests and financial connections. Thus, on April 29, 2003 PAGC charged Pleyto before the Office of the President (OP)

for violation of Section 8 of Republic Act (R.A.) 6713,5

also known as the Code of Conduct and Ethical Standards for Public Officials and Employees" and Section 7 of R.A. 30196 or "The Anti-Graft and Corrupt Practices Act."7

Pleyto claimed that he and his wife had no business interests of any kind and for this reason, he wrote "NONE" under thecolumn "Business Interests and Financial Connections" on his 1999 SALN and left the column blank in his 2000 and 2001SALNs.8 Further, he attributed the mistake to the fact that his SALNs were merely prepared by his wife’s bookkeeper.9

On July 10, 2003 PAGC found Pleyto guilty as charged and recommended to the OP his dismissal with forfeiture of allgovernment financial benefits and disqualification to re-enter government service.10

On January 29, 2004 the OP approved the recommendation.11 From this, Pleyto filed an Urgent Motion for Reconsideration12 claiming that: 1) he should first be allowed to avail of the review and compliance procedure in Section10 of R.A. 671313 before he is administratively charged; 2) he indicated "NONE" in the column for financial and businessinterests because he and his wife had no business interests related to DPWH; and 3) his failure to indicate his wife’sbusiness interests is not punishable under R.A. 3019.On March 2, 2004 PAGC filed its comment,14 contending that Pleyto’s reliance on the Review and Complicance Procedurewas unavailing because the mechanism had not yet been established and, in any case, his SALN was a sworn statement,the contents of which were beyond the corrective guidance of the DPWH Secretary. Furthermore, his failure to declare hiswife's business interests and financial connections was highly irregular and was a form of dishonesty.On March 11, 2005 Executive Secretary Eduardo R. Ermita ordered PAGC to conduct a reinvestigation of Pleyto’scase.15 In compliance, PAGC queried the Department of Trade and Industry of Region III–Bulacan regarding thebusinesses registered in the name of Miguela Pleyto, his wife. PAGC found that she operated the following businesses: 1)R.S. Pawnshop, registered since May 19, 1993; 2) M. Pleyto Piggery and Poultry Farm, registered since December 29,1998; 3) R.S. Pawnshop–Pulong Buhangin Branch, registered since July 24, 2000; and 4) RSP Laundry and DryCleaning, registered since July 24, 2001.16

The PAGC also inquired with the DPWH regarding their Review and Compliance procedure. The DPWH said that, theymerely reminded their officials of the need for them to comply with R.A. 6713 by filing their SALNs on time and that they

http://www.lawphil.net/judjuris/juri2011/mar2011/gr_176058_2011.html#fnt1








































had no mechanism for reviewing or validating the entries in the SALNs of their more than 19,000 permanent, casual andcontractual employees.17

On February 21, 2006 the PAGC maintained its finding and recommendation respecting Pleyto.18 On August 29, 2006 theOP denied Pleyto’s Motion for Reconsideration.19 Pleyto raised the matter to the Court of Appeals (CA), 20 which onDecember 29, 2006 granted Pleyto’s petition and permanently enjoined the PAGC and the OP from implementing their decisions.21 This prompted the latter offices to come to this Court on a petition for review.22

Issues PresentedThis case presents the following issues:1. Whether or not the CA erred in not finding Pleyto’s failure to indicate his spouse’s business interests in his SALNs aviolation of Section 8 of R.A. 6713.2. Whether or not the CA erred in finding that under the Review and Compliance Procedure, Pleyto should have first beenallowed to correct the error in his SALNs before being charged for violation of R.A. 6713.The Court’s RulingsThis is the second time Pleyto’s SALNs are before this Court. The first time was in G.R. 169982, Pleyto v. PhilippineNational Police Criminal Investigation and Detection Group (PNP-CIDG).23 In that case, the PNP-CIDG filed on July 28,2003 administrative charges against Pleyto with the Office of the Ombudsman for violating, among others, Section 8 of R.A. 6713 in that he failed to disclose in his 2001 and 2002 SALNs his wife’s business interests and financial connections.On June 28, 2004 the Office of the Ombudsman ordered Pleyto dismissed from the service. He appealed the order to theCA but the latter dismissed his petition and the motion for reconsideration that he subsequently filed. Pleyto then assailedthe CA’s ruling before this Court raising, among others, the following issues: 1) whether or not Pleyto violated Section 8(a)of R.A. 6713; and 2) whether or not Pleyto’s reliance on the Review and Compliance Procedure in the law wasunwarranted.

After threshing out the other issues, this Court found that Pleyto’s failure to disclose his wife’s business interests and

financial connections constituted simple negligence, not gross misconduct or dishonesty. Thus:Neither can petitioner’s failure to answer the question, "Do you have any business interest and other financialconnections including those of your spouse and unmarried children living in your household?" be tantamount togross misconduct or dishonesty. On the front page of petitioner’s 2002 SALN, it is already clearly stated that hiswife is a businesswoman, and it can be logically deduced that she had business interests. Such a statement of his wife’s occupation would be inconsistent with the intention to conceal his and his wife’s business interests.That petitioner and/or his wife had business interests is thus readily apparent on the face of the SALN; it is justthat the missing particulars may be subject of an inquiry or investigation.An act done in good faith, which constitutes only an error of judgment and for no ulterior motives and/or purposes, does not qualify as gross misconduct, and is merely simple negligence. Thus, at most, petitioner isguilty of negligence for having failed to ascertain that his SALN was accomplished properly, accurately, and inmore detail.Negligence is the omission of the diligence which is required by the nature of the obligation and corresponds

with the circumstances of the persons, of the time and of the place. In the case of public officials, there isnegligence when there is a breach of duty or failure to perform the obligation, and there is gross negligencewhen a breach of duty is flagrant and palpable. Both Section 7 of the Anti-Graft and Corrupt Practices Act andSection 8 of the Code of Conduct and Ethical Standards for Public Officials and Employees require theaccomplishment and submission of a true, detailed and sworn statement of assets and liabilities. Petitioner wasnegligent for failing to comply with his duty to provide a detailed list of his assets and business interests in hisSALN. He was also negligent in relying on the family bookkeeper/accountant to fill out his SALN and in signingthe same without checking or verifying the entries therein. Petitioner’s negligence, though, is only simple and notgross, in the absence of bad faith or the intent to mislead or deceive on his part, and in consideration of the factthat his SALNs actually disclose the full extent of his assets and the fact that he and his wife had other businessinterests.Gross misconduct and dishonesty are serious charges which warrant the removal or dismissal from service of the erring public officer or employee, together with the accessory penalties, such as cancellation of eligibility,forfeiture of retirement benefits, and perpetual disqualification from reemployment in government service. Hence,a finding that a public officer or employee is administratively liable for such charges must be supported bysubstantial evidence.24

The above concerns Pleyto’s 2001 and 2002 SALN; the present case, on the other hand, is about his 1999, 2000 and2001 SALNs but his omissions are identical. While he said that his wife was a businesswoman, he also did not discloseher business interests and financial connections in his 1999, 2000 and 2001 SALNs. Since the facts and the issues in thetwo cases are identical, the judgment in G.R. 169982, the first case, is conclusive upon this case.There is "conclusiveness of judgment" when any right, fact, or matter in issue, directly adjudicated on the merits in aprevious action by a competent court or necessarily involved in its determination, is conclusively settled by the judgmentin such court and cannot again be litigated between the parties and their privies whether or not the claim, demand,purpose, or subject matter of the two actions is the same.25

Thus, as in G.R. 169982, Pleyto’s failure to declare his wife’s business interest and financial connections does notconstitute dishonesty and grave misconduct but only simple negligence, warranting a penalty of forfeiture of the equivalentof six months of his salary from his retirement benefits.26

With regard to the issue concerning compliance with the Review and Compliance Procedure provided in R.A. 6713, thisCourt already held in G.R. 169982 that such procedure cannot limit the authority of the Ombudsman to conductadministrative investigations. R.A. 6770, otherwise known as "The Ombudsman Act of 1989," intended to vest in theOffice of the Ombudsman full administrative disciplinary authority.27 Here, however, it was the PAGC and the OP,respectively, that conducted the investigation and meted out the penalty of dismissal against Pleyto. Consequently, theruling in G.R. 169982 in this respect cannot apply.

Actually, nowhere in R.A. 6713 does it say that the Review and Compliance Procedure is a prerequisite to the filing of administrative charges for false declarations or concealments in one’s SALN. Thus:Section 10. Review and Compliance Procedure. - (a) The designated Committees of both Houses of the Congressshall establish procedures for the review of statements to determine whether said statements which have beensubmitted on time, are complete, and are in proper form. In the event a determination is made that a statement is






























not so filed, the appropriate Committee shall so inform the reporting individual and direct him to take thenecessary corrective action.(b) In order to carry out their responsibilities under this Act, the designated Committees of both Houses of Congress shall have the power within their respective jurisdictions, to render any opinion interpreting this Act, inwriting, to persons covered by this Act, subject in each instance to the approval by affirmative vote of themajority of the particular House concerned.The individual to whom an opinion is rendered, and any other individual involved in a similar factual situation,and who, after issuance of the opinion acts in good faith in accordance with it shall not be subject to anysanction provided in this Act.(c) The heads of other offices shall perform the duties stated in subsections (a) and (b) hereof insofar as their respective offices are concerned, subject to the approval of the Secretary of Justice, in the case of the ExecutiveDepartment and the Chief Justice of the Supreme Court, in the case of the Judicial Department.The provision that gives an impression that the Review and Compliance Procedure is a prerequisite to the filing of anadministrative complaint is found in paragraph (b) of Section 10 which states that "The individual to whom an opinion isrendered, and any other individual involved in a similar factual situation, and who, after the issuance of the opinion acts ingood faith in accordance with it shall not be subject to any sanction provided in this Act." This provision must not,however, be read in isolation.Paragraph (b) concerns the power of the Review and Compliance Committee to interpret the law governing SALNs. Itauthorizes the Committee to issue interpretative opinions regarding the filing of SALNs. Officers and employees affectedby such opinions "as well as" all who are similarly situated may be allowed to correct their SALNs according to thatopinion. What the law prohibits is merely the retroactive application of the committee’s opinions. In no way did the law saythat a public officer clearly violating R.A. 6713 must first be notified of any concealed or false information in his SALN andallowed to correct the same before he is administratively charged.

Furthermore, the only concern of the Review and Compliance Procedure, as per paragraph (a), is to determine whether the SALNs are complete and in proper form. This means that the SALN contains all the required data, i.e., the publicofficial answered all the questions and filled in all the blanks in his SALN form. If it finds that required information has beenomitted, the appropriate Committee shall so inform the official who prepared the SALN and direct him to make thenecessary correction.The Court cannot accept the view that the review required of the Committee refers to the substance of what is stated inthe SALN, i.e., the truth and accuracy of the answers stated in it, for the following reasons:First. Assuring the truth and accuracy of the answers in the SALN is the function of the filer’s oath28 that to the best of hisknowledge and information, the data he provides in it constitutes the true statements of his assets, liabilities, net worth,business interests, and financial connections, including those of his spouse and unmarried children below 18 years of age.29 Any falsity in the SALN makes him liable for falsification of public documents under Article 172 of the Revised PenalCode.Second. The law will not require the impossible, namely, that the Committee must ascertain the truth of all the information

that the public officer or employee stated or failed to state in his SALNs and remind him of it. The DPWH affirms this factin its certification below:This is to certify that this Department issues a memorandum every year reminding its officials and employees tosubmit their Statement of Assets and Liabilities and Networth (SALN) in compliance with R.A. 6713. Consideringthat it has approximately 19,000 permanent employees plus a variable number of casual and contractualemployees, the Department does not have the resources to review or validate the entries in all the SALNs.Officials and employees are assumed to be accountable for the veracity of the entries considering that the SALNsare under oath.301avvphi1Indeed, if the Committee knows the truth about the assets, liabilities, and net worth of its department’s employees, therewould be no need for the law to require the latter to file their sworn SALNs yearly.In this case, the PAGC succeeded in discovering the business interest of Pleyto’s wife only after it subpoenaed from theDepartment of Trade and Industry—Bulacan certified copies of her business interests there. The Heads of Offices do nothave the means to compel production of documents in the hands of other government agencies or third persons.The purpose of R.A. 6713 is "to promote a high standard of ethics in public service. Public officials and employees shall atall times be accountable to the people and shall discharge their duties with utmost responsibility, integrity, competence,and loyalty, act with patriotism and justice, lead modest lives, and uphold public interest over personal interest."31 The lawexpects public officials to be accountable to the people in the matter of their integrity and competence. Thus, the Courtcannot interpret the Review and Compliance Procedure as transferring such accountability to the Committee.WHEREFORE, the Court GRANTS the petition but finds petitioner Salvador A. Pleyto guilty only of simple negligence andimposes on him the penalty of forfeiture of the equivalent of six months of his salary from his retirement benefits.SO ORDERED.ROBERTO A. ABAD

Associate Justice

JOSE AVELINO vs. THE COLLECTOR OF INTERNAL REVENUE, G.R. No. L-17715, July 31, 1963

LABRADOR, J.:This is an appeal from a decision of the Court of Tax Appeals confirming substantially the assessment of Income taxdeficiencies of the petitioner Jose Avelino for the years 1946, 1947 and 1948. The assessments approved by the Court of Tax Appeals for the said years are as follows:

1946

Net taxable income in 1946 P106,223.06===========

Tax due on P106,223.06 P 29,669.22













Less tax previously assessed &paid

1,472.08


50% surcharge 14,098.57

Total deficiency tax & surchargeP 42,295.71===========

1947

Net taxable income in 1947 P 43,504.34===========

Tax due on P43,504.34 P 8,361.22


4,375.72.


50% surcharge 1,992.75


1948

Net taxable income in 1948 P 38,885.81===========

Tax due on P38,885.81 P 7,090.31


747.51


50% surcharge 3,171.40


SUMMARY

Deficiency tax & surcharge for 1946

P 42,295.71

Deficiency tax & surcharge for

1947 5,978.25

Deficiency tax & surcharge for 1948

9,414.20

GRAND TOTALP 57,788.16===========

In the brief of the petitioner various assignments of errors are made, each error raising specific questions of law and of fact. The errors will now be considered one by one, each independently of the others.ITHE COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT THE NET WORTH METHOD USED BYRESPONDENT IN DETERMINING PETITIONER'S TAXABLE INCOME IS WITHOUT JUSTIFIABLE BASISIt is contended under this assignment of error that there is no reasonable certainty of the amount taken as an opening networth, there being no sufficient basis for establishing such opening net worth. Included in the opening net worth as of January 1, 1946, both according to the petitioner as well as to the Commissioner of Internal Revenue, are P700.00 andP5,500.00, representing cash in bank, PNB savings account and PNB current account, respectively. But petitioner claimsthat the cash on hand in the opening net worth should be, on December 31, 1945 (or January 1, 1946), not P100.00 asestimated by respondent but P47,300.00, for the reason that in an income tax return submitted by the wife of thepetitioner, Mrs. Enriqueta Avelino, she made it appear that the netted a profit of P55,000.00 from her business of importation of shoes, operation of a bar, and of a restaurant, shortly after liberation. The income tax return submitted byher for the year 1946 was submitted in the year 1949 and was presented at the hearing as Exhibit "A". Petitioner assertsthat his wife made a gain of P55,000.00 during the year 1946, but the supposed copy of the income tax return that shehas submitted as evidence does not show how that amount had been earned. If she did actually earn that amount Exhibit"A" would have contained the details indicating the transactions in which the big sum was earned. Why none of that



amount or the greater part thereof appears to have been deposited in a bank has not been explained. Apparently thecourt below considered the return as a self-serving statement, and We agree that on the basis of that income tax return,without any other explanation how the gains were used or invested or deposited, there is no reason to disturb the action of the court below in giving no credence to the said alleged existence of the cash net worth existing at the beginning of theyear 1946. We therefore declare that the alleged error has not been committed.IITHE COURT OF TAX APPEALS, IN COMPUTING THE DEFICIENCY INCOME TAX ALLEGEDLY DUE FROM THEPETITIONER, ERRED IN NOT DEDUCTING FROM THE INCREASE IN NET WORTH OF THE PETITIONER FOR THEYEAR 1948, THE SUM OF P6,508.00 REPRESENTING ONE-HALF (½) OF THE CAPITAL GAIN REALIZED FROM THESALE OF TWO PARCELS OF LAND (CAPITAL ASSETS) MADE IN 1948.The respondent denies that this error have been committed. In Annex 1, the yellow working sheet prepared by Examiner Lasquety, it is shown that the sum of P6,508.00 was deducted in the year 1948 is the taxable capital gain. This deductionwas sustained by the Court below. The alleged error, therefore, is disproved by Annex I.IIITHE COURT OF TAX APPEALS ERRED IN DISALLOWING THE AMOUNT OF P9,816.78 AS DEPRECIATION ONRENTAL PROPERTIES IN DETERMINING THE PETITIONER'S NET WORTH FOR THE YEAR 1948.This supposed error was not committed as evidenced by an examination of Annex I, which shows that P9,816.78 wasallowed as deduction for 1948 under the heading "Reserve for Depreciation, Building".IVTHE COURT OF TAX APPEALS ERRED IN FAILING TO REFLECT OR TAKE UP IN 1947 THE IMPROVEMENTSVALUED AT P35,000.00. ERECTED IN 1947 IN THE QUEZON CITY LOT OF PETITIONER.This error again is disproved by Annex I, the yellow working sheet prepared by Bureau of Internal Revenue Examiner Lasquety. This working sheet was adopted by the Court of Tax Appeals and it shows that P35,000.00 alleged to have

been omitted was actually taken into account in the computation of the 1947 accounts of the petitioner, as improvementson four buildings.VTHE COURT OF TAX APPEALS ERRED IN HOLDING THAT THE PETITIONER AND HIS WIFE HAD INVESTMENT INTHE TALISAY LUMBER COMPANY IN THE SUM OF P20,000.00 WITHOUT CONSIDERING AN OFFSETTINGLIABILITY IN THE SAME AMOUNT.Neither do we find any merit in this assignment of error. According to the evidence, the articles, of incorporation of theTalisay Lumber Company, which is under oath, petitioner and his wife invested the sums of P28,000.00 and P1,000.00 inthe company. If these sums were not furnished by the petitioner but by the organizer of the company, still the total amountof P29,000.00 should be considered as a gift, or an income received by the petitioner and his wife from the said organizer of the Talisay Lumber Company, which income is liable to tax.VITHE COURT OF TAX APPEALS ERRED IN HOLDING THAT THE PETITIONER HAD INVESTMENT IN AVELINO,

BAGTAS, ALZATE AND COMPANY IN THE SUM OF P5,000.00 FOR EACH OF THE YEARS 1946 TO 1950.Under this assignment of error, petitioner argues that the appearance of the said amount as having been contributed tothe partnership by petitioner is no proof that that amount was petitioner's actual investment in the company. The samereasons obtaining in the case of the investment of P29,000.00 of the spouses in the Talisay Lumber Company obtain inthe case of the petitioner's investment in the partnership of Avelino, Bagtas, Alzate and Company.VIITHE COURT OF TAX APPEALS ERRED IN HOLDING THAT THE LOAN OF P10,000.00 FROM ROSARIO GRAY DEHAYS AND ANOTHER LOAN OF P30,000.00 FROM ANGELA M. VDA. DE BUTTE NEVER EXISTED.In support of this assignment of error, petitioner contends that he owed the sum of P10,000.00 to Rosario Gray de Hays,which amount represents one-half of the price of P20,000.00 which was the consideration for the sale of certain propertydescribed in Exhibit "C". But the original of the document shows that the amount of the consideration was P22,000.00 andthe vendor was Severina de Casal, and nothing is said in the original of the document that any part of the amount under consideration has not been paid.It is also alleged in support of this error that the petitioner is indebted to Angela M. Vda. de Butte in 1948 in the sum of P30,000.00. Mrs. Butte testified that petitioner owed her the amount of P30,000.00; that the debt was in the form of acheck and that in 1949 Mr. Avelino, the petitioner, paid P15,000.00, and that he paid the balance in 1951, no interest onthe loan having been demanded and paid. Evidence of this character has, as a rule, been declared insufficient for purposes of the income tax law. (Eugenio Perez vs. Court of Tax Appeals, et al., G.R. No. L-10507, May 30, 1958; AurelioP. Reyes vs. Collector of Internal Revenue, G.R. Nos. L-11534 & L-11558, Nov. 25, 1958.) We declare that inconsonance with the rule which appears to be reasonable, the alleged loan cannot be declared as, actually existing.VIIITHE COURT OF TAX APPEALS ERRED IN HOLDING THAT THE PETITIONER COMMITTED FRAUD IN FILING HISINCOME TAX RETURNS FOR THE YEARS UNDER REVIEW.Under this alleged error it is contended that there was no evidence of fraud committed by the petitioner. We find that theacts of the petitioner in declaring an income of only P5,258.99 in the year 1946 when he had an actual income of P105,223.06; his act in submitting an income tax return for 1947 only for the amount of P12,219.96 when he actually hada net taxable income of P43,504.34; and lastly his act in reporting an income for the year 1948 which is only ten percent

of the actual taxable income of P38,885.81 — all these circumstances justify the finding of the court below that there hasbeen fraud subject to be penalized by law.IX

APPEALS ERRED IN HOLDING THE COURT OF TAX THAT THE RESPONDENT'S ASSESSMENTS HAVE NOT YETPRESCRIBED.In this assignment of error it is contended that the liability of the petitioner for income tax for the years 1946, 1947 and1948 has already prescribed. The contention is without merit as it has been found out that the petitioner has been guilty of fraud. The period within which he may be subjected to liability in case of fraud begins from the moment the fraud isdiscovered and not when the income tax return was presented. (Sec. 332, Internal Revenue Law).XTHE COURT OF TAX APPEALS ERRED IN HOLDING THE PETITIONER LIABLE FOR P57,788.16 AS DEFICIENCYINCOME TAX FOR THE YEARS 1946, 1947, AND 1948.



This supposed error is the result of the previous errors and need not be considered.1äwphï1.ñët Finding no error in the conclusions of fact and of law made by the respondent court, we hereby affirm the assessmentsmade by it as above indicated, with costs against petitioner.Bengzon, C.J., Concepcion, Reyes, J.B.L., Paredes, Regala and Makalintal, JJ., concur.Padilla, Bautista Angelo and Dizon, JJ., took no part.

CHIEF JUSTICE RENATO C. CORONA vs. SENATE OF THE PHILIPPINES sitting as an IMPEACHMENT COURT,BANK OF THE PHILIPPINE ISLANDS, PHILIPPINE SAVINGS BANK, ARLENE "KAKA" BAG-AO, GIORGIDIAGGABAO, MARILYN PRIMICIAS-AGABAS, NIEL TUPAS, RODOLFO FARINAS, SHERWIN TUGNA, RAUL DAZA,ELPIDIO BARZAGA, REYNALDO UMALI, NERI COLMENARES (ALSO KNOWN AS THE PROSECUTORS FROM

THE HOUSE OF REPRESENTATIVES), G.R. No. 200242, July 17, 2012

R E S O L U T I O NVILLARAMA, JR., J.:Before this Court is a petition for certiorari and prohibition with prayer for immediate issuance of temporary restrainingorder (TRO) and writ of preliminary injunction filed by the former Chief Justice of this Court, Renato C. Corona, assailingthe impeachment case initiated by the respondent Members of the House of Representatives (HOR) and trial beingconducted by respondent Senate of the Philippines.On December 12, 2011, a caucus was held by the majority bloc of the HOR during which a verified complaint for impeachment against petitioner was submitted by the leadership of the Committee on Justice. After a brief presentation,on the same day, the complaint was voted in session and 188 Members signed and endorsed it, way above the one-thirdvote required by the Constitution.On December 13, 2011, the complaint was transmitted to the Senate which convened as an impeachment court thefollowing day, December 14, 2011.

On December 15, 2011, petitioner received a copy of the complaint charging him with culpable violation of theConstitution, betrayal of public trust and graft and corruption, allegedly committed as follows:

ARTICLE IRESPONDENT BETRAYED THE PUBLIC TRUST THROUGH HIS TRACK RECORD MARKED BY PARTIALITY ANDSUBSERVIENCE IN CASES INVOLVING THE ARROYO ADMINISTRATION FROM THE TIME OF HIS APPOINTMENT

AS SUPREME COURT JUSTICE AND UNTIL HIS DUBIOUS APPOINTMENT AS A MIDNIGHT CHIEF JUSTICE TOTHE PRESENT.

ARTICLE IIRESPONDENT COMMITTED CULPABLE VIOLATION OF THE CONSTITUTION AND/OR BETRAYED THE PUBLICTRUST WHEN HE FAILED TO DISCLOSE TO THE PUBLIC HIS STATEMENT OFASSETS, LIABILITIES AND NETWORTH AS REQUIRED UNDER SEC. 17, ART. XI OF THE 1987 CONSTITUTION.2.1. It is provided for in Art. XI, Section 17 of the 1987 Constitution that "a public officer or employee shall, uponassumption of office and as often thereafter as may be required by law, submit a declaration under oath of his assets,

liabilities, and net worth. In the case of the President, the Vice-President, the Members of the Cabinet, and other constitutional offices, and officers of the armed forces with general or flag rank, the declaration shall be disclosed to thepublic in the manner provided by law."2.2. Respondent failed to disclose to the public his statement of assets, liabilities, and net worth as required by theConstitution.2.3. It is also reported that some of the properties of Respondent are not included in his declaration of his assets,liabilities, and net worth, in violation of the anti-graft and corrupt practices act.2.4. Respondent is likewise suspected and accused of having accumulated ill-gotten wealth, acquiring assets of highvalues and keeping bank accounts with huge deposits. It has been reported that Respondent has, among others, a 300-sq. meter apartment in a poshMega World Property development at the Fort in Taguig. Has he reported this, as he is constitutionally-required under Art.XI, Sec. 17 of the Constitution in his Statement of Assets and Liabilities and Net Worth (SALN)? Is this acquisitionsustained and duly supported by his income as a public official? Since his assumption as Associate and subsequently,

Chief Justice, has he complied with this duty of public disclosure? ARTICLE IIIRESPONDENT COMMITTED CULPABLE VIOLATIONS OF THE CONSTITUTION AND/OR BETRAYED THE PUBLICTRUST BY FAILING TO MEET AND OBSERVE THE STRINGENT STANDARDS UNDER ART. VIII, SECTION 7 (3) OFTHE CONSTITUTION THAT PROVIDES THAT "[A] MEMBER OF THE JUDICIARY MUST BE A PERSON OF PROVENCOMPETENCE, INTEGRITY, PROBITY, AND INDEPENDENCE" IN ALLOWING THE SUPREME COURT TO ACT ONMERE LETTERS FILED BY A COUNSEL WHICH CAUSED THE ISSUANCE OF FLIP-FLOPPING DECISIONS IN FINAL

AND EXECUTORY CASES; IN CREATING AN EXCESSIVE ENTANGLEMENT WITH MRS. ARROYO THROUGH HER APPOINTMENT OF HIS WIFE TO OFFICE; AND IN DISCUSSING WITH LITIGANTS REGARDING CASES PENDINGBEFORE THE SUPREME COURT.

ARTICLE IVRESPONDENT BETRAYED THE PUBLIC TRUST AND/OR COMMITTED CULPABLE VIOLATION OF THECONSTITUTION WHEN HE BLATANTLY DISREGARDED THE PRINCIPLE OF SEPARATION OF POWERS BYISSUING A "STATUS QUO ANTE" ORDER AGAINST THE HOUSE OF REPRESENTATIVES IN THE CASECONCERNING THE IMPEACHMENT OF THEN OMBUDSMAN MERCEDITAS NAVARRO-GUTIERREZ.

ARTICLE VRESPONDENT BETRAYED THE PUBLIC TRUST THROUGH WANTON ARBITRARINESS AND PARTIALITY INCONSISTENTLY DISREGARDING THE PRINCIPLE OF RES JUDICATA IN THE CASES INVOLVING THE 16 NEWLY-CREATED CITIES, AND THE PROMOTION OF DINAGAT ISLAND INTO A PROVINCE.

ARTICLE VIRESPONDENT BETRAYED THE PUBLIC TRUST BY ARROGATING UNTO HIMSELF, AND TO A COMMITTEE HECREATED, THE AUTHORITY AND JURISDICTION TO IMPROPERLY INVESTIGATE A JUSTICE OF THE SUPREMECOURT FOR THE PURPOSE OF EXCULPATING HIM. SUCH AUTHORITY AND JURISDICTION IS PROPERLYREPOSED BY THE CONSTITUTION IN THE HOUSE OF REPRESENTATIVES VIA IMPEACHMENT.

ARTICLE VII



RESPONDENT BETRAYED THE PUBLIC TRUST THROUGH HIS PARTIALITY IN GRANTING A TEMPORARYRESTRAINING ORDER (TRO) IN FAVOR OF FORMER PRESIDENT GLORIA MACAPAGAL-ARROYO AND HERHUSBAND JOSE MIGUEL ARROYO IN ORDER TO GIVE THEM AN OPPORTUNITY TO ESCAPE PROSECUTION

AND TO FRUSTRATE THE ENDS OF JUSTICE, AND IN DISTORTING THE SUPREME COURT DECISION ON THEEFFECTIVITY OF THE TRO IN VIEW OF A CLEAR FAILURE TO COMPLY WITH THE CONDITIONS OF THESUPREME COURT’S OWN TRO. ARTICLE VIII RESPONDENT BETRAYED THE PUBLIC TRUST AND/ORCOMMITTED GRAFT AND CORRUPTION WHEN HE FAILED AND REFUSEDTO ACCOUNT FOR THE JUDICIARYDEVELOPMENT FUND (JDF) AND SPECIAL ALLOWANCE FOR THE JUDICIARY (SAJ) COLLECTIONS.1

On December 26, 2011, petitioner filed his Answer 2 assailing the "blitzkrieg" fashion by which the impeachment complaintwas signed by the Members of the HOR and immediately transmitted to the Senate. Citing previous instances whenPresident Aquino openly expressed his rejection of petitioner’s appointment as Chief Justice and publicly attacked thisCourt under the leadership of petitioner for "derailing his administration’s mandate," petitioner concluded that the move toimpeach him was the handiwork of President Aquino’s party mates and supporters, including"hidden forces" who will bebenefited by his ouster. As to the charges against him, petitioner denied the same but admitted having once served theOffices of the President and Vice-President during the term of former President Gloria Macapagal-Arroyo and granted therequest for courtesy call only to Mr. Dante Jimenez of the Volunteers Against Crime and Corruption (VACC) while Mr.Lauro Vizconde appeared with Mr. Jimenez without prior permission or invitation. Petitioner argued at length that the acts,misdeeds or offenses imputed to him were either false or baseless, and otherwise not illegal nor improper. He prayed for the outright dismissal of the complaint for failing to meet the requirements of the Constitution or that the ImpeachmentCourt enter a judgment of acquittal for all the articles of impeachment.Meanwhile, the prosecution panel composed of respondent Representatives held a press conference revealing evidencewhich supposedly support their accusations against petitioner. The following day, newspapers carried front page reportsof high-priced condominium units and other real properties in Fort Bonifacio, Taguig and Quezon City allegedly owned by

petitioner, as disclosed by prosecutors led by respondent Rep. Niel C. Tupas, Jr. The prosecution told the media that it ispossible that these properties were not included by petitioner in his Statement of Assets, Liabilities and Net Worth (SALN)which had not been made available to the public. Reacting to this media campaign, Senators scolded the prosecutorsreminding them that under the Senate Rules of Procedure on Impeachment Trials3 they are not allowed to make anypublic disclosure or comment regarding the merits of a pending impeachment case. 4 By this time, five petitions havealready been filed with this Court by different individuals seeking to enjoin the impeachment trial on grounds of improperlyverified complaint and lack of due process.On January 16, 2012, respondent Senate of the Philippines acting as an Impeachment Court, commenced trialproceedings against the petitioner.Petitioner’s motion for a preliminary hearing was denied. On January 18, 2012, Atty.Enriqueta E. Vidal, Clerk of Court of this Court, in compliance with a subpoena issued by the Impeachment Court, took thewitness stand and submitted the SALNs of petitioner for the years 2002 to 2010. Other prosecution witnesses alsotestified regarding petitioner’s SALNs for the previous years (Marianito Dimaandal, Records Custodian of MalacañangPalace, Atty. Randy A. Rutaquio, Register of Deeds of Taguig and Atty. Carlo V. Alcantara, Acting Register of Deeds of

Quezon City).In compliance with the directive of the Impeachment Court, the prosecution and defense submitted their respectivememoranda on the question of whether the prosecution may present evidence to prove the allegations in paragraphs 2.3(failure to report some properties in SALN) and 2.4 (acquisition of ill-gotten wealth and failure to disclose in SALN suchbank accounts with huge deposits and 300-sq.m. Megaworld property at the Fort in Taguig) under Article II (par. 2.2.refers to petitioner’s alleged failure to disclose to the public his SALN as required by the Constitution).On January 27, 2012, the Impeachment Court issued a Resolution5 which states:IN SUM, THEREFORE, this Court resolves and accordingly rules:1. To allow the Prosecution to introduce evidence in support of Paragraphs 2.2 and 2.3 of Article II of the Articles of Impeachment;2. To disallow the introduction of evidence in support of Par. 2.4 of the Articles of Impeachment, with respect to which, thisCourt shall be guided by and shall rely upon the legal presumptions on the nature of any property or asset which may beproven to belong to the Respondent Chief Justice as provided under Section 8 of Republic Act No. 3019 and Section 2 of Republic Act No. 1379.SO ORDERED.6

In a subsequent Resolution7 dated February 6, 2012, the Impeachment Court granted the prosecution’s request for subpoena directed to the officersof two private banks where petitioner allegedly deposited millions in peso and dollar currencies, as follows:WHEREFORE, IN VIEW OF THE FOREGOING, the majority votes to grant the Prosecution’s Requests for Subpoenae tothe responsible officers of Philippine Savings Bank (PSBank) and Bank of the Philippine Island (BPI), for them to testifyand bring and/or produce before the Court documents on the alleged bank accounts of Chief Justice Corona, only for thepurpose of the instant impeachment proceedings, as follows:a) The Branch Manager of the Bank of Philippine Islands, Ayala Avenue Branch, 6th Floor, SGV Building, 6758 Ayala

Avenue, Makati City, is commanded to bring before the Senate at 2:00 p.m. on February 8, 2012, the original and certifiedtrue copies of the account opening forms/documents for Bank Account no. 1445-8030-61 in the name of Renato C.Corona and the bank statements showing the balances of the said account as of December 31, 2005, December 31,2006, December 31, 2007, December 31, 2008, December 31, 2009 and December 31, 2010.

b) The Branch Manager (and/or authorized representative) of Philippine Savings Bank, Katipunan Branch, Katipunan Avenue, Loyola Heights, Quezon City, is commanded to bring before the Senate at 2:00 p.m. on February 8, 2012, theoriginal and certified true copies of the account opening forms/documents for the following bank accounts allegedly in thename of Renato C. Corona, and the documents showing the balances of the said accounts as of December 31, 2007,December 31, 2008, December 31, 2009 and December 31, 2010:089-19100037-3089-13100282-6089-121017358089-121019593089-121020122089-121021681089-141-00712-9

http://www.lawphil.net/judjuris/juri2012/jul2012/gr_200242_2012.html#fnt1


















089-141-00746-9089-14100814-5089-121-01195-7SO ORDERED.8

On February 8, 2012, PSBank filed a petition for certiorari and prohibition (G.R. No. 200238) seeking to enjoin theImpeachment Court and the HOR prosecutors from implementing the aforesaid subpoena requiring PSBank thru itsauthorized representative to testify and to bring the original and certified true copies of the opening documents for petitioner’salleged foreign currency accounts, and thereafter to render judgment nullifying the subpoenas including thebank statements showing the year-end balances for the said accounts.On the same day, the present petition was filed arguing that the Impeachment Court committed grave abuse of discretionamounting to lack or excess of jurisdiction when it: (1) proceeded to trial on the basis of the complaint filed by respondentRepresentatives which complaint is constitutionally infirm and defective for lack of probable cause; (2) did not strike outthe charges discussed in Art. II of the complaint which, aside from being a "hodge-podge" of multiple charges, do notconstitute allegations in law, much less ultimate facts, being all premised on suspicion and/or hearsay; assumingarguendo that the retention of Par. 2.3 is correct, the ruling of the Impeachment Court to retain Par. 2.3 effectively allowsthe introduction of evidence under Par. 2.3, as vehicle to prove Par. 2.4 and therefore its earlier resolution was nothingmore than a hollow relief, bringing no real protection to petitioner; (3) allowed the presentation of evidence on charges of alleged corruption and unexplained wealth which violates petitioner’s right to due process because first, Art. II does notmention "graft and corruption" or unlawfully acquired wealth as grounds for impeachment, and second, it is clear under Sec. 2, Art. XI of the Constitution that "graft and corruption" is a separate and distinct ground from "culpable violation of the Constitution" and "betrayal of public trust"; and (4) issued the subpoena for the production of petitioner’s alleged bankaccounts as requested by the prosecution despite the same being the result of an illegal act ("fruit of the poisonous tree")considering that those documents submitted by the prosecution violates the absolute confidentiality of such accounts

under Sec. 8 of R.A. No. 6426 (Foreign Currency Deposits Act) which is also penalized under Sec. 10 thereof. Petitioner thus prayed for the following reliefs:(a) Immediately upon filing of this Petition, issue a temporary restraining order or a writ of preliminary injunction enjoining:(i) the proceedings before the Impeachment Court; (ii) implementation ofResolution dated 6 February 2012; (iii) theofficers or representatives of BPI and PSBank from testifying and submitting documents on petitioner’s or his family’sbank accounts; and (iv) the presentation, reception and admission of evidence on paragraphs 2.3 and 2.4 of theImpeachment Complaint;(b) After giving due course to the Petition, render judgment:(i) Declaring the Impeachment Complaint null and void ab initio;(ii) Prohibiting the presentation, reception and admission of evidence on paragraphs 2.3 and 2.4 of the ImpeachmentComplaint;(iii) Annulling the Impeachment Court’s Resolution dated 27 January 2012 and 6 February 2011 [sic], as well as anySubpoenae issued pursuant thereto; and

(iv) Making the TRO and/or writ of preliminary injunction permanent.Other reliefs, just or equitable, are likewise prayed for.9

Petitioner also sought the inhibition of Justices Antonio T. Carpio and Maria Lourdes P. A. Sereno on the ground of partiality, citing their publicly known "animosity" towards petitioner aside from the fact that they have been openly toutedas the likely replacements in the event that petitioner is removed from office.10

On February 9, 2012, this Court issued a TRO in G.R. No. 200238 enjoining the Senate from implementing the Resolutionand subpoena ad testificandum et duces tecum issued by the Senate sitting as an Impeachment Court, both datedFebruary 6, 2012. The Court further resolved to deny petitioner’s motion for the inhibition of Justices Carpio and Sereno"in the absence of any applicable compulsory ground and of any voluntary inhibition from the Justices concerned."On February 13, 2012, petitioner filed a Supplemental Petition 11 claiming that his right to due process is being violated inthe ongoing impeachment proceedings because certain Senator-Judges have lost the coldneutrality of impartial judges byacting as prosecutors. Petitioner particularly mentioned Senator-Judge Franklin S. Drilon, whose inhibition he had soughtfrom the Impeachment Court, to no avail. He further called attention to the fact that despite the Impeachment Court’sJanuary 27, 2012 Resolution which disallowed the introduction of evidence in support of paragraph 2.4 of Article II, fromwhich no motion for reconsideration would be entertained, "the allies of President Aquino in the Senate abused their authority and continued their presentation of evidence for the prosecution, without fear of objection". In view of thepersistent efforts of President Aquino’s Senator-allies to overturn the ruling of Presiding Officer Juan Ponce Enrile that theprosecution could not present evidence on paragraph 2.4 of Article II -- for which President Aquino even thanked "hissenator allies in delivering what the prosecution could not"-- petitioner reiterates the reliefs prayed for in his petition beforethis Court.In the Comment Ad Cautelam Ex Superabundanti 12 filed on behalf of the respondents, the Solicitor General argues thatthe instant petition raises matters purely political in character which may be decided or resolved only by the Senate andHOR, with the manifestation that the comment is being filed by the respondents "without submitting themselves to the

jurisdiction of the Honorable Supreme Court and without conceding the constitutional and exclusive power of the House toinitiate all cases of impeachment and of the Senate to try and decide all cases of impeachment." Citing the case of Nixon v. United States,13 respondents contend that to allow a public official being impeached to raise before this Court any

and all issues relative to the substance of the impeachment complaint would result in an unnecessarily long and tediousprocess that may even go beyond the terms of the Senator-Judges hearing the impeachment case. Such scenario isclearly not what the Constitution intended.Traversing the allegations of the petition, respondents assert that the Impeachment Court did not commit any grave abuseof discretion; it has, in fact, been conducting the proceedings judiciously. Respondents maintain that subjecting theongoing impeachment trial to judicial review defeats the very essence of impeachment. They contend that theconstitutional command of public accountability to petitioner and his obligation to fully disclose his assets, liabilities andnet worth prevail over his claim of confidentiality of deposits; hence, the subpoena subject of this case were correctly and

judiciously issued. Considering that the ongoing impeachment proceedings, which was initiated and is being conducted inaccordance with the Constitution, simply aims to enforce the principle of public accountability and ensure that thetransgressions of impeachable public officials are corrected, the injury being claimed by petitioner allegedly resulting from

















the impeachment trial has no factual and legal basis. It is thus prayed that the present petition, as well as petitioner’sprayer for issuance of a TRO/preliminary injunction, be dismissed.The core issue presented is whether the certiorari jurisdiction of this Court may be invoked to assail matters or incidentsarising from impeachment proceedings, and to obtain injunctive relief for alleged violations of right to due process of theperson being tried by the Senate sitting as Impeachment Court.Impeachment and Judicial ReviewImpeachment, described as "the most formidable weapon in the arsenal of democracy," 14 was foreseen as creatingdivisions, partialities and enmities, or highlighting pre-existing factions with the greatest danger that "the decision will beregulated more by the comparative strength of parties, than by the real demonstrations of innocence or guilt." 15 Given their concededly political character, the precise role of the judiciary in impeachment cases is a matter of utmost importance toensure the effective functioning of the separate branches while preserving the structure of checks and balance in our government. Moreover, in this jurisdiction, the acts of any branch or instrumentality of the government, including thosetraditionally entrusted to the political departments, are proper subjects of judicial review if tainted with grave abuse or arbitrariness.Impeachment refers to the power of Congress to remove a public official for serious crimes or misconduct as provided inthe Constitution. A mechanism designed to check abuse of power, impeachment has its roots in Athens and was adoptedin the United States (US) through the influence of English common law on the Framers of the US Constitution.Our own Constitution’s provisions on impeachment were adopted from the US Constitution. Petitioner was impeachedthrough the mode provided under Art. XI, par. 4, Sec. 3, in a manner that he claims was accomplished with undue hasteand under a complaint which is defective for lack of probable cause. Petitioner likewise assails the Senate in proceedingwith the trial under the said complaint, and in the alleged partiality exhibited by some Senator-Judges who wereapparently aiding the prosecution during the hearings.On the other hand, respondents contend that the issues raised in the Supplemental Petition regarding the behavior of

certain Senator-Judges in the course of the impeachment trial are issues that do not concern, or allege any violation of,the three express and exclusive constitutional limitations on the Senate’s sole power to try and decide impeachmentcases. They argue that unless there is a clear transgression of these constitutional limitations, this Court may not exerciseits power of expanded judicial review over the actions of Senator-Judges during the proceedings. By the nature of thefunctions they discharge when sitting as an Impeachment Court, Senator-Judges are clearly entitled to propoundquestions on the witnesses, prosecutors and counsel during the trial. Petitioner thus failed to prove any semblance of partiality on the part of any Senator-Judges. But whether the Senate Impeachment Rules were followed or not, is apolitical question that is not within this Court’s power of expanded judicial review.In the first impeachment case decided by this Court, Francisco, Jr. v.Nagmamalasakit na mga Manananggol ng mga Manggagawang Pilipino, Inc.16 we ruled that the power of judicial reviewin this jurisdiction includes the power of review over justiciable issues in impeachment proceedings. Subsequently, inGutierrez v. House of Representatives Committee on Justice,17 the Court resolved the question of the validity of thesimultaneous referral of two impeachment complaints against petitioner Ombudsman which was allegedly a violation of

the due process clause and of the one-year bar provision.On the basis of these precedents, petitioner asks this Court to determine whether respondents committed a violation of the Constitution or gravely abused its discretion in the exercise of their functions and prerogatives that could translate aslack or excess of jurisdiction, which would require corrective measures from the Court.MootnessIn the meantime, the impeachment trial had been concluded with the conviction of petitioner by more than the requiredmajority vote of the Senator-Judges. Petitioner immediately accepted the verdict and without any protest vacated hisoffice. In fact, the Judicial and Bar Council is already in the process of screening applicants and nominees, and thePresident of the Philippines is expected to appoint a new Chief Justice within the prescribed 90-day period from amongthose candidates shortlisted by the JBC. Unarguably, the constitutional issue raised by petitioner had been mooted bysupervening events and his own acts.1âwphi1

An issue or a case becomes moot and academic when it ceases to present a justiciable controversy so that adetermination thereof would be without practical use and value.18 In such cases, there is no actual substantial relief towhich the petitioner would be entitled to and which would be negated by the dismissal of the petition.19

WHEREFORE, the present petition for certiorari and prohibition with prayer for injunctive relief/s is DISMISSED on theground of MOOTNESS.No pronouncement as to costs.SO ORDERED.

MARTIN S. VILLARAMA, JR.

PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK, Administrator of the Testate Estate of Charles NewtonHodges (Sp. Proc. No. 1672 of the Court of First Instance of Iloilo), petitioner,vs.THE HONORABLE VENICIO ESCOLIN, Presiding Judge of the Court of First Instance of Iloilo, Branch II, andAVELINA A. MAGNO, respondents. G.R. Nos. L-27860 and L-27896 March 29, 1974

TESTATE ESTATE OF THE LATE LINNIE JANE HODGES (Sp. Proc. No. 1307). TESTATE ESTATE OF THE LATECHARLES NEWTON HODGES (Sp. Proc. No. 1672). PHILIPPINE COMMERCIAL AND INDUSTRIALBANK,administrator-appellant,vs.LORENZO CARLES, JOSE PABLICO, ALFREDO CATEDRAL, SALVADOR GUZMAN, BELCESAR CAUSING,FLORENIA BARRIDO, PURIFICACION CORONADO, GRACIANO LUCERO, ARITEO THOMAS JAMIR,MELQUIADES BATISANAN, PEPITO IYULORES, ESPERIDION PARTISALA, WINIFREDO ESPADA, ROSARIOALINGASA, ADELFA PREMAYLON, SANTIAGO PACAONSIS, and AVELINA A. MAGNO, the last as Administratrixin Sp. Proc. No. 1307, appellees, WESTERN INSTITUTE OF TECHNOLOGY, INC., movant-appellee. G.R. Nos. L-27936 & L-27937 March 29, 1974


















San Juan, Africa, Gonzales and San Agustin for Philippine Commercial and Industrial Bank.Manglapus Law Office, Antonio Law Office and Rizal R. Quimpo for private respondents and appellees Avelina A. Magno,etc., et al. BARREDO, J.: pCertiorari and prohibition with preliminary injunction; certiorari to "declare all acts of the respondent court in the TestateEstate of Linnie Jane Hodges (Sp. Proc. No. 1307 of the Court of First Instance of Iloilo) subsequent to the order of December 14, 1957 as null and void for having been issued without jurisdiction"; prohibition to enjoin the respondent courtfrom allowing, tolerating, sanctioning, or abetting private respondent Avelina A. Magno to perform or do any acts of administration, such as those enumerated in the petition, and from exercising any authority or power as Regular

Administratrix of above-named Testate Estate, by entertaining manifestations, motion and pleadings filed by her andacting on them, and also to enjoin said court from allowing said private respondent to interfere, meddle or take part in anymanner in the administration of the Testate Estate of Charles Newton Hodges (Sp. Proc. No. 1672 of the same court andbranch); with prayer for preliminary injunction, which was issued by this Court on August 8, 1967 upon a bond of P5,000;the petition being particularly directed against the orders of the respondent court of October 12, 1966 denying petitioner'smotion of April 22, 1966 and its order of July 18, 1967 denying the motion for reconsideration of said order.Related to and involving basically the same main issue as the foregoing petition, thirty-three (33) appeals from differentorders of the same respondent court approving or otherwise sanctioning the acts of administration of the respondentMagno on behalf of the testate Estate of Mrs. Hodges.THE FACTSOn May 23, 1957, Linnie Jane Hodges died in Iloilo City leaving a will executed on November 22, 1952 pertinentlyproviding as follows:FIRST: I direct that all my just debts and funeral expenses be first paid out of my estate.

SECOND: I give, devise and bequeath all of the rest, residue and remainder of my estate, both personal and real,wherever situated, or located, to my beloved husband, Charles Newton Hodges, to have and to hold unto him, my saidhusband, during his natural lifetime.THIRD: I desire, direct and provide that my husband, Charles Newton Hodges, shall have the right to manage, control,use and enjoy said estate during his lifetime, and he is hereby given the right to make any changes in the physicalproperties of said estate, by sale or any part thereof which he may think best, and the purchase of any other or additionalproperty as he may think best; to execute conveyances with or without general or special warranty, conveying in feesimple or for any other term or time, any property which he may deem proper to dispose of; to lease any of the realproperty for oil, gas and/or other minerals, and all such deeds or leases shall pass the absolute fee simple title to theinterest so conveyed in such property as he may elect to sell. All rents, emoluments and income from said estate shallbelong to him, and he is further authorized to use any part of the principal of said estate as he may need or desire. It isprovided herein, however, that he shall not sell or otherwise dispose of any of the improved property now owned by uslocated at, in or near the City of Lubbock, Texas, but he shall have the full right to lease, manage and enjoy the same

during his lifetime, above provided. He shall have the right to subdivide any farm land and sell lots therein. and may sellunimproved town lots.FOURTH: At the death of my said husband, Charles Newton Hodges, I give, devise and bequeath all of the rest, residueand remainder of my estate, both real and personal, wherever situated or located, to be equally divided among mybrothers and sisters, share and share alike, namely:Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Saddie Rascoe, Era Roman and Nimroy Higdon.FIFTH: In case of the death of any of my brothers and/or sisters named in item Fourth, above, prior to the death of myhusband, Charles Newton Hodges, then it is my will and bequest that the heirs of such deceased brother or sister shalltake jointly the share which would have gone to such brother or sister had she or he survived.SIXTH: I nominate and appoint my said husband, Charles Newton Hodges, to be executor of this, my last will andtestament, and direct that no bond or other security be required of him as such executor.SEVENTH: It is my will and bequest that no action be had in the probate court, in the administration of my estate, other than that necessary to prove and record this will and to return an inventory and appraisement of my estate and list of claims. (Pp. 2-4, Petition.)This will was subsequently probated in aforementioned Special Proceedings No. 1307 of respondent court on June 28,1957, with the widower Charles Newton Hodges being appointed as Executor, pursuant to the provisions thereof.Previously, on May 27, 1957, the said widower (hereafter to be referred to as Hodges) had been appointed Special

Administrator, in which capacity he filed a motion on the same date as follows:URGENT EX-PARTE MOTION TO ALLOW OR AUTHORIZE PETITIONER TO CONTINUE THE BUSINESS IN WHICH HE WAS ENGAGED AND TO PERFORM ACTS WHICH HE HAD BEEN DOING WHILE DECEASED WAS LIVINGCome petitioner in the above-entitled special proceedings, thru his undersigned attorneys, to the Hon. Court, mostrespectfully states:1. — That Linnie Jane Hodges died leaving her last will and testament, a copy of which is attached to the petition for probate of the same.2. — That in said last will and testament herein petitioner Charles Newton Hodges is directed to have the right to manage,control use and enjoy the estate of deceased Linnie Jane Hodges, in the same way, a provision was placed in paragraphtwo, the following: "I give, devise and bequeath all of the rest, residue and remainder of my estate, to my beloved

husband, Charles Newton Hodges, to have and (to) hold unto him, my said husband, during his natural lifetime."3. — That during the lifetime of Linnie Jane Hodges, herein petitioner was engaged in the business of buying and sellingpersonal and real properties, and do such acts which petitioner may think best.4. — That deceased Linnie Jane Hodges died leaving no descendants or ascendants, except brothers and sisters andherein petitioner as executor surviving spouse, to inherit the properties of the decedent.5. — That the present motion is submitted in order not to paralyze the business of petitioner and the deceased, especiallyin the purchase and sale of properties. That proper accounting will be had also in all these transactions.WHEREFORE, it is most respectfully prayed that, petitioner C. N. Hodges (Charles Newton Hodges) be allowed or authorized to continue the business in which he was engaged and to perform acts which he had been doing whiledeceased Linnie Jane Hodges was living.City of Iloilo, May 27, 1957. (Annex "D", Petition.)which the respondent court immediately granted in the following order:



It appearing in the urgent ex-parte motion filed by petitioner C. N. Hodges, that the business in which said petitioner andthe deceased were engaged will be paralyzed, unless and until the Executor is named and appointed by the Court, thesaid petitioner is allowed or authorized to continue the business in which he was engaged and to perform acts which hehad been doing while the deceased was living.SO ORDERED.City of Iloilo May 27, 1957. (Annex "E", Petition.)Under date of December 11, 1957, Hodges filed as such Executor another motion thus:MOTION TO APPROVE ALL SALES, CONVEYANCES, LEASES, MORTGAGES THAT THE EXECUTOR HAD MADEFURTHER AND SUBSEQUENT TRANSACTIONS WHICH THE EXECUTOR MAY DO IN ACCORDANCE WITH THELAST WISH OF THE DECEASED LINNIE JANE HODGES.Comes the Executor in the above-entitled proceedings, thru his undersigned attorney, to the Hon. Court, most respectfullystates:1. — That according to the last will and testament of the deceased Linnie Jane Hodges, the executor as the survivingspouse and legatee named in the will of the deceased; has the right to dispose of all the properties left by the deceased,portion of which is quoted as follows:Second: I give, devise and bequeath all of the rest, residue and remainder of my estate, both personal and real, wherever situated, or located, to my beloved husband, Charles Newton Hodges, to have and to hold unto him, my said husband,during his natural lifetime.Third: I desire, direct and provide that my husband, Charles Newton Hodges, shall have the right to manage, control, useand enjoy said estate during his lifetime, and he is hereby given the right to make any changes in the physical propertiesof said estate, by sale or any part thereof which he may think best, and the purchase of any other or additional property ashe may think best; to execute conveyances with or without general or special warranty, conveying in fee simple or for anyother term or time, any property which he may deem proper to dispose of; to lease any of the real property for oil, gas

and/or other minerals, and all such deeds or leases shall pass the absolute fee simple title to the interest so conveyed insuch property as he may elect to sell. All rents, emoluments and income from said estate shall belong to him, and he isfurther authorized to use any part of the principal of said estate as he may need or desire. ...2. — That herein Executor, is not only part owner of the properties left as conjugal, but also, the successor to all theproperties left by the deceased Linnie Jane Hodges. That during the lifetime of herein Executor, as Legatee has the rightto sell, convey, lease or dispose of the properties in the Philippines. That inasmuch as C.N. Hodges was and is engagedin the buy and sell of real and personal properties, even before the death of Linnie Jane Hodges, a motion to authorizesaid C.N. Hodges was filed in Court, to allow him to continue in the business of buy and sell, which motion was favorablygranted by the Honorable Court.3. — That since the death of Linnie Jane Hodges, Mr. C.N. Hodges had been buying and selling real and personalproperties, in accordance with the wishes of the late Linnie Jane Hodges.4. — That the Register of Deeds for Iloilo, had required of late the herein Executor to have all the sales, leases,conveyances or mortgages made by him, approved by the Hon. Court.

5. — That it is respectfully requested, all the sales, conveyances leases and mortgages executed by the Executor, beapproved by the Hon. Court. and subsequent sales conveyances, leases and mortgages in compliances with the wishesof the late Linnie Jane Hodges, and within the scope of the terms of the last will and testament, also be approved;6. — That the Executor is under obligation to submit his yearly accounts, and the properties conveyed can also beaccounted for, especially the amounts received.WHEREFORE, it is most respectfully prayed that, all the sales, conveyances, leases, and mortgages executed by theExecutor, be approved by the Hon. Court, and also the subsequent sales, conveyances, leases, and mortgages inconsonance with the wishes of the deceased contained in her last will and testament, be with authorization and approvalof the Hon. Court.City of Iloilo, December 11, 1967.(Annex "G", Petition.)which again was promptly granted by the respondent court on December 14, 1957 as follows:O R D E R

As prayed for by Attorney Gellada, counsel for the Executor for the reasons stated in his motion dated December 11,1957, which the Court considers well taken all the sales, conveyances, leases and mortgages of all properties left by thedeceased Linnie Jane Hodges executed by the Executor Charles N. Hodges are hereby APPROVED. The said Executor is further authorized to execute subsequent sales, conveyances, leases and mortgages of the properties left by the saiddeceased Linnie Jane Hodges in consonance with the wishes conveyed in the last will and testament of the latter.So ordered.Iloilo City. December 14, 1957.(Annex "H", Petition.)On April 14, 1959, in submitting his first statement of account as Executor for approval, Hodges alleged:Pursuant to the provisions of the Rules of Court, herein executor of the deceased, renders the following account of hisadministration covering the period from January 1, 1958 to December 31, 1958, which account may be found in detail inthe individual income tax return filed for the estate of deceased Linnie Jane Hodges, to wit:That a certified public accountant has examined the statement of net worth of the estate of Linnie Jane Hodges, theassets and liabilities, as well as the income and expenses, copy of which is hereto attached and made integral part of this

statement of account as Annex "A".IN VIEW OF THE FOREGOING, it is most respectfully prayed that, the statement of net worth of the estate of Linnie JaneHodges, the assets and liabilities, income and expenses as shown in the individual income tax return for the estate of thedeceased and marked as Annex "A", be approved by the Honorable Court, as substantial compliance with therequirements of the Rules of Court.That no person interested in the Philippines of the time and place of examining the herein accounts be given notice, asherein executor is the only devisee or legatee of the deceased, in accordance with the last will and testament alreadyprobated by the Honorable court.City of Iloilo April 14, 1959.(Annex "I", Petition.)The respondent court approved this statement of account on April 21, 1959 in its order worded thus:



Upon petition of Atty. Gellada, in representation of the Executor, the statement of net worth of the estate of Linnie JaneHodges, assets and liabilities, income and expenses as shown in the individual income tax return for the estate of thedeceased and marked as Annex "A" is approved.SO ORDERED.City of Iloilo April 21, 1959.(Annex "J", Petition.)His accounts for the periods January 1, 1959 to December 31, 1959 and January 1, 1960 to December 31, 1960 weresubmitted likewise accompanied by allegations identical mutatis mutandis to those of April 14, 1959, quoted above; andthe respective orders approving the same, dated July 30, 1960 and May 2, 1961, were substantially identical to the above-quoted order of April 21, 1959. In connection with the statements of account just mentioned, the following assertionsrelated thereto made by respondent-appellee Magno in her brief do not appear from all indications discernible in therecord to be disputable:Under date of April 14, 1959, C.N. Hodges filed his first "Account by the Executor" of the estate of Linnie Jane Hodges. Inthe "Statement of Networth of Mr. C.N. Hodges and the Estate of Linnie Jane Hodges" as of December 31, 1958 annexedthereto, C.N. Hodges reported that the combined conjugal estate earned a net income of P328,402.62, divided evenlybetween him and the estate of Linnie Jane Hodges. Pursuant to this, he filed an "individual income tax return" for calendar year 1958 on the estate of Linnie Jane Hodges reporting, under oath, the said estate as having earned income of P164,201.31, exactly one-half of the net income of his combined personal assets and that of the estate of Linnie JaneHodges. (p. 91, Appellee's Brief.)xxx xxx xxxUnder date of July 21, 1960, C.N. Hodges filed his second "Annual Statement of Account by the Executor" of the estate of Linnie Jane Hodges. In the "Statement of Networth of Mr. C.N. Hodges and the Estate of Linnie Jane Hodges" as of December 31, 1959 annexed thereto, C.N. Hodges reported that the combined conjugal estate earned a net income of

P270,623.32, divided evenly between him and the estate of Linnie Jane Hodges. Pursuant to this, he filed an "individualincome tax return" for calendar year 1959 on the estate of Linnie Jane Hodges reporting, under oath, the said estate ashaving earned income of P135,311.66, exactly one-half of the net income of his combined personal assets and that of theestate of Linnie Jane Hodges. (pp. 91-92. Appellee's Brief.)xxx xxx xxxUnder date of April 20, 1961, C.N. Hodges filed his third "Annual Statement of Account by the Executor for the Year 1960"of the estate of Linnie Jane Hodges. In the "Statement of Net Worth of Mr. C.N. Hodges and the Estate of Linnie JaneHodges" as of December 31, 1960 annexed thereto, C.N. Hodges reported that the combined conjugal estate earned anet income of P314,857.94, divided evenly between him and the estate of Linnie Jane Hodges. Pursuant to this, he filedan "individual income tax return" for calendar year 1960 on the estate of Linnie Jane Hodges reporting, under oath, thesaid estate as having earned income of P157,428.97, exactly one-half of the net income of his combined personal assetsand that of the estate of Linnie Jane Hodges. (Pp. 92-93, Appellee's Brief.)Likewise the following:

In the petition for probate that he (Hodges) filed, he listed the seven brothers and sisters of Linnie Jane as her "heirs" (seep. 2, Green ROA). The order of the court admitting the will to probate unfortunately omitted one of the heirs, Roy Higdon(see p. 14, Green ROA). Immediately, C.N. Hodges filed a verified motion to have Roy Higdon's name included as an heir,stating that he wanted to straighten the records "in order the heirs of deceased Roy Higdon may not think or believe theywere omitted, and that they were really and are interested in the estate of deceased Linnie Jane Hodges. .

As an executor, he was bound to file tax returns for the estate he was administering under American law. He did file suchas estate tax return on August 8, 1958. In Schedule "M" of such return, he answered "Yes" to the question as to whether he was contemplating "renouncing the will". On the question as to what property interests passed to him as the survivingspouse, he answered:"None, except for purposes of administering the Estate, paying debts, taxes and other legal charges. It is the intention of the surviving husband of deceased to distribute the remaining property and interests of the deceased in their Communityestate to the devisees and legatees named in the will when the debts, liabilities, taxes and expenses of administration arefinally determined and paid."

Again, on August 9, 1962, barely four months before his death, he executed an "affidavit" wherein he ratified andconfirmed all that he stated in Schedule "M" of his estate tax returns as to his having renounced what was given him byhis wife's will. 1

As appointed executor, C.N. Hodges filed an "Inventory" dated May 12, 1958. He listed all the assets of his conjugalpartnership with Linnie Jane Hodges on a separate balance sheet and then stated expressly that her estate which hascome into his possession as executor was "one-half of all the items" listed in said balance sheet. (Pp. 89-90, Appellee'sBrief.)Parenthetically, it may be stated, at this juncture, that We are taking pains to quote wholly or at least, extensively fromsome of the pleadings and orders whenever We feel that it is necessary to do so for a more comprehensive and clearer view of the important and decisive issues raised by the parties and a more accurate appraisal of their respective positionsin regard thereto.The records of these cases do not show that anything else was done in the above-mentioned Special Proceedings No.1307 until December 26, 1962, when on account of the death of Hodges the day before, the same lawyer, Atty. Leon P.Gellada, who had been previously acting as counsel for Hodges in his capacity as Executor of his wife's estate, and as

such had filed the aforequoted motions and manifestations, filed the following:URGENT EX-PARTE MOTION FOR THE APPOINTMENT OF ASPECIAL ADMINISTRATRIXCOMES the undersigned attorney for the Executor in the above-entitled proceedings, to the Honorable Court, mostrespectfully states:1. That in accordance with the Last Will and Testament of Linnie Jane Hodges (deceased), her husband, Charles NewtonHodges was to act as Executor, and in fact, in an order issued by this Hon. Court dated June 28, 1957, the said CharlesNewton Hodges was appointed Executor and had performed the duties as such.2. That last December 22, 1962, the said Charles Newton Hodges was stricken ill, and brought to the Iloilo MissionHospital for treatment, but unfortunately, he died on December 25, 1962, as shown by a copy of the death certificatehereto attached and marked as Annex "A".



3. That in accordance with the provisions of the last will and testament of Linnie Jane Hodges, whatever real and personalproperties that may remain at the death of her husband Charles Newton Hodges, the said properties shall be equallydivided among their heirs. That there are real and personal properties left by Charles Newton Hodges, which need to beadministered and taken care of.4. That the estate of deceased Linnie Jane Hodges, as well as that of Charles Newton Hodges, have not as yet beendetermined or ascertained, and there is necessity for the appointment of a general administrator to liquidate and distributethe residue of the estate to the heirs and legatees of both spouses. That in accordance with the provisions of Section 2 of Rule 75 of the Rules of Court, the conjugal partnership of Linnie Jane Hodges and Charles Newton Hodges shall beliquidated in the testate proceedings of the wife.5. That the undersigned counsel, has perfect personal knowledge of the existence of the last will and testament of CharlesNewton Hodges, with similar provisions as that contained in the last will and testament of Linnie Jane Hodges. However,said last will and testament of Charles Newton Hodges is kept inside the vault or iron safe in his office, and will bepresented in due time before this honorable Court.6. That in the meantime, it is imperative and indispensable that, an Administratrix be appointed for the estate of LinnieJane Hodges and a Special Administratrix for the estate of Charles Newton Hodges, to perform the duties required by law,to administer, collect, and take charge of the goods, chattels, rights, credits, and estate of both spouses, Charles NewtonHodges and Linnie Jane Hodges, as provided for in Section 1 and 2, Rule 81 of the Rules of Court.7. That there is delay in granting letters testamentary or of administration, because the last will and testament of deceased, Charles Newton Hodges, is still kept in his safe or vault, and in the meantime, unless an administratrix (and,) atthe same time, a Special Administratrix is appointed, the estate of both spouses are in danger of being lost, damaged or go to waste.8. That the most trusted employee of both spouses Linnie Jane Hodges and C.N. Hodges, who had been employed for around thirty (30) years, in the person of Miss Avelina Magno, (should) be appointed Administratrix of the estate of Linnie

Jane Hodges and at the same time Special Administratrix of the estate of Charles Newton Hodges. That the said Miss Avelina Magno is of legal age, a resident of the Philippines, the most fit, competent, trustworthy and well-qualified personto serve the duties of Administratrix and Special Administratrix and is willing to act as such.9. That Miss Avelina Magno is also willing to file bond in such sum which the Hon. Court believes reasonable.WHEREFORE, in view of all the foregoing, it is most respectfully prayed that, Miss AVELINA A. MAGNO be immediatelyappointed Administratrix of the estate of Linnie Jane Hodges and as Special Administratrix of the estate of CharlesNewton Hodges, with powers and duties provided for by law. That the Honorable Court fix the reasonable bond of P1,000.00 to be filed by Avelina A. Magno.(Annex "O", Petition.)which respondent court readily acted on in its order of even date thus: .For the reasons alleged in the Urgent Ex-parte Motion filed by counsel for the Executor dated December 25, 1962, whichthe Court finds meritorious, Miss AVELINA A. MAGNO, is hereby appointed Administratrix of the estate of Linnie JaneHodges and as Special Administratrix of the estate of Charles Newton Hodges, in the latter case, because the last will of

said Charles Newton Hodges is still kept in his vault or iron safe and that the real and personal properties of both spousesmay be lost, damaged or go to waste, unless a Special Administratrix is appointed.Miss Avelina A. Magno is required to file bond in the sum of FIVE THOUSAND PESOS (P5,000.00), and after havingdone so, let letters of Administration be issued to her." (Annex "P", Petition.)On December 29, 1962, however, upon urgent ex-parte petition of respondent Magno herself, thru Atty. Gellada, Harold,R. Davies, "a representative of the heirs of deceased Charles Newton Hodges (who had) arrived from the United States of

America to help in the administration of the estate of said deceased" was appointed as Co-Special Administrator of theestate of Hodges, (pp. 29-33, Yellow - Record on Appeal) only to be replaced as such co-special administrator on January22, 1963 by Joe Hodges, who, according to the motion of the same attorney, is "the nephew of the deceased (who had)arrived from the United States with instructions from the other heirs of the deceased to administer the properties or estateof Charles Newton Hodges in the Philippines, (Pp. 47-50, id.)Meanwhile, under date of January 9, 1963, the same Atty. Gellada filed in Special Proceedings 1672 a petition for theprobate of the will of Hodges, 2 with a prayer for the issuance of letters of administration to the same Joe Hodges, albeitthe motion was followed on February 22, 1963 by a separate one asking that Atty. Fernando Mirasol be appointed as hisco-administrator. On the same date this latter motion was filed, the court issued the corresponding order of probate andletters of administration to Joe Hodges and Atty. Mirasol, as prayed for.

At this juncture, again, it may also be explained that just as, in her will, Mrs. Hodges bequeathed her whole estate to her husband "to have and to hold unto him, my said husband, during his natural lifetime", she, at the same time or in likemanner, provided that "at the death of my said husband — I give devise and bequeath all of the rest, residue andremainder of my estate, both real and personal, wherever situated or located, to be equally divided among my brothersand sisters, share and share alike —". Accordingly, it became incumbent upon Hodges, as executor of his wife's will, toduly liquidate the conjugal partnership, half of which constituted her estate, in order that upon the eventuality of his death,"the rest, residue and remainder" thereof could be determined and correspondingly distributed or divided among her brothers and sisters. And it was precisely because no such liquidation was done, furthermore, there is the issue of whether the distribution of her estate should be governed by the laws of the Philippines or those of Texas, of which Stateshe was a national, and, what is more, as already stated, Hodges made official and sworn statements or manifestationsindicating that as far as he was concerned no "property interests passed to him as surviving spouse — "except for

purposes of administering the estate, paying debts, taxes and other legal charges" and it was the intention of the survivinghusband of the deceased to distribute the remaining property and interests of the deceased in their Community Estate tothe devisees and legatees named in the will when the debts, liabilities, taxes and expenses of administration are finallydetermined and paid", that the incidents and controversies now before Us for resolution arose. As may be observed, thesituation that ensued upon the death of Hodges became rather unusual and so, quite understandably, the lower court'sactuations presently under review are apparently wanting in consistency and seemingly lack proper orientation.Thus, We cannot discern clearly from the record before Us the precise perspective from which the trial court proceeded inissuing its questioned orders. And, regretably, none of the lengthy briefs submitted by the parties is of valuable assistancein clearing up the matter.To begin with, We gather from the two records on appeal filed by petitioner, as appellant in the appealed cases, one withgreen cover and the other with a yellow cover, that at the outset, a sort of modus operandi had been agreed upon by theparties under which the respective administrators of the two estates were supposed to act conjointly, but since no copy of



the said agreement can be found in the record before Us, We have no way of knowing when exactly such agreement wasentered into and under what specific terms. And while reference is made to said modus operandi in the order of September 11, 1964, on pages 205-206 of the Green Record on Appeal, reading thus:The present incident is to hear the side of administratrix, Miss Avelina A. Magno, in answer to the charges contained inthe motion filed by Atty. Cesar Tirol on September 3, 1964. In answer to the said charges, Miss Avelina A. Magno,through her counsel, Atty. Rizal Quimpo, filed a written manifestation.

After reading the manifestation here of Atty. Quimpo, for and in behalf of the administratrix, Miss Avelina A. Magno, theCourt finds that everything that happened before September 3, 1964, which was resolved on September 8, 1964, to thesatisfaction of parties, was simply due to a misunderstanding between the representative of the Philippine Commercialand Industrial Bank and Miss Magno and in order to restore the harmonious relations between the parties, the Courtordered the parties to remain in status quo as to their modus operandi before September 1, 1964, until after the Court canhave a meeting with all the parties and their counsels on October 3, as formerly agreed upon between counsels, Attys.Ozaeta, Gibbs and Ozaeta, Attys. Tirol and Tirol and Atty. Rizal Quimpo.In the meantime, the prayers of Atty. Quimpo as stated in his manifestation shall not be resolved by this Court untilOctober 3, 1964.SO ORDERED.there is nothing in the record indicating whatever happened to it afterwards, except that again, reference thereto wasmade in the appealed order of October 27, 1965, on pages 292-295 of the Green Record on Appeal, as follows:On record is an urgent motion to allow PCIB to open all doors and locks in the Hodges Office at 206-208 Guanco Street,Iloilo City, to take immediate and exclusive possession thereof and to place its own locks and keys for security purposesof the PCIB dated October 27, 1965 thru Atty. Cesar Tirol. It is alleged in said urgent motion that Administratrix Magno of the testate estate of Linnie Jane Hodges refused to open the Hodges Office at 206-208 Guanco Street, Iloilo City wherePCIB holds office and therefore PCIB is suffering great moral damage and prejudice as a result of said act. It is prayed

that an order be issued authorizing it (PCIB) to open all doors and locks in the said office, to take immediate and exclusivepossession thereof and place thereon its own locks and keys for security purposes; instructing the clerk of court or anyavailable deputy to witness and supervise the opening of all doors and locks and taking possession of the PCIB.

