Dael vs. Intermediate Appellate Court

Where the liquidation of the conjugal partnerships of two or more marriages contracted by the same person is carried out simultaneously and there is no evidence showing the capital or the conjugal property belonging to each partnership to be liquidated, the total mass of the partnership property shall be divided between the different partnerships in proportion to the duration of each and to the property belonging to the respective spouses. The properties acquired during the second marriage cannot be adjudicated in their entirety to the first conjugal partnership merely because the business that generated them originated during the first marriage.

Cesario Cabutihan was first married to Bienvenida Durana in February 1942, and the union produced five legitimate children, all surnamed Cabutihan. Bienvenida died on May 2, 1957, and less than a year later, on April 6, 1958, Cesario married her sister, Victorina Durana. The second marriage produced no issue. During that marriage the spouses engaged in a copra business and a public transportation business, with Victorina managing the copra business. Cesario died on June 9, 1972, and Victorina died intestate on August 1, 1977 in Manila. Victorina's heirs are the children of her two sisters and a brother — Bienvenida Durana, Soledad Durana, and Federico Durana Sr. — so that the parties to the settlement proceeding are the Cabutihan children of the first marriage on one side and the Dael and Durana nephews and nieces of Victorina on the other. The settlement of Victorina's estate thus required the prior determination of what property actually pertained to her, an inquiry that necessarily reached back into the unliquidated conjugal partnership of the first marriage.

Cesario Cabutihan first married Bienvenida Durana in February 1942, and the union produced five legitimate children: Nonilon, Carmencita, Romulo, Lermo, and Bienvenido, all surnamed Cabutihan. Bienvenida died on May 2, 1957. Less than a year later, on April 6, 1958, Cesario married her sister, Victorina Durana. The second marriage produced no issue. During that marriage the spouses engaged in a copra business and a public transportation business, with Victorina managing the copra business. Cesario died on June 9, 1972, and Victorina died intestate on August 1, 1977 in Manila. Victorina's heirs are the children of her two sisters and a brother: Bienvenida Durana, whose children are the petitioner Carmencita and the intervenors; Soledad Durana, mother of Evaristo, Domingo Jr., Lucilda, and Conrado, all surnamed Dael; and Federico Durana Sr., father of Federico Jr., Flordelizada, Fredisvinda, Fabian, and Fe Patricio, all surnamed Durana. The relationship of all the parties to Victorina and their right to inherit from her were undisputed.

After Cesario's death, Victorina and the private respondents executed an extrajudicial settlement of his estate on December 30, 1973, under which Victorina was adjudicated the copra business and some of the vehicles used in the transportation business. The vehicles were subsequently transferred to the private respondents by a deed of sale dated July 24, 1978.

Carmencita Cabutihan commenced the case by filing a petition for the settlement of Victorina's intestate estate, in which she also prayed for her appointment as administratrix. The petitioners filed an opposition asking that letters of administration be issued instead to petitioner Lucilda Dael, while the other private respondents intervened on their own motion. On December 22, 1977, Honesto, Democrito, and David Cabutihan filed a claim against the estate for P70,350.82, representing the value of the harvest of their property entrusted to Victorina for her copra business, which she failed to pay before her death. Amado Zoleta was appointed special administrator on May 24, 1978 and, upon order of the probate court, submitted an inventory of the estate's properties on August 30, 1978 consisting of twenty parcels of land valued at P69,340.00, cash in bank of P140,079.41, cattle and livestock valued at P7,200.00, furniture valued at P5,120.00, fixtures of P1,300.00, equipment worth P11,863.00, and miscellaneous items valued at P3,038.00, for a total of P237,940.41. On January 16, 1979, a supplementary inventory was filed covering Victorina's undivided shares in Cesario's inheritance from his parents, Bartolome Cabutihan and Natividad Daelo, with a total value of P4,700.82. The properties adjudicated to Victorina in the extrajudicial settlement were included in the inventory.

