Heirs of Dr. Celestino Henson vs. Don Pepe Henson Enterprises, Inc.

A notice of adverse claim under Section 70 of P.D. No. 1529 is not registrable when the claimant's alleged interest in the land is not adverse to the title of the registered owner. The Court held that heirs of a deceased partner who claim successional rights to the partner's share in a partnership do not have an adverse interest in specific partnership property, because a partner's right in such property is not assignable except in connection with the assignment of the rights of all partners, and the heirs' interest is merely an inchoate monetary claim against the partnership after liquidation.

Don Pepe Henson Enterprises (DPHE) is a registered partnership established in 1964 by the Henson siblings: Vicente Henson, Amanda Henson-Nepomuceno, Manuela Henson-Suarez, Ines Henson-Dizon, Francisca Henson-Roque, and Sor Luisa Henson. In a Deed of Assignment dated June 20, 1964, the siblings assigned, transferred, and conveyed to DPHE 11 co-owned parcels of registered lands in Angeles City, which they had inherited from their parents. Under DPHE's Articles of Partnership, each partner contributed his or her one-sixth (1/6) equal share in the lands as capital. The dispute centers on the nature of a partner's interest in specific partnership property and whether heirs of a deceased partner can claim an adverse interest in such property.

Don Pepe Henson Enterprises (DPHE) is a registered partnership established in 1964 by siblings Vicente Henson, Amanda Henson-Nepomuceno, Manuela Henson-Suarez, Ines Henson-Dizon, Francisca Henson-Roque, and Sor Luisa Henson. In a Deed of Assignment dated June 20, 1964, the Henson siblings assigned, transferred, and conveyed to DPHE 11 co-owned parcels of registered lands located in Angeles City, which they inherited from their parents, Don Jose "Pepe" Henson and Rosario Sadie. Under DPHE's Articles of Partnership, each partner contributed his or her one-sixth (1/6) equal share in the above lands as capital.

In a Joint Affidavit of Adverse Claim dated October 26, 2017, filed with the RD-Angeles City, the petitioners, heirs of Dr. Celestino Henson, sought to register their adverse claim on Sor Luisa's averred one-sixth share in the subject lands, covered by TCT Nos. 045-2015013261 to 045-2015013269 in DPHE's name. Petitioners claimed that their late father, Dr. Henson, was one of the siblings of Sor Luisa and was entitled to inherit from her upon her demise on June 23, 1995, single and without issue. The notice of adverse claim was filed to protect and enforce Dr. Henson's successional rights in the estate of Sor Luisa included in the assets of DPHE.

On December 15, 2017, the RD-Angeles City issued a Notice of Denial of the registration of the adverse claim, ruling that petitioners lacked the requisite interest in the land adverse to the registered owner under Section 70 of P.D. No. 1529, absent proof of liquidation of the partnership properties. Petitioners elevated the matter by Consulta to the LRA Administrator, who sustained the denial in a Resolution dated April 2, 2019, holding that petitioners failed to establish an adverse interest against DPHE, a juridical entity distinct from its partner Sor Luisa. The LRA pointed out that it is only after the dissolution, winding up, and termination of the partnership that petitioners may have the right to inherit from the share of Sor Luisa. Petitioners' Motion for Reconsideration was denied in an Order dated November 29, 2020.

Meanwhile, on May 30, 2019, Don Pepe Henson Enterprises, Inc. (DPHEI) filed an Amended Petition before the RTC, seeking the cancellation of the adverse claim annotated on the subject titles. DPHEI claimed that on April 6, 2019, it lawfully acquired the subject lands in good faith and for value from DPHE, but later learned of the annotation of the adverse claim. In their Answer, petitioners maintained that the mere lapse of the 30-day period does not warrant cancellation of the adverse claim, and claimed that on September 19, 2018, they filed a criminal charge for estafa through falsification of public documents against the partners of DPHE and the directors of DPHEI, which was dismissed by the Angeles City Prosecutor's Office but was pending appeal before the DOJ.

In a Decision dated September 27, 2019, the RTC directed the RD-Angeles City to cancel the annotation of the adverse claim, holding that the adverse claim was unmeritorious because petitioners failed to prove they are lawful heirs of Sor Luisa and to show that the decedent's estate had been settled or a complaint to quiet title had been filed. The RTC also found that the appeal of the estafa case before the DOJ could not be considered a pending controversy warranting the maintenance of the adverse claim, as its resolution would not determine petitioners' purported rights as alleged heirs. The CA affirmed these rulings, finding that petitioners failed to establish an adverse interest in the subject lands against the registered owner, and that their interest was inchoate as they were only entitled to what may remain after payment of the decedent's debts.