A written opposition has been filed by Administratrix Magno of even date (Oct. 27) thru counsel Rizal Quimpo statingtherein that she was compelled to close the office for the reason that the PCIB failed to comply with the order of this Courtsigned by Judge Anacleto I. Bellosillo dated September 11, 1964 to the effect that both estates should remain in statusquo to their modus operandi as of September 1, 1964.To arrive at a happy solution of the dispute and in order not to interrupt the operation of the office of both estates, theCourt aside from the reasons stated in the urgent motion and opposition heard the verbal arguments of Atty. Cesar Tirolfor the PCIB and Atty. Rizal Quimpo for Administratix Magno.

After due consideration, the Court hereby orders Magno to open all doors and locks in the Hodges Office at 206-208Guanco Street, Iloilo City in the presence of the PCIB or its duly authorized representative and deputy clerk of court Albisof this branch not later than 7:30 tomorrow morning October 28, 1965 in order that the office of said estates could operate

for business.Pursuant to the order of this Court thru Judge Bellosillo dated September 11, 1964, it is hereby ordered:(a) That all cash collections should be deposited in the joint account of the estates of Linnie Jane Hodges and estates of C.N. Hodges;(b) That whatever cash collections that had been deposited in the account of either of the estates should be withdrawnand since then deposited in the joint account of the estate of Linnie Jane Hodges and the estate of C.N. Hodges;(c) That the PCIB should countersign the check in the amount of P250 in favor of Administratrix Avelina A. Magno as her compensation as administratrix of the Linnie Jane Hodges estate chargeable to the testate estate of Linnie Jane Hodgesonly;(d) That Administratrix Magno is hereby directed to allow the PCIB to inspect whatever records, documents and papersshe may have in her possession in the same manner that Administrator PCIB is also directed to allow AdministratrixMagno to inspect whatever records, documents and papers it may have in its possession;(e) That the accountant of the estate of Linnie Jane Hodges shall have access to all records of the transactions of bothestates for the protection of the estate of Linnie Jane Hodges; and in like manner the accountant or any authorizedrepresentative of the estate of C.N. Hodges shall have access to the records of transactions of the Linnie Jane Hodgesestate for the protection of the estate of C.N. Hodges.Once the estates' office shall have been opened by Administratrix Magno in the presence of the PCIB or its dulyauthorized representative and deputy clerk Albis or his duly authorized representative, both estates or any of the estatesshould not close it without previous consent and authority from this court.SO ORDERED.

As may be noted, in this order, the respondent court required that all collections from the properties in the name of Hodges should be deposited in a joint account of the two estates, which indicates that seemingly the so-called modusoperandi was no longer operative, but again there is nothing to show when this situation started.Likewise, in paragraph 3 of the petitioner's motion of September 14, 1964, on pages 188-201 of the Green Record on

Appeal, (also found on pp. 83-91 of the Yellow Record on Appeal) it is alleged that:3. On January 24, 1964 virtually all of the heirs of C.N. Hodges, Joe Hodges and Fernando P. Mirasol acting as the twoco-administrators of the estate of C.N. Hodges, Avelina A. Magno acting as the administratrix of the estate of Linnie Jane

Hodges and Messrs. William Brown and Ardell Young acting for all of the Higdon family who claim to be the solebeneficiaries of the estate of Linnie Jane Hodges and various legal counsel representing the aforementioned partiesentered into an amicable agreement, which was approved by this Honorable Court, wherein the parties thereto agreedthat certain sums of money were to be paid in settlement of different claims against the two estates and that the assets (tothe extent they existed) of both estates would be administered jointly by the PCIB as administrator of the estate of C.N.Hodges and Avelina A. Magno as administratrix of the estate of Linnie Jane Hodges, subject, however, to the aforesaidOctober 5, 1963 Motion, namely, the PCIB's claim to exclusive possession and ownership of one hundred percent (100%)(or, in the alternative, seventy-five percent (75%) of all assets owned by C.N. Hodges or Linnie Jane Hodges situated inthe Philippines. On February 1, 1964 (pp. 934-935, CFI Rec., S.P. No. 1672) this Honorable Court amended its order of January 24, 1964 but in no way changed its recognition of the afore-described basic demand by the PCIB as administrator of the estate of C.N. Hodges to one hundred percent (100%) of the assets claimed by both estates.



but no copy of the mentioned agreement of joint administration of the two estates exists in the record, and so, We are notinformed as to what exactly are the terms of the same which could be relevant in the resolution of the issues herein.On the other hand, the appealed order of November 3, 1965, on pages 313-320 of the Green Record on Appeal,authorized payment by respondent Magno of, inter alia, her own fees as administratrix, the attorney's fees of her lawyers,etc., as follows:

Administratrix Magno thru Attys. Raul S. Manglapus and Rizal. R. Quimpo filed a Manifestation and Urgent Motion datedJune 10, 1964 asking for the approval of the Agreement dated June 6, 1964 which Agreement is for the purpose of retaining their services to protect and defend the interest of the said Administratrix in these proceedings and the same hasbeen signed by and bears the express conformity of the attorney-in-fact of the late Linnie Jane Hodges, Mr. James L.Sullivan. It is further prayed that the Administratrix of the Testate Estate of Linnie Jane Hodges be directed to pay theretailers fee of said lawyers, said fees made chargeable as expenses for the administration of the estate of Linnie JaneHodges (pp. 1641-1642, Vol. V, Sp. 1307).

An opposition has been filed by the Administrator PCIB thru Atty. Herminio Ozaeta dated July 11, 1964, on the groundthat payment of the retainers fee of Attys. Manglapus and Quimpo as prayed for in said Manifestation and Urgent Motionis prejudicial to the 100% claim of the estate of C. N. Hodges; employment of Attys. Manglapus and Quimpo is prematureand/or unnecessary; Attys. Quimpo and Manglapus are representing conflicting interests and the estate of Linnie JaneHodges should be closed and terminated (pp. 1679-1684, Vol, V, Sp. 1307).

Atty. Leon P. Gellada filed a memorandum dated July 28, 1964 asking that the Manifestation and Urgent Motion filed by Attys. Manglapus and Quimpo be denied because no evidence has been presented in support thereof. Atty. Manglapusfiled a reply to the opposition of counsel for the Administrator of the C. N. Hodges estate wherein it is claimed thatexpenses of administration include reasonable counsel or attorney's fees for services to the executor or administrator. Asa matter of fact the fee agreement dated February 27, 1964 between the PCIB and the law firm of Ozaeta, Gibbs &Ozaeta as its counsel (Pp. 1280-1284, Vol. V, Sp. 1307) which stipulates the fees for said law firm has been approved by

the Court in its order dated March 31, 1964. If payment of the fees of the lawyers for the administratrix of the estate of Linnie Jane Hodges will cause prejudice to the estate of C. N. Hodges, in like manner the very agreement which providesfor the payment of attorney's fees to the counsel for the PCIB will also be prejudicial to the estate of Linnie Jane Hodges(pp. 1801-1814, Vol. V, Sp. 1307).

Atty. Herminio Ozaeta filed a rejoinder dated August 10, 1964 to the reply to the opposition to the Manifestation andUrgent Motion alleging principally that the estates of Linnie Jane Hodges and C. N. Hodges are not similarly situated for the reason that C. N. Hodges is an heir of Linnie Jane Hodges whereas the latter is not an heir of the former for thereason that Linnie Jane Hodges predeceased C. N. Hodges (pp. 1839-1848, Vol. V, Sp. 1307); that Attys. Manglapus andQuimpo formally entered their appearance in behalf of Administratrix of the estate of Linnie Jane Hodges on June 10,1964 (pp. 1639-1640, Vol. V, Sp. 1307).

Atty. Manglapus filed a manifestation dated December 18, 1964 stating therein that Judge Bellosillo issued an order requiring the parties to submit memorandum in support of their respective contentions. It is prayed in this manifestationthat the Manifestation and Urgent Motion dated June 10, 1964 be resolved (pp. 6435-6439, Vol. VII, Sp. 1307).

Atty. Roman Mabanta, Jr. for the PCIB filed a counter- manifestation dated January 5, 1965 asking that after theconsideration by the court of all allegations and arguments and pleadings of the PCIB in connection therewith (1) saidmanifestation and urgent motion of Attys. Manglapus and Quimpo be denied (pp. 6442-6453, Vol. VII, Sp. 1307). JudgeQuerubin issued an order dated January 4, 1965 approving the motion dated June 10, 1964 of the attorneys for theadministratrix of the estate of Linnie Jane Hodges and agreement annexed to said motion. The said order further states:"The Administratrix of the estate of Linnie Jane Hodges is authorized to issue or sign whatever check or checks may benecessary for the above purpose and the administrator of the estate of C. N. Hodges is ordered to countersign the same.(pp. 6518-6523, Vol VII, Sp. 1307).

Atty. Roman Mabanta, Jr. for the PCIB filed a manifestation and motion dated January 13, 1965 asking that the order of January 4, 1965 which was issued by Judge Querubin be declared null and void and to enjoin the clerk of court and theadministratrix and administrator in these special proceedings from all proceedings and action to enforce or comply withthe provision of the aforesaid order of January 4, 1965. In support of said manifestation and motion it is alleged that theorder of January 4, 1965 is null and void because the said order was never delivered to the deputy clerk Albis of Branch V(the sala of Judge Querubin) and the alleged order was found in the drawer of the late Judge Querubin in his office whensaid drawer was opened on January 13, 1965 after the death of Judge Querubin by Perfecto Querubin, Jr., the son of the

judge and in the presence of Executive Judge Rovira and deputy clerk Albis (Sec. 1, Rule 36, New Civil Code) (Pp. 6600-6606, Vol. VIII, Sp. 1307).

Atty. Roman Mabanta, Jr. for the PCIB filed a motion for reconsideration dated February 23, 1965 asking that the order dated January 4, 1964 be reversed on the ground that:1. Attorneys retained must render services to the estate not to the personal heir;2. If services are rendered to both, fees should be pro-rated between them;3. Attorneys retained should not represent conflicting interests; to the prejudice of the other heirs not represented by saidattorneys;4. Fees must be commensurate to the actual services rendered to the estate;5. There must be assets in the estate to pay for said fees (Pp. 6625-6636, Vol. VIII, Sp. 1307).

Atty. Quimpo for Administratrix Magno of the estate of Linnie Jane Hodges filed a motion to submit dated July 15, 1965asking that the manifestation and urgent motion dated June 10, 1964 filed by Attys. Manglapus and Quimpo and other

incidents directly appertaining thereto be considered submitted for consideration and approval (pp. 6759-6765, Vol. VIII,Sp. 1307).Considering the arguments and reasons in support to the pleadings of both the Administratrix and the PCIB, and of Atty.Gellada, hereinbefore mentioned, the Court believes that the order of January 4, 1965 is null and void for the reason thatthe said order has not been filed with deputy clerk Albis of this court (Branch V) during the lifetime of Judge Querubin whosigned the said order. However, the said manifestation and urgent motion dated June 10, 1964 is being treated andconsidered in this instant order. It is worthy to note that in the motion dated January 24, 1964 (Pp. 1149- 1163, Vol. V, Sp.1307) which has been filed by Atty. Gellada and his associates and Atty. Gibbs and other lawyers in addition to thestipulated fees for actual services rendered. However, the fee agreement dated February 27, 1964, between the

Administrator of the estate of C. N. Hodges and Atty. Gibbs which provides for retainer fee of P4,000 monthly in additionto specific fees for actual appearances, reimbursement for expenditures and contingent fees has also been approved by



the Court and said lawyers have already been paid. (pp. 1273-1279, Vol. V, Sp. Proc. 1307 pp. 1372-1373, Vol. V, Sp.Proc. 1307).WHEREFORE, the order dated January 4, 1965 is hereby declared null and void.The manifestation and motion dated June 10, 1964 which was filed by the attorneys for the administratrix of the testateestate of Linnie Jane Hodges is granted and the agreement annexed thereto is hereby approved.The administratrix of the estate of Linnie Jane Hodges is hereby directed to be needed to implement the approval of theagreement annexed to the motion and the administrator of the estate of C. N. Hodges is directed to countersign the saidcheck or checks as the case may be.SO ORDERED.thereby implying somehow that the court assumed the existence of independent but simultaneous administrations.Be that as it may, again, it appears that on August 6, 1965, the court, acting on a motion of petitioner for the approval of deeds of sale executed by it as administrator of the estate of Hodges, issued the following order, also on appeal herein:

Acting upon the motion for approval of deeds of sale for registered land of the PCIB, Administrator of the Testate Estate of C. N. Hodges in Sp. Proc. 1672 (Vol. VII, pp. 2244-2245), dated July 16, 1965, filed by Atty. Cesar T. Tirol inrepresentation of the law firms of Ozaeta, Gibbs and Ozaeta and Tirol and Tirol and the opposition thereto of Atty. Rizal R.Quimpo (Vol. VIII, pp. 6811-6813) dated July 22, 1965 and considering the allegations and reasons therein stated, thecourt believes that the deeds of sale should be signed jointly by the PCIB, Administrator of the Testate Estate of C. N.Hodges and Avelina A. Magno, Administratrix of the Testate Estate of Linnie Jane Hodges and to this effect the PCIBshould take the necessary steps so that Administratrix Avelina A. Magno could sign the deeds of sale.SO ORDERED. (p. 248, Green Record on Appeal.)Notably this order required that even the deeds executed by petitioner, as administrator of the Estate of Hodges, involvingproperties registered in his name, should be co-signed by respondent Magno. 3 And this was not an isolated instance.In her brief as appellee, respondent Magno states:

After the lower court had authorized appellee Avelina A. Magno to execute final deeds of sale pursuant to contracts to sellexecuted by C. N. Hodges on February 20, 1963 (pp. 45-46, Green ROA), motions for the approval of final deeds of sale(signed by appellee Avelina A. Magno and the administrator of the estate of C. N. Hodges, first Joe Hodges, then Atty.Fernando Mirasol and later the appellant) were approved by the lower court upon petition of appellee Magno's counsel,

Atty. Leon P. Gellada, on the basis of section 8 of Rule 89 of the Revised Rules of Court. Subsequently, the appellant,after it had taken over the bulk of the assets of the two estates, started presenting these motions itself. The first suchattempt was a "Motion for Approval of Deeds of Sale for Registered Land and Cancellations of Mortgages" dated July 21,1964 filed by Atty. Cesar T. Tirol, counsel for the appellant, thereto annexing two (2) final deeds of sale and two (2)cancellations of mortgages signed by appellee Avelina A. Magno and D. R. Paulino, Assistant Vice-President andManager of the appellant (CFI Record, Sp. Proc. No. 1307, Vol. V, pp. 1694-1701). This motion was approved by thelower court on July 27, 1964. It was followed by another motion dated August 4, 1964 for the approval of one final deed of sale again signed by appellee Avelina A. Magno and D. R. Paulino (CFI Record, Sp. Proc. No. 1307. Vol. V, pp. 1825-1828), which was again approved by the lower court on August 7, 1964. The gates having been opened, a flood ensued:

the appellant subsequently filed similar motions for the approval of a multitude of deeds of sales and cancellations of mortgages signed by both the appellee Avelina A. Magno and the appellant. A random check of the records of Special Proceeding No. 1307 alone will show Atty. Cesar T. Tirol as having presentedfor court approval deeds of sale of real properties signed by both appellee Avelina A. Magno and D. R. Paulino in thefollowing numbers: (a) motion dated September 21, 1964 — 6 deeds of sale; (b) motion dated November 4, 1964 — 1deed of sale; (c) motion dated December 1, 1964 — 4 deeds of sale; (d) motion dated February 3, 1965 — 8 deeds of sale; (f) motion dated May 7, 1965 — 9 deeds of sale. In view of the very extensive landholdings of the Hodges spousesand the many motions filed concerning deeds of sale of real properties executed by C. N. Hodges the lower court has hadto constitute special separate expedientes in Special Proceedings Nos. 1307 and 1672 to include mere motions for theapproval of deeds of sale of the conjugal properties of the Hodges spouses.

As an example, from among the very many, under date of February 3, 1965, Atty. Cesar T. Tirol, as counsel for theappellant, filed "Motion for Approval of Deeds of Sale for Registered Land and Cancellations of Mortgages" (CFI Record,Sp. Proc. No. 1307, Vol. VIII, pp. 6570-6596) the allegations of which read:"1. In his lifetime, the late C. N. Hodges executed "Contracts to Sell" real property, and the prospective buyers under saidcontracts have already paid the price and complied with the terms and conditions thereof;"2. In the course of administration of both estates, mortgage debtors have already paid their debts secured by chattelmortgages in favor of the late C. N. Hodges, and are now entitled to release therefrom;"3. There are attached hereto documents executed jointly by the Administratrix in Sp. Proc. No. 1307 and the

Administrator in Sp. Proc. No. 1672, consisting of deeds of sale in favor —Fernando Cano, Bacolod City, Occ. NegrosFe Magbanua, Iloilo CityPolicarpio M. Pareno, La Paz, Iloilo CityRosario T. Libre, Jaro, Iloilo CityFederico B. Torres, Iloilo CityReynaldo T. Lataquin, La Paz, Iloilo City

Anatolio T. Viray, Iloilo CityBenjamin Rolando, Jaro, Iloilo City

and cancellations of mortgages in favor of —Pablo Manzano, Oton, IloiloRicardo M. Diana, Dao, San Jose, AntiqueSimplicio Tingson, Iloilo City

Amado Magbanua, Pototan, IloiloRoselia M. Baes, Bolo, Roxas CityWilliam Bayani, Rizal Estanzuela, Iloilo CityElpidio Villarete, Molo, Iloilo CityNorma T. Ruiz, Jaro, Iloilo City"4. That the approval of the aforesaid documents will not reduce the assets of the estates so as to prevent any creditor from receiving his full debt or diminish his dividend."

And the prayer of this motion is indeed very revealing:



"WHEREFORE, it is respectfully prayed that, under Rule 89, Section 8 of the Rules of Court, this honorable court approvethe aforesaid deeds of sale and cancellations of mortgages." (Pp. 113-117, Appellee's Brief.)None of these assertions is denied in Petitioner's reply brief.Further indicating lack of concrete perspective or orientation on the part of the respondent court and its hesitancy to clear up matters promptly, in its other appealed order of November 23, 1965, on pages 334-335 of the Green Record on

Appeal, said respondent court allowed the movant Ricardo Salas, President of appellee Western Institute of Technology(successor of Panay Educational Institutions, Inc.), one of the parties with whom Hodges had contracts that are inquestion in the appeals herein, to pay petitioner, as Administrator of the estate of Hodges and/or respondent Magno, as

Administrator of the estate of Mrs. Hodges, thus:Considering that in both cases there is as yet no judicial declaration of heirs nor distribution of properties to whomsoever are entitled thereto, the Court believes that payment to both the administrator of the testate estate of C. N. Hodges andthe administratrix of the testate estate of Linnie Jane Hodges or to either one of the two estates is proper and legal.WHEREFORE, movant Ricardo T. Salas can pay to both estates or either of them.SO ORDERED.(Pp. 334-335, Green Record on Appeal.)On the other hand, as stated earlier, there were instances when respondent Magno was given authority to act alone. For instance, in the other appealed order of December 19, 1964, on page 221 of the Green Record on Appeal, the respondentcourt approved payments made by her of overtime pay to some employees of the court who had helped in gathering andpreparing copies of parts of the records in both estates as follows:Considering that the expenses subject of the motion to approve payment of overtime pay dated December 10, 1964, arereasonable and are believed by this Court to be a proper charge of administration chargeable to the testate estate of thelate Linnie Jane Hodges, the said expenses are hereby APPROVED and to be charged against the testate estate of thelate Linnie Jane Hodges. The administrator of the testate estate of the late Charles Newton Hodges is hereby ordered to

countersign the check or checks necessary to pay the said overtime pay as shown by the bills marked Annex "A", "B" and"C" of the motion.SO ORDERED.(Pp. 221-222, Green Record on Appeal.)Likewise, the respondent court approved deeds of sale executed by respondent Magno alone, as Administratrix of theestate of Mrs. Hodges, covering properties in the name of Hodges, pursuant to "contracts to sell" executed by Hodges,irrespective of whether they were executed by him before or after the death of his wife. The orders of this nature which arealso on appeal herein are the following:1. Order of March 30, 1966, on p. 137 of the Green Record on Appeal, approving the deed of sale executed byrespondent Magno in favor of appellee Lorenzo Carles on February 24, 1966, pursuant to a "contract to sell" signed byHodges on June 17, 1958, after the death of his wife, which contract petitioner claims was cancelled by it for failure of Carles to pay the installments due on January 7, 1965.2. Order of April 5, 1966, on pp. 139-140, id., approving the deed of sale executed by respondent Magno in favor of

appellee Salvador Guzman on February 28, 1966 pursuant to a "contract to sell" signed by Hodges on September 13,1960, after the death of his wife, which contract petitioner claims it cancelled on March 3, 1965 in view of failure of saidappellee to pay the installments on time.3. Order of April 20, 1966, on pp. 167-168, id., approving the deed of sale executed by respondent Magno in favor of appellee Purificacion Coronado on March 28, 1966 pursuant to a "contract to sell" signed by Hodges on August 14, 1961,after the death of his wife.4. Order of April 20, 1966, on pp. 168-169, id., approving the deed of sale executed by respondent Magno in favor of appellee Florenia Barrido on March 28, 1966, pursuant to a "contract to sell" signed by Hodges on February 21, 1958,after the death of his wife.5. Order of June 7, 1966, on pp. 184-185, id., approving the deed of sale executed by respondent Magno in favor of appellee Belcezar Causing on May 2, 1966, pursuant to a "contract to sell" signed by Hodges on February 10, 1959, after the death of his wife.6. Order of June 21, 1966, on pp. 211-212, id., approving the deed of sale executed by respondent Magno in favor of appellee Artheo Thomas Jamir on June 3, 1966, pursuant to a "contract to sell" signed by Hodges on May 26, 1961, after the death of his wife.7. Order of June 21, 1966, on pp. 212-213, id., approving the deed of sale executed by respondent Magno in favor of appellees Graciano Lucero and Melquiades Batisanan on June 6 and June 3, 1966, respectively, pursuant to "contracts tosell" signed by Hodges on June 9, 1959 and November 27, 1961, respectively, after the death of his wife.8. Order of December 2, 1966, on pp. 303-304, id., approving the deed of sale executed by respondent Magno in favor of appellees Espiridion Partisala, Winifredo Espada and Rosario Alingasa on September 6, 1966, August 17, 1966 and

August 3, 1966, respectively, pursuant to "contracts to sell" signed by Hodges on April 20, 1960, April 18, 1960 and August 25, 1958, respectively, that is, after the death of his wife.9. Order of April 5, 1966, on pp. 137-138, id., approving the deed of sale executed by respondent Magno in favor of appellee Alfredo Catedral on March 2, 1966, pursuant to a "contract to sell" signed by Hodges on May 29, 1954, beforethe death of his wife, which contract petitioner claims it had cancelled on February 16, 1966 for failure of appelleeCatedral to pay the installments due on time.10. Order of April 5, 1966, on pp. 138-139, id., approving the deed of sale executed by respondent Magno in favor of

appellee Jose Pablico on March 7, 1966, pursuant to a "contract to sell" signed by Hodges on March 7, 1950, after thedeath of his wife, which contract petitioner claims it had cancelled on June 29, 1960, for failure of appellee Pablico to paythe installments due on time.11. Order of December 2, 1966, on pp. 303-304, id., insofar as it approved the deed of sale executed by respondentMagno in favor of appellee Pepito Iyulores on September 6, 1966, pursuant to a "contract to sell" signed by Hodges onFebruary 5, 1951, before the death of his wife.12. Order of January 3, 1967, on pp. 335-336, id., approving three deeds of sale executed by respondent Magno, one infavor of appellees Santiago Pacaonsis and two in favor of appellee Adelfa Premaylon on December 5, 1966 andNovember 3, 1966, respectively, pursuant to separate "promises to sell" signed respectively by Hodges on May 26, 1955and January 30, 1954, before the death of his wife, and October 31, 1959, after her death.



In like manner, there were also instances when respondent court approved deeds of sale executed by petitioner aloneand without the concurrence of respondent Magno, and such approvals have not been the subject of any appeal. No lessthan petitioner points this out on pages 149-150 of its brief as appellant thus:The points of fact and law pertaining to the two abovecited assignments of error have already been discussed previously.In the first abovecited error, the order alluded to was general, and as already explained before, it was, as admitted by thelower court itself, superseded by the particular orders approving specific final deeds of sale executed by the appellee,

Avelina A. Magno, which are subject of this appeal, as well as the particular orders approving specific final deeds of saleexecuted by the appellant, Philippine Commercial and Industrial Bank, which were never appealed by the appellee,

Avelina A. Magno, nor by any party for that matter, and which are now therefore final.Now, simultaneously with the foregoing incidents, others of more fundamental and all embracing significance developed.On October 5, 1963, over the signature of Atty. Allison J. Gibbs in representation of the law firm of Ozaeta, Gibbs &Ozaeta, as counsel for the co-administrators Joe Hodges and Fernando P. Mirasol, the following self-explanatory motionwas filed:URGENT MOTION FOR AN ACCOUNTING AND DELIVERY TO ADMINISTRATION OF THE ESTATE OF C. N.HODGES OF ALL OF THE ASSETS OF THE CONJUGAL PARTNERSHIP OF THE DECEASED LINNIE JANE HODGES AND C N. HODGES EXISTING AS OF MAY 23, 1957 PLUS ALL THE RENTS, EMOLUMENTS AND INCOME THEREFROM.COMES NOW the co-administrator of the estate of C. N. Hodges, Joe Hodges, through his undersigned attorneys in theabove-entitled proceedings, and to this Honorable Court respectfully alleges:(1) On May 23, 1957 Linnie Jane Hodges died in Iloilo City.(2) On June 28, 1957 this Honorable Court admitted to probate the Last Will and Testament of the deceased Linnie JaneHodges executed November 22, 1952 and appointed C. N. Hodges as Executor of the estate of Linnie Jane Hodges (pp.24-25, Rec. Sp. Proc. 1307).

(3) On July 1, 1957 this Honorable Court issued Letters Testamentary to C. N. Hodges in the Estate of Linnie JaneHodges (p. 30, Rec. Sp. Proc. 1307).(4) On December 14, 1957 this Honorable Court, on the basis of the following allegations in a Motion dated December 11,1957 filed by Leon P. Gellada as attorney for the executor C. N. Hodges:"That herein Executor, (is) not only part owner of the properties left as conjugal, but also, the successor to all the

properties left by the deceased Linnie Jane Hodges."(p. 44, Rec. Sp. Proc. 1307; emphasis supplied.)issued the following order:"As prayed for by Attorney Gellada, counsel for the Executory, for the reasons stated in his motion dated December 11,1957 which the court considers well taken, all the sales, conveyances, leases and mortgages of all properties left by thedeceased Linnie Jane Hodges are hereby APPROVED. The said executor is further authorized to execute subsequentsales, conveyances, leases and mortgages of the properties left by the said deceased Linnie Jane Hodges in consonancewith the wishes contained in the last will and testament of the latter ."

(p. 46, Rec. Sp. Proc. 1307; emphasis supplied.)(5) On April 21, 1959 this Honorable Court approved the inventory and accounting submitted by C. N. Hodges through hiscounsel Leon P. Gellada on April 14, 1959 wherein he alleged among other things"That no person interested in the Philippines of the time and place of examining the herein account, be given notice,as herein executor is the only devisee or legatee of the deceased, in accordance with the last will and testament already

probated by the Honorable Court ."(pp. 77-78, Rec. Sp. Proc. 1307; emphasis supplied.).(6) On July 30, 1960 this Honorable Court approved the "Annual Statement of Account" submitted by C. N. Hodgesthrough his counsel Leon P. Gellada on July 21, 1960 wherein he alleged among other things:"That no person interested in the Philippines of the time and place of examining the herein account, be given noticeas herein executor is the only devisee or legatee of the deceased Linnie Jane Hodges, in accordance with the last will andtestament of the deceased, already probated by this Honorable Court."(pp. 81-82. Rec. Sp. Proc. 1307; emphasis supplied.)(7) On May 2, 1961 this Honorable court approved the "Annual Statement of Account By The Executor for the Year 1960"submitted through Leon P. Gellada on April 20, 1961 wherein he alleged:That no person interested in the Philippines be given notice, of the time and place of examining the herein account,as herein Executor is the only devisee or legatee of the deceased Linnie Jane Hodges, in accordance with the last will and testament of the deceased, already probated by this Honorable Court .(pp. 90-91. Rec. Sp. Proc. 1307; emphasis supplied.)(8) On December 25, 1962, C.N. Hodges died.(9) On December 25, 1962, on the Urgent Ex-parte Motion of Leon P. Gellada filed only in Special Proceeding No. 1307,this Honorable Court appointed Avelina A. Magno"Administratrix of the estate of Linnie Jane Hodges and as Special Administratrix of the estate of Charles Newton Hodges,in the latter case, because the last will of said Charles Newton Hodges is still kept in his vault or iron safe and that the realand personal properties of both spouses may be lost, damaged or go to waste, unless a Special Administratrix isappointed."(p. 100. Rec. Sp. Proc. 1307)

(10) On December 26, 1962 Letters of Administration were issued to Avelina Magno pursuant to this Honorable Court'saforesaid Order of December 25, 1962"With full authority to take possession of all the property of said deceased in any province or provinces in which it may besituated and to perform all other acts necessary for the preservation of said property, said Administratrix and/or Special

Administratrix having filed a bond satisfactory to the Court."(p. 102, Rec. Sp. Proc. 1307)(11) On January 22, 1963 this Honorable Court on petition of Leon P. Gellada of January 21, 1963 issued Letters of

Administration to:(a) Avelina A. Magno as Administratrix of the estate of Linnie Jane Hodges;(b) Avelina A. Magno as Special Administratrix of the Estate of Charles Newton Hodges; and(c) Joe Hodges as Co-Special Administrator of the Estate of Charles Newton Hodges.(p. 43, Rec. Sp. Proc. 1307)



(12) On February 20, 1963 this Honorable Court on the basis of a motion filed by Leon P. Gellada as legal counsel onFebruary 16, 1963 for Avelina A. Magno acting as Administratrix of the Estate of Charles Newton Hodges (pp. 114-116,Sp. Proc. 1307) issued the following order:"... se autoriza a aquella (Avelina A. Magno) a firmar escrituras de venta definitiva de propiedades cubiertas por contratospara vender, firmados, en vida, por el finado Charles Newton Hodges, cada vez que el precio estipulado en cada contratoeste totalmente pagado. Se autoriza igualmente a la misma a firmar escrituras de cancelacion de hipoteca tanto debienes reales como personales cada vez que la consideracion de cada hipoteca este totalmente pagada."Cada una de dichas escrituras que se otorguen debe ser sometida para la aprobacion de este Juzgado."(p. 117, Sp. Proc. 1307).[Par 1 (c), Reply to Motion For Removal of Joe Hodges](13) On September l6, 1963 Leon P. Gellada, acting as attorney for Avelina A. Magno as Administratrix of the estate of Linnie Jane Hodges, alleges:3. — That since January, 1963, both estates of Linnie Jane Hodges and Charles Newton Hodges have been receiving infull, payments for those "contracts to sell" entered into by C. N. Hodges during his lifetime, and the purchasers have beendemanding the execution of definite deeds of sale in their favor.4. — That hereto attached are thirteen (13) copies deeds of sale executed by the Administratrix and by the co-administrator (Fernando P. Mirasol) of the estate of Linnie Jane Hodges and Charles Newton Hodges respectively, incompliance with the terms and conditions of the respective "contracts to sell" executed by the parties thereto."(14) The properties involved in the aforesaid motion of September 16, 1963 are all registered in the name of the deceasedC. N. Hodges.(15) Avelina A. Magno, it is alleged on information and belief, has been advertising in the newspaper in Iloilo thusly:For SaleTestate Estate of Linnie Jane Hodges and Charles Newton Hodges.

All Real Estate or Personal Property will be sold on First Come First Served Basis. Avelina A. Magno Administratrix(16) Avelina A. Magno, it is alleged on information and belief, has paid and still is paying sums of money to sundrypersons.(17) Joe Hodges through the undersigned attorneys manifested during the hearings before this Honorable Court onSeptember 5 and 6, 1963 that the estate of C. N. Hodges was claiming all of the assets belonging to the deceasedspouses Linnie Jane Hodges and C. N. Hodges situated in Philippines because of the aforesaid election by C. N. Hodgeswherein he claimed and took possession as sole owner of all of said assets during the administration of the estate of Linnie Jane Hodges on the ground that he was the sole devisee and legatee under her Last Will and Testament.(18) Avelina A. Magno has submitted no inventory and accounting of her administration as Administratrix of the estate of Linnie Jane Hodges and Special Administratrix of the estate of C. N. Hodges. However, from manifestations made by

Avelina A. Magno and her legal counsel, Leon P. Gellada, there is no question she will claim that at least fifty per cent

(50%) of the conjugal assets of the deceased spouses and the rents, emoluments and income therefrom belong to theHigdon family who are named in paragraphs Fourth and Fifth of the Will of Linnie Jane Hodges (p. 5, Rec. Sp. Proc.1307).WHEREFORE, premises considered, movant respectfully prays that this Honorable Court, after due hearing, order:(1) Avelina A. Magno to submit an inventory and accounting of all of the funds, properties and assets of any character belonging to the deceased Linnie Jane Hodges and C. N. Hodges which have come into her possession, with full detailsof what she has done with them;(2) Avelina A. Magno to turn over and deliver to the Administrator of the estate of C. N. Hodges all of the funds, propertiesand assets of any character remaining in her possession;(3) Pending this Honorable Court's adjudication of the aforesaid issues, Avelina A. Magno to stop, unless she first securesthe conformity of Joe Hodges (or his duly authorized representative, such as the undersigned attorneys) as the Co-administrator and attorney-in-fact of a majority of the beneficiaries of the estate of C. N. Hodges:(a) Advertising the sale and the sale of the properties of the estates:(b) Employing personnel and paying them any compensation.(4) Such other relief as this Honorable Court may deem just and equitable in the premises. (Annex "T", Petition.)

Almost a year thereafter, or on September 14, 1964, after the co-administrators Joe Hodges and Fernando P. Mirasolwere replaced by herein petitioner Philippine Commercial and Industrial Bank as sole administrator, pursuant to anagreement of all the heirs of Hodges approved by the court, and because the above motion of October 5, 1963 had notyet been heard due to the absence from the country of Atty. Gibbs, petitioner filed the following:MANIFESTATION AND MOTION, INCLUDING MOTION TO SET FOR HEARING AND RESOLVE "URGENT MOTION FOR AN ACCOUNTING AND DELIVERY TO ADMINISTRATORS OF THE ESTATE OF C. N. HODGES OF ALL THE

ASSETS OF THE CONJUGAL PARTNERSHIP OF THE DECEASED LINNIE JANE HODGES AND C. N. HODGESEXISTING AS OF MAY 23, 1957 PLUS ALL OF THE RENTS, EMOLUMENTS AND INCOME THEREFROM OF OCTOBER 5, 1963.COMES NOW Philippine Commercial and Industrial Bank (hereinafter referred to as PCIB), the administrator of the estateof C. N. Hodges, deceased, in Special Proceedings No. 1672, through its undersigned counsel, and to this HonorableCourt respectfully alleges that:

1. On October 5, 1963, Joe Hodges acting as the co-administrator of the estate of C. N. Hodges filed, through theundersigned attorneys, an "Urgent Motion For An Accounting and Delivery To Administrator of the Estate of C. N. Hodgesof all Of The Assets Of The Conjugal Partnership of The Deceased Linnie Jane Hodges and C. N. Hodges Existing as Of May, 23, 1957 Plus All Of The Rents, Emoluments and Income Therefrom" (pp. 536-542, CFI Rec. S. P. No. 1672).2. On January 24, 1964 this Honorable Court, on the basis of an amicable agreement entered into on January 23, 1964 bythe two co-administrators of the estate of C. N. Hodges and virtually all of the heirs of C. N. Hodges (p. 912, CFI Rec., S.P. No. 1672), resolved the dispute over who should act as administrator of the estate of C. N. Hodges by appointing thePCIB as administrator of the estate of C. N. Hodges (pp. 905-906, CFI Rec. S. P. No. 1672) and issuing letters of administration to the PCIB.3. On January 24, 1964 virtually all of the heirs of C. N. Hodges, Joe Hodges and Fernando P. Mirasol acting as the twoco-administrators of the estate of C. N. Hodges, Avelina A. Magno acting as the administratrix of the estate of Linnie JaneHodges, and Messrs. William Brown and Ardel Young Acting for all of the Higdon family who claim to be the sole



beneficiaries of the estate of Linnie Jane Hodges and various legal counsel representing the aforenamed parties enteredinto an amicable agreement, which was approved by this Honorable Court, wherein the parties thereto agreed that certainsums of money were to be paid in settlement of different claims against the two estates and that the assets (to the extent they existed)of both estates would be administrated jointly by the PCIB as administrator of the estate of C. N. Hodges and

Avelina A. Magno as administratrix of the estate of Linnie Jane Hodges, subject, however, to the aforesaid October 5,1963 Motion, namely, the PCIB's claim to exclusive possession and ownership of one-hundred percent (10017,) (or, in thealternative, seventy-five percent [75%] of all assets owned by C. N. Hodges or Linnie Jane Hodges situated in thePhilippines. On February 1, 1964 (pp. 934-935, CFI Rec., S. P. No. 1672) this Honorable Court amended its order of January 24, 1964 but in no way changes its recognition of the aforedescribed basic demand by the PCIB as administrator of the estate of C. N. Hodges to one hundred percent (100%) of the assets claimed by both estates.4. On February 15, 1964 the PCIB filed a "Motion to Resolve" the aforesaid Motion of October 5, 1963. This HonorableCourt set for hearing on June 11, 1964 the Motion of October 5, 1963.5. On June 11, 1964, because the undersigned Allison J. Gibbs was absent in the United States, this Honorable Courtordered the indefinite postponement of the hearing of the Motion of October 5, 1963.6. Since its appointment as administrator of the estate of C. N. Hodges the PCIB has not been able to properly carry outits duties and obligations as administrator of the estate of C. N. Hodges because of the following acts, among others, of

Avelina A. Magno and those who claim to act for her as administratrix of the estate of Linnie Jane Hodges:(a) Avelina A. Magno illegally acts as if she is in exclusive control of all of the assets in the Philippines of both estatesincluding those claimed by the estate of C. N. Hodges as evidenced in part by her locking the premises at 206-208Guanco Street, Iloilo City on August 31, 1964 and refusing to reopen same until ordered to do so by this Honorable Courton September 7, 1964.(b) Avelina A. Magno illegally acts as though she alone may decide how the assets of the estate of C.N. Hodges shouldbe administered, who the PCIB shall employ and how much they may be paid as evidenced in party by her refusal to sign

checks issued by the PCIB payable to the undersigned counsel pursuant to their fee agreement approved by thisHonorable Court in its order dated March 31, 1964.(c) Avelina A. Magno illegally gives access to and turns over possession of the records and assets of the estate of C.N.Hodges to the attorney-in-fact of the Higdon Family, Mr. James L. Sullivan, as evidenced in part by the cashing of hispersonal checks.(d) Avelina A. Magno illegally refuses to execute checks prepared by the PCIB drawn to pay expenses of the estate of C.N. Hodges as evidenced in part by the check drawn to reimburse the PCIB's advance of P48,445.50 to pay the 1964income taxes reported due and payable by the estate of C.N. Hodges.7. Under and pursuant to the orders of this Honorable Court, particularly those of January 24 and February 1, 1964, andthe mandate contained in its Letters of Administration issued on January 24, 1964 to the PCIB, it has"full authority to take possession of all the property of the deceased C. N. Hodges"and to perform all other acts necessary for the preservation of said property." (p. 914, CFI Rec., S.P. No. 1672.)8. As administrator of the estate of C. N. Hodges, the PCIB claims the right to the immediate exclusive possession and

control of all of the properties, accounts receivables, court cases, bank accounts and other assets, including thedocumentary records evidencing same, which existed in the Philippines on the date of C. N. Hodges' death, December 25, 1962, and were in his possession and registered in his name alone. The PCIB knows of no assets in the Philippinesregistered in the name of Linnie Jane Hodges, the estate of Linnie Jane Hodges, or, C. N. Hodges, Executor of the Estateof Linnie Jane Hodges on December 25, 1962. All of the assets of which the PCIB has knowledge are either registered inthe name of C. N. Hodges, alone or were derived therefrom since his death on December 25, 1962.9. The PCIB as the current administrator of the estate of C. N. Hodges, deceased, succeeded to all of the rights of thepreviously duly appointed administrators of the estate of C. N. Hodges, to wit:(a) On December 25, 1962, date of C. N. Hodges' death, this Honorable Court appointed Miss Avelina A. Magnosimultaneously as:(i) Administratrix of the estate of Linnie Jane Hodges (p. 102, CFI Rec., S.P. No. 1307) to replace the deceased C. N.Hodges who on May 28, 1957 was appointed Special Administrator (p. 13. CFI Rec. S.P. No. 1307) and on July 1, 1957Executor of the estate of Linnie Jane Hodges (p. 30, CFI Rec., S. P. No. 1307).(ii) Special Administratrix of the estate of C. N. Hodges (p. 102, CFI Rec., S.P. No. 1307).(b) On December 29, 1962 this Honorable Court appointed Harold K. Davies as co-special administrator of the estate of C.N. Hodges along with Avelina A. Magno (pp. 108-111, CFI Rec., S. P. No. 1307).(c) On January 22, 1963, with the conformity of Avelina A. Magno, Harold K. Davies resigned in favor of Joe Hodges (pp.35-36, CFI Rec., S.P. No. 1672) who thereupon was appointed on January 22, 1963 by this Honorable Court as specialco-administrator of the estate of C.N. Hodges (pp. 38-40 & 43, CFI Rec. S.P. No. 1672) along with Miss Magno who atthat time was still acting as special co-administratrix of the estate of C. N. Hodges.(d) On February 22, 1963, without objection on the part of Avelina A. Magno, this Honorable Court appointed Joe Hodgesand Fernando P. Mirasol as co-administrators of the estate of C.N. Hodges (pp. 76-78, 81 & 85, CFI Rec., S.P. No. 1672).10. Miss Avelina A. Magno, pursuant to the orders of this Honorable Court of December 25, 1962, took possession of allPhilippine Assets now claimed by the two estates. Legally, Miss Magno could take possession of the assets registered inthe name of C. N. Hodges alone only in her capacity as Special Administratrix of the Estate of C.N. Hodges. With theappointment by this Honorable Court on February 22, 1963 of Joe Hodges and Fernando P. Mirasol as the co-administrators of the estate of C.N. Hodges, they legally were entitled to take over from Miss Magno the full and exclusive

possession of all of the assets of the estate of C.N. Hodges. With the appointment on January 24, 1964 of the PCIB asthe sole administrator of the estate of C.N. Hodges in substitution of Joe Hodges and Fernando P. Mirasol, the PCIBlegally became the only party entitled to the sole and exclusive possession of all of the assets of the estate of C. N.Hodges.11. The PCIB's predecessors submitted their accounting and this Honorable Court approved same, to wit:(a) The accounting of Harold K. Davies dated January 18, 1963 (pp. 16-33, CFI Rec. S.P. No. 1672); which shows or itsface the:(i) Conformity of Avelina A. Magno acting as "Administratrix of the Estate of Linnie Jane Hodges and Special

Administratrix of the Estate of C. N. Hodges";(ii) Conformity of Leslie Echols, a Texas lawyer acting for the heirs of C.N. Hodges; and(iii) Conformity of William Brown, a Texas lawyer acting for the Higdon family who claim to be the only heirs of Linnie JaneHodges (pp. 18, 25-33, CFI Rec., S. P. No. 1672).



Note: This accounting was approved by this Honorable Court on January 22, 1963 (p. 34, CFI Rec., S. P. No. 1672).(b) The accounting of Joe Hodges and Fernando P. Mirasol as of January 23, 1964, filed February 24, 1964 (pp. 990-1000, CFI Rec. S.P. No. 1672 and pp. 1806-1848, CFI Rec. S.P. No. 1307).Note: This accounting was approved by this Honorable Court on March 3, 1964.(c) The PCIB and its undersigned lawyers are aware of no report or accounting submitted by Avelina A. Magno of her actsas administratrix of the estate of Linnie Jane Hodges or special administratrix of the estate of C.N. Hodges, unless it is theaccounting of Harold K. Davies as special co-administrator of the estate of C.N. Hodges dated January 18, 1963 to whichMiss Magno manifested her conformity (supra).12. In the aforesaid agreement of January 24, 1964, Miss Avelina A. Magno agreed to receive P10,000.00"for her services as administratrix of the estate of Linnie Jane Hodges"and in addition she agreed to be employed, starting February 1, 1964, at"a monthly salary of P500.00 for her services as an employee of both estates."24 ems.13. Under the aforesaid agreement of January 24, 1964 and the orders of this Honorable Court of same date, the PCIB asadministrator of the estate of C. N. Hodges is entitled to the exclusive possession of all records, properties and assets inthe name of C. N. Hodges as of the date of his death on December 25, 1962 which were in the possession of thedeceased C. N. Hodges on that date and which then passed to the possession of Miss Magno in her capacity as SpecialCo-Administratrix of the estate of C. N. Hodges or the possession of Joe Hodges or Fernando P. Mirasol as co-administrators of the estate of C. N. Hodges.14. Because of Miss Magno's refusal to comply with the reasonable request of PCIB concerning the assets of the estateof C. N. Hodges, the PCIB dismissed Miss Magno as an employee of the estate of C. N. Hodges effective August 31,1964. On September 1, 1964 Miss Magno locked the premises at 206-208 Guanco Street and denied the PCIB accessthereto. Upon the Urgent Motion of the PCIB dated September 3, 1964, this Honorable Court on September 7, 1964

ordered Miss Magno to reopen the aforesaid premises at 206-208 Guanco Street and permit the PCIB access thereto nolater than September 8, 1964.15. The PCIB pursuant to the aforesaid orders of this Honorable Court is again in physical possession of all of the assetsof the estate of C. N. Hodges. However, the PCIB is not in exclusive control of the aforesaid records, properties andassets because Miss Magno continues to assert the claims hereinabove outlined in paragraph 6, continues to use her own locks to the doors of the aforesaid premises at 206-208 Guanco Street, Iloilo City and continues to deny the PCIB itsright to know the combinations to the doors of the vault and safes situated within the premises at 206-208 Guanco Streetdespite the fact that said combinations were known to only C. N. Hodges during his lifetime.16. The Philippine estate and inheritance taxes assessed the estate of Linnie Jane Hodges were assessed and paid onthe basis that C. N. Hodges is the sole beneficiary of the assets of the estate of Linnie Jane Hodges situated in thePhilippines. Avelina A. Magno and her legal counsel at no time have questioned the validity of the aforesaid assessmentand the payment of the corresponding Philippine death taxes.17. Nothing further remains to be done in the estate of Linnie Jane Hodges except to resolve the aforesaid Motion of

October 5, 1963 and grant the PCIB the exclusive possession and control of all of the records, properties and assets of the estate of C. N. Hodges.18. Such assets as may have existed of the estate of Linnie Jane Hodges were ordered by this Honorable Court in specialProceedings No. 1307 to be turned over and delivered to C. N. Hodges alone. He in fact took possession of them beforehis death and asserted and exercised the right of exclusive ownership over the said assets as the sole beneficiary of theestate of Linnie Jane Hodges.WHEREFORE, premises considered, the PCIB respectfully petitions that this Honorable court:(1) Set the Motion of October 5, 1963 for hearing at the earliest possible date with notice to all interested parties;(2) Order Avelina A. Magno to submit an inventory and accounting as Administratrix of the Estate of Linnie Jane Hodgesand Co-Administratrix of the Estate of C. N. Hodges of all of the funds, properties and assets of any character belongingto the deceased Linnie Jane Hodges and C. N. Hodges which have come into her possession, with full details of what shehas done with them;(3) Order Avelina A. Magno to turn over and deliver to the PCIB as administrator of the estate of C. N. Hodges all of thefunds, properties and assets of any character remaining in her possession;(4) Pending this Honorable Court's adjudication of the aforesaid issues, order Avelina A. Magno and her representativesto stop interferring with the administration of the estate of C. N. Hodges by the PCIB and its duly authorizedrepresentatives;(5) Enjoin Avelina A. Magno from working in the premises at 206-208 Guanco Street, Iloilo City as an employee of theestate of C. N. Hodges and approve her dismissal as such by the PCIB effective August 31, 1964;(6) Enjoin James L. Sullivan, Attorneys Manglapus and Quimpo and others allegedly representing Miss Magno fromentering the premises at 206-208 Guanco Street, Iloilo City or any other properties of C. N. Hodges without the expresspermission of the PCIB;(7) Order such other relief as this Honorable Court finds just and equitable in the premises. (Annex "U" Petition.)On January 8, 1965, petitioner also filed a motion for "Official Declaration of Heirs of Linnie Jane Hodges Estate" alleging:COMES NOW Philippine Commercial and Industrial Bank (hereinafter referred to as PCIB), as administrator of the estateof the late C. N. Hodges, through the undersigned counsel, and to this Honorable Court respectfully alleges that:1. During their marriage, spouses Charles Newton Hodges and Linnie Jane Hodges, American citizens originally from the

State of Texas, U.S.A., acquired and accumulated considerable assets and properties in the Philippines and in the Statesof Texas and Oklahoma, United States of America. All said properties constituted their conjugal estate.2. Although Texas was the domicile of origin of the Hodges spouses, this Honorable Court, in its orders dated March 31and December 12, 1964 (CFI Record, Sp. Proc. No. 1307, pp. ----; Sp. Proc. No. 1672, p. ----), conclusively found andcategorically ruled that said spouses had lived and worked for more than 50 years in Iloilo City and had, therefore,acquired a domicile of choice in said city, which they retained until the time of their respective deaths.3. On November 22, 1952, Linnie Jane Hodges executed in the City of Iloilo her Last Will and Testament, a copy of whichis hereto attached as Annex "A" . The bequests in said will pertinent to the present issue are the second, third ,and fourth provisions, which we quote in full hereunder.SECOND: I give, devise and bequeath all of the rest, residue and remainder of my estate, both personal and real,wherever situated, or located, to my husband, Charles Newton Hodges, to have and to hold unto him, my said husbandduring his natural lifetime.



THIRD: I desire, direct and provide that my husband, Charles Newton Hodges, shall have the right to manage, control,use and enjoy said estate during his lifetime, and he is hereby given the right to make any changes in the physicalproperties of said estate by sale of any part thereof which he think best, and the purchase of any other or additionalproperty as he may think best; to execute conveyances with or without general or special warranty, conveying in feesimple or for any other term or time, any property which he may deem proper to dispose of; to lease any of the realproperty for oil, gas and/or other minerals, and all such deeds or leases shall pass the absolute fee simple title to theinterest so conveyed in such property as he may elect to sell. All rents, emoluments and income from said estate shallbelong to him, and he is further authorized to use any part of the principal of said estate as he may need or desire. It isprovided herein, however, that he shall not sell or otherwise dispose of any of the improved property now owned by uslocated at, in or near the City of Lubbock, Texas, but he shall have the full right to lease, manage and enjoy the sameduring his lifetime, as above provided. He shall have the right to sub-divide any farmland and sell lots therein, and maysell unimproved town lots.FOURTH: At the death of my said husband, Charles Newton Hodges, I give, devise and bequeath all of the rest, residueand remainder of my estate both real and personal, wherever situated or located, to be equally divided among mybrothers and sisters, share and share alike, namely:"Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie Rascoe, Era Boman and Nimray Higdon."4. On November 14, 1953, C. N. Hodges executed in the City of Iloilo his Last Will and Testament, a copy of which ishereto attached as Annex "B ". In said Will, C. N. Hodges designated his wife, Linnie Jane Hodges, as his beneficiaryusing the identical language she used in the second and third provisos of her Will, supra.5. On May 23, 1957 Linnie Jane Hodges died in Iloilo City, predeceasing her husband by more than five (5) years. At thetime of her death, she had no forced or compulsory heir, except her husband, C. N. Hodges. She was survived also byvarious brothers and sisters mentioned in her Will (supra), which, for convenience, we shall refer to as the HIGDONS.6. On June 28, 1957, this Honorable Court admitted to probate the Last Will and Testament of the deceased Linnie Jane

Hodges (Annex "A"), and appointed C. N. Hodges as executor of her estate without bond. (CFI Record, Sp. Proc. No.1307, pp. 24-25). On July 1, 1957, this Honorable Court issued letters testamentary to C. N. Hodges in the estate of Linnie Jane Hodges. (CFI Record, Sp. Proc. No. 1307, p. 30.)7. The Will of Linnie Jane Hodges, with respect to the order of succession, the amount of successional rights, and theintrinsic of its testamentary provisions, should be governed by Philippine laws because:(a) The testatrix, Linnie Jane Hodges, intended Philippine laws to govern her Will;(b) Article 16 of the Civil Code provides that "the national law of the person whose succession is under consideration,whatever may be the nature of the property and regardless of the country wherein said property may be found", shallprevail. However, the Conflict of Law of Texas, which is the "national law" of the testatrix, Linnie Jane Hodges, providethat the domiciliary law (Philippine law — see paragraph 2, supra) should govern the testamentary dispositions andsuccessional rights over movables (personal properties), and the law of the situs of the property (also Philippine law as toproperties located in the Philippines) with regards immovable (real properties). Thus applying the "Renvoi Doctrine", asapproved and applied by our Supreme Court in the case of "In The Matter Of The Testate Estate of Eduard E.

Christensen", G.R. No.L-16749, promulgated January 31, 1963, Philippine law should apply to the Will of Linnie Jane Hodges and to thesuccessional rights to her estate insofar as her movable andimmovable assets in the Philippines are concerned. We shallnot, at this stage, discuss what law should govern the assets of Linnie Jane Hodges located in Oklahoma and Texas,because the only assets in issue in this motion are those within the jurisdiction of this motion Court in the two above-captioned Special Proceedings.8. Under Philippine and Texas law, the conjugal or community estate of spouses shall, upon dissolution, be dividedequally between them. Thus, upon the death of Linnie Jane Hodges on May 23, 1957, one-half (1/2) of the entirety of theassets of the Hodges spouses constituting their conjugal estate pertained automatically to Charles Newton Hodges, not by way of inheritance, but in his own right as partner in the conjugal partnership . The other one-half (1/2) portion of theconjugal estate constituted the estate of Linnie Jane Hodges. This is the only portion of the conjugal estate capable of inheritance by her heirs.9. This one-half (1/2) portion of the conjugal assets pertaining to Linnie Jane Hodges cannot, under a clear and specificprovision of her Will, be enhanced or increased by income, earnings, rents, or emoluments accruing after her death onMay 23, 1957. Linnie Jane Hodges' Will provides that "all rents, emoluments and income from said estate shall belong tohim (C. N. Hodges) and he is further authorized to use any part of the principal of said estate as he may need or desire ."(Paragraph 3, Annex "A".) Thus, by specific provision of Linnie Jane Hodges' Will, "all rents, emoluments and income"must be credited to the one-half (1/2) portion of the conjugal estate pertaining to C. N. Hodges. Clearly, therefore, theestate of Linnie Jane Hodges, capable of inheritance by her heirs, consisted exclusively of no more than one-half (1/2) of the conjugal estate, computed as of the time of her death on May 23, 1957 .10. Articles 900, 995 and 1001 of the New Civil Code provide that the surviving spouse of a deceased leaving noascendants or descendants is entitled, as a matter of right and by way of irrevocable legitime, to at least one-half (1/2) of the estate of the deceased, and no testamentary disposition by the deceased can legally and validly affect this right of thesurviving spouse. In fact, her husband is entitled to said one-half (1/2) portion of her estate by way of legitime. (Article886, Civil Code.) Clearly, therefore, immediately upon the death of Linnie Jane Hodges, C. N. Hodges was the owner of atleast three-fourths (3/4) or seventy-five (75%) percent of all of the conjugal assets of the spouses, (1/2 or 50% by way of conjugal partnership share and 1/4 or 25% by way of inheritance and legitime) plus all "rents, emoluments and income"

accruing to said conjugal estate from the moment of Linnie Jane Hodges' death (see paragraph 9, supra).11. The late Linnie Jane Hodges designated her husband C.N. Hodges as her sole and exclusive heir with full authority todo what he pleased, as exclusive heir and owner of all the assets constituting her estate, except only with regards certainproperties "owned by us, located at, in or near the City of Lubbock, Texas". Thus, even without relying on our laws of succession and legitime, which we have cited above , C. N. Hodges, by specific testamentary designation of his wife, wasentitled to the entirely to his wife's estate in the Philippines.12. Article 777 of the New Civil Code provides that "the rights of the successor are transmitted from the death of thedecedent". Thus, title to the estate of Linnie Jane Hodges was transmitted to C. N. Hodges immediately upon her deathon May 23, 1957. For the convenience of this Honorable Court, we attached hereto as Annex "C" a graph of how theconjugal estate of the spouses Hodges should be divided in accordance with Philippine law and the Will of Linnie JaneHodges.



13. In his capacity as sole heir and successor to the estate of Linnie Jane Hodges as above-stated, C. N. Hodges, shortlyafter the death of Linnie Jane Hodges, appropriated to himself the entirety of her estate. He operated all the assets,engaged in business and performed all acts in connection with the entirety of the conjugal estate, in his own name alone,

just as he had been operating, engaging and doing while the late Linnie Jane Hodges was still alive. Upon his death onDecember 25, 1962, therefore, all said conjugal assets were in his sole possession and control, and registered in hisname alone, not as executor, but as exclusive owner of all said assets.14. All these acts of C. N. Hodges were authorized and sanctioned expressly and impliedly by various orders of thisHonorable Court, as follows:(a) In an Order dated May 27, 1957, this Honorable Court ruled that C. N. Hodges "is allowed or authorized to continuethe business in which he was engaged, and to perform acts which he had been doing while the deceased was living." (CFIRecord, Sp. Proc. No. 1307, p. 11.)(b) On December 14, 1957, this Honorable Court, on the basis of the following fact, alleged in the verified Motion datedDecember 11, 1957 filed by Leon P. Gellada as attorney for the executor C. N. Hodges:That herein Executor, (is) not only part owner of the properties left as conjugal, but also, the successor to all theproperties left by the deceased Linnie Jane Hodges.' (CFI Record, Sp. Proc. No. 1307, p. 44; emphasis supplied.)issued the following order:"As prayed for by Attorney Gellada, counsel for the Executor, for the reasons stated in his motion dated December 11,1957, which the Court considers well taken , all the sales, conveyances, leases and mortgages of all the properties left bythe deceased Linnie Jane Hodges executed by the Executor, Charles Newton Hodges are hereby APPROVED. The saidExecutor is further authorized to execute subsequent sales, conveyances, leases and mortgages of the properties left bythe said deceased Linnie Jane Hodges in consonance with the wishes contained in the last will and testament of thelatter ." (CFI Record. Sp. Proc. No. 1307, p. 46; emphasis supplied.)24 ems

(c) On April 21, 1959, this Honorable Court approved the verified inventory and accounting submitted by C. N. Hodgesthrough his counsel Leon P. Gellada on April 14, 1959 wherein he alleged among other things,"That no person interested in the Philippines of the time and place of examining the herein account, be given notice, asherein executor is the only devisee or legatee of the deceased, in accordance with the last will and testament already

probated by the Honorable Court ." (CFI Record, Sp. Proc. No. 1307, pp. 77-78; emphasis supplied.)(d) On July 20, 1960, this Honorable Court approved the verified "Annual Statement of Account" submitted by C. N.Hodges through his counsel Leon P. Gellada on July 21, 1960 wherein he alleged, among other things."That no person interested in the Philippines of the time and place of examining the herein account, be given notice asherein executor is the only devisee or legatee of the deceased Linnie Jane Hodges , in accordance with the last will andtestament ofthe deceased, already probated by this Honorable Court." (CFI Record, Sp. Proc. No. 1307, pp. 81-82;emphasis supplied.)(e) On May 2, 1961, this Honorable Court approved the verified "Annual Statement of Account By The Executor For theYear 1960" submitted through Leon P. Gellada on April 20, 1961 wherein he alleged:

"That no person interested in the Philippines be given notice, ofthe time and place of examining the herein account,as herein executor is the only devisee or legatee of the deceased Linnie Jane Hodges, in accordance with the last will and testament ofthe deceased, already probated by this Honorable Court ." (CFI Record, Sp. Proc. No. 1307, pp. 90-91;emphasis supplied.)15. Since C. N. Hodges was the sole and exclusive heir of Linnie Jane Hodges, not only by law, but in accordance withthe dispositions of her will, there was, in fact, no need to liquidate the conjugal estate of the spouses. The entirely of saidconjugal estate pertained to him exclusively, therefore this Honorable Court sanctioned and authorized, as above-stated,C. N. Hodges to manage, operate and control all the conjugal assets as owner.16. By expressly authorizing C. N. Hodges to act as he did in connection with the estate of his wife, this Honorable Courthas (1) declared C. N. Hodges as the sole heir of the estate of Linnie Jane Hodges, and (2) delivered and distributed her estate to C. N. Hodges as sole heir in accordance with the terms and conditions of her Will. Thus, although the "estate of Linnie Jane Hodges" still exists as a legal and juridical personality, it had no assets or properties located in the Philippinesregistered in its name whatsoever at the time of the death of C. N. Hodges on December 25, 1962.17. The Will of Linnie Jane Hodges (Annex "A"), fourth paragraph, provides as follows:"At the death of my said husband, Charles Newton Hodges, I give, devise and bequeath all of the rest, residue andremainder of my estate both real and personal, wherever situated or located, to be equally divided among my brothersand sisters, share and share alike, namely:"Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie Rascoe, Era Boman and Nimray Higdon."Because of the facts hereinabove set out there is no "rest, residue and remainder", at least to the extent of the Philippineassets, which remains to vest in the HIGDONS, assuming this proviso in Linnie Jane Hodges' Will is valid and bindingagainst the estate of C. N. Hodges.18. Any claims by the HIGDONS under the above-quoted provision of Linnie Jane Hodges' Will is without merit becausesaid provision is void and invalid at least as to the Philippine assets. It should not, in anyway, affect the rights of the estateof C. N. Hodges or his heirs to the properties, which C. N. Hodges acquired by way of inheritance from his wife LinnieJane Hodges upon her death.(a) In spite of the above-mentioned provision in the Will of Linnie Jane Hodges, C. N. Hodges acquired, not merely ausufructuary right, but absolute title and ownership to her estate. In a recent case involving a very similar testamentary

provision, the Supreme Court held that the heir first designated acquired full ownership of the property bequeathed by thewill, not mere usufructuary rights. (Consolacion Florentino de Crisologo, et al., vs. Manuel Singson, G. R. No. L-13876,February 28, 1962.)(b) Article 864, 872 and 886 of the New Civil Code clearly provide that no charge, condition or substitution whatsoever upon the legitime can be imposed by a testator. Thus, under the provisions of Articles 900, 995 and 1001 of the New CivilCode, the legitime of a surviving spouse is 1/2 of the estate of the deceased spouse. Consequently, the above-mentionedprovision in the Will of Linnie Jane Hodges is clearly invalid insofar as the legitime of C. N. Hodges was concerned, whichconsisted of 1/2 of the 1/2 portion of the conjugal estate, or 1/4 of the entire conjugal estate of the deceased.(c) There are generally only two kinds of substitution provided for and authorized by our Civil Code (Articles 857-870),namely, (1) simple or common substitution, sometimes referred to as vulgar substitution (Article 859), and (2)fideicommissary substitution (Article 863). All other substitutions are merely variations of these. The substitution providedfor by paragraph four of the Will of Linnie Jane Hodges is not fideicommissary substitution, because there is clearly no



obligation on the part of C. N. Hodges as the first heir designated, to preserve the properties for the substitute heirs.(Consolacion Florentino de Crisologo et al. vs. Manuel Singson, G. R. No.L-13876.) At most, it is a vulgar or simple substitution. However, in order that a vulgar or simple substitution can be valid,three alternative conditions must be present, namely, that the first designated heir (1) should die before the testator; or (2)should not wish to accept the inheritance; or (3) should be incapacitated to do so. None of these conditions apply to C. N.Hodges, and, therefore, the substitution provided for by the above-quoted provision of the Will is not authorized by theCode, and, therefore, it is void. Manresa, commenting on these kisses of substitution, meaningfully stated that: "... cuandoel testador instituyeun primer heredero, y por fallecimiento de este nombra otro u otros, ha de entenderse que estassegundas designaciones solo han de llegar a tener efectividad en el caso de que el primer instituido muera antes que eltestador, fuera o no esta su verdadera intencion. ...". (6 Manresa, 7 a ed., pag. 175.) In other words, when another heir isdesignated to inherit upon the death of a first heir, the second designation can have effect only in case the first instituted heir dies before the testator, whether or not that was the true intention of said testator . Since C. N. Hodges did not diebefore Linnie Jane Hodges, the provision for substitution contained in Linnie Jane Hodges' Willis void.(d) In view of the invalidity of the provision for substitution in the Will, C. N. Hodges' inheritance to the entirety of the LinnieJane Hodges estate is irrevocable and final.19. Be that as it may, at the time of C. N. Hodges' death, the entirety of the conjugal estate appeared and was registeredin him exclusively as owner. Thus, the presumption is that all said assets constituted his estate. Therefore —(a) If the HIGDONS wish to enforce their dubious rights as substituted heirs to 1/4 of the conjugal estate (the other 1/4 iscovered by the legitime of C. N. Hodges which can not be affected by any testamentary disposition), their remedy, if any,is to file their claim against the estate of C. N. Hodges, which should be entitled at the present time to full custody andcontrol of all the conjugal estate of the spouses.(b) The present proceedings, in which two estates exist under separate administration, where the administratrix of theLinnie Jane Hodges estate exercises an officious right to object and intervene in matters affecting exclusively the C. N.

Hodges estate, is anomalous.WHEREFORE, it is most respectfully prayed that after trial and reception of evidence, this Honorable Court declare:1. That the estate of Linnie Jane Hodges was and is composed exclusively of one-half (1/2) share in the conjugal estate of the spouses Hodges, computed as of the date of her death on May 23, 1957;2. That the other half of the conjugal estate pertained exclusively to C. N. Hodges as his share as partner in the conjugalpartnership;3. That all "rents, emoluments and income" of the conjugal estate accruing after Linnie Jane Hodges' death pertains to C.N. Hodges;4. That C. N. Hodges was the sole and exclusive heir of the estate of Linnie Jane Hodges;5. That, therefore, the entire conjugal estate of the spouses located in the Philippines, plus all the "rents, emoluments andincome" above-mentioned, now constitutes the estate of C. N. Hodges, capable of distribution to his heirs upontermination of Special Proceedings No. 1672;6. That PCIB, as administrator of the estate of C. N. Hodges, is entitled to full and exclusive custody, control and

management of all said properties; and7. That Avelina A. Magno, as administratrix of the estate of Linnie Jane Hodges, as well as the HIGDONS, has no right tointervene or participate in the administration of the C. N. Hodges estate.PCIB further prays for such and other relief as may be deemed just and equitable in the premises."(Record, pp. 265-277)Before all of these motions of petitioner could be resolved, however, on December 21, 1965, private respondent Magnofiled her own "Motion for the Official Declaration of Heirs of the Estate of Linnie Jane Hodges" as follows:COMES NOW the Administratrix of the Estate of Linnie Jane Hodges and, through undersigned counsel, unto thisHonorable Court most respectfully states and manifests:1. That the spouses Charles Newton Hodges and Linnie Jane Hodges were American citizens who died at the City of Iloilo after having amassed and accumulated extensive properties in the Philippines;2. That on November 22, 1952, Linnie Jane Hodges executed a last will and testament (the original of this will now formspart of the records of these proceedings as Exhibit "C" and appears as Sp. Proc. No. 1307, Folio I, pp. 17-18);3. That on May 23, 1957, Linnie Jane Hodges died at the City of Iloilo at the time survived by her husband, CharlesNewton Hodges, and several relatives named in her last will and testament;4. That on June 28, 1957, a petition therefor having been priorly filed and duly heard, this Honorable Court issued anorder admitting to probate the last will and testament of Linnie Jane Hodges (Sp. Proc. No. 1307, Folio I, pp. 24-25, 26-28);5. That the required notice to creditors and to all others who may have any claims against the decedent, Linnie JaneHodges has already been printed, published and posted (Sp. Proc. No. 1307, Folio I. pp. 34-40) and the reglamentaryperiod for filing such claims has long ago lapsed and expired without any claims having been asserted against the estateof Linnie Jane Hodges, approved by the Administrator/Administratrix of the said estate, nor ratified by this HonorableCourt;6. That the last will and testament of Linnie Jane Hodges already admitted to probate contains an institution of heirs in thefollowing words:"SECOND: I give, devise and bequeath all of the rest, residue and remainder of my estate, both personal and real,wherever situated or located, to my beloved husband, Charles Newton Hodges to have and to hold unto him, my said

husband, during his natural lifetime.THIRD: I desire, direct and provide that my husband, Charles Newton Hodges, shall have the right to manage, control,use and enjoy said estate during his lifetime, and, he is hereby given the right to make any changes in the physicalproperties of said estate, by sale of any part thereof which he may think best, and the purchase of any other or additionalproperty as he may think best; to execute conveyances with or without general or special warranty, conveying in feesimple or for any other term or time, any property which he may deem proper to dispose of; to lease any of the realproperty for oil, gas and/or other minerals, and all such deeds or leases shall pass the absolute fee simple title to theinterest so conveyed in such property as he elect to sell. All rents, emoluments and income from said estate shall belongto him, and he is further authorized to use any part of the principal of said estate as he may need or desire. It is providedherein, however, that he shall not sell or otherwise dispose of any of the improved property now owned by us located at,in or near the City of Lubbock Texas, but he shall have the full right to lease, manage and enjoy the same during his



lifetime, above provided. He shall have the right to subdivide any farm land and sell lots therein, and may sell unimprovedtown lots.FOURTH: At the death of my said husband, Charles Newton Hodges, I give, devise and bequeath all of the rest, residueand remainder of my estate, both real and personal, wherever situated or located, to be equally divided among mybrothers and sisters, share and share alike, namely:Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie Rascoe, Era Boman and Nimroy Higdon.FIFTH: In case of the death of any of my brothers and/or sisters named in item Fourth, above, prior to the death of myhusband, Charles Newton Hodges, then it is my will and bequest that the heirs of such deceased brother or sister shalltake jointly the share which would have gone to such brother or sister had she or he survived."7. That under the provisions of the last will and testament already above-quoted, Linnie Jane Hodges gave a life-estate or a usufruct over all her estate to her husband, Charles Newton Hodges, and a vested remainder-estate or the naked titleover the same estate to her relatives named therein;8. That after the death of Linnie Jane Hodges and after the admission to probate of her last will and testament, but duringthe lifetime of Charles Newton Hodges, the said Charles Newton Hodges with full and complete knowledge of the life-estate or usufruct conferred upon him by the will since he was then acting as Administrator of the estate and later asExecutor of the will of Linnie Jane Hodges, unequivocably and clearly through oral and written declarations and swornpublic statements, renounced, disclaimed and repudiated his life-estate and usufruct over the estate of Linnie JaneHodges;9. That, accordingly, the only heirs left to receive the estate of Linnie Jane Hodges pursuant to her last will and testament,are her named brothers and sisters, or their heirs, to wit: Esta Higdon, Emma Howell, Leonard Higdon, Aline Higdon andDavid Higdon, the latter two being the wife and son respectively of the deceased Roy Higdon, Sadie Rascoe Era Bomanand Nimroy Higdon, all of legal ages, American citizens, with residence at the State of Texas, United States of America;10. That at the time of the death of Linnie Jane Hodges on May 23, 1957, she was the co-owner (together with her

husband Charles Newton Hodges) of an undivided one-half interest in their conjugal properties existing as of that date,May 23, 1957, which properties are now being administered sometimes jointly and sometimes separately by the

Administratrix of the estate of Linnie Jane Hodges and/or the Administrator of the estate of C. N. Hodges but all of whichare under the control and supervision of this Honorable Court;11. That because there was no separation or segregation of the interests of husband and wife in the combined conjugalestate, as there has been no such separation or segregation up to the present, both interests have continually earnedexactly the same amount of "rents, emoluments and income", the entire estate having been continually devoted to thebusiness of the spouses as if they were alive;12. That the one-half interest of Linnie Jane Hodges in the combined conjugal estate was earning "rents, emoluments andincome" until her death on May 23, 1957, when it ceased to be saddled with any more charges or expenditures which arepurely personal to her in nature, and her estate kept on earning such "rents, emoluments and income" by virtue of their having been expressly renounced, disclaimed and repudiated by Charles Newton Hodges to whom they were bequeathedfor life under the last will and testament of Linnie Jane Hodges;

13. That, on the other hand, the one-half interest of Charles Newton Hodges in the combined conjugal estate existing asof May 23, 1957, while it may have earned exactly the same amount of "rents, emoluments and income" as that of theshare pertaining to Linnie Jane Hodges, continued to be burdened by charges, expenditures, and other dispositions whichare purely personal to him in nature, until the death of Charles Newton Hodges himself on December 25, 1962;14. That of all the assets of the combined conjugal estate of Linnie Jane Hodges and Charles Newton Hodges as theyexist today, the estate of Linnie Jane Hodges is clearly entitled to a portion more than fifty percent (50%) as compared tothe portion to which the estate of Charles Newton Hodges may be entitled, which portions can be exactly determined bythe following manner:a. An inventory must be made of the assets of the combined conjugal estate as they existed on the death of Linnie JaneHodges on May 23, 1957 — one-half of these assets belong to the estate of Linnie Jane Hodges;b. An accounting must be made of the "rents, emoluments and income" of all these assets — again one-half of thesebelong to the estate of Linnie Jane Hodges;c. Adjustments must be made, after making a deduction of charges, disbursements and other dispositions made byCharles Newton Hodges personally and for his own personal account from May 23, 1957 up to December 25, 1962, aswell as other charges, disbursements and other dispositions made for him and in his behalf since December 25, 1962 upto the present;15. That there remains no other matter for disposition now insofar as the estate of Linnie Jane Hodges is concerned but tocomplete the liquidation of her estate, segregate them from the conjugal estate, and distribute them to her heirs pursuantto her last will and testament.WHEREFORE, premises considered, it is most respectfully moved and prayed that this Honorable Court, after a hearingon the factual matters raised by this motion, issue an order:a. Declaring the following persons, to wit: Esta Higdon, Emma Howell, Leonard Higdon, Aline Higdon, David Higdon,Sadie Rascoe, Era Boman and Nimroy Higdon, as the sole heirs under the last will and testament of Linnie Jane Hodgesand as the only persons entitled to her estate;b. Determining the exact value of the estate of Linnie Jane Hodges in accordance with the system enunciated inparagraph 14 of this motion;c. After such determination ordering its segregation from the combined conjugal estate and its delivery to the

Administratrix of the estate of Linnie Jane Hodges for distribution to the heirs to whom they properly belong and appertain.(Green Record on Appeal, pp. 382-391)whereupon, instead of further pressing on its motion of January 8, 1965 aforequoted, as it had been doing before,petitioner withdrew the said motion and in addition to opposing the above motion of respondent Magno, filed a motion on

April 22, 1966 alleging in part that:1. That it has received from the counsel for the administratrix of the supposed estate of Linnie Jane Hodges a notice to sether "Motion for Official Declaration of Heirs of the Estate of Linnie Jane Hodges";2. That before the aforesaid motion could be heard, there are matters pending before this Honorable Court, such as:a. The examination already ordered by this Honorable Court of documents relating to the allegation of Avelina Magno thatCharles Newton Hodges "through ... written declarations and sworn public statements, renounced, disclaimed andrepudiated life-estate and usufruct over the estate of Linnie Jane Hodges';



b. That "Urgent Motion for An Accounting and Delivery to the Estate of C. N. Hodges of All the Assets of the ConjugalPartnership of the Deceased Linnie Jane Hodges and C. N. Hodges Existing as of May 23, 1957 Plus All the Rents,Emoluments and Income Therefrom";c. Various motions to resolve the aforesaid motion;d. Manifestation of September 14, 1964, detailing acts of interference of Avelina Magno under color of title asadministratrix of the Estate of Linnie Jane Hodges;which are all prejudicial, and which involve no issues of fact, all facts involved therein being matters of record, andtherefore require only the resolution of questions of law;3. That whatever claims any alleged heirs or other persons may have could be very easily threshed out in the TestateEstate of Charles Newton Hodges;4. That the maintenance of two separate estate proceedings and two administrators only results in confusion and isunduly burdensome upon the Testate Estate of Charles Newton Hodges, particularly because the bond filed by AvelinaMagno is grossly insufficient to answer for the funds and property which she has inofficiously collected and held , as wellas those which she continues to inofficiously collect and hold ;5. That it is a matter of record that such state of affairs affects and inconveniences not only the estate but also third-parties dealing with it;" (Annex "V", Petition.)and then, after further reminding the court, by quoting them, of the relevant allegations of its earlier motion of September 14, 1964, Annex U, prayed that:1. Immediately order Avelina Magno to account for and deliver to the administrator of the Estate of C. N. Hodges all theassets of the conjugal partnership of the deceased Linnie Jane Hodges and C. N. Hodges, plus all the rents, emolumentsand income therefrom;2. Pending the consideration of this motion, immediately order Avelina Magno to turn over all her collections to theadministrator Philippine Commercial & Industrial Bank;

3. Declare the Testate Estate of Linnie Jane Hodges (Sp. Proc. No. 1307) closed;4. Defer the hearing and consideration of the motion for declaration of heirs in the Testate Estate of Linnie Jane Hodgesuntil the matters hereinabove set forth are resolved.(Prayer, Annex "V" of Petition.)On October 12, 1966, as already indicated at the outset of this opinion, the respondent court denied the foregoing motion,holding thus:O R D E ROn record is a motion (Vol. X, Sp. 1672, pp. 4379-4390) dated April 22, 1966 of administrator PCIB praying that (1)Immediately order Avelina Magno to account for and deliver to the administrator of the estate of C. N. Hodges all assets of the conjugal partnership of the deceased Linnie Jane Hodges and C. N. Hodges, plus all the rents, emoluments andincome therefrom; (2) Pending the consideration of this motion, immediately order Avelina Magno to turn over all her collections to the administrator PCIB; (3) Declare the Testate Estate of Linnie Jane Hodges (Sp. Proc. No. 1307) closed;and (4) Defer the hearing and consideration of the motion for declaration of heirs in the Testate Estate of Linnie Jane

Hodges until the matters hereinabove set forth are resolved.This motion is predicated on the fact that there are matters pending before this court such as (a) the examination alreadyordered by this Honorable Court of documents relating to the allegation of Avelina Magno that Charles Newton Hodgesthru written declaration and sworn public statements renounced, disclaimed and repudiated his life-estate and usufructover the estate of Linnie Jane Hodges (b) the urgent motion for accounting and delivery to the estate of C. N. Hodges of all the assets of the conjugal partnership of the deceased Linnie Jane Hodges and C. N. Hodges existing as of May 23,1957 plus all the rents, emoluments and income therefrom; (c) various motions to resolve the aforesaid motion; and (d)manifestation of September 14, 1964, detailing acts of interference of Avelina Magno under color of title as administratrixof the estate of Linnie Jane Hodges.These matters, according to the instant motion, are all pre-judicial involving no issues of facts and only require theresolution of question of law; that in the motion of October 5, 1963 it is alleged that in a motion dated December 11, 1957filed by Atty. Leon Gellada as attorney for the executor C. N. Hodges, the said executor C. N. Hodges is not only partowner of the properties left as conjugal but also the successor to all the properties left by the deceased Linnie JaneHodges.Said motion of December 11, 1957 was approved by the Court in consonance with the wishes contained in the last willand testament of Linnie Jane Hodges.That on April 21, 1959 this Court approved the inventory and accounting submitted by C. N. Hodges thru counsel Atty.Leon Gellada in a motion filed on April 14, 1959 stating therein that executor C. N. Hodges is the only devisee or legateeof Linnie Jane Hodges in accordance with the last will and testament already probated by the Court.That on July 13, 1960 the Court approved the annual statement of accounts submitted by the executor C. N. Hodges thruhis counsel Atty. Gellada on July 21, 1960 wherein it is stated that the executor, C. N. Hodges is the only devisee or legatee of the deceased Linnie Jane Hodges; that on May 2, 1961 the Court approved the annual statement of accountssubmitted by executor, C. N. Hodges for the year 1960 which was submitted by Atty. Gellada on April 20, 1961 wherein itis stated that executor Hodges is the only devisee or legatee of the deceased Linnie Jane Hodges;That during the hearing on September 5 and 6, 1963 the estate of C. N. Hodges claimed all the assets belonging to thedeceased spouses Linnie Jane Hodges and C. N. Hodges situated in the Philippines; that administratrix Magno hasexecuted illegal acts to the prejudice of the testate estate of C. N. Hodges.

