Chua vs. Absolute Management Corporation

A trial court commits grave abuse of discretion when it denies a motion for examination under Section 6, Rule 87 of the Rules of Court on the ground that it constitutes a "fishing expedition," because the rule expressly authorizes the examination of persons suspected of having concealed, embezzled, or fraudulently conveyed away properties of the deceased, and such examination is a preparatory step sanctioned by the Rules for eliciting information or securing evidence.

The case involves the settlement of the intestate estate of the deceased Jose L. Chua, with Betty T. Chua appointed as administratrix. Respondent Absolute Management Corporation is a creditor of the deceased, having filed a claim against the estate in the amount of ₱63,699,437.74. The dispute centers on shares of stock in Ayala Sales Corporation and Ayala Construction Supply, Inc. that were allegedly transferred by the decedent to third parties prior to his death, and which were not included in the inventory of estate assets. Section 6, Rule 87 of the Rules of Court provides the procedural mechanism for examining persons suspected of concealing or conveying away estate properties.

Sometime in 1999, Jennifer T. Chua-Locsin, Benison T. Chua, and Baldwin T. Chua filed a petition for letters of administration with the Regional Trial Court, Branch 112, Pasay City, for the intestate estate of the deceased Jose L. Chua. Betty T. Chua was appointed administratrix and thereafter submitted to the trial court an inventory of all the real and personal properties of the deceased.

Absolute Management Corporation, a creditor of the deceased, filed a claim against the estate in the amount of ₱63,699,437.74. As administratrix, Betty T. Chua tentatively accepted said amount as correct, with a statement that it shall be reduced or adjusted as additional evidence may warrant. In the interim, Absolute noticed that the deceased's shares of stock with Ayala Sales Corporation and Ayala Construction Supply, Inc. were not included in the inventory of assets. Absolute filed a motion to require Betty T. Chua to explain why she did not report these shares in the inventory. Through a reply, Betty T. Chua alleged that these shares had already been assigned and transferred to other parties prior to the death of her husband, Jose L. Chua, attaching deeds of assignment which allegedly constituted proofs of transfer. Judge Dumatol accepted the explanation as meritorious.

Absolute, suspecting that the documents attached to Betty T. Chua's reply were spurious and simulated, filed a motion for the examination of the supposed transferees, premised on Section 6, Rule 87 of the Revised Rules of Court. Petitioners opposed the motion on the ground that this provision bears no application to the case. On February 7, 2000, Judge Dumatol issued the assailed order denying the motion, stating that it "in effect seeks to engage in a fishing expedition for evidence to be used against the administratrix and others whom it seeks to examine."

During the hearing before the Court of Appeals, Absolute presented evidence to support its assertion that the transfers of the shares were spurious, including: (a) a certification from the Office of the Clerk of Court of the RTC of Pasay City that Atty. Hilarion A.D. Maagad, the notary public who notarized the questioned Secretary's Certificate and Deeds of Assignment of Shares of Stock, is not listed in the Roll of Notaries Public for Pasay City for the periods 1993-1994, 1994-1995, 1998-1999, and 1999-2000; (b) a certification from the Clerk of Court of the RTC of Makati City that the questioned Secretary's Certificate was not included in the Notarial Report of Atty. Lope M. Velasco for the years 1998-1999; and (c) certifications that the questioned Deeds of Assignment of Shares of Stock were not included in the Notarial Report of Atty. Lope M. Velasco for the years 1998-1999. The Court of Appeals set aside the trial court's order, pointing out that the presentation of the deeds of assignment executed by the decedent does not automatically negate the existence of concealment, as it is a common occurrence in estate proceedings for heirs to execute simulated deeds of transfer which conceal and place properties of the decedent beyond the reach of creditors.

• Nature of Section 6, Rule 87: Petitioners argued that the Court should rule on whether Section 6, Rule 87 of the Rules of Court is mandatory or merely directory on the trial court, contending that the provision's permissive language ("may cite") renders the examination discretionary.
• Procedural Infirmities — Certification Against Forum Shopping: Petitioners pointed out that counsel for Absolute, not the proper officers of Absolute, filed the Certification against Forum Shopping, which should have warranted dismissal of the petition before the Court of Appeals.
• Procedural Infirmities — Duplicate Original Copy: Petitioners claimed that Absolute attached only a duplicate original copy of the challenged order of the trial court to the petition submitted to the Court of Appeals, allegedly violating Section 1, Rule 65 of the 1997 Rules of Civil Procedure which requires a certified true copy.
• Procedural Infirmities — Proof of Service: Petitioners argued that no proper proof of service accompanied the petition submitted to the Court of Appeals.
• Propriety of Certiorari: Petitioners quoted Arcega and Miranda vs. Pecson and Arcega to question the propriety of filing a petition for certiorari before the Court of Appeals, arguing that certiorari is not an appropriate remedy under Section 6, Rule 87.