• Registrability of Adverse Claim: Petitioners argued that their adverse claim was registrable because they are Sor Luisa's heirs with an actual and established interest in the subject lands from the moment of the decedent's death, and a prior declaration of heirship in a special proceeding is not required before an heir may assert successional rights.
• Cancellation of Adverse Claim: Petitioners maintained that the mere lapse of the 30-day period does not warrant cancellation of the adverse claim, as it may only be cancelled if it is proven to be unmeritorious.
• Pending Controversy: Petitioners argued that the appeal of the estafa case before the DOJ constituted a pending controversy that warranted the maintenance of their adverse claim.

• Affirmance of Lower Court Rulings: Respondents maintained that the assailed ruling should not be disturbed as it was in accord with the established facts, and the applicable laws and jurisprudence.

• Registrability of Adverse Claim: Whether the CA committed reversible error in affirming the LRA Resolution finding that the notice of adverse claim is not registrable.
• Cancellation of Adverse Claim: Whether the CA committed reversible error in affirming the RTC Decision directing the cancellation of the annotation of petitioners' adverse claim on the subject titles.

• Registrability of Adverse Claim: No. The notice of adverse claim was not registrable because petitioners failed to establish an adverse interest in the subject lands against the registered owner, DPHE, a juridical entity distinct from its partner Sor Luisa. A partner's right in specific partnership property is not assignable except in connection with the assignment of the rights of all partners, and petitioners, as alleged heirs, only had an inchoate monetary claim against the partnership after liquidation.
• Cancellation of Adverse Claim: No. The cancellation of the annotation of the adverse claim was proper because petitioners failed to discharge their burden to show that their adverse claim over the subject lands was meritorious. A mere money claim may not be registered as an adverse claim on a Torrens certificate of title as it does not affect the title or is adverse to the title of the registered owner.

• Registrability of Adverse Claim: The Court applied Section 70 of P.D. No. 1529, which allows the registration of an adverse claim by "[w]hoever claims any part or interest in registered land adverse to the registered owner." The purpose of annotating an adverse claim is to preserve and protect the right of the adverse claimant during the pendency of a controversy over the ownership of the land. The burden of proof is on the adverse claimant to show that the claim is meritorious. The Court noted that while a prior declaration of heirship is not required, petitioners failed to show their relationship to Sor Luisa and their right to inherit, other than bare and self-serving allegations. Even assuming they are heirs, the Court held that the six original partners assigned the subject lands as capital contribution to DPHE in exchange for equal shares. Under Article 1811(2) of the Civil Code, a partner's right in specific partnership property is merely for partnership purposes and cannot be assigned except in connection with the assignment of the rights of all partners. A partner's right in specific partnership property is not assignable because it is impossible to determine the extent of his or her beneficial interest until after liquidation of the partnership affairs. Consequently, absent the assignment of the rights of all partners, any person who acquires a partner's entire interest in the partnership, such as the assignee or his or her heirs, does not become a co-owner of specific partnership property and cannot have any adverse interest against the partnership as the registered owner.
• Cancellation of Adverse Claim: The Court reiterated that the whole partnership property belongs to the partnership as a juridical person, and a partner has no interest in it but his or her share of what remains after all partnership debts are paid. At most, as supposed heirs of Sor Luisa, petitioners only have an inchoate monetary claim against DPHE for her equity share after liquidation. However, a mere money claim may not be registered as an adverse claim on a Torrens certificate of title because it does not affect the title or is adverse to the title of the registered owner. Thus, petitioners failed to discharge their burden to show that their adverse claim was meritorious, warranting its cancellation.

• Adverse Claim (Section 70, P.D. No. 1529) — An adverse claim is a type of involuntary dealing designed to protect the interest of a person over a real property by apprising third persons that there is a controversy over its ownership. The claim asserted must affect the title or be adverse to the title of the registered owner in order to be duly annotated as an adverse claim. The burden of proof is on the adverse claimant to show that the claim is meritorious. In this case, the Court held that the petitioners' claim was not adverse to the title of the registered owner, DPHE, because they only had an inchoate monetary claim against the partnership.
• Partner's Right in Specific Partnership Property (Civil Code, Articles 1810-1813) — A partner's property rights include his or her rights in specific partnership property, and he or she is a co-owner with other partners of specific partnership property, but only for partnership purposes. This right cannot be assigned except in connection with the assignment of the rights of all partners in the same property. A partner's right in specific partnership property is not assignable because it is impossible to determine the extent of his or her beneficial interest until after the liquidation of the partnership affairs. The whole partnership property belongs to the partnership as a juridical person, and a partner has no interest in it but his or her share of what remains after all partnership debts are paid. The Court applied this doctrine to hold that the petitioners, as alleged heirs of a deceased partner, did not become co-owners of specific partnership property and could not register an adverse claim on the partnership's titles.