An opposition (Sp. 1672, Vol. X, pp. 4415-4421) dated April 27, 1966 of administratrix Magno has been filed asking thatthe motion be denied for lack of merit and that the motion for the official declaration of heirs of the estate of Linnie JaneHodges be set for presentation and reception of evidence.It is alleged in the aforesaid opposition that the examination of documents which are in the possession of administratrixMagno can be made prior to the hearing of the motion for the official declaration of heirs of the estate of Linnie JaneHodges, during said hearing.That the matters raised in the PCIB's motion of October 5, 1963 (as well as the other motion) dated September 14, 1964have been consolidated for the purpose of presentation and reception of evidence with the hearing on the determinationof the heirs of the estate of Linnie Jane Hodges. It is further alleged in the opposition that the motion for the officialdeclaration of heirs of the estate of Linnie Jane Hodges is the one that constitutes a prejudicial question to the motionsdated October 5 and September 14, 1964 because if said motion is found meritorious and granted by the Court, the



PCIB's motions of October 5, 1963 and September 14, 1964 will become moot and academic since they are premised onthe assumption and claim that the only heir of Linnie Jane Hodges was C. N. Hodges.That the PCIB and counsel are estopped from further questioning the determination of heirs in the estate of Linnie JaneHodges at this stage since it was PCIB as early as January 8, 1965 which filed a motion for official declaration of heirs of Linnie Jane Hodges that the claim of any heirs of Linnie Jane Hodges can be determined only in the administrationproceedings over the estate of Linnie Jane Hodges and not that of C. N. Hodges, since the heirs of Linnie Jane Hodgesare claiming her estate and not the estate of C. N. Hodges.

A reply (Sp. 1672, Vol. X, pp. 4436-4444) dated May 11, 1966 of the PCIB has been filed alleging that the motion dated April 22, 1966 of the PCIB is not to seek deferment of the hearing and consideration of the motion for official declaration of heirs of Linnie Jane Hodges but to declare the testate estate of Linnie Jane Hodges closed and for administratrix Magnoto account for and deliver to the PCIB all assets of the conjugal partnership of the deceased spouses which has come toher possession plus all rents and income.

A rejoinder (Sp. 1672, Vol. X, pp. 4458-4462) of administratrix Magno dated May 19, 1966 has been filed alleging that themotion dated December 11, 1957 only sought the approval of all conveyances made by C. N. Hodges and requested theCourt authority for all subsequent conveyances that will be executed by C. N. Hodges; that the order dated December 14,1957 only approved the conveyances made by C. N. Hodges; that C. N. Hodges represented by counsel never made anyclaim in the estate of Linnie Jane Hodges and never filed a motion to declare himself as the heir of the said Linnie JaneHodges despite the lapse of more than five (5) years after the death of Linnie Jane Hodges; that it is further alleged in therejoinder that there can be no order of adjudication of the estate unless there has been a prior express declaration of heirsand so far no declaration of heirs in the estate of Linnie Jane Hodges (Sp. 1307) has been made.Considering the allegations and arguments in the motion and of the PCIB as well as those in the opposition and rejoinder of administratrix Magno, the Court finds the opposition and rejoinder to be well taken for the reason that so far there hasbeen no official declaration of heirs in the testate estate of Linnie Jane Hodges and therefore no disposition of her estate.

WHEREFORE, the motion of the PCIB dated April 22, 1966 is hereby DENIED.(Annex "W", Petition)In its motion dated November 24, 1966 for the reconsideration of this order, petitioner alleged inter alia that:It cannot be over-stressed that the motion of December 11, 1957 was based on the fact that:a. Under the last will and testament of the deceased, Linnie Jane Hodges, the late Charles Newton Hodges was the soleheir instituted insofar as her properties in the Philippines are concerned;b. Said last will and testament vested upon the said late Charles Newton Hodges rights over said properties which, insum, spell ownership, absolute and in fee simple;c. Said late Charles Newton Hodges was, therefore, "not only part owner of the properties left as conjugal, but also, thesuccessor to all the properties left by the deceased Linnie Jane Hodges.Likewise, it cannot be over-stressed that the aforesaid motion was granted by this Honorable Court "for the reasonsstated" therein.

Again, the motion of December 11, 1957 prayed that not only "all the sales, conveyances, leases, and mortgages

executed by" the late Charles Newton Hodges, but also all "the subsequent sales, conveyances, leases, andmortgages ..." be approved and authorized. This Honorable Court, in its order of December 14, 1957, "for the reasonsstated" in the aforesaid motion, granted the same, and not only approved all the sales, conveyances, leases andmortgages of all properties left by the deceased Linnie Jane Hodges executed by the late Charles Newton Hodges, butalso authorized "all subsequent sales, conveyances, leases and mortgages of the properties left by the said deceasedLinnie Jane Hodges. (Annex "X", Petition)and reiterated its fundamental pose that the Testate Estate of Linnie Jane Hodges had already been factually, althoughnot legally, closed with the virtual declaration of Hodges and adjudication to him, as sole universal heir of all the propertiesof the estate of his wife, in the order of December 14, 1957, Annex G. Still unpersuaded, on July 18, 1967, respondentcourt denied said motion for reconsideration and held that "the court believes that there is no justification why the order of October 12, 1966 should be considered or modified", and, on July 19, 1967, the motion of respondent Magno "for officialdeclaration of heirs of the estate of Linnie Jane Hodges", already referred to above, was set for hearing.In consequence of all these developments, the present petition was filed on August 1, 1967 (albeit petitioner had to payanother docketing fee on August 9, 1967, since the orders in question were issued in two separate testate estateproceedings, Nos. 1307 and 1672, in the court below).Together with such petition, there are now pending before Us for resolution herein, appeals from the following:1. The order of December 19, 1964 authorizing payment by respondent Magno of overtime pay, (pp. 221, Green Recordon Appeal) together with the subsequent orders of January 9, 1965, (pp. 231-232, id.) October 27, 1965, (pp. 227, id.) andFebruary 15, 1966 (pp. 455-456, id.) repeatedly denying motions for reconsideration thereof.2. The order of August 6, 1965 (pp. 248, id.) requiring that deeds executed by petitioner to be co-signed by respondentMagno, as well as the order of October 27, 1965 (pp. 276-277) denying reconsideration.3. The order of October 27, 1965 (pp. 292-295, id.) enjoining the deposit of all collections in a joint account and the sameorder of February 15, 1966 mentioned in No. 1 above which included the denial of the reconsideration of this order of October 27, 1965.4. The order of November 3, 1965 (pp. 313-320, id.) directing the payment of attorney's fees, fees of the respondentadministratrix, etc. and the order of February 16, 1966 denying reconsideration thereof.5. The order of November 23, 1965 (pp. 334-335, id.) allowing appellee Western Institute of Technology to make

payments to either one or both of the administrators of the two estates as well as the order of March 7, 1966 (p. 462, id.)denying reconsideration.6. The various orders hereinabove earlier enumerated approving deeds of sale executed by respondent Magno in favor of appellees Carles, Catedral, Pablito, Guzman, Coronado, Barrido, Causing, Javier, Lucero and Batisanan, (see pp. 35 to37 of this opinion), together with the two separate orders both dated December 2, 1966 (pp. 306-308, and pp. 308-309,Yellow Record on Appeal) denying reconsideration of said approval.7. The order of January 3, 1967, on pp. 335-336, Yellow Record on Appeal, approving similar deeds of sale executed byrespondent Magno, as those in No. 6, in favor of appellees Pacaonsis and Premaylon, as to which no motion for reconsideration was filed.8. Lastly, the order of December 2, 1966, on pp. 305-306, Yellow Record on Appeal, directing petitioner to surrender toappellees Lucero, Batisanan, Javier, Pablito, Barrido, Catedral, Causing, Guzman, and Coronado, the certificates of titlecovering the lands involved in the approved sales, as to which no motion for reconsideration was filed either.



Strictly speaking, and considering that the above orders deal with different matters, just as they affect distinctly differentindividuals or persons, as outlined by petitioner in its brief as appellant on pp. 12-20 thereof, there are, therefore, thirty-three (33) appeals before Us, for which reason, petitioner has to pay also thirty-one (31) more docket fees.It is as well perhaps to state here as elsewhere in this opinion that in connection with these appeals, petitioner hasassigned a total of seventy-eight (LXXVIII) alleged errors, the respective discussions and arguments under all of themcovering also the fundamental issues raised in respect to the petition for certiorari and prohibition, thus making it feasibleand more practical for the Court to dispose of all these cases together. 4

The assignments of error read thus:I to IVTHE ORDER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEES, PEPITOG. IYULORES, ESPIRIDION PARTISALA, WINIFREDO C. ESPADA AND ROSARIO ALINGASA, EXECUTED BY THE

APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF LAND OWNED BY THE DECEASED, CHARLESNEWTON HODGES, AND THE CONTRACTS TO SELL COVERING WHICH WERE EXECUTED BY HIM DURING HISLIFETIME.V to VIIITHE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR OF THE APPELLEES, PEPITO G.IYULORES, ESPIRIDION PARTISALA, WINIFREDO C. ESPADA AND ROSARIO ALINGASA, COVERING PARCELSOF LAND FOR WHICH THEY HAVE NEVER PAID IN FULL IN ACCORDANCE WITH THE ORIGINAL CONTRACTS TOSELL.IX to XIITHE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF OWNERSHIP OVER REAL PROPERTY OF THE

APPELLEES, PEPITO G. IYULORES, ESPIRIDION PARTISALA, WINIFREDO C. ESPADA AND ROSARIO ALINGASA,WHILE ACTING AS A PROBATE COURT.

XIII to XVTHE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEES ADELFAPREMAYLON (LOT NO. 102), SANTIAGO PACAONSIS, AND ADELFA PREMAYLON (LOT NO. 104), EXECUTED BYTHE APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF LAND OWNED BY THE DECEASED, CHARLESNEWTON HODGES, AND THE CONTRACTS TO SELL COVERING WHICH WERE EXECUTED BY HIM DURING HISLIFETIME.XVI to XVIIITHE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR OF THE APPELLEES ADELFAPREMAYLON (LOT NO. 102), SANTIAGO PACAONSIS, AND ADELFA PREMAYLON (LOT NO. 104) COVERINGPARCELS OF LAND FOR WHICH THEY HAVE NEVER PAID IN FULL IN ACCORDANCE WITH THE ORIGINALCONTRACTS TO SELL.XIX to XXITHE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF OWNERSHIP OVER REAL PROPERTY OF THE

APPELLEES ADELFA PREMAYLON (LOT NO. 102), SANTIAGO PACAONSIS, AND ADELFA PREMAYLON (LOT NO.104) WHILE ACTING AS A PROBATE COURT.XXII to XXVTHE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEESLORENZO CARLES, JOSE PABLICO, ALFREDO CATEDRAL AND SALVADOR S. GUZMAN, EXECUTED BY THE

APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF LAND OWNED BY THE DECEASED, CHARLESNEWTON HODGES, AND THE CONTRACTS TO SELL COVERING WHICH WERE EXECUTED BY HIM DURING HISLIFETIME.XXVI to XXIXTHE LOWER COURT ERRED IN APPROVING THE FINAL DEED OF SALE EXECUTED IN FAVOR OF THE

APPELLEES, LORENZO CARLES, JOSE PABLICO, ALFREDO CATEDRAL AND SALVADOR S. GUZMAN PURSUANTTO CONTRACTS TO SPELL WHICH WERE CANCELLED AND RESCINDED.XXX to XXXIVTHE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF OWNERSHIP OVER REAL PROPERTY OF THELORENZO CARLES, JOSE PABLICO, ALFREDO CATEDRAL AND SALVADOR S. GUZMAN, WHILE ACTING AS APROBATE COURT.XXXV to XXXVITHE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEES,FLORENIA BARRIDO AND PURIFICACION CORONADO, EXECUTED BY THE APPELLEE, AVELINA A. MAGNO,COVERING PARCELS OF LAND OWNED BY THE DECEASED, CHARLES NEWTON HODGES, AND THECONTRACTS TO SELL COVERING WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.XXXVII to XXXVIIITHE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR OF THE APPELLEES, FLORENIABARRIDO AND PURIFICACION CORONADO, ALTHOUGH THEY WERE IN ARREARS IN THE PAYMENTS AGREEDUPON IN THE ORIGINAL CONTRACT TO SELL WHICH THEY EXECUTED WITH THE DECEASED, CHARLESNEWTON HODGES, IN THE AMOUNT OF P10,680.00 and P4,428.90, RESPECTIVELY.XXXIX to XL

THE LOWER COURT ERRED IN DEPRIVING THE DECEASED, CHARLES NEWTON HODGES, OF THECONTRACTUAL RIGHT, EXERCISED THROUGH HIS ADMINISTRATOR, THE INSTANT APPELLANT, TO CANCELTHE CONTRACTS TO SELL OF THE APPELLEES, FLORENIA BARRIDO AND PURIFICACION CORONADO.XLI to XLIIITHE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEES,GRACIANO LUCERO, ARITEO THOMAS JAMIR AND MELQUIADES BATISANAN, EXECUTED BY THE APPELLEE,

AVELINA A. MAGNO, COVERING PARCELS OF LAND OWNED BY THE DECEASED, CHARLES NEWTON HODGES, AND THE CONTRACTS TO SELL COVERING WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.XLIV to XLVITHE LOWER COURT ERRED IN APPROVING THE FINAL DEED OF SALE IN FAVOR OF THE APPELLEES,GRACIANO LUCERO, ARITEO THOMAS JAMIR AND MELQUIADES BATISANAN, PURSUANT TO CONTRACTS TO



SELL EXECUTED BY THEM WITH THE DECEASED, CHARLES NEWTON HODGES, THE TERMS AND CONDITIONSOF WHICH THEY HAVE NEVER COMPLIED WITH.XLVII to XLIXTHE LOWER COURT ERRED IN DEPRIVING THE DECEASED, CHARLES NEWTON HODGES, OF HIS RIGHT,EXERCISED THROUGH HIS ADMINISTRATION, THE INSTANT APPELLANT, TO CANCEL THE CONTRACTS TOSELL OF THE APPELLEES, GRACIANO LUCERO, ARITEO THOMAS JAMIR AND MELQUIADES BATISANAN, AND INDETERMINING THE RIGHTS OF THE SAID APPELLEES OVER REAL PROPERTY WHILE ACTING AS A PROBATECOURT.LTHE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEE,BELCESAR CAUSING, EXECUTED BY THE APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF LANDOWNED BY THE DECEASED, CHARLES NEWTON HODGES, AND THE CONTRACTS TO SELL COVERING WHICHWERE EXECUTED BY HIM DURING HIS LIFETIME.LITHE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR OF THE APPELLEE, BELCESARCAUSING, ALTHOUGH HE WAS IN ARREARS IN THE PAYMENTS AGREED UPON IN THE ORIGINAL CONTRACTTO SELL WHICH HE EXECUTED WITH THE DECEASED, CHARLES NEWTON HODGES, IN THE AMOUNT OFP2,337.50.LIITHE LOWER COURT ERRED IN APPROVING THE DEED OF SALE IN FAVOR OF THE APPELLEE, BELCESARCAUSING, ALTHOUGH THE SAME WAS NOT EXECUTED IN ACCORDANCE WITH THE RULES OF COURT.LIII to LXITHE LOWER COURT ERRED IN ORDERING THE APPELLANT, PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK

TO SURRENDER THE OWNER'S DUPLICATE CERTIFICATES OF TITLE OVER THE RESPECTIVE LOTS COVEREDBY THE DEEDS OF SALE EXECUTED BY THE APPELLEE, AVELINA A. MAGNO, IN FAVOR OF THE OTHER

APPELLEES, JOSE PABLICO, ALFREDO CATEDRAL, SALVADOR S. GUZMAN, FLRENIA BARRIDO, PURIFICACIONCORONADO, BELCESAR CAUSING, ARITEO THOMAS JAMIR, MAXIMA BATISANAN AND GRACIANO L. LUCERO.LXIITHE LOWER COURT ERRED IN RESOLVING THE MOTION OF THE APPELLEE, WESTERN INSTITUTE OFTECHNOLOGY, DATED NOVEMBER 3, 1965, WITHOUT ANY COPY THEREOF HAVING BEEN SERVED UPON THE

APPELLANT, PHILIPPINE COMMERCIAL & INDUSTRIAL BANK.LXIIITHE LOWER COURT ERRED IN HEARING AND CONSIDERING THE MOTION OF THE APPELLEE, WESTERNINSTITUTE OF TECHNOLOGY, DATED NOVEMBER 3rd, 1965, ON NOVEMBER 23, 1965, WHEN THE NOTICE FORTHE HEARING THEREOF WAS FOR NOVEMBER 20, 1965.LXIV

THE LOWER COURT ERRED IN GRANTING THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY A RELIEFOTHER THAN THAT PRAYED FOR IN ITS MOTION, DATED NOVEMBER 3, 1965, IN THE ABSENCE OF A PRAYERFOR GENERAL RELIEF CONTAINED THEREIN.LXVTHE LOWER COURT ERRED IN ALLOWING THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY, TOCONTINUE PAYMENTS UPON A CONTRACT TO SELL THE TERMS AND CONDITIONS OF WHICH IT HAS FAILEDTO FULFILL.LXVITHE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF THE APPELLEE, WESTERN INSTITUTE OFTECHNOLOGY OVER THE REAL PROPERTY SUBJECT MATTER OF THE CONTRACT TO SELL IT EXECUTEDWITH THE DECEASED, CHARLES NEWTON HODGES, WHILE ACTING AS A PROBATE COURT.LXVIILOWER COURT ERRED IN ALLOWING THE CONTINUATION OF PAYMENTS BY THE APPELLEE, WESTERNINSTITUTE OF TECHNOLOGY, UPON A CONTRACT TO SELL EXECUTED BY IT AND THE DECEASED, CHARLESNEWTON HODGES, TO A PERSON OTHER THAN HIS LAWFULLY APPOINTED ADMINISTRATOR.LXVIIITHE LOWER COURT ERRED IN ORDERING THE PAYMENT OF RETAINER'S FEES FROM THE SUPPOSEDESTATE OF THE DECEASED, LINNIE JANE HODGES, WHEN THERE IS NEITHER SUCH ESTATE NOR ASSETSTHEREOF.LXIXTHE LOWER COURT ERRED IN ORDERING THE PAYMENT OF RETAINER'S FEES OF LAWYERS OF ALLEGEDHEIRS TO THE SUPPOSED ESTATE OF THE DECEASED, LINNIE JANE HODGES.LXXTHE LOWER COURT ERRED IN IMPLEMENTING THE ALLEGED AGREEMENT BETWEEN THE HEIRS OF THESUPPOSED ESTATE OF THE DECEASED, LINNIE JANE HODGES, AND THEIR LAWYERS.LXXITHE LOWER COURT ERRED IN ORDERING THE PREMATURE DISTRIBUTION OF ESTATE ASSETS TO ALLEGED

HEIRS OR BENEFICIARIES THEREOF, BY WAY OF RETAINER'S FEES.LXXIITHE LOWER COURT ERRED IN ORDERING THAT ALL FINAL DEEDS OF SALE EXECUTED PURSUANT TOCONTRACTS TO SELL ENTERED INTO BY THE DECEASED, CHARLES NEWTON HODGES, DURING HISLIFETIME, BE SIGNED JOINTLY BY THE APPELLEE, AVELINA A. MAGNO, AND THE APPELLANT, PHILIPPINECOMMERCIAL AND INDUSTRIAL BANK, AND NOT BY THE LATTER ONLY AS THE LAWFULLY APPOINTED

ADMINISTRATOR OF HIS ESTATE.LXXIIITHE LOWER COURT ERRED IN ORDERING THE PAYMENT OF LEGAL EXPENSES FROM THE SUPPOSEDESTATE OF THE DECEASED, LINNIE JANE HODGES, WHEN THERE IS NEITHER SUCH ESTATE NOR ASSETSTHEREOF.LXXIV



THE LOWER COURT ERRED IN ORDERING THE PAYMENT OF LEGAL EXPENSES OF LAWYERS OF ALLEGEDHEIRS TO THE SUPPOSED ESTATE OF THE DECEASED, LINNIE JANE HODGES.LXXVTHE LOWER COURT ERRED IN ORDERING THE PREMATURE DISTRIBUTION OF ESTATE ASSETS TO ALLEGEDHEIRS OR BENEFICIARIES THEREOF, BY WAY OF LEGAL EXPENSES.LXXVITHE LOWER COURT ERRED IN ORDERING THE PAYMENT OF COMPENSATION TO THE PURPORTED

ADMINISTRATRIX OF THE SUPPOSED ESTATE OF THE DECEASED, LINNIE JANE HODGES, THE INSTANT APPELLEE, AVELINA A. MAGNO, WHEN THERE IS NEITHER SUCH ESTATE NOR ASSETS THEREOF.LXXVIITHE LOWER COURT ERRED IN ORDERING THAT THE FUNDS OF THE TESTATE ESTATE OF THE DECEASED,CHARLES NEWTON HODGES, BE PLACED IN A JOINT ACCOUNT OF THE APPELLANT, PHILIPPINE COMMERCIAL

AND INDUSTRIAL BANK, AND THE APPELLEE, AVELINA A. MAGNO, WHO IS A COMPLETE STRANGER TO THE AFORESAID ESTATE.LXXVIIITHE LOWER COURT ERRED IN ORDERING THAT THE APPELLEE, AVELINA A. MAGNO, BE GIVEN EQUAL

ACCESS TO THE RECORDS OF THE TESTATE ESTATE OF THE DECEASED, CHARLES NEWTON HODGES,WHEN SHE IS A COMPLETE STRANGER TO THE AFORESAID ESTATE. (Pp. 73-83, Appellant's Brief.)To complete this rather elaborate, and unavoidably extended narration of the factual setting of these cases, it may also bementioned that an attempt was made by the heirs of Mrs. Hodges to have respondent Magno removed as administratrix,with the proposed appointment of Benito J. Lopez in her place, and that respondent court did actually order suchproposed replacement, but the Court declared the said order of respondent court violative of its injunction of August 8,1967, hence without force and effect (see Resolution of September 8, 1972 and February 1, 1973). Subsequently, Atty.

Efrain B. Trenas, one of the lawyers of said heirs, appeared no longer for the proposed administrator Lopez but for theheirs themselves, and in a motion dated October 26, 1972 informed the Court that a motion had been filed withrespondent court for the removal of petitioner PCIB as administrator of the estate of C. N. Hodges in Special Proceedings1672, which removal motion alleged that 22.968149% of the share of C. N. Hodges had already been acquired by theheirs of Mrs. Hodges from certain heirs of her husband. Further, in this connection, in the answer of PCIB to the motion of respondent Magno to have it declared in contempt for disregarding the Court's resolution of September 8, 1972 modifyingthe injunction of August 8, 1967, said petitioner annexed thereto a joint manifestation and motion, appearing to have beenfiled with respondent court, informing said court that in addition to the fact that 22% of the share of C. N. Hodges hadalready been bought by the heirs of Mrs. Hodges, as already stated, certain other heirs of Hodges representing17.343750% of his estate were joining cause with the heirs of Mrs. Hodges as against PCIB, thereby making somewhatprecarious, if not possibly untenable, petitioners' continuation as administrator of the Hodges estate.RESOLUTION OF ISSUES IN THE CERTIORARI ANDPROHIBITION CASES

I As to the Alleged Tardinessof the Present AppealsThe priority question raised by respondent Magno relates to the alleged tardiness of all the aforementioned thirty-threeappeals of PCIB. Considering, however, that these appeals revolve around practically the same main issues and that it isadmitted that some of them have been timely taken, and, moreover, their final results hereinbelow to be stated andexplained make it of no consequence whether or not the orders concerned have become final by the lapsing of therespective periods to appeal them, We do not deem it necessary to pass upon the timeliness of any of said appeals.IIThe Propriety Here of Certiorari and Prohibition instead of Appeal The other preliminary point of the same respondent is alleged impropriety of the special civil action of certiorari

andprohibition in view of the existence of the remedy of appeal which it claims is proven by the very appeals now before Us.Such contention fails to take into account that there is a common thread among the basic issues involved in all thesethirty-three appeals which, unless resolved in one single proceeding, will inevitably cause the proliferation of more or lesssimilar or closely related incidents and consequent eventual appeals. If for this consideration alone, and without takingaccount anymore of the unnecessary additional effort, expense and time which would be involved in as many individualappeals as the number of such incidents, it is logical and proper to hold, as We do hold, that the remedy of appeal is notadequate in the present cases. In determining whether or not a special civil action of certiorari or prohibition may beresorted to in lieu of appeal, in instances wherein lack or excess of jurisdiction or grave abuse of discretion is alleged, it isnot enough that the remedy of appeal exists or is possible. It is indispensable that taking all the relevant circumstances of the given case, appeal would better serve the interests of justice. Obviously, the longer delay, augmented expense andtrouble and unnecessary repetition of the same work attendant to the present multiple appeals, which, after all, deal withpractically the same basic issues that can be more expeditiously resolved or determined in a single special civil action,make the remedies of certiorari and prohibition, pursued by petitioner, preferable, for purposes of resolving the commonbasic issues raised in all of them, despite the conceded availability of appeal. Besides, the settling of such commonfundamental issues would naturally minimize the areas of conflict between the parties and render more simple the

determination of the secondary issues in each of them. Accordingly, respondent Magno's objection to the present remedyof certiorari and prohibition must be overruled.We come now to the errors assigned by petitioner-appellant, Philippine Commercial & Industrial Bank, (PCIB, for short) inthe petition as well as in its main brief as appellant.IIIOn Whether or Not There is Still Any Part of the TestateEstate Mrs. Hodges that may be Adjudicated to her brothersand sisters as her estate, of which respondent Magno is theunquestioned Administratrix in special Proceedings 1307.In the petition, it is the position of PCIB that the respondent court exceeded its jurisdiction or gravely abused its discretionin further recognizing after December 14, 1957 the existence of the Testate Estate of Linnie Jane Hodges and insanctioning purported acts of administration therein of respondent Magno. Main ground for such posture is that by the



aforequoted order of respondent court of said date, Hodges was already allowed to assert and exercise all his rights asuniversal heir of his wife pursuant to the provisions of her will, quoted earlier, hence, nothing else remains to be done inSpecial Proceedings 1307 except to formally close it. In other words, the contention of PCIB is that in view of said order,nothing more than a formal declaration of Hodges as sole and exclusive heir of his wife and the consequent formalunqualified adjudication to him of all her estate remain to be done to completely close Special Proceedings 1307, hencerespondent Magno should be considered as having ceased to be Administratrix of the Testate Estate of Mrs. Hodgessince then.

After carefully going over the record, We feel constrained to hold that such pose is patently untenable from whatever angle it is examined.To start with, We cannot find anywhere in respondent Order of December 14, 1957 the sense being read into it by PCIB.The tenor of said order bears no suggestion at all to such effect. The declaration of heirs and distribution by the probatecourt of the estate of a decedent is its most important function, and this Court is not disposed to encourage judges of probate proceedings to be less than definite, plain and specific in making orders in such regard, if for no other reason thanthat all parties concerned, like the heirs, the creditors, and most of all the government, the devisees and legatees, shouldknow with certainty what are and when their respective rights and obligations ensuing from the inheritance or in relationthereto would begin or cease, as the case may be, thereby avoiding precisely the legal complications and consequentlitigations similar to those that have developed unnecessarily in the present cases. While it is true that in instanceswherein all the parties interested in the estate of a deceased person have already actually distributed among themselvestheir respective shares therein to the satisfaction of everyone concerned and no rights of creditors or third parties areadversely affected, it would naturally be almost ministerial for the court to issue the final order of declaration anddistribution, still it is inconceivable that the special proceeding instituted for the purpose may be considered terminated,the respective rights of all the parties concerned be deemed definitely settled, and the executor or administrator thereof beregarded as automatically discharged and relieved already of all functions and responsibilities without the corresponding

definite orders of the probate court to such effect.Indeed, the law on the matter is specific, categorical and unequivocal. Section 1 of Rule 90 provides:SECTION 1. When order for distribution of residue made. — When the debts, funeral charges, and expenses of administration, the allowance to the widow and inheritance tax, if any, chargeable to the estate in accordance with lawhave been paid, the court, on the application of the executor or administrator, or of a person interested in the estate, andafter hearing upon notice, shall assign the residue of the estate to the persons entitled to the same, naming them and theproportions, or parts, to which each is entitled, and such persons may demand and recover their respective shares fromthe executor or administrator, or any other person having the same in his possession. If there is a controversy before thecourt as to who are the lawful heirs of the deceased person or as to the distributive shares to which each person isentitled under the law, the controversy shall be heard and decided as in ordinary cases.No distribution shall be allowed until the payment of the obligations above mentioned has been made or provided for,unless the distributees, or any of them give a bond, in a sum to be fixed by the court, conditioned for the payment of saidobligations within such time as the court directs.

These provisions cannot mean anything less than that in order that a proceeding for the settlement of the estate of adeceased may be deemed ready for final closure, (1) there should have been issued already an order of distribution or assignment of the estate of the decedent among or to those entitled thereto by will or by law, but (2) such order shall notbe issued until after it is shown that the "debts, funeral expenses, expenses of administration, allowances, taxes, etc.chargeable to the estate" have been paid, which is but logical and proper. (3) Besides, such an order is usually issuedupon proper and specific application for the purpose of the interested party or parties, and not of the court.... it is only after, and not before, the payment of all debts, funeral charges, expenses of administration, allowance to thewidow, and inheritance tax shall have been effected that the court should make a declaration of heirs or of such personsas are entitled by law to the residue. (Moran, Comments on the Rules of Court, 2nd ed., Vol. II, p. 397, citing Capistranovs. Nadurata, 49 Phil., 726; Lopez vs. Lopez, 37 Off. Gaz., 3091.) (JIMOGA-ON v. BELMONTE, 84 Phil. 545, 548) (p. 86,

Appellee's Brief)xxx xxx xxxUnder Section 753 of the Code of Civil Procedure, (corresponding to Section 1, Rule 90) what brings an intestate (or testate) proceeding to a close is the order of distribution directing delivery of the residue to the persons entitled theretoafter paying the indebtedness, if any, left by the deceased. (Santiesteban vs. Santiesteban, 68 Phil. 367, 370.)In the cases at bar, We cannot discern from the voluminous and varied facts, pleadings and orders before Us that theabove indispensable prerequisites for the declaration of heirs and the adjudication of the estate of Mrs. Hodges hadalready been complied with when the order of December 14, 1957 was issued. As already stated, We are not persuadedthat the proceedings leading to the issuance of said order, constituting barely of the motion of May 27, 1957, Annex D of the petition, the order of even date, Annex E, and the motion of December 11, 1957, Annex H, all aforequoted, are whatthe law contemplates. We cannot see in the order of December 14, 1957, so much relied upon by the petitioner, anythingmore than an explicit approval of "all the sales, conveyances, leases and mortgages of all the properties left by thedeceased Linnie Jane Hodges executed by the Executor Charles N. Hodges" (after the death of his wife and prior to thedate of the motion), plus a general advance authorization to enable said "Executor — to execute subsequent sales,conveyances, leases and mortgages of the properties left the said deceased Linnie Jane Hodges in consonance withwishes conveyed in the last will and testament of the latter", which, certainly, cannot amount to the order of adjudication of the estate of the decedent to Hodges contemplated in the law. In fact, the motion of December 11, 1957 on which the

court predicated the order in question did not pray for any such adjudication at all. What is more, although said motion didallege that "herein Executor (Hodges) is not only part owner of the properties left as conjugal, but also, the successor toall the properties left by the deceased Linnie Jane Hodges", it significantly added that "herein Executor, as Legatee (sic),has the right to sell, convey, lease or dispose of the properties in the Philippines — during his lifetime", thereby indicatingthat what said motion contemplated was nothing more than either the enjoyment by Hodges of his rights under theparticular portion of the dispositions of his wife's will which were to be operative only during his lifetime or the use of hisown share of the conjugal estate, pending the termination of the proceedings. In other words, the authority referred to insaid motions and orders is in the nature of that contemplated either in Section 2 of Rule 109 which permits, in appropriatecases, advance or partial implementation of the terms of a duly probated will before final adjudication or distribution whenthe rights of third parties would not be adversely affected thereby or in the established practice of allowing the survivingspouse to dispose of his own share of he conjugal estate, pending its final liquidation, when it appears that no creditors of the conjugal partnership would be prejudiced thereby, (see the Revised Rules of Court by Francisco, Vol. V-B, 1970 ed. p.



887) albeit, from the tenor of said motions, We are more inclined to believe that Hodges meant to refer to the former. Inany event, We are fully persuaded that the quoted allegations of said motions read together cannot be construed as arepudiation of the rights unequivocally established in the will in favor of Mrs. Hodges' brothers and sisters to whatever have not been disposed of by him up to his death.Indeed, nowhere in the record does it appear that the trial court subsequently acted upon the premise suggested bypetitioner. On the contrary, on November 23, 1965, when the court resolved the motion of appellee Western Institute of Technology by its order We have quoted earlier, it categorically held that as of said date, November 23, 1965, "in bothcases (Special Proceedings 1307 and 1672) there is as yet no judicial declaration of heirs nor distribution of properties towhomsoever are entitled thereto." In this connection, it may be stated further against petitioner, by way of some kind of estoppel, that in its own motion of January 8, 1965, already quoted in full on pages 54-67 of this decision, it prayed inter alia that the court declare that "C. N. Hodges was the sole and exclusive heir of the estate of Linnie Jane Hodges", whichit would not have done if it were really convinced that the order of December 14, 1957 was already the order of adjudication and distribution of her estate. That said motion was later withdrawn when Magno filed her own motion for determination and adjudication of what should correspond to the brothers and sisters of Mrs. Hodges does not alter theindubitable implication of the prayer of the withdrawn motion.It must be borne in mind that while it is true that Mrs. Hodges bequeathed her whole estate to her husband and gave himwhat amounts to full powers of dominion over the same during his lifetime, she imposed at the same time the conditionthat whatever should remain thereof upon his death should go to her brothers and sisters. In effect, therefore, what wasabsolutely given to Hodges was only so much of his wife's estate as he might possibly dispose of during his lifetime;hence, even assuming that by the allegations in his motion, he did intend to adjudicate the whole estate to himself, assuggested by petitioner, such unilateral act could not have affected or diminished in any degree or manner the right of hisbrothers and sisters-in-law over what would remain thereof upon his death, for surely, no one can rightly contend that thetestamentary provision in question allowed him to so adjudicate any part of the estate to himself as to prejudice them. In

other words, irrespective of whatever might have been Hodges' intention in his motions, as Executor, of May 27, 1957 andDecember 11, 1957, the trial court's orders granting said motions, even in the terms in which they have been worded,could not have had the effect of an absolute and unconditional adjudication unto Hodges of the whole estate of his wife.None of them could have deprived his brothers and sisters-in-law of their rights under said will. And it may be added herethat the fact that no one appeared to oppose the motions in question may only be attributed, firstly, to the failure of Hodges to send notices to any of them, as admitted in the motion itself, and, secondly, to the fact that even if they hadbeen notified, they could not have taken said motions to be for the final distribution and adjudication of the estate, butmerely for him to be able, pending such final distribution and adjudication, to either exercise during his lifetime rights of dominion over his wife's estate in accordance with the bequest in his favor, which, as already observed, may be allowedunder the broad terms of Section 2 of Rule 109, or make use of his own share of the conjugal estate. In any event, We donot believe that the trial court could have acted in the sense pretended by petitioner, not only because of the clear language of the will but also because none of the interested parties had been duly notified of the motion and hearingthereof. Stated differently, if the orders of May 27, 1957 and December 4, 1957 were really intended to be read in the

sense contended by petitioner, We would have no hesitancy in declaring them null and void.Petitioner cites the case of Austria vs. Ventenilla, G. R. No. L-10018, September 19, 1956, (unreported but a partial digestthereof appears in 99 Phil. 1069) in support of its insistence that with the orders of May 27 and December 14, 1957, theclosure of Mrs. Hodges' estate has become a mere formality, inasmuch as said orders amounted to the order of adjudication and distribution ordained by Section 1 of Rule 90. But the parallel attempted to be drawn between that caseand the present one does not hold. There the trial court had in fact issued a clear, distinct and express order of adjudication and distribution more than twenty years before the other heirs of the deceased filed their motion asking thatthe administratrix be removed, etc. As quoted in that decision, the order of the lower court in that respect read as follows:En orden a la mocion de la administradora, el juzgado la encuentra procedente bajo la condicion de que no se haraentrega ni adjudicacion de los bienes a los herederos antes de que estos presten la fianza correspondiente y de acuerdocon lo prescrito en el Art. 754 del Codigo de Procedimientos: pues, en autos no aparece que hayan sido nombradoscomisionados de avaluo y reclamaciones. Dicha fianza podra ser por un valor igual al de los bienes que correspondan acada heredero segun el testamento. Creo que no es obice para la terminacion del expediente el hecho de que laadministradora no ha presentado hasta ahora el inventario de los bienes; pues, segun la ley, estan exentos de estaformalidad os administradores que son legatarios del residuo o remanente de los bienes y hayan prestado fianza pararesponder de las gestiones de su cargo, y aparece en el testamento que la administradora Alejandra Austria reune dichacondicion.POR TODO LO EXPUESTO, el juzgado declara, 1.o: no haber lugar a la mocion de Ramon Ventenilla y otros; 2.o,declara asimismo que los unicos herederos del finado Antonio Ventenilla son su esposa Alejandra Austria, MariaVentenilla, hermana del testador, y Ramon Ventenilla, Maria Ventenilla, Ramon Soriano, Eulalio Soriano, Jose Soriano,Gabriela Ventenilla, Lorenzo Ventenilla, Felicitas Ventenilla, Eugenio Ventenilla y Alejandra Ventenilla, en representacionde los difuntos Juan, Tomas, Catalino y Froilan, hermanos del testador, declarando, ademas que la heredera Alejandra

Austria tiene derecho al remanente de todos los bienes dejados por el finado, despues de deducir de ellos la porcion quecorresponde a cada uno de sus coherederos, conforme esta mandado en las clausulas 8.a, 9.a, 10.a, 11.a, 12.a y 13.adel testamento; 3.o, se aprueba el pago hecho por la administradora de los gastos de la ultima enfermedad y funeralesdel testador, de la donacion hecha por el testador a favor de la Escuela a Publica del Municipio de Mangatarem, y de lasmisas en sufragio del alma del finado; 4.o, que una vez prestada la fianza mencionada al principio de este auto, se haga

la entrega y adjudicacion de los bienes, conforme se dispone en el testamento y se acaba de declarar en este auto; 5.o,y, finalmente, que verificada la adjudicacion, se dara por terminada la administracion, revelandole toda responsabilidad ala administradora, y cancelando su fianza.

ASI SE ORDENA.Undoubtedly, after the issuance of an order of such tenor, the closure of any proceedings for the settlement of the estateof a deceased person cannot be but perfunctory.In the case at bar, as already pointed out above, the two orders relied upon by petitioner do not appear ex-facie to be of the same tenor and nature as the order just quoted, and, what is more, the circumstances attendant to its issuance do notsuggest that such was the intention of the court, for nothing could have been more violative of the will of Mrs. Hodges.Indeed, to infer from Hodges' said motions and from his statements of accounts for the years 1958, 1959 and 1960, A

Annexes I, K and M, respectively, wherein he repeatedly claimed that "herein executor (being) the only devisee or legateeof the deceased, in accordance with the last will and testament already probated," there is "no (other) person interested in



the Philippines of the time and place of examining herein account to be given notice", an intent to adjudicate unto himself the whole of his wife's estate in an absolute manner and without regard to the contingent interests of her brothers andsisters, is to impute bad faith to him, an imputation which is not legally permissible, much less warranted by the facts of record herein. Hodges knew or ought to have known that, legally speaking, the terms of his wife's will did not give himsuch a right. Factually, there are enough circumstances extant in the records of these cases indicating that he had nosuch intention to ignore the rights of his co-heirs. In his very motions in question, Hodges alleged, thru counsel, that the"deceased Linnie Jane Hodges died leaving no descendants and ascendants, except brothers and sisters and herein

petitioner, as surviving spouse, to inherit the properties of the decedent ", and even promised that "proper accounting willbe had — in all these transactions" which he had submitted for approval and authorization by the court, thereby implyingthat he was aware of his responsibilities vis-a-vis his co-heirs. As alleged by respondent Magno in her brief as appellee:Under date of April 14, 1959, C. N. Hodges filed his first "Account by the Executor" of the estate of Linnie Jane Hodges. Inthe "Statement of Networth of Mr. C. N. Hodges and the Estate of Linnie Jane Hodges" as of December 31, 1958 annexedthereto, C. N. Hodges reported that the combined conjugal estate earned a net income of P328,402.62, divided evenlybetween him and the estate of Linnie Jane Hodges. Pursuant to this, he filed an "individual income tax return" for calendar year 1958 on the estate of Linnie Jane Hodges reporting, under oath, the said estate as having earned income of P164,201.31, exactly one-half of the net income of his combined personal assets and that of the estate of Linnie JaneHodges. (p. 91, Appellee's Brief.)Under date of July 21, 1960, C. N. Hodges filed his second "Annual Statement of Account by the Executor" of the estateof Linnie Jane Hodges. In the "Statement of Networth of Mr. C. N. Hodges and the Estate of Linnie Jane Hodges" as of December 31, 1959 annexed thereto, C. N. Hodges reported that the combined conjugal estate earned a net income of P270,623.32, divided evenly between him and the estate of Linnie Jane Hodges. Pursuant to this, he filed an "individualincome tax return" for calendar year 1959 on the estate of Linnie Jane Hodges reporting, under oath, the said estate ashaving earned income of P135,311.66, exactly one-half of the net income of his combined personal assets and that of the

estate of Linnie Jane Hodges. (pp. 91-92, id.)Under date of April 20, 1961, C. N. Hodges filed his third "Annual Statement of Account by the Executor for the year 1960"of the estate of Linnie Jane Hodges. In the "Statement of Net Worth of Mr. C. N. Hodges and the Estate of Linnie JaneHodges" as of December 31, 1960 annexed thereto, C. N. Hodges reported that the combined conjugal estate earned anet income of P314,857.94, divided of Linnie Jane Hodges. Pursuant to this, he filed an "individual evenly between himand the estate income tax return" for calendar year 1960 on the estate of Linnie Jane Hodges reporting, under oath, thesaid estate as having earned income of P157,428.97, exactly one-half of the net income of his combined personal assetsand that of the estate of Linnie Jane Hodges. (pp. 92-93, id.)In the petition for probate that he (Hodges) filed, he listed the seven brothers and sisters of Linnie Jane as her "heirs" (seep. 2, Green ROA). The order of the court admitting the will to probate unfortunately omitted one of the heirs, Roy Higdon(see p. 14, Green ROA). Immediately, C. N. Hodges filed a verified motion to have Roy Higdon's name included as anheir, stating that he wanted to straighten the records "in order (that) the heirs of deceased Roy Higdon may not think or believe they were omitted, and that they were really and are interested in the estate of deceased Linnie Jane Hodges".

Thus, he recognized, if in his own way, the separate identity of his wife's estate from his own share of the conjugalpartnership up to the time of his death, more than five years after that of his wife. He never considered the whole estateas a single one belonging exclusively to himself. The only conclusion one can gather from this is that he could have beenpreparing the basis for the eventual transmission of his wife's estate, or, at least, so much thereof as he would not havebeen able to dispose of during his lifetime, to her brothers and sisters in accordance with her expressed desire, asintimated in his tax return in the United States to be more extensively referred to anon. And assuming that he did pay thecorresponding estate and inheritance taxes in the Philippines on the basis of his being sole heir, such payment is notnecessarily inconsistent with his recognition of the rights of his co-heirs. Without purporting to rule definitely on the matter in these proceedings, We might say here that We are inclined to the view that under the peculiar provisions of his wife'swill, and for purposes of the applicable inheritance tax laws, Hodges had to be considered as her sole heir, pending theactual transmission of the remaining portion of her estate to her other heirs, upon the eventuality of his death, andwhatever adjustment might be warranted should there be any such remainder then is a matter that could well be takencare of by the internal revenue authorities in due time.It is to be noted that the lawyer, Atty. Leon P. Gellada, who signed the motions of May 27, 1957 and December 11, 1957and the aforementioned statements of account was the very same one who also subsequently signed and filed the motionof December 26, 1962 for the appointment of respondent Magno as "Administratrix of the Estate of Mrs. Linnie JaneHodges" wherein it was alleged that "in accordance with the provisions of the last will and testament of Linnie JaneHodges, whatever real properties that may remain at the death of her husband, Charles Newton Hodges, the saidproperties shall be equally divided among their heirs." And it appearing that said attorney was Hodges' lawyer as Executor of the estate of his wife, it stands to reason that his understanding of the situation, implicit in his allegations just quoted,could somehow be reflective of Hodges' own understanding thereof.

As a matter of fact, the allegations in the motion of the same Atty. Gellada dated July 1, 1957, a "Request for Inclusion of the Name of Roy Higdon in the Order of the Court dated July 19, 1957, etc.", reference to which is made in the abovequotation from respondent Magno's brief, are over the oath of Hodges himself, who verified the motion. Said allegationsread:1. — That the Hon. Court issued orders dated June 29, 1957, ordering the probate of the will.2. — That in said order of the Hon. Court, the relatives of the deceased Linnie Jane Hodges were enumerated. However,

in the petition as well as in the testimony of Executor during the hearing, the name Roy Higdon was mentioned, butdeceased. It was unintentionally omitted the heirs of said Roy Higdon who are his wife Aline Higdon and son DavidHigdon, all of age, and residents of Quinlan, Texas, U.S.A.3. — That to straighten the records, and in order the heirs of deceased Roy Higdon may not think or believe they wereomitted, and that they were really and are interested in the estate of deceased Linnie Jane Hodges , it is requested of theHon. Court to insert the names of Aline Higdon and David Higdon, wife and son of deceased Roy Higdon in the said order of the Hon. Court dated June 29, 1957. (pars. 1 to 3, Annex 2 of Magno's Answer — Record, p. 260)

As can be seen, these italicized allegations indicate, more or less, the real attitude of Hodges in regard to thetestamentary dispositions of his wife.In connection with this point of Hodges' intent, We note that there are documents, copies of which are annexed torespondent Magno's answer, which purportedly contain Hodges' own solemn declarations recognizing the right of his co-heirs, such as the alleged tax return he filed with the United States Taxation authorities, identified as Schedule M, (Annex



4 of her answer) and his supposed affidavit of renunciation, Annex 5. In said Schedule M, Hodges appears to haveanswered the pertinent question thus:2a. Had the surviving spouse the right to declare an election between (1) the provisions made in his or her favor by thewill and (11) dower, curtesy or a statutory interest? (X) Yes ( ) No2d. Does the surviving spouse contemplate renouncing the will and electing to take dower, curtesy, or a statutory interest?(X) Yes ( ) No3. According to the information and belief of the person or persons filing the return, is any action described under question1 designed or contemplated? ( ) Yes (X) No (Annex 4, Answer — Record, p. 263)and to have further stated under the item, "Description of property interests passing to surviving spouse" the following:None, except for purposes of administering the Estate, paying debts, taxes and other legal charges. It is the intention of the surviving husband of deceased to distribute the remaining property and interests of the deceased in their Community Estate to the devisees and legatees named in the will when the debts, liabilities, taxes and expenses of administration arefinally determined and paid . (Annex 4, Answer — Record, p. 263)In addition, in the supposed affidavit of Hodges, Annex 5, it is stated:I, C. N. Hodges, being duly sworn, on oath affirm that at the time the United States Estate Tax Return was filed in theEstate of Linnie Jane Hodges on August 8, 1958, I renounced and disclaimed any and all right to receive the rents,emoluments and income from said estate, as shown by the statement contained in Schedule M at page 29 of said return,a copy of which schedule is attached to this affidavit and made a part hereof.The purpose of this affidavit is to ratify and confirm, and I do hereby ratify and confirm, the declaration made in ScheduleM of said return and hereby formally disclaim and renounce any right on my part to receive any of the said rents,emoluments and income from the estate of my deceased wife, Linnie Jane Hodges. This affidavit is made to absolve meor my estate from any liability for the payment of income taxes on income which has accrued to the estate of Linnie JaneHodges since the death of the said Linnie Jane Hodges on May 23, 1957. (Annex 5, Answer — Record, p. 264)

Although it appears that said documents were not duly presented as evidence in the court below, and We cannot,therefore, rely on them for the purpose of the present proceedings, still, We cannot close our eyes to their existence in therecord nor fail to note that their tenor jibes with Our conclusion discussed above from the circumstances related to theorders of May 27 and December 14, 1957. 5 Somehow, these documents, considering they are supposed to be copies of their originals found in the official files of the governments of the United States and of the Philippines, serve to lessen anypossible apprehension that Our conclusion from the other evidence of Hodges' manifest intent vis-a-vis the rights of hisco-heirs is without basis in fact.Verily, with such eloquent manifestations of his good intentions towards the other heirs of his wife, We find it very hard tobelieve that Hodges did ask the court and that the latter agreed that he be declared her sole heir and that her wholeestate be adjudicated to him without so much as just annotating the contingent interest of her brothers and sisters in whatwould remain thereof upon his demise. On the contrary, it seems to us more factual and fairer to assume that Hodges waswell aware of his position as executor of the will of his wife and, as such, had in mind the following admonition made bythe Court in Pamittan vs. Lasam, et al ., 60 Phil., 908, at pp. 913-914:

Upon the death of Bernarda in September, 1908, said lands continued to be conjugal property in the hands of thedefendant Lasam. It is provided in article 1418 of the Civil Code that upon the dissolution of the conjugal partnership, aninventory shall immediately be made and this court in construing this provision in connection with section 685 of the Codeof Civil Procedure (prior to its amendment by Act No. 3176 of November 24, 1924) has repeatedly held that in the event of the death of the wife, the law imposes upon the husband the duty of liquidating the affairs of the partnership without delay(desde luego) (Alfonso vs. Natividad, 6 Phil., 240; Prado vs. Lagera, 7 Phil., 395; De la Rama vs. De la Rama, 7 Phil.,745; Enriquez vs. Victoria, 10 Phil., 10; Amancio vs. Pardo, 13 Phil., 297; Rojas vs. Singson Tongson, 17 Phil., 476;Sochayseng vs. Trujillo, 31 Phil., 153; Molera vs. Molera, 40 Phil., 566; Nable Jose vs. Nable Jose, 41 Phil., 713.)In the last mentioned case this court quoted with approval the case of Leatherwood vs. Arnold (66 Texas, 414, 416, 417),in which that court discussed the powers of the surviving spouse in the administration of the community property.

Attention was called to the fact that the surviving husband, in the management of the conjugal property after the death of the wife, was a trustee of unique character who is liable for any fraud committed by him with relation to the property whilehe is charged with its administration. In the liquidation of the conjugal partnership, he had wide powers (as the law stoodprior to Act No. 3176) and the high degree of trust reposed in him stands out more clearly in view of the fact that he wasthe owner of a half interest in his own right of the conjugal estate which he was charged to administer. He could thereforeno more acquire a title by prescription against those for whom he was administering the conjugal estate than could aguardian against his ward or a judicial administrator against the heirs of estate. Section 38 of Chapter III of the Code of Civil Procedure, with relation to prescription, provides that "this chapter shall not apply ... in the case of a continuing andsubsisting trust." The surviving husband in the administration and liquidation of the conjugal estate occupies the positionof a trustee of the highest order and is not permitted by the law to hold that estate or any portion thereof adversely tothose for whose benefit the law imposes upon him the duty of administration and liquidation. No liquidation was ever made by Lasam — hence, the conjugal property which came into his possession on the death of his wife in September,1908, still remains conjugal property, a continuing and subsisting trust. He should have made a liquidation immediately(desde luego). He cannot now be permitted to take advantage of his own wrong. One of the conditions of title byprescription (section 41, Code of Civil Procedure) is possession "under a claim of title exclusive of any other right". For atrustee to make such a claim would be a manifest fraud.

And knowing thus his responsibilities in the premises, We are not convinced that Hodges arrogated everything unto

himself leaving nothing at all to be inherited by his wife's brothers and sisters.PCIB insists, however, that to read the orders of May 27 and December 14, 1957, not as adjudicatory, but merely asapproving past and authorizing future dispositions made by Hodges in a wholesale and general manner, wouldnecessarily render the said orders void for being violative of the provisions of Rule 89 governing the manner in which suchdispositions may be made and how the authority therefor and approval thereof by the probate court may be secured. If We sustained such a view, the result would only be that the said orders should be declared ineffective either way they areunderstood, considering We have already seen it is legally impossible to consider them as adjudicatory. As a matter of fact, however, what surges immediately to the surface, relative to PCIB's observations based on Rule 89, is that from suchpoint of view, the supposed irregularity would involve no more than some non-jurisdictional technicalities of procedure,which have for their evident fundamental purpose the protection of parties interested in the estate, such as the heirs, itscreditors, particularly the government on account of the taxes due it; and since it is apparent here that none of suchparties are objecting to said orders or would be prejudiced by the unobservance by the trial court of the procedure pointed



out by PCIB, We find no legal inconvenience in nor impediment to Our giving sanction to the blanket approval andauthority contained in said orders. This solution is definitely preferable in law and in equity, for to view said orders in thesense suggested by PCIB would result in the deprivation of substantive rights to the brothers and sisters of Mrs. Hodges,whereas reading them the other way will not cause any prejudice to anyone, and, withal, will give peace of mind andstability of rights to the innocent parties who relied on them in good faith, in the light of the peculiar pertinent provisions of the will of said decedent.Now, the inventory submitted by Hodges on May 12, 1958 referred to the estate of his wife as consisting of "One-half of allthe items designated in the balance sheet, copy of which is hereto attached and marked as "Annex A"." Although,regrettably, no copy of said Annex A appears in the records before Us, We take judicial notice, on the basis of theundisputed facts in these cases, that the same consists of considerable real and other personal kinds of properties. Andsince, according to her will, her husband was to be the sole owner thereof during his lifetime, with full power and authorityto dispose of any of them, provided that should there be any remainder upon his death, such remainder would go to her brothers and sisters, and furthermore, there is no pretension, much less any proof that Hodges had in fact disposed of allof them, and, on the contrary, the indications are rather to the effect that he had kept them more or less intact, it cannottruthfully be said that, upon the death of Hodges, there was no more estate of Mrs. Hodges to speak of. It is Our conclusion, therefore, that properties do exist which constitute such estate, hence Special Proceedings 1307 should notyet be closed.Neither is there basis for holding that respondent Magno has ceased to be the Administratrix in said proceeding. There isno showing that she has ever been legally removed as such, the attempt to replace her with Mr. Benito Lopez withoutauthority from the Court having been expressly held ineffective by Our resolution of September 8, 1972. Parenthetically,on this last point, PCIB itself is very emphatic in stressing that it is not questioning said respondent's status as suchadministratrix. Indeed, it is not clear that PCIB has any standing to raise any objection thereto, considering it is a completestranger insofar as the estate of Mrs. Hodges is concerned.

It is the contention of PCIB, however, that as things actually stood at the time of Hodges' death, their conjugal partnershiphad not yet been liquidated and, inasmuch as the properties composing the same were thus commingled pro indiviso and,consequently, the properties pertaining to the estate of each of the spouses are not yet identifiable, it is PCIB alone, asadministrator of the estate of Hodges, who should administer everything, and all that respondent Magno can do for thetime being is to wait until the properties constituting the remaining estate of Mrs. Hodges have been duly segregated anddelivered to her for her own administration. Seemingly, PCIB would liken the Testate Estate of Linnie Jane Hodges to aparty having a claim of ownership to some properties included in the inventory of an administrator of the estate of adecedent, (here that of Hodges) and who normally has no right to take part in the proceedings pending the establishmentof his right or title; for which as a rule it is required that an ordinary action should be filed, since the probate court iswithout jurisdiction to pass with finality on questions of title between the estate of the deceased, on the one hand, and athird party or even an heir claiming adversely against the estate, on the other.We do not find such contention sufficiently persuasive. As We see it, the situation obtaining herein cannot be comparedwith the claim of a third party the basis of which is alien to the pending probate proceedings. In the present cases what

gave rise to the claim of PCIB of exclusive ownership by the estate of Hodges over all the properties of the Hodgesspouses, including the share of Mrs. Hodges in the community properties, were the orders of the trial court issued in thecourse of the very settlement proceedings themselves, more specifically, the orders of May 27 and December 14, 1957 sooften mentioned above. In other words, the root of the issue of title between the parties is something that the court itself has done in the exercise of its probate jurisdiction. And since in the ultimate analysis, the question of whether or not all theproperties herein involved pertain exclusively to the estate of Hodges depends on the legal meaning and effect of saidorders, the claim that respondent court has no jurisdiction to take cognizance of and decide the said issue is incorrect. If itwas within the competence of the court to issue the root orders, why should it not be within its authority to declare their true significance and intent, to the end that the parties may know whether or not the estate of Mrs. Hodges had alreadybeen adjudicated by the court, upon the initiative of Hodges, in his favor, to the exclusion of the other heirs of his wifeinstituted in her will?

At this point, it bears emphasis again that the main cause of all the present problems confronting the courts and theparties in these cases was the failure of Hodges to secure, as executor of his wife's estate, from May, 1957 up to the timeof his death in December, 1962, a period of more than five years, the final adjudication of her estate and the closure of theproceedings. The record is bare of any showing that he ever exerted any effort towards the early settlement of said estate.While, on the one hand, there are enough indications, as already discuss that he had intentions of leaving intact her shareof the conjugal properties so that it may pass wholly to his co-heirs upon his death, pursuant to her will, on the other hand,by not terminating the proceedings, his interests in his own half of the conjugal properties remained commingled pro-indiviso with those of his co-heirs in the other half. Obviously, such a situation could not be conducive to readyascertainment of the portion of the inheritance that should appertain to his co-heirs upon his death. Having theseconsiderations in mind, it would be giving a premium for such procrastination and rather unfair to his co-heirs, if theadministrator of his estate were to be given exclusive administration of all the properties in question, which wouldnecessarily include the function of promptly liquidating the conjugal partnership, thereby identifying and segregatingwithout unnecessary loss of time which properties should be considered as constituting the estate of Mrs. Hodges, theremainder of which her brothers and sisters are supposed to inherit equally among themselves.To be sure, an administrator is not supposed to represent the interests of any particular party and his acts are deemed tobe objectively for the protection of the rights of everybody concerned with the estate of the decedent, and from this point

of view, it maybe said that even if PCIB were to act alone, there should be no fear of undue disadvantage to anyone. Onthe other hand, however, it is evidently implicit in section 6 of Rule 78 fixing the priority among those to whom letters of administration should be granted that the criterion in the selection of the administrator is not his impartiality alone but,more importantly, the extent of his interest in the estate, so much so that the one assumed to have greater interest ispreferred to another who has less. Taking both of these considerations into account, inasmuch as, according to Hodges'own inventory submitted by him as Executor of the estate of his wife, practically all their properties were conjugal whichmeans that the spouses have equal shares therein, it is but logical that both estates should be administered jointly byrepresentatives of both, pending their segregation from each other. Particularly is such an arrangement warrantedbecause the actuations so far of PCIB evince a determined, albeit groundless, intent to exclude the other heirs of Mrs.Hodges from their inheritance. Besides, to allow PCIB, the administrator of his estate, to perform now what Hodges wasduty bound to do as executor is to violate the spirit, if not the letter, of Section 2 of Rule 78 which expressly provides that



"The executor of an executor shall not, as such, administer the estate of the first testator." It goes without saying that thisprovision refers also to the administrator of an executor like PCIB here.We are not unmindful of the fact that under Section 2 of Rule 73, "When the marriage is dissolved by the death of thehusband or wife, the community property shall be inventoried, administered, and liquidated, and the debts thereof paid, inthe testate or intestate proceedings of the deceased spouse. If both spouses have died, the conjugal partnership shall beliquidated in the testate or intestate proceedings of either." Indeed, it is true that the last sentence of this provision allowsor permits the conjugal partnership of spouses who are both deceased to be settled or liquidated in the testate or intestateproceedings of either, but precisely because said sentence allows or permits that the liquidation be made in either proceeding, it is a matter of sound judicial discretion in which one it should be made. After all, the former rule referring tothe administrator of the husband's estate in respect to such liquidation was done away with by Act 3176, the pertinentprovisions of which are now embodied in the rule just cited.Thus, it can be seen that at the time of the death of Hodges, there was already the pending judicial settlement proceedingof the estate of Mrs. Hodges, and, more importantly, that the former was the executor of the latter's will who had, as such,failed for more than five years to see to it that the same was terminated earliest, which was not difficult to do, since fromought that appears in the record, there were no serious obstacles on the way, the estate not being indebted and therebeing no immediate heirs other than Hodges himself. Such dilatory or indifferent attitude could only spell possibleprejudice of his co-heirs, whose rights to inheritance depend entirely on the existence of any remainder of Mrs. Hodges'share in the community properties, and who are now faced with the pose of PCIB that there is no such remainder. HadHodges secured as early as possible the settlement of his wife's estate, this problem would not arisen. All thingsconsidered, We are fully convinced that the interests of justice will be better served by not permitting or allowing PCIB or any administrator of the estate of Hodges exclusive administration of all the properties in question. We are of theconsidered opinion and so hold that what would be just and proper is for both administrators of the two estates to actconjointly until after said estates have been segregated from each other.

