Ramirez vs. Baltazar

Heirs have legal capacity to sue to protect the estate when the administrator fails or refuses to act, as when the administrator is himself charged with collusion and fraud against the estate. The general rule that heirs have no legal standing in court upon the commencement of testate or intestate proceedings admits of an exception when the administrator fails or refuses to act, in which event the heirs may act in his place.

The case involves the estate of Victoriana Eguaras, who died single after executing a real estate mortgage over her property in favor of the spouses Artemio Baltazar and Susana Flores. The mortgagees themselves filed a petition for intestate proceedings of the deceased's estate, alleging therein that Filemon Ramirez and Monica Ramirez are the heirs of the deceased. Artemio Diawan, a deputy clerk of court, was appointed administrator of the estate after Filemon Ramirez failed to qualify.

On 6 January 1959, Victoriana Eguaras, single, executed a real estate mortgage over a parcel of land owned by her in fee simple, as security for a loan of P2,170.00 in favor of the spouses Artemio Baltazar and Susana Flores. Upon the demise of the mortgagor, the mortgagees, as creditors of the deceased, filed on 16 September 1960 a petition for intestate proceedings of her estate, docketed as Civil Case No. SC-99, wherein they alleged that Filemon Ramirez and Monica Ramirez are the heirs of the deceased. Filemon Ramirez was appointed administrator of the estate; however, having failed to qualify, the court on 16 January 1961 appointed Artemio Diawan, then a deputy clerk of court, as administrator of the estate, who in due time qualified for the office.

On 19 April 1961, the mortgagees filed a complaint for foreclosure of the mortgage against Artemio Diawan in his capacity as administrator, docketed as Civil Case No. SC-292. The defendant-administrator was duly served with summons but failed to answer, whereupon he was declared in default. The case was referred to a commissioner to receive evidence for the plaintiffs, and the defendant-administrator, as deputy clerk of court, acted as such hearing commissioner. On 16 August 1961, a decision was rendered decreeing the foreclosure of the mortgaged property and the sale thereof if, within ninety days from finality of the decision, the obligation was not fully paid. The judgment not having been satisfied, a writ of execution was issued, and after compliance with the requirements of law regarding notice of sale, the Sheriff sold the property at public auction to the highest bidder, who happened to be the mortgagees themselves, for the sum of P2,888.50. The sale was confirmed by the court on 26 January 1962.

On 6 February 1962, Filemon Ramirez, Monica Ramirez, and Jose Eguaras filed a complaint designated "For the Annulment of all Proceedings in said Civil Case No. SC-292 for the Foreclosure of the Mortgage" against the spouses Baltazar and Flores, Artemio Diawan as administrator, and Silverio Talabis as deputy provincial sheriff, docketed as Civil Case No. SC-319. The complaint alleged that Diawan acted in collusion with the other defendants, deliberately and in fraud of the plaintiffs: (a) in allowing the reglementary period to file an answer to lapse without notifying the plaintiffs, resulting in a declaration of default; (b) in not allowing a counterclaim since payment of P1,548.52 had been made on the debt; (c) in presiding as hearing officer in the ex parte hearing despite another deputy clerk being available, creating an anomalous situation where he was both defendant and commissioner; (d) in allowing judgment to become final without notifying the plaintiffs; (e) in allowing the 90-day period to pay to expire without notifying the heirs; and (f) in refusing to help the heirs seek postponement of the auction sale. It was also alleged that the heirs only came to know about the foreclosure proceedings when the property was published for sale at public auction.

The defendants filed motions to dismiss on the grounds that the plaintiffs have no legal capacity to sue and that the complaint states no cause of action. The trial court dismissed the complaint, reasoning that the defendant-administrator could not have offered any evidence to avoid the foreclosure, that there could not have been any connivance or collusion given the apparent disinterestedness of Filemon and Rolando to qualify as administrator, and that the plaintiffs have no legal capacity to sue since their status as legal heirs had yet to be determined in Special Proceeding No. SC-99. The court also denied the plaintiffs' petition for a writ of preliminary injunction on the ground that possession had already been delivered to the mortgagees in February 1962.

• Lack of Legal Capacity: Plaintiffs-appellants argued that the lower court erred in holding that they have no legal capacity to sue until their status as legal heirs of the deceased is determined in Special Proceeding No. SC-99, since the defendants themselves alleged in their petition for intestate proceedings that Filemon Ramirez and Monica Ramirez are the heirs of the deceased.

• Collusion Issue: Plaintiffs-appellants argued that the lower court erred in ruling that there was no collusion or connivance among the defendants-appellees, despite the fact that the issue in the motion to dismiss is purely legal, not factual.

• Preliminary Injunction: Plaintiffs-appellants assigned as error the denial of their petition for a writ of preliminary injunction to enjoin defendants from entering and taking physical possession of the land.

• Lack of Legal Capacity: The defendant spouses Baltazar and Flores moved to dismiss the complaint on the ground that the plaintiffs have no legal capacity to sue.

• Lack of Legal Capacity and No Cause of Action: Defendant Diawan moved to dismiss on two grounds: that plaintiffs have no legal capacity to sue and that the complaint states no cause of action.

• Legal Capacity of Heirs to Sue: Whether the plaintiffs-appellants, who have not yet been judicially declared as heirs of the deceased in the intestate proceedings, have legal capacity to sue for the annulment of the foreclosure proceedings.

• Propriety of Ruling on Collusion in a Motion to Dismiss: Whether the lower court erred in ruling on the existence or inexistence of collusion among the defendants in resolving the motions to dismiss, when that issue was not raised therein and is the very core of the complaint.

