Pedrosa vs. Court of Appeals

A deed of extrajudicial settlement and partition executed without including an heir who did not participate and had no notice is not binding on that heir and is fraudulent and vicious; the two-year prescriptive period under Section 4, Rule 74 does not apply, and an action to annul the deed on the ground of fraud may be filed within four years from discovery. This rule controlled because petitioner, an adopted heir, was omitted from the 1983 partition while her adoption was under litigation, and her complaint was filed three years and ten months after the deed.

Maria Elena Rodriguez Pedrosa is the adopted child of the spouses Miguel Rodriguez and Rosalina J. de Rodriguez, whose adoption was decreed by the Court of First Instance of Ozamiz City. The dispute concerns her successional participation in the estate of Miguel, who died intestate, and in the estate of Miguel’s sister Pilar, who died without heirs except her brothers and sisters. The controlling statutory backdrop is Rule 74 of the Rules of Court, which permits extrajudicial settlement of estates but provides that no such settlement binds a person who did not participate or had no notice, and fixes periods for challenging settlements. Prior litigation over the validity of Maria Elena’s adoption forms part of the context in which the 1983 partition was executed.

On April 8, 1946, the spouses Miguel Rodriguez and Rosalina J. de Rodriguez initiated proceedings before the Court of First Instance of Ozamiz City for the legal adoption of Maria Elena Rodriguez Pedrosa. On August 1, 1946, the CFI granted the petition and declared Maria Elena the adopted child of Miguel and Rosalina. On April 29, 1972, Miguel died intestate. Thereafter, Maria Elena and Rosalina entered into an extrajudicial settlement of Miguel’s estate, adjudicating between themselves in equal proportion the estate of Miguel.

On November 21, 1972, private respondents filed an action to annul Maria Elena’s adoption before the CFI of Ozamiz City, with Maria Elena and Rosalina as defendants, docketed as OZ 349. On August 28, 1974, the CFI denied the petition and upheld the validity of the adoption. Private respondents appealed the decision to the Court of Appeals.

On March 11, 1983, while the appeal was pending, the Rodriguezes entered into an extrajudicial settlement with Rosalina for the partition of the estate of Miguel and of another sister, Pilar. Rosalina acted as the representative of the heirs of Miguel Rodriguez. Pilar had no heirs except her brothers and sisters. The Deed of Extrajudicial Settlement and Partition covered fourteen parcels of land with a total area of 224,883 square meters. These properties were divided among Jose, Carmen, Mercedes, Ramon, and the heirs of Miguel, represented solely by Rosalina. The heirs of Miguel were given 226 square meters of parcel 2, and 9,567 square meters and 24,457 square meters of parcels 7 and 9, respectively, for a total of 34,250 square meters. Armed with the deed, respondents Rodriguezes secured new Transfer Certificates of Title and transferred some parcels to the other respondents. Portions of Lot 504 were transferred to respondent Chan Lung Fai and other respondents, and some were registered under Lilian Express, Inc. under TCT No. T-11337. Parcel 6, Lot 560, was subdivided among Ramon, Jose, Carmen, and Mercedes into Lots 560-A, 560-B, 560-C, 560-D, and 560-E. Lot 560-A was transferred to Victorino S. Detalia and later to Jerome Deiparine under TCT No. T-10706; Lot 560-B was transferred to Petronilo S. Detalia and later to Hubert Chiu Yulo under TCT No. T-11305; Lot 560-C was registered under Paterio N. Lao under TCT No. T-10206; Lot 560-D was registered under Lorensita M. Padilla under TCT No. T-10207; and Lot 560-E was bought by Immaculate Concepcion College and registered under TCT No. T-10208.

On June 19, 1986, the parties in the appeal seeking to annul Maria Elena’s adoption filed a joint Motion to Dismiss. On June 25, 1986, the Court of Appeals dismissed the appeal but upheld the validity of the adoption. Thereafter, Maria Elena sent her daughter, Loreto Jocelyn, to claim their share of the properties from the Rodriguezes. The latter refused, saying that Maria Elena and Loreto were not heirs because they were not their blood relatives.

Maria Elena then filed a complaint to annul the 1983 partition on January 28, 1987. The complaint was later amended on March 25, 1987 to include the allegation that earnest efforts toward a compromise were made between the plaintiffs and the defendants, but the same failed. The Regional Trial Court dismissed the complaint, and the Court of Appeals affirmed.