At this juncture, it may be stated that we are not overlooking the fact that it is PCIB's contention that, viewed as asubstitution, the testamentary disposition in favor of Mrs. Hodges' brothers and sisters may not be given effect. To acertain extent, this contention is correct. Indeed, legally speaking, Mrs. Hodges' will provides neither for a simple or vulgar substitution under Article 859 of the Civil Code nor for a fideicommissary substitution under Article 863 thereof. There isno vulgar substitution therein because there is no provision for either (1) predecease of the testator by the designated heir or (2) refusal or (3) incapacity of the latter to accept the inheritance, as required by Article 859; and neither is there afideicommissary substitution therein because no obligation is imposed thereby upon Hodges to preserve the estate or anypart thereof for anyone else. But from these premises, it is not correct to jump to the conclusion, as PCIB does, that thetestamentary dispositions in question are therefore inoperative and invalid.The error in PCIB's position lies simply in the fact that it views the said disposition exclusively in the light of substitutionscovered by the Civil Code section on that subject, (Section 3, Chapter 2, Title IV, Book III) when it is obvious thatsubstitution occurs only when another heir is appointed in a will "so that he may enter into inheritance in default of the heir originally instituted," (Article 857, id.) and, in the present case, no such possible default is contemplated. The brothers and

sisters of Mrs. Hodges are not substitutes for Hodges because, under her will, they are not to inherit what Hodges cannot,would not or may not inherit, but what he would not dispose of from his inheritance; rather, therefore, they are also heirsinstituted simultaneously with Hodges, subject, however, to certain conditions, partially resolutory insofar as Hodges wasconcerned and correspondingly suspensive with reference to his brothers and sisters-in-law. It is partially resolutory, sinceit bequeaths unto Hodges the whole of her estate to be owned and enjoyed by him as universal and sole heir withabsolute dominion over them 6 only during his lifetime, which means that while he could completely and absolutely disposeof any portion thereof inter vivos to anyone other than himself, he was not free to do so mortis causa, and all his rights towhat might remain upon his death would cease entirely upon the occurrence of that contingency, inasmuch as the right of his brothers and sisters-in-law to the inheritance, although vested already upon the death of Mrs. Hodges, wouldautomatically become operative upon the occurrence of the death of Hodges in the event of actual existence of anyremainder of her estate then.Contrary to the view of respondent Magno, however, it was not the usufruct alone of her estate, as contemplated in Article869 of the Civil Code, that she bequeathed to Hodges during his lifetime, but the full ownership thereof, although thesame was to last also during his lifetime only, even as there was no restriction whatsoever against his disposing or conveying the whole or any portion thereof to anybody other than himself. The Court sees no legal impediment to this kindof institution, in this jurisdiction or under Philippine law, except that it cannot apply to the legitime of Hodges as thesurviving spouse, consisting of one-half of the estate, considering that Mrs. Hodges had no surviving ascendants nor descendants. (Arts. 872, 900, and 904, New Civil Code.)But relative precisely to the question of how much of Mrs. Hodges' share of the conjugal partnership properties may beconsidered as her estate, the parties are in disagreement as to how Article 16 of the Civil Code 7 should be applied. Onthe one hand, petitioner claims that inasmuch as Mrs. Hodges was a resident of the Philippines at the time of her death,under said Article 16, construed in relation to the pertinent laws of Texas and the principle of renvoi , what should beapplied here should be the rules of succession under the Civil Code of the Philippines, and, therefore, her estate couldconsist of no more than one-fourth of the said conjugal properties, the other fourth being, as already explained, thelegitime of her husband (Art. 900, Civil Code) which she could not have disposed of nor burdened with any condition (Art.872, Civil Code). On the other hand, respondent Magno denies that Mrs. Hodges died a resident of the Philippines, sinceallegedly she never changed nor intended to change her original residence of birth in Texas, United States of America,

and contends that, anyway, regardless of the question of her residence, she being indisputably a citizen of Texas, under said Article 16 of the Civil Code, the distribution of her estate is subject to the laws of said State which, according to her,do not provide for any legitime, hence, the brothers and sisters of Mrs. Hodges are entitled to the remainder of the wholeof her share of the conjugal partnership properties consisting of one-half thereof. Respondent Magno further maintainsthat, in any event, Hodges had renounced his rights under the will in favor of his co-heirs, as allegedly proven by thedocuments touching on the point already mentioned earlier, the genuineness and legal significance of which petitioner seemingly questions. Besides, the parties are disagreed as to what the pertinent laws of Texas provide. In the interest of settling the estates herein involved soonest, it would be best, indeed, if these conflicting claims of the parties weredetermined in these proceedings. The Court regrets, however, that it cannot do so, for the simple reason that neither theevidence submitted by the parties in the court below nor their discussion, in their respective briefs and memoranda beforeUs, of their respective contentions on the pertinent legal issues, of grave importance as they are, appear to Us to beadequate enough to enable Us to render an intelligent comprehensive and just resolution. For one thing, there is no clear



and reliable proof of what in fact the possibly applicable laws of Texas are. 7* Then also, the genuineness of documentsrelied upon by respondent Magno is disputed. And there are a number of still other conceivable related issues which theparties may wish to raise but which it is not proper to mention here. In Justice, therefore, to all the parties concerned,these and all other relevant matters should first be threshed out fully in the trial court in the proceedings hereafter to beheld therein for the purpose of ascertaining and adjudicating and/or distributing the estate of Mrs. Hodges to her heirs inaccordance with her duly probated will.To be more explicit, all that We can and do decide in connection with the petition for certiorari and prohibition are: (1) thatregardless of which corresponding laws are applied, whether of the Philippines or of Texas, and taking for granted either of the respective contentions of the parties as to provisions of the latter, 8 and regardless also of whether or not it can beproven by competent evidence that Hodges renounced his inheritance in any degree, it is easily and definitely discerniblefrom the inventory submitted by Hodges himself, as Executor of his wife's estate, that there are properties which shouldconstitute the estate of Mrs. Hodges and ought to be disposed of or distributed among her heirs pursuant to her will insaid Special Proceedings 1307; (2) that, more specifically, inasmuch as the question of what are the pertinent laws of Texas applicable to the situation herein is basically one of fact, and, considering that the sole difference in the positions of the parties as to the effect of said laws has reference to the supposed legitime of Hodges — it being the stand of PCIBthat Hodges had such a legitime whereas Magno claims the negative - it is now beyond controversy for all future purposesof these proceedings that whatever be the provisions actually of the laws of Texas applicable hereto, the estate of Mrs.Hodges is at least, one-fourth of the conjugal estate of the spouses; the existence and effects of foreign laws beingquestions of fact, and it being the position now of PCIB that the estate of Mrs. Hodges, pursuant to the laws of Texas,should only be one-fourth of the conjugal estate, such contention constitutes an admission of fact, and consequently, itwould be in estoppel in any further proceedings in these cases to claim that said estate could be less, irrespective of whatmight be proven later to be actually the provisions of the applicable laws of Texas; (3) that Special Proceedings 1307 for the settlement of the testate estate of Mrs. Hodges cannot be closed at this stage and should proceed to its logical

conclusion, there having been no proper and legal adjudication or distribution yet of the estate therein involved; and (4)that respondent Magno remains and continues to be the Administratrix therein. Hence, nothing in the foregoing opinion isintended to resolve the issues which, as already stated, are not properly before the Court now, namely, (1) whether or notHodges had in fact and in law waived or renounced his inheritance from Mrs. Hodges, in whole or in part, and (2)assuming there had been no such waiver, whether or not, by the application of Article 16 of the Civil Code, and in the lightof what might be the applicable laws of Texas on the matter, the estate of Mrs. Hodges is more than the one-fourthdeclared above. As a matter of fact, even our finding above about the existence of properties constituting the estate of Mrs. Hodges rests largely on a general appraisal of the size and extent of the conjugal partnership gathered fromreference made thereto by both parties in their briefs as well as in their pleadings included in the records on appeal, and itshould accordingly yield, as to which exactly those properties are, to the more concrete and specific evidence which theparties are supposed to present in support of their respective positions in regard to the foregoing main legal and factualissues. In the interest of justice, the parties should be allowed to present such further evidence in relation to all theseissues in a joint hearing of the two probate proceedings herein involved. After all, the court a quo has not yet passed

squarely on these issues, and it is best for all concerned that it should do so in the first instance.Relative to Our holding above that the estate of Mrs. Hodges cannot be less than the remainder of one-fourth of theconjugal partnership properties, it may be mentioned here that during the deliberations, the point was raised as to whether or not said holding might be inconsistent with Our other ruling here also that, since there is no reliable evidence as to whatare the applicable laws of Texas, U.S.A. "with respect to the order of succession and to the amount of successional rights"that may be willed by a testator which, under Article 16 of the Civil Code, are controlling in the instant cases, in view of theundisputed Texan nationality of the deceased Mrs. Hodges, these cases should be returned to the court a quo, so that theparties may prove what said law provides, it is premature for Us to make any specific ruling now on either the validity of the testamentary dispositions herein involved or the amount of inheritance to which the brothers and sisters of Mrs.Hodges are entitled. After nature reflection, We are of the considered view that, at this stage and in the state of therecords before Us, the feared inconsistency is more apparent than real. Withal, it no longer lies in the lips of petitioner PCIB to make any claim that under the laws of Texas, the estate of Mrs. Hodges could in any event be less than that Wehave fixed above.It should be borne in mind that as above-indicated, the question of what are the laws of Texas governing the mattersherein issue is, in the first instance, one of fact, not of law. Elementary is the rule that foreign laws may not be taken

judicial notice of and have to be proven like any other fact in dispute between the parties in any proceeding, with the rareexception in instances when the said laws are already within the actual knowledge of the court, such as when they arewell and generally known or they have been actually ruled upon in other cases before it and none of the parties concerneddo not claim otherwise. (5 Moran, Comments on the Rules of Court, p. 41, 1970 ed.) In Fluemer vs. Hix , 54 Phil. 610, itwas held:It is the theory of the petitioner that the alleged will was executed in Elkins West Virginia, on November 3, 1925, by Hixwho had his residence in that jurisdiction, and that the laws of West Virginia govern. To this end, there was submitted acopy of section 3868 of Acts 1882, c. 84 as found in West Virginia Code, Annotated, by Hogg Charles E., vol. 2, 1914, p.1960, and as certified to by the Director of the National Library. But this was far from a compliance with the law. The lawsof a foreign jurisdiction do not prove themselves in our courts. The courts of the Philippine Islands are not authorized totake judicial notice of the laws of the various States of the American Union. Such laws must be proved as facts. (In reEstate of Johnson [1918], 39 Phil., 156.) Here the requirements of the law were not met. There was no showing that the

book from which an extract was taken was printed or published under the authority of the State of West Virginia, asprovided in section 300 of the Code of Civil Procedure. Nor was the extract from the law attested by the certificate of theofficer having charge of the original, under the seal of the State of West Virginia, as provided in section 301 of the Code of Civil Procedure. No evidence was introduced to show that the extract from the laws of West Virginia was in force at thetime the alleged will was executed."No evidence of the nature thus suggested by the Court may be found in the records of the cases at bar. Quite to thecontrary, the parties herein have presented opposing versions in their respective pleadings and memoranda regarding thematter. And even if We took into account that in Aznar vs. Garcia, the Court did make reference to certain provisionsregarding succession in the laws of Texas, the disparity in the material dates of that case and the present ones would notpermit Us to indulge in the hazardous conjecture that said provisions have not been amended or changed in themeantime.On the other hand, in In re Estate of Johnson, 39 Phil. 156, We held:



Upon the other point — as to whether the will was executed in conformity with the statutes of the State of Illinois — wenote that it does not affirmatively appear from the transcription of the testimony adduced in the trial court that any witnesswas examined with reference to the law of Illinois on the subject of the execution of will. The trial judge no doubt wassatisfied that the will was properly executed by examining section 1874 of the Revised Statutes of Illinois, as exhibited involume 3 of Starr & Curtis's Annotated Illinois Statutes, 2nd ed., p. 426; and he may have assumed that he could take

judicial notice of the laws of Illinois under section 275 of the Code of Civil Procedure. If so, he was in our opinionmistaken. That section authorizes the courts here to take judicial notice, among other things, of the acts of the legislativedepartment of the United States. These words clearly have reference to Acts of the Congress of the United States; andwe would hesitate to hold that our courts can, under this provision, take judicial notice of the multifarious laws of thevarious American States. Nor do we think that any such authority can be derived from the broader language, used in thesame section, where it is said that our courts may take judicial notice of matters of public knowledge "similar" to thosetherein enumerated. The proper rule we think is to require proof of the statutes of the States of the American Unionwhenever their provisions are determinative of the issues in any action litigated in the Philippine courts.Nevertheless, even supposing that the trial court may have erred in taking judicial notice of the law of Illinois on the pointin question, such error is not now available to the petitioner, first, because the petition does not state any fact from which itwould appear that the law of Illinois is different from what the court found, and, secondly, because the assignment of error and argument for the appellant in this court raises no question based on such supposed error. Though the trial court mayhave acted upon pure conjecture as to the law prevailing in the State of Illinois, its judgment could not be set aside, evenupon application made within six months under section 113 of the Code of Civil Procedure, unless it should be made toappear affirmatively that the conjecture was wrong. The petitioner, it is true, states in general terms that the will inquestion is invalid and inadequate to pass real and personal property in the State of Illinois, but this is merely a conclusionof law. The affidavits by which the petition is accompanied contain no reference to the subject, and we are cited to noauthority in the appellant's brief which might tend to raise a doubt as to the correctness of the conclusion of the trial court.

It is very clear, therefore, that this point cannot be urged as of serious moment.It is implicit in the above ruling that when, with respect to certain aspects of the foreign laws concerned, the parties in agiven case do not have any controversy or are more or less in agreement, the Court may take it for granted for thepurposes of the particular case before it that the said laws are as such virtual agreement indicates, without the need of requiring the presentation of what otherwise would be the competent evidence on the point. Thus, in the instant caseswherein it results from the respective contentions of both parties that even if the pertinent laws of Texas were known andto be applied, the amount of the inheritance pertaining to the heirs of Mrs. Hodges is as We have fixed above, theabsence of evidence to the effect that, actually and in fact, under said laws, it could be otherwise is of no longer of anyconsequence, unless the purpose is to show that it could be more. In other words, since PCIB, the petitioner-appellant,concedes that upon application of Article 16 of the Civil Code and the pertinent laws of Texas, the amount of the estate incontroversy is just as We have determined it to be, and respondent-appellee is only claiming, on her part, that it could bemore, PCIB may not now or later pretend differently.To be more concrete, on pages 20-21 of its petition herein, dated July 31, 1967, PCIB states categorically:

Inasmuch as Article 16 of the Civil Code provides that "intestate and testamentary successions both with respect to theorder of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shallbe regulated by the national law of the person whose succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found", while the law of Texas (the Hodgesspouses being nationals of U.S.A., State of Texas), in its conflicts of law rules, provides that the domiciliary law (in thiscase Philippine law) governs the testamentary dispositions and successional rights over movables or personal properties,while the law of the situs (in this case also Philippine law with respect to all Hodges properties located in the Philippines),governs with respect to immovable properties, and applying therefore the 'renvoi doctrine' as enunciated and applied bythis Honorable Court in the case of In re Estate of Christensen (G.R. No. L-16749, Jan. 31, 1963), there can be noquestion that Philippine law governs the testamentary dispositions contained in the Last Will and Testament of thedeceased Linnie Jane Hodges, as well as the successional rights to her estate, both with respect to movables, as well asto immovables situated in the Philippines.In its main brief dated February 26, 1968, PCIB asserts:The law governing successional rights.

As recited above, there is no question that the deceased, Linnie Jane Hodges, was an American citizen. There is also noquestion that she was a national of the State of Texas, U.S.A. Again, there is likewise no question that she had her domicile of choice in the City of Iloilo, Philippines, as this has already been pronounced by the above-cited orders of thelower court, pronouncements which are by now res adjudicata (par. [a], See. 49, Rule 39, Rules of Court; In re Estate of Johnson, 39 Phil. 156).

Article 16 of the Civil Code provides:"Real property as well as personal property is subject to the law of the country where it is situated.However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of theperson whose succession is under consideration, whatever may be the nature of the property and regardless of thecountry wherein said property may be found."Thus the aforecited provision of the Civil Code points towards the national law of the deceased, Linnie Jane Hodges,which is the law of Texas, as governing succession "both with respect to the order of succession and to the amount of

successional rights and to the intrinsic validity of testamentary provisions ...". But the law of Texas, in its conflicts of lawrules, provides that the domiciliary law governs the testamentary dispositions and successional rights over movables or personal property, while the law of the situs governs with respect to immovable property. Such that with respect to bothmovable property, as well as immovable property situated in the Philippines, the law of Texas points to the law of thePhilippines.

Applying, therefore, the so-called "renvoi doctrine", as enunciated and applied by this Honorable Court in the case of "Inre Christensen" (G.R. No. L-16749, Jan. 31, 1963), there can be no question that Philippine law governs the testamentaryprovisions in the Last Will and Testament of the deceased Linnie Jane Hodges, as well as the successional rights to her estate, both with respect to movables, as well as immovables situated in the Philippines.The subject of successional rights.Under Philippine law, as it is under the law of Texas, the conjugal or community property of the spouses, Charles NewtonHodges and Linnie Jane Hodges, upon the death of the latter, is to be divided into two, one-half pertaining to each of the



spouses, as his or her own property. Thus, upon the death of Linnie Jane Hodges, one-half of the conjugal partnershipproperty immediately pertained to Charles Newton Hodges as his own share, and not by virtue of any successional rights.There can be no question about this.

Again, Philippine law, or more specifically, Article 900 of the Civil Code provides:If the only survivor is the widow or widower, she or he shall be entitled to one-half of the hereditary estate of the deceasedspouse, and the testator may freely dispose of the other half.If the marriage between the surviving spouse and the testator was solemnized in articulo mortis, and the testator diedwithin three months from the time of the marriage, the legitime of the surviving spouse as the sole heir shall be one-thirdof the hereditary estate, except when they have been living as husband and wife for more than five years. In the latter case, the legitime of the surviving spouse shall be that specified in the preceding paragraph.This legitime of the surviving spouse cannot be burdened by a fideicommisary substitution (Art. 864, Civil code), nor byany charge, condition, or substitution (Art, 872, Civil code). It is clear, therefore, that in addition to one-half of the conjugalpartnership property as his own conjugal share, Charles Newton Hodges was also immediately entitled to one-half of thehalf conjugal share of the deceased, Linnie Jane Hodges, or one-fourth of the entire conjugal property, as his legitime.One-fourth of the conjugal property therefore remains at issue.In the summary of its arguments in its memorandum dated April 30, 1968, the following appears:Briefly, the position advanced by the petitioner is:a. That the Hodges spouses were domiciled legally in the Philippines (pp. 19-20, petition). This is now a matter of resadjudicata (p. 20, petition).b. That under Philippine law, Texas law, and the renvoi doctrine, Philippine law governs the successional rights over theproperties left by the deceased, Linnie Jane Hodges (pp. 20-21, petition).c. That under Philippine as well as Texas law, one-half of the Hodges properties pertains to the deceased, CharlesNewton Hodges (p. 21, petition). This is not questioned by the respondents.

d. That under Philippine law, the deceased, Charles Newton Hodges, automatically inherited one-half of the remainingone-half of the Hodges properties as his legitime (p. 21, petition).e. That the remaining 25% of the Hodges properties was inherited by the deceased, Charles Newton Hodges, under thewill of his deceased spouse (pp. 22-23, petition). Upon the death of Charles Newton Hodges, the substitution 'provision of the will of the deceased, Linnie Jane Hodges, did not operate because the same is void (pp. 23-25, petition).f. That the deceased, Charles Newton Hodges, asserted his sole ownership of the Hodges properties and the probatecourt sanctioned such assertion (pp. 25-29, petition). He in fact assumed such ownership and such was the status of theproperties as of the time of his death (pp. 29-34, petition).Of similar tenor are the allegations of PCIB in some of its pleadings quoted in the earlier part of this option.On her part, it is respondent-appellee Magno's posture that under the laws of Texas, there is no system of legitime, hencethe estate of Mrs. Hodges should be one-half of all the conjugal properties.It is thus unquestionable that as far as PCIB is concerned, the application to these cases of Article 16 of the Civil Code inrelation to the corresponding laws of Texas would result in that the Philippine laws on succession should control. On that

basis, as We have already explained above, the estate of Mrs. Hodges is the remainder of one-fourth of the conjugalpartnership properties, considering that We have found that there is no legal impediment to the kind of disposition orderedby Mrs. Hodges in her will in favor of her brothers and sisters and, further, that the contention of PCIB that the sameconstitutes an inoperative testamentary substitution is untenable. As will be recalled, PCIB's position that there is no suchestate of Mrs. Hodges is predicated exclusively on two propositions, namely: (1) that the provision in question in Mrs.Hodges' testament violates the rules on substitution of heirs under the Civil Code and (2) that, in any event, by the ordersof the trial court of May 27, and December 14, 1957, the trial court had already finally and irrevocably adjudicated to her husband the whole free portion of her estate to the exclusion of her brothers and sisters, both of which poses, We haveoverruled. Nowhere in its pleadings, briefs and memoranda does PCIB maintain that the application of the laws of Texaswould result in the other heirs of Mrs. Hodges not inheriting anything under her will. And since PCIB's representations inregard to the laws of Texas virtually constitute admissions of fact which the other parties and the Court are being made torely and act upon, PCIB is "not permitted to contradict them or subsequently take a position contradictory to or inconsistent with them." (5 Moran, id, p. 65, citing Cunanan vs. Amparo, 80 Phil. 227; Sta. Ana vs. Maliwat, L-23023, Aug.31, 1968, 24 SCRA 1018).

Accordingly, the only question that remains to be settled in the further proceedings hereby ordered to be held in the courtbelow is how much more than as fixed above is the estate of Mrs. Hodges, and this would depend on (1) whether or notthe applicable laws of Texas do provide in effect for more, such as, when there is no legitime provided therein, and (2)whether or not Hodges has validly waived his whole inheritance from Mrs. Hodges.In the course of the deliberations, it was brought out by some members of the Court that to avoid or, at least, minimizefurther protracted legal controversies between the respective heirs of the Hodges spouses, it is imperative to elucidate onthe possible consequences of dispositions made by Hodges after the death of his wife from the mass of the unpartitionedestates without any express indication in the pertinent documents as to whether his intention is to dispose of part of hisinheritance from his wife or part of his own share of the conjugal estate as well as of those made by PCIB after the deathof Hodges. After a long discussion, the consensus arrived at was as follows: (1) any such dispositionsmade gratuitously in favor of third parties, whether these be individuals, corporations or foundations, shall be consideredas intended to be of properties constituting part of Hodges' inheritance from his wife, it appearing from the tenor of hismotions of May 27 and December 11, 1957 that in asking for general authority to make sales or other disposals of

properties under the jurisdiction of the court, which include his own share of the conjugal estate, he was not invokingparticularly his right over his own share, but rather his right to dispose of any part of his inheritance pursuant to the will of his wife; (2) as regards sales, exchanges or other remunerative transfers, the proceeds of such sales or the propertiestaken in by virtue of such exchanges, shall be considered as merely the products of "physical changes" of the propertiesof her estate which the will expressly authorizes Hodges to make, provided that whatever of said products should remainwith the estate at the time of the death of Hodges should go to her brothers and sisters; (3) the dispositions made by PCIBafter the death of Hodges must naturally be deemed as covering only the properties belonging to his estate consideringthat being only the administrator of the estate of Hodges, PCIB could not have disposed of properties belonging to theestate of his wife. Neither could such dispositions be considered as involving conjugal properties, for the simple reasonthat the conjugal partnership automatically ceased when Mrs. Hodges died, and by the peculiar provision of her will, under discussion, the remainder of her share descended also automatically upon the death of Hodges to her brothers andsisters, thus outside of the scope of PCIB's administration. Accordingly, these construction of the will of Mrs. Hodges



should be adhered to by the trial court in its final order of adjudication and distribution and/or partition of the two estates inquestion.THE APPEALS

A cursory examination of the seventy-eight assignments of error in appellant PCIB's brief would readily reveal that all of them are predicated mainly on the contention that inasmuch as Hodges had already adjudicated unto himself all theproperties constituting his wife's share of the conjugal partnership, allegedly with the sanction of the trial court per its order of December 14, 1957, there has been, since said date, no longer any estate of Mrs. Hodges of which appellee Magnocould be administratrix, hence the various assailed orders sanctioning her actuations as such are not in accordance withlaw. Such being the case, with the foregoing resolution holding such posture to be untenable in fact and in law and that itis in the best interest of justice that for the time being the two estates should be administered conjointly by the respectiveadministrators of the two estates, it should follow that said assignments of error have lost their fundamental reasons for being. There are certain matters, however, relating peculiarly to the respective orders in question, if commonly amongsome of them, which need further clarification. For instance, some of them authorized respondent Magno to act alone or without concurrence of PCIB. And with respect to many of said orders, PCIB further claims that either the matters involvedwere not properly within the probate jurisdiction of the trial court or that the procedure followed was not in accordance withthe rules. Hence, the necessity of dealing separately with the merits of each of the appeals.Indeed, inasmuch as the said two estates have until now remained commingled pro-indiviso, due to the failure of Hodgesand the lower court to liquidate the conjugal partnership, to recognize appellee Magno as Administratrix of the TestateEstate of Mrs. Hodges which is still unsegregated from that of Hodges is not to say, without any qualification, that she wastherefore authorized to do and perform all her acts complained of in these appeals, sanctioned though they might havebeen by the trial court. As a matter of fact, it is such commingling pro-indivisoof the two estates that should depriveappellee of freedom to act independently from PCIB, as administrator of the estate of Hodges, just as, for the samereason, the latter should not have authority to act independently from her. And considering that the lower court failed to

adhere consistently to this basic point of view, by allowing the two administrators to act independently of each other, in thevarious instances already noted in the narration of facts above, the Court has to look into the attendant circumstances of each of the appealed orders to be able to determine whether any of them has to be set aside or they may all be legallymaintained notwithstanding the failure of the court a quo to observe the pertinent procedural technicalities, to the end onlythat graver injury to the substantive rights of the parties concerned and unnecessary and undesirable proliferation of incidents in the subject proceedings may be forestalled. In other words, We have to determine, whether or not, in the lightof the unusual circumstances extant in the record, there is need to be more pragmatic and to adopt a rather unorthodoxapproach, so as to cause the least disturbance in rights already being exercised by numerous innocent third parties, evenif to do so may not appear to be strictly in accordance with the letter of the applicable purely adjective rules.Incidentally, it may be mentioned, at this point, that it was principally on account of the confusion that might result later from PCIB's continuing to administer all the community properties, notwithstanding the certainty of the existence of theseparate estate of Mrs. Hodges, and to enable both estates to function in the meantime with a relative degree of regularity, that the Court ordered in the resolution of September 8, 1972 the modification of the injunction issued pursuant

to the resolutions of August 8, October 4 and December 6, 1967, by virtue of which respondent Magno was completelybarred from any participation in the administration of the properties herein involved. In the September 8 resolution, Weordered that, pending this decision, Special Proceedings 1307 and 1672 should proceed jointly and that the respectiveadministrators therein "act conjointly — none of them to act singly and independently of each other for any purpose."Upon mature deliberation, We felt that to allow PCIB to continue managing or administering all the said properties to theexclusion of the administratrix of Mrs. Hodges' estate might place the heirs of Hodges at an unduly advantageous positionwhich could result in considerable, if not irreparable, damage or injury to the other parties concerned. It is indeed to beregretted that apparently, up to this date, more than a year after said resolution, the same has not been given due regard,as may be gleaned from the fact that recently, respondent Magno has filed in these proceedings a motion to declare PCIBin contempt for alleged failure to abide therewith, notwithstanding that its repeated motions for reconsideration thereof have all been denied soon after they were filed. 9

Going back to the appeals, it is perhaps best to begin first with what appears to Our mind to be the simplest, and thenproceed to the more complicated ones in that order, without regard to the numerical sequence of the assignments of error in appellant's brief or to the order of the discussion thereof by counsel.

Assignments of error numbersLXXII, LXXVII and LXXVIII.These assignments of error relate to (1) the order of the trial court of August 6, 1965 providing that "the deeds of sale(therein referred to involving properties in the name of Hodges) should be signed jointly by the PCIB, as Administrator of Testate Estate of C.N. Hodges, and Avelina A. Magno, as Administratrix of the Testate Estate of Linnie Jane Hodges, andto this effect, the PCIB should take the necessary steps so that Administratrix Avelina A. Magno could sign the deeds of sale," (p. 248, Green Rec. on Appeal) (2) the order of October 27, 1965 denying the motion for reconsideration of theforegoing order, (pp. 276-277, id.) (3) the other order also dated October 27, 1965 enjoining inter alia, that "(a) all cashcollections should be deposited in the joint account of the estate of Linnie Jane Hodges and estate of C. N. Hodges, (b)that whatever cash collections (that) had been deposited in the account of either of the estates should be withdrawn andsince then (sic) deposited in the joint account of the estate of Linnie Jane Hodges and the estate of C. N. Hodges; ... (d)(that) Administratrix Magno — allow the PCIB to inspect whatever records, documents and papers she may have in her possession, in the same manner that Administrator PCIB is also directed to allow Administratrix Magno to inspect

whatever records, documents and papers it may have in its possession" and "(e) that the accountant of the estate of Linnie Jane Hodges shall have access to all records of the transactions of both estates for the protection of the estate of Linnie Jane Hodges; and in like manner, the accountant or any authorized representative of the estate of C. N. Hodgesshall have access to the records of transactions of the Linnie Jane Hodges estate for the protection of the estate of C. N.Hodges", (pp. 292-295, id.) and (4) the order of February 15, 1966, denying, among others, the motion for reconsiderationof the order of October 27, 1965 last referred to. (pp. 455-456, id.)

As may be readily seen, the thrust of all these four impugned orders is in line with the Court's above-mentioned resolutionof September 8, 1972 modifying the injunction previously issued on August 8, 1967, and, more importantly, with what Wehave said the trial court should have always done pending the liquidation of the conjugal partnership of the Hodgesspouses. In fact, as already stated, that is the arrangement We are ordering, by this decision, to be followed. Stateddifferently, since the questioned orders provide for joint action by the two administrators, and that is precisely what We are



holding out to have been done and should be done until the two estates are separated from each other, the said ordersmust be affirmed. Accordingly the foregoing assignments of error must be, as they are hereby overruled.

Assignments of error Numbers LXVIII to LXXI and LXXIII to LXXVI.The orders complained of under these assignments of error commonly deal with expenditures made by appellee Magno,as Administratrix of the Estate of Mrs. Hodges, in connection with her administration thereof, albeit additionally,assignments of error Numbers LXIX to LXXI put into question the payment of attorneys fees provided for in the contractfor the purpose, as constituting, in effect, premature advances to the heirs of Mrs. Hodges.More specifically, assignment Number LXXIII refers to reimbursement of overtime pay paid to six employees of the courtand three other persons for services in copying the court records to enable the lawyers of the administration to be fullyinformed of all the incidents in the proceedings. The reimbursement was approved as proper legal expenses of administration per the order of December 19, 1964, (pp. 221-222, id.) and repeated motions for reconsideration thereof were denied by the orders of January 9, 1965, (pp. 231-232, id.) October 27, 1965, (p. 277, id.) and February 15, 1966.(pp. 455-456, id.) On the other hand, Assignments Numbers LXVIII to LXXI, LXXIV and LXXV question the trial court'sorder of November 3, 1965 approving the agreement of June 6, 1964 between Administratrix Magno and James L.Sullivan, attorney-in-fact of the heirs of Mrs. Hodges, as Parties of the First Part, and Attorneys Raul Manglapus and RizalR. Quimpo, as Parties of the Second Part, regarding attorneys fees for said counsel who had agreed "to prosecute anddefend their interests (of the Parties of the First Part) in certain cases now pending litigation in the Court of First Instanceof Iloilo —, more specifically in Special Proceedings 1307 and 1672 —" (pp. 126-129, id.) and directing AdministratrixMagno "to issue and sign whatever check or checks maybe needed to implement the approval of the agreement annexedto the motion" as well as the "administrator of the estate of C. N. Hodges — to countersign the said check or checks asthe case maybe." (pp. 313-320, id.), reconsideration of which order of approval was denied in the order of February 16,1966, (p. 456,id.) Assignment Number LXXVI imputes error to the lower court's order of October 27, 1965, already

referred to above, insofar as it orders that "PCIB should counter sign the check in the amount of P250 in favor of Administratrix Avelina A. Magno as her compensation as administratrix of Linnie Jane Hodges estate chargeable to theTestate Estate of Linnie Jane Hodges only." (p. 294, id.)Main contention again of appellant PCIB in regard to these eight assigned errors is that there is no such estate as theestate of Mrs. Hodges for which the questioned expenditures were made, hence what were authorized were in effectexpenditures from the estate of Hodges. As We have already demonstrated in Our resolution above of the petitionfor certiorari and prohibition, this posture is incorrect. Indeed, in whichever way the remaining issues between the partiesin these cases are ultimately resolved, 10 the final result will surely be that there are properties constituting the estate of Mrs. Hodges of which Magno is the current administratrix. It follows, therefore, that said appellee had the right, as suchadministratrix, to hire the persons whom she paid overtime pay and to be paid for her own services as administratrix. Thatshe has not yet collected and is not collecting amounts as substantial as that paid to or due appellant PCIB is to her credit.Of course, she is also entitled to the services of counsel and to that end had the authority to enter into contracts for

attorney's fees in the manner she had done in the agreement of June 6, 1964. And as regards to the reasonableness of the amount therein stipulated, We see no reason to disturb the discretion exercised by the probate court in determiningthe same. We have gone over the agreement, and considering the obvious size of the estate in question and the nature of the issues between the parties as well as the professional standing of counsel, We cannot say that the fees agreed uponrequire the exercise by the Court of its inherent power to reduce it.PCIB insists, however, that said agreement of June 6, 1964 is not for legal services to the estate but to the heirs of Mrs.Hodges, or, at most, to both of them, and such being the case, any payment under it, insofar as counsels' services wouldredound to the benefit of the heirs, would be in the nature of advances to such heirs and a premature distribution of theestate. Again, We hold that such posture cannot prevail.Upon the premise We have found plausible that there is an existing estate of Mrs. Hodges, it results that juridically andfactually the interests involved in her estate are distinct and different from those involved in her estate of Hodges and viceversa. Insofar as the matters related exclusively to the estate of Mrs. Hodges, PCIB, as administrator of the estate of Hodges, is a complete stranger and it is without personality to question the actuations of the administratrix thereof regarding matters not affecting the estate of Hodges. Actually, considering the obviously considerable size of the estate of Mrs. Hodges, We see no possible cause for apprehension that when the two estates are segregated from each other, theamount of attorney's fees stipulated in the agreement in question will prejudice any portion that would correspond toHodges' estate.

And as regards the other heirs of Mrs. Hodges who ought to be the ones who should have a say on the attorney's feesand other expenses of administration assailed by PCIB, suffice it to say that they appear to have been duly represented inthe agreement itself by their attorney-in-fact, James L. Sullivan and have not otherwise interposed any objection to any of the expenses incurred by Magno questioned by PCIB in these appeals. As a matter of fact, as ordered by the trial court,all the expenses in question, including the attorney's fees, may be paid without awaiting the determination andsegregation of the estate of Mrs. Hodges.Withal, the weightiest consideration in connection with the point under discussion is that at this stage of the controversyamong the parties herein, the vital issue refers to the existence or non-existence of the estate of Mrs. Hodges. In thisrespect, the interest of respondent Magno, as the appointed administratrix of the said estate, is to maintain that it exists,which is naturally common and identical with and inseparable from the interest of the brothers and sisters of Mrs. Hodges.

Thus, it should not be wondered why both Magno and these heirs have seemingly agreed to retain but one counsel. Infact, such an arrangement should be more convenient and economical to both. The possibility of conflict of interestbetween Magno and the heirs of Mrs. Hodges would be, at this stage, quite remote and, in any event, rather insubstantial.Besides, should any substantial conflict of interest between them arise in the future, the same would be a matter that theprobate court can very well take care of in the course of the independent proceedings in Case No. 1307 after thecorresponding segregation of the two subject estates. We cannot perceive any cogent reason why, at this stage, theestate and the heirs of Mrs. Hodges cannot be represented by a common counsel.Now, as to whether or not the portion of the fees in question that should correspond to the heirs constitutes prematurepartial distribution of the estate of Mrs. Hodges is also a matter in which neither PCIB nor the heirs of Hodges have anyinterest. In any event, since, as far as the records show, the estate has no creditors and the corresponding estate andinheritance taxes, except those of the brothers and sisters of Mrs. Hodges, have already been paid, 11 no prejudice cancaused to anyone by the comparatively small amount of attorney's fees in question. And in this connection, it may be



added that, although strictly speaking, the attorney's fees of the counsel of an administrator is in the first instance hispersonal responsibility, reimbursable later on by the estate, in the final analysis, when, as in the situation on hand, theattorney-in-fact of the heirs has given his conformity thereto, it would be idle effort to inquire whether or not the sanctiongiven to said fees by the probate court is proper.For the foregoing reasons, Assignments of Error LXVIII to LXXI and LXXIII to LXXVI should be as they are herebyoverruled.

Assignments of error I to IV, XIII to XV, XXII to XXV, XXXV to XXX VI, XLI to XLIII and L.These assignments of error deal with the approval by the trial court of various deeds of sale of real properties registered inthe name of Hodges but executed by appellee Magno, as Administratrix of the Estate of Mrs. Hodges, purportedly inimplementation of corresponding supposed written "Contracts to Sell" previously executed by Hodges during the interimbetween May 23, 1957, when his wife died, and December 25, 1962, the day he died. As stated on pp. 118-120 of appellant's main brief, "These are: the, contract to sell between the deceased, Charles Newton Hodges, and the appellee,Pepito G. Iyulores executed on February 5, 1961; the contract to sell between the deceased, Charles Newton Hodges,and the appellant Esperidion Partisala, executed on April 20, 1960; the contract to sell between the deceased, CharlesNewton Hodges, and the appellee, Winifredo C. Espada, executed on April 18, 1960; the contract to sell between thedeceased, Charles Newton Hodges, and the appellee, Rosario Alingasa, executed on August 25, 1958; the contract tosell between the deceased, Charles Newton Hodges, and the appellee, Lorenzo Carles, executed on June 17, 1958; thecontract to sell between the deceased, Charles Newton Hodges, and the appellee, Salvador S. Guzman, executed onSeptember 13, 1960; the contract to sell between the deceased, Charles Newton Hodges, and the appellee, FloreniaBarrido, executed on February 21, 1958; the contract to sell between the deceased, Charles Newton Hodges, and theappellee, Purificacion Coronado, executed on August 14, 1961; the contract to sell between the deceased, Charles

Newton Hodges, and the appellee, Graciano Lucero, executed on November 27, 1961; the contract to sell between thedeceased, Charles Newton Hodges, and the appellee, Ariteo Thomas Jamir, executed on May 26, 1961; the contract tosell between the deceased, Charles Newton Hodges, and the appellee, Melquiades Batisanan, executed on June 9, 1959;the contract to sell between the deceased, Charles Newton Hodges, and the appellee, Belcezar Causing, executed onFebruary 10, 1959 and the contract to sell between the deceased, Charles Newton Hodges, and the appellee, AdelfaPremaylon, executed on October 31, 1959, re Title No. 13815."Relative to these sales, it is the position of appellant PCIB that, inasmuch as pursuant to the will of Mrs. Hodges, her husband was to have dominion over all her estate during his lifetime, it was as absolute owner of the propertiesrespectively covered by said sales that he executed the aforementioned contracts to sell, and consequently, upon hisdeath, the implementation of said contracts may be undertaken only by the administrator of his estate and not by theadministratrix of the estate of Mrs. Hodges. Basically, the same theory is invoked with particular reference to five other sales, in which the respective "contracts to sell" in favor of these appellees were executed by Hodges before the death of his wife, namely, those in favor of appellee Santiago Pacaonsis, Alfredo Catedral, Jose Pablico, Western Institute of

Technology and Adelfa Premaylon. Anent those deeds of sale based on promises or contracts to sell executed by Hodges after the death of his wife, thoseenumerated in the quotation in the immediately preceding paragraph, it is quite obvious that PCIB's contention cannot besustained. As already explained earlier, 1 1* all proceeds of remunerative transfers or dispositions made by Hodges after the death of his wife should be deemed as continuing to be parts of her estate and, therefore, subject to the terms of her will in favor of her brothers and sisters, in the sense that should there be no showing that such proceeds, whether in cashor property have been subsequently conveyed or assigned subsequently by Hodges to any third party by acts inter vivoswith the result that they could not thereby belong to him anymore at the time of his death, they automatically became partof the inheritance of said brothers and sisters. The deeds here in question involve transactions which are exactly of thisnature. Consequently, the payments made by the appellees should be considered as payments to the estate of Mrs.Hodges which is to be distributed and partitioned among her heirs specified in the will.The five deeds of sale predicated on contracts to sell executed Hodges during the lifetime of his wife, present a differentsituation. At first blush, it would appear that as to them, PCIB's position has some degree of plausibility. Considering,however, that the adoption of PCIB's theory would necessarily have tremendous repercussions and would bring aboutconsiderable disturbance of property rights that have somehow accrued already in favor of innocent third parties, the fivepurchasers aforenamed, the Court is inclined to take a pragmatic and practical view of the legal situation involving themby overlooking the possible technicalities in the way, the non-observance of which would not, after all, detract materiallyfrom what should substantially correspond to each and all of the parties concerned.To start with, these contracts can hardly be ignored. Bona fide third parties are involved; as much as possible, they shouldnot be made to suffer any prejudice on account of judicial controversies not of their own making. What is more, thetransactions they rely on were submitted by them to the probate court for approval, and from already known and recordedactuations of said court then, they had reason to believe that it had authority to act on their motions, since appellee Magnohad, from time to time prior to their transactions with her, been allowed to act in her capacity as administratrix of one of the subject estates either alone or conjointly with PCIB. All the sales in question were executed by Magno in 1966already, but before that, the court had previously authorized or otherwise sanctioned expressly many of her act asadministratrix involving expenditures from the estate made by her either conjointly with or independently from PCIB, as

Administrator of the Estate of Hodges. Thus, it may be said that said buyers-appellees merely followed precedents in

previous orders of the court. Accordingly, unless the impugned orders approving those sales indubitably suffer from someclearly fatal infirmity the Court would rather affirm them.It is quite apparent from the record that the properties covered by said sales are equivalent only to a fraction of whatshould constitute the estate of Mrs. Hodges, even if it is assumed that the same would finally be held to be only one-fourthof the conjugal properties of the spouses as of the time of her death or, to be more exact, one-half of her estate as per theinventory submitted by Hodges as executor, on May 12, 1958. In none of its numerous, varied and voluminous pleadings,motions and manifestations has PCIB claimed any possibility otherwise. Such being the case, to avoid any conflict withthe heirs of Hodges, the said properties covered by the questioned deeds of sale executed by appellee Magno may betreated as among those corresponding to the estate of Mrs. Hodges, which would have been actually under her controland administration had Hodges complied with his duty to liquidate the conjugal partnership. Viewing the situation in thatmanner, the only ones who could stand to be prejudiced by the appealed orders referred to in the assignment of errors



under discussion and who could, therefore, have the requisite interest to question them would be only the heirs of Mrs.Hodges, definitely not PCIB.It is of no moment in what capacity Hodges made the "contracts to sell' after the death of his wife. Even if he had acted asexecutor of the will of his wife, he did not have to submit those contracts to the court nor follow the provisions of the rules,(Sections 2, 4, 5, 6, 8 and 9 of Rule 89 quoted by appellant on pp. 125 to 127 of its brief) for the simple reason that by thevery orders, much relied upon by appellant for other purposes, of May 27, 1957 and December 14, 1957, Hodges was"allowed or authorized" by the trial court "to continue the business in which he was engaged and to perform acts which hehad been doing while the deceased was living", (Order of May 27) which according to the motion on which the court actedwas "of buying and selling personal and real properties", and "to execute subsequent sales, conveyances, leases andmortgages of the properties left by the said deceased Linnie Jane Hodges in consonance with the wishes conveyed in thelast will and testament of the latter." (Order of December 14) In other words, if Hodges acted then as executor, it can besaid that he had authority to do so by virtue of these blanket orders, and PCIB does not question the legality of such grantof authority; on the contrary, it is relying on the terms of the order itself for its main contention in these cases. On the other hand, if, as PCIB contends, he acted as heir-adjudicatee, the authority given to him by the aforementioned orders wouldstill suffice.

As can be seen, therefore, it is of no moment whether the "contracts to sell" upon which the deeds in question were basedwere executed by Hodges before or after the death of his wife. In a word, We hold, for the reasons already stated, that theproperties covered by the deeds being assailed pertain or should be deemed as pertaining to the estate of Mrs. Hodges;hence, any supposed irregularity attending the actuations of the trial court may be invoked only by her heirs, not by PCIB,and since the said heirs are not objecting, and the defects pointed out not being strictly jurisdictional in nature, all thingsconsidered, particularly the unnecessary disturbance of rights already created in favor of innocent third parties, it is bestthat the impugned orders are not disturbed.In view of these considerations, We do not find sufficient merit in the assignments of error under discussion.

Assignments of error V to VIII, XVI to XVIII, XXVI to XXIX, XXXVII to XXXVIII, XLIV to XLVI and LI.

All these assignments of error commonly deal with alleged non-fulfillment by the respective vendees, appellees herein, of the terms and conditions embodied in the deeds of sale referred to in the assignments of error just discussed. It is claimedthat some of them never made full payments in accordance with the respective contracts to sell, while in the cases of theothers, like Lorenzo Carles, Jose Pablico, Alfredo Catedral and Salvador S. Guzman, the contracts with them had alreadybeen unilaterally cancelled by PCIB pursuant to automatic rescission clauses contained in them, in view of the failure of said buyers to pay arrearages long overdue. But PCIB's posture is again premised on its assumption that the propertiescovered by the deeds in question could not pertain to the estate of Mrs. Hodges. We have already held above that, itbeing evident that a considerable portion of the conjugal properties, much more than the properties covered by saiddeeds, would inevitably constitute the estate of Mrs. Hodges, to avoid unnecessary legal complications, it can beassumed that said properties form part of such estate. From this point of view, it is apparent again that the questions,

whether or not it was proper for appellee Magno to have disregarded the cancellations made by PCIB, thereby revivingthe rights of the respective buyers-appellees, and, whether or not the rules governing new dispositions of properties of theestate were strictly followed, may not be raised by PCIB but only by the heirs of Mrs. Hodges as the persons designatedto inherit the same, or perhaps the government because of the still unpaid inheritance taxes. But, again, since there is nopretense that any objections were raised by said parties or that they would necessarily be prejudiced, the contentions of PCIB under the instant assignments of error hardly merit any consideration.

Assignments of error IX to XII, XIX to XXI, XXX to XXIV, XXXIX to XL,

XLVII to XLIX, LII and LIII to LXI.PCIB raises under these assignments of error two issues which according to it are fundamental, namely: (1) that inapproving the deeds executed by Magno pursuant to contracts to sell already cancelled by it in the performance of itsfunctions as administrator of the estate of Hodges, the trial court deprived the said estate of the right to invoke suchcancellations it (PCIB) had made and (2) that in so acting, the court "arrogated unto itself, while acting as a probate court,the power to determine the contending claims of third parties against the estate of Hodges over real property," since it hasin effect determined whether or not all the terms and conditions of the respective contracts to sell executed by Hodges infavor of the buyers-appellees concerned were complied with by the latter. What is worse, in the view of PCIB, is that thecourt has taken the word of the appellee Magno, "a total stranger to his estate as determinative of the issue".

Actually, contrary to the stand of PCIB, it is this last point regarding appellee Magno's having agreed to ignore thecancellations made by PCIB and allowed the buyers-appellees to consummate the sales in their favor that is decisive.Since We have already held that the properties covered by the contracts in question should be deemed to be portions of the estate of Mrs. Hodges and not that of Hodges, it is PCIB that is a complete stranger in these incidents. Considering,therefore, that the estate of Mrs. Hodges and her heirs who are the real parties in interest having the right to oppose theconsummation of the impugned sales are not objecting, and that they are the ones who are precisely urging that saidsales be sanctioned, the assignments of error under discussion have no basis and must accordingly be as they arehereby overruled.With particular reference to assignments LIII to LXI, assailing the orders of the trial court requiring PCIB to surrender therespective owner's duplicate certificates of title over the properties covered by the sales in question and otherwise

directing the Register of Deeds of Iloilo to cancel said certificates and to issue new transfer certificates of title in favor of the buyers-appellees, suffice it to say that in the light of the above discussion, the trial court was within its rights to sorequire and direct, PCIB having refused to give way, by withholding said owners' duplicate certificates, of thecorresponding registration of the transfers duly and legally approved by the court.

Assignments of error LXII to LXVII All these assignments of error commonly deal with the appeal against orders favoring appellee Western Institute of Technology. As will be recalled, said institute is one of the buyers of real property covered by a contract to sell executedby Hodges prior to the death of his wife. As of October, 1965, it was in arrears in the total amount of P92,691.00 in thepayment of its installments on account of its purchase, hence it received under date of October 4, 1965 and October 20,1965, letters of collection, separately and respectively, from PCIB and appellee Magno, in their respective capacities asadministrators of the distinct estates of the Hodges spouses, albeit, while in the case of PCIB it made known that "noother arrangement can be accepted except by paying all your past due account", on the other hand, Magno merely said



she would "appreciate very much if you can make some remittance to bring this account up-to-date and to reduce theamount of the obligation." (See pp. 295-311, Green R. on A.) On November 3, 1965, the Institute filed a motion which,after alleging that it was ready and willing to pay P20,000 on account of its overdue installments but uncertain whether itshould pay PCIB or Magno, it prayed that it be "allowed to deposit the aforesaid amount with the court pending resolutionof the conflicting claims of the administrators." Acting on this motion, on November 23, 1965, the trial court issued anorder, already quoted in the narration of facts in this opinion, holding that payment to both or either of the twoadministrators is "proper and legal", and so "movant — can pay to both estates or either of them", considering that "inboth cases (Special Proceedings 1307 and 1672) there is as yet no judicial declaration of heirs nor distribution of properties to whomsoever are entitled thereto."The arguments under the instant assignments of error revolve around said order. From the procedural standpoint, it isclaimed that PCIB was not served with a copy of the Institute's motion, that said motion was heard, considered andresolved on November 23, 1965, whereas the date set for its hearing was November 20, 1965, and that what the order grants is different from what is prayed for in the motion. As to the substantive aspect, it is contended that the matter treated in the motion is beyond the jurisdiction of the probate court and that the order authorized payment to a personother than the administrator of the estate of Hodges with whom the Institute had contracted.The procedural points urged by appellant deserve scant consideration. We must assume, absent any clear proof to thecontrary, that the lower court had acted regularly by seeing to it that appellant was duly notified. On the other hand, thereis nothing irregular in the court's having resolved the motion three days after the date set for hearing the same. Moreover,the record reveals that appellants' motion for reconsideration wherein it raised the same points was denied by the trialcourt on March 7, 1966 (p. 462, Green R. on A.) Withal, We are not convinced that the relief granted is not within thegeneral intent of the Institute's motion.Insofar as the substantive issues are concerned, all that need be said at this point is that they are mere reiterations of contentions We have already resolved above adversely to appellants' position. Incidentally, We may add, perhaps, to

erase all doubts as to the propriety of not disturbing the lower court's orders sanctioning the sales questioned in all theseappeal s by PCIB, that it is only when one of the parties to a contract to convey property executed by a deceased personraises substantial objections to its being implemented by the executor or administrator of the decedent's estate thatSection 8 of Rule 89 may not apply and, consequently, the matter has, to be taken up in a separate action outside of theprobate court; but where, as in the cases of the sales herein involved, the interested parties are in agreement that theconveyance be made, it is properly within the jurisdiction of the probate court to give its sanction thereto pursuant to theprovisions of the rule just mentioned. And with respect to the supposed automatic rescission clauses contained in thecontracts to sell executed by Hodges in favor of herein appellees, the effect of said clauses depend on the true nature of the said contracts, despite the nomenclature appearing therein, which is not controlling, for if they amount to actualcontracts of sale instead of being mere unilateral accepted "promises to sell", (Art. 1479, Civil Code of the Philippines, 2ndparagraph) the pactum commissorium or the automatic rescission provision would not operate, as a matter of public policy,unless there has been a previous notarial or judicial demand by the seller (10 Manresa 263, 2nd ed.) neither of whichhave been shown to have been made in connection with the transactions herein involved.

Consequently, We find no merit in the assignments of error Number LXII to LXVII.S U M M A R Y Considering the fact that this decision is unusually extensive and that the issues herein taken up and resolved are rather numerous and varied, what with appellant making seventy-eight assignments of error affecting no less than thirty separateorders of the court a quo, if only to facilitate proper understanding of the import and extent of our rulings herein contained,it is perhaps desirable that a brief restatement of the whole situation be made together with our conclusions in regard to itsvarious factual and legal aspects. .The instant cases refer to the estate left by the late Charles Newton Hodges as well as that of his wife, Linnie JaneHodges, who predeceased him by about five years and a half. In their respective wills which were executed on differentoccasions, each one of them provided mutually as follows: "I give, devise and bequeath all of the rest, residue andremainder (after funeral and administration expenses, taxes and debts) of my estate, both real and personal, wherever situated or located, to my beloved (spouse) to have and to hold unto (him/her) — during (his/her) natural lifetime", subjectto the condition that upon the death of whoever of them survived the other, the remainder of what he or she would inheritfrom the other is "give(n), devise(d) and bequeath(ed)" to the brothers and sisters of the latter.Mrs. Hodges died first, on May 23, 1957. Four days later, on May 27, Hodges was appointed special administrator of her estate, and in a separate order of the same date, he was "allowed or authorized to continue the business in which he wasengaged, (buying and selling personal and real properties) and to perform acts which he had been doing while thedeceased was living." Subsequently, on December 14, 1957, after Mrs. Hodges' will had been probated and Hodges hadbeen appointed and had qualified as Executor thereof, upon his motion in which he asserted that he was "not only partowner of the properties left as conjugal, but also, the successor to all the properties left by the deceased Linnie JaneHodges", the trial court ordered that "for the reasons stated in his motion dated December 11, 1957, which the Courtconsiders well taken, ... all the sales, conveyances, leases and mortgages of all properties left by the deceased LinnieJane Hodges executed by the Executor, Charles Newton Hodges are hereby APPROVED. The said Executor is further authorized to execute subsequent sales, conveyances, leases and mortgages of the properties left by the said deceasedLinnie Jane Hodges in consonance with the wishes contained in the last will and testament of the latter."

Annually thereafter, Hodges submitted to the court the corresponding statements of account of his administration, with the

particularity that in all his motions, he always made it point to urge the that "no person interested in the Philippines of thetime and place of examining the herein accounts be given notice as herein executor is the only devisee or legatee of thedeceased in accordance with the last will and testament already probated by the Honorable Court." All said accountsapproved as prayed for.Nothing else appears to have been done either by the court a quo or Hodges until December 25, 1962. Importantly to bethe provision in the will of Mrs. Hodges that her share of the conjugal partnership was to be inherited by her husband "tohave and to hold unto him, my said husband, during his natural lifetime" and that "at the death of my said husband, I give,devise and bequeath all the rest, residue and remainder of my estate, both real and personal, wherever situated or located, to be equally divided among my brothers and sisters, share and share alike", which provision naturally made itimperative that the conjugal partnership be promptly liquidated, in order that the "rest, residue and remainder" of his wife'sshare thereof, as of the time of Hodges' own death, may be readily known and identified, no such liquidation was ever undertaken. The record gives no indication of the reason for such omission, although relatedly, it appears therein:



1. That in his annual statement submitted to the court of the net worth of C. N. Hodges and the Estate of Linnie JaneHodges, Hodges repeatedly and consistently reported the combined income of the conjugal partnership and then merelydivided the same equally between himself and the estate of the deceased wife, and, more importantly, he also, asconsistently, filed corresponding separate income tax returns for each calendar year for each resulting half of suchcombined income, thus reporting that the estate of Mrs. Hodges had its own income distinct from his own.2. That when the court a quo happened to inadvertently omit in its order probating the will of Mrs. Hodges, the name of one of her brothers, Roy Higdon then already deceased, Hodges lost no time in asking for the proper correction "in order that the heirs of deceased Roy Higdon may not think or believe they were omitted, and that they were really interested inthe estate of the deceased Linnie Jane Hodges".3. That in his aforementioned motion of December 11, 1957, he expressly stated that "deceased Linnie Jane Hodges diedleaving no descendants or ascendants except brothers and sisters and herein petitioner as the surviving spouse, to inheritthe properties of the decedent", thereby indicating that he was not excluding his wife's brothers and sisters from theinheritance.4. That Hodges allegedly made statements and manifestations to the United States inheritance tax authorities indicatingthat he had renounced his inheritance from his wife in favor of her other heirs, which attitude he is supposed to havereiterated or ratified in an alleged affidavit subscribed and sworn to here in the Philippines and in which he evenpurportedly stated that his reason for so disclaiming and renouncing his rights under his wife's will was to "absolve (him)or (his) estate from any liability for the payment of income taxes on income which has accrued to the estate of Linnie JaneHodges", his wife, since her death.On said date, December 25, 1962, Hodges died. The very next day, upon motion of herein respondent and appellee,

Avelina A. Magno, she was appointed by the trial court as Administratrix of the Testate Estate of Linnie Jane Hodges, inSpecial Proceedings No. 1307 and as Special Administratrix of the estate of Charles Newton Hodges, "in the latter case,because the last will of said Charles Newton Hodges is still kept in his vault or iron safe and that the real and personal

properties of both spouses may be lost, damaged or go to waste, unless Special Administratrix is appointed," (Order of December 26, 1962, p. 27, Yellow R. on A.) although, soon enough, on December 29, 1962, a certain Harold K. Davieswas appointed as her Co-Special Administrator, and when Special Proceedings No. 1672, Testate Estate of CharlesNewton Hodges, was opened, Joe Hodges, as next of kin of the deceased, was in due time appointed as Co-

Administrator of said estate together with Atty. Fernando P. Mirasol, to replace Magno and Davies, only to be in turnreplaced eventually by petitioner PCIB alone.

At the outset, the two probate proceedings appear to have been proceeding jointly, with each administrator actingtogether with the other, under a sort of modus operandi. PCIB used to secure at the beginning the conformity to andsignature of Magno in transactions it wanted to enter into and submitted the same to the court for approval as their jointacts. So did Magno do likewise. Somehow, however, differences seem to have arisen, for which reason, each of thembegan acting later on separately and independently of each other, with apparent sanction of the trial court. Thus, PCIBhad its own lawyers whom it contracted and paid handsomely, conducted the business of the estate independently of Magno and otherwise acted as if all the properties appearing in the name of Charles Newton Hodges belonged solely and

only to his estate, to the exclusion of the brothers and sisters of Mrs. Hodges, without considering whether or not in factany of said properties corresponded to the portion of the conjugal partnership pertaining to the estate of Mrs. Hodges. Onthe other hand, Magno made her own expenditures, hired her own lawyers, on the premise that there is such an estate of Mrs. Hodges, and dealth with some of the properties, appearing in the name of Hodges, on the assumption that theyactually correspond to the estate of Mrs. Hodges. All of these independent and separate actuations of the twoadministrators were invariably approved by the trial court upon submission. Eventually, the differences reached a pointwherein Magno, who was more cognizant than anyone else about the ins and outs of the businesses and properties of thedeceased spouses because of her long and intimate association with them, made it difficult for PCIB to perform normallyits functions as administrator separately from her. Thus, legal complications arose and the present judicial controversiescame about.Predicating its position on the tenor of the orders of May 27 and December 14, 1957 as well as the approval by thecourt a quo of the annual statements of account of Hodges, PCIB holds to the view that the estate of Mrs. Hodges hasalready been in effect closed with the virtual adjudication in the mentioned orders of her whole estate to Hodges, and that,therefore, Magno had already ceased since then to have any estate to administer and the brothers and sisters of Mrs.Hodges have no interests whatsoever in the estate left by Hodges. Mainly upon such theory, PCIB has come to this Courtwith a petition for certiorari and prohibition praying that the lower court's orders allowing respondent Magno to continueacting as administratrix of the estate of Mrs. Hodges in Special Proceedings 1307 in the manner she has been doing, asdetailed earlier above, be set aside. Additionally, PCIB maintains that the provision in Mrs. Hodges' will instituting her brothers and sisters in the manner therein specified is in the nature of a testamentary substitution, but inasmuch as thepurported substitution is not, in its view, in accordance with the pertinent provisions of the Civil Code, it is ineffective andmay not be enforced. It is further contended that, in any event, inasmuch as the Hodges spouses were both residents of the Philippines, following the decision of this Court in Aznar vs. Garcia, or the case of Christensen, 7 SCRA 95, the estateleft by Mrs. Hodges could not be more than one-half of her share of the conjugal partnership, notwithstanding the fact thatshe was citizen of Texas, U.S.A., in accordance with Article 16 in relation to Articles 900 and 872 of the Civil Code.Initially, We issued a preliminary injunction against Magno and allowed PCIB to act alone.

At the same time PCIB has appealed several separate orders of the trial court approving individual acts of appelleeMagno in her capacity as administratrix of the estate of Mrs. Hodges, such as, hiring of lawyers for specified fees and

incurring expenses of administration for different purposes and executing deeds of sale in favor of her co-appelleescovering properties which are still registered in the name of Hodges, purportedly pursuant to corresponding "contracts tosell" executed by Hodges. The said orders are being questioned on jurisdictional and procedural grounds directly or indirectly predicated on the principal theory of appellant that all the properties of the two estates belong already to theestate of Hodges exclusively.On the other hand, respondent-appellee Magno denies that the trial court's orders of May 27 and December 14, 1957were meant to be finally adjudicatory of the hereditary rights of Hodges and contends that they were no more than thecourt's general sanction of past and future acts of Hodges as executor of the will of his wife in due course of administration. As to the point regarding substitution, her position is that what was given by Mrs. Hodges to her husbandunder the provision in question was a lifetime usufruct of her share of the conjugal partnership, with the naked ownershippassing directly to her brothers and sisters. Anent the application of Article 16 of the Civil Code, she claims that theapplicable law to the will of Mrs. Hodges is that of Texas under which, she alleges, there is no system of legitime, hence,



the estate of Mrs. Hodges cannot be less than her share or one-half of the conjugal partnership properties. She further maintains that, in any event, Hodges had as a matter of fact and of law renounced his inheritance from his wife and,therefore, her whole estate passed directly to her brothers and sisters effective at the latest upon the death of Hodges.In this decision, for the reasons discussed above, and upon the issues just summarized, We overrule PCIB's contentionthat the orders of May 27, 1957 and December 14, 1957 amount to an adjudication to Hodges of the estate of his wife,and We recognize the present existence of the estate of Mrs. Hodges, as consisting of properties, which, while registeredin that name of Hodges, do actually correspond to the remainder of the share of Mrs. Hodges in the conjugal partnership,it appearing that pursuant to the pertinent provisions of her will, any portion of said share still existing and undisposed of by her husband at the time of his death should go to her brothers and sisters share and share alike. Factually, We findthat the proven circumstances relevant to the said orders do not warrant the conclusion that the court intended to makethereby such alleged final adjudication. Legally, We hold that the tenor of said orders furnish no basis for such aconclusion, and what is more, at the time said orders were issued, the proceedings had not yet reached the point when afinal distribution and adjudication could be made. Moreover, the interested parties were not duly notified that suchdisposition of the estate would be done. At best, therefore, said orders merely allowed Hodges to dispose of portions of his inheritance in advance of final adjudication, which is implicitly permitted under Section 2 of Rule 109, there being nopossible prejudice to third parties, inasmuch as Mrs. Hodges had no creditors and all pertinent taxes have been paid.More specifically, We hold that, on the basis of circumstances presently extant in the record, and on the assumption thatHodges' purported renunciation should not be upheld, the estate of Mrs. Hodges inherited by her brothers and sistersconsists of one-fourth of the community estate of the spouses at the time of her death, minus whatever Hodges hadgratuitously disposed of therefrom during the period from, May 23, 1957, when she died, to December 25, 1962, when hedied provided, that with regard to remunerative dispositions made by him during the same period, the proceeds thereof,whether in cash or property, should be deemed as continuing to be part of his wife's estate, unless it can be shown that hehad subsequently disposed of them gratuitously

.

At this juncture, it may be reiterated that the question of what are the pertinent laws of Texas and what would be theestate of Mrs. Hodges under them is basically one of fact, and considering the respective positions of the parties in regardto said factual issue, it can already be deemed as settled for the purposes of these cases that, indeed, the free portion of said estate that could possibly descend to her brothers and sisters by virtue of her will may not be less than one-fourth of the conjugal estate, it appearing that the difference in the stands of the parties has reference solely to the legitime of Hodges, PCIB being of the view that under the laws of Texas, there is such a legitime of one-fourth of said conjugal estateand Magno contending, on the other hand, that there is none. In other words, hereafter, whatever might ultimately appear,at the subsequent proceedings, to be actually the laws of Texas on the matter would no longer be of any consequence,since PCIB would anyway be in estoppel already to claim that the estate of Mrs. Hodges should be less than ascontended by it now, for admissions by a party related to the effects of foreign laws, which have to be proven in our courtslike any other controverted fact, create estoppel.In the process, We overrule PCIB's contention that the provision in Mrs. Hodges' will in favor of her brothers and sistersconstitutes ineffective hereditary substitutions. But neither are We sustaining, on the other hand, Magno's pose that it

gave Hodges only a lifetime usufruct. We hold that by said provision, Mrs. Hodges simultaneously instituted her brothersand sisters as co-heirs with her husband, with the condition, however, that the latter would have complete rights of dominion over the whole estate during his lifetime and what would go to the former would be only the remainder thereof atthe time of Hodges' death. In other words, whereas they are not to inherit only in case of default of Hodges, on the other hand, Hodges was not obliged to preserve anything for them. Clearly then, the essential elements of testamentarysubstitution are absent; the provision in question is a simple case of conditional simultaneous institution of heirs, wherebythe institution of Hodges is subject to a partial resolutory condition the operative contingency of which is coincidental withthat of the suspensive condition of the institution of his brothers and sisters-in-law, which manner of institution is notprohibited by law.We also hold, however, that the estate of Mrs. Hodges inherited by her brothers and sisters could be more than juststated, but this would depend on (1) whether upon the proper application of the principle of renvoi in relation to Article 16of the Civil Code and the pertinent laws of Texas, it will appear that Hodges had no legitime as contended by Magno, and(2) whether or not it can be held that Hodges had legally and effectively renounced his inheritance from his wife. Under the circumstances presently obtaining and in the state of the record of these cases, as of now, the Court is not in aposition to make a final ruling, whether of fact or of law, on any of these two issues, and We, therefore, reserve saidissues for further proceedings and resolution in the first instance by the court a quo, as hereinabove indicated. Wereiterate, however, that pending such further proceedings, as matters stand at this stage, Our considered opinion is that itis beyond cavil that since, under the terms of the will of Mrs. Hodges, her husband could not have anyway legallyadjudicated or caused to be adjudicated to himself her whole share of their conjugal partnership, albeit he could havedisposed any part thereof during his lifetime, the resulting estate of Mrs. Hodges, of which Magno is the uncontestedadministratrix, cannot be less than one-fourth of the conjugal partnership properties, as of the time of her death, minuswhat, as explained earlier, have beengratuitously disposed of therefrom, by Hodges in favor of third persons since then,for even if it were assumed that, as contended by PCIB, under Article 16 of the Civil Code and applying renvoi the laws of the Philippines are the ones ultimately applicable, such one-fourth share would be her free disposable portion, taking intoaccount already the legitime of her husband under Article 900 of the Civil Code.The foregoing considerations leave the Court with no alternative than to conclude that in predicating its orders on theassumption, albeit unexpressed therein, that there is an estate of Mrs. Hodges to be distributed among her brothers and

sisters and that respondent Magno is the legal administratrix thereof, the trial court acted correctly and within its jurisdiction. Accordingly, the petition for certiorari and prohibition has to be denied. The Court feels however, that pendingthe liquidation of the conjugal partnership and the determination of the specific properties constituting her estate, the twoadministrators should act conjointly as ordered in the Court's resolution of September 8, 1972 and as further clarified inthe dispositive portion of its decision.

Anent the appeals from the orders of the lower court sanctioning payment by appellee Magno, as administratrix, of expenses of administration and attorney's fees, it is obvious that, with Our holding that there is such an estate of Mrs.Hodges, and for the reasons stated in the body of this opinion, the said orders should be affirmed. This We do on theassumption We find justified by the evidence of record, and seemingly agreed to by appellant PCIB, that the size andvalue of the properties that should correspond to the estate of Mrs. Hodges far exceed the total of the attorney's fees andadministration expenses in question.



With respect to the appeals from the orders approving transactions made by appellee Magno, as administratrix, coveringproperties registered in the name of Hodges, the details of which are related earlier above, a distinction must be madebetween those predicated on contracts to sell executed by Hodges before the death of his wife, on the one hand, andthose premised on contracts to sell entered into by him after her death. As regards the latter, We hold that inasmuch asthe payments made by appellees constitute proceeds of sales of properties belonging to the estate of Mrs. Hodges, asmay be implied from the tenor of the motions of May 27 and December 14, 1957, said payments continue to pertain tosaid estate, pursuant to her intent obviously reflected in the relevant provisions of her will, on the assumption that the sizeand value of the properties to correspond to the estate of Mrs. Hodges would exceed the total value of all the propertiescovered by the impugned deeds of sale, for which reason, said properties may be deemed as pertaining to the estate of Mrs. Hodges. And there being no showing that thus viewing the situation, there would be prejudice to anyone, includingthe government, the Court also holds that, disregarding procedural technicalities in favor of a pragmatic and practicalapproach as discussed above, the assailed orders should be affirmed. Being a stranger to the estate of Mrs. Hodges,PCIB has no personality to raise the procedural and jurisdictional issues raised by it. And inasmuch as it does not appear that any of the other heirs of Mrs. Hodges or the government has objected to any of the orders under appeal, even as tothese parties, there exists no reason for said orders to be set aside.DISPOSITIVE PART IN VIEW OF ALL THE FOREGOING PREMISES, judgment is hereby rendered DISMISSING the petition in G. R. Nos. L-27860 and L-27896, and AFFIRMING, in G. R. Nos. L-27936-37 and the other thirty-one numbers hereunder ordered tobe added after payment of the corresponding docket fees, all the orders of the trial court under appeal enumerated indetail on pages 35 to 37 and 80 to 82 of this decision; the existence of the Testate Estate of Linnie Jane Hodges, withrespondent-appellee Avelina A. Magno, as administratrix thereof is recognized, and it is declared that, until final judgmentis ultimately rendered regarding (1) the manner of applying Article 16 of the Civil Code of the Philippines to the situationobtaining in these cases and (2) the factual and legal issue of whether or not Charles Newton Hodges had effectively and

legally renounced his inheritance under the will of Linnie Jane Hodges, the said estate consists of one-fourth of thecommunity properties of the said spouses, as of the time of the death of the wife on May 23, 1957, minus whatever thehusband had already gratuitously disposed of in favor of third persons from said date until his death, provided, first, thatwith respect to remunerative dispositions, the proceeds thereof shall continue to be part of the wife's estate, unlesssubsequently disposed of gratuitously to third parties by the husband, and second, that should the purported renunciationbe declared legally effective, no deductions whatsoever are to be made from said estate; in consequence, the preliminaryinjunction of August 8, 1967, as amended on October 4 and December 6, 1967, is lifted, and the resolution of September 8, 1972, directing that petitioner-appellant PCIB, as Administrator of the Testate Estate of Charles Newton Hodges, inSpecial Proceedings 1672, and respondent-appellee Avelina A. Magno, as Administratrix of the Testate Estate of LinnieJane Hodges, in Special Proceedings 1307, should act thenceforth always conjointly, never independently from eachother, as such administrators, is reiterated, and the same is made part of this judgment and shall continue in force,pending the liquidation of the conjugal partnership of the deceased spouses and the determination and segregation fromeach other of their respective estates, provided, that upon the finality of this judgment, the trial court should immediately

proceed to the partition of the presently combined estates of the spouses, to the end that the one-half share thereof of Mrs. Hodges may be properly and clearly identified; thereafter, the trial court should forthwith segregate the remainder of the one-fourth herein adjudged to be her estate and cause the same to be turned over or delivered to respondent for her exclusive administration in Special Proceedings 1307, while the other one-fourth shall remain under the jointadministration of said respondent and petitioner under a joint proceedings in Special Proceedings 1307 and 1672,whereas the half unquestionably pertaining to Hodges shall be administered by petitioner exclusively in SpecialProceedings 1672, without prejudice to the resolution by the trial court of the pending motions for its removal asadministrator 12; and this arrangement shall be maintained until the final resolution of the two issues of renvoi andrenunciation hereby reserved for further hearing and determination, and the corresponding complete segregation andpartition of the two estates in the proportions that may result from the said resolution.Generally and in all other respects, the parties and the court a quo are directed to adhere henceforth, in all their actuations in Special Proceedings 1307 and 1672, to the views passed and ruled upon by the Court in the foregoingopinion.

Appellant PCIB is ordered to pay, within five (5) days from notice hereof, thirty-one additional appeal docket fees, but thisdecision shall nevertheless become final as to each of the parties herein after fifteen (15) days from the respective noticesto them hereof in accordance with the rules.Costs against petitioner-appellant PCIB.Zaldivar, Castro, Esguerra and Fernandez, JJ., concur.Makasiar, Antonio, Muñoz Palma and Aquino, JJ., concur in the result.

Separate Opinions FERNANDO, J., concurring:I concur on the basis of the procedural pronouncements in the opinion.TEEHANKEE, J., concurring:

I concur in the result of dismissal of the petition for certiorari and prohibition in Cases L-27860 and L-27896 and with theaffirmance of the appealed orders of the probate court in Cases L-27936-37.I also concur with the portion of the dispositive part of the judgment penned by Mr. Justice Barredo decreeing the lifting of the Court's writ of preliminary injunction of August 8, 1967 as amended on October 4, and December 6, 1967 1 andordering in lieu thereof that the Court's resolution of September 8, 1972 2 which directed that petitioner-appellant PCIB asadministrator of C. N. (Charles Newton) Hodges' estate (Sp. Proc. No. 1672 and respondent-appellee Avelina A. Magnoas administratrix of Linnie Jane Hodges' estate (Sp. Proc. No. 1307) should act always conjointly never independentlyfrom each other, as such administrators, is reiterated and shall continue in force and made part of the judgment.It is manifest from the record that petitioner-appellant PCIB's primal contention in the cases at bar belatedly filed by it withthis Court on August 1, 1967 (over ten (10) years after Linnie Jane Hodges' death on May 23, 1957 and (over five (5)years after her husband C.N. Hodges' death on December 25, 1962 — during which time both estates havebeen pending settlement and distribution to the decedents' respective rightful heirs all this time up to now) — that the



probate court per its order of December 14, 1957 (supplementing an earlier order of May 25, 1957) 3 in granting C. N.Hodges' motion as Executor of his wife Linnie's estate to continue their "business of buying and selling personal and realproperties" and approving "all sales, conveyances, leases and mortgages" made and to be made by him as such executor under his obligation to submit his yearly accounts in effect declared him as sole heir of his wife's estate and nothingremains to be done except to formally close her estate (Sp. Proc. No. 1307) as her estate was thereby merged with hisown so that nothing remains of it that may be adjudicated to her brothers and sisters as her designated heirs after him, 4 — is wholly untenable and deserves scant consideration.

Aside from having been put forth as an obvious afterthought much too late in the day, this contention of PCIB that thereno longer exists any separate estate of Linnie Jane Hodges after the probate court's order of December 14, 1957 goesagainst the very acts and judicial admissions of C.N. Hodges as her executor whereby he consistently recognizedthe separate existence and identity of his wife's estate apart from his own separate estate and from his own share of their conjugal partnership and estate and "never considered the whole estate as a single one belonging exclusively to himself"during the entire period that he survived her for over five (5) years up to the time of his own death on December 25,1962 5 and against the identical acts and judicial admissions of PCIB as administrator of C.N. Hodges' estate until PCIBsought in 1966 to take over both estates as pertaining to its sole administration.PCIB is now barred and estopped from contradicting or taking a belated position contradictory to or inconsistent with itsprevious admissions 6 (as well as those of C.N. Hodges himself in his lifetime and of whose estate PCIB is merely anadministrator) recognizing the existence and identity of Linnie Jane Hodges' separate estate and the legal rights andinterests therein of her brothers and sisters as her designated heirs in her will.PCIB's petition for certiorari and prohibition to declare all acts of the probate court in Linnie Jane Hodges' estatesubsequent to its order of December 14, 1957 as "null and void for having been issued without jurisdiction" must thereforebe dismissed with the rejection of its belated and untenable contention that there is no longer any estate of Mrs. Hodgesof which respondent Avelina Magno is the duly appointed and acting administratrix.