Private respondents moved for disapproval of the inventories, claiming that the properties listed were either acquired during Cesario's first marriage, were merely the products or fruits of the properties of that first union, or were otherwise acquired through its funds.

The trial court found that Victorina had no paraphernal properties brought or contributed to her marriage with Cesario; that the copra business was formed in 1949 during the first marriage; that Victorina used the same facilities, credit, and capital in managing the business; and that the copra business was the main source of income of both Cesario and Victorina during their respective lifetimes. On these findings the probate court concluded that all the properties listed in the inventories in Victorina's name or jointly with Cesario did not belong to her exclusively, but were either the paraphernal property of Bienvenida, the conjugal partnership assets of the first marriage, or Cesario's capital, having been acquired or purchased out of the fruits or produce of those properties or out of the income of the copra business of the first marriage, which Victorina merely managed and administered after the owners' deaths. It accordingly disapproved both inventories and annulled the extrajudicial settlement and the deed of sale as simulated or fictitious and as involving conjugal properties of the first marriage, including properties of Bienvenida to which Victorina was not an heir.

• Continuation of the First Marital Community: Petitioners submitted that both the respondent and lower courts erred in concluding that the copra business, as well as the properties listed in the inventories as acquired during the second marriage, were assets of the conjugal partnership of the first marriage between Cesario and Bienvenida, since to so hold would in effect maintain the theory that the marital community of proprietary interest continued to exist even after the Cesario-Bienvenida conjugal partnership had been dissolved by Bienvenida's death.
• Dead Man's Statute: Petitioners questioned the approval of the claims of Democrito, Honesto, and David Cabutihan, contending that the claim was approved primarily on the basis of the testimony of claimant Democrito Cabutihan, which they asserted was inadmissible under the Dead Man's Statute or the survivorship disqualification rule.
• Withdrawal of Funds as Advance Inheritance: Petitioners challenged the order of the court below dated December 11, 1980 allowing the withdrawal of funds for distribution to the heirs as advance inheritance.
• Premature Payment of Claims: Petitioners questioned the propriety of the alleged payment of the claims of the Cabutihan brothers before the decision in the case became final and executory.

• Character of the Inventoried Properties: Private respondents moved for the disapproval of the inventories submitted by the special administrator, claiming that the properties listed therein were either acquired during the first marriage of Cesario Cabutihan, or were merely the products or fruits of the properties of that first union, or were otherwise acquired through the funds thereof.

• Liquidation of the Two Conjugal Partnerships: Whether both the respondent and lower courts erred in concluding that the copra business, as well as the properties listed in the inventories as acquired during the second marriage, are assets of the conjugal partnership of the first marriage between Cesario and Bienvenida.
• Admissibility of the Claimant's Testimony: Whether the approval of the claims of Democrito, Honesto, and David Cabutihan was proper, given petitioners' objection that the claim rested primarily on the testimony of claimant Democrito Cabutihan, allegedly inadmissible under the Dead Man's Statute.
• Withdrawal of Funds Pending Appeal: Whether the order of the court below dated December 11, 1980 allowing the withdrawal of funds for distribution to the heirs as advance inheritance was valid.
• Payment of Claims Before Finality of Judgment: Whether the alleged payment of the claims of the Cabutihan brothers before the decision became final and executory was proper.

• Liquidation of the Two Conjugal Partnerships: Yes, in part. The lower courts erred in adjudicating all the inventoried properties to the first conjugal partnership; absent proof of the capital of each partnership, Article 189 of the Civil Code requires proration of the total mass between the two partnerships in proportion to their respective durations.
• Admissibility of the Claimant's Testimony: No reversible error. The issue is academic, since the testimony of Urbano Prado and Tirso Linosa was more than sufficient to establish the claim and to bolster the supporting documentary evidence even assuming the Dead Man's Statute applied.
• Withdrawal of Funds Pending Appeal: No. The order is expressly authorized by Rule 109, Section 2 of the Rules of Court, which permits distribution of the portion of the estate unaffected by the controversy or appeal, subject to the conditions of Rule 90.
• Payment of Claims Before Finality of Judgment: Not resolved. The question requires the prior resolution of basic factual questions that this Court, not being a trier of facts, cannot pass upon; it must be threshed out in the court of origin.

