Paredes vs. Moya

A money judgment against a deceased defendant cannot be enforced by writ of execution against the properties of the estate; the judgment must be filed as a claim in the probate court where the estate administration proceedings are pending, because the estate properties are in custodia legis of that court and execution would improperly divest the probate court of jurisdiction.

Paredes was an employee of August Kuntze and sued for separation and overtime pay. Kuntze died while his appeal was pending, and Carmencita Navarro was appointed administratrix of his estate, which was under administration proceedings in the probate court. The pendency of those proceedings placed all estate properties under the probate court's jurisdiction, a circumstance that governs the proper mode of satisfying money claims against the decedent.

Severino Paredes commenced suit on January 4, 1964 in the Court of First Instance of Manila, as Civil Case No. 55880, for the collection of separation and overtime pays against his employer, August Kuntze. On March 5, 1971, a decision was rendered against Kuntze, from which he appealed to the Court of Appeals. While the appeal was pending, Kuntze died on June 19, 1972. Paredes was duly notified, and Carmencita D. Navarro Kuntze, administratrix of the estate of the deceased, was substituted in his place as party in the appealed case.

On June 5, 1973, the Court of Appeals dismissed the appeal for the appellant's failure to file the printed record on appeal, and the record was ordered remanded to the respondent court. Paredes filed a motion for execution. On August 22, 1973, the provincial Sheriff of Rizal levied on the properties of the deceased, consisting of two lots covered by TCT No. 45089 issued by the Register of Deeds of the Province of Rizal. At the auction sale conducted by the Sheriff on October 2, 1973, Paredes, being the highest bidder, acquired the lot for the total sum of P17,296.16, as per the certificate of sale duly annotated on the back of TCT No. 45089.

Meanwhile, the administratrix had filed a Motion to Quash the Writ of Execution on September 6, 1973, which was still pending resolution. Notwithstanding the pending motion, Paredes sold the property he acquired in the execution sale in favor of his co-petitioner, Victorio Ignacio, on October 10, 1973. On November 2, 1973, the respondent court issued an order setting aside the Writ of Execution of August 22, 1973, and the Sheriff's Sale and Public Auction of the property covered by TCT No. 45089, without prejudice to the filing of the judgment as a claim in the proceedings for settlement of the estate of the deceased.

N/A — the decision does not recount the petitioners' specific arguments beyond the general assertion that the order nullifying execution was illegal.

• Finality of Judgment: Respondents claimed that the judgment against the deceased Kuntze was not final and executory, apparently contending that his death arrested the judgment; the Court expressly rejected this claim, holding that the judgment became final and executory and was not arrested by death.

• Survival of Appeal: Whether the appeal should have been dismissed when the defendant died during the pendency of his appeal from a money judgment rendered against him.
• Execution Against Estate Properties: Whether a money judgment against a deceased defendant may be enforced by writ of execution and levy against the properties of the estate.
• Purchaser in Good Faith: Whether co-petitioner Victorio Ignacio could be considered a purchaser in good faith of the property sold at the execution sale.

• Survival of Appeal: No. The appeal should not have been dismissed; it should continue, with the deceased defendant substituted by his legal representative, the executor or administrator of the estate.
• Execution Against Estate Properties: No. Execution against the properties of the deceased was improper; the proper remedy was to file the judgment as a claim in the administration proceedings before the probate court, pursuant to Section 5, Rule 86 of the Rules of Court.
• Purchaser in Good Faith: No. Ignacio could not be considered a purchaser in good faith because the administratrix had already filed a motion to quash the writ of execution and auction sale on September 6, 1973, before Ignacio purchased the property on October 10, 1973.

• Survival of Appeal: Under Section 21, Rule 3 of the Rules of Court, when an action is for recovery of money and the defendant dies before final judgment in the Court of First Instance, the action is dismissed to be prosecuted in the manner especially provided in the rules. Conversely, if the defendant dies after final judgment has been rendered by the CFI, the action survives. The appeal should proceed with the deceased defendant substituted by his legal representative, which prevents a useless repetition of presenting anew before the probate court the evidence already presented in the Court of First Instance on the validity of the claim. Consequently, the judgment against the deceased Kuntze became final and executory; it was not arrested by his death.

• Execution Against Estate Properties: Although the judgment became final and executory, it was error for Paredes to have the money judgment executed against the properties of the deceased. Section 5, Rule 86 of the Rules of Court requires that all claims for money against the decedent, including judgment for money against the decedent, must be filed within the time limited in the notice to creditors before the court where the administration proceedings are pending; otherwise they are barred forever. The judgment for money against the deceased stands on the same footing as other money claims, although its validity can no longer be litigated in the probate court. The Court applied the ruling in Aldamiz vs. Judge of the Court of First Instance of Mindoro (85 Phil. 228) and Domingo vs. Garlitos (8 SCRA 443), holding that a writ of execution is not the proper procedure for the payment of debts and expenses of administration. The legal basis is that in testate or intestate proceedings, the properties belonging to the estate are under the jurisdiction of the court, and such jurisdiction continues until the properties have been distributed; during the pendency of the proceedings, all the estate is in custodia legis, and the proper procedure is not to allow the sheriff to seize the properties but to ask the court for an order to require the administrator to pay the amount due. Execution may issue only where the devisees, legatees, or heirs have entered into possession of their respective portions prior to settlement and payment of debts, which was not the case here.