PCIB's appeal 7 from the probate court's various orders recognizing respondent Magno as administratrix of Linnie's estate(Sp. Proc No. 1307) and sanctioning her acts of administration of said estate and approving the sales contracts executedby her with the various individual appellees, which involve basically the same primal issue raised in the petition as towhether there still exists a separate estate of Linnie of which respondent-appellee Magno may continue to be theadministratrix, must necessarily fail — a result of the Court's main opinion at bar that there does exist such an estate andthat the two estates (husband's and wife's) must be administered cojointly by their respective administrators (PCIB andMagno).The dispositive portion of the main opinionThe main opinion disposes that:IN VIEW OF ALL THE FOREGOING PREMISES, judgment is hereby rendered DISMISSING the petition in G. R. Nos. L-27860 and L-27896, and AFFIRMING, in G. R. Nos. L-27936-37 and the other thirty-one numbers hereunder ordered tobe added after payment of the corresponding docket fees, all the orders of the trial court under appeal enumerated indetail on pages 35 to 37 and 80 to 82 of this decision:

The existence of the Testate Estate of Linnie Jane Hodges, with respondent-appellee Avelina A. Magno, as administratrixthereof is recognized , andIt is declared that, until final judgment is ultimately rendered regarding (1) the manner of applying Article 16 of the CivilCode of the Philippines to the situation obtaining in these cases and (2) the factual and legal issues of whether or notCharles Newton Hodges has effectively and legally renounced his inheritance under the will of Linnie Jane Hodges, thesaid estate consists of one-fourthof the community properties of the said spouses, as of the time of the death of the wifeon May 23, 1957, minus whatever the husband had already gratuitously disposed of in favor of third persons from saiddate until his death, provided, first, that with respect to remunerative dispositions, the proceeds thereof shall continue tobe part of the wife's estate, unless subsequently disposed of gratuitously to third parties by the husband, and second, thatshould the purported renunciation be declared legally effective, no deduction whatsoever are to be made from said estate;In consequence, the preliminary injunction of August 8, 1967, as amended on October 4 and December 6, 1967, is liftedand the resolution of September 8, 1972, directing that petitioner-appellant PCIB, as Administrator of the Testate Estate of Charles Newton Hodges in Special Proceedings 1672, and respondent-appellee Avelina A. Magno, as Administratrix of the Testate Estate of Linnie Jane Hodges in Special Proceedings 1307, should act thenceforth always conjointly , never independently from each other, as such administrators, is reiterated , and the same is made part of this judgment and shallcontinue in force, pending the liquidation of the conjugal partnership of the deceased spouses andthe determination and segregation from each other of their respective estates; provided, that upon the finality of this

judgment, the trial court should immediately proceed to the partition of the presently combined estates of the spouses, tothe end that the one-half share thereof of Mrs. Hodges may be properly and clearly identified;Thereafter , the trial court should forthwith segregate the remainder of the one-fourth herein adjudged to be her estate andcause the same to be turned over or delivered to respondent for her exclusive administration in Special Proceedings1307, while the other one-fourth shall remain under the joint administrative of said respondent and petitioner under a joint

proceedings in Special Proceedings 1307 and 1672, whereas the half unquestionably pertaining to Hodges shallbe administered by petitioner exclusively in Special Proceedings 1672, without prejudice to the resolution by the trial courtof the pending motions for its removal as administrator;

And this arrangement shall be maintained until the final resolution of the two issues of renvoi andrenunciation herebyreserved for further hearing and determination, and the corresponding completesegregation and partition of the two

estates in the proportions that may result from the said resolution.Generally and in all other respects, the parties and the court a quo are directed to adhere henceforth, in all their actuations in Special Proceedings 1307 and 1672, to the views passed and ruled upon by the Court in the foregoingopinion. 8

Minimum estimate of Mrs. Hodges' estate:One-fourth of conjugal properties.The main opinion in declaring the existence of a separate estate of Linnie Jane Hodges which shall pass to her brothersand sisters with right of representation (by their heirs) as her duly designated heirs declares that her estate consists asa minimum (i.e. assuming (1) that under Article 16 of the Philippine Civil Code C. N. Hodges as surviving husband wasentitled to one-half of her estate as legitime and (2) that he had not effectively and legallyrenounced his inheritance under her will) of "one-fourth of the community properties of the said spouses, as of the time of the death of the wife on May 23,1957, minus whatever the husband had already gratuitously disposed of in favor of third persons from said date until his



death," with the proviso that proceeds of remunerative dispositions or sales for valuable consideration made by C. N.Hodges after his wife Linnie's death shall continue to be part of her estate unless subsequently disposed of byhim gratuitously to third parties subject to the condition, however, that if he is held to have validly andeffectively renounced his inheritance under his wife's will, no deductions of any dispositions made by Hodges evenif gratuitously are to be made from his wife Linnie's estate which shall pass intact to her brothers and sisters as her designated heirs called in her will to succeed to her estate upon the death of her husband C. N. Hodges.Differences with the main opinionI do not share the main opinion's view that Linnie Jane Hodges instituted her husband as her heir under her will "to havedominion over all her estate during his lifetime ... as absolute owner of the properties ..." 9 and that she bequeathed "thewhole of her estate to be owned and enjoyed by him as universal and sole heir with absolute dominion over them onlyduring his lifetime, which means that while he could completely and absolutely dispose of any portion thereof inter vivos toanyone other than himself, he was not free to do so mortis causa, and all his rights to what might remain upon his deathwould cease entirely upon the occurrence of that contingency, inasmuch as the right of his brothers and sisters-in-law tothe inheritance, although vested already upon the death of Mrs. Hodges, would automatically become operative upon theoccurrence of the death of Hodges in the event of actual existence of any remainder of her estate then." 10

As will be amplified hereinafter, I do not subscribe to such a view that Linnie Jane Hodges willed "full and absoluteownership" and "absolute dominion" over her estate to her husband, but rather that she named her husband C. N.Hodges and her brothers and sisters as instituted heirs with a term under Article 885 of our Civil Code, to wit, Hodges asinstituted heir with a resolutory term whereunder his right to the succession ceased in diem upon arrival of the resolutory term of his death on December 25, 1962 and her brothers and sisters as instituted heirs withasuspensive term whereunder their right to the succession commenced ex die upon arrival of the suspensive term of thedeath of C. N. Hodges on December 25, 1962.Hence, while agreeing with the main opinion that the proceeds of all remunerative dispositions made by C. N. Hodges

after his wife's death remain an integral part of his wife's estate which she willed to her brothers and sisters, I submit thatC. N. Hodges could not validly make gratuitous dispositions of any part or all of his wife's estate — "completely andabsolutely dispose of any portion thereof inter vivos to anyone other than himself" in the language of the mainopinion, supra — and thereby render ineffectual and nugatory her institution of her brothers and sisters as her designatedheirs to succeed to her whole estate "at the death of (her) husband." If according to the main opinion, Hodgescould not make such gratuitous "complete and absolute dispositions" of his wife Linnie's estate " mortis causa," it wouldseem that by the same token and rationale he was likewise proscribed by the will from making such dispositions of Linnie's estate inter vivos.I believe that the two questions of renvoi and renunciation should be resolved preferentially and expeditiously by theprobate court ahead of the partition and segregation of the minimum one-fourth of the conjugal or community propertiesconstituting Linnie Jane Hodges' separate estate, which task considering that it is now seventeen (17) years since LinnieJane Hodges' death and her conjugal estate with C. N. Hodges has remained unliquidated up to now might take a similar number of years to unravel with the numerous items, transactions and details of the sizable estates involved.

Such partition of the minimum one-fourth would not be final, since if the two prejudicial questionsof renvoi andrenunciation were resolved favorably to Linnie's estate meaning to say that if it should be held that C. N.Hodges is not entitled to any legitime of her estate and at any rate he had totally renounced his inheritance under the will),then Linnie's estate would consist not only of the minimum one-fourth but one-half of the conjugal or community propertiesof the Hodges spouses, which would require again the partition and segregation of still another one-fourth of said.properties to complete Linnie's separate estate.My differences with the main opinion involve further the legal concepts, effects and consequences of the testamentarydispositions of Linnie Jane Hodges in her will and the question of the best to reach a solution of the pressing question of expediting the closing of the estates which after all do not appear to involve any outstanding debts nor any disputebetween the heirs and should therefore be promptly settled now after all these years without any further unduecomplications and delays and distributed to the heirs for their full enjoyment and benefit. As no consensus appears tohave been reached thereon by a majority of the Court, I propose to state views as concisely as possible with the sole endin view that they may be of some assistance to the probate court and the parties in reaching an expeditious closing andsettlement of the estates of the Hodges spouses.Two Assumptions

As indicated above, the declaration of the minimum of Mrs. Hodges' estate as one-fourth of the conjugal properties isbased on two assumptions most favorable to C. N. Hodges' estate and his heirs, namely (1) that the probate court mustaccept the renvoi or "reference back" 11 allegedly provided by the laws of the State of Texas (of which state the Hodgesspouses were citizens) whereby the civil laws of the Philippines as the domicile of the Hodges spouses would govern their succession notwithstanding the provisions of Article 16 of our Civil Code (which provides that the national law of thedecedents, in this case, of Texas, shall govern their succession) with the result that her estate would consist of nomore than one-fourth of the conjugal properties since the legitime of her husband (the other one-fourth of said conjugalproperties or one-half of her estate, under Article 900 of our Civil Code) could not then be disposed of nor burdened withany condition by her and (2) that C.N. Hodges had not effectively and legally renounced his inheritance under his wife'swill.These two assumptions are of course flatly disputed by respondent-appellee Magno as Mrs. Hodges' administratrix, whoavers that the law of the State of Texas governs her succession and does not provide for and legitime, hence, her

brothers and sisters are entitled to succeed to the whole of her share of the conjugal properties which is one-half thereof and that in any event, Hodges had totally renounced all his rights under the will.The main opinion concedes that "(I)n the interest of settling the estates herein involved soonest, it would be best, indeed,if these conflicting claims of the parties were determined in these proceedings." It observes however that this cannot bedone due to the inadequacy of the evidence submitted by the parties in the probate court and of the parties'discussion, viz , "there is no clear and reliable proof of what the possibly applicable laws of Texas are. Then also, thegenuineness of the documents relied upon by respondent Magno [re Hodges' renunciation] is disputed." 12

Hence, the main opinion expressly reserves resolution and determination on these two conflicting claims and issues whichit deems "are not properly before the Courtnow," 13 and specifically holds that "(A)ccordingly, the only question that remains to be settled in the further proceedingshereby ordered to be held in the court below is how much more than as fixed above is the estate of Mrs. Hodges, and thiswould depend on (1) whether or not the applicable laws of Texas do provide in effect for more, such as, when there is



no legitime provided therein, and (2) whether or not Hodges has validly waived his whole inheritance from Mrs.Hodges." 14

Suggested guidelinesConsidering that the only unresolved issue has thus been narrowed down and in consonance with the ruling spirit of our probate law calling for the prompt settlement of the estates of deceased persons for the benefit of creditors and thoseentitled to the residue by way of inheritance — considering that the estates have been long pending settlement since1957 and 1962 , respectively — it was felt that the Court should lay down specific guidelines for the guidance of theprobate court towards the end that it may expedite the closing of the protracted estates proceedings below to the mutualsatisfaction of the heirs and without need of a dissatisfied party elevating its resolution of this only remaining issue oncemore to this Court and dragging out indefinitely the proceedings.

After all, the only question that remains depends for its determination on the resolution of the two questionsof renvoi and renunciation, i.e. as to whether C. N. Hodges can claim a legitime and whether he had renounced theinheritance. But as already indicated above, the Court without reaching a consensus which would finally resolve theconflicting claims here and now in this case opted that "these and other relevant matters should first be threshed out fullyin the trial court in the proceedings hereinafter to be held for the purpose of ascertaining and/or distributing the estate of Mrs. Hodges to her heirs in accordance with her duly probated will." 15

The writer thus feels that laying down the premises and principles governing the nature, effects and consequences of Linnie Jane Hodges' testamentary dispositions in relation to her conjugal partnership and co-ownership of properties withher husband C. N. Hodges and "thinking out" the end results, depending on whether the evidence directed to be formallyreceived by the probate court would bear out that under renvoi C. N. Hodges was or was not entitled to claim a legitime of one-half of his wife Linnie's estate and/or that he had or had not effectively and validly renounced his inheritance shouldhelp clear the decks, as it were, and assist the probate court in resolving the only remaining question of how muchmore than the minimum one-fourth of the community properties of the Hodges spouses herein finally determined should

be awarded as the separate estate of Linnie, particularly since the views expressed in the main opinion have not gained aconsensus of the Court. Hence, the following suggested guidelines, which needless to state, representthe personal opinion and views of the writer:1. To begin with, as pointed out in the main opinion, "according to Hodges' own inventory submitted by him as executor of the estate of his wife, practically all their properties were conjugal which means that the spouses haveequal shares therein." 16

2. Upon the death of Mrs. Hodges on May 23, 1957 , and the dissolution thereby of the marriage, the law imposed uponHodges as surviving husband the duty of inventorying, administering and liquidating the conjugal or communityproperty. 17 Hodges failed to discharge this duty of liquidating the conjugal partnership and estate. On the contrary, hesought and obtained authorization from the probate court to continue the conjugal partnership'sbusiness of buying andselling real and personal properties.In his annual accounts submitted to the probate court as executor of Mrs. Hodges' estate, Hodgesthusconsistently reported the considerable combined income (in six figures) of the conjugal partnership or

coownershipand then divided the same equally between himself and Mrs. Hodges' estate and as consistentlyfiled separate income tax returns and paid the income taxes for each resulting half of such combined incomecorresponding to his own and to Mrs. Hodges' estate. 18 (Parenthetically, he could not in law do this, had he adjudicatedLinnie's entire estate to himself, thus supporting the view advanced even in the main opinion that "Hodges waived not onlyhis rights to the fruits but to the properties themselves." 19

By operation of the law of trust 20 as well as by his own acknowledgment and acts, therefore, all transactions made byHodges after his wife's death were deemed for and on behalf of their unliquidated conjugal partnershipandcommunity estate and were so reported and treated by him.3. With this premise established that all transactions of Hodges after his wife's death were for and on behalf of their unliquidated conjugal partnership and community estate, share and share alike, it should be clear thatnogratuitous dispositions, if any, made by C. N. Hodges from his wife Linnie's estate should be deducted fromher separate estate as held in the main opinion. On the contrary, any such gratuitous dispositions should be charged to hisown share of the conjugal estate since he had no authority or right to make any gratuitous dispositions of Linnie'sproperties to the prejudice of her brothers and sisters whom she called to her succession upon his death, not to mentionthat the very authority obtained by him from the probate court per its orders of May 25, and December 14, 1957 wasto continue the conjugal partnership's business of buying and selling real properties for the account of their unliquidatedconjugal estate and co-ownership, share and share alike and not to make anyfree dispositions of Linnie's estate.4. All transactions as well after the death on December 25, 1962 of Hodges himself appear perforce and necessarily tohave been conducted, on the same premise, for and on behalf of their unliquidated conjugal partnership and/or co-ownership, share and share alike — since the conjugal partnership remained unliquidated — which is another way of saying that such transactions, purchases and sales, mostly the latter, must be deemed in effect to have been made for therespective estates of C. N. Hodges and of his wife Linnie Jane Hodges, as both estates continued to have an equal stakeand share in the conjugal partnership which was not only leftunliquidated but continued as a co-ownership or jointbusiness with the probate court's approval by Hodges during the five-year period that he survived his wife.This explains the probate court's action of requiring that deeds of sale executed by PCIB as Hodges' estate'sadministrator be "signed jointly " by respondent Magno as Mrs. Hodges' estate's administratrix, as well as its order authorizing payment by lot purchasers from the Hodges to either estate, since "there is as yet no judicial declaration of

heirs nor distribution of properties to whomsoever are entitled thereto." 22

And this equally furnishes the rationale of the main opinion for continued conjoint administration by the administrators of the two estates of the deceased spouses, "pending the liquidation of the conjugal partnership," 23 since "it is but logical thatboth estates should be administered jointly by the representatives of both, pending their segregation from each other.Particularly ... because the actuations so far of PCIB evince a determined, albeit groundless, intent to exclude the other heirs of Mrs. Hodges from their inheritance." 24 5. Antly by the representatives of both, pending their segregation fromeach other. Particularly ... because the actuations so far of PCIB evince a determined, albeit groundless, intent to excludethe other heirs of Mrs. Hodges from their inheritance." 24

5. As stressed in the main opinion, the determination of the only unresolved issue of how much more than the minimumof one-fourth of the community or conjugal properties of the Hodges spouses pertains to Mrs. Hodges' estate depends onthe twin questions of renunciation and renvoi . It directed consequently that "a joint hearing of the two probate proceedings



herein involved" be held by the probate court for the reception of "further evidence" in order to finally resolved these twinquestions. 25

(a) On the question of renunciation, it is believed that all that the probate court has to do is to receive formally in evidencethe various documents annexed to respondent Magno's answer at bar, 26 namely: Copy of the U.S. Estate Tax Return filedon August 8, 1958 by C. N. Hodges for his wife Linnie's estate wherein he purportedly declared that hewas renouncing his inheritance under his wife's will in favor of her brothers and sisters as co-heirs designated with himand that it was his "intention (as) surviving husband of the deceased to distribute the remaining property and interests of the deceased in their community estate to the devisee and legatees named in the will when the debts, liabilities, taxes andexpenses of administration are finally determined and paid;" 27 andThe affidavit of ratification of such renunciation (which places him in estoppel ) allegedly executed on August 9, 1962 by C.N. Hodges in Iloilo City wherein he reaffirmed that "... on August 8, 1958 , I renounced and disclaimed any and all right toreceive the rents, emoluments and income from said estate" and further declared that "(T)he purpose of this affidavit isto ratify and confirm, and I do hereby ratify and confirm, the declaration made in schedule M of said return and herebyformally disclaim and renounce any right on my part to receive any of the said rents, emoluments and income from theestate of my deceased wife, Linnie Jane Hodges. This affidavit is made to absolve me or my estate from any liability for the payment of income taxes on income which has accrued to the estate of Linnie Jane Hodges since the death of thesaid Linnie Jane Hodges on May 23, 1957." 28

(b) On the question of renvoi, all that remains for the probate court to do is to formally receive in evidence dulyauthenticated copies of the laws of the State of Texas governing the succession of Linnie Jane Hodges and her husbandC. N. Hodges as citizens of said State at the time of their respective deaths on May 23, 1957 andDecember 25, 1962 . 29

6. The text and tenor of the declarations by C. N. Hodges of renunciation of his inheritance from his wife in favor of her other named heirs in her will (her brothers and sisters and their respective heirs) as ratified and reiterated expressly in hisaffidavit of renunciation executed four years later for the avowed purpose of not being held liable for payment of income

taxes on income which has accrued to his wife's estate since her death indicate a valid and effective renunciation.Once the evidence has been formally admitted and its genuineness and legal effectivity established by the probate court,the renunciation by C. N. Hodges must be given due effect with the result that C. N. Hodges therefore acquired no part of his wife's one-half share of the community properties since he removed himself as an heir by virtue of his renunciation. Bysimple substitution then under Articles 857 and 859 of our Civil Code 30 and by virtue of the will's institution of heirs, since"the heir originally instituted C. N. Hodges) does not become an heir" 31 by force of his renunciation, Mrs. Hodges' brothersand sisters whom she designated as her heirs upon her husband's death are called immediately to her succession.Consequently, the said community and conjugal properties would then pertain pro indiviso share and share alike to their respective estates, with each estate, however, shouldering its own expenses of administration, estate and inheritancetaxes, if any remain unpaid, attorneys' fees and other like expenses and the net remainder to be adjudicated directly to thedecedents' respective brothers and sisters (and their heirs) as the heirs duly designated in their respective wills. Thequestion of renvoi becomes immaterial since most laws and our laws permit such renunciation of inheritance.7. If there were no renunciation (or the same may somehow be declared to have not been valid and effective) by C. N.

Hodges of his inheritance from his wife, however, what would be the consequence?(a) If the laws on succession of the State of Texas do provide for renvoi or "reference back" to Philippine law as thedomiciliary law of the Hodges' spouses governing their succession, then petitioners' view that Mrs. Hodges' estate wouldconsist only of the minimum of "one-fourth of the community properties of the said spouses, as of the time of (her) deathon May 23, 1957" would have to be sustained and C. N. Hodges' estate would consist of three-fourths of the communityproperties, comprising his own one-half (or two-fourths) share and the other fourth of Mrs. Hodges' estate as the legitimegranted him as surviving spouse by Philippine law (Article 900 of the Civil Code) which could not be disposed of nor burdened with any condition by Mrs. Hodges as testatrix.(b) If the laws on succession of the State of Texas do not provide for such renvoi and respondent Magno's assertion iscorrect that the Texas law which would then prevail, provides for no legitime for C. N. Hodges as the surviving spouse,then respondent Magno's assertion that Mrs. Hodges' estate would consist of one-half of the community properties (withthe other half pertaining to C. N. Hodges) would have to be sustained. The community and conjugal properties would thenpertain share and share alike to their respective estates, with each estate shouldering its own expenses of administrationin the same manner stated in the last paragraph of paragraph 6 hereof. .8. As to the nature of the institution of heirs made by Mrs. Hodges in her will, the main opinion holds that "(T)he brothersand sisters of Mrs. Hodges are not substitutes for Hodges; rather, they are also heirs institutedsimultaneously withHodges," but goes further and holds that "it was not the usufruct alone of her estate ... that she bequeathed toHodges during his lifetime, but the full ownership thereof, although the same was to last also during his lifetime only , evenas there was no restriction against his disposing or conveying the whole or any portion thereof anybody other thanhimself " and describes Hodges "as universal and sole heir with absolute dominion over Mrs. Hodges' estate (except over their Lubbock, Texas property ), 32 adding that "Hodges was not obliged to preserve anything for them" (referring to Mrs.Hodges' brothers and sisters as instituted co-heirs). 33

Contrary to this view of the main opinion, the writer submits that the provisions of Mrs. Hodges' will did not grant to C.N.Hodges "full ownership" nor "absolute dominion" over her estate, such that he could as "universal and sole heir" by themere expedient of gratuitously disposing to third persons her whole estate during his lifetime nullify her institution of her brothers and sisters as his co-heirs to succeed to her whole estate "at the death of (her) husband ," deprive them of anyinheritance and make his own brothers and sisters in effect sole heirs not only of his own estate but of his wife's estate as

well.Thus, while Linnie Jane Hodges did not expressly name her brothers and sisters as substitutes for Hodges because shewilled that they would enter into the succession upon his death, still it cannot be gainsaid, as the main opinion concedes,"that they are also heirs instituted simultaneously with Hodges, subject however to certain conditions,partially resolutory insofar as Hodges was concerned and correspondingly suspensive with reference to his brothers andsisters-in-law." 34

Hence, if Hodges is found to have validly renounced his inheritance, there would be a substitution of heirs in fact and inlaw since Linnie's brothers and sisters as the heirs "simultaneously instituted" with a suspensive term would becalled immediately to her succession instead of waiting for the arrival of suspensive term of Hodges' death, since as theheir originally instituted he does not become an heir by force of his renunciation and therefore they would "enter into theinheritance in default of the heir originally instituted" (Hodges) under the provisions of Article 857 and 859 of our CivilCode, supra, 35 thus accelerating their succession to her estate as a consequence of Hodges' renunciation.



Consequently, Linnie Jane Hodges willed that her husband C.N. Hodges would "during his natural lifetime ...manage,control, use and enjoy said estate" and that only "all rents, emoluments and income" alone shall belong to him. Shefurther willed that while he could sell and purchase properties of her estate, and "use any part of the principal estate,"such principal notwithstanding "any changes in the physical properties of said estate"(i.e. new properties acquired or exchanged) would still pertain to her estate, which at the time of his death would pass in full dominion to her brothers andsisters as the ultimate sole and universal heirs of her estate. 36

The testatrix Linnie Jane Hodges in her will thus principally provided that "I give, devise and bequeath all of the rest,residue and remainder of my estate, both personal and real ... to my beloved husband , Charles Newton Hodges, to haveand to hold with him ... during his natural lifetime;" 37 that "(he) shall have the right to manage, control, use and enjoy saidestate during his lifetime, ... to make any changes in the physical properties of said estate, by sale ... and the purchase of any other or additional property as he may think best ... . All rents, emoluments and income from said estate shall belong to him and he is further authorized to use any part of the principal of said estate as he may need or desire, ... he shall notsell or otherwise dispose of any of the improved property now owned by us, located at ... City of Lubbock, Texas ... . Heshall have the right to subdivide any farmland and sell lots therein, and may sell unimproved town lots;" 38 that "(A)t thedeath of my said husband , Charles Newton, I give, devise and bequeath all of the rest, residue and remainder of myestate, both personal and real, ... to be equally divided among my brothers and sisters, share and share alike, namely:Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie Rascoe, Era Roman and Nimroy Higdon;" 39 and that"(I)n case of the death of any of my brothers and/or sisters ... prior to the death of my husband ... the heirs of suchdeceased brother or sister shall take jointly the share which would have gone to such brother or sister had she or hesurvived." 40

Such provisions are wholly consistent with the view already fully expounded above that all transactions and sales madeby Hodges after his wife Linnie's death were by operation of the law of trust as well as by his ownacknowledgment andacts deemed for and on behalf of their unliquidated conjugal partnership and community estate, share and share alike,

with the express authorization of the probate court per its orders of May 25, and December 14, 1957 granting Hodges'motion to continue the conjugal partnership business of buying and selling real estate even after her death. By the sametoken, Hodges could not conceivably be deemed to have had any authority or right to dispose gratuitously of any portionof her estate to whose succession she had called her brothers and sisters upon his death.9. Such institutions of heirs with a term are expressly recognized and permitted under Book III, Chapter 2, section 4 of our Civil Code dealing with "conditional testamentary dispositions and testamentary dispositions with a term." 41

Thus, Article 885 of our Civil Code expressly provides that: ART 885. The designation of the day or time when the effects of the institution of an heir shallcommence or cease shallbe valid .In both cases, the legal heir shall be considered as called to the succession until the arrival of the period or its expiration.But in the first case he shall not enter into possession of the property until after having given sufficient security, with theintervention of the instituted heir.

Accordingly, under the terms of Mrs. Hodges' will, her husband's right to the succession as the instituted heir ceased in

diem, i.e. upon the arrival of the resolutory term of his death on December 25, 1962, while her brothers' and sisters' rightto the succession also as instituted heirs commenced ex die, i.e. upon the expiration of the suspensive term (as far asthey were concerned) of the death of C. N. Hodges on December 25, 1962 . 42

As stated in Padilla's treatise on the Civil Code, "A term is a period whose arrival is certain although the exact date thereof may be uncertain. A term may have either a suspensive or a resolutory effect. The designation of the day when the legacy"shall commence" is ex die, or a term with a suspensive effect, from a certain day. The designation of the day when thelegacy "shall cease" is in diem or a term with a resolutory effect, until a certain day." He adds that "A legacy based upon acertain age or upon the death of a person is not a condition but aterm. If the arrival of the term would commence the rightof the heir, it is suspensive. If the arrival of the term would terminate his right, it is resolutory" and that "upon the arrival of the period, in case of a suspensive term, theinstituted heir is entitled to the succession, and in case of a resolutory term,his right terminates." 43

10. The sizable estates herein involved have now been pending settlement for a considerably protracted period (of seventeen years counted from Linnie's death in 1957), and all that is left to be done is to resolve the only remaining issue(involving the two questions of renunciation and renvoi ) hereinabove discussed in order to close up the estates and finallyeffect distribution to the deceased spouses' respective brothers and sisters and their heirs as the heirs duly instituted intheir wills long admitted to probate. Hence, it is advisable for said instituted heirs and their heirs in turn 44 to come to termsfor the adjudication and distribution to them pro-indiviso of the up to now unliquidated community properties of the estatesof the Hodges spouses (derived from their unliquidated conjugal partnership) rather than to get bogged down with theformidable task of physically segregating and partitioning the two estates with the numerous transactions, items anddetails and physical changes of properties involved. The estates proceedings would thus be closed and they could thenname their respective attorneys-in-fact to work out the details of segregating, dividing or partitioningthe unliquidated community properties or liquidating them — which can be done then on their own without further need of intervention on the part of the probate court as well as allow them meanwhile to enjoy and make use of the income andcash and liquid assets of the estates in such manner as may be agreed upon between them.Such a settlement or modus vivendi between the heirs of the unliquidated two estates for the mutual benefit of all of themshould not prove difficult, considering that it appears as stated in the main opinion that 22.968149% of the share or undivided estate of C. N. Hodges have already been acquired by the heirs of Linnie Jane Hodges from certain heirs of her

husband, while certain other heirs representing 17.34375% of Hodges' estate were joining cause with Linnie's heirs intheir pending and unresolved motion for the removal of petitioner PCIB as administrator of Hodges' estate, 45 apparentlyimpatient with the situation which has apparently degenerated into a running battle between the administrators of the twoestates to the common prejudice of all the heirs.11. As earlier stated, the writer has taken the pain of suggesting these guidelines which may serve to guide the probatecourt as well as the parties towards expediting the winding up and closing of the estates and the distribution of the netestates to the instituted heirs and their successors duly entitled thereto. The probate court should exert all effort towardsthis desired objective pursuant to the mandate of our probate law, bearing in mind the Court's admonition in previouscases that "courts of first instance should exert themselves to close up estate within twelve months from the time they arepresented, and they may refuse to allow any compensation to executors and administrators who do not actively labor tothat end, and they may even adopt harsher measures."46



Timeliness of appeals and imposition of thirty-one (31) additional docket feesTwo appeals were docketed with this Court, as per the two records on appeal submitted (one with a green cover and theother with a yellow cover). As stated at the outset, these appeals involve basically the same primal issue raised in thepetition for certiorari as to whether there still exists a separate estate of Linnie Jane Hodges which has to continue to beadministered by respondent Magno. Considering the main opinion's ruling in the affirmative and that her estate and that of her husband (since they jointly comprise unliquidated community properties) must be administered conjointly by their respective administrators (PCIB and Magno), the said appeals (involving thirty-three different orders of the probate courtapproving sales contracts and other acts of administration executed and performed by respondent Magno on behalf of Linnie's estate) have been necessarily overruled by the Court's decision at bar.(a) The "priority question" raised by respondent Magno as to the patent failure of the two records on appeal to show ontheir face and state the material data that the appeals were timely taken within the 30-day reglamentary period as requiredby Rule 41, section 6 of the Rules of Court, has been brushed aside by the main opinion with the statement that it is "notnecessary to pass upon the timeliness of any of said appeals" since they "revolve around practically the same main issuesand ... it is admitted that some of them have been timely taken." 47 The main opinion thus proceeded with thedetermination of the thirty-three appealed orders despite the grave defect of the appellant PCIB's records on appeal andtheir failure to state the required material data showing the timeliness of the appeals.Such disposition of the question of timeliness deemed as "mandatory and jurisdictional" in a number of cases merits thewriter's concurrence in that the question raised has been subordinated to the paramount considerations of substantial

justice and a "liberal interpretation of the rules" applied so as not to derogate and detract from the primary intent andpurpose of the rules, viz "the proper and just determination of a litigation" 48 — which calls for "adherence to a liberalconstruction of the procedural rules in order to attain their objective of substantial justice and of avoiding denials of substantial justice due to procedural technicalities." 49

Thus, the main opinion in consonance with the same paramount considerations of substantial justice has likewiseoverruled respondents' objection to petitioner's taking the recourse of "the present remedy of certiorari and prohibition" —"despite the conceded availability of appeal" — on the ground that "there is a common thread among the basic issuesinvolved in all these thirty-three appeals — (which) deal with practically the same basic issues that can be moreexpeditiously resolved or determined in a single special civil action . . . " 50

(b) Since the basic issues have been in effect resolved in the special civil action at bar (as above stated) with thedismissal of the petition by virtue of the Court's judgment as to the continued existence of a separate estate of Linnie JaneHodges and the affirmance as a necessary consequence of the appealed orders approving and sanctioning respondentMagno's sales contracts and acts of administration, some doubt would arise as to the propriety of the main opinionrequiring the payment by PCIB of thirty-one (31) additional appeal docket fees. This doubt is further enhanced by thequestion of whether it would make the cost of appeal unduly expensive or prohibitive by requiring the payment of aseparate appeal docket fee for each incidental order questioned when the resolution of all such incidental questionedorders involve basically one and the same main issue (in this case, the existence of a separate estate of Linnie Jane

Hodges) and can be more expeditiously resolved or determined in a single special civil action" (for which a single docketfee is required) as stated in the main opinion. 51Considering the importance of the basic issues and the magnitude of theestates involved, however, the writer has pro hac vice given his concurrence to the assessment of the said thirty-one (31)additional appeal docket fees.MAKALINTAL, C.J., concurring:I concur in the separate opinion of Justice Teehankee, which in turn agrees with the dispositive portion of the main opinionof Justice Barredo insofar as it dismisses the petition for certiorari and prohibition in Cases L-27860 and L-27896 andaffirms the appealed orders of the probate court in cases L-27936-37.However, I wish to make one brief observation for the sake of accuracy. Regardless of whether or not C. N. Hodges wasentitled to a legitime in his deceased wife's estate — which question, still to be decided by the said probate court, maydepend upon what is the law of Texas and upon its applicability in the present case — the said estate consists of one-half,not one-fourth, of the conjugal properties. There is neither a minimum of one-fourth nor a maximum beyond that. It isimportant to bear this in mind because the estate of Linnie Hodges consists of her share in the conjugal properties, is stillunder administration and until now has not been distributed by order of the court.The reference in both the main and separate opinions to a one-fourth portion of the conjugal properties as Linnie Hodges'minimum share is a misnomer and is evidently meant only to indicate that if her husband should eventually be declaredentitled to a legitime, then the disposition made by Linnie Hodges in favor of her collateral relatives would be valid only asto one-half of her share, or one-fourth of the conjugal properties, since the remainder, which constitutes such legitime,would necessarily go to her husband in absolute ownership, unburdened by any substitution, term or condition, resolutoryor otherwise. And until the estate is finally settled and adjudicated to the heirs who may be found entitled to it, theadministration must continue to cover Linnie's entire conjugal share.

Separate OpinionsFERNANDO, J., concurring:I concur on the basis of the procedural pronouncements in the opinion.TEEHANKEE, J., concurring:

I concur in the result of dismissal of the petition for certiorari and prohibition in Cases L-27860 and L-27896 and with theaffirmance of the appealed orders of the probate court in Cases L-27936-37.I also concur with the portion of the dispositive part of the judgment penned by Mr. Justice Barredo decreeing the lifting of the Court's writ of preliminary injunction of August 8, 1967 as amended on October 4, and December 6, 1967 1 andordering in lieu thereof that the Court's resolution of September 8, 1972 2 which directed that petitioner-appellant PCIB asadministrator of C. N. (Charles Newton) Hodges' estate (Sp. Proc. No. 1672 and respondent-appellee Avelina A. Magnoas administratrix of Linnie Jane Hodges' estate (Sp. Proc. No. 1307) should act always conjointly never independentlyfrom each other, as such administrators, is reiterated and shall continue in force and made part of the judgment.It is manifest from the record that petitioner-appellant PCIB's primal contention in the cases at bar belatedly filed by it withthis Court on August 1, 1967 (over ten (10) years after Linnie Jane Hodges' death on May 23, 1957 and (over five (5)years after her husband C.N. Hodges' death on December 25, 1962 — during which time both estates havebeen pending settlement and distribution to the decedents' respective rightful heirs all this time up to now) — that the



probate court per its order of December 14, 1957 (supplementing an earlier order of May 25, 1957) 3 in granting C. N.Hodges' motion as Executor of his wife Linnie's estate to continue their "business of buying and selling personal and realproperties" and approving "all sales, conveyances, leases and mortgages" made and to be made by him as such executor under his obligation to submit his yearly accounts in effect declared him as sole heir of his wife's estate and nothingremains to be done except to formally close her estate (Sp. Proc. No. 1307) as her estate was thereby merged with hisown so that nothing remains of it that may be adjudicated to her brothers and sisters as her designated heirs after him, 4 — is wholly untenable and deserves scant consideration.

Aside from having been put forth as an obvious afterthought much too late in the day, this contention of PCIB that thereno longer exists any separate estate of Linnie Jane Hodges after the probate court's order of December 14, 1957 goesagainst the very acts and judicial admissions of C.N. Hodges as her executor whereby he consistently recognizedthe separate existence and identity of his wife's estate apart from his own separate estate and from his own share of their conjugal partnership and estate and "never considered the whole estate as a single one belonging exclusively to himself"during the entire period that he survived her for over five (5) years up to the time of his own death on December 25,1962 5 and against the identical acts and judicial admissions of PCIB as administrator of C.N. Hodges' estate until PCIBsought in 1966 to take over both estates as pertaining to its sole administration.PCIB is now barred and estopped from contradicting or taking a belated position contradictory to or inconsistent with itsprevious admissions 6 (as well as those of C.N. Hodges himself in his lifetime and of whose estate PCIB is merely anadministrator) recognizing the existence and identity of Linnie Jane Hodges' separate estate and the legal rights andinterests therein of her brothers and sisters as her designated heirs in her will.PCIB's petition for certiorari and prohibition to declare all acts of the probate court in Linnie Jane Hodges' estatesubsequent to its order of December 14, 1957 as "null and void for having been issued without jurisdiction" must thereforebe dismissed with the rejection of its belated and untenable contention that there is no longer any estate of Mrs. Hodgesof which respondent Avelina Magno is the duly appointed and acting administratrix.

PCIB's appeal 7 from the probate court's various orders recognizing respondent Magno as administratrix of Linnie's estate(Sp. Proc No. 1307) and sanctioning her acts of administration of said estate and approving the sales contracts executedby her with the various individual appellees, which involve basically the same primal issue raised in the petition as towhether there still exists a separate estate of Linnie of which respondent-appellee Magno may continue to be theadministratrix, must necessarily fail — a result of the Court's main opinion at bar that there does exist such an estate andthat the two estates (husband's and wife's) must be administered cojointly by their respective administrators (PCIB andMagno).The dispositive portion of the main opinionThe main opinion disposes that:IN VIEW OF ALL THE FOREGOING PREMISES, judgment is hereby rendered DISMISSING the petition in G. R. Nos. L-27860 and L-27896, and AFFIRMING, in G. R. Nos. L-27936-37 and the other thirty-one numbers hereunder ordered tobe added after payment of the corresponding docket fees, all the orders of the trial court under appeal enumerated indetail on pages 35 to 37 and 80 to 82 of this decision:

The existence of the Testate Estate of Linnie Jane Hodges, with respondent-appellee Avelina A. Magno, as administratrixthereof is recognized , andIt is declared that, until final judgment is ultimately rendered regarding (1) the manner of applying Article 16 of the CivilCode of the Philippines to the situation obtaining in these cases and (2) the factual and legal issues of whether or notCharles Newton Hodges has effectively and legally renounced his inheritance under the will of Linnie Jane Hodges, thesaid estate consists of one-fourthof the community properties of the said spouses, as of the time of the death of the wifeon May 23, 1957, minus whatever the husband had already gratuitously disposed of in favor of third persons from saiddate until his death, provided, first, that with respect to remunerative dispositions, the proceeds thereof shall continue tobe part of the wife's estate, unless subsequently disposed of gratuitously to third parties by the husband, and second, thatshould the purported renunciation be declared legally effective, no deduction whatsoever are to be made from said estate;In consequence, the preliminary injunction of August 8, 1967, as amended on October 4 and December 6, 1967, is liftedand the resolution of September 8, 1972, directing that petitioner-appellant PCIB, as Administrator of the Testate Estate of Charles Newton Hodges in Special Proceedings 1672, and respondent-appellee Avelina A. Magno, as Administratrix of the Testate Estate of Linnie Jane Hodges in Special Proceedings 1307, should act thenceforth always conjointly , never independently from each other, as such administrators, is reiterated , and the same is made part of this judgment and shallcontinue in force, pending the liquidation of the conjugal partnership of the deceased spouses andthe determination and segregation from each other of their respective estates; provided, that upon the finality of this

judgment, the trial court should immediately proceed to the partition of the presently combined estates of the spouses, tothe end that the one-half share thereof of Mrs. Hodges may be properly and clearly identified;Thereafter , the trial court should forthwith segregate the remainder of the one-fourth herein adjudged to be her estate andcause the same to be turned over or delivered to respondent for her exclusive administration in Special Proceedings1307, while the other one-fourth shall remain under the joint administrative of said respondent and petitioner under a joint

proceedings in Special Proceedings 1307 and 1672, whereas the half unquestionably pertaining to Hodges shallbe administered by petitioner exclusively in Special Proceedings 1672, without prejudice to the resolution by the trial courtof the pending motions for its removal as administrator;

And this arrangement shall be maintained until the final resolution of the two issues of renvoi andrenunciation herebyreserved for further hearing and determination, and the corresponding completesegregation and partition of the two

estates in the proportions that may result from the said resolution.Generally and in all other respects, the parties and the court a quo are directed to adhere henceforth, in all their actuations in Special Proceedings 1307 and 1672, to the views passed and ruled upon by the Court in the foregoingopinion. 8

Minimum estimate of Mrs. Hodges' estate:One-fourth of conjugal properties.The main opinion in declaring the existence of a separate estate of Linnie Jane Hodges which shall pass to her brothersand sisters with right of representation (by their heirs) as her duly designated heirs declares that her estate consists asa minimum (i.e. assuming (1) that under Article 16 of the Philippine Civil Code C. N. Hodges as surviving husband wasentitled to one-half of her estate as legitime and (2) that he had not effectively and legallyrenounced his inheritance under her will) of "one-fourth of the community properties of the said spouses, as of the time of the death of the wife on May 23,1957, minus whatever the husband had already gratuitously disposed of in favor of third persons from said date until his



death," with the proviso that proceeds of remunerative dispositions or sales for valuable consideration made by C. N.Hodges after his wife Linnie's death shall continue to be part of her estate unless subsequently disposed of byhim gratuitously to third parties subject to the condition, however, that if he is held to have validly andeffectively renounced his inheritance under his wife's will, no deductions of any dispositions made by Hodges evenif gratuitously are to be made from his wife Linnie's estate which shall pass intact to her brothers and sisters as her designated heirs called in her will to succeed to her estate upon the death of her husband C. N. Hodges.Differences with the main opinionI do not share the main opinion's view that Linnie Jane Hodges instituted her husband as her heir under her will "to havedominion over all her estate during his lifetime ... as absolute owner of the properties ..." 9 and that she bequeathed "thewhole of her estate to be owned and enjoyed by him as universal and sole heir with absolute dominion over them onlyduring his lifetime, which means that while he could completely and absolutely dispose of any portion thereof inter vivos toanyone other than himself, he was not free to do so mortis causa, and all his rights to what might remain upon his deathwould cease entirely upon the occurrence of that contingency, inasmuch as the right of his brothers and sisters-in-law tothe inheritance, although vested already upon the death of Mrs. Hodges, would automatically become operative upon theoccurrence of the death of Hodges in the event of actual existence of any remainder of her estate then." 10

As will be amplified hereinafter, I do not subscribe to such a view that Linnie Jane Hodges willed "full and absoluteownership" and "absolute dominion" over her estate to her husband, but rather that she named her husband C. N.Hodges and her brothers and sisters as instituted heirs with a term under Article 885 of our Civil Code, to wit, Hodges asinstituted heir with a resolutory term whereunder his right to the succession ceased in diem upon arrival of the resolutory term of his death on December 25, 1962 and her brothers and sisters as instituted heirs withasuspensive term whereunder their right to the succession commenced ex die upon arrival of the suspensive term of thedeath of C. N. Hodges on December 25, 1962.Hence, while agreeing with the main opinion that the proceeds of all remunerative dispositions made by C. N. Hodges

after his wife's death remain an integral part of his wife's estate which she willed to her brothers and sisters, I submit thatC. N. Hodges could not validly make gratuitous dispositions of any part or all of his wife's estate — "completely andabsolutely dispose of any portion thereof inter vivos to anyone other than himself" in the language of the mainopinion, supra — and thereby render ineffectual and nugatory her institution of her brothers and sisters as her designatedheirs to succeed to her whole estate "at the death of (her) husband." If according to the main opinion, Hodgescould not make such gratuitous "complete and absolute dispositions" of his wife Linnie's estate " mortis causa," it wouldseem that by the same token and rationale he was likewise proscribed by the will from making such dispositions of Linnie's estate inter vivos.I believe that the two questions of renvoi and renunciation should be resolved preferentially and expeditiously by theprobate court ahead of the partition and segregation of the minimum one-fourth of the conjugal or community propertiesconstituting Linnie Jane Hodges' separate estate, which task considering that it is now seventeen (17) years since LinnieJane Hodges' death and her conjugal estate with C. N. Hodges has remained unliquidated up to now might take a similar number of years to unravel with the numerous items, transactions and details of the sizable estates involved.

Such partition of the minimum one-fourth would not be final, since if the two prejudicial questionsof renvoi andrenunciation were resolved favorably to Linnie's estate meaning to say that if it should be held that C. N.Hodges is not entitled to any legitime of her estate and at any rate he had totally renounced his inheritance under the will),then Linnie's estate would consist not only of the minimum one-fourth but one-half of the conjugal or community propertiesof the Hodges spouses, which would require again the partition and segregation of still another one-fourth of said.properties to complete Linnie's separate estate.My differences with the main opinion involve further the legal concepts, effects and consequences of the testamentarydispositions of Linnie Jane Hodges in her will and the question of the best to reach a solution of the pressing question of expediting the closing of the estates which after all do not appear to involve any outstanding debts nor any disputebetween the heirs and should therefore be promptly settled now after all these years without any further unduecomplications and delays and distributed to the heirs for their full enjoyment and benefit. As no consensus appears tohave been reached thereon by a majority of the Court, I propose to state views as concisely as possible with the sole endin view that they may be of some assistance to the probate court and the parties in reaching an expeditious closing andsettlement of the estates of the Hodges spouses.Two Assumptions

As indicated above, the declaration of the minimum of Mrs. Hodges' estate as one-fourth of the conjugal properties isbased on two assumptions most favorable to C. N. Hodges' estate and his heirs, namely (1) that the probate court mustaccept the renvoi or "reference back" 11 allegedly provided by the laws of the State of Texas (of which state the Hodgesspouses were citizens) whereby the civil laws of the Philippines as the domicile of the Hodges spouses would govern their succession notwithstanding the provisions of Article 16 of our Civil Code (which provides that the national law of thedecedents, in this case, of Texas, shall govern their succession) with the result that her estate would consist of nomore than one-fourth of the conjugal properties since the legitime of her husband (the other one-fourth of said conjugalproperties or one-half of her estate, under Article 900 of our Civil Code) could not then be disposed of nor burdened withany condition by her and (2) that C.N. Hodges had not effectively and legally renounced his inheritance under his wife'swill.These two assumptions are of course flatly disputed by respondent-appellee Magno as Mrs. Hodges' administratrix, whoavers that the law of the State of Texas governs her succession and does not provide for and legitime, hence, her

brothers and sisters are entitled to succeed to the whole of her share of the conjugal properties which is one-half thereof and that in any event, Hodges had totally renounced all his rights under the will.The main opinion concedes that "(I)n the interest of settling the estates herein involved soonest, it would be best, indeed,if these conflicting claims of the parties were determined in these proceedings." It observes however that this cannot bedone due to the inadequacy of the evidence submitted by the parties in the probate court and of the parties'discussion, viz , "there is no clear and reliable proof of what the possibly applicable laws of Texas are. Then also, thegenuineness of the documents relied upon by respondent Magno [re Hodges' renunciation] is disputed." 12

Hence, the main opinion expressly reserves resolution and determination on these two conflicting claims and issues whichit deems "are not properly before the Courtnow," 13 and specifically holds that "(A)ccordingly, the only question that remains to be settled in the further proceedingshereby ordered to be held in the court below is how much more than as fixed above is the estate of Mrs. Hodges, and thiswould depend on (1) whether or not the applicable laws of Texas do provide in effect for more, such as, when there is



no legitime provided therein, and (2) whether or not Hodges has validly waived his whole inheritance from Mrs.Hodges." 14

Suggested guidelinesConsidering that the only unresolved issue has thus been narrowed down and in consonance with the ruling spirit of our probate law calling for the prompt settlement of the estates of deceased persons for the benefit of creditors and thoseentitled to the residue by way of inheritance — considering that the estates have been long pending settlement since1957 and 1962 , respectively — it was felt that the Court should lay down specific guidelines for the guidance of theprobate court towards the end that it may expedite the closing of the protracted estates proceedings below to the mutualsatisfaction of the heirs and without need of a dissatisfied party elevating its resolution of this only remaining issue oncemore to this Court and dragging out indefinitely the proceedings.

After all, the only question that remains depends for its determination on the resolution of the two questionsof renvoi and renunciation, i.e. as to whether C. N. Hodges can claim a legitime and whether he had renounced theinheritance. But as already indicated above, the Court without reaching a consensus which would finally resolve theconflicting claims here and now in this case opted that "these and other relevant matters should first be threshed out fullyin the trial court in the proceedings hereinafter to be held for the purpose of ascertaining and/or distributing the estate of Mrs. Hodges to her heirs in accordance with her duly probated will." 15

The writer thus feels that laying down the premises and principles governing the nature, effects and consequences of Linnie Jane Hodges' testamentary dispositions in relation to her conjugal partnership and co-ownership of properties withher husband C. N. Hodges and "thinking out" the end results, depending on whether the evidence directed to be formallyreceived by the probate court would bear out that under renvoi C. N. Hodges was or was not entitled to claim a legitime of one-half of his wife Linnie's estate and/or that he had or had not effectively and validly renounced his inheritance shouldhelp clear the decks, as it were, and assist the probate court in resolving the only remaining question of how muchmore than the minimum one-fourth of the community properties of the Hodges spouses herein finally determined should

be awarded as the separate estate of Linnie, particularly since the views expressed in the main opinion have not gained aconsensus of the Court. Hence, the following suggested guidelines, which needless to state, representthe personal opinion and views of the writer:1. To begin with, as pointed out in the main opinion, "according to Hodges' own inventory submitted by him as executor of the estate of his wife, practically all their properties were conjugal which means that the spouses haveequal shares therein." 16

2. Upon the death of Mrs. Hodges on May 23, 1957 , and the dissolution thereby of the marriage, the law imposed uponHodges as surviving husband the duty of inventorying, administering and liquidating the conjugal or communityproperty. 17 Hodges failed to discharge this duty of liquidating the conjugal partnership and estate. On the contrary, hesought and obtained authorization from the probate court to continue the conjugal partnership'sbusiness of buying andselling real and personal properties.In his annual accounts submitted to the probate court as executor of Mrs. Hodges' estate, Hodgesthusconsistently reported the considerable combined income (in six figures) of the conjugal partnership or

coownershipand then divided the same equally between himself and Mrs. Hodges' estate and as consistentlyfiled separate income tax returns and paid the income taxes for each resulting half of such combined incomecorresponding to his own and to Mrs. Hodges' estate. 18 (Parenthetically, he could not in law do this, had he adjudicatedLinnie's entire estate to himself, thus supporting the view advanced even in the main opinion that "Hodges waived not onlyhis rights to the fruits but to the properties themselves." 19

By operation of the law of trust 20 as well as by his own acknowledgment and acts, therefore, all transactions made byHodges after his wife's death were deemed for and on behalf of their unliquidated conjugal partnershipandcommunity estate and were so reported and treated by him.3. With this premise established that all transactions of Hodges after his wife's death were for and on behalf of their unliquidated conjugal partnership and community estate, share and share alike, it should be clear thatnogratuitous dispositions, if any, made by C. N. Hodges from his wife Linnie's estate should be deducted fromher separate estate as held in the main opinion. On the contrary, any such gratuitous dispositions should be charged to hisown share of the conjugal estate since he had no authority or right to make any gratuitous dispositions of Linnie'sproperties to the prejudice of her brothers and sisters whom she called to her succession upon his death, not to mentionthat the very authority obtained by him from the probate court per its orders of May 25, and December 14, 1957 wasto continue the conjugal partnership's business of buying and selling real properties for the account of their unliquidatedconjugal estate and co-ownership, share and share alike and not to make anyfree dispositions of Linnie's estate.4. All transactions as well after the death on December 25, 1962 of Hodges himself appear perforce and necessarily tohave been conducted, on the same premise, for and on behalf of their unliquidated conjugal partnership and/or co-ownership, share and share alike — since the conjugal partnership remained unliquidated — which is another way of saying that such transactions, purchases and sales, mostly the latter, must be deemed in effect to have been made for therespective estates of C. N. Hodges and of his wife Linnie Jane Hodges, as both estates continued to have an equal stakeand share in the conjugal partnership which was not only leftunliquidated but continued as a co-ownership or jointbusiness with the probate court's approval by Hodges during the five-year period that he survived his wife.This explains the probate court's action of requiring that deeds of sale executed by PCIB as Hodges' estate'sadministrator be "signed jointly " by respondent Magno as Mrs. Hodges' estate's administratrix, as well as its order authorizing payment by lot purchasers from the Hodges to either estate, since "there is as yet no judicial declaration of

heirs nor distribution of properties to whomsoever are entitled thereto." 22

And this equally furnishes the rationale of the main opinion for continued conjoint administration by the administrators of the two estates of the deceased spouses, "pending the liquidation of the conjugal partnership," 23 since "it is but logical thatboth estates should be administered jointly by the representatives of both, pending their segregation from each other.Particularly ... because the actuations so far of PCIB evince a determined, albeit groundless, intent to exclude the other heirs of Mrs. Hodges from their inheritance." 24 5. Antly by the representatives of both, pending their segregation fromeach other. Particularly ... because the actuations so far of PCIB evince a determined, albeit groundless, intent to excludethe other heirs of Mrs. Hodges from their inheritance." 24

5. As stressed in the main opinion, the determination of the only unresolved issue of how much more than the minimumof one-fourth of the community or conjugal properties of the Hodges spouses pertains to Mrs. Hodges' estate depends onthe twin questions of renunciation and renvoi . It directed consequently that "a joint hearing of the two probate proceedings



herein involved" be held by the probate court for the reception of "further evidence" in order to finally resolved these twinquestions. 25

(a) On the question of renunciation, it is believed that all that the probate court has to do is to receive formally in evidencethe various documents annexed to respondent Magno's answer at bar, 26 namely: Copy of the U.S. Estate Tax Return filedon August 8, 1958 by C. N. Hodges for his wife Linnie's estate wherein he purportedly declared that hewas renouncing his inheritance under his wife's will in favor of her brothers and sisters as co-heirs designated with himand that it was his "intention (as) surviving husband of the deceased to distribute the remaining property and interests of the deceased in their community estate to the devisee and legatees named in the will when the debts, liabilities, taxes andexpenses of administration are finally determined and paid;" 27 andThe affidavit of ratification of such renunciation (which places him in estoppel ) allegedly executed on August 9, 1962 by C.N. Hodges in Iloilo City wherein he reaffirmed that "... on August 8, 1958 , I renounced and disclaimed any and all right toreceive the rents, emoluments and income from said estate" and further declared that "(T)he purpose of this affidavit isto ratify and confirm, and I do hereby ratify and confirm, the declaration made in schedule M of said return and herebyformally disclaim and renounce any right on my part to receive any of the said rents, emoluments and income from theestate of my deceased wife, Linnie Jane Hodges. This affidavit is made to absolve me or my estate from any liability for the payment of income taxes on income which has accrued to the estate of Linnie Jane Hodges since the death of thesaid Linnie Jane Hodges on May 23, 1957." 28

(b) On the question of renvoi, all that remains for the probate court to do is to formally receive in evidence dulyauthenticated copies of the laws of the State of Texas governing the succession of Linnie Jane Hodges and her husbandC. N. Hodges as citizens of said State at the time of their respective deaths on May 23, 1957 andDecember 25, 1962 . 29

6. The text and tenor of the declarations by C. N. Hodges of renunciation of his inheritance from his wife in favor of her other named heirs in her will (her brothers and sisters and their respective heirs) as ratified and reiterated expressly in hisaffidavit of renunciation executed four years later for the avowed purpose of not being held liable for payment of income

taxes on income which has accrued to his wife's estate since her death indicate a valid and effective renunciation.Once the evidence has been formally admitted and its genuineness and legal effectivity established by the probate court,the renunciation by C. N. Hodges must be given due effect with the result that C. N. Hodges therefore acquired no part of his wife's one-half share of the community properties since he removed himself as an heir by virtue of his renunciation. Bysimple substitution then under Articles 857 and 859 of our Civil Code 30 and by virtue of the will's institution of heirs, since"the heir originally instituted C. N. Hodges) does not become an heir" 31 by force of his renunciation, Mrs. Hodges' brothersand sisters whom she designated as her heirs upon her husband's death are called immediately to her succession.Consequently, the said community and conjugal properties would then pertain pro indiviso share and share alike to their respective estates, with each estate, however, shouldering its own expenses of administration, estate and inheritancetaxes, if any remain unpaid, attorneys' fees and other like expenses and the net remainder to be adjudicated directly to thedecedents' respective brothers and sisters (and their heirs) as the heirs duly designated in their respective wills. Thequestion of renvoi becomes immaterial since most laws and our laws permit such renunciation of inheritance.7. If there were no renunciation (or the same may somehow be declared to have not been valid and effective) by C. N.

Hodges of his inheritance from his wife, however, what would be the consequence?(a) If the laws on succession of the State of Texas do provide for renvoi or "reference back" to Philippine law as thedomiciliary law of the Hodges' spouses governing their succession, then petitioners' view that Mrs. Hodges' estate wouldconsist only of the minimum of "one-fourth of the community properties of the said spouses, as of the time of (her) deathon May 23, 1957" would have to be sustained and C. N. Hodges' estate would consist of three-fourths of the communityproperties, comprising his own one-half (or two-fourths) share and the other fourth of Mrs. Hodges' estate as the legitimegranted him as surviving spouse by Philippine law (Article 900 of the Civil Code) which could not be disposed of nor burdened with any condition by Mrs. Hodges as testatrix.(b) If the laws on succession of the State of Texas do not provide for such renvoi and respondent Magno's assertion iscorrect that the Texas law which would then prevail, provides for no legitime for C. N. Hodges as the surviving spouse,then respondent Magno's assertion that Mrs. Hodges' estate would consist of one-half of the community properties (withthe other half pertaining to C. N. Hodges) would have to be sustained. The community and conjugal properties would thenpertain share and share alike to their respective estates, with each estate shouldering its own expenses of administrationin the same manner stated in the last paragraph of paragraph 6 hereof. .8. As to the nature of the institution of heirs made by Mrs. Hodges in her will, the main opinion holds that "(T)he brothersand sisters of Mrs. Hodges are not substitutes for Hodges; rather, they are also heirs institutedsimultaneously withHodges," but goes further and holds that "it was not the usufruct alone of her estate ... that she bequeathed toHodges during his lifetime, but the full ownership thereof, although the same was to last also during his lifetime only , evenas there was no restriction against his disposing or conveying the whole or any portion thereof anybody other thanhimself " and describes Hodges "as universal and sole heir with absolute dominion over Mrs. Hodges' estate (except over their Lubbock, Texas property ), 32 adding that "Hodges was not obliged to preserve anything for them" (referring to Mrs.Hodges' brothers and sisters as instituted co-heirs). 33

Contrary to this view of the main opinion, the writer submits that the provisions of Mrs. Hodges' will did not grant to C.N.Hodges "full ownership" nor "absolute dominion" over her estate, such that he could as "universal and sole heir" by themere expedient of gratuitously disposing to third persons her whole estate during his lifetime nullify her institution of her brothers and sisters as his co-heirs to succeed to her whole estate "at the death of (her) husband ," deprive them of anyinheritance and make his own brothers and sisters in effect sole heirs not only of his own estate but of his wife's estate as

well.Thus, while Linnie Jane Hodges did not expressly name her brothers and sisters as substitutes for Hodges because shewilled that they would enter into the succession upon his death, still it cannot be gainsaid, as the main opinion concedes,"that they are also heirs instituted simultaneously with Hodges, subject however to certain conditions,partially resolutory insofar as Hodges was concerned and correspondingly suspensive with reference to his brothers andsisters-in-law." 34

Hence, if Hodges is found to have validly renounced his inheritance, there would be a substitution of heirs in fact and inlaw since Linnie's brothers and sisters as the heirs "simultaneously instituted" with a suspensive term would becalled immediately to her succession instead of waiting for the arrival of suspensive term of Hodges' death, since as theheir originally instituted he does not become an heir by force of his renunciation and therefore they would "enter into theinheritance in default of the heir originally instituted" (Hodges) under the provisions of Article 857 and 859 of our CivilCode, supra, 35 thus accelerating their succession to her estate as a consequence of Hodges' renunciation.



Consequently, Linnie Jane Hodges willed that her husband C.N. Hodges would "during his natural lifetime ...manage,control, use and enjoy said estate" and that only "all rents, emoluments and income" alone shall belong to him. Shefurther willed that while he could sell and purchase properties of her estate, and "use any part of the principal estate,"such principal notwithstanding "any changes in the physical properties of said estate"(i.e. new properties acquired or exchanged) would still pertain to her estate, which at the time of his death would pass in full dominion to her brothers andsisters as the ultimate sole and universal heirs of her estate. 36

The testatrix Linnie Jane Hodges in her will thus principally provided that "I give, devise and bequeath all of the rest,residue and remainder of my estate, both personal and real ... to my beloved husband , Charles Newton Hodges, to haveand to hold with him ... during his natural lifetime;" 37 that "(he) shall have the right to manage, control, use and enjoy saidestate during his lifetime, ... to make any changes in the physical properties of said estate, by sale ... and the purchase of any other or additional property as he may think best ... . All rents, emoluments and income from said estate shall belong to him and he is further authorized to use any part of the principal of said estate as he may need or desire, ... he shall notsell or otherwise dispose of any of the improved property now owned by us, located at ... City of Lubbock, Texas ... . Heshall have the right to subdivide any farmland and sell lots therein, and may sell unimproved town lots;" 38 that "(A)t thedeath of my said husband , Charles Newton, I give, devise and bequeath all of the rest, residue and remainder of myestate, both personal and real, ... to be equally divided among my brothers and sisters, share and share alike, namely:Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie Rascoe, Era Roman and Nimroy Higdon;" 39 and that"(I)n case of the death of any of my brothers and/or sisters ... prior to the death of my husband ... the heirs of suchdeceased brother or sister shall take jointly the share which would have gone to such brother or sister had she or hesurvived." 40

Such provisions are wholly consistent with the view already fully expounded above that all transactions and sales madeby Hodges after his wife Linnie's death were by operation of the law of trust as well as by his ownacknowledgment andacts deemed for and on behalf of their unliquidated conjugal partnership and community estate, share and share alike,

with the express authorization of the probate court per its orders of May 25, and December 14, 1957 granting Hodges'motion to continue the conjugal partnership business of buying and selling real estate even after her death. By the sametoken, Hodges could not conceivably be deemed to have had any authority or right to dispose gratuitously of any portionof her estate to whose succession she had called her brothers and sisters upon his death.9. Such institutions of heirs with a term are expressly recognized and permitted under Book III, Chapter 2, section 4 of our Civil Code dealing with "conditional testamentary dispositions and testamentary dispositions with a term." 41

Thus, Article 885 of our Civil Code expressly provides that: ART 885. The designation of the day or time when the effects of the institution of an heir shallcommence or cease shallbe valid .In both cases, the legal heir shall be considered as called to the succession until the arrival of the period or its expiration.But in the first case he shall not enter into possession of the property until after having given sufficient security, with theintervention of the instituted heir.

Accordingly, under the terms of Mrs. Hodges' will, her husband's right to the succession as the instituted heir ceased in

diem, i.e. upon the arrival of the resolutory term of his death on December 25, 1962, while her brothers' and sisters' rightto the succession also as instituted heirs commenced ex die, i.e. upon the expiration of the suspensive term (as far asthey were concerned) of the death of C. N. Hodges on December 25, 1962 . 42

As stated in Padilla's treatise on the Civil Code, "A term is a period whose arrival is certain although the exact date thereof may be uncertain. A term may have either a suspensive or a resolutory effect. The designation of the day when the legacy"shall commence" is ex die, or a term with a suspensive effect, from a certain day. The designation of the day when thelegacy "shall cease" is in diem or a term with a resolutory effect, until a certain day." He adds that "A legacy based upon acertain age or upon the death of a person is not a condition but aterm. If the arrival of the term would commence the rightof the heir, it is suspensive. If the arrival of the term would terminate his right, it is resolutory" and that "upon the arrival of the period, in case of a suspensive term, theinstituted heir is entitled to the succession, and in case of a resolutory term,his right terminates." 43

10. The sizable estates herein involved have now been pending settlement for a considerably protracted period (of seventeen years counted from Linnie's death in 1957), and all that is left to be done is to resolve the only remaining issue(involving the two questions of renunciation and renvoi ) hereinabove discussed in order to close up the estates and finallyeffect distribution to the deceased spouses' respective brothers and sisters and their heirs as the heirs duly instituted intheir wills long admitted to probate. Hence, it is advisable for said instituted heirs and their heirs in turn 44 to come to termsfor the adjudication and distribution to them pro-indiviso of the up to now unliquidated community properties of the estatesof the Hodges spouses (derived from their unliquidated conjugal partnership) rather than to get bogged down with theformidable task of physically segregating and partitioning the two estates with the numerous transactions, items anddetails and physical changes of properties involved. The estates proceedings would thus be closed and they could thenname their respective attorneys-in-fact to work out the details of segregating, dividing or partitioningthe unliquidated community properties or liquidating them — which can be done then on their own without further need of intervention on the part of the probate court as well as allow them meanwhile to enjoy and make use of the income andcash and liquid assets of the estates in such manner as may be agreed upon between them.Such a settlement or modus vivendi between the heirs of the unliquidated two estates for the mutual benefit of all of themshould not prove difficult, considering that it appears as stated in the main opinion that 22.968149% of the share or undivided estate of C. N. Hodges have already been acquired by the heirs of Linnie Jane Hodges from certain heirs of her

husband, while certain other heirs representing 17.34375% of Hodges' estate were joining cause with Linnie's heirs intheir pending and unresolved motion for the removal of petitioner PCIB as administrator of Hodges' estate, 45 apparentlyimpatient with the situation which has apparently degenerated into a running battle between the administrators of the twoestates to the common prejudice of all the heirs.11. As earlier stated, the writer has taken the pain of suggesting these guidelines which may serve to guide the probatecourt as well as the parties towards expediting the winding up and closing of the estates and the distribution of the netestates to the instituted heirs and their successors duly entitled thereto. The probate court should exert all effort towardsthis desired objective pursuant to the mandate of our probate law, bearing in mind the Court's admonition in previouscases that "courts of first instance should exert themselves to close up estate within twelve months from the time they arepresented, and they may refuse to allow any compensation to executors and administrators who do not actively labor tothat end, and they may even adopt harsher measures."46



Timeliness of appeals and imposition of thirty-one (31) additional docket feesTwo appeals were docketed with this Court, as per the two records on appeal submitted (one with a green cover and theother with a yellow cover). As stated at the outset, these appeals involve basically the same primal issue raised in thepetition for certiorari as to whether there still exists a separate estate of Linnie Jane Hodges which has to continue to beadministered by respondent Magno. Considering the main opinion's ruling in the affirmative and that her estate and that of her husband (since they jointly comprise unliquidated community properties) must be administered conjointly by their respective administrators (PCIB and Magno), the said appeals (involving thirty-three different orders of the probate courtapproving sales contracts and other acts of administration executed and performed by respondent Magno on behalf of Linnie's estate) have been necessarily overruled by the Court's decision at bar.(a) The "priority question" raised by respondent Magno as to the patent failure of the two records on appeal to show ontheir face and state the material data that the appeals were timely taken within the 30-day reglamentary period as requiredby Rule 41, section 6 of the Rules of Court, has been brushed aside by the main opinion with the statement that it is "notnecessary to pass upon the timeliness of any of said appeals" since they "revolve around practically the same main issuesand ... it is admitted that some of them have been timely taken." 47 The main opinion thus proceeded with thedetermination of the thirty-three appealed orders despite the grave defect of the appellant PCIB's records on appeal andtheir failure to state the required material data showing the timeliness of the appeals.Such disposition of the question of timeliness deemed as "mandatory and jurisdictional" in a number of cases merits thewriter's concurrence in that the question raised has been subordinated to the paramount considerations of substantial

justice and a "liberal interpretation of the rules" applied so as not to derogate and detract from the primary intent andpurpose of the rules, viz "the proper and just determination of a litigation" 48 — which calls for "adherence to a liberalconstruction of the procedural rules in order to attain their objective of substantial justice and of avoiding denials of substantial justice due to procedural technicalities." 49

Thus, the main opinion in consonance with the same paramount considerations of substantial justice has likewiseoverruled respondents' objection to petitioner's taking the recourse of "the present remedy of certiorari and prohibition" —"despite the conceded availability of appeal" — on the ground that "there is a common thread among the basic issuesinvolved in all these thirty-three appeals — (which) deal with practically the same basic issues that can be moreexpeditiously resolved or determined in a single special civil action . . . " 50

(b) Since the basic issues have been in effect resolved in the special civil action at bar (as above stated) with thedismissal of the petition by virtue of the Court's judgment as to the continued existence of a separate estate of Linnie JaneHodges and the affirmance as a necessary consequence of the appealed orders approving and sanctioning respondentMagno's sales contracts and acts of administration, some doubt would arise as to the propriety of the main opinionrequiring the payment by PCIB of thirty-one (31) additional appeal docket fees. This doubt is further enhanced by thequestion of whether it would make the cost of appeal unduly expensive or prohibitive by requiring the payment of aseparate appeal docket fee for each incidental order questioned when the resolution of all such incidental questionedorders involve basically one and the same main issue (in this case, the existence of a separate estate of Linnie Jane

Hodges) and can be more expeditiously resolved or determined in a single special civil action" (for which a single docketfee is required) as stated in the main opinion. 51Considering the importance of the basic issues and the magnitude of theestates involved, however, the writer has pro hac vice given his concurrence to the assessment of the said thirty-one (31)additional appeal docket fees.MAKALINTAL, C.J., concurring:I concur in the separate opinion of Justice Teehankee, which in turn agrees with the dispositive portion of the main opinionof Justice Barredo insofar as it dismisses the petition for certiorari and prohibition in Cases L-27860 and L-27896 andaffirms the appealed orders of the probate court in cases L-27936-37.However, I wish to make one brief observation for the sake of accuracy. Regardless of whether or not C. N. Hodges wasentitled to a legitime in his deceased wife's estate — which question, still to be decided by the said probate court, maydepend upon what is the law of Texas and upon its applicability in the present case — the said estate consists of one-half,not one-fourth, of the conjugal properties. There is neither a minimum of one-fourth nor a maximum beyond that. It isimportant to bear this in mind because the estate of Linnie Hodges consists of her share in the conjugal properties, is stillunder administration and until now has not been distributed by order of the court.The reference in both the main and separate opinions to a one-fourth portion of the conjugal properties as Linnie Hodges'minimum share is a misnomer and is evidently meant only to indicate that if her husband should eventually be declaredentitled to a legitime, then the disposition made by Linnie Hodges in favor of her collateral relatives would be valid only asto one-half of her share, or one-fourth of the conjugal properties, since the remainder, which constitutes such legitime,would necessarily go to her husband in absolute ownership, unburdened by any substitution, term or condition, resolutoryor otherwise. And until the estate is finally settled and adjudicated to the heirs who may be found entitled to it, theadministration must continue to cover Linnie's entire conjugal share.Footnotes1 Actually, the affidavit reads as follows:"I, C. N. Hodges, being duly sworn, on oath affirm that at the time the United States Estate Tax Return was filed in theEstate of Linnie Jane Hodges on August 8, 1958, I renounced and disclaimed any and all right to receive the rents,emoluments and income from said estate, as shown by the statement contained in schedule M at page 29 of said return,a copy of which schedule is attached to this affidavit and made a part hereof.

"The purpose of this affidavit is to ratify and confirm, and I do hereby ratify and confirm, the declaration made in scheduleM of said return and hereby formally disclaim and renounce any right on my part to receive any of the said rents,emoluments and income from the estate of my deceased wife, Linnie Jane Hodges. This affidavit is made to absolve meor my estate from any liability for the payment of income taxes on income which has accrued to the estate of Linnie JaneHodges since the death of the said Linnie Jane Hodges on May 23, 1957." ( annex 5, Answer of respondent AvelinaMagno, p. 264, L-27860 Rollo.)2 The will of Hodges executed on November 14, 1953 contained mutually similar dispositions as those of his wife asfollows:xxx xxx xxx"FIRST: I direct that all my just debts and funeral expenses be first paid out of my estate.



SECOND: I give, devise and bequeath all the rest, residue and remainder of my estate, both personal and real, wherever situated, or located, to my beloved wife, Linnie Jane Hodges, to have and to hold unto her, my said wife, during her natural lifetime.THIRD: I desire, direct and provide that my wife, Linnie Jane Hodges, shall have the right to manage, control, use andenjoy said estate during her lifetime, and she is hereby given the right to make any changes in the physical properties of said estate, by sale or any part thereof which she may think best; to execute conveyances with or without general or special warranty, conveying in fee simple or for any other term or time, any property which she may deem proper todispose of; to lease any of the real property for oil, gas and/or other minerals, and all such deeds or leases shall pass theabsolute fee simple title to the interest so conveyed in such property as she may elect to sell. All rents, emoluments andincome from said estate shall belong to her, and she is further authorized to use any part of the principal of said estate asshe may need or desire. It is provided herein, however, that she shall not sell or otherwise dispose of any of the improvedproperty now owned by us located at, in or near the City of Lubbock, Texas, but she shall have the full right to lease,manage and enjoy the same during her lifetime, as above provided. She shall have the right to subdivide any farm landand sell lots therein, and may sell unimproved town lots.xxx xxx xxxFIFTH: At the death of my beloved wife, Linnie Jane Hodges, I give, devise and bequeath to the heirs of my half brother,Robert Hodges, who is now deceased, a half brother's share of my estate.SIXTH: At the death of my said wife, Linnie Jane Hodges, I give, devise and bequeath to the heirs of my deceased fullsister, Mattie Hodges Simpkins, a full sister's share of my estate.SEVENTH: At the death of my said wife, Linnie Jane Hodges, I give, devise and bequeath to the heirs of my deceasedhalf sister, Barbara O'dell, a half sister's share of my estate.EIGHT: At the death of my said wife, Linnie Jane Hodges, I give, devise and bequeath to the heirs of my full brother, JoeHodges, deceased, a full brother's share of my estate. .

NINTH: At the death of my said wife, Linnie Jane Hodges, I give, devise and bequeath to the heirs of my half brother,Willie Carver, deceased, a half brother's share of my estate.TENTH: At the death of my said wife, Linnie Jane Hodges, I give, devise and bequeath all of the rest, residue andremainder of my estate, both real and personal, wherever situated or located, to be equally divided among my other fullbrothers and full sisters, share and share alike, namely: J. A. Hodges, B. F. Hodges, Laura Holland and Addie Elliot.ELEVENTH: In case of the death of any of my full brothers and/or full sisters named in Item Tenth above, prior to thedeath of my wife, Linnie Jane Hodges, then it is my will and bequest that the heirs of such deceased full brother or fullsister shall take jointly the share which would have gone to such full brother or full sister had he or she survived.xxx xxx xxx

All erasures and interlineations made before signing."3 None of the two records on appeal contains any copy of the motion and the opposition upon which the court acted.4 More specific factual details related to these appeals will be stated later in the course of the distribution of theassignments of error.