• Prescription: Petitioner argued that the complaint for annulment of the extrajudicial partition had not prescribed because the applicable prescriptive period was four years under Beltran vs. Ayson, 4 SCRA 69 (1962), and that Section 4, Rule 74’s two-year period required both notice to the party assailing the partition and participation by that party, neither of which was present in her case.
• Validity of the Partition: Petitioner maintained that a deed of extrajudicial partition executed without including some heirs who had no knowledge of and consent to the same is fraudulent, citing Villaluz vs. Neme, 7 SCRA 27, 30 (1963), and asserted that she is an adoptive daughter and thus an heir of Miguel.
• Bad Faith of Buyers: Petitioner contended that the respondent buyers were buyers in bad faith because they failed to exercise the necessary due diligence required before purchasing the lots in question.
• Redemption: In the alternative, petitioner sought to redeem the lots as a co-owner of respondent Rodriguezes under Article 1620 of the New Civil Code.
• Lesion and Rescission: Petitioner asserted that she would suffer lesion if the partition were allowed and asked for rescission of the partitioning under Articles 165-175 of the Civil Code.

• Prescription: Respondents claimed that petitioner’s action had already prescribed.
• Prior Compromise and Shares: Respondents argued that petitioner Maria Elena and Rosalina already had their shares in the estate of Miguel Rodriguez reflected in the compromise agreement they entered into with respondent Rodriguezes in AC-G.R. SP 00208.
• Non-Participation Excused: Respondents averred that Maria Elena’s non-participation in the extrajudicial partition was understandable because her status as an adopted child was then under litigation, and that in any case the shares of Miguel’s heirs were adequately protected in the partition.

• Prescription: Whether the complaint for annulment of the Deed of Extrajudicial Settlement and Partition had already prescribed.
• Validity of the Deed: Whether the Deed of Extrajudicial Settlement and Partition is valid.
• Recovery of Transferred Lots: Whether petitioner is entitled to recover the lots already transferred to respondent buyers.
• Damages: Whether petitioner is entitled to damages.

• Prescription: No. The two-year period under Section 4, Rule 74 does not apply because petitioner did not participate in the extrajudicial partition; the four-year period for fraud under Gerona vs. De Guzman, 11 SCRA 153 (1964), applies, and the complaint filed on January 28, 1987 was within four years of the March 11, 1983 deed.
• Validity of the Deed: No. Under Section 1, Rule 74, no extrajudicial settlement binds a person who did not participate or had no notice; the deed, executed without including petitioner, is fraudulent and vicious and invalid as to her.
• Recovery of Transferred Lots: No. The properties are registered under third parties, and a Torrens title cannot be collaterally attacked; the validity of the title must be raised in an action expressly instituted for that purpose.
• Damages: Yes, nominal damages. Actual and moral damages were not proved; P100,000 nominal damages is awarded to vindicate petitioner’s violated right.