• Liquidation of the Two Conjugal Partnerships: The factual findings of the trial court, being based on substantial documentary and testimonial evidence, were conceded to be entitled to weight and respect, but the conclusions drawn from them by both the court a quo and the respondent court were not. When Bienvenida Durana died on May 2, 1957, the first conjugal partnership was automatically dissolved under Article 175(i) of the Civil Code and was converted into an implied ordinary co-ownership; at that same moment the inheritance was transmitted to Bienvenida's heirs under Article 777. Cesario, Nonilon, Carmencita, Romulo, Lermo, and Bienvenido thereby acquired respective and definite rights over the one-half of the conjugal partnership property that pertained to Bienvenida. Consequently, whatever fruits or income might thereafter be derived from those properties, including the copra business, would no longer be conjugal but would belong in part to the heirs in proportion to their respective shares, while the fruits and income of the other half would belong exclusively to Cesario. The marriage of Cesario and Victorina produced its own legal consequences: from that moment the fruits or income of the separate properties of the spouses became conjugal, including those acquired through their industry, pursuant to Articles 142 and 153 of the Civil Code. Hence the fruits and income of Cesario's share in the inheritance from Bienvenida and of his conjugal share in the first partnership formed part of the conjugal partnership of the second marriage, and the fruits and income derived or acquired through those properties were likewise conjugal in nature. Ideally the first conjugal partnership should have been liquidated, but the records did not disclose the amount of its properties at the time of Bienvenida's demise, and there was a dearth of proof on the matter. What did appear evident was that, considering the continuity in the operation of the two businesses during the marital coverture between Cesario and Victorina spanning fourteen years, and the fact that after Cesario's death Victorina still actively engaged in the same business until her own death five years later, the properties enumerated in the inventories could not all have been properties of the first marriage. Guidance was therefore sought from Article 189 of the Civil Code, which provides that whenever the liquidation of the partnership of two or more marriages contracted by the same person is carried out at the same time and there is no evidence to show the capital or the conjugal property belonging to each of the partnerships to be liquidated, the total mass of the partnership property shall be divided between the different partnerships in proportion to the duration of each and to the property belonging to the respective spouses. The first marriage existed for approximately fifteen years (1942 to 1957) and the second for about fourteen years (1958 to 1972); accordingly, the first conjugal partnership was prorated 15/29 of the properties in the August 30, 1978 inventory and the second conjugal partnership 14/29 thereof. The real properties listed in the supplementary inventory of January 16, 1979 were excluded, because they definitely belonged to the estate of Cesario as his inheritance from his parents Bartolome Cabutihan and Natividad Daelo. One-half of the properties pertaining to the first conjugal partnership belongs to Cesario as his conjugal share, while the other half is considered inherited by him and his five children as the heirs of Bienvenida. The properties pertaining to the second partnership are equally divided, one-half to Cesario and the other to Victorina as their respective shares in the conjugal partnership properties, and Cesario's share is then divided among his heirs, namely, Victorina and his five children. To recapitulate, the estate of Victorina for distribution to her heirs consists of her one-half share in the conjugal properties of the second marriage and her one-sixth share in the estate of Cesario as an heir.
• Admissibility of the Claimant's Testimony: Although petitioners' arguments on the applicability of the Dead Man's Statute might have a juris tantum plausibility if considered alone, the Court saw no reason to dwell on the issue as it would be pointless. As correctly observed by the trial court, even assuming the applicability of the dead man's rule concerning the testimony of Democrito Cabutihan, the testimonies of Urbano Prado and Tirso Linosa were more than sufficient to establish the claim and to bolster the documentary evidence in support thereof as indicated in Exhibits "B", "B-1" to "B-82-claim", "C", and "C-1" inclusive.
• Withdrawal of Funds Pending Appeal: The challenged order falls within the contemplation and authority of Rule 109, Section 2 of the Rules of Court, which provides that notwithstanding a pending controversy or appeal in proceedings to settle the estate of a decedent, the court may, in its discretion and upon such terms as it may deem proper and just, permit that such part of the estate as may not be affected by the controversy or appeal be distributed among the heirs or legatees, upon compliance with the conditions set forth in Rule 90. Rule 90 in turn provides that no distribution shall be allowed until payment of the obligations mentioned therein has been made or provided for, unless the distributees or any of them give a bond in a sum fixed by the court conditioned for the payment of those obligations within such time as the court directs. While partial distribution of the decedent's estate pending final termination of the proceedings should as much as possible be discouraged, and such advances of inheritance should not be countenanced unless in extreme cases, because courts should guard with utmost zeal and jealousy the estate of the decedent so that creditors are adequately protected and all rightful heirs assured of their shares, the validity of the questioned order was sustained after due consideration of the foregoing rules. The respondent court correctly held that if the oppositors would stand to share more in the inheritance than what was fixed for them in the appealed judgment, the estate had sufficient assets to ensure an equitable distribution of the inheritance in accordance with law and the final judgment in the proceedings. Neither did it appear that there were unpaid obligations, as contemplated in Rule 90, for which provisions should have been made or a bond required. The provisions of the Rules of Court, as well as the jurisprudence thereon, were followed in this particular incident.
• Payment of Claims Before Finality of Judgment: The Court declined to rule on the propriety of the alleged payment of the claims of the Cabutihan brothers before the decision became final and executory, because it is not a trier of facts and the issue requires the prior resolution of basic factual questions — namely, whether such payment had actually been made to the claimants and the circumstances under which the same was effected. The probate court had not yet ruled on petitioners' motion to order the return of the amount paid for the claim when the petition was filed; the last action taken in the lower court was its order that the private respondents comment on the motion, but no response or subsequent development was reflected or reported. If petitioners had sufficient basis to complain on the matter, the same should be pursued and threshed out in the court below.