• Purchaser in Good Faith: The decision against Paredes binds co-petitioner Ignacio not only because the order of execution and the public auction sale were null and void, but also because Ignacio cannot be considered a purchaser in good faith. Ignacio purchased the "Right of Execution Sale" of Paredes on October 10, 1973, when the administratrix had already filed on September 6, 1973 a motion to quash the writ of execution and auction sale, and the validity of the writ was still pending resolution. A void judgment or order is in legal effect no judgment or order; by it no rights are divested, from it no rights can be obtained, and all acts performed under it and all claims flowing from it are void.

• Custodia legis — During the pendency of testate or intestate proceedings, all properties belonging to the estate are under the jurisdiction of the probate court, and such jurisdiction continues until the properties have been distributed among the heirs. The proper procedure for satisfying a money judgment against the decedent is not to allow the sheriff to seize the properties but to ask the probate court for an order requiring the administrator to pay the amount due from the estate.

• Survival of action after final judgment — Under Section 21, Rule 3 of the Rules of Court, if the defendant dies before final judgment in the Court of First Instance in a money claim action, the action is dismissed to be prosecuted in the manner especially provided in the rules; conversely, if the defendant dies after final judgment, the action survives and the appeal proceeds with the deceased defendant substituted by his legal representative.

• Claims against the estate — Under Section 5, Rule 86 of the Rules of Court, all claims for money against the decedent, including judgment for money against the decedent, must be filed within the time limited in the notice to creditors before the probate court; otherwise they are barred forever. A judgment for money against the deceased stands on the same footing as other money claims, although its validity can no longer be litigated in the probate court.

• Void judgment — A void judgment or order is in legal effect no judgment or order; by it no rights are divested, from it no rights can be obtained, and being worthless, it neither binds nor bars anyone. All acts performed under it and all claims flowing from it are void.

• "We hold that in the case of a money claim, where the defendant dies during the pendency of his appeal from the judgment rendered against him, the appeal should not be dismissed; it should continue, but the deceased defendant should be substituted by his legal representative, namely, the executor or administrator of the estate." — This passage states the ratio decidendi on the survival of the appeal and the necessity of substitution, which is the foundational rule applied throughout the decision.

• "The proper remedy of plaintiff Paredes should have been to file his claim in the administration proceedings of the estate of the deceased defendant Kuntze where private respondent is the administratrix." — This passage identifies the controlling remedy for satisfying a money judgment against a decedent, namely, filing the claim in the probate court rather than seeking execution.

• "During the pendency of the proceedings all the estate is in custodia legis and the proper procedure is not to allow the sheriff, in the case of court judgment, to seize the properties but to ask the court for an order to require the administrator to pay the amount due from the estate and required to be paid." — This passage, quoted from Domingo vs. Garlitos, articulates the custodia legis doctrine that bars execution against estate properties.

• "In this jurisdiction, a void judgment or order is in legal effect no judgment or order. By it no rights are divested. From it no rights can be obtained. Being worthless, it neither binds nor bars anyone. All acts performed under it and all claims flowing from it are void." — This passage, quoted from Chavez vs. Court of Appeals, establishes the legal effect of the nullified execution order and the consequent invalidity of the auction sale and Ignacio's purchase.

• Aldamiz vs. Judge of the Court of First Instance of Mindoro, 85 Phil. 228 — Controlling precedent holding that a writ of execution is not the proper procedure for the payment of debts and expenses of administration; the proper procedure is for the court to order the administratrix to make payment, and if there is no sufficient cash on hand, to order the sale of properties and pay the debts out of the proceeds.

• Domingo vs. Garlitos, 8 SCRA 443 — Followed, applying the same ruling to the payment of estate and inheritance taxes and articulating the custodia legis principle that bars sheriff seizure of estate properties during pending administration proceedings.

• Chavez vs. Court of Appeals, 24 SCRA 663 — Cited for the doctrine that a void judgment or order is in legal effect no judgment or order, divesting no rights and conferring none, with all acts performed under it being void.

• Section 21, Rule 3, Rules of Court — Provides that when the action is for recovery of money, debt, or interest thereon, and the defendant dies before final judgment in the Court of First Instance, it shall be dismissed to be prosecuted in the manner especially provided in the rules; conversely, if the defendant dies after final judgment, the action survives and the appeal proceeds with substitution of the legal representative.

• Section 5, Rule 86, Rules of Court — Requires that all claims for money against the decedent, including judgment for money against the decedent, must be filed within the time limited in the notice to creditors before the probate court; otherwise they are barred forever, except as counterclaims in actions brought by the executor or administrator.

• Rule 89, Section 3; Rule 90, Sections 2 and 7, Rules of Court — Cited in Aldamiz for the proper procedure of ordering the sale or mortgage of real property of the deceased to pay debts and expenses of administration, upon motion of the administrator with written notice to all heirs, legatees, and devisees.

• Rule 39, Section 6; Rule 74, Section 4, Rules of Court — Cited for the limited circumstance where execution may issue, namely, where devisees, legatees, or heirs have entered into possession of their respective portions in the estate prior to settlement and payment of debts and expenses of administration.

Fernando (Chairman), Barredo, Antonio, and Aquino, JJ., concurred.

N/A — no dissenting opinion is noted in the text.