• Prescription: The threshold question was whether the action had prescribed. Section 4, Rule 74 provides a two-year prescriptive period for persons who participated or took part or had notice of the extrajudicial partition, and only when Section 1 of Rule 74 has been strictly complied with, i.e., all persons or heirs of the decedent have taken part in the extrajudicial settlement or are represented by themselves or through guardians. Petitioner did not participate in the extrajudicial partition; therefore, the two-year period was not applicable. The applicable period was four years under Gerona vs. De Guzman, 11 SCRA 153 (1964), which held that an action to annul a deed of extrajudicial settlement upon the ground of fraud may be filed within four years from discovery of the fraud; discovery is deemed to have taken place when the instrument was filed with the Register of Deeds and new certificates of title were issued in the name of respondents exclusively. The complaint was filed on January 28, 1987, or three years and ten months after the questioned extrajudicial settlement dated March 11, 1983, so the action had not prescribed.
• Validity of the Deed: Section 1, Rule 74 states that the fact of extrajudicial settlement or administration shall be published in a newspaper of general circulation, but no extrajudicial settlement shall be binding upon any person who has not participated therein or had no notice thereof. The rule contemplates notice sent or issued before the Deed of Settlement and/or Partition is agreed upon—a notice calling all interested parties to participate—not after, which was when publication was done in this case. Following Rule 74 and Beltran vs. Ayson, 4 SCRA 69 (1962), since Maria Elena did not participate in the partition, the settlement was not binding on her. Section 4, Rule 74 also does not apply when the deed of extrajudicial partition is sought to be annulled on the ground of fraud. A deed of extrajudicial partition executed without including some of the heirs, who had no knowledge of and consent to the same, is fraudulent and vicious, as held in Villaluz vs. Neme, 7 SCRA 27, 30 (1963). Maria Elena is an heir of Miguel together with her adopting mother, Rosalina. Being the lone descendant of Miguel, she excludes the collateral relatives of Miguel from participating in his estate under Article 1003 of the Civil Code. Private respondents could not claim they were unaware of Maria Elena’s adoption because they even filed an action to annul the decree of adoption. Nor could they claim their actions were valid because the adoption was still being questioned at the time they executed the deed; the complaint to annul the adoption was filed only twenty-six years after the decree, patently a delayed response to prevent Maria Elena from inheriting from her adoptive parents. The decree of adoption was valid and existing. Thus, private respondents executed the deed of partition in bad faith with intent to defraud Maria Elena. Segura vs. Segura, 165 SCRA 368, 373 (1988), further held that Section 1, Rule 74 does not apply to a partition that is null and void as far as the plaintiffs; the rule covers only valid partitions. The partition was invalid because it excluded heirs entitled to shares, and no extrajudicial settlement binds a person who did not participate or had no notice. To say Maria Elena was represented by Rosalina was imprecise: Maria Elena was no longer a minor at the time Miguel died, and Rosalina represented only her own interests. Since Miguel predeceased Pilar, his estate automatically vested to his child and widow in equal shares; respondent Rodriguezes’ interests did not include Miguel’s estate but only Pilar’s estate.
• Recovery of Transferred Lots: The properties sought to be recovered by petitioner were now all registered under the name of third parties. The doctrine that a Torrens title cannot be collaterally attacked is well settled; the validity of the title can only be raised in an action expressly instituted for such purpose. Thus, this case was not the proper forum to decide whether petitioner could redeem or recover the lots from the buyers.
• Damages: No receipts, agreements, or other documentary evidence were presented to justify the claim for damages. Actual damages must be proved with a reasonable degree of certainty; courts cannot rely on speculation, conjecture, or guesswork. Moral damages likewise cannot be awarded in the absence of any factual basis. The unsubstantiated testimony of Loreto Jocelyn Pedrosa was hearsay and had no probative value; damages may not be awarded on hearsay evidence. Nevertheless, failure to substantiate the claims did not mean petitioner would be totally deprived of damages. Under the law, nominal damages are awarded so that a plaintiff’s right, which has been invaded or violated by defendants, may be vindicated and recognized. Considering that (1) petitioner technically sustained injury but it was not adequately and properly proved, (2) she was unlawfully deprived of her legal participation in the partition of the estate of Miguel, her adoptive father, (3) respondents had transferred portions of the properties to third parties, and (4) the case had dragged on for more than a decade, nominal damages of P100,000 were reasonable to recognize the technical injury.

• Two-year prescriptive period under Section 4, Rule 74 — Section 4, Rule 74 provides a two-year prescriptive period for persons who participated or took part or had notice of the extrajudicial partition, and only when Section 1 of Rule 74 has been strictly complied with, meaning all persons or heirs of the decedent have taken part in the extrajudicial settlement or are represented by themselves or through guardians. The period did not apply to petitioner because she did not participate in the partition and Section 1 was not complied with.
• Extrajudicial settlement not binding on non-participants; notice must precede the deed — Under Section 1, Rule 74, no extrajudicial settlement shall be binding upon any person who has not participated therein or had no notice thereof. The notice contemplated is one sent or issued before the Deed of Settlement and/or Partition is agreed upon, not after publication. Since Maria Elena did not participate and the publication occurred after the deed, the settlement was not binding on her.
• Fraudulent and vicious deed of extrajudicial partition; Section 4 inapplicable to annulment for fraud — A deed of extrajudicial partition executed without including some of the heirs, who had no knowledge of and consent to the same, is fraudulent and vicious. Section 4, Rule 74 does not apply when the deed is sought to be annulled on the ground of fraud. The 1983 deed was therefore invalid as to Maria Elena.
• Adopted child’s successional rights and exclusion of collaterals — Maria Elena, as the adopted child of Miguel, is an heir of Miguel together with her adopting mother, Rosalina. Being the lone descendant of Miguel, she excludes the collateral relatives of Miguel from participating in his estate under Article 1003 of the Civil Code. The partition of Miguel’s estate without her participation was thus invalid.
• Torrens title cannot be collaterally attacked — The validity of a Torrens title can only be raised in an action expressly instituted for that purpose. Because the lots sought to be recovered were already registered under third parties, this case was not the proper forum to resolve their recovery.
• Nominal damages — Nominal damages are awarded so that a plaintiff’s right, which has been invaded or violated by defendants, may be vindicated and recognized, even if actual and moral damages are not proved. The Court awarded P100,000 nominal damages for the technical injury petitioner suffered.