• Automatic dissolution of the conjugal partnership upon the death of a spouse — Under Article 175(i) of the Civil Code, the conjugal partnership of gains is dissolved by the death of either spouse. The Court applied this rule to hold that the first conjugal partnership of Cesario and Bienvenida was automatically dissolved upon Bienvenida's death on May 2, 1957, and that the properties acquired thereafter during the second marriage could not be treated as though the first marital community of proprietary interest had continued to exist.
• Conversion of the dissolved conjugal partnership into an implied ordinary co-ownership — Upon dissolution by death, the conjugal partnership is converted into an implied ordinary co-ownership among the surviving spouse and the heirs of the deceased, each holding a definite undivided interest. The Court relied on this conversion to hold that Cesario, Nonilon, Carmencita, Romulo, Lermo, and Bienvenido acquired respective and definite rights over the one-half of the conjugal property pertaining to Bienvenida, such that fruits and income thereafter derived from those properties would no longer be conjugal but would belong in part to the heirs in proportion to their respective shares.
• Transmission of inheritance at the moment of death — Under Article 777 of the Civil Code, the rights to the succession are transmitted from the moment of the death of the decedent. The Court used this principle to fix the point at which Bienvenida's heirs acquired their rights over her share of the conjugal partnership property.
• Conjugal character of the fruits of separate properties and of income from industry — Under Articles 142 and 153 of the Civil Code, the fruits or income of the separate properties of the spouses, as well as those acquired through their industry, form part of the conjugal partnership. The Court applied this rule to hold that the fruits and income of Cesario's share in the inheritance from Bienvenida, and of his conjugal share in the property of the first conjugal partnership, formed part of the conjugal partnership properties of the second marriage.
• Proration of the mass of partnership property among successive marriages (Article 189, Civil Code) — Whenever the liquidation of the partnership of two or more marriages contracted by the same person is carried out at the same time and there is no evidence to show the capital or the conjugal property belonging to each of the partnerships to be liquidated, the total mass of the partnership property shall be divided between the different partnerships in proportion to the duration of each and to the property belonging to the respective spouses. The Court applied this rule to prorate the August 30, 1978 inventory 15/29 to the first conjugal partnership (1942–1957) and 14/29 to the second (1958–1972), and excluded the January 16, 1979 supplementary inventory as Cesario's own inheritance from his parents.
• Dead Man's Statute (survivorship disqualification rule) — Section 19(a) of Rule 130 disqualifies a party or his assignor from testifying against the estate of a deceased person upon a claim or demand against the estate, as to any matter of fact occurring before the death of the deceased. The Court treated the objection as academic because the testimonies of Urbano Prado and Tirso Linosa were more than sufficient to establish the claim and to bolster the documentary evidence supporting it.
• Partial distribution of the estate pending appeal — Rule 109, Section 2 of the Rules of Court permits the court, notwithstanding a pending controversy or appeal in settlement proceedings, in its discretion and upon such terms as it may deem proper and just, to allow distribution of such part of the estate as may not be affected by the controversy or appeal, upon compliance with the conditions set forth in Rule 90. Rule 90 prohibits distribution until payment of the obligations mentioned therein has been made or provided for, unless the distributees or any of them give a bond fixed by the court conditioned on payment of those obligations. The Court reiterated that partial distribution should as much as possible be discouraged and should not be countenanced except in extreme cases, because courts must guard with utmost zeal and jealousy the estate of the decedent so that creditors are adequately protected and all rightful heirs assured of their shares, but sustained the order where the estate had sufficient assets to ensure an equitable distribution and no unpaid obligations appeared.

