Ferrer vs. Diaz

A waiver of hereditary rights executed by a future heir while the parents are still living is void because it is a contract upon future inheritance prohibited under the second paragraph of Article 1347 of the Civil Code, and an adverse claim annotated on the basis of such void waiver is likewise invalid and ineffective and cannot bind subsequent owners or confer any right or interest upon the claimant.

The parties were connected through a series of financial accommodations between petitioner Atty. Pedro M. Ferrer and respondent Reina Comandante, who were fellow members of the Couples for Christ Movement. Comandante sought financial help from petitioner regarding the mortgage of her parents' lot and obtained various loans from him. The property at the center of the dispute was covered by Transfer Certificate of Title No. RT-6604 registered in the names of Comandante's parents, Spouses Alfredo and Imelda Diaz, who had been residing in the United States for 16 years. The legal framework governing the dispute included Article 1347 of the Civil Code prohibiting contracts upon future inheritance, and Section 70 of Presidential Decree No. 1529 governing the registration and cancellation of adverse claims.

Petitioner Atty. Pedro M. Ferrer claimed that on May 7, 1999, the Diazes, as represented by their daughter Comandante through a Special Power of Attorney, obtained from him a loan of ₱1,118,228.00, secured by a Real Estate Mortgage Contract by way of second mortgage over TCT No. RT-6604 and a Promissory Note payable within six months. Comandante also issued postdated checks to secure payment of the loan. Prior to this, on May 29, 1998, Comandante executed in petitioner's favor an instrument entitled "Waiver of Hereditary Rights and Interests Over a Real Property (Still Undivided)" for a valuable consideration of ₱600,000.00, which formed part of the secured loan. The waiver covered her hereditary rights and interests as a legitimate heir of her parents over the property covered by TCT No. RT-6604. On the basis of this waiver, petitioner executed an Affidavit of Adverse Claim which was annotated at the back of TCT No. RT-6604 on May 26, 1999.

When the checks issued by Comandante were dishonored and the respondents failed to settle the loan despite demands, petitioner filed a Complaint for Collection of Sum of Money Secured by Real Estate Mortgage Contract. He twice amended his complaint, first by including judicial foreclosure of mortgage as an alternative relief, and second by impleading the Pangans as additional defendants since the mortgaged property had been transferred to their names under TCT No. N-209049. The Pangans had acquired the subject property by purchase in good faith and for a consideration of ₱3,000,000.00 on November 11, 1999 from the Diazes through Comandante, who was clothed with an SPA acknowledged before the Consul of New York.

Comandante, for her part, alleged that she sought financial accommodations from petitioner totaling ₱500,000.00, secured by chattel mortgages over her taxi units and postdated checks. She claimed that petitioner presented the waiver document in May 1998 to secure her loan which had ballooned to ₱600,000.00 due to interests. A year later, petitioner required her to sign a Real Estate Mortgage Contract and an undated Promissory Note corresponding to ₱1,118,228.00. Comandante alleged that she reminded petitioner she was not the registered owner of the property and that her parents' SPA only authorized her to mortgage the property to banks and financial institutions, not to individuals. She claimed she was constrained to sign due to threats to foreclose her taxi units and present her postdated checks for payment. The documents were never notarized. On September 29, 1999, Comandante executed an Affidavit of Repudiation/Revocation of the waiver, which she caused to be annotated on the title, and petitioner filed his complaint later that same day.

The Diazes asserted that they did not know petitioner, did not execute any SPA in favor of Comandante authorizing her to mortgage the property, and contested the due execution of the SPA as it was neither authenticated before the Philippine Consulate nor notarized in New York. The Pangans alleged that they acquired the property in good faith, took actual possession without anyone complaining, and only learned of the mortgage through petitioner's phone call on December 21, 1999. Upon inquiry, Comandante admitted she had a personal loan with petitioner, that her parents were not aware of the mortgage, and that the signatures of her parents on the SPA were fictitious and prepared by petitioner.

Both the Diazes and petitioner filed Motions for Summary Judgment. The trial court deemed both motions submitted for resolution and rendered Summary Judgment in favor of petitioner, ordering all defendants jointly and solidarily liable. The CA modified this judgment by excluding the Pangans from solidary liability, declaring the waiver null and void, and ruling that the Pangans were purchasers in good faith and for value.

• Adverse Claim Anchored on Multiple Documents: Petitioner insisted that his adverse claim annotated at the back of TCT No. RT-6604 was not merely anchored on Comandante's Waiver of Hereditary Rights but also on her being the attorney-in-fact of the Diazes when she executed the mortgage contract in his favor.
• Registrability of Adverse Claim: Petitioner averred that his adverse claim was not frivolous or invalid and was registrable under Section 70 of PD No. 1529, as the Registrar of Deeds of Quezon City had already determined the sufficiency and validity of such registration by annotating the claim.
• Pangans Not Purchasers in Good Faith: Petitioner claimed that even prior to the sale and transfer of the subject property to the Pangans, they were already aware of his valid and existing adverse claim thereon and were therefore not purchasers in good faith.
• Solidary Liability of All Respondents: Petitioner maintained that the Pangans should be held, together with the Diazes and Comandante, jointly and severally liable to him in the total amount of ₱1,118,228.00.