5 It should be noted that in his affidavit, Hodges ratified and confirmed the "declaration made in Schedule M (of theinheritance tax return he filed in the U.S.)" wherein he declared that no property interests passed to him as the survivingspouse, except for purposes of administration and distribution to the devisees and legatees named in the will of his wife,and further disclaimed and renounced any right on his part to receive rents, emoluments and income therefrom becausehe wanted to be "absolved ... from liability for the payment of income taxes on income that has accrued to the estate of"his wife. While We cannot make any definite ruling on the point now, We might at least express the impression thatreading all these statements together, one can hardly escape the conclusion that in the literal sense the idea conveyed bythem is that Hodges waived not only his rights to the fruits but to the properties themselves.6 With the exception of the limitations referring to the Texas properties.7 "Real property as well as personal property is subject to the law of the country where it is situated.However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of theperson whose succession is under consideration, whatever may be the nature of the property and regardless of thecountry wherein said property may be found." (Article 16, Civil Code.)7* The question of what is the law of a foreign country is one of fact subject to proof like any other factual issue. (Sy JocLien vs. Sy Quia, 16 Phil. 137; Ching Huat vs. Co Heong 77 Phil. 988.)8 PCIB claims that pursuant to the laws of Texas, Mrs. Hodges' estate is only one-fourth of the conjugal estate, while, onthe other hand, Magno contends that under said laws, it is one-half of said estate since there is no legitime for thesurviving spouse provided in said laws.9 The motion for contempt will be separately taken up in due time.10 The issues We have expressly reserved for later resolution. (See pp. 111-114 of this opinion.)11 If it should be found by the court later that Hodges did renounce his inheritance from Mrs. Hodges, as seems to beindicated in the documents mentioned in the opinion, Schedule M of the Inheritance Tax Return filed by Hodges in theUnited States, Annex 4 of the Answer in G. R. Nos. L- 27860 & L-27896, and the affidavit of Hodges, Annex 5 also of thesame answer, it is likely that Hodges did not have to pay any inheritance tax, and it would only be after these proceedingsare finally terminated with a judgment favorable to the brothers and sisters of Mrs. Hodges that taxes could be assessedagainst them according to their respective individual shares.

11* See page 114-I ante.12 See page 89-A of this decision.TEEHANKEE J., CONCURRING:1 This writ enjoined respondent court from acting in Sp. Proc. No. 1307 (Testate Estate of Linnie Jane Hodges) andrespondent-appellee Avelina A. Magno from interfering and intervening therein, pending determination of the main issueraised by petitioner-appellant PCIB as to whether or not Mrs. Hodges' estate continued to exist as such so as to requirethe services of said Avelina A. Magno as administratrix thereof in view of PCIB's contention that her (Mrs. Hodges') entireestate had been adjudicated in 1957 by the probate court to her surviving husband C. N. Hodges as "the only devisee or legatee" under her will, which contention has now been rejected in the Court's decision at bar.2 This resolution was based on "the inherent fairness of allowing the administratrix of the estate of Mrs. Hodges [Avelina

A. Magno] to jointly administer the properties, rights and interests comprising both estates [Linnie Jane Hodges' and thatof her husband C. N. Hodges] until they are separated from each other" in order to give adequate protection to the rights



and interests of their respective brothers and sisters as their designated heirs rather than "if the whole [both] proceedingswere to be under the administration of the estate of Mr. Hodges [PCIB] to the exclusion of any representative of the heirsof Mrs. Hodges."3 See page 5 et seq of main opinion.4 See page 91 et seq of main opinion.5 See page 100 of main opinion.6 "Sec. 2. Judicial Admissions. — Admissions made by the parties in the pleadings, or in the course of the trial or other proceedings do not require proof and can not be contradicted unless previously shown to have been made throughpalpable mistake." (Rule 129). See also 5 Moran's 1970 Ed. 65 and cases cited.7 See p. 114-1 et seq. of main opinion.8 At pp., 136-137 of main opinion; paragraphing and emphasis supplied.9 At page 121 of main opinion.10 At pages 110-11 of main opinion.11 See In re: Testate Estate of Edward E. Christiansen, deceased, Aznar vs. Garcia, 7 SCRA 95, 103, 107 (1963).12 At p. 112, main opinion. See also p. 103, where the main opinion refers to still other documentsevidencing Hodges' renunciation and observes that "we cannot close our eyes to their existence in the record." (emphasis supplied).13 At p. 113, main opinion.14 At p. 114-I, main opinion, emphasis supplied.15 At page 112, main opinion.16 At page 109, main opinion; emphasis supplied.17 "SEC 2. Where estate settled upon dissolution of marriage. — When the marriage is dissolved by the death of thehusband or wife, the community property shall be inventoried, administered, and liquidated, and the debts thereof paid, inthe testate or intestate proceedings of the deceased spouse. If both spouses have died, the conjugal partnership shall be

liquidated in the testate or intestate proceedings of either." (Rule 73) 18 At pp. 129-130, main opinion.19 At page 103, main opinion, fn. 5.20 Pamittan vs. Lasam, 60 Phil. 908 (1934), where the Court stressed the " high degree of trust " reposed in the survivinghusband as "owner of a half interest in his own right of the conjugal estate which he was charged to administer" and thatthe conjugal property which thus comes into his possession upon his wife's death " remains conjugal property, acontinuing and subsisting trust " for as long as it remains unliquidated .21 Order of August 6, 1965, p. 248 Green Record on Appeal; see p. 30, main opinion.22 Appealed order of November 23, 1965 against Western Institute of Technology, Inc. as purchaser-appellee, pp. 334-335, Green Rec. on App. see pp. 33-34, main opinion.23 At p. 137, main opinion.24 At pp. 108-109, main opinion.25 At p. 114, main opinion, which notes that "the question of what are the laws of Texas governing the matter here inissue is . . . one of fact, not of law."

26 See p. 102 et seq. main opinion; Annexes 4 and 5 Answer, pp. 163-264 of Rollo.27 Annex 4, Answer, p. 263 of Rollo; emphasis supplied. 28 Annex 5, Answer, see p. 103, main opinion; emphasissupplied. 29 See pp. 114 et seq. main opinion.30 "ART. 857. Substitution is the appointment of another heir so that he may enter into the inheritance in default of theheir originally instituted." (Civil Code)"ART. 859. The testator may designate one or more persons to substitute the heir or heirs instituted in case such heir or heirs should die before him, or should not wish, or should be incapacitated to accept the inheritance."A simple substitution, without a statement of the cases to which it refers, shall comprise the three mentioned in thepreceding paragraph, unless the testator has otherwise provided." (Civil Code, emphasis supplied)31 6 Manresa 116, cited in III Padilla's Civil Code 1973 Ed., p. 241.32 At pp. 110-112, main opinion; emphasis supplied.33 At p. 134, main opinion.34 At page 110, main opinion.35 Text reproduced in fn. 30 hereof.36 C.N. Hodges' own will contained identical provisions in favor of his wife, Linnie Jane Hodges to "manage, control,use and enjoy (his)estate during her lifetime" and making specific bequests of his whole estate to his full and half-brothersand sisters in clauses Fifth to Tenth thereof all " at the death of my said wife, Linnie Jane Hodges. "At p. 18 et seq. mainopinion.37 Second of seven clauses of will, emphasis supplied.38 Third clause of will, idem.39 Fourth clause of will, idem.40 Fifth clause of will, idem.41 Art. 871, Civil Code provides that "(T)he institution of an heir may he made conditionally, or for a certain purpose or cause."42 An analogous case is found in Crisologo vRepublic of the PhilippinesSUPREME COURT

ManilaTHIRD DIVISIONA.M. No. SCC-08-12 October 19, 2011(Formerly OCA I.P.I. No. 08-29-SCC)OFFICE OF THE COURT ADMINISTRATOR, Complainant,vs.JUDGE UYAG P. USMAN, Presiding Judge, Shari'a Circuit Court, Pagadian City, Respondent.D E C I S I O NMENDOZA, J.:This administrative proceeding stemmed from a letter-complaint dated April 23, 2008 filed before the Office of theOmbudsman, Mindanao, requesting for a lifestyle check on respondent Judge Uyag P. Usman (respondent), Presiding



Judge, Shari’a Circuit Court, Pagadian City, in connection with his acquisition of a Sports Utility Vehicle (SUV) amountingto P 1,526,000.00.In his letter ,1 complainant alleged that respondent acquired a brand new SUV, specifically a Kia Sorento EX, AutomaticTransmission and 2.57 CRDI Diesel for P 1,526,000.00; that he paid in cash the total down payment ofP 344,200.00; andthat the remaining balance was payable in 48 months with a monthly amortization of P34,844.00 to the Philippine SavingsBank (PS Bank), Ozamis City Branch.Complainant further averred that respondent had just been recently appointed as a judge and since he assumed his post,he seldom reported for work and could not be located within the court’s premises during office hours. Moreover, he wasonly receiving a very small take home pay because of his salary and policy loans with the Supreme Court Savings andLoan Association (SCSLA) and the Government Service Insurance System (GSIS), many of which he incurred when hewas still a Clerk of Court of the Shari’a Circuit Court in Isabela City, Basilan. Complainant attached photocopies of his payslips to prove his allegation.Respondent’s financial capability to acquire said vehicle has been questioned because he is the sole bread winner in hisfamily and he has seven (7) children, two (2) of whom were college students at the Medina College School of Nursing, aprivate school.On May 26, 2008, the Office of the Ombudsman forwarded the complaint to the Office of the Court Administrator (OCA). Inturn, the OCA, in its Letter dated April 22, 2009, directed respondent to comment on the letter 2 within 10 days fromreceipt thereof.In his Comment,3 respondent explained that he acquired the Kia Sorento vehicle in 2008 but it was a second-hand, andnot a brand new, vehicle; that he had no intention of buying the said vehicle but his friend, who was a manager of KIAMotors, Pagadian City, convinced him to avail of their lowest down payment promo of P 90,000.00 to own a second-handdemo unit vehicle; that he was hesitant to avail of the promo but his mother, a U.S. Veteran Pensioner receiving a monthlypension of US$1,056.00, persuaded him to avail of it; that it was his mother who paid the down payment of P 90,000.00

and the monthly installment of more than P 30,000.00; that when his mother got sick, her pensions and savings wereused to buy medicines, thus, he defaulted in the payment of the said vehicle for four (4) months; and that PS Bankforeclosed the mortgage on the said vehicle.Respondent denied the allegation that all his seven (7) children depended on him for support. He claimed that only threeof his children, all in the elementary level and studying in public schools, were under his care; that his mother financiallyhelped him in the education of his two daughters who were in college; and that his other two children were alreadymarried and gainfully employed.Respondent also refuted the charges that he seldom reported for work and could not be located within the court’spremises. He, instead, asserted that there was never a single day that he failed to report for work; that he often arrivedahead of his staff considering that he lived near the court; and that his conduct as a judge was beyond reproach and thiscould be attested to by his staff and employees at the Sangguniang Panlunsod of Pagadian City. To support his claim,respondent submitted the Joint Affidavit of his staff and the affidavit of Mohammad Basher Cader, a member of a religiousgroup in Pagadian City, attesting to his diligence and dedication in the performance of his function as a judge.

Respondent bared that, at present, he is receiving a monthly take home pay of more than P 40,000.00 including his salaryand allowances plus honorarium from the local government.In its Report4 dated March 16, 2011, the OCA found the explanation of respondent meritorious.The OCA, however, held respondent liable for violation of Section 8 of Republic Act (R.A.) No. 6713 otherwise known asthe Code of Conduct and Ethical Standards for Public Officials and Employees and of Section 7 of R.A. No. 3019, knownas the Anti-Graft and Corrupt Practices Act, for failing to file his Statement of Assets, Liabilities and Net Worth (SALN) for the years 2004-2008. Thus, the OCA recommended that respondent be fined in the amount of P 10,000.00The Court agrees with the finding of the OCA that the charges against respondent were not fully substantiated. Theevidence adduced in the case, consisting of documents submitted by respondent are sufficient to prove that it was,indeed, his mother who paid the down payment and the monthly amortizations for the subject vehicle.The Court also agrees with the OCA that respondent is guilty of violating Section 7 of R.A. No. 3019 and Section 8 of R.A.No. 6713.Section 7 of R.A. No. 3019 provides:Sec. 7. Statement of Assets and Liabilities. – Every public officer, within thirty days after assuming office and, thereafter,on or before the fifteenth day of April following the close of every calendar year, as well as upon the expiration of his termof office, or upon his resignation or separation from office, shall prepare and file with the office of the correspondingDepartment Head, or in the case of a Head of Department or Chief of an independent office, with the Office of thePresident, a true, detailed and sworn statement of assets and liabilities, including a statement of the amounts and sourcesof his income, the amounts of his personal and family expenses and the amount of income taxes paid for the nextpreceding calendar year: Provided, That public officers assuming office less than two months before the end of thecalendar year, may file their first statement on or before the fifteenth day of April following the close of the said calendar year.In the same manner, Section 8, R.A. No. 6713 states:SEC. 8. Statements and Disclosure. – Public officials and employees have an obligation to accomplish and submitdeclarations under oath of, and the public has the right to know, their assets, liabilities, net worth and financial andbusiness interests including those of their spouses and of unmarried children under eighteen (18) years of age living intheir households.

(A) Statements of Assets and Liabilities and Financial Disclosure. – All public officials and employees, except those whoserve in an honorary capacity, laborers and casual or temporary workers, shall file under oath their Statements of Assets,Liabilities and Net Worth and a Disclosure of Business Interests and Financial connections and those of their spouses andunmarried children under eighteen (18) years of age living in their households.The two documents shall contain information on the following:(a) real property, its improvements, acquisition costs, assessed value and current fair market value;(b) personal property and acquisition cost;(c) all other assets such as investments, cash on hand or in banks, stocks, bonds, and the like;(d) liabilities, and;(e) all business interests and financial connections.The documents must be filed:(a) within thirty (30) days after assumption of office;

http://www.lawphil.net/judjuris/juri2011/oct2011/am_scc-08-12_2011.html#fnt1











(b) on or before April 30, of every year thereafter; and(c) within thirty (30) days after separation from the service.

All public officials and employees required under this section to file the aforestated documents shall also execute, withinthirty (30) days from the date of their assumption of office, the necessary authority in favor of the Ombudsman to obtainfrom all appropriate government agencies, including the Bureau of Internal Revenue, such documents as may show their assets, liabilities, net worth, and also their business interests and financial connections in previous years, including, if possible, the year when they first assumed any office in the Government.Husband and wife who are both public officials or employees may file the required statements jointly or separately.x x x x x x x x xFrom the foregoing, it is imperative that every public official or government employee must make and submit a completedisclosure of his assets, liabilities and net worth in order to suppress any questionable accumulation of wealth. 5 Thisserves as the basis of the government and the people in monitoring the income and lifestyle of public officials andemployees in compliance with the constitutional policy to eradicate corruption, to promote transparency in government,and to ensure that all government employees and officials lead just and modest lives, 6 with the end in view of curtailingand minimizing the opportunities for official corruption and maintaining a standard of honesty in the public service.7

In the present case, respondent clearly violated the above-quoted laws when he failed to file his SALN for the years 2004-2008. He gave no explanation either why he failed to file his SALN for five (5) consecutive years. While every office in thegovernment service is a public trust, no position exacts a greater demand on moral righteousness and uprightness of anindividual than a seat in the Judiciary. Hence, judges are strictly mandated to abide with the law, the Code of JudicialConduct and with existing administrative policies in order to maintain the faith of our people in the administration of

justice.81avvphi1Considering that this is the first offense of the respondent, albeit for five years, the Court shall impose a fine of only FiveThousand Pesos (P 5,000.00) with warning.

WHEREFORE, the Court finds respondent Uyag P. Usman, Presiding Judge, Shari’a Circuit Court, PagadianCity,GUILTY of violation of Section 7, R.A. No. 3019 and Section 8, R.A. No. 6713 and orders him to pay a FINE of FiveThousand Pesos (P5,000.00) with a STERN WARNING that a repetition of the same or similar act will be dealt with moreseverely.SO ORDERED.JOSE CATRAL MENDOZA

Associate JusticeRepublic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No 176556 July 4, 2012BRIGIDO B. QUIAO, Petitioner,

vs.RITA C. QUIAO, KITCHIE C. QUIAO, LOTIS C. QUIAO, PETCHIE C. QUIAO, represented by their mother RITAQUIAO, Respondents.D E C I S I O NREYES, J.:The family is the basic and the most important institution of society. It is in the family where children are born and moldedeither to become useful citizens of the country or troublemakers in the community. Thus, we are saddened when parentshave to separate and fight over properties, without regard to the message they send to their children. Notwithstandingthis, we must not shirk from our obligation to rule on this case involving legal separation escalating to questions ondissolution and partition of properties.The CaseThis case comes before us via Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court. The petitioner seeksthat we vacate and set aside the Order 2 dated January 8, 2007 of the Regional Trial Court (RTC), Branch 1, Butuan City.In lieu of the said order, we are asked to issue a Resolution defining the net profits subject of the forfeiture as a result of the decree of legal separation in accordance with the provision of Article 102(4) of the Family Code, or alternatively, inaccordance with the provisions of Article 176 of the Civil Code.Antecedent FactsOn October 26, 2000, herein respondent Rita C. Quiao (Rita) filed a complaint for legal separation against hereinpetitioner Brigido B. Quiao (Brigido).3 Subsequently, the RTC rendered a Decision4 dated October 10, 2005, thedispositive portion of which provides:WHEREFORE, viewed from the foregoing considerations, judgment is hereby rendered declaring the legal separation of plaintiff Rita C. Quiao and defendant-respondent Brigido B. Quiao pursuant to Article 55.

As such, the herein parties shall be entitled to live separately from each other, but the marriage bond shall not be severed.Except for Letecia C. Quiao who is of legal age, the three minor children, namely, Kitchie, Lotis and Petchie, all surnamedQuiao shall remain under the custody of the plaintiff who is the innocent spouse.Further, except for the personal and real properties already foreclosed by the RCBC, all the remaining properties, namely:1. coffee mill in Balongagan, Las Nieves, Agusan del Norte;

2. coffee mill in Durian, Las Nieves, Agusan del Norte;3. corn mill in Casiklan, Las Nieves, Agusan del Norte;4. coffee mill in Esperanza, Agusan del Sur;5. a parcel of land with an area of 1,200 square meters located in Tungao, Butuan City;6. a parcel of agricultural land with an area of 5 hectares located in Manila de Bugabos, Butuan City;7. a parcel of land with an area of 84 square meters located in Tungao, Butuan City;8. Bashier Bon Factory located in Tungao, Butuan City;shall be divided equally between herein [respondents] and [petitioner] subject to the respective legitimes of the childrenand the payment of the unpaid conjugal liabilities of [P]45,740.00.[Petitioner’s] share, however, of the net profits earned by the conjugal partnership is forfeited in favor of the commonchildren.




















He is further ordered to reimburse [respondents] the sum of [P]19,000.00 as attorney's fees and litigation expenses of [P]5,000.00[.]SO ORDERED.5

Neither party filed a motion for reconsideration and appeal within the period provided for under Section 17(a) and (b) of the Rule on Legal Separation.6

On December 12, 2005, the respondents filed a motion for execution 7 which the trial court granted in its Order datedDecember 16, 2005, the dispositive portion of which reads:"Wherefore, finding the motion to be well taken, the same is hereby granted. Let a writ of execution be issued for theimmediate enforcement of the Judgment.SO ORDERED."8

Subsequently, on February 10, 2006, the RTC issued a Writ of Execution9 which reads as follows:NOW THEREFORE, that of the goods and chattels of the [petitioner] BRIGIDO B. QUIAO you cause to be made the sumsstated in the afore-quoted DECISION [sic], together with your lawful fees in the service of this Writ, all in the PhilippineCurrency.But if sufficient personal property cannot be found whereof to satisfy this execution and your lawful fees, then wecommand you that of the lands and buildings of the said [petitioner], you make the said sums in the manner required bylaw. You are enjoined to strictly observed Section 9, Rule 39, Rule [sic] of the 1997 Rules of Civil Procedure.You are hereby ordered to make a return of the said proceedings immediately after the judgment has been satisfied inpart or in full in consonance with Section 14, Rule 39 of the 1997 Rules of Civil Procedure, as amended.10

On July 6, 2006, the writ was partially executed with the petitioner paying the respondents the amount ofP

46,870.00,representing the following payments:(a) P22,870.00 – as petitioner's share of the payment of the conjugal share;(b) P19,000.00 – as attorney's fees; and

(c) P5,000.00 – as litigation expenses.11

On July 7, 2006, or after more than nine months from the promulgation of the Decision, the petitioner filed before the RTCa Motion for Clarification,12 asking the RTC to define the term "Net Profits Earned."To resolve the petitioner's Motion for Clarification, the RTC issued an Order 13 dated August 31, 2006, which held that thephrase "NET PROFIT EARNED" denotes "the remainder of the properties of the parties after deducting the separateproperties of each [of the] spouse and the debts." 14 The Order further held that after determining the remainder of theproperties, it shall be forfeited in favor of the common children because the offending spouse does not have any right toany share of the net profits earned, pursuant to Articles 63, No. (2) and 43, No. (2) of the Family Code. 15 The dispositiveportion of the Order states:WHEREFORE, there is no blatant disparity when the sheriff intends to forfeit all the remaining properties after deductingthe payments of the debts for only separate properties of the defendant-respondent shall be delivered to him which he hasnone.The Sheriff is herein directed to proceed with the execution of the Decision.

IT IS SO ORDERED.16

Not satisfied with the trial court's Order, the petitioner filed a Motion for Reconsideration 17 on September 8, 2006.Consequently, the RTC issued another Order 18 dated November 8, 2006, holding that although the Decision datedOctober 10, 2005 has become final and executory, it may still consider the Motion for Clarification because the petitioner simply wanted to clarify the meaning of "net profit earned."19 Furthermore, the same Order held:

ALL TOLD, the Court Order dated August 31, 2006 is hereby ordered set aside. NET PROFIT EARNED, which is subjectof forfeiture in favor of [the] parties' common children, is ordered to be computed in accordance [with] par. 4 of Article 102of the Family Code.20

On November 21, 2006, the respondents filed a Motion for Reconsideration, 21 praying for the correction and reversal of the Order dated November 8, 2006. Thereafter, on January 8, 2007, 22 the trial court had changed its ruling again andgranted the respondents' Motion for Reconsideration whereby the Order dated November 8, 2006 was set aside toreinstate the Order dated August 31, 2006.Not satisfied with the trial court's Order, the petitioner filed on February 27, 2007 this instant Petition for Review under Rule 45 of the Rules of Court, raising the following:IssuesIIS THE DISSOLUTION AND THE CONSEQUENT LIQUIDATION OF THE COMMON PROPERTIES OF THE HUSBAND

AND WIFE BY VIRTUE OF THE DECREE OF LEGAL SEPARATION GOVERNED BY ARTICLE 125 (SIC) OF THEFAMILY CODE?IIWHAT IS THE MEANING OF THE NET PROFITS EARNED BY THE CONJUGAL PARTNERSHIP FOR PURPOSES OFEFFECTING THE FORFEITURE AUTHORIZED UNDER ARTICLE 63 OF THE FAMILY CODE?IIIWHAT LAW GOVERNS THE PROPERTY RELATIONS BETWEEN THE HUSBAND AND WIFE WHO GOT MARRIED IN1977? CAN THE FAMILY CODE OF THE PHILIPPINES BE GIVEN RETROACTIVE EFFECT FOR PURPOSES OFDETERMINING THE NET PROFITS SUBJECT OF FORFEITURE AS A RESULT OF THE DECREE OF LEGALSEPARATION WITHOUT IMPAIRING VESTED RIGHTS ALREADY ACQUIRED UNDER THE CIVIL CODE?

IVWHAT PROPERTIES SHALL BE INCLUDED IN THE FORFEITURE OF THE SHARE OF THE GUILTY SPOUSE IN THENET CONJUGAL PARTNERSHIP AS A RESULT OF THE ISSUANCE OF THE DECREE OF LEGAL SEPARATION? 23

Our RulingWhile the petitioner has raised a number of issues on the applicability of certain laws, we are well-aware that therespondents have called our attention to the fact that the Decision dated October 10, 2005 has attained finality when theMotion for Clarification was filed.24 Thus, we are constrained to resolve first the issue of the finality of the Decision datedOctober 10, 2005 and subsequently discuss the matters that we can clarify.The Decision dated October 10, 2005 has become final and executory at the time the Motion for Clarification wasfiled on July 7, 2006.Section 3, Rule 41 of the Rules of Court provides:
















































Section 3. Period of ordinary appeal . - The appeal shall be taken within fifteen (15) days from notice of the judgment or final order appealed from. Where a record on appeal is required, the appellant shall file a notice of appeal and a record onappeal within thirty (30) days from notice of the judgment or final order.The period of appeal shall be interrupted by a timely motion for new trial or reconsideration. No motion for extension of time to file a motion for new trial or reconsideration shall be allowed.In Neypes v. Court of Appeals,25 we clarified that to standardize the appeal periods provided in the Rules and to affordlitigants fair opportunity to appeal their cases, we held that "it would be practical to allow a fresh period of 15 days withinwhich to file the notice of appeal in the RTC, counted from receipt of the order dismissing a motion for a new trial or motion for reconsideration."26

In Neypes, we explained that the "fresh period rule" shall also apply to Rule 40 governing appeals from the Municipal TrialCourts to the RTCs; Rule 42 on petitions for review from the RTCs to the Court of Appeals (CA); Rule 43 on appeals fromquasi-judicial agencies to the CA and Rule 45 governing appeals by certiorari to the Supreme Court. We also said, "Thenew rule aims to regiment or make the appeal period uniform, to be counted from receipt of the order denying the motionfor new trial, motion for reconsideration (whether full or partial) or any final order or resolution." 27 In other words, a partylitigant may file his notice of appeal within a fresh 15-day period from his receipt of the trial court's decision or final order denying his motion for new trial or motion for reconsideration. Failure to avail of the fresh 15-day period from the denial of the motion for reconsideration makes the decision or final order in question final and executory.In the case at bar, the trial court rendered its Decision on October 10, 2005. The petitioner neither filed a motion for reconsideration nor a notice of appeal. On December 16, 2005, or after 67 days had lapsed, the trial court issued an order granting the respondent's motion for execution; and on February 10, 2006, or after 123 days had lapsed, the trial courtissued a writ of execution. Finally, when the writ had already been partially executed, the petitioner, on July 7, 2006 or after 270 days had lapsed, filed his Motion for Clarification on the definition of the "net profits earned." From the foregoing,the petitioner had clearly slept on his right to question the RTC’s Decision dated October 10, 2005. For 270 days, the

petitioner never raised a single issue until the decision had already been partially executed. Thus at the time the petitioner filed his motion for clarification, the trial court’s decision has become final and executory. A judgment becomes final andexecutory when the reglementary period to appeal lapses and no appeal is perfected within such period. Consequently,no court, not even this Court, can arrogate unto itself appellate jurisdiction to review a case or modify a judgment thatbecame final.28

The petitioner argues that the decision he is questioning is a void judgment. Being such, the petitioner's thesis is that itcan still be disturbed even after 270 days had lapsed from the issuance of the decision to the filing of the motion for clarification. He said that "a void judgment is no judgment at all. It never attains finality and cannot be a source of any rightnor any obligation."29 But what precisely is a void judgment in our jurisdiction? When does a judgment becomes void?"A judgment is null and void when the court which rendered it had no power to grant the relief or no jurisdiction over thesubject matter or over the parties or both."30 In other words, a court, which does not have the power to decide a case or that has no jurisdiction over the subject matter or the parties, will issue a void judgment or acoram non judice.31

The questioned judgment does not fall within the purview of a void judgment. For sure, the trial court has jurisdiction over

a case involving legal separation. Republic Act (R.A.) No. 8369 confers upon an RTC, designated as the Family Court of acity, the exclusive original jurisdiction to hear and decide, among others, complaints or petitions relating to marital statusand property relations of the husband and wife or those living together.32 The Rule on Legal Separation33 provides that"the petition [for legal separation] shall be filed in the Family Court of the province or city where the petitioner or therespondent has been residing for at least six months prior to the date of filing or in the case of a non-resident respondent,where he may be found in the Philippines, at the election of the petitioner."34 In the instant case, herein respondent Rita isfound to reside in Tungao, Butuan City for more than six months prior to the date of filing of the petition; thus, the RTC,clearly has jurisdiction over the respondent's petition below. Furthermore, the RTC also acquired jurisdiction over thepersons of both parties, considering that summons and a copy of the complaint with its annexes were served upon theherein petitioner on December 14, 2000 and that the herein petitioner filed his Answer to the Complaint on January 9,2001.35 Thus, without doubt, the RTC, which has rendered the questioned judgment, has jurisdiction over the complaintand the persons of the parties.From the aforecited facts, the questioned October 10, 2005 judgment of the trial court is clearly not void ab initio, since itwas rendered within the ambit of the court's jurisdiction. Being such, the same cannot anymore be disturbed, even if themodification is meant to correct what may be considered an erroneous conclusion of fact or law. 36 In fact, we have ruledthat for "[as] long as the public respondent acted with jurisdiction, any error committed by him or it in the exercise thereof will amount to nothing more than an error of judgment which may be reviewed or corrected only by appeal." 37 Grantingwithout admitting that the RTC's judgment dated October 10, 2005 was erroneous, the petitioner's remedy should be anappeal filed within the reglementary period. Unfortunately, the petitioner failed to do this. He has already lost the chanceto question the trial court's decision, which has become immutable and unalterable. What we can only do is to clarify thevery question raised below and nothing more.For our convenience, the following matters cannot anymore be disturbed since the October 10, 2005 judgment hasalready become immutable and unalterable, to wit:(a) The finding that the petitioner is the offending spouse since he cohabited with a woman who is not his wife;38

(b) The trial court's grant of the petition for legal separation of respondent Rita;39

(c) The dissolution and liquidation of the conjugal partnership;40

(d) The forfeiture of the petitioner's right to any share of the net profits earned by the conjugal partnership;41

(e) The award to the innocent spouse of the minor children's custody;42

(f) The disqualification of the offending spouse from inheriting from the innocent spouse by intestate succession;43

(g) The revocation of provisions in favor of the offending spouse made in the will of the innocent spouse;44

(h) The holding that the property relation of the parties is conjugal partnership of gains and pursuant to Article 116 of theFamily Code, all properties acquired during the marriage, whether acquired by one or both spouses, is presumed to beconjugal unless the contrary is proved;45

(i) The finding that the spouses acquired their real and personal properties while they were living together;46

(j) The list of properties which Rizal Commercial Banking Corporation (RCBC) foreclosed;47

(k) The list of the remaining properties of the couple which must be dissolved and liquidated and the fact that respondentRita was the one who took charge of the administration of these properties;48

(l) The holding that the conjugal partnership shall be liable to matters included under Article 121 of the Family Code andthe conjugal liabilities totaling P503,862.10 shall be charged to the income generated by these properties;49


























































(m) The fact that the trial court had no way of knowing whether the petitioner had separate properties which can satisfy hisshare for the support of the family;50

(n) The holding that the applicable law in this case is Article 129(7);51

(o) The ruling that the remaining properties not subject to any encumbrance shall therefore be divided equally betweenthe petitioner and the respondent without prejudice to the children's legitime;52

(p) The holding that the petitioner's share of the net profits earned by the conjugal partnership is forfeited in favor of thecommon children;53 and(q) The order to the petitioner to reimburse the respondents the sum of P19,000.00 as attorney's fees and litigationexpenses of P5,000.00.54

After discussing lengthily the immutability of the Decision dated October 10, 2005, we will discuss the following issues for the enlightenment of the parties and the public at large.Article 129 of the Family Code applies to the present case since the parties' property relation is governed by thesystem of relative community or conjugal partnership of gains.The petitioner claims that the court a quo is wrong when it applied Article 129 of the Family Code, instead of Article 102.He confusingly argues that Article 102 applies because there is no other provision under the Family Code which definesnet profits earned subject of forfeiture as a result of legal separation.Offhand, the trial court's Decision dated October 10, 2005 held that Article 129(7) of the Family Code applies in this case.We agree with the trial court's holding.First , let us determine what governs the couple's property relation. From the record, we can deduce that the petitioner andthe respondent tied the marital knot on January 6, 1977. Since at the time of the exchange of marital vows, the operativelaw was the Civil Code of the Philippines (R.A. No. 386) and since they did not agree on a marriage settlement, theproperty relations between the petitioner and the respondent is the system of relative community or conjugal partnershipof gains.55 Article 119 of the Civil Code provides:

Art. 119. The future spouses may in the marriage settlements agree upon absolute or relative community of property, or upon complete separation of property, or upon any other regime. In the absence of marriage settlements, or when thesame are void, the system of relative community or conjugal partnership of gains as established in this Code, shall governthe property relations between husband and wife.Thus, from the foregoing facts and law, it is clear that what governs the property relations of the petitioner and of therespondent is conjugal partnership of gains. And under this property relation, "the husband and the wife place in acommon fund the fruits of their separate property and the income from their work or industry." 56 The husband and wifealso own in common all the property of the conjugal partnership of gains.57

Second , since at the time of the dissolution of the petitioner and the respondent's marriage the operative law is alreadythe Family Code, the same applies in the instant case and the applicable law in so far as the liquidation of the conjugalpartnership assets and liabilities is concerned is Article 129 of the Family Code in relation to Article 63(2) of the FamilyCode. The latter provision is applicable because according to Article 256 of the Family Code "[t]his Code shall haveretroactive effect insofar as it does not prejudice or impair vested or acquired rights in accordance with the Civil Code or

other law."58

Now, the petitioner asks: Was his vested right over half of the common properties of the conjugal partnership violatedwhen the trial court forfeited them in favor of his children pursuant to Articles 63(2) and 129 of the Family Code?We respond in the negative.Indeed, the petitioner claims that his vested rights have been impaired, arguing: "As earlier adverted to, the petitioner acquired vested rights over half of the conjugal properties, the same being owned in common by the spouses. If theprovisions of the Family Code are to be given retroactive application to the point of authorizing the forfeiture of thepetitioner's share in the net remainder of the conjugal partnership properties, the same impairs his rights acquired prior tothe effectivity of the Family Code."59 In other words, the petitioner is saying that since the property relations between thespouses is governed by the regime of Conjugal Partnership of Gains under the Civil Code, the petitioner acquired vestedrights over half of the properties of the Conjugal Partnership of Gains, pursuant to Article 143 of the Civil Code, whichprovides: "All property of the conjugal partnership of gains is owned in common by the husband and wife." 60 Thus, sincehe is one of the owners of the properties covered by the conjugal partnership of gains, he has a vested right over half of the said properties, even after the promulgation of the Family Code; and he insisted that no provision under the FamilyCode may deprive him of this vested right by virtue of Article 256 of the Family Code which prohibits retroactiveapplication of the Family Code when it will prejudice a person's vested right.However, the petitioner's claim of vested right is not one which is written on stone. In Go, Jr. v. Court of Appeals,61wedefine and explained "vested right" in the following manner:

A vested right is one whose existence, effectivity and extent do not depend upon events foreign to the will of the holder, or to the exercise of which no obstacle exists, and which is immediate and perfect in itself and not dependent upon acontingency. The term "vested right" expresses the concept of present fixed interest which, in right reason and natural

justice, should be protected against arbitrary State action, or an innately just and imperative right which enlightened freesociety, sensitive to inherent and irrefragable individual rights, cannot deny.To be vested, a right must have become a title—legal or equitable—to the present or future enjoyment of property.62 (Citations omitted)In our en banc Resolution dated October 18, 2005 for ABAKADA Guro Party List Officer Samson S. Alcantara, et al. v.The Hon. Executive Secretary Eduardo R. Ermita,63 we also explained:

The concept of "vested right" is a consequence of the constitutional guaranty of due process that expresses a presentfixed interest which in right reason and natural justice is protected against arbitrary state action; it includes not only legalor equitable title to the enforcement of a demand but also exemptions from new obligations created after the right hasbecome vested. Rights are considered vested when the right to enjoyment is a present interest, absolute, unconditional,and perfect or fixed and irrefutable.64 (Emphasis and underscoring supplied)From the foregoing, it is clear that while one may not be deprived of his "vested right," he may lose the same if there isdue process and such deprivation is founded in law and jurisprudence.In the present case, the petitioner was accorded his right to due process. First, he was well-aware that the respondentprayed in her complaint that all of the conjugal properties be awarded to her.65 In fact, in his Answer, the petitioner prayedthat the trial court divide the community assets between the petitioner and the respondent as circumstances and evidencewarrant after the accounting and inventory of all the community properties of the parties. 66 Second, when the Decisiondated October 10, 2005 was promulgated, the petitioner never questioned the trial court's ruling forfeiting what the trial













































court termed as "net profits," pursuant to Article 129(7) of the Family Code. 67 Thus, the petitioner cannot claim beingdeprived of his right to due process.Furthermore, we take note that the alleged deprivation of the petitioner's "vested right" is one founded, not only in theprovisions of the Family Code, but in Article 176 of the Civil Code. This provision is like Articles 63 and 129 of the FamilyCode on the forfeiture of the guilty spouse's share in the conjugal partnership profits. The said provision says:

Art. 176. In case of legal separation, the guilty spouse shall forfeit his or her share of the conjugal partnership profits,which shall be awarded to the children of both, and the children of the guilty spouse had by a prior marriage. However, if the conjugal partnership property came mostly or entirely from the work or industry, or from the wages and salaries, or from the fruits of the separate property of the guilty spouse, this forfeiture shall not apply.In case there are no children, the innocent spouse shall be entitled to all the net profits.From the foregoing, the petitioner's claim of a vested right has no basis considering that even under Article 176 of the CivilCode, his share of the conjugal partnership profits may be forfeited if he is the guilty party in a legal separation case.Thus, after trial and after the petitioner was given the chance to present his evidence, the petitioner's vested right claimmay in fact be set aside under the Civil Code since the trial court found him the guilty party.More, in Abalos v. Dr. Macatangay, Jr.,68 we reiterated our long-standing ruling that:[P]rior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal assets is inchoate, a mereexpectancy, which constitutes neither a legal nor an equitable estate, and does not ripen into title until it appears thatthere are assets in the community as a result of the liquidation and settlement. The interest of each spouse is limited tothe net remainder or "remanente liquido" (haber ganancial) resulting from the liquidation of the affairs of the partnershipafter its dissolution. Thus, the right of the husband or wife to one-half of the conjugal assets does not vest until thedissolution and liquidation of the conjugal partnership, or after dissolution of the marriage, when it is finally determinedthat, after settlement of conjugal obligations, there are net assets left which can be divided between the spouses or their respective heirs.69 (Citations omitted)

Finally, as earlier discussed, the trial court has already decided in its Decision dated October 10, 2005 that the applicablelaw in this case is Article 129(7) of the Family Code.70 The petitioner did not file a motion for reconsideration nor a noticeof appeal. Thus, the petitioner is now precluded from questioning the trial court's decision since it has become final andexecutory. The doctrine of immutability and unalterability of a final judgment prevents us from disturbing the Decisiondated October 10, 2005 because final and executory decisions can no longer be reviewed nor reversed by this Court. 71

From the above discussions, Article 129 of the Family Code clearly applies to the present case since the parties' propertyrelation is governed by the system of relative community or conjugal partnership of gains and since the trial court'sDecision has attained finality and immutability.The net profits of the conjugal partnership of gains are all the fruits of the separate properties of the spouses andthe products of their labor and industry.The petitioner inquires from us the meaning of "net profits" earned by the conjugal partnership for purposes of effectingthe forfeiture authorized under Article 63 of the Family Code. He insists that since there is no other provision under theFamily Code, which defines "net profits" earned subject of forfeiture as a result of legal separation, then Article 102 of the

Family Code applies.What does Article 102 of the Family Code say? Is the computation of "net profits" earned in the conjugal partnership of gains the same with the computation of "net profits" earned in the absolute community?Now, we clarify.First and foremost, we must distinguish between the applicable law as to the property relations between the parties andthe applicable law as to the definition of "net profits." As earlier discussed, Article 129 of the Family Code applies as to theproperty relations of the parties. In other words, the computation and the succession of events will follow the provisionsunder Article 129 of the said Code. Moreover, as to the definition of "net profits," we cannot but refer to Article 102(4) of the Family Code, since it expressly provides that for purposes of computing the net profits subject to forfeiture under

Article 43, No. (2) and Article 63, No. (2), Article 102(4) applies. In this provision, net profits "shall be the increase in valuebetween the market value of the community property at the time of the celebration of the marriage and the market value atthe time of its dissolution."72 Thus, without any iota of doubt, Article 102(4) applies to both the dissolution of the absolutecommunity regime under Article 102 of the Family Code, and to the dissolution of the conjugal partnership regime under

Article 129 of the Family Code. Where lies the difference? As earlier shown, the difference lies in the processes usedunder the dissolution of the absolute community regime under Article 102 of the Family Code, and in the processes usedunder the dissolution of the conjugal partnership regime under Article 129 of the Family Code.Let us now discuss the difference in the processes between the absolute community regime and the conjugal partnershipregime.On Absolute Community Regime:When a couple enters into a regime of absolute community, the husband and the wife becomes joint owners ofall theproperties of the marriage. Whatever property each spouse brings into the marriage, and those acquired during themarriage (except those excluded under Article 92 of the Family Code) form the common mass of the couple's properties.

And when the couple's marriage or community is dissolved, that common mass is divided between the spouses, or their respective heirs, equally or in the proportion the parties have established, irrespective of the value each one may haveoriginally owned.73

Under Article 102 of the Family Code, upon dissolution of marriage, an inventory is prepared, listing separately all theproperties of the absolute community and the exclusive properties of each; then the debts and obligations of the absolute

community are paid out of the absolute community's assets and if the community's properties are insufficient, the separateproperties of each of the couple will be solidarily liable for the unpaid balance. Whatever is left of the separate propertieswill be delivered to each of them. The net remainder of the absolute community is its net assets, which shall be dividedbetween the husband and the wife; and for purposes of computing the net profits subject to forfeiture, said profits shall bethe increase in value between the market value of the community property at the time of the celebration of the marriageand the market value at the time of its dissolution.74

Applying Article 102 of the Family Code, the "net profits" requires that we first find the market value of the properties at thetime of the community's dissolution. From the totality of the market value of all the properties, we subtract the debts andobligations of the absolute community and this result to the net assets or net remainder of the properties of the absolutecommunity, from which we deduct the market value of the properties at the time of marriage, which then results to the netprofits.75

Granting without admitting that Article 102 applies to the instant case, let us see what will happen if we apply Article 102:
























(a) According to the trial court's finding of facts, both husband and wife have no separate properties, thus, the remainingproperties in the list above are all part of the absolute community. And its market value at the time of the dissolution of theabsolute community constitutes the "market value at dissolution."(b) Thus, when the petitioner and the respondent finally were legally separated, all the properties which remained will beliable for the debts and obligations of the community. Such debts and obligations will be subtracted from the "market valueat dissolution."(c) What remains after the debts and obligations have been paid from the total assets of the absolute communityconstitutes the net remainder or net asset. And from such net asset/remainder of the petitioner and respondent'sremaining properties, the market value at the time of marriage will be subtracted and the resulting totality constitutes the"net profits."(d) Since both husband and wife have no separate properties, and nothing would be returned to each of them, whatwill be divided equally between them is simply the "net profits." However, in the Decision dated October 10, 2005, the trialcourt forfeited the half-share of the petitioner in favor of his children. Thus, if we use Article 102 in the instant case (whichshould not be the case), nothing is left to the petitioner since both parties entered into their marriage without bringing withthem any property.On Conjugal Partnership Regime:Before we go into our disquisition on the Conjugal Partnership Regime, we make it clear that Article 102(4) of the FamilyCode applies in the instant case for purposes only of defining "net profit." As earlier explained, the definition of "netprofits" in Article 102(4) of the Family Code applies to both the absolute community regime and conjugal partnershipregime as provided for under Article 63, No. (2) of the Family Code, relative to the provisions on Legal Separation.Now, when a couple enters into a regime of conjugal partnership of gains under Article 142 of the Civil Code, "thehusband and the wife place in common fund the fruits of their separate property and income from their work or industry,and divide equally, upon the dissolution of the marriage or of the partnership, the net gains or benefits obtained

indiscriminately by either spouse during the marriage."76 From the foregoing provision, each of the couple has his and her own property and debts. The law does not intend to effect a mixture or merger of those debts or properties between thespouses. Rather, it establishes a complete separation of capitals.77

Considering that the couple's marriage has been dissolved under the Family Code, Article 129 of the same Code appliesin the liquidation of the couple's properties in the event that the conjugal partnership of gains is dissolved, to wit:

Art. 129. Upon the dissolution of the conjugal partnership regime, the following procedure shall apply:(1) An inventory shall be prepared, listing separately all the properties of the conjugal partnership and the exclusiveproperties of each spouse.(2) Amounts advanced by the conjugal partnership in payment of personal debts and obligations of either spouse shall becredited to the conjugal partnership as an asset thereof.(3) Each spouse shall be reimbursed for the use of his or her exclusive funds in the acquisition of property or for the valueof his or her exclusive property, the ownership of which has been vested by law in the conjugal partnership.(4) The debts and obligations of the conjugal partnership shall be paid out of the conjugal assets. In case of insufficiency

of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties, in accordancewith the provisions of paragraph (2) of Article 121.(5) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of them.(6) Unless the owner had been indemnified from whatever source, the loss or deterioration of movables used for thebenefit of the family, belonging to either spouse, even due to fortuitous event, shall be paid to said spouse from theconjugal funds, if any.(7) The net remainder of the conjugal partnership properties shall constitute the profits, which shall be divided equallybetween husband and wife, unless a different proportion or division was agreed upon in the marriage settlements or unless there has been a voluntary waiver or forfeiture of such share as provided in this Code.(8) The presumptive legitimes of the common children shall be delivered upon the partition in accordance with Article 51.(9) In the partition of the properties, the conjugal dwelling and the lot on which it is situated shall, unless otherwise agreedupon by the parties, be adjudicated to the spouse with whom the majority of the common children choose to remain.Children below the age of seven years are deemed to have chosen the mother, unless the court has decided otherwise. Incase there is no such majority, the court shall decide, taking into consideration the best interests of said children.In the normal course of events, the following are the steps in the liquidation of the properties of the spouses:(a) An inventory of all the actual properties shall be made, separately listing the couple's conjugal properties and their separate properties.78 In the instant case, the trial court found that the couple has no separate properties when theymarried. 79 Rather, the trial court identified the following conjugal properties, to wit:1. coffee mill in Balongagan, Las Nieves, Agusan del Norte;2. coffee mill in Durian, Las Nieves, Agusan del Norte;3. corn mill in Casiklan, Las Nieves, Agusan del Norte;4. coffee mill in Esperanza, Agusan del Sur;5. a parcel of land with an area of 1,200 square meters located in Tungao, Butuan City;6. a parcel of agricultural land with an area of 5 hectares located in Manila de Bugabos, Butuan City;7. a parcel of land with an area of 84 square meters located in Tungao, Butuan City;8. Bashier Bon Factory located in Tungao, Butuan City.80

(b) Ordinarily, the benefit received by a spouse from the conjugal partnership during the marriage is returned in equal

amount to the assets of the conjugal partnership; 81 and if the community is enriched at the expense of the separateproperties of either spouse, a restitution of the value of such properties to their respective owners shall be made. 82

(c) Subsequently, the couple's conjugal partnership shall pay the debts of the conjugal partnership; while the debts andobligation of each of the spouses shall be paid from their respective separate properties. But if the conjugal partnership isnot sufficient to pay all its debts and obligations, the spouses with their separate properties shall be solidarily liable.83

(d) Now, what remains of the separate or exclusive properties of the husband and of the wife shall be returned to each of them.84 In the instant case, since it was already established by the trial court that the spouses have no separateproperties, 85 there is nothing to return to any of them. The listed properties above are considered part of the conjugalpartnership. Thus, ordinarily, what remains in the above-listed properties should be divided equally between the spousesand/or their respective heirs.86However, since the trial court found the petitioner the guilty party, his share from the netprofits of the conjugal partnership is forfeited in favor of the common children, pursuant to Article 63(2) of the FamilyCode. Again, lest we be confused, like in the absolute community regime, nothing will be returned to the guilty party in the
































conjugal partnership regime, because there is no separate property which may be accounted for in the guilty party'sfavor.In the discussions above, we have seen that in both instances, the petitioner is not entitled to any property at all. Thus, wecannot but uphold the Decision dated October 10, 2005 of the trial court. However, we must clarify, as we already didabove, the Order dated January 8, 2007.WHEREFORE, the Decision dated October 10, 2005 of the Regional Trial Court, Branch 1 of Butuan City is AFFIRMED.

Acting on the Motion for Clarification dated July 7, 2006 in the Regional Trial Court, the Order dated January 8, 2007 of the Regional Trial Court is hereby CLARIFIED in accordance with the above discussions.SO ORDERED.BIENVENIDO L. REYES

Associate JusticeRepublic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. 187316 July 16, 2012WONDER BOOK CORPORATION, Petitioner,vs.PHILIPPINE BANK OF COMMUNICATIONS, Respondent.D E C I S I O NREYES, J.:This is a petition for review under Rule 45 of the Rules of Court assailing the Decision1 dated March 25, 2009 of the Courtof Appeals ( CA) in CA-G.R. SP No. 102860, which reversed and set aside the Order 2 dated February 15, 2008 of Branch

21 of the Regional Trial Court (RTC) of Imus, Cavite in SEC Case No. 058-06 upon a petition for review tiled byrespondent Philippine Bank of Communications (PBCOM).Factual Antecedents The facts are undisputed.Petitioner Wonder Book Corporation (Wonder Book) is a corporation duly organized and existing under Philippine lawsengaged in the business of retailing books, school and office supplies, greeting cards and other related items. It operatesthe chain of stores known as the Diplomat Book Center.On February 27, 2004, Wonder Book and eight (8) other corporations,3 collectively known as the Limtong Group of Companies (LGC), filed a joint petition for rehabilitation with the RTC. The petition was docketed as SEC Case No. 031-04 and raffled to Branch 21.On March 2, 2004, a Stay Order 4 was issued.On April 30, 2004, Equitable PCI Bank (EPCI Bank), one of the creditors of LGC, filed an opposition raising, amongothers, the impropriety of nine (9) corporations with separate and distinct personalities seeking joint rehabilitation under one proceeding.5

On February 9, 2005, the RTC issued an Order 6

approving the petition for rehabilitation, the dispositive portion of whichstates:CONSIDERING THE FOREGOING, the Court hereby approves the Rehabilitation Plan of the LGC thereby granting theLGC a moratorium of two (2) years from today in the payment of all its obligations, together with the correspondinginterests, to its creditor banks, subject to the modification that the interest charges shall be reduced to 5% per annum.

After the two-year grace period, the LGC shall commence to pay its existing obligations with its creditor banks monthlywithin a period of fifteen (15) years.LGC are enjoined to comply strictly with the provisions of the Rehabilitation Plan, perform its obligations thereunder andtake all actions necessary to carry out the Plan, failing which, the Court shall either, upon motion, motu proprio or uponrecommendation of the Rehabilitation Receiver, terminate the proceedings pursuant to Section 27, Rule 1 of the InterimRules of Procedure on Corporate Rehabilitation.The Rehabilitation Receiver is directed to strictly monitor the implementation of the Plan and submit a quarterly report onthe progress thereof.SO ORDERED.7

The foregoing was questioned by EPCI Bank and PBCOM before the CA by way of a petition for review. EPCI Bank’spetition8 was docketed as CA-G.R. SP No. 89461 and raffled to the Third Division. PBCOM’s petition 9 was docketed asCA-G.R. SP No. 89507 and raffled to the Eight Division.On October 25, 2005, the CA rendered a Decision 10 granting EPCI Bank’s petition. The CA reversed the Order datedFebruary 9, 2005 of the RTC and dismissed LGC’s petition for rehabilitation. LGC filed a petition for review on certiorariwith this Court, which was later withdrawn.On the other hand, PBCOM’s petition was denied by the CA in a Decision 11 dated January 16, 2008. The denial becamefinal as PBCOM did not move for reconsideration or interpose an appeal to this Court.12

Meantime, on September 5, 2006, Wonder Book filed a petition for Rehabilitation 13 with the RTC, which was docketed asSEC Case No. 058-06 and raffled to Branch 21. Wonder Book cited the following as causes for its inability to pay its debtsas they fall due: (a) high interest rates, penalties and charges imposed by its creditors; (b) low demand for gift items andgreeting cards due to the widespread use of cellular phones and economic recession; (c) competition posed by other stores; and (d) the fire on July 19, 2002 that destroyed its inventories worth P264 Million, which are insured for P245

Million but yet to be collected.14

Wonder Book’s rehabilitation plan put forward a payment program that guaranteed full payment of its loan from PBCOMafter fifteen (15) years at a reduced interest rate of five percent (5%) per annum with a waiver of all penalties andmoratorium on interest and principal payments for two (2) years and five (5) years, respectively, that will be counted fromthe court’s approval. Wonder Book proposed to pay its trade creditors and the interest that will accrue during the two-year moratorium within ten (10) years from the approval of its rehabilitation plan. 15Further, it committed to: (a) convert alldeposits for future subscriptions to common stock; (b) treat all its liabilities to its officers and stockholders as tradepayables; (c) infuse an additional capital of P10 Million; and (d) use 70% and 30% of its unpaid insurance claim for thepayment of its debts and capital infusion, respectively.16

The RTC issued a Stay Order 17 on September 5, 2006.PBCOM filed an Opposition18 dated October 18, 2006 stating that: (a) Wonder Book’s petition cannot be granted on thebasis of proposals that are vague and anchored on baseless presumptions; (b) it is clear from Wonder Book’s financial













































statements that it is insolvent and can no longer be rehabilitated; (c) Wonder Book’s proposed capital infusion isspeculative at best, as there is no reasonable expectation that it will be paid under the insurance covering the inventorythat was destroyed by fire on July 19, 2002; (d) Wonder Book failed to present an alternative funding for its capital infusionshould its insurance claim fail to materialize; (e) Wonder Book failed to specify how its proposed sales, marketing andproduction strategies would be carried out; (f) Wonder Book failed to specify its underpinnings for its claim that thesestrategies would certainly lead to its expected rate of profitability; and (g) Wonder Book’s proposed payment program istoo onerous.On September 17, 2007, Wonder Book filed what it described as its detailed rehabilitation plan.19 Wonder Bookmaintained its proposed term of fifteen (15) years and reduced interest rate of 5% per annum. However, it shortened theperiod on the suspension of principal payments from five (5) to three (3) years and extended the moratorium on interestpayment from two (2) to three (3) years. It also lengthened the period for the payment of interest that will accrue duringthe stay from ten (10) to twelve (12) years and proffered a waiver of penalties and interest from February 2004 up to thecourt’s approval of its rehabilitation plan.20

Wonder Book likewise intimated the sale of some real properties owned by TOL Realty and Development Corporation(TOL), an affiliate that is likewise undergoing rehabilitation and similarly indebted to PBCOM. The proceeds of such salewill be used for the payment of TOL’s debt to PBCOM and any excess will be used to settle Wonder’s Book debt toPBCOM.21

Wonder Book limited its commitments to the conversion of deposits for future subscriptions to common stock andtreatment of its payables to its officers and stockholders as trade payables.22

Wonder Book undertook to implement the following changes in its internal operations by: (a) changing the name "DiplomatBook Center" to one more appropriate for a bookstore and retailer of office and school supplies; (b) closing down non-performing branches and opening new stores in areas with high human traffic; (c) improving product display and variety;(d) investing in technology to properly monitor sales and manage inventory; (e) launching customer loyalty program; (f)

allocating three percent (3%) of total sales to advertising and promotions; (g) strengthening its organization by improvingits hiring, training and incentive programs; and (h) carrying its own brand of products. 23 Wonder Books expects toaccomplish the foregoing on capital from investors and sales during the three-year moratorium.24

On February 15, 2008, the RTC issued an Order, approving Wonder Book’s rehabilitation plan, the dispositive portion of which states:CONSIDERING THE FOREGOING, the Court hereby approves the Detailed Rehabilitation Plan, together with thereceiver’s report and recommendation and its clarifications and corrections and enjoins the petitioner to strictly complywith the provisions of the plan, perform its obligations thereunder and take all actions necessary to carry out the plan,failing which, the Court shall either, upon motion, motu proprio or upon the recommendation of the RehabilitationReceiver, terminate the proceedings pursuant to Section 27, Rule 1 of the Interim Rules of Procedure on CorporateRehabilitation.The Rehabilitation Receiver is directed to strictly monitor the implementation of the Plan and submit a quarterly report onthe progress thereof.

SO ORDERED.25

(Citation omitted)PBCOM filed a petition for review26 of the approval of Wonder Book’s rehabilitation plan, which the CA granted in aDecision27 dated March 25, 2009. According to the CA, Wonder Book’s financial statements reveal that it is not merelyilliquid but in a state of insolvency:

A perusal of the interim financial statement of Wonder Book as of August 2006 will readily show that Wonder Book is notmerely having liquidity problems, but it is actually in a state of serious insolvency. It should be noted that this fact wasnever denied by Wonder Book. The RTC even mentioned in its order that as of August 2006, the total assets of Wonder Book is only P144,922,218.00 whereas its liabilities totaled to P306,141,399.00. In effect, the debt ratio of Wonder Book is2.11 to 1. This means that Wonder Book has P2.11 pesos in debt for every peso of asset. Obviously, Wonder Book is interrible financial condition as it does not have enough assets to pay its obligations. For a good financial status, the totaldebt ratio should be 1 or less.28 (Citation omitted)The CA noted that Wonder Book failed to support its petition with reassuring "material financial commitments", which is arequirement under Section 5 of the 2000 Interim Rules on Corporate Rehabilitation (Interim Rules):Indeed, page 7 of the assailed order provides the following:"Wonder Book will commit an additional amount of P10 Million as working capital. If the insurance claim in the amount of P245 Million will be collected, 70% or the amount of P171,500,000.00 shall be used to pay existing debts and 30% shallbe used as additional working capital. The stockholders agreed that no dividends will be paid within the rehabilitationperiod.The directors and shareholders of Wonder Book are so fully committed to rehabilitate the corporation that they havecommitted to convert their deposit for future subscription to common stock.The company is highly confident that the financing will be made available by its investors once the rehabilitation plan isgiven green light by the court. Its financial plan does not take into consideration the possibility of sourcing funds outsideinternally generated cash nor the entry of strategic investors who have expressed interest in the completion of the projectand assist in rehabilitating the corporation."We note, however, that the foregoing statements were mentioned in Wonder Book’s original rehabilitation plan but wereno longer restated in its detailed rehabilitation plan, which was the one approved by the RTC. True enough, thecommitment of Wonder Book to put up additional P10 Million as working capital was not reflected in the projected balance

sheet of Wonder Book. There was also no mention about the expected insurance claim in the amount of P245 Millionwhereby 70% thereof or the amount of P171,500,000.00 should be used to pay existing debts and the remaining 30%shall be used as additional working capital. As a matter of fact, a full-allowance for non-recovery of said insurance claimwas already provided by Wonder Book because the latter believed that it could no longer be recovered.It may be observed that the detailed rehabilitation plan merely provided for two management commitments, such as, (1)all deposits for future subscriptions by the officers and directors will be converted to common stock and (2) all liabilities(cash advances made by the stockholders’ (sic) to the corporation) of the company from the officers and stockholdersshall be treated just like trade payable. But these could hardly be considered as "material financial commitments" thatwould support Wonder Book’s rehabilitation plan. The first commitment was not even shown in the projected balancesheet of Wonder Book. The subscribed and paid-up capital of Wonder Book remained at P4,500,000.00 even at the endof the 15th year from the approval of the rehabilitation plan. Even so, the deposits for future subscription is (sic) only




























P319,000.00, which is very significant vis-à-vis Wonder Book’s capital deficiency of P161,219,121.00 as of August 2006. xx x29 (Citations omitted)The CA also noted that Wonder Book’s expected profits during the rehabilitation period are not sufficient to cover itsliabilities and reverse its dismal financial state:

A careful examination of the projected balance sheet and income statement of Wonder Book for the period of rehabilitation reveals that while Wonder Book will be earning, the same will not be sufficient to cover its accumulatedlosses. At the 15th year, its profit margin will be only 2.9% (P3,785,000.00/[P]466,277,000.00). This tells us that for everypeso in sales, Wonder Book will be generating 3 centavos net profit, which is most insubstantial to cover up its endingdeficit of P50,960,000.00. Thus, at the end of the rehabilitation period, though Wonder Book will be able to fully pay itsobligation to PBCOM, it will remain insolvent. It would still have a capital deficiency of P46,142,000.00. Its total assets willbe only P196,515,000.00 whereas its total liabilities will still be P242,657,000.00. Consequently, its debt ratio wouldremain high, at 1.23 to 1. It would have P1.23 pesos in debt for every peso of asset. Furthermore, liquidity problems wouldstill exist because on the 15th year, its current ratio would be 0.9353 to 1 (P83,339,000.00/P89,104,000.00), meaningWonder Book would only have 0.9353 cents to meet every peso of its current liabilities. x x x30 (Citations omitted)Wonder Book instituted the present petition claiming that the CA erred in dismissing its petition for rehabilitation. The CAallegedly has no basis in concluding that Wonder Book is insolvent, hence, incapable of being rehabilitated consideringthat: (a) P162,286,966.00 of its total liabilities in the amount of P286,944,120.00 represents advances or loans extendedby affiliates that are not due and demandable during the period of rehabilitation; (b) the prevailing rules do not preclude acorporation who is insolvent from seeking rehabilitation; (c) there is nothing in the rules that specify a parameter for classifying a debt as sustainable or not, hence, its apparent insolvency should not be a determinant of the feasibility of itsrehabilitation; (d) one of its shareholders paid a supplier the amount of P13,600,000.00, thus, ensuring the continuoussupply of products for sale, and was willing to postpone collection until Wonder Book is successfullyrehabilitated;31 (e) its suppliers have agreed to supply products on credit and this indicates their faith in the feasibility of

the proposed rehabilitation plan;32 and (f) the payment posted by one of its stockholders was more than enough to cover the promised capital infusion of P10,000,000.00.Our RulingThe sole issue is whether Wonder Book’s petition for rehabilitation is impressed with merit and this Court rules in thenegative.IRehabilitation contemplates a continuance of corporate life and activities in an effort to restore and reinstate thecorporation to its former position of successful operation and solvency. The purpose of rehabilitation proceedings is toenable the company to gain a new lease on life and thereby allow creditors to be paid their claims from its earnings. Therehabilitation of a financially distressed corporation benefits its employees, creditors, stockholders and, in a larger sense,the general public.33

Rehabilitation proceedings in our jurisdiction, much like the bankruptcy laws of the United States, have equitable andrehabilitative purposes. On one hand, they attempt to provide for the efficient and equitable distribution of an insolvent

debtor’s remaining assets to its creditors; and on the other, to provide debtors with a "fresh start" by relieving them of theweight of their outstanding debts and permitting them to reorganize their affairs. The rationale of Presidential Decree No.902-A, as amended, is to "effect a feasible and viable rehabilitation," by preserving a floundering business as goingconcern, because the assets of a business are often more valuable when so maintained than they would be whenliquidated.34

Under Section 23, Rule 4 of the Interim Rules, a rehabilitation plan may be approved if there is a showing thatrehabilitation is feasible and the opposition entered by the creditors holding a majority of the total liabilities isunreasonable. In determining whether the objections to the approval of a rehabilitation plan are reasonable or otherwise,the court has the following to consider: (a) that the opposing creditors would receive greater compensation under the planthan if the corporate assets would be sold; (b) that the shareholders would lose their controlling interest as a result of theplan; and (c) that the receiver has recommended approval.Rehabilitation is therefore available to a corporation who, while illiquid, has assets that can generate more cash if used inits daily operations than sold. Its liquidity issues can be addressed by a practicable business plan that will generateenough cash to sustain daily operations, has a definite source of financing for its proper and full implementation, andanchored on realistic assumptions and goals. This remedy should be denied to corporations whose insolvency appears tobe irreversible and whose sole purpose is to delay the enforcement of any of the rights of the creditors, which is renderedobvious by the following: (a) the absence of a sound and workable business plan; (b) baseless and unexplainedassumptions, targets and goals; (c) speculative capital infusion or complete lack thereof for the execution of the businessplan; (d) cash flow cannot sustain daily operations; and (e) negative net worth and the assets are near full depreciation or fully depreciated.In China Banking Corporation v. Cebu Printing and Packaging Corporation, 35 this Court declared that Cebu Printing andPackaging Corporation can no longer be rehabilitated given its patent insolvency that appeared irremediable because of the unfounded projections on profitability:The RTC found CEPRI to be in the state of insolvency which precludes it from being entitled to rehabilitation. The findingsof fact of the RTC must be given respect as it is clear and categorical in ruling that CEPRI is not merely in the state of illiquidity, but in an apparent state of insolvency. There is nothing more detailed than the contents of the said Order, whichreads, in part:

"After the aforesaid initial hearing, this Court made a careful and judicious scrutiny and evaluation as to whether thepetition for rehabilitation filed by the petitioner is impressed with merit or not. Up to this time, this Court is not satisfied thatthere is merit in the said petition.Foremost of all, it appears that the petitioner does not really have enough assets, net worth and earning to meet andsettle its outstanding liabilities. As stated by it in paragraph 7.8 of the petition, it has outstanding liabilities in the aggregatesum of P69,539,903.57 to the Bank of Philippine Islands and China Banking Corporation. These major liabilities arebroken down as follows: P20,230,000.00 to BPI and P49,309,903.57 to China Banking Corporation as of December 31,2001. There is a strong probability that these may still increase substantially after December 31, 2001. However, thepetitioner has relatively less assets to answer for these liabilities. As historically shown by its audited financial statements,the petitioner’s assets from 1990 to 2000 were only worth as follows: P352,222.40 in 1990 (Exhibit K), P452,723.33 in1991 (Exhibit K), P569,948.19 in 1992 (Exhibit L), P787,300.65 in 1993 (Exhibit M), P761,310.69 in 1994 (Exhibit N),P3,042,411.81 in 1995 (Exhibit O), P5,608,866.70 in 1996 (Exhibit P), P8,100,022.81 in 1997 (Exhibit Q), P10,007,490.26




















in 1998 (Exhibit R), P10,905,649.83 in 1999 (Exhibit S) and P11,615,251.75 in 2000 (Exhibit T). x x x For all intents andpurposes, it can thus be said that the petitioner was not actually better off in terms of its assets and equity in 2001 than in2000. In view thereof, this Court concurs with the oppositor, China Banking Corporation, that the petitioner is actually nowin a state of insolvency, not illiquidity. In other words, it cannot be the proper subject of rehabilitation.Secondly, this Court is not really prepared to give full faith to the financial projections of the petitioner (Annex H-1 of thepetition). The assumption that petitioner’s gross sales will increase by 25% to 30% within the next five years is withoutadequate basis. It is too speculative and unrealistic. It is not borne by petitioner’s historical operations. Neither is it borneby an objective industry forecast. It is even belied by the Packaging Industry Profile prepared by the DTI Cebu ProvincialOffice which the petitioner submitted to this Court (Exhibit U). In said Packaging Industry Profile, it is categorically andexplicitly stated that "packaging demand is projected by the Strategic Industry Research and Analysis (SIRA) to increaseonly by around 4.7% compound per annum over the period 1997-2003." And so, there is actually no faithful and adequateshowing by the petitioner that it has ample capacity to pay its outstanding and overdue loans to its major creditors such asthe BPI and China Banking Corporation, even if it be given a breathing spell. x x x."36 (Citation omitted)This Court finds no reason to accord a different treatment to Wonder Book. The figures appearing on Wonder Book’sfinancial documents and the nature and value of its assets are indeed discouraging. First, as of August 2006, Wonder Book’s total assets are worth P144,922,218.00 and its total liabilities amount to P306,141,399.00 and this is a clear evidence of its actual insolvency, not mere illiquidity, and dispossession of financial leverage. Second, bulk or approximately seventy-two percent (72%) of its current assets consists of inventories 37 and the average turn-over rate isseventy-three (73) days, hence, cannot be relied on for a quick cash flow. Third, a majority or seventy-seven percent(77%) of its non-current assets is comprised of deferred tax assets38 or taxes that have been paid on income that have notyet been reported, hence, may only be used to decrease future tax liability but not for the increase of capital, the financeof operations or the purchase of an asset. Fourth, its property and equipment comprise only two percent (2%) of its non-current assets. Apart from the fact that these consist largely of personal properties – computers and store equipment –

that are certain to depreciate over time, there is no evidence that the valuation assigned to them by Wonder Book isattributable to an independent third-party appraiser. There is likewise no mention of their actual market values as, moreoften than not, they will be sold for less than their book value.In other words, rehabilitation is not the proper remedy for Wonder Book’s dire financial condition. Given that it is actuallyinsolvent and not just suffering from temporary liquidity problems, rehabilitation is not a viable option.II

Another reason for this Court’s denial of Wonder Book’s petition is its failure to comply with Section 5 of the Interim Rules,which enumerates the minimum requirements of an acceptable rehabilitation plan:Sec. 5. Rehabilitation Plan. — The rehabilitation plan shall include: (a) the desired business targets or goals and theduration and coverage of the rehabilitation; (b) the terms and conditions of such rehabilitation which shall include themanner of its implementation, giving due regard to the interests of secured creditors; (c) the material financialcommitments to support the rehabilitation plan; (d) the means for the execution of the rehabilitation plan, which mayinclude conversion of the debts or any portion thereof to equity, restructuring of the debts, dacion en pago, or sale of

assets or of the controlling interest; (e) a liquidation analysis that estimates the proportion of the claims that the creditorsand shareholders would receive if the debtor’s properties were liquidated; and (f) such other relevant information to enablea reasonable investor to make an informed decision on the feasibility of the rehabilitation plan.It is imperative for a distressed corporation seeking rehabilitation to present "material financial commitments" as this iscritical in determining its resolve, determination, earnestness and good faith in financing its proposed rehabilitation plan.

As discussed above, Wonder Book’s "material financial commitments" are limited to converting all deposits for futuresubscriptions to common stock and treating all its payables to its officers and stockholders as trade payables. These,unfortunately, do not qualify as sincere commitment and even betray Wonder Book’s intent to fund the implementation of its rehabilitation plan using whatever cash it will generate during the reprieve provided by the stay order and themoratorium on the principal and interest payments. This scheme is certainly unfair as PBCOM or any of Wonder Book’screditors cannot be compelled to finance Wonder Book’s rehabilitation by a delay in the payment of their claims or aconsiderable reduction in the amounts thereof.