• "When Bienvenida Durana died on May 2, 1957, the first conjugal partnership was automatically dissolved. That conjugal partnership was then converted into an implied ordinary co-ownership. It was also at this point in time that the inheritance was transmitted to the heirs of Bienvenida." — This passage states the ratio decidendi on the first issue: it fixes the moment the first conjugal partnership ended and explains why the properties subsequently acquired during the second marriage could not be wholly attributed to the first union.
• "Inevitably, the problem is how to apportion the properties involved between the two conjugal partnerships. On this score, guidance should be sought from the provisions of the Civil Code to the effect that whenever the liquidation of the partnership of two or more marriages contracted by the same person should be carried out at the same time and there is no evidence to show the capital or the conjugal property belonging to each of the partnerships to be liquidated, the total mass of the partnership property shall be divided between the different partnerships in proportion to the duration of each and to the property belonging to the respective spouses." — This is the canonical formulation of the controlling rule in the case, the basis for the proration of the inventoried properties between the two marriages.
• "The first marriage existed for approximately fifteen (15) years (1942 to 1957), while the second marriage lasted for about fourteen (14) years (1958 to 1972). Applying the aforestated rule, the first conjugal partnership will be prorated a share of fifteen twenty-ninths (15/29) of the properties included in the inventory submitted on August 30, 1978, while the second conjugal partnership will get fourteen twenty-ninths (14/29) thereof." — This passage demonstrates the actual application of Article 189 to the facts and supplies the arithmetic that governs the dispositive portion.
• "It is true that 'partial distribution of the decedent's estate pending the final termination of the testate or intestate proceedings should as much as possible be discouraged by the courts and, unless in extreme cases, such form of advances of inheritance should not be countenanced. The reason for this strict rule is obvious courts should guard with utmost zeal and jealousy the estate of the decedent to the end that the creditors thereof be adequately protected and all the rightful heirs assured of their shares in the inheritance.'" — This passage articulates the policy behind the strict treatment of advance distributions, which the Court nonetheless held was not violated by the order allowing withdrawal of funds.