• Waiver Void Under Article 1347: All respondents contended that the Waiver of Hereditary Rights and Interests Over a Real Property executed by Comandante was null and void for being violative of the second paragraph of Article 1347 of the Civil Code, hence petitioner's adverse claim based upon such waiver was likewise void and could not confer any right or interest over the property.
• No Hearing on Adverse Claim: Respondents pointed out that the records were bereft of any showing that the trial court conducted any hearing on the validity of the adverse claim as required by Section 70 of PD 1529, and that the trial court merely echoed petitioner's claim without any ratiocination.
• Impropriety of Summary Judgment: The Diazes and Comandante argued that summary judgment was proper only when there was clearly no genuine issue as to any material fact, and that the defendants presented defenses tendering factual issues which called for presentation of evidence.
• Genuine Issues Requiring Trial: The Diazes and Comandante enumerated genuine issues including: (1) the execution of the SPA was never admitted by the Diazes; (2) Comandante admitted only ₱500,000.00 or ₱600,000.00 as her obligation, not ₱1,118,228.00; and (3) the trial court ignored material issues such as the lack of probative value of the waiver and SPA, and that Comandante signed the documents in her personal capacity.
• Pangans as Purchasers in Good Faith: The Pangans asserted that the annotation of petitioner's adverse claim could not impair their rights as new owners, and that the Real Estate Mortgage Contract could not bind them because it was not registered before the Register of Deeds.

• Validity of the Waiver of Hereditary Rights: Whether a waiver of hereditary rights in favor of another executed by a future heir while the parents are still living is valid.
• Validity and Effect of the Adverse Claim: Whether an adverse claim annotated on the title of a property on the basis of such waiver is valid and effective as to bind subsequent owners and hold them liable to the claimant.
• Propriety of Summary Judgment: Whether the trial court properly rendered summary judgment in favor of petitioner despite the existence of genuine issues of material fact.

• Validity of the Waiver of Hereditary Rights: No. The waiver of hereditary rights executed by Comandante in favor of petitioner was declared void for being violative of the second paragraph of Article 1347 of the Civil Code, which prohibits contracts upon future inheritance except in cases expressly authorized by law.
• Validity and Effect of the Adverse Claim: No. Since no right or interest on the subject property flowed from Comandante's invalid waiver of hereditary rights upon petitioner, the latter was not entitled to the registration of his adverse claim; the adverse claim was without basis and was adjudged invalid and ineffective and ordered cancelled.
• Propriety of Summary Judgment: No. The trial court should have refrained from issuing the summary judgment because genuine issues of material fact existed, including the validity and due execution of the SPA, the Real Estate Mortgage, and the Promissory Note, which required a full blown trial.

• Validity of the Waiver of Hereditary Rights: Pursuant to the second paragraph of Article 1347 of the Civil Code, no contract may be entered into upon a future inheritance except in cases expressly authorized by law. For the inheritance to be considered "future," the succession must not have been opened at the time of the contract. The Court applied the three requisites for a contract upon future inheritance: (1) that the succession has not yet been opened; (2) that the object of the contract forms part of the inheritance; and (3) that the promissor has, with respect to the object, an expectancy of a right which is purely hereditary in nature. All three requisites concurred in this case: succession had not been opened since both parents were still living; the property formed part of what Comandante expected to inherit; and her expectancy was purely hereditary in nature. Citing Tañedo vs. Court of Appeals, the Court declared the waiver invalid and not a source of any right or obligation between the parties.

• Validity and Effect of the Adverse Claim: Section 70 of PD 1529 requires that the claimant have a right or interest in the registered land adverse to the registered owner, arising subsequent to registration. The Court noted that the validity of the adverse claim should have been determined by the trial court after the petition for cancellation was consolidated with the civil case, pursuant to Section 70 of PD 1529, which provides that any party in interest may file a petition for cancellation of the adverse claim and the court shall grant a speedy hearing upon the question of validity. The trial court failed to conduct such hearing. Since no right or interest flowed from the invalid waiver, petitioner was not entitled to the registration of his adverse claim. The Court also rejected petitioner's assertion that the adverse claim was anchored on the mortgage contract, noting that the Affidavit of Adverse Claim itself stated it was based solely on the waiver of hereditary interest, and the inscription at the back of TCT No. RT-6604 likewise referred only to the waiver.

• Propriety of Summary Judgment: Under Rule 35 of the Rules of Court, summary judgment is proper only when the pleadings, supporting affidavits, depositions and admissions on file show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. The Court found genuine issues existed: the Diazes denied executing the SPA; Comandante assailed the validity and due execution of the documents and limited her admission of obligation to ₱600,000.00; and the determination of whether the Diazes were obligated to petitioner or whether the obligation was purely personal to Comandante, as well as the true amount due, depended on the validity of the disputed documents. Citing D.M. Consunji, Inc. vs. Duvas Corporation, the Court held that when the facts as pleaded by the parties are disputed or contested, proceedings for summary judgment cannot take the place of trial.