• Grave Abuse of Discretion: Absolute claimed that the trial court committed grave abuse of discretion in denying its Motion and in failing to act on its claim, depriving it of the right to show that the documents presented by petitioners were fictitious to the prejudice of Absolute.
• Purpose of the Examination: Absolute's Motion for examination was intended merely to investigate and take testimony in preparation for an independent action, as a preparatory move sanctioned by the Rules of Court.

• Examination of Suspected Persons: Whether the Court of Appeals correctly ordered the trial court to give due course to Absolute's Motion for Examination under Section 6, Rule 87 of the Rules of Court.
• Certification Against Forum Shopping: Whether the Court of Appeals should have dismissed Absolute's petition because counsel for Absolute, not the proper officers, filed the Certification against Forum Shopping.
• Duplicate Original Copy: Whether the attachment of a duplicate original copy of the challenged order instead of a certified true copy warranted dismissal of the petition.
• Proof of Service: Whether the absence of proper proof of service accompanying the petition warranted dismissal.
• Propriety of Certiorari: Whether certiorari under Rule 65 was the proper remedy to challenge the denial of the Motion for Examination.

• Examination of Suspected Persons: Yes. The Court of Appeals correctly ordered the trial court to give due course to the Motion for Examination. Section 6, Rule 87 of the Rules of Court authorizes the examination of persons suspected of having concealed, embezzled, or conveyed away properties of the deceased, and the presentation of deeds of assignment does not automatically negate concealment.
• Certification Against Forum Shopping: No. The subsequent filing of an affidavit of non-forum shopping signed by the corporate director cured the defect, as substantial compliance is sufficient under prevailing jurisprudence.
• Duplicate Original Copy: No. Under Section 3, Rule 46 of the 1997 Rules of Civil Procedure, as amended by Circular No. 39-98, either a certified true copy or a duplicate original copy may be attached to the petition.
• Proof of Service: No. The affidavit of service executed by counsel stating that he served a copy of the petition by registered mail with the corresponding registry receipts constitutes sufficient proof of service, complying with Section 13, Rule 13 of the 1997 Rules of Civil Procedure.
• Propriety of Certiorari: Yes. The denial of the Motion was an interlocutory order not subject to appeal, but may be challenged before a superior court through a petition for certiorari under Rule 65.

• Examination of Suspected Persons: Section 6, Rule 87 of the Rules of Court seeks to secure evidence from persons suspected of having possession or knowledge of the properties left by a deceased person, or of having concealed, embezzled, or conveyed any of the properties of the deceased. The court which acquires jurisdiction over the properties of a deceased person through the filing of the corresponding proceedings has supervision and control over these properties. The trial court has the inherent duty to see to it that the inventory of the administrator lists all the properties, rights, and credits which the law requires the administrator to include in his inventory. In compliance with this duty, the court also has the inherent power to determine what properties, rights, and credits of the deceased the administrator should include or exclude in the inventory. An heir or person interested in the properties of a deceased may call the court's attention that certain properties, rights, or credits are left out from the inventory, and it is the court's duty to hear the observations of such party. However, in such proceedings the trial court has no authority to decide whether the properties belong to the estate or to the persons examined; if after such examination there is good reason to believe that the person examined is keeping properties belonging to the estate, then the administrator should file an ordinary action in court to recover the same. In the present case, some of the transferees of the shares of stock do not appear to be heirs of the decedent nor parties to the intestate proceedings. Third persons to whom the decedent's assets had been conveyed may be cited to appear in court and examined under oath as to how they came into possession of the decedent's assets. Petitioners' admission that these persons are the decedent's assignees does not automatically negate concealment of the decedent's assets on their part, as the assignment might be simulated so as to place the shares beyond the reach of creditors. The inventory is merely provisional and is not determinative of the issue of ownership; a separate action is necessary for determination of ownership and recovery of possession.

