Balus vs. Balus

Co-ownership over a foreclosed property is not transmitted to the heirs if ownership was lost by the decedent during his lifetime, and an extrajudicial settlement partitioning the property does not create an enforceable agreement to continue co-ownership and repurchase the property from a third party absent an express stipulation.

Spouses Rufo and Sebastiana Balus owned a parcel of land in Iligan City. Sebastiana died in 1978. In 1979, Rufo mortgaged the property to the Rural Bank of Maigo but subsequently defaulted on the loan. The bank foreclosed on the mortgage and consolidated ownership in 1984, before Rufo's death in July of that year. In 1989, the heirs executed an extrajudicial settlement dividing the property into three portions while acknowledging the mortgage and expressing intent to redeem. Respondents ultimately purchased the property from the bank in 1992, prompting petitioner to assert a right to retain his portion.

• Ownership and Mortgage: Rufo Balus exclusively owned a 3.0740-hectare parcel of land. On January 3, 1979, he mortgaged the property as security for a loan obtained from the Rural Bank of Maigo.
• Foreclosure: Rufo failed to pay the loan. The bank foreclosed the mortgage, purchased the property as the sole bidder at a public auction on November 20, 1981, and, after the redemption period lapsed, acquired a Definite Deed of Sale on January 25, 1984. A new title was issued in the bank's name during Rufo's lifetime.
• Death of the Decedent: Sebastiana Balus died on September 6, 1978. Rufo Balus died on July 6, 1984.
• Extrajudicial Settlement: On October 10, 1989, petitioner and respondents executed an Extrajudicial Settlement of Estate, adjudicating to each a specific one-third portion of the property consisting of 10,246 square meters. The document contained provisions where the parties admitted knowledge of the mortgage and expressed their intention to redeem the property.
• Repurchase by Respondents: On October 12, 1992, respondents bought the property from the bank. A Deed of Sale of Registered Land was executed, and a new title was issued in their names. Petitioner continued to possess the lot.
• Demand to Vacate: Respondents informed petitioner of their ownership and demanded he surrender possession, but he refused. Respondents claimed they exhausted all remedies for amicable settlement to no avail.

• Persistence of Co-ownership: Petitioner insisted that co-ownership persisted even after the property was purchased by the bank and title transferred, by virtue of the parties' agreement prior to the repurchase by respondents.
• Extrajudicial Settlement as Binding Contract: Petitioner contended that the Extrajudicial Settlement was an independent contract containing an agreement to continue co-ownership by redeeming or repurchasing the property from the bank, which binds the respondents as the law between the parties.
• Right to Reimbursement: Petitioner asserted that respondents' purchase of the property without notifying him inured to his benefit, giving him the right to claim his one-third portion by reimbursing respondents the equivalent one-third of the sum they paid to the bank.

• Extinguishment of Co-ownership: Respondents countered that when the property was not redeemed within the redemption period and ownership consolidated in the bank, any co-ownership among the heirs was extinguished.
• Right to Possession: Respondents argued that as the absolute owners of the property by virtue of the purchase from the bank, they were entitled to possession, and petitioner had no legal basis to remain on the property.

• Transmissibility of Co-ownership: Whether co-ownership among petitioner and respondents over the property persisted even after the transfer of title to the bank by virtue of the parties' agreement prior to the repurchase by respondents, warranting petitioner's act of enforcing the agreement by reimbursing respondents his just share of the repurchase price.

• Transmissibility of Co-ownership: Co-ownership did not persist, and petitioner cannot enforce a right to reimburse respondents. The property was exclusively owned by Rufo and was foreclosed and transferred to the bank during his lifetime. Because inheritance consists only of property existing at the time of death, the property did not form part of Rufo's estate, and no co-ownership was transmitted to the heirs. Furthermore, the Extrajudicial Settlement contained no express stipulation to continue co-ownership and repurchase the property; interpreting it as such would be absurd and illogical. The settlement's clear intent was to partition the property, an act that seeks to end co-ownership rather than perpetuate it. Petitioner's claim of intent to repurchase was also contradicted by his own admission that he refused the bank's offer to resell the property to him.

• Succession — The rights to a person's succession are transmitted from the moment of death. The inheritance consists of the property and transmissible rights and obligations existing at the time of death. Property lost by the decedent during his lifetime does not form part of his estate and cannot be transmitted to his heirs.
• Interpretation of Contracts — The intention of the parties is accorded primordial consideration, determined from the express terms of the agreement as well as their contemporaneous and subsequent acts. Absurd and illogical interpretations should be avoided.
• Partition — Partition calls for the segregation and conveyance of a determinate portion of the property owned in common, severing the individual interests of each co-owner and vesting in each a sole estate in a specific property. The purpose of partition is to put an end to co-ownership.

• "Since Rufo lost ownership of the subject property during his lifetime, it only follows that at the time of his death, the disputed parcel of land no longer formed part of his estate to which his heirs may lay claim. Stated differently, petitioner and respondents never inherited the subject lot from their father."
• "In the present case, however, there is nothing in the subject Extrajudicial Settlement to indicate any express stipulation for petitioner and respondents to continue with their supposed co-ownership of the contested lot."
• "For petitioner to claim that the Extrajudicial Settlement is an agreement between him and his siblings to continue what they thought was their ownership of the subject property, even after the same had been bought by the Bank, is stretching the interpretation of the said Extrajudicial Settlement too far."
• "In other words, the purpose of partition is to put an end to co-ownership, an objective which negates petitioner's claims in the present case."

• Aliño v. Heirs of Angelica A. Lorenzo, G.R. No. 159550 (2008) — Cited for the principle that the intention of the parties is accorded primordial consideration in the interpretation of contracts.
• TSPIC Corporation v. TSPIC Employees Union (FFW), G.R. No. 163419 (2008) — Cited for the rule that courts must place a practical and realistic construction on contracts, giving due consideration to the context and purpose, and avoiding absurd and illogical interpretations.
• Tating v. Marcella, G.R. No. 155208 (2007) — Cited for the principle that the intention of the parties is determined from the express terms of their agreement, as well as their contemporaneous and subsequent acts.
• Arbolario v. Court of Appeals, 449 Phil. 357 (2003) — Cited for the definition of partition as the segregation and conveyance of a determinate portion of the property in common, which seeks a severance of individual interests.
• Cruz v. Court of Appeals, G.R. No. 122904 (2005); Lopez v. Court of Appeals, 446 Phil. 722 (2003) — Cited for the doctrine that the purpose of partition is to put an end to co-ownership.

• Article 777, Civil Code — Provides that the rights to the succession of a person are transmitted from the moment of his death. Applied to establish that the heirs could only inherit what the decedent owned at the time of his death, which excluded the foreclosed property.
• Article 781, Civil Code — Provides that the inheritance includes the property and transmissible rights and obligations existing at the time of death, as well as those accrued thereto since the opening of the succession. Applied to reinforce that the property was not part of the inheritance since it was lost during the decedent's lifetime.
• Article 1315, Civil Code — Provides that contracts are perfected by mere consent and bind the parties to what has been expressly stipulated and all consequences in keeping with good faith, usage, and law. Petitioner invoked this to argue the Extrajudicial Settlement bound respondents to continue co-ownership, but the Court found no such stipulation existed.
• Article 1306, Civil Code — Provides that contracting parties may establish stipulations not contrary to law, morals, good customs, public order, or public policy. Referenced regarding the parties' freedom to agree, though no express agreement to continue co-ownership was found.

Renato C. Corona (Chairperson), Presbitero J. Velasco, Jr., Antonio Eduardo B. Nachura, Jose C. Mendoza