• "A partner's right in specific partnership property is not assignable because it is impossible to determine the extent of his/her beneficial interest in the property until after the liquidation of the partnership affairs." — This passage articulates the core rationale for why the petitioners could not claim an adverse interest in the specific partnership property, as the extent of Sor Luisa's interest could not be determined before liquidation.
• "From the foregoing, it follows that absent the assignment of the rights of all the partners in specific partnership property, any person who acquires a partner's entire interest in the partnership, such as the assignee and/or his/her heirs, does not become co-owners of specific partnership property with the other partners." — This passage states the controlling rule that heirs of a deceased partner do not acquire co-ownership over specific partnership property, which is the basis for denying the registrability of the adverse claim.
• "At most, as supposed heirs of Sor Luisa, petitioners only have an inchoate monetary claim against DPHE for her equity share therein after the liquidation of the partnership affairs. However, a mere money claim may not be registered as an adverse claim on a torrens certificate of title as the same does not affect the title or is adverse to the title of the registered owner." — This passage defines the nature of the petitioners' interest as an inchoate monetary claim, which is not a registrable adverse claim on a Torrens title.

• Alberto vs. Heirs of Juan A. Panti, 939 Phil. 389 (2023) — Cited for the definition and purpose of an adverse claim as a type of involuntary dealing designed to protect the interest of a person over a real property by apprising third persons that there is a controversy over its ownership.
• Valderama vs. Arguelles, 829 Phil. 29 (2018) — Cited for the rule 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 may be cancelled.
• Zamora vs. Bagatsing, 939 Phil. 402 (2023) — Cited for the rule that the burden of proof is on the adverse claimant to show that the adverse claim over the subject property is meritorious.
• Lozano vs. Ballesteros, 273 Phil. 43 (1991) — Cited for the formal requisites of an adverse claim, including the statement of the alleged right or interest, how and under whom acquired, the description of the land, and the certificate of title number.
• Treyes vs. Larlar, 882 Phil. 505 (2020) — Cited for the rule that a prior declaration of heirship in a special proceeding is not required before an heir may assert successional rights in the estate of a decedent.
• Sanchez, Jr. vs. Court of Appeals, 161 Phil. 425 (1976) — Cited for the rule that the claim asserted must affect the title or be adverse to the title of the registered owner in order to be duly annotated as an adverse claim, and that a mere money claim may not be registered as an adverse claim on a Torrens certificate of title.

• Section 70, Presidential Decree No. 1529 — The provision governing the annotation and cancellation of adverse claims. The Court applied this provision to determine that the petitioners' claim was not registrable because they failed to establish an adverse interest against the registered owner, DPHE.
• Article 1810, Civil Code — Defines a partner's property rights, including rights in specific partnership property. The Court cited this provision to establish that a partner is a co-owner with other partners of specific partnership property, but only for partnership purposes.
• Article 1811(2), Civil Code — Provides that a partner's right in specific partnership property cannot be assigned except in connection with the assignment of the rights of all partners in the same property. The Court applied this provision to hold that the petitioners, as heirs, did not acquire co-ownership over the specific partnership property.
• Article 1812, Civil Code — Cited in relation to the rule that a partner has no interest in specific partnership property but his or her share of what remains after all partnership debts are paid.
• Article 1813, Civil Code — Provides that a conveyance by a partner of his or her whole interest in the partnership merely entitles the assignee to receive the profits to which the assigning partner would otherwise be entitled. The Court cited this provision to show that even a conveyance of a partner's whole interest does not make the assignee a co-owner of specific partnership property.
• Article 1839, Civil Code — Cited in relation to the rule that a partner has no interest in specific partnership property but his or her share of what remains after all partnership debts are paid.

Leonen, SAJ. (Chairperson), Lazaro-Javier, J. Lopez, and Villanueva, JJ., concurred.