• Certification Against Forum Shopping: The petition filed before the Court of Appeals contained a certificate of non-forum shopping executed by counsel and not by the authorized officer of Absolute. However, the subsequent filing of an affidavit of non-forum shopping signed by the corporate director cured this defect. In Maricalum Mining Corp. vs. National Labor Relations Commission, the Court held that a slight delay in the filing of an affidavit of non-forum shopping should not defeat the action. A liberal interpretation of the rules is more in keeping with the objective to "secure a just, speedy and inexpensive disposition of every action and proceeding." As held in Loyola vs. Court of Appeals, substantial compliance is sufficient. While submission of the certificate of non-forum shopping is mandatory, the requirement must not be interpreted too literally to defeat the objective of preventing the undesirable practice of forum shopping. Technical rules of procedure should be used to promote, not frustrate, justice.

• Duplicate Original Copy: Petitioners' claim that the attachment of a mere duplicate original copy of the assailed order violates the express mandate of Section 1, Rule 65 of the 1997 Rules of Civil Procedure is unavailing. Under Section 3, Rule 46 of the 1997 Rules of Civil Procedure, as amended by Circular No. 39-98, either a certified true copy or a duplicate original copy may be attached to the petition.

• Proof of Service: The affidavit of service executed by petitioners' counsel stating that he served a copy of the petition by registered mail to respondents with the corresponding registry receipts constitutes sufficient proof of service, complying with Section 13, Rule 13 of the 1997 Rules of Civil Procedure.

• Propriety of Certiorari: The facts in Arcega are not on all fours with the facts in the instant case. In Arcega, the judge granted the examination but only with respect to three of the several lots involved, while in the present case there was an absolute refusal by the trial court to conduct an examination on the ground that it would constitute a "fishing expedition" of evidence. In Arcega, the trial court issued an order in favor of the person suspected of having concealed properties of the estate and against the special administratrix and the judicial receiver, while in the present case Absolute as a creditor of the decedent filed the petition after the trial court denied its Motion for examination. Although as a creditor Absolute does have the remedy of filing another case to recover such properties under Section 10, Rule 87, its Motion for examination was intended merely to investigate and take testimony in preparation for an independent action. Aside from the administratrix and the heirs of the decedent, Absolute also sought to examine the supposed assignees of the decedent's shares, who are third persons with respect to the probate proceedings. The Motion was a preparatory move sanctioned by the Rules of Court. The denial of Absolute's Motion was an interlocutory order not subject to appeal, but may be challenged before a superior court through a petition for certiorari under Rule 65.

• Examination of persons suspected of concealing estate properties (Section 6, Rule 87, Rules of Court) — The rule authorizes the court having jurisdiction over the estate to cite and examine under oath any person suspected of having concealed, embezzled, or fraudulently conveyed away any money, goods, or chattels of the deceased, or who has in his possession or knowledge any deed, conveyance, bond, contract, or other writing containing evidence of or tending to disclose the right, title, interest, or claim of the deceased. The examination is a preparatory step for eliciting information or securing evidence, and the court's denial of such motion on the ground that it constitutes a "fishing expedition" constitutes grave abuse of discretion. The court, however, has no authority in such proceedings to decide ownership of the properties; a separate ordinary action is necessary for recovery.

• Substantial compliance with the certification against forum shopping — While submission of the certificate of non-forum shopping is mandatory, substantial compliance is sufficient. A slight delay in the filing of an affidavit of non-forum shopping signed by the corporate director cures the defect of a certificate executed by counsel, as technical rules of procedure should be used to promote, not frustrate, justice.

• Interlocutory orders and certiorari under Rule 65 — The denial of a motion for examination under Section 6, Rule 87 is an interlocutory order not subject to appeal, but may be challenged before a superior court through a petition for certiorari under Rule 65.

• "Section 6 of Rule 87 seeks to secure evidence from persons suspected of having possession or knowledge of the properties left by a deceased person, or of having concealed, embezzled or conveyed any of the properties of the deceased." — This passage defines the purpose of the rule and establishes the foundation for the Court's ruling that the examination is a legitimate preparatory step sanctioned by the Rules of Court.