• Ofias vs. Javillo, et al., 59 Phil. 733 (1934) — Cited in support of the rule that the conjugal partnership is dissolved by the death of a spouse under Article 175(i) of the Civil Code.
• Nable Jose, et al. vs. Nable Jose, et al., 41 Phil. 713 (1916) — Cited together with Ofias as authority for the automatic dissolution of the conjugal partnership upon the death of a spouse.
• Taningco, et al. vs. Register of Deeds of Laguna, 5 SCRA 381 (1962) — Cited for the proposition that the dissolved conjugal partnership is converted into an implied ordinary co-ownership.
• Prades, et al. vs. Tecson, 49 Phil. 230 (1926) — Cited, with Taningco and Borja, as authority for the conversion of the conjugal partnership into an implied ordinary co-ownership upon dissolution.
• Borja vs. Addison, et al., 44 Phil. 895 (1922) — Cited for the same co-ownership principle following dissolution of the conjugal partnership.
• Gatmaitan vs. Medina, 109 Phil. 108, 111 (1960) — Cited for the rule that partial distribution of the decedent's estate pending final termination of the proceedings should as much as possible be discouraged and that advances of inheritance should not be countenanced except in extreme cases, in order to protect creditors and assure the rightful heirs of their shares.

• Article 175(i), Civil Code — Provides that the conjugal partnership of gains is dissolved by the death of either spouse. Applied to hold that the first conjugal partnership of Cesario and Bienvenida was automatically dissolved upon Bienvenida's death on May 2, 1957.
• Article 777, Civil Code — Provides that the rights to the succession are transmitted from the moment of the death of the decedent. Applied to fix the point at which Bienvenida's heirs acquired their rights over her one-half share of the conjugal partnership property.
• Article 142, Civil Code — Provides that the fruits of the separate property of either spouse, as well as those acquired through their industry, form part of the conjugal partnership. Applied to hold that the fruits and income of Cesario's share in the inheritance from Bienvenida and of his conjugal share in the first partnership became conjugal property of the second marriage.
• Article 153, Civil Code — Cited with Article 142 for the rule that the fruits or income of the separate properties of the spouses, including those acquired through their industry, are conjugal in nature, and applied to the same effect.
• Article 189, Civil Code — Provides that whenever the liquidation of the partnership of two or more marriages contracted by the same person is carried out at the same time and there is no evidence to show the capital or the conjugal property belonging to each of the partnerships to be liquidated, the total mass of the partnership property shall be divided between the different partnerships in proportion to the duration of each and to the property belonging to the respective spouses. This is the controlling provision applied to prorate the August 30, 1978 inventory 15/29 to the first conjugal partnership and 14/29 to the second.
• Section 19(a), Rule 130, Rules of Court — The Dead Man's Statute or survivorship disqualification rule invoked by petitioners against the testimony of claimant Democrito Cabutihan. The Court found it unnecessary to resolve the objection because other witnesses sufficiently established the claim.
• Rule 109, Section 2, Rules of Court — Provides that notwithstanding a pending controversy or appeal in proceedings to settle the estate of a decedent, the court may, in its discretion and upon such terms as it may deem proper and just, permit that such part of the estate as may not be affected by the controversy or appeal be distributed among the heirs or legatees, upon compliance with the conditions set forth in Rule 90. Applied to sustain the order of December 11, 1980 allowing the withdrawal of funds for distribution among the heirs.
• Rule 90, Rules of Court — Provides that no distribution shall be allowed until payment of the obligations mentioned therein has been made or provided for, unless the distributees or any of them give a bond in a sum fixed by the court conditioned for the payment of those obligations within such time as the court directs. Applied to hold that no bond or provision was required because no unpaid obligations appeared.

Melencio-Herrera (Chairperson), Paras, Padilla, and Sarmiento, JJ., concur. No separate concurring opinions are reflected in the text.