• "Section 4, Rule 74 provides for a two year prescriptive period (1) to persons who have participated or taken part or had notice of the extrajudicial partition, and in addition (2) when the provisions of Section 1 of Rule 74 have been strictly complied with, i.e., that all the persons or heirs of the decedent have taken part in the extrajudicial settlement or are represented by themselves or through guardians." — This passage states the requisites for the two-year period and is the basis for holding that the period did not apply to petitioner, who did not participate.
• "Under said provision, without the participation of all persons involved in the proceedings, the extrajudicial settlement cannot be binding on said persons. The rule contemplates a notice which must be sent out or issued before the Deed of Settlement and/or Partition is agreed upon, i.e., a notice calling all interested parties to participate in the said deed of extrajudicial settlement and partition, not after, which was when publication was done in the instant case." — This passage construes Section 1, Rule 74 and establishes that notice must precede the deed, not follow it.
• "A deed of extrajudicial partition executed without including some of the heirs, who had no knowledge of and consent to the same, is fraudulent and vicious." — This is the Court’s canonical statement on the fraudulent character of an extrajudicial partition that omits heirs.
• "Well settled is the doctrine that a Torrens Title cannot be collaterally attacked. The validity of the title can only be raised in an action expressly instituted for such purpose." — This passage explains why the recovery of lots from third-party buyers could not be resolved in the annulment case.

• Beltran vs. Ayson, 4 SCRA 69 (1962) — Cited for the requirements of Section 4, Rule 74 and for the rule that a non-participant is not bound by an extrajudicial settlement. Followed.
• Gerona vs. De Guzman, 11 SCRA 153 (1964) — Held that an action to annul an extrajudicial settlement on the ground of fraud may be filed within four years from discovery; discovery is deemed upon filing with the Register of Deeds and issuance of new titles. Applied to hold the complaint timely.
• Villaluz vs. Neme, 7 SCRA 27, 30 (1963) — Held that a deed of extrajudicial partition executed without including some heirs who had no knowledge and consent is fraudulent and vicious. Applied.
• Segura vs. Segura, 165 SCRA 368, 373 (1988) — Held that Section 1, Rule 74 does not apply to a partition that is null and void as to excluded heirs; the rule covers only valid partitions. Applied.
• Halili vs. Court of Industrial Relations, 257 SCRA 174, 184 (1996) — Cited for the doctrine that a Torrens title cannot be collaterally attacked. Applied.
• Lufthansa German Airlines vs. Court of Appeals, 243 SCRA 600, 616 (1995) — Cited for the award of nominal damages to vindicate a violated right. Applied.
• PNOC Shipping and Transport Corporation vs. Court of Appeals, 297 SCRA 402, 425 (1998) — Cited for the rule that damages may not be awarded on hearsay evidence and for nominal damages. Applied.
• Marina Properties Corporation vs. Court of Appeals, 294 SCRA 273, 286 (1998) — Cited for the requirement that actual damages be proved with reasonable certainty. Applied.
• Brent Hospital, Inc. vs. NLRC, 292 SCRA 304, 311 (1998) — Cited for the rule that moral damages cannot be awarded absent factual basis. Applied.
• China Air Lines, Ltd. vs. Court of Appeals, 185 SCRA 449, 460 (1990) — Cited on the amount of nominal damages. Applied.

• Section 4, Rule 74, Rules of Court — Provides a two-year prescriptive period for persons who participated or had notice of the extrajudicial partition and when Section 1 has been strictly complied with. The Court held it inapplicable because petitioner did not participate and Section 1 was not complied with.
• Section 1, Rule 74, Rules of Court — Requires publication of the extrajudicial settlement but provides that no extrajudicial settlement shall be binding upon any person who has not participated therein or had no notice thereof. The Court construed the notice to be one issued before the deed is agreed upon, not after publication, and applied it to hold the 1983 deed not binding on petitioner.
• Article 1003, Civil Code — Governs intestate succession and provides that the descendant excludes collateral relatives. The Court applied it to hold that Maria Elena, as the lone descendant of Miguel, excluded Miguel’s collateral relatives from participating in his estate.
• Article 1620, Civil Code — Provides the co-owner’s right of redemption. Petitioner invoked it as an alternative remedy, but the Court did not resolve the redemption claim because the properties were registered under third parties and a Torrens title cannot be collaterally attacked.
• Articles 1098-1100, Civil Code — Cited in the footnote as the provisions on rescission/lesion invoked by petitioner. The Court did not apply them because it resolved the case on the invalidity of the partition and prescription, not rescission.

Bellosillo, Mendoza, Buena, and De Leon, Jr., JJ., concur.