Apart from the fact that the deposits for future subscriptions in the amount of P319,000.0039 is insignificant as compared toWonder Book’s capital deficiency of P161,219,121.00,40 its projected balance sheet reveals that Wonder Book has nointention to carry out this commitment. No adjustment in its paid-up capital is reflected in the balance sheet attached toWonder Book’s rehabilitation plan as the amount thereof is consistently pegged at P4,500,000.00 until the end of therehabilitation period. Indeed, this commitment is far from being "material" as it will not even create a dent on Wonder Book’s capital deficit. Furthermore, it will not qualify as a "commitment" and is, in fact, a mere artifice, as Wonder Book’sbalance sheet unequivocally demonstrates.On the other hand, treating its debts to its stockholders and officers as trade payables only signifies that no priority inpayment will be accorded to them but this does not provide Wonder Book with the means to finance the activitiessupposedly ensuring its successful rehabilitation.While Wonder Book mentioned that there are individuals who have expressed their interest in investing and financing itsbusiness plans, their identities were not disclosed nor were the evidence of the existence of these funds proved. It wasalleged before this Court that one of its stockholders paid the amount of P13,600,000.00 to one of Wonder Book’ssuppliers and this constitutes sufficient compliance with the commitment of substantial capital infusion. However, apartfrom being belated, uncorroborated and unreflected in Wonder Book’s rehabilitation plan and balance sheet, this

supposed payment will not do wonders to change the undisputed fact that Wonder Book will still be saddled with a deficitof P50,960,000.00 by the end of the fifteen-year period.The foregoing only goes to show that rehabilitation is a vain waste of effort and resources and a mere exercise infutility.1âwphi1 Worse, that Wonder Book will still post a negative net worth after its rehabilitation plan is fully implementedsuggests that the remedy of rehabilitation is availed without a reasonable expectation that Wonder Book will regain itsprior status of viability and profitability but with a mere crapshoot that the value of its present pool of assets will increaseduring the rehabilitation period. Given Wonder Book’s admission that fifteen (15) years do not suffice for it to register apositive net worth, it is logical to assume that the only thing the stockholders are gunning for is the recovery of their investments or a portion thereof after the corporate debts are satisfied from the liquidation of the corporate assets. ThisCourt cannot sanction such a selfish venture. While there is no absolute certainty in rehabilitation, the sacrifice that thecreditors are compelled to make can only be considered justified if the restoration of the corporation’s former state of















solvency is feasible due to a sound business plan with an assured funding. Such cannot be said in this case, hence,PBCOM’s skepticism is not unfounded.The RTC’s approval of the subject rehabilitation plan is heavily premised on the collection of Wonder Book’s insuranceclaim and the conversion of the deposit for future subscription to common stocks. However, Wonder Book has alreadyadmitted the impossibility of being paid by reducing its two (2) commitments discussed above and by writing-off thisreceivable from its balance sheet. A cursory examination of Wonder Book’s balance sheet reveals its lack of sincerityinsofar as these two (2) commitments are concerned and this should have been enough for the RTC to dismiss Wonder Book’s attempt at rehabilitation.Wonder Book’s undertaking to fully pay its debts through sales, which it expected to increase by ten percent (10%)annually during the period it is under rehabilitation, hardly inspires belief. No basis was provided for this presumptivefigure such as forecasts of independent industry analysts. In fact, even Wonder Book’s performance in previous yearsdoes not indicate that its sales grow annually at such rate. Wonder Book also failed to explain its favorable assumptionsrelative to its future market share and ability to contend with large-scale corporations when it cited the competition posedby the latter as one of the reasons for its monumental losses. Notably, the proposed changes in Wonder Book’s internaloperations are far from being innovative and merely imitate the business plans of its successful competitors. Wonder Book did not explain why it assumed that the consumers would shift their loyalties in its favor.Wonder Book alleged that it posted pre-tax income of P1,167,765.00 and P826,714.00 in 2007 and 2008. In itsrehabilitation plan, which it submitted for approval in 2007 and approved in 2008, Wonder Book projected that it will earnthe following pre-tax income during the first five (5) years of rehabilitation:

1st 2nd 3rd 4th 5th

P

4,958,000.00 P5,804,000.00 P5,934,000.00 P6,367,000.00 P6,616,000.00

Apart from the fact that Wonder Book's actual income does not even approximate its projected income, there was even aplunge in its earnings for two (2) successive years belying its anticipated annual growth rate of ten percent (I 0%). Wonder Book is therefore mistaken in interpreting its actual income for 2007 and 2008 as a positive indicator of its viability andfitness for rehabilitation. On the contrary, it validates the doubtful stance taken by PBCOM and the CA that Wonder Bookcan no longer rise from its financial debacles even if granted a lengthy respite.WHEREFORE, premises considered, the petition is DENIED and the Decision dated March 25, 2009 of the Court of

Appeals in CA-G.R. SP No. 102860 is AFFIRMED.SO ORDERED.BIENVENIDO L. REYES

Associate justiceRepublic of the PhilippinesSUPREME COURTBaguio City

SECOND DIVISIONG.R. No. 189434 April 25, 2012FERDINAND R. MARCOS, JR. Petitioner,vs.REPUBLIC OF THE PHILIPPINES, represented by the Presidential Commission on Good Government, Respondent.x - - - - - - - - - - - - - - - - - - - - - - - xG.R. No. 189505IMELDA ROMUALDEZ-MARCOS, Petitioner,vs.REPUBLIC OF THE PHILIPPINES, Respondent.D E C I S I O NSERENO, J.:These two consolidated Petitions filed under Rule 45 of the 1997 Rules of Civil Procedure pray for the reversal of the 2

April 2009 Decision of the Sandiganbayan in Civil Case No. 0141 entitled Republic of the Philippines v. Heirs of FerdinandE. Marcos and Imelda R. Marcos.1 The anti-graft court granted the Motion for Partial Summary Judgment filed byrespondent Republic of the Philippines (Republic) and declared all assets and properties of Arelma, S.A., an entitycreated by the late Ferdinand E. Marcos, forfeited in favor of the government.On 17 December 1991, the Republic, through the Presidential Commission on Good Government (PCGG), filed a Petitionfor Forfeiture2 before the Sandiganbayan pursuant to the forfeiture law, Republic Act No. 1379 (R.A. 1379) 3 in relation toExecutive Order Nos. 1, 2 and 14.4 The petition was docketed as Civil Case No. 0141.Respondent Republic, through the PCGG and the Office of the Solicitor General (OSG), sought the declaration of Swissbank accounts totaling USD 356 million (now USD 658 million), and two treasury notes worth USD 25 million and USD 5million, as ill-gotten wealth.5 The Swiss accounts, previously held by five groups of foreign foundations,6 were deposited inescrow with the Philippine National Bank (PNB), while the treasury notes were frozen by the Bangko Sentral ng Pilipinas(BSP).Respondent also sought the forfeiture of the assets of dummy corporations and entities established by nominees of Marcos and his wife, Petitioner Imelda Romualdez-Marcos, as well as real and personal properties manifestly out of proportion to the spouses’ lawful income. This claim was based on evidence collated by the PCGG with the assistance of the United States Justice Department and the Swiss Federal Police Department.7 The Petition for Forfeiture describedamong others, a corporate entity by the name "Arelma, Inc.," which maintained an account and portfolio in Merrill Lynch,New York, and which was purportedly organized for the same purpose of hiding ill-gotten wealth.8

Before the case was set for pretrial, the Marcos children and PCGG Chairperson Magtanggol Gunigundo signed severalCompromise Agreements (a General Agreement and Supplemental Agreements) all dated 28 December 1993 for a globalsettlement of the Marcos assets. One of the "whereas" clauses in the General Agreement specified that the Republic"obtained a judgment from the Swiss Federal Tribunal on December 21, 1990, that the Three Hundred Fifty-six MillionU.S. dollars (USD 356 million) belongs in principle to the Republic of the Philippines provided certain conditionalities aremet xxx." This Decision was in turn based on the finding of Zurich District Attorney Peter Cosandey that the deposits inthe name of the foundations were of illegal provenance.9

http://www.lawphil.net/judjuris/juri2012/apr2012/gr_189434_2012.html#fnt1
























On 18 October 1996, respondent Republic filed a Motion for Summary Judgment and/or judgment on the pleadings (the1996 Motion) pertaining to the forfeiture of the USD 356 million. The Sandiganbayan denied the 1996 Motion on the soleground that the Marcoses had earlier moved for approval of the Compromise Agreements, and that this latter Motion tookprecedence over that for summary judgment. Petitioner Imelda Marcos filed a manifestation claiming she was not a partyto the Motion for Approval of the Compromise Agreements, and that she owned 90% of the funds while the remaining10% belonged to the Marcos estate.10

On 10 March 2000, the Republic filed another Motion for Summary Judgment (the 2000 Motion), based on the groundsthat: (1) the essential facts that warrant the forfeiture of the funds subject of the Petition under R.A. 1379 are admitted byrespondents in their pleadings and other submissions; and (2) the respondent Marcoses’ pretrial admission that they didnot have any interest or ownership over the funds subject of the action for forfeiture tendered no genuine issue or controversy as to any material fact.In a 19 September 2000 Decision, the Sandiganbayan initially granted the 2000 Motion, declaring that the Swiss depositsheld in escrow at the PNB were ill-gotten wealth, and, thus, forfeited in favor of the State. 11 In a Resolution dated 31January 2002, the Sandiganbayan reversed its earlier ruling and denied the 2000 Motion. Alleging grave abuse of discretion on the part of the court in rendering the later Resolution, the Republic filed a Petition for Certiorari with theSupreme Court. In G.R. No. 152154 entitled Republic of the Philippines v. Sandiganbayan (for brevity, the "SwissDeposits Decision"),12 this Court set aside the 31 January 2002 Sandiganbayan Resolution and reinstated the 19September 2000 Decision, including the declaration that the Swiss deposits are ill-gotten wealth. On 18 November 2003,the Court denied with finality petitioner Marcoses’ Motion for Reconsideration.On 16 July 2004, the Republic filed a Motion for Partial Summary Judgment (2004 Motion) to declare "the funds,properties, shares in and interests of ARELMA, wherever they may be located, as ill-gotten assets and forfeited in favor of the Republic of the Philippines pursuant to R.A. 1379 in the same manner (that) the Honorable Supreme Court forfeited infavor of the petitioner the funds and assets of similar ‘Marcos foundations’ such as AVERTINA, VIBUR, AGUAMINA,

MALER and PALMY."13 Petitioner contends that: (1) respondents are deemed to have admitted the allegations of thePetition as regards Arelma; and (2) there is no dispute that the combined lawful income of the Marcoses is grosslydisproportionate to the deposits of their foundations and dummy corporations, including Arelma. Ferdinand Marcos, Jr.,Imelda Marcos, and Imee Marcos-Manotoc filed their respective Oppositions. Irene Marcos-Araneta filed a Motion toExpunge on the ground that the proceedings in Civil Case No. 0141 had already terminated.On 2 April 2009, the Sandiganbayan rendered the assailed Decision granting respondent’s Motion for Partial SummaryJudgment.14 It found that the proceedings in Civil Case No. 0141 had not yet terminated, as the Petition for Forfeitureincluded numerous other properties, which the Sandiganbayan and Supreme Court had not yet ruled upon. TheRepublic’s 1996 Motion was merely held in abeyance to await the outcome of the global settlement of the Marcos assets.Further, this development had prompted the Republic to file the 2000 Motion, which was clearly limited only to the Swissaccounts amounting to USD 356 million. Thus, according to the Sandiganbayan, its 19 September 2000 Decision asaffirmed by the Supreme Court in G.R. No. 152154, was in the nature of a separate judgment over the Swiss accountsand did not preclude a subsequent judgment over the other properties subject of the same Petition for Forfeiture, such as

those of Arelma.15

The Sandiganbayan held as follows:WHEREFORE, considering all the foregoing, the Motion for Partial Summary Judgment dated July 16, 2004 of petitioner is hereby GRANTED. Accordingly, Partial Summary Judgment is hereby rendered declaring the assets, investments,securities, properties, shares, interests, and funds of Arelma, Inc., presently under management and/or in an account atthe Meryll (sic) Lynch Asset Management, New York, U.S.A., in the estimated aggregate amount of US$3,369,975.00 asof 1983, plus all interests and all other income that accrued thereon, until the time or specific day that all money or moniesare released and/or transferred to the possession of the Republic of the Philippines, are hereby forfeited in favor of petitioner Republic of the Philippines.SO ORDERED.16

On 22 October 2009, Ferdinand R. Marcos, Jr. filed the instant Rule 45 Petition, questioning the said Decision. 17One weeklater, Imelda Marcos filed a separate Rule 45 Petition18 on essentially identical grounds, which was later consolidated withthe first Petition. The grievances of both petitioners boil down to the following issues:1. Whether the forfeiture proceeding, Civil Case No. 0141 with the Sandiganbayan is criminal in nature, such thatsummary judgment is not allowed;2. Whether petitioner Republic complied with Section 3, subparagraphs c, d, and e of R.A. 1375;3. Whether Civil Case No. 0141 has been terminated such that a motion for partial summary judgment may no longer beallowed; and4. Whether in this case there are genuine, triable issues which would preclude the application of the rule on summary

judgment.I. Forfeiture proceedings are civil in naturePetitioner Ferdinand Marcos, Jr. argues that R.A. 1379 is a penal law; therefore a person charged under its provisionsmust be accorded all the rights granted to an accused under the Constitution and penal laws. 19 He asserts that theMarcoses were entitled to all the substantial rights of an accused, one of these being the right "to present their evidence toa full blown trial as per Section 5 of R.A. 1379."20 He relies on the 1962 case, Cabal v. Kapunan, 21 where the Court ruledthat:We are not unmindful of the doctrine laid down in Almeda vs. Perez, L-18428 (August 30, 1962) in which the theory that,after the filing of respondents' answer to a petition for forfeiture under Republic Act No. 1379, said petition may not be

amended as to substance pursuant to our rules of criminal procedure, was rejected by this Court upon the ground thatsaid forfeiture proceeding is civil in nature. This doctrine refers, however, to the purely procedural aspect of saidproceeding, and has no bearing on the substantial rights of the respondents therein, particularly their constitutional rightagainst self-incrimination.This argument fails to convince. Petitioner conveniently neglects to quote from the preceding paragraphs of Cabal, whichclearly classified forfeiture proceedings as quasi-criminal, not criminal. And even so, Cabal declared that forfeiture casespartake of a quasi-criminal nature only in the sense that the right against self-incrimination is applicable to theproceedings, i.e., in which the owner of the property to be forfeited is relieved from the compulsory production of his booksand papers:Generally speaking, informations for the forfeiture of goods that seek no judgment of fine or imprisonment against anyperson are deemed to be civil proceedings in rem. Such proceedings are criminal in nature to the extent that where the






























person using the res illegally is the owner or rightful possessor of it, the forfeiture proceeding is in the nature of a punishment .x x x x x x x x xProceedings for forfeitures are generally considered to be civil and in the nature of proceedings in rem. The statuteproviding that no judgment or other proceedings in civil cases shall be arrested or reversed for any defect or want of formis applicable to them. In some aspects, however, suits for penalties and forfeitures are of quasi-criminal nature and withinthe reason of criminal proceedings for all the purposes of * * * that portion of the Fifth Amendment which declares that no

person shall be compelled in any criminal case to be a witness against himself.The proceeding is one against the owner,as well as against the goods; for it is his breach of the laws which has to be proved to establish the forfeiture and hisproperty is sought to be forfeited.x x x x x x x x x

As already observed, the various constitutions provide that no person shall be compelled in any criminal case to be awitness against himself. This prohibition against compelling a person to take the stand as a witness against himself applies only to criminal, quasi-criminal, and penal proceedings, including a proceeding civil in form for forfeiture of

property by reason of the commission of an offense, but not a proceeding in which the penalty recoverable is civil or remedial in nature. (Emphasis supplied.)22

The right of the Marcoses against self-incrimination has been amply protected by the provisions of R.A. 1379, whichprohibits the criminal prosecution of individuals for or on account of any transaction, matter or thing concerning which theyare compelled -- after having claimed the privilege against self-incrimination -- to testify or produce evidence,documentary or otherwise.23 Since this case’s inception in 1991, petitioners have participated in the hearings, argued their case, and submitted their pleadings and other documents, never once putting at issue their right against self-incriminationor the violation thereof.24

More importantly, the factual context in the present case is wholly disparate from that in Cabal, which was originally

initiated as an action in personam. Manuel C. Cabal, then Chief of Staff of the Armed Forces of the Philippines, wascharged with "graft, corrupt practices, unexplained wealth, conduct unbecoming of an officer and gentleman, dictatorialtendencies, giving false statements of his assets and liabilities in 1958 and other equally reprehensible acts." 25 Incontradistinction, the crux of the present case devolves solely upon the recovery of assets presumptively characterized bythe law as ill-gotten, and owned by the State; hence, it is an action in rem. In Republic v. Sandiganbayan, this Courtsettled the rule that forfeiture proceedings are actions in rem and therefore civil in nature. 26 Proceedings under R.A. 1379do not terminate in the imposition of a penalty but merely in the forfeiture of the properties illegally acquired in favor of theState.27

As early as Almeda v. Judge Perez,28 we have already delineated the difference between criminal and civil forfeiture andclassified the proceedings under R.A. 1379 as belonging to the latter, viz:"Forfeiture proceedings may be either civil or criminal in nature, and may be in rem or in personam. If they are under astatute such that if an indictment is presented the forfeiture can be included in the criminal case, they are criminal innature, although they may be civil in form; and where it must be gathered from the statute that the action is meant to be

criminal in its nature it cannot be considered as civil. If, however, the proceeding does not involve the conviction of thewrongdoer for the offense charged the proceeding is of a civil nature; and under statutes which specifically so provide,where the act or omission for which the forfeiture is imposed is not also a misdemeanor, such forfeiture may be sued for and recovered in a civil action."In the first place a proceeding under the Act (Rep. Act No. 1379) does not terminate in the imposition of a penalty butmerely in the forfeiture of the properties illegally acquired in favor of the state. (Sec. 6) In the second place the procedureoutlined in the law leading to forfeiture is that provided for in a civil action. Thus there is a petition (Sec. 3), then an answer (Sec. 4), and lastly, a hearing. The preliminary investigation which is required prior to the filing of the petition, inaccordance with Sec. 2 of the Act, is provided expressly to be one similar to a preliminary investigation in a criminal case.If the investigation is only similar to that in a criminal case, but the other steps in the proceedings are those for civilproceedings, it stands to reason that the proceeding is not criminal. xxx. (citations omitted)Forfeiture cases impose neither a personal criminal liability, nor the civil liability that arises from the commission of a crime(ex delicto). The liability is based solely on a statute that safeguards the right of the State to recover unlawfully acquiredproperties.29 Executive Order No. 14 (E.O. No. 14), Defining the Jurisdiction Over Cases Involving the Ill-gotten Wealth of Former President Ferdinand Marcos, authorizes the filing of forfeiture suits that will proceed independently of any criminalproceedings. Section 3 of E.O. 14 empowered the PCGG to file independent civil actions separate from the criminalactions.30

Thus, petitioners cannot equate the present case with a criminal case and assail the proceedings before theSandiganbayan on the bare claim that they were deprived of a "full-blown trial." In affirming the Sandiganbayan anddenying petitioners’ Motion for Reconsideration in the Swiss Deposits Decision, the Court held:Section 5 of RA 1379 provides:The court shall set a date for a hearing which may be open to the public, and during which the respondent shall be givenample opportunity to explain, to the satisfaction of the court, how he has acquired the property in question.

And pursuant to Section 6 of the said law, if the respondent is unable to show to the satisfaction of the court that he haslawfully acquired the property in question, then the court shall declare such property forfeited in favor of the State.x x x x x x x x x

A careful analysis of Section 5 of RA 1379 readily discloses that the word "hearing" does not always require the formal

introduction of evidence in a trial, only that the parties are given the occasion to participate and explain how they acquiredthe property in question. If they are unable to show to the satisfaction of the court that they lawfully acquired the propertyin question, then the court shall declare such property forfeited in favor of the State. There is no provision in the law that afull blown trial ought to be conducted before the court declares the forfeiture of the subject property. Thus, even if theforfeiture proceedings do not reach trial, the court is not precluded from determining the nature of the acquisition of theproperty in question even in a summary proceeding.31

As forfeiture suits under R.A. 1379 are civil in nature, it follows that Rule 35 of the Rules of Court on Summary Judgmentmay be applied to the present case. This is consistent with our ruling in the Swiss Deposits Decision upholding thesummary judgment rendered by the Sandiganbayan over the Swiss deposits, which are subject of the same Petition for Forfeiture as the Arelma assets.II. Republic complied with Section 3 (c), (d), and (e) of R.A. 1375
























Petitioner Marcos, Jr. argues that there are genuine issues of fact as borne by the Pre-trial Order, Supplemental Pre-trialOrder, and the Pre-trial Briefs of the parties. He laments that the Republic was unable to meet the necessary avermentsunder the forfeiture law, which requires a comparison between the approximate amount of property acquired during theincumbency of Ferdinand Marcos, and the total amount of governmental salaries and other earnings. 32 While the Petitioncontained an analysis of Ferdinand Marcos’s income from 1965 to 1986 (during his incumbency), there was purportedlyno mention of the latter’s income from 1940 to 1965 when he was a practicing lawyer, congressman and senator; other earnings until the year 1985; and real properties that were auctioned off to satisfy the estate tax assessed by the Bureauof Internal Revenue.33

Petitioner Marcos, Jr. implores us herein to revisit and reverse our earlier ruling in the Swiss Deposits Decision andargues that the pronouncements in that case are contrary to law and its basic tenets. The Court in that case allegedlyapplied a lenient standard for the Republic, but a strict one for the Marcoses. He finds fault in the ruling therein which wasgrounded on public policy and the ultimate goal of the forfeiture law, arguing that public policy is better served if the Courtgave more importance to the substantive rights of the Marcoses.In accordance with the principle of immutability of judgments, petitioners can no longer use the present forum to assail theruling in the Swiss Deposits Decision, which has become final and executory. Aside from the fact that the methodemployed by petitioner is improper and redundant, we also find no cogent reason to revisit the factual findings of theSandiganbayan in Civil Case No. 0141, which this Court in the Swiss Deposits Decision found to be thorough andconvincing. In the first place, using a Rule 45 Petition to question a judgment that has already become final is improper,especially when it seeks reconsideration of factual issues, such as the earnings of the late President from 1940 to 1965and the existence of real properties that petitioners claim were auctioned off to pay the taxes. Secondly, petitioners never raised the existence of these earnings and real properties at the outset and never mentioned these alleged other incomesby way of defense in their Answer. In their Answer, and even in their subsequent pleadings, they merely made generaldenials of the allegations without stating facts admissible in evidence at the hearing. As will be discussed later, both the

Sandiganbayan and the Supreme Court found that the Marcoses’ unsupported denials of matters patently and necessarilywithin their knowledge were inexcusable, and that a trial would have served no purpose at all.34

R.A. 1379 provides that whenever any public officer or employee has acquired during his incumbency an amount of property manifestly out of proportion to his salary as such public officer and to his other lawful income, said property shallbe presumed prima facie to have been unlawfully acquired.35 The elements that must concur for this prima faciepresumption to apply are the following: (1) the offender is a public officer or employee; (2) he must have acquired aconsiderable amount of money or property during his incumbency; and (3) said amount is manifestly out of proportion tohis salary as such public officer or employee and to his other lawful income and income from legitimately acquiredproperty.Thus, in determining whether the presumption of ill-gotten wealth should be applied, the relevant period is incumbency, or the period in which the public officer served in that position. The amount of the public officer’s salary and lawful income iscompared against any property or amount acquired for that same period. In the Swiss Deposits Decision, the Court ruledthat petitioner Republic was able to establish the prima facie presumption that the assets and properties acquired by the

Marcoses "were manifestly and patently disproportionate to their aggregate salaries as public officials."36

For a petition to flourish under the forfeiture law, it must contain the following:(a) The name and address of the respondent.(b) The public officer or employment he holds and such other public offices or employment which he has previously held.(c) The approximate amount of property he has acquired during his incumbency in his past and present offices andemployments.(d) A description of said property, or such thereof as has been identified by the Solicitor General.(e) The total amount of his government salary and other proper earnings and incomes from legitimately acquired property,and(f) Such other information as may enable the court to determine whether or not the respondent has unlawfully acquiredproperty during his incumbency.37 (Emphasis supplied)Petitioners claim that the Republic failed to comply with subparagraphs c, d, and e above, because the latter allegedlynever took into account the years when Ferdinand Marcos served as a war veteran with back pay, a practicing lawyer, atrader and investor, a congressman and senator. We find this claim to be a haphazard rehash of what has already beenconclusively determined by the Sandiganbayan and the Supreme Court in the Swiss Deposits Decision. The alleged"receivables from prior years" were without basis, because Marcos never had a known law office nor any known clients,and neither did he file any withholding tax certificate that would prove the existence of a supposedly profitable law practicebefore he became President. As discussed in the Swiss Deposits Decision:The Solicitor General made a very thorough presentation of its case for forfeiture:x x x x x x x x x4. Respondent Ferdinand E. Marcos (now deceased and represented by his Estate/Heirs) was a public officer for severaldecades continuously and without interruption as Congressman, Senator, Senate President and President of the Republicof the Philippines from December 31, 1965 up to his ouster by direct action of the people of EDSA on February 22-25,1986.5. Respondent Imelda Romualdez Marcos (Imelda, for short) the former First Lady who ruled with FM (Ferdinand Marcos)during the 14-year martial law regime, occupied the position of Minister of Human Settlements from June 1976 up to thepeaceful revolution in February 22-25, 1986. She likewise served once as a member of the Interim Batasang Pambansa

during the early years of martial law from 1978 to 1984 and as Metro Manila Governor in concurrent capacity as Minister of Human Settlements.1âwphi1x x x x x x x x x11. At the outset, however, it must be pointed out that based on the Official Report of the Minister of Budget, the totalsalaries of former President Marcos as President from 1966 to 1976 was P 60,000 a year and from 1977 to1985, P 100,000 a year; while that of the former First Lady, Imelda R. Marcos, as Minister of Human Settlements fromJune 1976 to February 22-25, 1986 was P 75,000 a year .38

The Sandiganbayan found that neither the late Ferdinand Marcos nor petitioner Imelda Marcos filed any Statement of Assets and Liabilities, as required by law, from which their net worth could be determined. Coupled with the fact that the Answer consisted of general denials and a standard plea of "lack of knowledge or information sufficient to form a belief asto the truth of the allegations" – what the Court characterized as "foxy replies" and mere pretense – fairness dictates thatwhat must be considered as lawful income should only be the accumulated salaries of the spouses and what are shown in



















the public documents they submitted, such as their Income Tax Return (ITR) and their Balance Sheets. The amountsrepresenting the combined salaries of the spouses were admitted by petitioner Imelda Marcos in paragraph 10 of her

Answer, and reflected in the Certification dated May 27, 1986 issued by then Minister of Budget and Management AlbertoRomulo:Ferdinand E. Marcos, as President

1966-1976 at P 60,000/year P 660,000

1977-1984 at P 100,000/year 800,000

1985 at P 110,000/year 110,000

P 1,570,00

Imelda R. Marcos, as Minister June 1976-1985 at P 75,000/year P 718,000

In addition to their accumulated salaries from 1966 to 1985 are the Marcos couple's combined salaries from January toFebruary 1986 in the amount of P 30,833.33. Hence, their total accumulated salaries amounted to P2,319,583.33.Converted to U.S. dollars on the basis of the corresponding peso-dollar exchange rates prevailing during the applicableperiod when said salaries were received, the total amount had an equivalent value of $304,372.43.39

The date contained in the ITRs and Balance Sheets filed by the Marcoses are summarized in Schedules A to D submittedas evidence by the Republic. Schedule A showed that from 1965 to 1984, the Marcoses reported Php 16,408,442.00 or USD 2,414,484.91 in total income, comprised of:

Income Source Amount Percentage

Official Salaries - P 2,627,581.00 - 16.01%

Legal Practice - 11,109,836.00 - 67.71%

Farm Income - 149,700.00 - .91%

Others - 2,521,325.00 - 15.37%Total P 16,408,442.00 - 100.00%

The amount reported by the Marcos couple as their combined salaries more or less coincided with the Official Reportsubmitted by the Minister of Budget. Yet what appeared anomalous was the Php 11,109,836 representing "LegalPractice," which accounted for 67% or more than three-fourths of their reported income. Out of this anomalous amount,Php 10,649,836, or 96% thereof, represented "receivables from prior years" during the period 1967 to 1984. The Courtcited the Solicitor General’s findings:In the guise of reporting income using the cash method under Section 38 of the National Internal Revenue Code, FMmade it appear that he had an extremely profitable legal practice before he became a President (FM being barred by lawfrom practicing his law profession during his entire presidency) and that, incredibly, he was still receiving payments almost20 years after. The only problem is that in his Balance Sheet attached to his 1965 ITR immediately preceding hisascendancy to the presidency he did not show any Receivables from client at all, much less the P 10.65-M that hedecided to later recognize as income. There are no documents showing any withholding tax certificates. Likewise, there is

nothing on record that will show any known Marcos client as he has no known law office. As previously stated, his networth was a mere P 120,000.00 in December, 1965. The joint income tax returns of FM and Imelda cannot, therefore,conceal the skeletons of their kleptocracy.40

In addition, the former President also reported a total of Php 2,521,325 which he referred to as "Miscellaneous Items" and"Various Corporations" under "Other Income" for 1972-1976. Spouses Marcos did not declare any income from anydeposits that may be subject to a 5% withholding tax, nor did they file any capital gains tax returns from 1960 to 1965. TheBureau of Internal Revenue attested that there are no records pertaining to the tax transactions of the spouses in BaguioCity, Manila, Quezon City, and Tacloban.The Balance Sheet attached to the couple’s ITR for 1965 indicates an ending net worth of Php 120,000, which coveredthe year immediately preceding their ascendancy to the presidency. As previously mentioned, the combined salaries of the spouses for the period 1966 to 1986, or in the two decades that they stayed in power, totaled only USD 304,372.43. Instark contrast, as shown by Schedule D, computations establish the total net worth of the spouses for the years 1965 until1984 in the total amount of USD 957,487.75, assuming that the income from legal practice is real and valid. 41 The

combined salaries make up only 31.79% of the spouses’ total net worth from 1965 to 1984. This means petitioners areunable to account for or explain more than two-thirds of the total net worth of the Marcos spouses from 1965 to 1984.Thus, for the final time, we soundly reiterate that the Republic was able to establish the prima facie presumption that theassets and properties acquired by the Marcoses were manifestly and patently disproportionate to their aggregate salariesas public officials. The Republic presented further evidence that they had bigger deposits beyond their lawful incomes,foremost of which were the Swiss accounts deposited in the names of five foundations spirited away by the couple todifferent countries. Petitioners herein thus failed to overturn this presumption when they merely presented vague denialsand pleaded "lack of sufficient knowledge" in their Answer.In any case, petitioners may no longer question the findings of the Sandiganbayan affirmed by the Supreme Court in theSwiss Deposits Decision, as these issues have long become the "law of the case" in the original Petition for Forfeiture. Asheld in Philippine Coconut Producers Federation, Inc. (COCOFED) v. Republic:42

Law of the case … is a term applied to an established rule that when an appellate court passes on a question andremands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon

subsequent appeal. It means that whatever is once irrevocably established as the controlling legal rule or decisionbetween the same parties in the same case continues to be the law of the case, … so long as the facts on which suchdecision was predicated continue to be the facts of the case before the court.Otherwise put, the principle means that questions of law that have been previously raised and disposed of in theproceedings shall be controlling in succeeding instances where the same legal question is raised, provided that the factson which the legal issue was predicated continue to be the facts of the case before the court.In the case at bar, the same legal issues are being raised by petitioners. In fact, petitioner Marcos Jr. admits outright thatwhat he seeks is a reversal of the issues identical to those already decided by the Court in the Swiss DepositsDecision.43 He may not resuscitate, via another petition for review, the same issues long laid to rest and established as thelaw of the case.III. Civil Case No. 0141 has not yet terminated














Petitioners next argue that the "law of the case" doctrine should be applied, not to the ruling affirming the forfeiture, but tothe grant of the summary judgment over the Swiss accounts as affirmed by the Supreme Court in the Swiss DepositsDecision. They contend that since the Court’s Decision mentioned only the deposits under the five Swiss foundations,then the Republic can no longer seek partial summary judgment for forfeiture over the Arelma account. And since the saidDecision has long become final and has in fact been executed, they insist that the Sandiganbayan has lost its jurisdictionover the case.Petitioners are under the mistaken impression that the Swiss Deposits Decision serves as the entire judgment in CivilCase No. 0141. Just because respondent Republic succeeded in obtaining summary judgment over the Swiss accountsdoes not mean it is precluded from seeking partial summary judgment over a different subject matter covered by the samepetition for forfeiture. In fact, Civil Case No. 0141 pertains to the recovery of all the assets enumerated therein, such as (1)holding companies, agro-industrial ventures and other investments; (2) landholdings, buildings, condominium units,mansions; (3) New York properties; (4) bills amounting to Php 27,744,535, time deposits worth Php 46.4 million, foreigncurrencies and jewelry seized by the United States customs authorities in Honolulu, Hawaii; (5) USD 30 million in thecustody of the Central Bank in dollar-denominated Treasury Bills; shares of stock, private vehicles, and real estate in theUnited States, among others.44

In the enumeration of properties included in the Petition, the Arelma assets were described as "Assets owned by Arelma,Inc., a Panamanian corporation organized in Liechtenstein, for sole purpose (sic) of maintaining an account in MerrillLynch, New York."45 Paragraph 59 of the Petition for Forfeiture states:59. FM and Imelda used a number of their close business associations or favorite cronies in opening bank accountsabroad for the purpose of laundering their filthy riches. Aside from the foundations and corporations established by their dummies/nominees to hide their ill-gotten wealth as had already been discussed, several other corporate entities hadbeen formed for the same purpose, to wit:(1). ARELMA, INC – (T)his was organized for the sole purpose of maintaining an account and portfolio in Merrill Lynch,

New York.(2). Found among Malacañang documents is a letter dated September 21, 1972 by J.L. Sunier, Senior Vice President of SBC to Mr. Jose V. Campos, a known Marcos crony (See Annex "V-21" hereof). In the said letter, instructions were givenby Sunier to their Panama office to constitute a Panamanian company, the name of which will be either Larema,Inc. or Arelma, Inc., or Relma, Inc. this company will have the same set-up as Maler; the appointment of Sunier and Dr.Barbey as attorneys and appointment of selected people in Panama as directors; the opening of direct account in thename of the new company with Merrill Lynch, New York, giving them authority to operate the account, but excludingwithdrawals of cash, securities or pledging of portfolio; and sending of money in favor of the new company under reference AZUR in order to cut links with the present account already opened with Merrill Lynch under an individual’sname.(3). Also found was a letter dated November 14, 1972 and signed by Jose Y. Campos (Annex "V-21-a" hereof). The letter was addressed to SEC, Geneva, and Sunier duly authorized by their "mutual friend" regarding the opening of an accountof Arelma, Inc. with Merrill Lynch, New York to the attention of Mr. Saccardi, Vice-President.

(4). On May 19, 1983, J. L. Sunier wrote a letter with a reference "SAPPHIRE" and a salutation "Dear Excellency" stating,among others, the current valuation by Merrill Lynch of the assets of Arelma, Inc. amounting to $3,369,975 (Annex "V-21-b" hereof).(5). Included in the documents sent by SBC, Geneva, through the Swiss Federal Department of Justice and Police werethose related to Arelma, Inc. as follows:(a) Opening bank documents for Account No. 53.145 A.R. dated September 17, 1972, signed by Dr. Barbey and Mr.Sunier. This was later on cancelled as a result of the change in attorneys and authorized signatories of the company(Annexes "V-21-c" and "V-21-d" hereof).(b) Opening bank documents for Account No. 53. 145 A.R. signed by new attorneys led by Michel Amandruz (Annexes"V-21-e" and "V-21-f" hereof).(c). Bank statements for Account No. 53.145 A.R. with ending balance of $26.10 as of 12-31-85 (Annex "V-21-g" and "V-21-h" hereof).(d). An informative letter stating that Account 53. 145 A.R. was related to an account opened with Merrill Lynch AssetManagement, Inc., New York for Arelma, Inc. The opening of this account slowly made Account 53. 145 A.R. an inactiveaccount (See Annexes "V-21-I" and "V-21-j" hereof).46

When the Marcos family fled Manila in 1986, they left behind several documents that revealed the existence of secretbank deposits in Switzerland and other financial centers. 47 These papers, referred to by respondent as Malacañangdocuments, detailed how "Arelma, Inc."48 was established. Attached as Annex V-21 was the Letter of Instruction sent tothe Panamanian branch of the Sunier company to open Arelma. The latter was to have the same set-up as Maler, one of the five Swiss foundations, subject of the 2000 Motion. Annexes "V-21-c" to "V-21-j" pertained to documents to be used toopen an account with Merrill Lynch Asset Management, Inc. in New York.The Swiss Deposits Decision dealt only with the summary judgment as to the five Swiss accounts, because the 2000Motion for Partial Summary Judgment dated 7 March 2000 specifically identified the five Swiss accounts only. It did notinclude the Arelma account. There was a prayer for general reliefs in the 1996 Motion, but as has been discussed, thisprayer was dismissed by the Sandiganbayan. The dismissal was based solely on the existence of the Compromise

Agreements for a global settlement of the Marcos assets, which the Supreme Court later invalidated. The 2000 Motion for Summary Judgment was confined only to the five accounts amounting to USD 356 million held by five Swiss foundations.

As clarified by the Solicitor General during the hearing of 24 March 2000 in the Sandiganbayan:PJ: The Court is of the impression and the Court is willing to be corrected, that ones (sic) the plaintiff makes a claim for summary judgment it in fact states it no longer intends to present evidence and based on this motion to render judgment,is that correct?SOL. BALLACILLO: Yes, your Honors.PJ: In other words, on the basis of pre-trial, you are saying…because if we are talking of a partial claim, then there issummary judgment, unless there is preliminary issue to the claim which is a matter of stipulation.SOL. BALLACILLO: We submit, your Honors, that there can be partial summary judgment on this matter.PJ: But in this instance, you are making summary judgment on the entire case?SOL. BALLACILLO: With respect to the $365 million.PJ: In the complaint you asked for the relief over several topics. You have $356 million, $25 million and $5 million. Nowwith regards to the $365 million, you are asking for summary judgment?















SOL. BALLACILLO: Yes, your Honor.PJ: And, therefore, you are telling us now, "that’s it, we need not have to prove."SOL. BALLACILLO: Yes, your Honors.49 (Emphasis supplied.)The Court’s discussion clearly did not include the Arelma account. The dispositive portion of the Swiss Deposits Decisionstates:WHEREFORE, the petition is hereby GRANTED. The assailed Resolution of the Sandiganbayan dated January 31, 2002is SET ASIDE. The Swiss deposits which were transferred to and are now deposited in escrow at the Philippine NationalBank in the estimated aggregate amount of US$658,175,373.60 as of January 31, 2002, plus interest, are hereby forfeitedin favor of petitioner Republic of the Philippines.50

Thus, the other properties, which were subjects of the Petition for Forfeiture, but were not included in the 2000 Motion,can still be subjects of a subsequent motion for summary judgment. To rule otherwise would run counter to this Court’slong established policy on asset recovery which, in turn, is anchored on considerations of national survival.E.O. 14, Series of 1986,51 and Section 1(d) of Proclamation No. 352 declared the national policy after the Marcos regime.The government aimed to implement the reforms mandated by the people: protecting their basic rights, adopting aprovisional constitution, and providing for an orderly transition to a government under a new constitution. The saidProclamation further states that "The President shall give priority to measures to achieve the mandate of the people torecover ill-gotten properties amassed by the leaders and supporters of the previous regime and protect the interest of thepeople through orders of sequestration or freezing of assets or accounts." One of the "whereas" clauses of E.O. 14entrusts the PCGG with the "just and expeditious recovery of such ill-gotten wealth in order that the funds, assets andother properties may be used to hasten national economic recovery." These clauses are anchored on the overridingconsiderations of national interest and national survival, always with due regard to the requirements of fairness and dueprocess.With the myriad of properties and interconnected accounts used to hide these assets that are in danger of dissipation, it

would be highly unreasonable to require the government to ascertain their exact locations and recover themsimultaneously, just so there would be one comprehensive judgment covering the different subject matters.In any case, the Sandiganbayan rightly characterized their ruling on the 2004 Motion as a separate judgment, which isallowed by the Rules of Court under Section 5 of Rule 36:Separate judgments.—When more than one claim for relief is presented in an action, the court, at any stage, upon adetermination of the issues material to a particular claim and all counterclaims arising out of the transaction or occurrencewhich is the subject matter of the claim, may render a separate judgment disposing of such claim. The judgment shallterminate the action with respect to the claim so disposed of and the action shall proceed as to the remaining claims. Incase a separate judgment is rendered, the court by order may stay its enforcement until the rendition of a subsequent

judgment or judgments and may prescribe such conditions as may be necessary to secure the benefit thereof to the partyin whose favor the judgment is rendered.53

Rule 35 on summary judgments, admits of a situation in which a case is not fully adjudicated on motion, 54 and judgment isnot rendered upon all of the reliefs sought. In Philippine Business Bank v. Chua, 55 we had occasion to rule that a careful

reading of its Section 4 reveals that a partial summary judgment was never intended to be considered a "final judgment,"as it does not "[put] an end to an action at law by declaring that the plaintiff either has or has not entitled himself to recover the remedy he sues for." In this case, there was never any final or complete adjudication of Civil Case No. 0141, as theSandiganbayan’s partial summary judgment in the Swiss Deposits Decision made no mention of the Arelma account.Section 4 of Rule 35 pertains to a situation in which separate judgments were necessary because some facts existedwithout controversy, while others were controverted. However, there is nothing in this provision or in the Rules thatprohibits a subsequent separate judgment after a partial summary judgment on an entirely different subject matter hadearlier been rendered. There is no legal basis for petitioners’ contention that a judgment over the Swiss accounts bars amotion for summary judgment over the Arelma account.Thus, the Swiss Deposits Decision has finally and thoroughly disposed of the forfeiture case only as to the five Swissaccounts. Respondent’s 2004 Motion is in the nature of a separate judgment, which is authorized under Section 5 of Rule36. More importantly respondent has brought to our attention the reasons why a motion for summary judgment over the

Arelma account was prompted only at this stage. In Republic of the Philippines v. Pimentel,56 a case filed by human rightsvictims in the United States decided by the US Supreme Court only in 2008, the antecedents of the Arelma account weredescribed as follows:In 1972, Ferdinand Marcos, then President of the Republic, incorporated Arelma, S.A. (Arelma), under Panamanian law.

Around the same time, Arelma opened a brokerage account with Merrill Lynch, Pierce, Fenner & Smith Inc. (Merrill Lynch)in New York, in which it deposited $2 million. As of the year 2000, the account had grown to approximately $35 million.

Alleged crimes and misfeasance by Marcos during his presidency became the subject of worldwide attention and protest. A class action by and on behalf of some 9,539 of his human rights victims was filed against Marcos and his estate, amongothers. The class action was tried in the United States District Court for the District of Hawaii and resulted in a nearly $2billion judgment for the class. See Hilao v. Estate of Marcos, 103 F.3d 767 (C.A.9 1996) . We refer to that litigation as thePimentel case and to its class members as the Pimentel class. In a related action, the Estate of Roger Roxas and GoldenBudha [sic] Corporation (the Roxas claimants) claim a right to execute against the assets to satisfy their own judgmentagainst Marcos' widow, Imelda Marcos. See Roxas v. Marcos, 89 Hawaii 91, 113-115, 969 P.2d 1209, 1231-1233 (1998) .The Pimentel class claims a right to enforce its judgment by attaching the Arelma assets held by Merrill Lynch. TheRepublic and the Commission claim a right to the assets under a 1955 Philippine law providing that property derived from

the misuse of public office is forfeited to the Republic from the moment of misappropriation. See An Act DeclaringForfeiture in Favor of the State Any Property Found To Have Been Unlawfully Acquired by Any Public Officer or Employeeand Providing for the Proceedings Therefor, Rep. Act No. 1379, 51:9 O.G. 4457 (June 18, 1955).

After Marcos fled the Philippines in 1986, the Commission was created to recover any property he wrongfully took. Almostimmediately the Commission asked the Swiss Government for assistance in recovering assets-including shares in

Arelma-that Marcos had moved to Switzerland. In compliance the Swiss Government froze certain assets and, in 1990,that freeze was upheld by the Swiss Federal Supreme Court. In 1991, the Commission asked the Sandiganbayan, aPhilippine court of special jurisdiction over corruption cases, to declare forfeited to the Republic any property Marcos hadobtained through misuse of his office. That litigation is still pending in the Sandiganbayan. (Citations omitted.)The pursuit of the Arelma account encountered several hindrances, as it was subject to not one, but two claims of humanrights victims in foreign courts: the Pimentel class and the Roxas claimants. The government and the PCGG were able to













http://international.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=506&FindType=Y&SerialNum=1996275450



http://international.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=661&FindType=Y&ReferencePositionType=S&SerialNum=1998234337&ReferencePosition=1231



















obtain a Stay Order at the appellate level, but the trial court judge vacated the stay and awarded the Arelma assets to thePimentel class of human rights victims.

As early as 1986, the PCGG had already sought assistance from the Swiss government to recover the Arelma assets;however, it was only in 2000 that the Swiss authorities turned over two Stock Certificates, which were assets of Arelma.The transfer by Switzerland of the Stock Certificates to the Republic was made under the same conditions as the bankdeposits of the five Swiss foundations.57

Meanwhile, the Pimentel case was tried as a class action before Judge Manuel Real of the United States District Court for the Central District of California. Judge Real was sitting by designation in the District of Hawaii after the Judicial Panel onMultidistrict Litigation consolidated the various human rights Complaints against Marcos in that court.58 Judge Realdirected Merrill Lynch to file an action for interpleader in the District of Hawaii, where he presided over the matter, andwhere the Republic and the PCGG were named as defendants. In Pimentel, the Court further narrates how Judge Realruled that the pending litigation in Philippine courts could not determine entitlement to the Arelma assets:

After being named as defendants in the interpleader action, the Republic and the Commission asserted sovereignimmunity under the Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. § 1604 . They moved to dismisspursuant to Rule 19(b) , based on the premise that the action could not proceed without them… Judge Real initiallyrejected the request by the Republic and the Commission to dismiss the interpleader action. They appealed, and theCourt of Appeals reversed. It held the Republic and the Commission are entitled to sovereign immunity and thatunder Rule 19(a) they are required parties (or "necessary" parties under the old terminology). See In re Republic of the Philippines, 309 F.3d 1143, 1149-1152 (C.A.9 2002) . The Court of Appeals entered a stay pending the outcome of thelitigation in the Sandiganbayan over the Marcos assets.

After concluding that the pending litigation in the Sandiganbayan could not determine entitlement to the Arelma assets,Judge Real vacated the stay, allowed the action to proceed, and awarded the assets to the Pimentel class. A week later,in the case initiated before the Sandiganbayan in 1991, the Republic asked that court to declare the Arelma assets

forfeited, arguing the matter was ripe for decision. The Sandiganbayan has not yet ruled. In the interpleader case theRepublic, the Commission, Arelma, and PNB appealed the District Court's judgment in favor of the Pimentel claimants.This time the Court of Appeals affirmed. Dismissal of the interpleader suit, it held, was not warranted under Rule 19(b) because, though the Republic and the Commission were required ("necessary") parties under Rule 19(a) , their claim had so little likelihood of success on the merits that the interpleader action could proceed without them. One of thereasons the court gave was that any action commenced by the Republic and the Commission to recover the assets wouldbe barred by New York's 6-year statute of limitations for claims involving the misappropriation of publicproperty.59 (Citations omitted)The American Supreme Court reversed the judgment of the Court of Appeals for the Ninth Circuit and remanded the casewith instructions to order the District Court to dismiss the interpleader action. The former held that the District Court andthe Court of Appeals failed to give full effect to sovereign immunity when they held that the action could proceed withoutthe Republic and the Commission:Comity and dignity interests take concrete form in this case. The claims of the Republic and the Commission arise from

events of historical and political significance for the Republic and its people. The Republic and the Commission have aunique interest in resolving the ownership of or claims to the Arelma assets and in determining if, and how, the assetsshould be used to compensate those persons who suffered grievous injury under Marcos. There is a comity interest inallowing a foreign state to use its own courts for a dispute if it has a right to do so. The dignity of a foreign state is notenhanced if other nations bypass its courts without right or good cause. Then, too, there is the more specific affront thatcould result to the Republic and the Commission if property they claim is seized by the decree of a foreign court.60

Thus it was only in 2008 that the Republic was finally able to obtain a favorable judgment from the American SupremeCourt with regard to the different claims against the Arelma assets. Petitioners never intervened or lifted a finger in any of the litigation proceedings involving the enforcement of judgment against the Arelma assets abroad. We find merit inrespondent’s observation that petitioner Imelda Marcos’s participation in the proceedings in the Philippines, particularlyher invocation of her right against undue deprivation of property, is inconsistent with her and Ferdinand Marcos, Jr.’sinsistence that the properties in question do not belong to them, and that they are mere beneficiaries.61

Indeed, it is clear that the Arelma assets are in danger of dissipation. Even as the United States Supreme Court gaveweight to the likely prejudice to be suffered by the Republic when it dismissed the interpleader in Pimentel, it alsoconsidered that the "balance of equities may change in due course. One relevant change may occur if it appears that theSandiganbayan cannot or will not issue its ruling within a reasonable period of time. If the Sandiganbayan rules that theRepublic and the Commission have no right to the assets, their claims in some later interpleader suit would be lesssubstantial than they are now."62

IV. Petitioners’ sham denials justify the application of summary judgment As already settled in the Swiss Deposits Decision and reiterated in the discussion above as the law of the case, the lawfulincome of the Marcoses is only USD 304,372.43. As discussed in paragraph 9 of the Petition for Forfeiture, Annex V-21-bstates that Arelma’s assets as of 19 May 1983 were worth USD 3,369,975.00. 63 The entirety of the lawful income of theMarcoses represents only 9% of the entire assets of Arelma, which petitioners remain unable to explain.In their Answer to the Petition for Forfeiture, petitioners employ the same tactic, consisting of general denials based on apurported lack of knowledge regarding the whereabouts of the Arelma assets. Paragraph 32 of the said pleading states:Respondents specifically DENY paragraph 59 of the Petition insofar as it alleges that the Marcoses used their cronies andengaged in laundering their filthy riches for being false and conclusory of the truth being that the Marcoses did not engage

in any such illegal acts and that all the properties they acquired were lawfully acquired; and specifically DENY the rest for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents are not privyto the alleged transactions.64

This particular denial mimics petitioners’ similar denials of the allegations in the forfeiture Petition pertaining to the Swissaccounts and is practically identical to paragraphs 7 to 37 of the Answer. The Swiss Deposits Decision has characterizedthese as "sham" denials:17. Respondents specifically DENY paragraph 18 of the Petition for lack of knowledge or information sufficient to form abelief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the allegedITRs.18. Respondents specifically DENY paragraph 19 of the Petition for lack of knowledge or information sufficient to form abelief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the allegedITRs and that they are not privy to the activities of the BIR.



http://international.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000546&DocName=28USCAS1604&FindType=L


http://international.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1004365&DocName=USFRCPR19&FindType=L








































19. Respondents specifically DENY paragraph 20 of the Petition for lack of knowledge or information sufficient to form abelief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the allegedITRs.20. Respondents specifically DENY paragraph 21 of the Petition for lack of knowledge or information sufficient to form abelief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the allegedITRs.21. Respondents specifically DENY paragraph 22 of the Petition for lack of knowledge or information sufficient to form abelief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the allegedITRs.22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents clandestinely stashed thecountry's wealth in Switzerland and hid the same under layers and layers of foundation and corporate entities for beingfalse, the truth being that Respondents aforesaid properties were lawfully acquired.23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents were not privy to the transactionsregarding the alleged Azio-Verso-Vibur Foundation accounts, except that as to Respondent Imelda R. Marcos shespecifically remembers that the funds involved were lawfully acquired.24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36,37, 38, 39, 40, and 41 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since Respondents are not privy to thetransactions and as to such transaction they were privy to they cannot remember with exactitude the same havingoccurred a long time ago, except that as to Respondent Imelda R. Marcos she specifically remembers that the fundsinvolved were lawfully acquired.25. Respondents specifically DENY paragraphs 42, 43, 44, 45, and 46, of the Petition for lack of knowledge or informationsufficient to form a belief as to the truth of the allegations since Respondents were not privy to the transactions and as to

such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago,except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfullyacquired.26. Respondents specifically DENY paragraphs 49, 50, 51 and 52, of the Petition for lack of knowledge or informationsufficient to form a belief as to the truth of the allegations since Respondents were not privy to the transactions and as tosuch transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago,except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfullyacquired.Upon careful perusal of the foregoing, the Court finds that respondent Mrs. Marcos and the Marcos children indubitablyfailed to tender genuine issues in their answer to the petition for forfeiture. A genuine issue is an issue of fact which callsfor the presentation of evidence as distinguished from an issue which is fictitious and contrived, set up in bad faith or patently lacking in substance so as not to constitute a genuine issue for trial. Respondents' defenses of "lack of knowledge for lack of privity" or "(inability to) recall because it happened a long time ago" or, on the part of Mrs. Marcos,

that "the funds were lawfully acquired" are fully insufficient to tender genuine issues. Respondent Marcoses' defenseswere a sham and evidently calibrated to compound and confuse the issues.65(Emphasis supplied.)In the case at bar, petitioners give the same stock answer to the effect that the Marcoses did not engage in any illegalactivities, and that all their properties were lawfully acquired. They fail to state with particularity the ultimate factssurrounding the alleged lawfulness of the mode of acquiring the funds in Arelma (which totaled USD 3,369,975.00 back in1983), considering that the entirety of their lawful income amounted only to USD 304,372.43, or only 9% of the entire

Arelma fund. Then, as now, they employ what the Court in G.R. No. 152154 characterized as a "negative pregnant," not just in denying the criminal provenance of the Arelma funds, but in the matter of ownership of the said funds. Asdiscussed by the Court in the first Republic case, cited by the Sandiganbayan:Evidently, this particular denial had the earmark of what is called in the law on pleadings as a negative pregnant , that is, adenial pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied. Itwas in effect an admission of the averments it was directed at. Stated otherwise, a negative pregnant is a form of negativeexpression which carries with it an affirmation or at least an implication of some kind favorable to the adverse party. It is adenial pregnant with an admission of the substantial facts alleged in the pleading. Where a fact is alleged with qualifyingor modifying language and the words of the allegation as so qualified or modified are literally denied, it has been held thatthe qualifying circumstances alone are denied while the fact itself is admitted.66

Due to the insufficiency of petitioners’ denial of paragraph 59 which in effect denies only the qualifying circumstances, andby virtue of the Court’s ruling in the Swiss Deposits Decision, petitioners are deemed to have admitted the factualantecedents and the establishment of Arelma. In paragraph 32 of their Answer, they only deny the first few sentences of paragraph 59, while conveniently neglecting to address subparagraphs 1 to 5 and the opening bank documents describedin 5 (a) to (d) of the Petition for Forfeiture. Paragraphs 1 and 2 of the Petition discusses the establishment of aPanamanian company to be named either "Larema, Inc. or Arelma, Inc., or Relma, Inc.;" the appointment of severalpeople as directors; and the opening of a direct account with Merrill Lynch. Paragraphs 3 to 5 also of the Petition for Forfeiture detail correspondences between a "J.L. Sunier" and a letter addressed to Malacañang with the salutation "Dear Excellency."Regarding the averment of petitioners that they lack knowledge sufficient to form a belief as to the truth of the aboveallegations in the Petition for Forfeiture, the Court’s discussion in the Swiss Deposits Decision bears reiterating:

Here, despite the serious and specific allegations against them, the Marcoses responded by simply saying that they hadno knowledge or information sufficient to form a belief as to the truth of such allegations. Such a general, self-servingclaim of ignorance of the facts alleged in the petition for forfeiture was insufficient to raise an issue. Respondent Marcosesshould have positively stated how it was that they were supposedly ignorant of the facts alleged.67

Petitioners cannot escape the fact that there is manifest disparity between the amount of the Arelma funds and the lawfulincome of the Marcoses as shown in the ITRs filed by spouses Marcos. The Swiss Deposits Decision found that thegenuineness of the said ITRs and balance sheets of the Marcos spouses have already been admitted by petitionersthemselves:Not only that. Respondents’ answer also technically admitted the genuineness and due execution of the Income TaxReturns (ITRs) and the balance sheets of the late Ferdinand E. Marcos and Imelda R. Marcos attached to the petition for forfeiture, as well as the veracity of the contents thereof.









The answer again premised its denials of said ITRs and balance sheets on the ground of lack of knowledge or informationsufficient to form a belief as to the truth of the contents thereof. Petitioner correctly points out that respondents' denial wasnot really grounded on lack of knowledge or information sufficient to form a belief but was based on lack of recollection.By reviewing their own records, respondent Marcoses could have easily determined the genuineness and due executionof the ITRs and the balance sheets. They also had the means and opportunity of verifying the same from the records of the BIR and the Office of the President. They did not.When matters regarding which respondents claim to have no knowledge or information sufficient to form a belief areplainly and necessarily within their knowledge, their alleged ignorance or lack of information will not be considered aspecific denial. An unexplained denial of information within the control of the pleader, or is readily accessible to him, isevasive and is insufficient to constitute an effective denial.68 (Footnotes omitted.)We find that petitioners have again attempted to delay the goal of asset recovery by their evasiveness and the expedientprofession of ignorance. It is well-established that a profession of ignorance about a fact that is necessarily within thepleader’s knowledge or means of knowing is as ineffective as no denial at all. On a similar vein, there is a failure bypetitioners to properly tender an issue, which as correctly ruled by the Sandiganbayan, justifies the Republic’s resort tosummary judgment.Summary judgment may be allowed where there is no genuine issue as to any material fact and where the moving party isentitled to a judgment as a matter of law.69 In Yuchengco v. Sandiganbayan, the Court has previously discussed theimportance of summary judgment in weeding out sham claims or defenses at an early stage of the litigation in order toavoid the expense and loss of time involved in a trial, viz:Even if the pleadings appear, on their face, to raise issues, summary judgment may still ensue as a matter of law if theaffidavits, depositions and admissions show that such issues are not genuine. The presence or absence of a genuineissue as to any material fact determines, at bottom, the propriety of summary judgment. A "genuine issue", asdifferentiated from a fictitious or contrived one, is an issue of fact that requires the presentation of evidence. To the party

who moves for summary judgment rests the onus of demonstrating clearly the absence of any genuine issue of fact, or that the issue posed in the complaint is patently unsubstantial so as not to constitute a genuine issue for trial. 70

Even if in the Answer itself there appears to be a tender of issues requiring trial, yet when the relevant affidavits,depositions, or admissions demonstrate that those issues are not genuine but sham or fictitious, the Court is justified indispensing with the trial and rendering summary judgment for plaintiff.71

Summary judgment, or accelerated judgment as it is sometimes known, may also call for a hearing so that both themovant and the adverse party may justify their positions. However, the hearing contemplated (with 10-day notice) is for the purpose of determining whether the issues are genuine or not, not to receive evidence of the issues set up in thepleadings. In Carcon Development Corporation v. Court of Appeals, 72 the Court ruled that a hearing is not de riguer . Thematter may be resolved, and usually is, on the basis of affidavits, depositions, and admissions. This does not mean thatthe hearing is superfluous; only that the court is empowered to determine its necessity.It is the law itself that determines when a summary judgment is proper. Under the rules, summary judgment is appropriatewhen there are no genuine issues of fact that call for the presentation of evidence in a full-blown trial. 1âwphi1Even if on

their face the pleadings appear to raise issues, when the affidavits, depositions and admissions show that such issues arenot genuine, then summary judgment as prescribed by the rules must ensue as a matter of law. What is crucial to adetermination, therefore, is the presence or absence of a genuine issue as to any material fact. When the facts aspleaded appear uncontested or undisputed, then summary judgment is called for.73

Guided by the principles above indicated, we hold that under the circumstances obtaining in the case at bar, summary judgment is proper. The Sandiganbayan did not commit a reversible error in granting the corresponding 2004 Motion for Summary Judgment filed by respondent. The latter is well within its right to avail itself of summary judgment and obtainimmediate relief, considering the insufficient denials and pleas of ignorance made by petitioners on matters that aresupposedly within their knowledge.These denials and pleas constitute admissions of material allegations under paragraph 59 of the Petition for Forfeiture – atact they have employed repeatedly in Civil Case No. 0141. As discussed, the purpose of summary judgment is preciselyto avoid long drawn litigations and useless delays.74 We also affirm the Sandiganbayan’s findings that the moving party,the Republic, is now entitled to judgment as a matter of law.WHEREFORE, the instant Petition is DENIED. The Decision dated 2 April 2009 of the Sandiganbayan is AFFIRMED. Allassets, properties, and funds belonging to Arelma, S.A., with an estimated aggregate amount of USD 3,369,975 as of 1983, plus all interests and all other income that accrued thereon, until the time or specific day that all money or moniesare released and/or transferred to the possession of the Republic of the Philippines, are hereby forfeited in favor of Respondent Republic of the Philippines.SO ORDERED.MARIA LOURDES P. A. SERENO

Associate JusticeRepublic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-11622 January 28, 1961THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.DOUGLAS FISHER AND BETTINA FISHER, and the COURT OF TAX APPEALS, respondents.x---------------------------------------------------------xG.R. No. L-11668 January 28, 1961.DOUGLAS FISHER AND BETTINA FISHER, petitioner,vs.THE COLLECTOR OF INTERNAL REVENUE, and the COURT OF TAX APPEALS, respondents.BARRERA, J .:This case relates to the determination and settlement of the hereditary estate left by the deceased Walter G. Stevenson,and the laws applicable thereto. Walter G. Stevenson (born in the Philippines on August 9, 1874 of British parents andmarried in the City of Manila on January 23, 1909 to Beatrice Mauricia Stevenson another British subject) died onFebruary 22, 1951 in San Francisco, California, U.S.A. whereto he and his wife moved and established their permanent



















residence since May 10, 1945. In his will executed in San Francisco on May 22, 1947, and which was duly probated in theSuperior Court of California on April 11, 1951, Stevenson instituted his wife Beatrice as his sole heiress to the followingreal and personal properties acquired by the spouses while residing in the Philippines, described and preliminaryassessed as follows:

Gross Estate

Real Property — 2 parcels of land in Baguio,covered by T.C.T. Nos. 378 and 379 P43,500.00

Personal Property

(1) 177 shares of stock of Canacao Estate atP10.00 each 1,770.00

(2) 210,000 shares of stock of MindanaoMother Lode Mines, Inc. at P0.38 per share 79,800.00

(3) Cash credit with Canacao Estate Inc. 4,870.88

(4) Cash, with the Chartered Bank of India, Australia & China

851.97

Total Gross Assets P130,792.85

On May 22, 1951, ancillary administration proceedings were instituted in the Court of First Instance of Manila for thesettlement of the estate in the Philippines. In due time Stevenson's will was duly admitted to probate by our court and IanMurray Statt was appointed ancillary administrator of the estate, who on July 11, 1951, filed a preliminary estate andinheritance tax return with the reservation of having the properties declared therein finally appraised at their values six

months after the death of Stevenson. Preliminary return was made by the ancillary administrator in order to secure thewaiver of the Collector of Internal Revenue on the inheritance tax due on the 210,000 shares of stock in the MindanaoMother Lode Mines Inc. which the estate then desired to dispose in the United States. Acting upon said return, theCollector of Internal Revenue accepted the valuation of the personal properties declared therein, but increased theappraisal of the two parcels of land located in Baguio City by fixing their fair market value in the amount of P52.200.00,instead of P43,500.00. After allowing the deductions claimed by the ancillary administrator for funeral expenses in theamount of P2,000.00 and for judicial and administration expenses in the sum of P5,500.00, the Collector assessed thestate the amount of P5,147.98 for estate tax and P10,875,26 or inheritance tax, or a total of P16,023.23. Both of theseassessments were paid by the estate on June 6, 1952.On September 27, 1952, the ancillary administrator filed in amended estate and inheritance tax return in pursuance f hisreservation made at the time of filing of the preliminary return and for the purpose of availing of the right granted bysection 91 of the National Internal Revenue Code.In this amended return the valuation of the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. was reduced

from 0.38 per share, as originally declared, to P0.20 per share, or from a total valuation of P79,800.00 to P42,000.00. Thischange in price per share of stock was based by the ancillary administrator on the market notation of the stock obtainingat the San Francisco California) Stock Exchange six months from the death of Stevenson, that is, As of August 22, 1931.In addition, the ancillary administrator made claim for the following deductions:

Funeral expenses ($1,04326) P2,086.52

Judicial Expenses:

(a) Administrator's Fee P1,204.34

(b) Attorney's Fee 6.000.00

(c) Judicial and Administrationexpenses as of August 9, 1952 1,400.05

8,604.39

Real Estate Tax for 1951 on Baguioreal properties (O.R. No. B-1 686836) 652.50

Claims against the estate:($5,000.00) P10,000.00 P10,000.00

Plus: 4% int. p.a. from Feb. 2 to 22,1951 22.47 10,022.47

Sub-Total P21,365.88

In the meantime, on December 1, 1952, Beatrice Mauricia Stevenson assigned all her rights and interests in the estate tothe spouses, Douglas and Bettina Fisher, respondents herein.On September 7, 1953, the ancillary administrator filed a second amended estate and inheritance tax return (Exh. "M-N").This return declared the same assets of the estate stated in the amended return of September 22, 1952, except that itcontained new claims for additional exemption and deduction to wit: (1) deduction in the amount of P4,000.00 from the

gross estate of the decedent as provided for in Section 861 (4) of the U.S. Federal Internal Revenue Code which theancillary administrator averred was allowable by way of the reciprocity granted by Section 122 of the National InternalRevenue Code, as then held by the Board of Tax Appeals in case No. 71 entitled "Housman vs. Collector," August 14,1952; and (2) exemption from the imposition of estate and inheritance taxes on the 210,000 shares of stock in theMindanao Mother Lode Mines, Inc. also pursuant to the reciprocity proviso of Section 122 of the National InternalRevenue Code. In this last return, the estate claimed that it was liable only for the amount of P525.34 for estate tax andP238.06 for inheritance tax and that, as a consequence, it had overpaid the government. The refund of the amount of P15,259.83, allegedly overpaid, was accordingly requested by the estate. The Collector denied the claim. For this reason,action was commenced in the Court of First Instance of Manila by respondents, as assignees of Beatrice MauriciaStevenson, for the recovery of said amount. Pursuant to Republic Act No. 1125, the case was forwarded to the Court of Tax Appeals which court, after hearing, rendered decision the dispositive portion of which reads as follows:



In fine, we are of the opinion and so hold that: (a) the one-half (½) share of the surviving spouse in the conjugalpartnership property as diminished by the obligations properly chargeable to such property should be deducted from thenet estate of the deceased Walter G. Stevenson, pursuant to Section 89-C of the National Internal Revenue Code; (b) theintangible personal property belonging to the estate of said Stevenson is exempt from inheritance tax, pursuant to theprovision of section 122 of the National Internal Revenue Code in relation to the California Inheritance Tax Law butdecedent's estate is not entitled to an exemption of P4,000.00 in the computation of the estate tax; (c) for purposes of estate and inheritance taxation the Baguio real estate of the spouses should be valued at P52,200.00, and 210,000shares of stock in the Mindanao Mother Lode Mines, Inc. should be appraised at P0.38 per share; and (d) the estate shallbe entitled to a deduction of P2,000.00 for funeral expenses and judicial expenses of P8,604.39.From this decision, both parties appealed.The Collector of Internal Revenue, hereinafter called petitioner assigned four errors allegedly committed by the trial court,while the assignees, Douglas and Bettina Fisher hereinafter called respondents, made six assignments of error. Together,the assigned errors raise the following main issues for resolution by this Court:(1) Whether or not, in determining the taxable net estate of the decedent, one-half (½) of the net estate should bededucted therefrom as the share of tile surviving spouse in accordance with our law on conjugal partnership and inrelation to section 89 (c) of the National Internal revenue Code;(2) Whether or not the estate can avail itself of the reciprocity proviso embodied in Section 122 of the National InternalRevenue Code granting exemption from the payment of estate and inheritance taxes on the 210,000 shares of stock inthe Mindanao Mother Lode Mines Inc.;(3) Whether or not the estate is entitled to the deduction of P4,000.00 allowed by Section 861, U.S. Internal RevenueCode in relation to section 122 of the National Internal Revenue Code;(4) Whether or not the real estate properties of the decedent located in Baguio City and the 210,000 shares of stock in theMindanao Mother Lode Mines, Inc., were correctly appraised by the lower court;

(5) Whether or not the estate is entitled to the following deductions: P8,604.39 for judicial and administration expenses;P2,086.52 for funeral expenses; P652.50 for real estate taxes; and P10,0,22.47 representing the amount of indebtednessallegedly incurred by the decedent during his lifetime; and(6) Whether or not the estate is entitled to the payment of interest on the amount it claims to have overpaid thegovernment and to be refundable to it.In deciding the first issue, the lower court applied a well-known doctrine in our civil law that in the absence of any ante-nuptial agreement, the contracting parties are presumed to have adopted the system of conjugal partnership as to theproperties acquired during their marriage. The application of this doctrine to the instant case is being disputed, however,by petitioner Collector of Internal Revenue, who contends that pursuant to Article 124 of the New Civil Code, the propertyrelation of the spouses Stevensons ought not to be determined by the Philippine law, but by the national law of thedecedent husband, in this case, the law of England. It is alleged by petitioner that English laws do not recognize legalpartnership between spouses, and that what obtains in that jurisdiction is another regime of property relation, wherein allproperties acquired during the marriage pertain and belong Exclusively to the husband. In further support of his stand,

petitioner cites Article 16 of the New Civil Code (Art. 10 of the old) to the effect that in testate and intestate proceedings,the amount of successional rights, among others, is to be determined by the national law of the decedent.In this connection, let it be noted that since the mariage of the Stevensons in the Philippines took place in 1909, theapplicable law is Article 1325 of the old Civil Code and not Article 124 of the New Civil Code which became effective onlyin 1950. It is true that both articles adhere to the so-called nationality theory of determining the property relation of spouses where one of them is a foreigner and they have made no prior agreement as to the administration disposition,and ownership of their conjugal properties. In such a case, the national law of the husband becomes the dominant law indetermining the property relation of the spouses. There is, however, a difference between the two articles in that Article1241 of the new Civil Code expressly provides that it shall be applicable regardless of whether the marriage wascelebrated in the Philippines or abroad while Article 1325 2 of the old Civil Code is limited to marriages contracted in aforeign land.It must be noted, however, that what has just been said refers to mixed marriages between a Filipino citizen and aforeigner. In the instant case, both spouses are foreigners who married in the Philippines. Manresa,3 in his Commentaries,has this to say on this point:La regla establecida en el art. 1.315, se refiere a las capitulaciones otorgadas en Espana y entre espanoles. El 1.325, alas celebradas en el extranjero cuando alguno de los conyuges es espanol. En cuanto a la regla procedente cuando dosextranjeros se casan en Espana, o dos espanoles en el extranjero hay que atender en el primer caso a la legislacion depais a que aquellos pertenezean, y en el segundo, a las reglas generales consignadas en los articulos 9 y 10 de nuestroCodigo. (Emphasis supplied.)If we adopt the view of Manresa, the law determinative of the property relation of the Stevensons, married in 1909, wouldbe the English law even if the marriage was celebrated in the Philippines, both of them being foreigners. But, as correctlyobserved by the Tax Court, the pertinent English law that allegedly vests in the decedent husband full ownership of theproperties acquired during the marriage has not been proven by petitioner. Except for a mere allegation in his answer,which is not sufficient, the record is bereft of any evidence as to what English law says on the matter. In the absence of proof, the Court is justified, therefore, in indulging in what Wharton calls "processual presumption," in presuming that thelaw of England on this matter is the same as our law.4

Nor do we believe petitioner can make use of Article 16 of the New Civil Code (art. 10, old Civil Code) to bolster his stand.

A reading of Article 10 of the old Civil Code, which incidentally is the one applicable, shows that it does not encompass or contemplate to govern the question of property relation between spouses. Said article distinctly speaks of amount of successional rights and this term, in speaks in our opinion, properly refers to the extent or amount of property that eachheir is legally entitled to inherit from the estate available for distribution. It needs to be pointed out that the property relation of spouses, as distinguished from their successional rights, is governed differently by the specific and expressprovisions of Title VI, Chapter I of our new Civil Code (Title III, Chapter I of the old Civil Code.) We, therefore, find that thelower court correctly deducted the half of the conjugal property in determining the hereditary estate left by the deceasedStevenson.On the second issue, petitioner disputes the action of the Tax Court in the exempting the respondents from payinginheritance tax on the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. in virtue of the reciprocity provisoof Section 122 of the National Internal Revenue Code, in relation to Section 13851 of the California Revenue and TaxationCode, on the ground that: (1) the said proviso of the California Revenue and Taxation Code has not been duly proven by



the respondents; (2) the reciprocity exemptions granted by section 122 of the National Internal Revenue Code can only beavailed of by residents of foreign countries and not of residents of a state in the United States; and (3) there is no "total"reciprocity between the Philippines and the state of California in that while the former exempts payment of both estate andinheritance taxes on intangible personal properties, the latter only exempts the payment of inheritance tax..To prove the pertinent California law, Attorney Allison Gibbs, counsel for herein respondents, testified that as an activemember of the California Bar since 1931, he is familiar with the revenue and taxation laws of the State of California. Whenasked by the lower court to state the pertinent California law as regards exemption of intangible personal properties, thewitness cited article 4, section 13851 (a) and (b) of the California Internal and Revenue Code as published in Derring'sCalifornia Code, a publication of the Bancroft-Whitney Company inc. And as part of his testimony, a full quotation of thecited section was offered in evidence as Exhibits "V-2" by the respondents.It is well-settled that foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take

judicial notice of them.5 Like any other fact, they must be alleged and proved.6

Section 41, Rule 123 of our Rules of Court prescribes the manner of proving foreign laws before our tribunals. However,although we believe it desirable that these laws be proved in accordance with said rule, we held in the case of WillametteIron and Steel Works v. Muzzal, 61 Phil. 471, that "a reading of sections 300 and 301 of our Code of Civil Procedure (nowsection 41, Rule 123) will convince one that these sections do not exclude the presentation of other competent evidenceto prove the existence of a foreign law." In that case, we considered the testimony of an attorney-at-law of San Francisco,California who quoted verbatim a section of California Civil Code and who stated that the same was in force at the timethe obligations were contracted, as sufficient evidence to establish the existence of said law. In line with this view, we findno error, therefore, on the part of the Tax Court in considering the pertinent California law as proved by respondents'witness.We now take up the question of reciprocity in exemption from transfer or death taxes, between the State of California andthe Philippines.F

Section 122 of our National Internal Revenue Code, in pertinent part, provides:... And, provided, further, That no tax shall be collected under this Title in respect of intangible personal property (a) if thedecedent at the time of his death was a resident of a foreign country which at the time of his death did not impose atransfer of tax or death tax of any character in respect of intangible personal property of citizens of the Philippines notresiding in that foreign country, or (b) if the laws of the foreign country of which the decedent was a resident at the time of his death allow a similar exemption from transfer taxes or death taxes of every character in respect of intangible personalproperty owned by citizens of the Philippines not residing in that foreign country." (Emphasis supplied).On the other hand, Section 13851 of the California Inheritance Tax Law, insofar as pertinent, reads:."SEC. 13851, Intangibles of nonresident: Conditions. Intangible personal property is exempt from the tax imposed by thispart if the decedent at the time of his death was a resident of a territory or another State of the United States or of aforeign state or country which then imposed a legacy, succession, or death tax in respect to intangible personal propertyof its own residents, but either:.(a) Did not impose a legacy, succession, or death tax of any character in respect to intangible personal property of

residents of this State, or (b) Had in its laws a reciprocal provision under which intangible personal property of a non-resident was exempt fromlegacy, succession, or death taxes of every character if the Territory or other State of the United States or foreign state or country in which the nonresident resided allowed a similar exemption in respect to intangible personal property of residents of the Territory or State of the United States or foreign state or country of residence of the decedent." (Id.)It is clear from both these quoted provisions that the reciprocity must be total, that is, with respect to transfer or deathtaxes of any and every character, in the case of the Philippine law, and to legacy, succession, or death taxes of any andevery character, in the case of the California law. Therefore, if any of the two states collects or imposes and does notexempt any transfer, death, legacy, or succession tax of any character, the reciprocity does not work. This is theunderlying principle of the reciprocity clauses in both laws.In the Philippines, upon the death of any citizen or resident, or non-resident with properties therein, there are imposedupon his estate and its settlement, both an estate and an inheritance tax. Under the laws of California, only inheritance taxis imposed. On the other hand, the Federal Internal Revenue Code imposes an estate tax on non-residents not citizens of the United States,7 but does not provide for any exemption on the basis of reciprocity. Applying these laws in the manner the Court of Tax Appeals did in the instant case, we will have a situation where a Californian, who is non-resident in thePhilippines but has intangible personal properties here, will the subject to the payment of an estate tax, although exemptfrom the payment of the inheritance tax. This being the case, will a Filipino, non-resident of California, but with intangiblepersonal properties there, be entitled to the exemption clause of the California law, since the Californian has not beenexempted from every character of legacy, succession, or death tax because he is, under our law, under obligation to payan estate tax? Upon the other hand, if we exempt the Californian from paying the estate tax, we do not thereby entitle aFilipino to be exempt from a similar estate tax in California because under the Federal Law, which is equally enforceablein California he is bound to pay the same, there being no reciprocity recognized in respect thereto. In both instances, theFilipino citizen is always at a disadvantage. We do not believe that our legislature has intended such an unfair situation tothe detriment of our own government and people. We, therefore, find and declare that the lower court erred in exemptingthe estate in question from payment of the inheritance tax.We are not unaware of our ruling in the case of Collector of Internal Revenue vs. Lara (G.R. Nos. L-9456 & L-9481, prom.January 6, 1958, 54 O.G. 2881) exempting the estate of the deceased Hugo H. Miller from payment of the inheritance tax

imposed by the Collector of Internal Revenue. It will be noted, however, that the issue of reciprocity between the pertinentprovisions of our tax law and that of the State of California was not there squarely raised, and the ruling therein cannotcontrol the determination of the case at bar. Be that as it may, we now declare that in view of the express provisions of both the Philippine and California laws that the exemption would apply only if the law of the other grants an exemptionfrom legacy, succession, or death taxes of every character, there could not be partial reciprocity. It would have to be totalor none at all.With respect to the question of deduction or reduction in the amount of P4,000.00 based on the U.S. Federal Estate TaxLaw which is also being claimed by respondents, we uphold and adhere to our ruling in the Lara case (supra) that theamount of $2,000.00 allowed under the Federal Estate Tax Law is in the nature of a deduction and not of an exemptionregarding which reciprocity cannot be claimed under the provision of Section 122 of our National Internal Revenue Code.Nor is reciprocity authorized under the Federal Law. .