• Contracts upon Future Inheritance — Under the second paragraph of Article 1347 of the Civil Code, no contract may be entered into upon a future inheritance except in cases expressly authorized by law. The three requisites for a contract to be classified as one upon future inheritance are: (1) that the succession has not yet been opened; (2) that the object of the contract forms part of the inheritance; and (3) that the promissor has, with respect to the object, an expectancy of a right which is purely hereditary in nature. The Court applied this doctrine to declare void the waiver of hereditary rights executed by Comandante while her parents were still living.

• Adverse Claims under Section 70 of PD 1529 — An adverse claim may be registered only by a person claiming any part or interest in registered land adverse to the registered owner, arising subsequent to the date of original registration. The validity or efficaciousness of an adverse claim may only be determined by the Court upon petition by an interested party, in which event the Court shall order immediate hearing and make proper adjudication. If the adverse claim is adjudged invalid, the registration thereof shall be ordered cancelled. The Court applied this doctrine to order the cancellation of petitioner's adverse claim, which was based on a void waiver.

• Summary Judgment — Summary judgment is a procedural device resorted to in order to avoid long drawn out litigations and useless delays, and is proper only when there is clearly no genuine issue as to any material fact. A genuine issue is such fact which requires the presentation of evidence as distinguished from a sham, fictitious, contrived or false claim. When the facts as pleaded by the parties are disputed or contested, proceedings for summary judgment cannot take the place of trial. The Court applied this doctrine to remand the case for full trial.

• "No contract may be entered into upon future inheritance except in cases expressly authorized by law." — This is the controlling statutory prohibition under the second paragraph of Article 1347 of the Civil Code, which the Court applied to declare Comandante's waiver of hereditary rights void.

• "From the foregoing, it is clear that Comandante and petitioner entered into a contract involving the former's future inheritance as embodied in the Waiver of Hereditary Rights and Interest Over a Real Property (Still Undivided) executed by her in petitioner's favor." — This passage identifies the specific contract at issue and the basis for its invalidation, applying the three requisites for a contract upon future inheritance.

• "Here, as no right or interest on the subject property flows from Comandante's invalid waiver of hereditary rights upon petitioner, the latter is thus not entitled to the registration of his adverse claim. Therefore, petitioner's adverse claim is without any basis and must consequently be adjudged invalid and ineffective and perforce be cancelled." — This passage states the ratio decidendi for the cancellation of the adverse claim, linking the invalidity of the waiver to the invalidity of the adverse claim based upon it.

• "When the facts as pleaded by the parties are disputed or contested, proceedings for summary judgment cannot take the place of trial." — This passage articulates the controlling principle for the impropriety of summary judgment where genuine issues of material fact exist, requiring remand for full trial.

• Tañedo vs. Court of Appeals, 322 Phil. 84 (1996) — Controlling precedent for the invalidation of contracts upon future inheritance. The Court cited this case where a contract of sale involving "one hectare of whatever share" the seller would have over a lot covered by a title was invalidated as constituting a part of the seller's future inheritance from his parents.

• Sajonas vs. Court of Appeals, 327 Phil. 689, 712 (1996) — Cited for the proposition that the validity or efficaciousness of an adverse claim may only be determined by the Court upon petition by an interested party, and it is only when such claim is found unmeritorious that the registration of the adverse claim may be cancelled.

• J.L.T. Agro Inc. vs. Balansag, 493 Phil. 365, 378-379 (2005) — Cited for the three requisites of a contract upon future inheritance prohibited under the second paragraph of Article 1347 of the Civil Code.

• D.M. Consunji, Inc. vs. Duvas Corporation, G.R. No. 155174, August 4, 2009 — Cited for the definition of a genuine issue as a fact which requires the presentation of evidence as distinguished from a sham, fictitious, contrived or false claim, and for the principle that summary judgment cannot take the place of trial when facts are disputed.

• Article 1347, Civil Code — The second paragraph provides that no contract may be entered into upon future inheritance except in cases expressly authorized by law. The Court applied this provision to declare void the waiver of hereditary rights executed by Comandante in favor of petitioner, as succession had not yet been opened and the waiver covered property she expected to inherit from her still-living parents.

• Section 70, Presidential Decree No. 1529 — This provision governs the registration of adverse claims, requiring that the claimant have a right or interest in registered land adverse to the registered owner arising subsequent to registration, and provides for the cancellation of adverse claims upon petition by a party in interest. The Court applied this provision to order the cancellation of petitioner's adverse claim, which was based on a void waiver.

• Sections 1, 2, and 3, Rule 35, Rules of Court — These provisions govern summary judgment, requiring that there be no genuine issue as to any material fact and that the moving party be entitled to a judgment as a matter of law. The Court applied these provisions to find that the trial court erred in rendering summary judgment because genuine issues of material fact existed.

• Carpio, J. (Chairperson)
• Brion, J.
• Abad, J.
• Perez, J.