• "Petitioners' admission that these persons are the decedent's assignees does not automatically negate concealment of the decedent's assets on their part. The assignment might be simulated so as to place the shares beyond the reach of creditors." — This statement articulates the core rationale for allowing the examination despite the presentation of deeds of assignment, recognizing the possibility of simulated transfers to defraud creditors.

• "Technical rules of procedure should be used to promote, not frustrate, justice. While the swift unclogging of court dockets is a laudable objective, the granting of substantial justice is an even more urgent ideal." — This passage supports the Court's liberal application of procedural rules regarding the certification against forum shopping and other alleged procedural infirmities.

• Modesto vs. Modesto, et al., 105 Phil. 1067 (1959) — Cited for the proposition that Section 6, Rule 87 seeks to secure evidence from persons suspected of concealing estate properties, and that the trial court has no authority to decide ownership in such proceedings; a separate action is necessary for recovery.
• Garcia vs. Garcia, 67 Phil. 353 (1939) — Cited for the principle that the court has the inherent duty to ensure the administrator's inventory lists all properties, rights, and credits of the deceased, and the inherent power to determine what should be included or excluded.
• Alafriz vs. Mina, 28 Phil. 137 (1914) — Cited for the proposition that inclusion of certain shares of stock by the administrator in the inventory does not automatically deprive the assignees of their shares, as they have a right to be heard on the question of ownership.
• Sebial vs. Sebial, No. L-23419, 27 June 1975, 64 SCRA 385 — Cited for the rule that third persons to whom the decedent's assets had been conveyed may be cited to appear in court and examined under oath as to how they came into possession of the decedent's assets.
• Valera vs. Inserto, No. L-56504, 7 May 1987, 149 SCRA 533 — Cited for the proposition that the inventory is merely provisional and not determinative of ownership, and that a separate action is necessary for determination of ownership and recovery of possession.
• Maricalum Mining Corp. vs. National Labor Relations Commission, 358 Phil. 864 (1998) — Followed for the rule that a slight delay in the filing of an affidavit of non-forum shopping should not defeat the action.
• Loyola vs. Court of Appeals, 315 Phil. 529 (1995) — Followed for the principle that substantial compliance with the certification against forum shopping requirement is sufficient.
• Bernardo vs. NLRC, 325 Phil. 371 (1996) — Cited in support of the liberal interpretation of the certification against forum shopping requirement.
• Shipside Incorporated vs. Court of Appeals, G.R. No. 143377, 20 February 2001, 352 SCRA 334 — Cited for the principle that technical rules of procedure should be used to promote, not frustrate, justice.
• Arcega and Miranda vs. Pecson and Arcega, 78 Phil. 743 (1947) — Distinguished; the facts in Arcega are not on all fours with the instant case because in Arcega the judge granted the examination partially, while in the present case there was an absolute refusal to conduct the examination.
• Mallari vs. Mallari, 92 Phil. 694 (1952) — Cited for the proposition that the Motion for examination was intended merely to investigate and take testimony in preparation for an independent action.

• Section 6, Rule 87, Rules of Court — The central provision in this case, which provides that when a person is suspected of having concealed, embezzled, or conveyed away any of the properties of the deceased, the court may cite such suspected person to appear before it and examine him on oath on the matter of such complaint. The Court held that this provision authorizes the examination sought by Absolute and that the trial court's denial constituted grave abuse of discretion.
• Section 10, Rule 87, Rules of Court — Cited to acknowledge that Absolute, as a creditor, has the remedy of filing another case to recover properties fraudulently conveyed, but the Court noted that the Motion for examination was intended merely to investigate and take testimony in preparation for an independent action.
• Section 1, Rule 65, 1997 Rules of Civil Procedure — Cited by petitioners to argue that the petition should be accompanied by a certified true copy of the judgment, order, or resolution subject thereof; the Court found this argument unavailing in light of Section 3, Rule 46.
• Section 3, Rule 46, 1997 Rules of Civil Procedure, as amended by Circular No. 39-98 — Applied to allow either a certified true copy or a duplicate original copy of the challenged order to be attached to the petition.
• Section 13, Rule 13, 1997 Rules of Civil Procedure — Applied to find that the affidavit of service executed by counsel stating that he served a copy of the petition by registered mail with the corresponding registry receipts constitutes sufficient proof of service.

Davide, Jr., C.J. (Chairman), Vitug, and Azcuna, JJ., concurred. Ynares-Santiago, J., was on leave.