On the issue of the correctness of the appraisal of the two parcels of land situated in Baguio City, it is contended that their assessed values, as appearing in the tax rolls 6 months after the death of Stevenson, ought to have been considered bypetitioner as their fair market value, pursuant to section 91 of the National Internal Revenue Code. It should be pointedout, however, that in accordance with said proviso the properties are required to be appraised at their fair market valueand the assessed value thereof shall be considered as the fair market value only when evidence to the contrary has notbeen shown. After all review of the record, we are satisfied that such evidence exists to justify the valuation made bypetitioner which was sustained by the tax court, for as the tax court aptly observed:"The two parcels of land containing 36,264 square meters were valued by the administrator of the estate in the Estate andInheritance tax returns filed by him at P43,500.00 which is the assessed value of said properties. On the other hand,defendant appraised the same at P52,200.00. It is of common knowledge, and this Court can take judicial notice of it, thatassessments for real estate taxation purposes are very much lower than the true and fair market value of the properties ata given time and place. In fact one year after decedent's death or in 1952 the said properties were sold for a price of P72,000.00 and there is no showing that special or extraordinary circumstances caused the sudden increase from theprice of P43,500.00, if we were to accept this value as a fair and reasonable one as of 1951. Even more, the counsel for plaintiffs himself admitted in open court that he was willing to purchase the said properties at P2.00 per square meter. Inthe light of these facts we believe and therefore hold that the valuation of P52,200.00 of the real estate in Baguio made bydefendant is fair, reasonable and justified in the premises." (Decision, p. 19).In respect to the valuation of the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc., (a domesticcorporation), respondents contend that their value should be fixed on the basis of the market quotation obtaining at theSan Francisco (California) Stock Exchange, on the theory that the certificates of stocks were then held in that place andregistered with the said stock exchange. We cannot agree with respondents' argument. The situs of the shares of stock,for purposes of taxation, being located here in the Philippines, as respondents themselves concede and considering thatthey are sought to be taxed in this jurisdiction, consistent with the exercise of our government's taxing authority, their fair

market value should be taxed on the basis of the price prevailing in our country.Upon the other hand, we find merit in respondents' other contention that the said shares of stock commanded a lesser value at the Manila Stock Exchange six months after the death of Stevenson. Through Atty. Allison Gibbs, respondentshave shown that at that time a share of said stock was bid for at only P.325 (p. 103, t.s.n.). Significantly, the testimony of

Atty. Gibbs in this respect has never been questioned nor refuted by petitioner either before this court or in the courtbelow. In the absence of evidence to the contrary, we are, therefore, constrained to reverse the Tax Court on this pointand to hold that the value of a share in the said mining company on August 22, 1951 in the Philippine market was P.325as claimed by respondents..It should be noted that the petitioner and the Tax Court valued each share of stock of P.38 on the basis of the declarationmade by the estate in its preliminary return. Patently, this should not have been the case, in view of the fact that theancillary administrator had reserved and availed of his legal right to have the properties of the estate declared at their fair market value as of six months from the time the decedent died..On the fifth issue, we shall consider the various deductions, from the allowance or disallowance of which by the Tax

Court, both petitioner and respondents have appealed..Petitioner, in this regard, contends that no evidence of record exists to support the allowance of the sum of P8,604.39 for the following expenses:.

1) Administrator's fee P1,204.34

2) Attorney's fee 6,000.00

3) Judicial and Administrative expenses 2,052.55

Total Deductions P8,604.39

An examination of the record discloses, however, that the foregoing items were considered deductible by the Tax Courton the basis of their approval by the probate court to which said expenses, we may presume, had also been presented for consideration. It is to be supposed that the probate court would not have approved said items were they not supported byevidence presented by the estate. In allowing the items in question, the Tax Court had before it the pertinent order of theprobate court which was submitted in evidence by respondents. (Exh. "AA-2", p. 100, record). As the Tax Court said, it

found no basis for departing from the findings of the probate court, as it must have been satisfied that those expenseswere actually incurred. Under the circumstances, we see no ground to reverse this finding of fact which, under Republic

Act of California National Association, which it would appear, that while still living, Walter G. Stevenson obtained we arenot inclined to pass upon the claim of respondents in respect to the additional amount of P86.52 for funeral expenseswhich was disapproved by the court a quo for lack of evidence.In connection with the deduction of P652.50 representing the amount of realty taxes paid in 1951 on the decedent's twoparcels of land in Baguio City, which respondents claim was disallowed by the Tax Court, we find that this claim has infact been allowed. What happened here, which a careful review of the record will reveal, was that the Tax Court, initemizing the liabilities of the estate, viz:

1) Administrator's fee P1,204.34

2) Attorney's fee 6,000.00

3) Judicial and Administration expenses as of August 9,

1952 2,052.55Total P9,256.89

added the P652.50 for realty taxes as a liability of the estate, to the P1,400.05 for judicial and administration expensesapproved by the court, making a total of P2,052.55, exactly the same figure which was arrived at by the Tax Court for

judicial and administration expenses. Hence, the difference between the total of P9,256.98 allowed by the Tax Court asdeductions, and the P8,604.39 as found by the probate court, which is P652.50, the same amount allowed for realtytaxes. An evident oversight has involuntarily been made in omitting the P2,000.00 for funeral expenses in the finalcomputation. This amount has been expressly allowed by the lower court and there is no reason why it should not be. .We come now to the other claim of respondents that pursuant to section 89(b) (1) in relation to section 89(a) (1) (E) andsection 89(d), National Internal Revenue Code, the amount of P10,022.47 should have been allowed the estate as adeduction, because it represented an indebtedness of the decedent incurred during his lifetime. In support thereof, theyoffered in evidence a duly certified claim, presented to the probate court in California by the Bank of California National



Association, which it would appear, that while still living, Walter G. Stevenson obtained a loan of $5,000.00 secured bypledge on 140,000 of his shares of stock in the Mindanao Mother Lode Mines, Inc. (Exhs. "Q-Q4", pp. 53-59, record). TheTax Court disallowed this item on the ground that the local probate court had not approved the same as a valid claimagainst the estate and because it constituted an indebtedness in respect to intangible personal property which the TaxCourt held to be exempt from inheritance tax.For two reasons, we uphold the action of the lower court in disallowing the deduction.Firstly, we believe that the approval of the Philippine probate court of this particular indebtedness of the decedent isnecessary. This is so although the same, it is averred has been already admitted and approved by the correspondingprobate court in California, situs of the principal or domiciliary administration. It is true that we have here in the Philippinesonly an ancillary administration in this case, but, it has been held, the distinction between domiciliary or principaladministration and ancillary administration serves only to distinguish one administration from the other, for the twoproceedings are separate and independent.8 The reason for the ancillary administration is that, a grant of administrationdoes not ex proprio vigore, have any effect beyond the limits of the country in which it was granted. Hence, we have therequirement that before a will duly probated outside of the Philippines can have effect here, it must first be proved andallowed before our courts, in much the same manner as wills originally presented for allowance therein. 9 And the estateshall be administered under letters testamentary, or letters of administration granted by the court, and disposed of according to the will as probated, after payment of just debts and expenses of administration. 10 In other words, there is aregular administration under the control of the court, where claims must be presented and approved, and expenses of administration allowed before deductions from the estate can be authorized. Otherwise, we would have the actuations of our own probate court, in the settlement and distribution of the estate situated here, subject to the proceedings before theforeign court over which our courts have no control. We do not believe such a procedure is countenanced or contemplated in the Rules of Court.

Another reason for the disallowance of this indebtedness as a deduction, springs from the provisions of Section 89, letter

(d), number (1), of the National Internal Revenue Code which reads:(d) Miscellaneous provisions — (1) No deductions shall be allowed in the case of a non-resident not a citizen of thePhilippines unless the executor, administrator or anyone of the heirs, as the case may be, includes in the return requiredto be filed under section ninety-three the value at the time of his death of that part of the gross estate of the non-residentnot situated in the Philippines."In the case at bar, no such statement of the gross estate of the non-resident Stevenson not situated in the Philippinesappears in the three returns submitted to the court or to the office of the petitioner Collector of Internal Revenue. Thepurpose of this requirement is to enable the revenue officer to determine how much of the indebtedness may be allowedto be deducted, pursuant to (b), number (1) of the same section 89 of the Internal Revenue Code which provides:(b) Deductions allowed to non-resident estates. — In the case of a non-resident not a citizen of the Philippines, bydeducting from the value of that part of his gross estate which at the time of his death is situated in the Philippines —(1) Expenses, losses, indebtedness, and taxes. — That proportion of the deductions specified in paragraph (1) of subjection (a) of this section11 which the value of such part bears the value of his entire gross estate wherever situated;"

In other words, the allowable deduction is only to the extent of the portion of the indebtedness which is equivalent to theproportion that the estate in the Philippines bears to the total estate wherever situated. Stated differently, if the propertiesin the Philippines constitute but 1/5 of the entire assets wherever situated, then only 1/5 of the indebtedness may bededucted. But since, as heretofore adverted to, there is no statement of the value of the estate situated outside thePhilippines, no part of the indebtedness can be allowed to be deducted, pursuant to Section 89, letter (d), number (1) of the Internal Revenue Code.For the reasons thus stated, we affirm the ruling of the lower court disallowing the deduction of the alleged indebtednessin the sum of P10,022.47.In recapitulation, we hold and declare that:(a) only the one-half (1/2) share of the decedent Stevenson in the conjugal partnership property constitutes his hereditaryestate subject to the estate and inheritance taxes;(b) the intangible personal property is not exempt from inheritance tax, there existing no complete total reciprocity asrequired in section 122 of the National Internal Revenue Code, nor is the decedent's estate entitled to an exemption of P4,000.00 in the computation of the estate tax;(c) for the purpose of the estate and inheritance taxes, the 210,000 shares of stock in the Mindanao Mother Lode Mines,Inc. are to be appraised at P0.325 per share; and(d) the P2,000.00 for funeral expenses should be deducted in the determination of the net asset of the deceasedStevenson.In all other respects, the decision of the Court of Tax Appeals is affirmed.Respondent's claim for interest on the amount allegedly overpaid, if any actually results after a recomputation on the basisof this decision is hereby denied in line with our recent decision in Collector of Internal Revenue v. St. Paul'sHospital (G.R. No. L-12127, May 29, 1959) wherein we held that, "in the absence of a statutory provision clearly or expressly directing or authorizing such payment, and none has been cited by respondents, the National Governmentcannot be required to pay interest."WHEREFORE, as modified in the manner heretofore indicated, the judgment of the lower court is hereby affirmed in allother respects not inconsistent herewith. No costs. So ordered.Paras, C.J., Bengzon, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Gutierrez David, Paredes and Dizon,

JJ., concur.Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISION G.R. No. 74305 January 31, 1992SAMHWA COMPANY LTD., and LOTUS EXPORTS SPECIALISTS, INC., petitioners,vs.THE HONORABLE INTERMEDIATE APPELLATE COURT, LOUIS SHEFF and HERSCHELL SWIRYN,respondents.

Angara, Abello, Concepcion, Regala & Cruz for petitioners.Tee, Tomas & Associates for private respondents.



MEDIALDEA, J.:This is a petition for review on certiorari of the decision of the Court of Appeals affirming the trial court's judgment whichordered petitioner Samwha Company Ltd. (Samhwa for brevity) to pay damages to private respondents. The civil actionwas instituted before the trial court against Samhwa by respondents Louis Sheff and Herschel Swiryn, who were amongthe original stockholders of a company known as Lotus Export Specialists, Inc. (Lotus, Inc. for brevity).The antecedent facts of the case as found both by the respondent appellate court and the trial court are as follows:On September 28, 1977, the plaintiffs and the other original stockholders sold their shareholdings in said company toSamhwa Company Ltd. The terms of the sale were embodied in a Memorandum of Agreement (Exhibit A) the pertinentprovisions of which provided that only 70% of the equity sold would be turned over to Samhwa immediately (par 3(a) of Exhibit A) and 30% upon release of the personal guarantees and other collaterals stated in paragraph 3(c) of Exhibit A.The personal guarantees referred to in Exhibit A cover the personal guarantees executed by the plaintiffs in favor of theDevelopment Bank of the Philippines, hereinafter referred to as DBP, to guarantee payment of a loan extended by theDBP to Lotus. In addition, the original stockholders and more particularly Mariano Marcos furnished the DBP with 212,980shares of Marcopper as collaterals for said loan. (In their various pleadings both parties placed the figure at 250,000shares but Exhibit 3 only states 212,980 shares). After the sale for all intents and purposes, Samhwa took control of theoperations of Lotus and the management of said corporation remained in the hands of Samhwa to the exclusion of plaintiffs.Under the terms of the Agreement of September 28, 1977 the following provisions were brought to the attention of theCourt as part of the evidence and are vital to the consideration of the matters raised in issue (par. 3(c) of Exhibit A):1. The primary consideration of this sale is the release of sellers from their individual or personal guarantees and thecollateral (250,000 shares of Marcopper Mining Corporation given to the DBP in connection with a loan DBP hasextended to Lotus) . . . provided, however, that if, after two years from date of this agreement, the said release of the

SELLERS' personal guarantees and collaterals will not have been accomplished, BUYER undertakes to cause Lotus topay DBP US $50,000.00 and a further US $50,000.00 every six (6) months thereafter, aside from payment of the regular amortization schedule due the DBP, until the release of the said personal guarantees and the aforesaid collateral will havebeen effected or until full payment of the Lotus loan whichever comes first (par 3 (c) of Exhibit A).2. Without prejudice to Lotus entering into any arrangements regarding the payment or restructuring of all interests,BUYER undertakes to cause Lotus to pay and keep current all interests on said DBP loan; provided, however, thatBUYER shall cause Lotus to pay interest on said loans as and when due, it being understood that any such restructuringas heretofore mentioned will not involve any further monetary or other type of obligation on the part of SELLERS (par. 5 of Exhibit A).Reduced to its simplest terms the above provisions made it incumbent on Samhwa to secure the release of the personalguarantees and collateral posted by the plaintiffs and other original stockholders (par. 3(c) of Exhibit A) in default of whichSamhwa undertook to cause Lotus to pay the DBP US $50,000.00 every six (6) months two years from date of theagreement until the release of the personal guarantees or full payment of the Lotus loan was made. Samhwa also

undertook to cause Lotus to pay and keep current all interests on said DBP loan. The other matter raised in the complaintof representation in the Board was not proved or brought up during the hearing and therefore, for all intents and purposes,can be disregarded in this decision.On the other hand, under paragraph 3(b) of Exhibit A, plaintiffs agreed and stipulated that if the negative net assets valueof the company exceeded the Amount of P3,375,000.00 then the plaintiffs would pay Samhwa any excess "at the time of release by the DBP of sellers" personal guarantees and other collaterals." In addition, plaintiffs also undertook to paySamhwa the difference between the peso equivalent and foreign currency loan extended by the DBP to Lotus on thebasis of prevailing rate of exchange available as of September 28, 1977 but not to exceed P750,000.00 which paymentagain shall be effected at the time of the release by the DBP of plaintiffs' personal guarantees and other collateral (par. 3,(b)-IV of Exhibit A).Time went by and defendants Samhwa and Lotus did not secure the release of the individual and personal guarantees of the plaintiffs despite the fact that on December 10, 1980 under Res. 4083(par. 7 of Exhibit A) the DBP approved thesubstitution of the personal guarantees of Louis Sheff, Isabel Wilson, Herschel Swiryn and Alfredo Africa by Samhwaunder certain conditions. It also appears from the record that until the time of the trial no payment was made on theprincipal obligation due the DBP and that defendants allowed the DBP loan to become delinquent (tsn, April 5, 1982; pp.22-23; pp. 28-29; pp. 32-35). Inspite of the fact that the principal obligations due the DBP had not been settled on timeand interest payments were delinquent as of the date of the trial Samhwa and Lotus never paid the US $50,000.00 everysix (6) months provided in paragraph 3(c) of Exhibit A . This was admitted by the witness for Samhwa himself, Mr. SaeChae Lee (tsn. Oct, 22, 1982, pp. 75-78).Having failed to compel defendants to comply with their undertakings under Exhibit A, plaintiff brought the presentcomplaint to this court with the prayer that defendants be ordered:1. To open its books of account and records for inspection,2. To pay the DBP amortization;3. To pay interest on the DBP loan;4. To deposit US $200,000.00 with the DBP representing payments due for September 1979, March 1980, September 1980 and March 198l;5. To release the personal guarantees of the plaintiffs with the DBP;

6. To pay plaintiffs damages in the amount of P1,000,000.00; and7. Such other relief as this Court may deem just and proper .In its Answer to the complaint the defendants, while admitting the existence of Exhibit A, allege that the complaint wasmalicious and unfounded and was filed to avoid plaintiffs' obligations under the said agreement which was quantified asfollows:1. Excess of negative net assetsvalue, under par. 3(b) of theMemorandum Agreement P 679,950.752. Foreign currency differentialunder par. 3(b)-iv of theMemorandum of Agreement. 750,000.00P1,429,950.75



The theory offered by the defendants is that under the provisions of Exhibit A and particularly paragraph 3(b), plaintiffshad to pay defendants the amount of P1,429,950.75 and having failed to do so the defendants did not have to comply withthe undertakings stated in the complaint. . . . (pp. 84-88, Rollo).On September 2, 1983, the trial court rendered a decision in favor of respondents, the dispositive portion of which reads:WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of plaintiffs Louis Sheff and Herschel Swirynand against defendants Samhwa Company Ltd. and Lotus Exports Specialists Inc. as follows:1. That the defendants take immediate steps to maintain the obligation due the DBP in such a manner as to free theplaintiffs from any further liability to the DBP;2. That the defendants immediately secure the release of the personal guarantees of the plaintiffs and the collateral of Mr. Mariano Marcos without any further demands on the plaintiffs;3. That the plaintiffs upon receipt of the clearances from the DBP turn over to the defendants the 30% equity of Lotus:4. That the counterclaims of defendants in the amount of P1,429,950.75 is offset against plaintiffs right of damagesagainst defendants in the amount of P2,250,627.30 so that defendants are jointly and severally ordered to pay plaintiffsthe amount of P833,455.35 in actual damages; and5. That the defendants are ordered to pay plaintiffs the sum of P150,000.00 as exemplary damages for bad faith andmalice in the handling of the matter in issue.With costs against the defendants.SO ORDERED. (pp. 45-46, Rollo)Not satisfied with the decision, petitioners appealed to the Court of Appeals. On November 15, 1985, the respondentappellate court rendered judgment affirming the decision of the trial court. On a motion for reconsideration filed bypetitioners, the Court of Appeals on April 9, 1986 issued the following resolutions:We find that there is sufficient evidence of actual damages, but no sufficient evidence of malice and bad faith.WHEREFORE, the Motion for Reconsideration is denied, except that the order for defendants to pay P150,000.00 as

exemplary damages to the plaintiffs is ordered deleted from the dispositive portion of the lower court's decision.SO ORDERED. (p. 121, Rollo)Hence, this petition was filed with the petitioners assigning the following errors committed by the respondent appellatecourt:1. Respondent Court has decided a question of substance, not heretofore determined by this Honorable Court,involving the propriety or fairness of an award for actual damages despite the admitted absence of actual proof substantiating pecuniary loss.2. Respondent Court has decided in a way not in accord with law or with applicable decisions of this Honorable Court byawarding actual damages based on unsupported allegations, speculations, and conjectures.3. Respondent Court has awarded actual damages in an excessive amount despite the fact that private respondents didnot incur any actual or additional cost or expense as a consequence of the acts and omissions complained of. (pp. 2-3, Rollo)The errors assigned by petitioners boil down to the issue of whether or not the award of actual damages made by the trial

court and affirmed by the respondent appellate court in favor of respondents Sheff and Swiryn is proper.Petitioners contend that the actual damages awarded by the trial court in favor of respondents representing guaranty feeswhich banks normally charge, which in this case amounted to l,111,663.30, has no legal basis considering thatrespondents did not suffer any damage resulting from the non-release of their personal guarantees; that respondents didnot pay any amount to the DBP on the loan of petitioner Lotus, Inc. nor were they called upon to make good their subsidiary liability on their personal guarantees. Petitioners also submit that those actual damages awarded torespondents equivalent to the value of the Marcopper shares which respondents could have realized if the shares werereleased by petitioners on time is speculative, there being no proof of the actual value of the shares or of the availability of buyers thereof during said period. Further, as to the difference in the exchange value of US $50,000 which petitionerscommitted to pay the DBP every six months pursuant to the memorandum agreement, petitioners argue that this cannotbe the basis for awarding damages to respondents since this is also remote and speculative, taking into account again thefact that respondents Sheff and Swiryn were never made to pay any amount on the loan to DBP.The contract has the force of law between the parties. From the moment the contract is perfected, the parties are boundnot only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law (Art. 1315, Civil Code). Hence, those who in the performanceof their obligations under the contract are guilty of fraud, negligence, or delay, and those who in any manner contravenethe tenor thereof, are liable for damages (Art. 1170, Civil Code).There is no doubt that petitioners have committed a substantial breach of the contract when they failed without reasonableground to release respondents Sheff and Swiryn from their personal guarantees on the loan of petitioner Lotus, Inc. fromDBP and when petitioners failed to pay the indebtedness of Lotus, Inc. within the stipulated period as provided in theMemorandum Agreement. In this case, the damages to which said respondents are entitled are governed by Article 2201of the Civil Code which states:

Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall bethose that are the natural and probable consequences of the breach of the obligation, and which the parties haveforeseen or could have reasonably foreseen at the time the obligation was constituted.In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may bereasonably attributed to the non-performance of the obligation.

The trial court awarded actual damages in favor of respondents in the form of guaranty fees, loss in the value of Marcopper shares and the difference in the peso value of US $50,000.00 payable semi-annually by petitioners to DBP, aswell as exemplary damages in the amount of P150,000.00 due to bad faith on the part of petitioners. Except as to theaward of exemplary damages, the respondent appellate court affirmed the findings of the trial court as to the award of actual damages. These were their findings:It was incumbent upon defendants:1. To keep payment of the principal obligation and interests with the DBP up to date;2. To secure within the two-year period stipulated the release of the personal guarantees and collateral of the plaintiffs.They failed in the above to pay US $50,000.00 every six (6) months starting September 1979. Having failed to performany of the foregoing under the provision of Articles 1169 and 1181 of the Civil Code quoted above the plaintiffs had noobligation to pay defendants the demanded P1,429,950.75.



The total obligation to the DBP was P19,762,995.31 (Exhibit F) computed at a conservative 12% per annum from thetarget date of payment or 2 years after September 18, 1977 or September 1979 to the present or for 3 years and 9months or 45 months. Plaintiffs' exposure for interest alone to the DBP is equivalent to P8,893,347.87On the other hand, this obligation was restructured as early as December 10, 1980 and April 1, 1981 (Exhibit E & 7) sothat in fact DBP has looked primarily to defendants for the payment of the obligation secured by plaintiff's guarantees andcollateral. Such being the case it would not be fair to charge defendants for this total interest figure but the fact of thematter is that plaintiffs remained liable to the DBP for the loan subsidiarily and this has a cost of at least 1-1/2% per annum which is what banks charge as a guaranty fee or Pl,111,668.30 for the 45 months after September 28, 1979. (Arts,l191 & 1192, Civil Code of the Philippines)In September of 1979 the Marcopper shares had a value of P1,011,665.00 computed at P4.75 per share (Manila StockMarket Price). This is what plaintiffs could have realized from said shares if they had been released at the correct time.The Marcopper shares only fetch P1.20 (price as of July 6, 1983) per share or 255,576. 00 for the 212,980 shares. Thismeans a loss to the plaintiffs of P756,089.00. On the US $50.000.00 that defendants committed to pay the DBP every six (6) months the Court agrees with thecomputation of the plaintiffs that in exchange value alone the plaintiffs were damaged in the amount of P382,870.00 up toSeptember of 1982 computed as follows:DatePayment of US$50,000.00 Dollar should Dollar ishave been was now

made worth or worth or LossSept 1979 P7.3715 368.575 P8.95 P447,500 P78,925.00March 1980 7.426 371.300 8.95 447,500 76,200.00Sept 1980 7.5605 378.025 8.95 447,500 69,475.00March 1981 7.75 387.500 8.95 447,500 60,000.00Sept 1981 8.02 401.000 8.95 447,500 46,500.00March 1982 8.2764 413.410 8.95 447,500 33,680.00Sept 1982 8.5882 429.410 8.95 447,500 18,090.00P382,870.00

All in all, therefore, on the basis of actual damage plaintiffs lost because of the delay in the settlement of the DBP accountthe following:Pl,111,668.30 as guaranty cost756,089.00 on the Marcopper shares

382,870.00 on the dollar difference2,250,627.30 totalThe above figure more than compensates what could be due defendants on their claim arising out of Exhibit A.Plaintiffs did not contest the correctness of the figure of P1,429,950.75 and so it stands uncontroverted and is accepted bythe Court as correct.When the guarantee and collateral are released, therefore, the said amount becomes due defendants from plaintiffssubject to plaintiffs claim for damages (pp. 210-213, Original Records) (pp. 42-45, Rollo)We give weight to the factual findings of the respondent appellate court and trial court with respect to the loss suffered byrespondents in the value of the Marcopper shares and as to the guaranty fees and difference in the peso equivalent of thesum of US $50,000.00 that should have been paid semi-annually. Petitioners failed in the performance of their contract,and as provided under the Civil Code, the person who fails in the performance of his obligations shall be subject toindemnify for the losses and damages caused thereby. The true measure of damages for the breach of such a contract iswhat the private respondents have lost by the breach (De la Cruz v. Seminario de Manila, 18 Phil. 330). While the contractimposed no penalty for such violation, this does not grant any of the parties the unbridled liberty to breach it with impunity.Our law on contracts recognizes the principle that actionable injury inheres in every contractual breach (Boysaw v.Interphil Promotions, Inc., No. L-22590, March 20, 1987, 148 SCRA 635).Since the trial court and respondent appellate court found that private respondents did not refute their liability topetitioners under the contract in the amount of P1,429,950.75, this should be set off against the aforestated damages dueto respondents in the amount of P2,250,627.30. Hence, petitioners shall he liable to pay respondents in the amount of P820,676.55.

ACCORDINGLY, the petition is DENIED and the assailed decision of the respondent appellate court dated November 15,1985 and its resolution dated April 9, 1986 are AFFIRMED. Petitioners Samhwa Company Ltd. and Lotus ExportsSpecialists Inc. shall be jointly and severally liable to pay respondents Louis Sheff and Herschell Swiryn in the amount of P820,676.55SO ORDERED.Narvasa, C.J., Cruz and Griño-Aquino, JJ., concur.Republic of the Philippines

SUPREME COURTManilaTHIRD DIVISION G.R. No. 108358 January 20, 1995COMMISSIONER OF INTERNAL REVENUE, petitioner,vs.THE HON. COURT OF APPEALS, R.O.H. AUTO PRODUCTS PHILIPPINES, INC. and THE HON. COURT OF TAXAPPEALS, respondents. VITUG, J.:



On 22 August 1986, during the period when the President of the Republic still wielded legislative powers, Executive Order No. 41 was promulgated declaring a one-time tax amnesty on unpaid income taxes, later amended to include estate anddonor's taxes and taxes on business, for the taxable years 1981 to 1985.

Availing itself of the amnesty, respondent R.O.H. Auto Products Philippines, Inc., filed, in October 1986 and November 1986, its Tax Amnesty Return No. 34-F-00146-41 and Supplemental Tax Amnesty Return No. 34-F-00146-64-B,respectively, and paid the corresponding amnesty taxes due.Prior to this availment, petitioner Commissioner of Internal Revenue, in a communication received by private respondenton 13 August 1986, assessed the latter deficiency income and business taxes for its fiscal years ended 30 September 1981 and 30 September 1982 in an aggregate amount of P1,410,157.71. The taxpayer wrote back to state that since ithad been able to avail itself of the tax amnesty, the deficiency tax notice should forthwith be cancelled and withdrawn. Therequest was denied by the Commissioner, in his letter of 22 November 1988, on the ground that Revenue MemorandumOrder No. 4-87, dated 09 February 1987, implementing Executive Order No. 41, had construed the amnesty coverage toinclude only assessments issued by the Bureau of Internal Revenue after the promulgation of the executive order on 22

August 1986 and not to assessments theretofore made. The invoked provisions of the memorandum order read:TO: All Internal Revenue Officers and Others Concerned:1.0. To give effect and substance to the immunity provisions of the tax amnesty under Executive Order No. 41, asexpanded by Executive Order No. 64, the following instructions are hereby issued:xxx xxx xxx1.02. A certification by the Tax Amnesty Implementation Officer of the fact of availment of the said tax amnesty shall be asufficient basis for:xxx xxx xxx1.02.3. In appropriate cases, the cancellation/withdrawal of assessment notices and letters of demand issued after August 21, 1986 for the collection of income, business, estate or donor's taxes due during the same taxable years . 1 (Emphasis

supplied)Private respondent appealed the Commissioner's denial to the Court of Tax Appeals. Ruling for the taxpayer, the tax courtsaid:Respondent (herein petitioner Commissioner) failed to present any case or law which proves that an assessment canwithstand or negate the force and effects of a tax amnesty. This burden of proof on the petitioner (herein respondenttaxpayer) was created by the clear and express terms of the executive order's intention — qualified availers of theamnesty may pay an amnesty tax in lieu of said unpaid taxes which are forgiven (Section 2, Section 5, Executive Order No. 41, as amended). More specifically, the plain provisions in the statute granting tax amnesty for unpaid taxes for theperiod January 1, 1981 to December 31, 1985 shifted the burden of proof on respondent to show how the issuance of anassessment before the date of the promulgation of the executive order could have a reasonable relation with the objectiveperiods of the amnesty, so as to make petitioner still answerable for a tax liability which, through the statute, should havebeen erased with the proper availment of the amnesty.

Additionally, the exceptions enumerated in Section 4 of Executive Order No. 41, as amended, do not indicate any

reference to an assessment or pending investigation aside from one arising from information furnished by an informer. . . .Thus, we deem that the rule in Revenue Memorandum Order No. 4-87 promulgating that only assessments issued after August 21, 1986 shall be abated by the amnesty is beyond the contemplation of Executive Order No. 41, as amended. 2

On appeal by the Commissioner to the Court of Appeals, the decision of the tax court was affirmed. The appellate courtfurther observed:In the instant case, examining carefully the words used in Executive Order No. 41, as amended, we find nothing which

justifies petitioner Commissioner's ground for denying respondent taxpayer's claim to the benefits of the amnesty law.Section 4 of the subject law enumerates, in no uncertain terms, taxpayers who may not avail of the amnesty granted,. . . .

Admittedly, respondent taxpayer does not fall under any of the . . . exceptions. The added exception urged by petitioner Commissioner based on Revenue Memorandum Order No. 4-87, further restricting the scope of the amnesty clearlyamounts to an act of administrative legislation quite contrary to the mandate of the law which the regulation ought toimplement.xxx xxx xxxLastly, by its very nature, a tax amnesty, being a general pardon or intentional overlooking by the State of its authority toimpose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law, partakes of an absoluteforgiveness or waiver by the Government of its right to collect what otherwise would be due it, and in this sense,prejudicial thereto, particularly to give tax evaders, who wish to relent and are willing to reform a chance to do so andthereby become a part of the new society with a clean slate. (Republic vs. Intermediate Appellate Court. 196 SCRA 335,340 [1991] citing Commissioner of Internal Revenue vs. Botelho Shipping Corp., 20 SCRA 487) To follow [the restrictiveapplication of Revenue Memorandum Order No. 4-87 pressed by petitioner Commissioner would be to work againstthe raison d'etre of E.O. 41, as amended, i.e., to raise government revenues by encouraging taxpayers to declare their untaxed income and pay the tax due thereon. (E.O. 41, first paragraph)] 3

In this petition for review, the Commissioner raises these related issues:1. WHETHER OR NOT REVENUE MEMORANDUM ORDER NO. 4-87, PROMULGATED TO IMPLEMENT E.O. NO. 41,IS VALID;2. WHETHER OR NOT SAID DEFICIENCY ASSESSMENTS IN QUESTION WERE EXTINGUISHED BY REASON ORPRIVATE RESPONDENT'S AVAILMENT OF EXECUTIVE ORDER NO. 41 AS AMENDED BY EXECUTIVE ORDER NO.

64;3. WHETHER OR NOT PRIVATE RESPONDENT HAS OVERCOME THE PRESUMPTION OF VALIDITY OF

ASSESSMENTS. 4

The authority of the Minister of Finance (now the Secretary of Finance), in conjunction with the Commissioner of InternalRevenue, to promulgate all needful rules and regulations for the effective enforcement of internal revenue laws cannot becontroverted. Neither can it be disputed that such rules and regulations, as well as administrative opinions and rulings,ordinarily should deserve weight and respect by the courts. Much more fundamental than either of the above, however, isthat all such issuances must not override, but must remain consistent and in harmony with, the law they seek to apply andimplement. Administrative rules and regulations are intended to carry out, neither to supplant nor to modify, the law.The real and only issue is whether or not the position taken by the Commissioner coincides with the meaning and intent of executive Order No. 41.



We agree with both the court of Appeals and court of Tax Appeals that Executive Order No. 41 is quite explicit andrequires hardly anything beyond a simple application of its provisions. It reads:Sec. 1. Scope of Amnesty. — A one-time tax amnesty covering unpaid income taxes for the years 1981 to 1985 is herebydeclared.Sec. 2. Conditions of the Amnesty. — A taxpayer who wishes to avail himself of the tax amnesty shall, on or beforeOctober 31, 1986;a) file a sworn statement declaring his net worth as of December 31, 1985;b) file a certified true copy of his statement declaring his net worth as of December 31, 1980 on record with the Bureau of Internal Revenue, or if no such record exists, file a statement of said net worth therewith, subject to verification by theBureau of Internal Revenue;c) file a return and pay a tax equivalent to ten per cent (10%) of the increase in net worth from December 31, 1980 toDecember 31, 1985: Provided , That in no case shall the tax be less than P5,000.00 for individuals and P10,000.00 for

judicial persons.Sec. 3. Computation of Net Worth. — In computing the net worths referred to in Section 2 hereof, the following rules shallgovern:a) Non-cash assets shall be valued at acquisition cost.b) Foreign currencies shall be valued at the rates of exchange prevailing as of the date of the net worth statement.Sec. 4. Exceptions. — The following taxpayers may not avail themselves of the amnesty herein granted:a) Those falling under the provisions of Executive Order Nos. 1, 2 and 14;b) Those with income tax cases already filed in Court as of the effectivity hereof;c) Those with criminal cases involving violations of the income tax already filed in court as of the effectivity filed in court asof the effectivity hereof;d) Those that have withholding tax liabilities under the National Internal Revenue Code, as amended, insofar as the said

liabilities are concerned;e) Those with tax cases pending investigation by the Bureau of Internal Revenue as of the effectivity hereof as a result of information furnished under Section 316 of the National Internal Revenue Code, as amended;f) Those with pending cases involving unexplained or unlawfully acquired wealth before the Sandiganbayan;g) Those liable under Title Seven, Chapter Three (Frauds, Illegal Exactions and Transactions) and Chapter Four (Malversation of Public Funds and Property) of the Revised Penal Code, as amended.xxx xxx xxxSec. 9. The Minister of finance, upon the recommendation of the Commissioner of Internal Revenue, shall promulgate thenecessary rules and regulations to implement this Executive Order.xxx xxx xxxSec. 11. This Executive Order shall take effect immediately.DONE in the City of Manila, this 22nd day of August in the year of Our Lord, nineteen hundred and eighty-six.The period of the amnesty was later extended to 05 December 1986 from 31 October 1986 by Executive Order No. 54,

dated 04 November 1986, and, its coverage expanded, under Executive Order No. 64, dated 17 November 1986, toinclude estate and honors taxes and taxes on business.If, as the Commissioner argues, Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities alreadyassessed (administratively) prior to 22 August 1986, the law could have simply so provided in its exclusionary clauses. Itdid not. The conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of ageneral grant of tax amnesty subject only to the cases specifically excepted by it.It might not be amiss to recall that the taxable periods covered by the amnesty include the years immediately precedingthe 1986 revolution during which time there had been persistent calls, all too vivid to be easily forgotten, for civildisobedience, most particularly in the payment of taxes, to the martial law regime. It should be understandable then thatthose who ultimately took over the reigns of government following the successful revolution would promptly provide for abroad, and not a confined, tax amnesty.Relative to the two other issued raised by the Commissioner, we need only quote from Executive Order No. 41 itself; thus:Sec. 6. Immunities and Privileges. — Upon full compliance with the conditions of the tax amnesty and the rules andregulations issued pursuant to this Executive order, the taxpayer shall enjoy the following immunities and privileges:a) The taxpayer shall be relieved of any income tax liability on any untaxed income from January 1, 1981 to December 31,1985, including increments thereto and penalties on account of the non-payment of the said tax. Civil, criminal or administrative liability arising from the non-payment of the said tax, which are actionable under the National InternalRevenue Code, as amended, are likewise deemed extinguished.b) The taxpayer's tax amnesty declaration shall not be admissible in evidence in all proceedings before judicial, quasi-

judicial or administrative bodies, in which he is a defendant or respondent, and the same shall not be examined, inquiredor looked into by any person, government official, bureau or office.c) The books of account and other records of the taxpayer for the period from January 1, 1981 to December 31, 1985shall not be examined for income tax purposes: Provided , That the Commissioner of Internal Revenue may authorize inwriting the examination of the said books of accounts and other records to verify the validity or correctness of a claim for grant of any tax refund, tax credit (other than refund on credit of withheld taxes on wages), tax incentives, and/or exemptions under existing laws.There is no pretension that the tax amnesty returns and due payments made by the taxpayer did not conform with the

conditions expressed in the amnesty order.WHEREFORE, the decision of the court of Appeals, sustaining that of the court of Tax Appeals, is hereby AFFIRMED intoto. No costs.SO ORDERED.Feliciano, Bidin, Romero and Melo, JJ., concur.Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. L-26284 October 8, 1986



TOMAS CALASANZ, ET AL., petitioners,vs.THE COMMISSIONER OF INTERNAL REVENUE and the COURT OF TAX APPEALS, respondents.San Juan, Africa, Gonzales & San Agustin Law Office for petitioners. FERNAN, J.:

Appeal taken by Spouses Tomas and Ursula Calasanz from the decision of the Court of Tax Appeals in CTA No. 1275dated June 7, 1966, holding them liable for the payment of P3,561.24 as deficiency income tax and interest for thecalendar year 1957 and P150.00 as real estate dealer's fixed tax. Petitioner Ursula Calasanz inherited from her father Mariano de Torres an agricultural land located in Cainta, Rizal,containing a total area of 1,678,000 square meters. In order to liquidate her inheritance, Ursula Calasanz had the landsurveyed and subdivided into lots. Improvements, such as good roads, concrete gutters, drainage and lighting system,were introduced to make the lots saleable. Soon after, the lots were sold to the public at a profit.In their joint income tax return for the year 1957 filed with the Bureau of Internal Revenue on March 31, 1958, petitionersdisclosed a profit of P31,060.06 realized from the sale of the subdivided lots, and reported fifty per centum thereof or P15,530.03 as taxable capital gains.Upon an audit and review of the return thus filed, the Revenue Examiner adjudged petitioners engaged in business asreal estate dealers, as defined in Section 194 [s] 1 of the National Internal Revenue Code, required them to pay the realestate dealer's tax 2 and assessed a deficiency income tax on profits derived from the sale of the lots based on the ratesfor ordinary income.On September 29, 1962, petitioners received from respondent Commissioner of Internal Revenue:a. Demand No. 90-B-032293-57 in the amount of P160.00 representing real estate dealer's fixed tax of P150.00 and

P10.00 compromise penalty for late payment; andb. Assessment No. 90-5-35699 in the amount of P3,561.24 as deficiency income tax on ordinary gain of P3,018.00 plusinterest of P 543.24.On October 17, 1962, petitioners filed with the Court of Tax Appeals a petition for review contesting the aforementionedassessments.On June 7, 1966, the Tax Court upheld the respondent Commissioner except for that portion of the assessment regardingthe compromise penalty of P10.00 for the reason that in this jurisdiction, the same cannot be collected in the absence of avalid and binding compromise agreement.Hence, the present appeal.The issues for consideration are:a. Whether or not petitioners are real estate dealers liable for real estate dealer's fixed tax; andb. Whether the gains realized from the sale of the lots are taxable in full as ordinary income or capital gains taxable atcapital gain rates.

The issues are closely interrelated and will be taken jointly.Petitioners assail their liabilities as "real estate dealers" and seek to bring the profits from the sale of the lots under Section 34 [b] [2] 3 of the Tax Code.The theory advanced by the petitioners is that inherited land is a capital asset within the meaning of Section 34[a] [1] of the Tax Code and that an heir who liquidated his inheritance cannot be said to have engaged in the real estate businessand may not be denied the preferential tax treatment given to gains from sale of capital assets, merely because hedisposed of it in the only possible and advantageous way.Petitioners averred that the tract of land subject of the controversy was sold because of their intention to effect aliquidation. They claimed that it was parcelled out into smaller lots because its size proved difficult, if not impossible, of disposition in one single transaction. They pointed out that once subdivided, certainly, the lots cannot be sold in oneisolated transaction. Petitioners, however, admitted that roads and other improvements were introduced to facilitate itssale. 4

On the other hand, respondent Commissioner maintained that the imposition of the taxes in question is in accordance withlaw since petitioners are deemed to be in the real estate business for having been involved in a series of real estatetransactions pursued for profit. Respondent argued that property acquired by inheritance may be converted from aninvestment property to a business property if, as in the present case, it was subdivided, improved, and subsequently soldand the number, continuity and frequency of the sales were such as to constitute "doing business." Respondent likewisecontended that inherited property is by itself neutral and the fact that the ultimate purpose is to liquidate is of no momentfor the important inquiry is what the taxpayer did with the property. Respondent concluded that since the lots are ordinaryassets, the profits realized therefrom are ordinary gains, hence taxable in full.We agree with the respondent.The assets of a taxpayer are classified for income tax purposes into ordinary assets and capital assets. Section 34[a] [1]of the National Internal Revenue Code broadly defines capital assets as follows:[1] Capital assets.-The term 'capital assets' means property held by the taxpayer [whether or not connected with his tradeor business], but does not include, stock in trade of the taxpayer or other property of a kind which would properly beincluded, in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or property used in the trade or business of

a character which is subject to the allowance for depreciation provided in subsection [f] of section thirty; or real propertyused in the trade or business of the taxpayer.The statutory definition of capital assets is negative in nature. 5 If the asset is not among the exceptions, it is a capitalasset; conversely, assets falling within the exceptions are ordinary assets. And necessarily, any gain resulting from thesale or exchange of an asset is a capital gain or an ordinary gain depending on the kind of asset involved in thetransaction.However, there is no rigid rule or fixed formula by which it can be determined with finality whether property sold by ataxpayer was held primarily for sale to customers in the ordinary course of his trade or business or whether it was sold asa capital asset. 6 Although several factors or indices 7 have been recognized as helpful guides in making a determination,none of these is decisive; neither is the presence nor the absence of these factors conclusive. Each case must in the lastanalysis rest upon its own peculiar facts and circumstances. 8



Also a property initially classified as a capital asset may thereafter be treated as an ordinary asset if a combination of thefactors indubitably tend to show that the activity was in furtherance of or in the course of the taxpayer's trade or business.Thus, a sale of inherited real property usually gives capital gain or loss even though the property has to be subdivided or improved or both to make it salable. However, if the inherited property is substantially improved or very actively sold or both it may be treated as held primarily for sale to customers in the ordinary course of the heir's business. 9

Upon an examination of the facts on record, We are convinced that the activities of petitioners are indistinguishable fromthose invariably employed by one engaged in the business of selling real estate.One strong factor against petitioners' contention is the business element of development which is very much in evidence.Petitioners did not sell the land in the condition in which they acquired it. While the land was originally devoted to rice andfruit trees, 10 it was subdivided into small lots and in the process converted into a residential subdivision and given thename Don Mariano Subdivision. Extensive improvements like the laying out of streets, construction of concrete guttersand installation of lighting system and drainage facilities, among others, were undertaken to enhance the value of the lotsand make them more attractive to prospective buyers. The audited financial statements 11 submitted together with the taxreturn in question disclosed that a considerable amount was expended to cover the cost of improvements. As a matter of fact, the estimated improvements of the lots sold reached P170,028.60 whereas the cost of the land is only P 4,742.66.There is authority that a property ceases to be a capital asset if the amount expended to improve it is double its originalcost, for the extensive improvement indicates that the seller held the property primarily for sale to customers in theordinary course of his business. 12

Another distinctive feature of the real estate business discernible from the records is the existence of contractsreceivables, which stood at P395,693.35 as of the year ended December 31, 1957. The sizable amount of receivables incomparison with the sales volume of P446,407.00 during the same period signifies that the lots were sold on installmentbasis and suggests the number, continuity and frequency of the sales. Also of significance is the circumstance that thelots were advertised 13 for sale to the public and that sales and collection commissions were paid out during the period in

question.Petitioners, likewise, urge that the lots were sold solely for the purpose of liquidation.In Ehrman vs. Commissioner, 14 the American court in clear and categorical terms rejected the liquidation test indetermining whether or not a taxpayer is carrying on a trade or business The court observed that the fact that property issold for purposes of liquidation does not foreclose a determination that a "trade or business" is being conducted by theseller. The court enunciated further:We fail to see that the reasons behind a person's entering into a business-whether it is to make money or whether it is toliquidate-should be determinative of the question of whether or not the gains resulting from the sales are ordinary gains or capital gains. The sole question is-were the taxpayers in the business of subdividing real estate? If they were, then itseems indisputable that the property sold falls within the exception in the definition of capital assets . . . that is, that itconstituted 'property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business.

Additionally, in Home Co., Inc. vs. Commissioner, 15 the court articulated on the matter in this wise:One may, of course, liquidate a capital asset. To do so, it is necessary to sell. The sale may be conducted in the most

advantageous manner to the seller and he will not lose the benefits of the capital gain provision of the statute unless heenters the real estate business and carries on the sale in the manner in which such a business is ordinarily conducted. Inthat event, the liquidation constitutes a business and a sale in the ordinary course of such a business and the preferredtax status is lost.In view of the foregoing, We hold that in the course of selling the subdivided lots, petitioners engaged in the real estatebusiness and accordingly, the gains from the sale of the lots are ordinary income taxable in full.WHEREFORE, the decision of the Court of Tax Appeals is affirmed. No costs.SO ORDERED.Feria (Chairman), Alampay, Gutierrez, Jr. and Paras, JJ., concur. Republic of the PhilippinesSUPREME COURTSECOND DIVISIONG.R. No. 126881 October 3, 2000HEIRS OF TAN ENG KEE, petitioners,vs.COURT OF APPEALS and BENGUET LUMBER COMPANY, represented by its President TAN ENGLAY,respondents.DE LEON, JR., J .:In this petition for review on certiorari, petitioners pray for the reversal of the Decision1 dated March 13, 1996 of the former Fifth Division2 of the Court of Appeals in CA-G.R. CV No. 47937, the dispositive portion of which states:THE FOREGOING CONSIDERED, the appealed decision is hereby set aside, and the complaint dismissed.The facts are:Following the death of Tan Eng Kee on September 13, 1984, Matilde Abubo, the common-law spouse of the decedent,

joined by their children Teresita, Nena, Clarita, Carlos, Corazon and Elpidio, collectively known as herein petitionersHEIRS OF TAN ENG KEE, filed suit against the decedent's brother TAN ENG LAY on February 19, 1990. Thecomplaint,3 docketed as Civil Case No. 1983-R in the Regional Trial Court of Baguio City was for accounting, liquidation

and winding up of the alleged partnership formed after World War II between Tan Eng Kee and Tan Eng Lay. On March18, 1991, the petitioners filed an amended complaint4 impleading private respondent herein BENGUET LUMBERCOMPANY, as represented by Tan Eng Lay. The amended complaint was admitted by the trial court in its Order datedMay 3, 1991.5

The amended complaint principally alleged that after the second World War, Tan Eng Kee and Tan Eng Lay, pooling their resources and industry together, entered into a partnership engaged in the business of selling lumber and hardware andconstruction supplies. They named their enterprise "Benguet Lumber" which they jointly managed until Tan Eng Kee'sdeath. Petitioners herein averred that the business prospered due to the hard work and thrift of the alleged partners.However, they claimed that in 1981, Tan Eng Lay and his children caused the conversion of the partnership "BenguetLumber" into a corporation called "Benguet Lumber Company." The incorporation was purportedly a ruse to deprive TanEng Kee and his heirs of their rightful participation in the profits of the business. Petitioners prayed for accounting of the

http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt1














partnership assets, and the dissolution, winding up and liquidation thereof, and the equal division of the net assets of Benguet Lumber.

After trial, Regional Trial Court of Baguio City, Branch 7 rendered judgment6 on April 12, 1995, to wit:WHEREFORE, in view of all the foregoing, judgment is hereby rendered:a) Declaring that Benguet Lumber is a joint venture which is akin to a particular partnership;b) Declaring that the deceased Tan Eng Kee and Tan Eng Lay are joint adventurers and/or partners in a business ventureand/or particular partnership called Benguet Lumber and as such should share in the profits and/or losses of the businessventure or particular partnership;c) Declaring that the assets of Benguet Lumber are the same assets turned over to Benguet Lumber Co. Inc. and as suchthe heirs or legal representatives of the deceased Tan Eng Kee have a legal right to share in said assets;d) Declaring that all the rights and obligations of Tan Eng Kee as joint adventurer and/or as partner in a particular partnership have descended to the plaintiffs who are his legal heirs.e) Ordering the defendant Tan Eng Lay and/or the President and/or General Manager of Benguet Lumber Company Inc.to render an accounting of all the assets of Benguet Lumber Company, Inc. so the plaintiffs know their proper share in thebusiness;f) Ordering the appointment of a receiver to preserve and/or administer the assets of Benguet Lumber Company, Inc. untilsuch time that said corporation is finally liquidated are directed to submit the name of any person they want to beappointed as receiver failing in which this Court will appoint the Branch Clerk of Court or another one who is qualified toact as such.g) Denying the award of damages to the plaintiffs for lack of proof except the expenses in filing the instant case.h) Dismissing the counter-claim of the defendant for lack of merit.SO ORDERED.Private respondent sought relief before the Court of Appeals which, on March 13, 1996, rendered the assailed decision

reversing the judgment of the trial court. Petitioners' motion for reconsideration 7 was denied by the Court of Appeals in aResolution8 dated October 11, 1996.Hence, the present petition.

As a side-bar to the proceedings, petitioners filed Criminal Case No. 78856 against Tan Eng Lay and Wilborn Tan for theuse of allegedly falsified documents in a judicial proceeding. Petitioners complained that Exhibits "4" to "4-U" offered bythe defendants before the trial court, consisting of payrolls indicating that Tan Eng Kee was a mere employee of BenguetLumber, were fake, based on the discrepancy in the signatures of Tan Eng Kee. They also filed Criminal Cases Nos.78857-78870 against Gloria, Julia, Juliano, Willie, Wilfredo, Jean, Mary and Willy, all surnamed Tan, for allegedfalsification of commercial documents by a private individual. On March 20, 1999, the Municipal Trial Court of Baguio City,Branch 1, wherein the charges were filed, rendered judgment9 dismissing the cases for insufficiency of evidence.In their assignment of errors, petitioners claim that:ITHE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP BETWEEN

THE LATE TAN ENG KEE AND HIS BROTHER TAN ENG LAY BECAUSE: (A) THERE WAS NO FIRM ACCOUNT; (B)THERE WAS NO FIRM LETTERHEADS SUBMITTED AS EVIDENCE; (C) THERE WAS NO CERTIFICATE OFPARTNERSHIP; (D) THERE WAS NO AGREEMENT AS TO PROFITS AND LOSSES; AND (E) THERE WAS NO TIMEFIXED FOR THE DURATION OF THE PARTNERSHIP (PAGE 13, DECISION).IITHE HONORABLE COURT OF APPEALS ERRED IN RELYING SOLELY ON THE SELF-SERVING TESTIMONY OFRESPONDENT TAN ENG LAY THAT BENGUET LUMBER WAS A SOLE PROPRIETORSHIP AND THAT TAN ENGKEE WAS ONLY AN EMPLOYEE THEREOF.IIITHE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE FOLLOWING FACTS WHICH WERE DULYSUPPORTED BY EVIDENCE OF BOTH PARTIES DO NOT SUPPORT THE EXISTENCE OF A PARTNERSHIP JUSTBECAUSE THERE WAS NO ARTICLES OF PARTNERSHIP DULY RECORDED BEFORE THE SECURITIES ANDEXCHANGE COMMISSION:a. THAT THE FAMILIES OF TAN ENG KEE AND TAN ENG LAY WERE ALL LIVING AT THE BENGUET LUMBERCOMPOUND;b. THAT BOTH TAN ENG LAY AND TAN ENG KEE WERE COMMANDING THE EMPLOYEES OF BENGUET LUMBER;c. THAT BOTH TAN ENG KEE AND TAN ENG LAY WERE SUPERVISING THE EMPLOYEES THEREIN;d. THAT TAN ENG KEE AND TAN ENG LAY WERE THE ONES DETERMINING THE PRICES OF STOCKS TO BESOLD TO THE PUBLIC; ANDe. THAT TAN ENG LAY AND TAN ENG KEE WERE THE ONES MAKING ORDERS TO THE SUPPLIERS (PAGE 18,DECISION).IVTHE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP JUSTBECAUSE THE CHILDREN OF THE LATE TAN ENG KEE: ELPIDIO TAN AND VERONICA CHOI, TOGETHER WITHTHEIR WITNESS BEATRIZ TANDOC, ADMITTED THAT THEY DO NOT KNOW WHEN THE ESTABLISHMENTKNOWN IN BAGUIO CITY AS BENGUET LUMBER WAS STARTED AS A PARTNERSHIP (PAGE 16-17, DECISION).V

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP BETWEENTHE LATE TAN ENG KEE AND HIS BROTHER TAN ENG LAY BECAUSE THE PRESENT CAPITAL OR ASSETS OFBENGUET LUMBER IS DEFINITELY MORE THAN P3,000.00 AND AS SUCH THE EXECUTION OF A PUBLICINSTRUMENT CREATING A PARTNERSHIP SHOULD HAVE BEEN MADE AND NO SUCH PUBLIC INSTRUMENTESTABLISHED BY THE APPELLEES (PAGE 17, DECISION).

As a premise, we reiterate the oft-repeated rule that findings of facts of the Court of Appeals will not be disturbed onappeal if such are supported by the evidence.10 Our jurisdiction, it must be emphasized, does not include review of factualissues. Thus:Filing of petition with Supreme Court . — A party desiring to appeal by certiorari from a judgment or final order or resolutionof the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may filewith the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.11 [emphasis supplied]


















Admitted exceptions have been recognized, though, and when present, may compel us to analyze the evidentiary basison which the lower court rendered judgment. Review of factual issues is therefore warranted:(1) when the factual findings of the Court of Appeals and the trial court are contradictory;(2) when the findings are grounded entirely on speculation, surmises, or conjectures;(3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or impossible;(4) when there is grave abuse of discretion in the appreciation of facts;(5) when the appellate court, in making its findings, goes beyond the issues of the case, and such findings are contrary tothe admissions of both appellant and appellee;(6) when the judgment of the Court of Appeals is premised on a misapprehension of facts;(7) when the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a differentconclusion;(8) when the findings of fact are themselves conflicting;(9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and(10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but such findings arecontradicted by the evidence on record.12

In reversing the trial court, the Court of Appeals ruled, to wit:We note that the Court a quo over extended the issue because while the plaintiffs mentioned only the existence of apartnership, the Court in turn went beyond that by justifying the existence of a joint venture.When mention is made of a joint venture, it would presuppose parity of standing between the parties, equal proprietaryinterest and the exercise by the parties equally of the conduct of the business, thus:xxx xxx xxxWe have the admission that the father of the plaintiffs was not a partner of the Benguet Lumber before the war. The

appellees however argued that (Rollo, p. 104; Brief, p. 6) this is because during the war, the entire stocks of the pre-war Benguet Lumber were confiscated if not burned by the Japanese. After the war, because of the absence of capital to starta lumber and hardware business, Lay and Kee pooled the proceeds of their individual businesses earned from buying andselling military supplies, so that the common fund would be enough to form a partnership, both in the lumber andhardware business. That Lay and Kee actually established the Benguet Lumber in Baguio City, was even testified to bywitnesses. Because of the pooling of resources, the post-war Benguet Lumber was eventually established. That the father of the plaintiffs and Lay were partners, is obvious from the fact that: (1) they conducted the affairs of the business duringKee's lifetime, jointly, (2) they were the ones giving orders to the employees, (3) they were the ones preparing orders fromthe suppliers, (4) their families stayed together at the Benguet Lumber compound, and (5) all their children were employedin the business in different capacities.xxx xxx xxxIt is obvious that there was no partnership whatsoever. Except for a firm name, there was no firm account, no firmletterheads submitted as evidence, no certificate of partnership, no agreement as to profits and losses, and no time fixed

for the duration of the partnership. There was even no attempt to submit an accounting corresponding to the period after the war until Kee's death in 1984. It had no business book, no written account nor any memorandum for that matter andno license mentioning the existence of a partnership [citation omitted].

Also, the exhibits support the establishment of only a proprietorship. The certification dated March 4, 1971, Exhibit "2",mentioned co-defendant Lay as the only registered owner of the Benguet Lumber and Hardware. His application for registration, effective 1954, in fact mentioned that his business started in 1945 until 1985 (thereafter, the incorporation).The deceased, Kee, on the other hand, was merely an employee of the Benguet Lumber Company, on the basis of hisSSS coverage effective 1958, Exhibit "3". In the Payrolls, Exhibits "4" to "4-U", inclusive, for the years 1982 to 1983, Keewas similarly listed only as an employee; precisely, he was on the payroll listing. In the Termination Notice, Exhibit "5",Lay was mentioned also as the proprietor.xxx xxx xxxWe would like to refer to Arts. 771 and 772, NCC, that a partner [sic] may be constituted in any form, but when animmovable is constituted, the execution of a public instrument becomes necessary. This is equally true if the capitalizationexceeds P3,000.00, in which case a public instrument is also necessary, and which is to be recorded with the Securitiesand Exchange Commission. In this case at bar, we can easily assume that the business establishment, which from thelanguage of the appellees, prospered (pars. 5 & 9, Complaint), definitely exceeded P3,000.00, in addition to theaccumulation of real properties and to the fact that it is now a compound. The execution of a public instrument, on theother hand, was never established by the appellees.

And then in 1981, the business was incorporated and the incorporators were only Lay and the members of his family.There is no proof either that the capital assets of the partnership, assuming them to be in existence, were maliciouslyassigned or transferred by Lay, supposedly to the corporation and since then have been treated as a part of the latter'scapital assets, contrary to the allegations in pars. 6, 7 and 8 of the complaint.These are not evidences supporting the existence of a partnership:1) That Kee was living in a bunk house just across the lumber store, and then in a room in the bunk house in Trinidad, butwithin the compound of the lumber establishment, as testified to by Tandoc; 2) that both Lay and Kee were seated on atable and were "commanding people" as testified to by the son, Elpidio Tan; 3) that both were supervising the laborers, astestified to by Victoria Choi; and 4) that Dionisio Peralta was supposedly being told by Kee that the proceeds of the 80

pieces of the G.I. sheets were added to the business.Partnership presupposes the following elements [citation omitted]: 1) a contract, either oral or written. However, if itinvolves real property or where the capital is P3,000.00 or more, the execution of a contract is necessary; 2) the capacityof the parties to execute the contract; 3) money property or industry contribution; 4) community of funds and interest,mentioning equality of the partners or one having a proportionate share in the benefits; and 5) intention to divide theprofits, being the true test of the partnership. The intention to join in the business venture for the purpose of obtainingprofits thereafter to be divided, must be established. We cannot see these elements from the testimonial evidence of theappellees.

As can be seen, the appellate court disputed and differed from the trial court which had adjudged that TAN ENG KEE andTAN ENG LAY had allegedly entered into a joint venture. In this connection, we have held that whether a partnershipexists is a factual matter; consequently, since the appeal is brought to us under Rule 45, we cannot entertain inquiriesrelative to the correctness of the assessment of the evidence by the court a quo. 13 Inasmuch as the Court of Appeals and








the trial court had reached conflicting conclusions, perforce we must examine the record to determine if the reversal was justified.The primordial issue here is whether Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber. A contract of partnership is defined by law as one where:. . . two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intentionof dividing the profits among themselves.Two or more persons may also form a partnership for the exercise of a profession.14

Thus, in order to constitute a partnership, it must be established that (1) two or more persons bound themselves tocontribute money, property, or industry to a common fund, and (2) they intend to divide the profits amongthemselves.15 The agreement need not be formally reduced into writing, since statute allows the oral constitution of apartnership, save in two instances: (1) when immovable property or real rights are contributed, 16 and (2) when thepartnership has a capital of three thousand pesos or more. 17 In both cases, a public instrument is required.18 An inventoryto be signed by the parties and attached to the public instrument is also indispensable to the validity of the partnershipwhenever immovable property is contributed to the partnership.19

The trial court determined that Tan Eng Kee and Tan Eng Lay had entered into a joint venture, which it said is akin to aparticular partnership.20 A particular partnership is distinguished from a joint adventure, to wit:(a) A joint adventure (an American concept similar to our joint accounts) is a sort of informal partnership, with no firmname and no legal personality. In a joint account, the participating merchants can transact business under their ownname, and can be individually liable therefor.(b) Usually, but not necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the business of pursuing to a successful termination may continue for a number of years; a partnership generally relates to a continuingbusiness of various transactions of a certain kind.21

A joint venture "presupposes generally a parity of standing between the joint co-ventures or partners, in which each party

has an equal proprietary interest in the capital or property contributed, and where each party exercises equal rights in theconduct of the business."22 Nonetheless, in Aurbach, et. al. v. Sanitary Wares Manufacturing Corporation, et. al., 23 weexpressed the view that a joint venture may be likened to a particular partnership, thus:The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been generallyunderstood to mean an organization formed for some temporary purpose. (Gates v. Megargel, 266 Fed. 811 [1920]) It ishardly distinguishable from the partnership, since their elements are similar — community of interest in the business,sharing of profits and losses, and a mutual right of control. (Blackner v. McDermott, 176 F. 2d. 498, [1949]; Carboneau v.Peterson, 95 P.2d., 1043 [1939]; Buckley v. Chadwick, 45 Cal. 2d. 183, 288 P.2d. 12 289 P.2d. 242 [1955]). The maindistinction cited by most opinions in common law jurisdiction is that the partnership contemplates a general business withsome degree of continuity, while the joint venture is formed for the execution of a single transaction, and is thus of atemporary nature. (Tufts v. Mann. 116 Cal. App. 170, 2 P. 2d. 500 [1931]; Harmon v. Martin, 395 Ill. 595, 71 NE 2d. 74[1947]; Gates v. Megargel 266 Fed. 811 [1920]). This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or universal, and a particular partnership may have for its object a specific

undertaking. (Art. 1783, Civil Code). It would seem therefore that under Philippine law, a joint venture is a form of partnership and should thus be governed by the law of partnerships. The Supreme Court has however recognized adistinction between these two business forms, and has held that although a corporation cannot enter into a partnershipcontract, it may however engage in a joint venture with others. (At p. 12, Tuazon v. Bolaños, 95 Phil. 906 [1954]) (Camposand Lopez-Campos Comments, Notes and Selected Cases, Corporation Code 1981).Undoubtedly, the best evidence would have been the contract of partnership itself, or the articles of partnership but thereis none. The alleged partnership, though, was never formally organized. In addition, petitioners point out that the New CivilCode was not yet in effect when the partnership was allegedly formed sometime in 1945, although the contrary may wellbe argued that nothing prevented the parties from complying with the provisions of the New Civil Code when it took effecton August 30, 1950. But all that is in the past. The net effect, however, is that we are asked to determine whether apartnership existed based purely on circumstantial evidence. A review of the record persuades us that the Court of

Appeals correctly reversed the decision of the trial court. The evidence presented by petitioners falls short of the quantumof proof required to establish a partnership.Unfortunately for petitioners, Tan Eng Kee has passed away. Only he, aside from Tan Eng Lay, could have expounded onthe precise nature of the business relationship between them. In the absence of evidence, we cannot accept as anestablished fact that Tan Eng Kee allegedly contributed his resources to a common fund for the purpose of establishing apartnership. The testimonies to that effect of petitioners' witnesses is directly controverted by Tan Eng Lay. It should benoted that it is not with the number of witnesses wherein preponderance lies;24 the quality of their testimonies is to beconsidered. None of petitioners' witnesses could suitably account for the beginnings of Benguet Lumber Company, exceptperhaps for Dionisio Peralta whose deceased wife was related to Matilde Abubo. 25 He stated that when he met Tan EngKee after the liberation, the latter asked the former to accompany him to get 80 pieces of G.I. sheets supposedly ownedby both brothers.26Tan Eng Lay, however, denied knowledge of this meeting or of the conversation between Peralta andhis brother .27 Tan Eng Lay consistently testified that he had his business and his brother had his, that it was only later onthat his said brother, Tan Eng Kee, came to work for him. Be that as it may, co-ownership or co-possession (specificallyhere, of the G.I. sheets) is not an indicium of the existence of a partnership.28

Besides, it is indeed odd, if not unnatural, that despite the forty years the partnership was allegedly in existence, Tan EngKee never asked for an accounting. The essence of a partnership is that the partners share in the profits and

losses.29 Each has the right to demand an accounting as long as the partnership exists. 30 We have allowed a scenariowherein "[i]f excellent relations exist among the partners at the start of the business and all the partners are moreinterested in seeing the firm grow rather than get immediate returns, a deferment of sharing in the profits is perfectlyplausible."31 But in the situation in the case at bar, the deferment, if any, had gone on too long to be plausible. A person ispresumed to take ordinary care of his concerns.32 As we explained in another case:In the first place, plaintiff did not furnish the supposed P20,000.00 capital. In the second place, she did not furnish anyhelp or intervention in the management of the theatre. In the third place, it does not appear that she has even demanded from defendant any accounting of the expenses and earnings of the business. Were she really a partner, her first concernshould have been to find out how the business was progressing, whether the expenses were legitimate, whether theearnings were correct, etc. She was absolutely silent with respect to any of the acts that a partner should have done ; allthat she did was to receive her share of P3,000.00 a month, which cannot be interpreted in any manner than a paymentfor the use of the premises which she had leased from the owners. Clearly, plaintiff had always acted in accordance with
















































the original letter of defendant of June 17, 1945 (Exh. "A"), which shows that both parties considered this offer as the realcontract between them.33 [emphasis supplied]

A demand for periodic accounting is evidence of a partnership.34 During his lifetime, Tan Eng Kee appeared never to havemade any such demand for accounting from his brother, Tang Eng Lay.This brings us to the matter of Exhibits "4" to "4-U" for private respondents, consisting of payrolls purporting to show thatTan Eng Kee was an ordinary employee of Benguet Lumber, as it was then called. The authenticity of these documentswas questioned by petitioners, to the extent that they filed criminal charges against Tan Eng Lay and his wife andchildren. As aforesaid, the criminal cases were dismissed for insufficiency of evidence. Exhibits "4" to "4-U" in fact showsthat Tan Eng Kee received sums as wages of an employee. In connection therewith, Article 1769 of the Civil Codeprovides:In determining whether a partnership exists, these rules shall apply:(1) Except as provided by Article 1825, persons who are not partners as to each other are not partners as to thirdpersons;(2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-possessorsdo or do not share any profits made by the use of the property;(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a

joint or common right or interest in any property which the returns are derived;(4) The receipt by a person of a share of the profits of a business is a prima facie evidence that he is a partner in thebusiness, but no such inference shall be drawn if such profits were received in payment:(a) As a debt by installment or otherwise;(b) As wages of an employee or rent to a landlord;(c) As an annuity to a widow or representative of a deceased partner;(d) As interest on a loan, though the amount of payment vary with the profits of the business;

(e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.In the light of the aforequoted legal provision, we conclude that Tan Eng Kee was only an employee, not a partner. Even if the payrolls as evidence were discarded, petitioners would still be back to square one, so to speak, since they did notpresent and offer evidence that would show that Tan Eng Kee received amounts of money allegedly representing hisshare in the profits of the enterprise. Petitioners failed to show how much their father, Tan Eng Kee, received, if any, ashis share in the profits of Benguet Lumber Company for any particular period. Hence, they failed to prove that Tan EngKee and Tan Eng Lay intended to divide the profits of the business between themselves, which is one of the essentialfeatures of a partnership.Nevertheless, petitioners would still want us to infer or believe the alleged existence of a partnership from this set of circumstances: that Tan Eng Lay and Tan Eng Kee were commanding the employees; that both were supervising theemployees; that both were the ones who determined the price at which the stocks were to be sold; and that both placedorders to the suppliers of the Benguet Lumber Company. They also point out that the families of the brothers Tan EngKee and Tan Eng Lay lived at the Benguet Lumber Company compound, a privilege not extended to its ordinary

employees.However, private respondent counters that:Petitioners seem to have missed the point in asserting that the above enumerated powers and privileges granted in favor of Tan Eng Kee, were indicative of his being a partner in Benguet Lumber for the following reasons:(i) even a mere supervisor in a company, factory or store gives orders and directions to his subordinates. So long,therefore, that an employee's position is higher in rank, it is not unusual that he orders around those lower in rank.(ii) even a messenger or other trusted employee, over whom confidence is reposed by the owner, can order materialsfrom suppliers for and in behalf of Benguet Lumber. Furthermore, even a partner does not necessarily have to performthis particular task. It is, thus, not an indication that Tan Eng Kee was a partner.(iii) although Tan Eng Kee, together with his family, lived in the lumber compound and this privilege was not accorded toother employees, the undisputed fact remains that Tan Eng Kee is the brother of Tan Eng Lay . Naturally, close personalrelations existed between them. Whatever privileges Tan Eng Lay gave his brother, and which were not given the other employees, only proves the kindness and generosity of Tan Eng Lay towards a blood relative.(iv) and even if it is assumed that Tan Eng Kee was quarreling with Tan Eng Lay in connection with the pricing of stocks,this does not adequately prove the existence of a partnership relation between them. Even highly confidential employees







Documents

Legal Acctng Cases