• Denial of Preliminary Injunction: Whether the lower court erred in denying the plaintiffs-appellants' petition for a writ of preliminary injunction.

• Legal Capacity of Heirs to Sue: Yes. The plaintiffs-appellants have legal capacity to sue under the exception to the general rule, as the administrator is charged with collusion and fraud against the estate, and it would be farfetched to expect the administrator himself to file the action in behalf of the estate.

• Propriety of Ruling on Collusion in a Motion to Dismiss: No. The lower court erred in practically adjudicating the case on the merits when it ruled on the existence or inexistence of collusion, as that question was never put at issue in the motions to dismiss and is the very core of the complaint.

• Denial of Preliminary Injunction: Yes. The denial of the preliminary injunction was proper, as it puts at issue the factual finding made by the lower court that the defendants had already been placed in possession of the property, a question beyond the competence of the Court at that stage.

• Legal Capacity of Heirs to Sue: The Court noted that the defendants-appellees, in their petition for intestate proceedings, alleged that Filemon Ramirez and Monica Ramirez are the heirs of the deceased, and are therefore estopped from questioning the heirship of these two named persons. The rights to succession are automatically transmitted to the heirs from the moment of the death of the decedent, per Article 777 of the New Civil Code. While, as a rule, the formal declaration or recognition of such successional rights needs judicial confirmation, the Court has, under special circumstances, protected these rights from encroachments made or attempted before the judicial declaration. Citing Pascual vs. Pascual, the Court ruled that although heirs have no legal standing in court upon the commencement of testate or intestate proceedings, this rule admits of an exception "when the administrator fails or refuses to act in which event the heirs may act in his place." A similar situation obtained in the case at bar: the administrator was charged with collusion and connivance with the mortgagees, allowing the foreclosure without notifying the heirs. Since the ground for the action to annul the foreclosure proceedings is the fraud resulting from such insidious machinations and collusion in which the administrator allegedly participated, it would be farfetched to expect the administrator himself to file the action in behalf of the estate. The heirs, who have an interest to assert and protect, are the proper parties to bring the action. The case falls under the exception rather than the general rule.

• Propriety of Ruling on Collusion in a Motion to Dismiss: The Court fully agreed with the plaintiffs-appellants that the lower court had gone too far in practically adjudicating the case on the merits when it made the observation that "there could not have been any connivance and/or collusion between plaintiffs in this case and Artemio Diawan as administrator." A thorough scrutiny of the allegations in the motions to dismiss did not indicate that the question of collusion was ever put at issue therein. The controversy on the existence or inexistence of collusion between the parties, as a result of which judgment was rendered against the estate, is the very core of the complaint that was dismissed. The cause of action is based on Section 30, Rule 132 of the Rules of Court.

• Denial of Preliminary Injunction: The Court was not in accord with the third assigned error — the denial of the motion for the issuance of preliminary injunction — for it puts at issue the factual finding made by the lower court that the defendants had already been placed in possession of the property. At that stage of the proceeding, and considering the nature of the case, such a question was beyond the competence of the Court.

• Exception to the Rule on Heirs' Lack of Legal Standing — Although heirs have no legal standing in court upon the commencement of testate or intestate proceedings, this rule admits of an exception when the administrator fails or refuses to act, in which event the heirs may act in his place. The Court applied this doctrine where the administrator was charged with collusion and connivance with the mortgagees, making it farfetched to expect the administrator himself to file the action in behalf of the estate.

• Automatic Transmission of Successional Rights — The rights to succession are automatically transmitted to the heirs from the moment of the death of the decedent, per Article 777 of the New Civil Code. While, as a rule, the formal declaration or recognition of such successional rights needs judicial confirmation, the Court has, under special circumstances, protected these rights from encroachments made or attempted before the judicial declaration.

• Estoppel on Questioning Heirship — A party who alleges in a petition for intestate proceedings that certain persons are the heirs of the deceased is estopped from questioning the heirship of those persons in a subsequent action. The defendants-appellees themselves alleged in their petition that Filemon Ramirez and Monica Ramirez are the heirs of the deceased, and are therefore estopped from questioning their heirship.

• "While, as a rule, the formal declaration or recognition to such successional rights needs judicial confirmation, this Court has, under special circumstances, protected these rights from encroachments made or attempted before the judicial declaration." — This passage articulates the principle that heirs' rights may be protected even before formal judicial declaration of heirship, supporting the exception to the general rule on legal standing.

• "In Pascual vs. Pascual, it was ruled that although heirs have no legal standing in court upon the commencement of testate or intestate proceedings, this rule admits of an exception as 'when the administrator fails or refuses to act in which event the heirs may act in his place.'" — This is the canonical formulation of the exception applied in this case, frequently cited in subsequent jurisprudence on heirs' standing to sue.

• "Since the ground for the present action to annul the aforesaid foreclosure proceedings is the fraud resulting from such insidious machinations and collusion in which the administrator has allegedly participated, it would be farfetched to expect the said administrator himself to file the action in behalf of the estate." — This passage states the ratio decidendi for allowing the heirs to sue when the administrator is himself charged with collusion and fraud.

• "A thorough scrutiny of the allegations in the motions to dismiss filed by defendants-appellees does not indicate that that question was ever put at issue therein. On the other hand, the controversy — on the existence or inexistence of collusion between the parties as a result of which judgment was rendered against the estate — is the very core of the complaint that was dismissed." — This passage explains why the trial court erred in ruling on the merits of the collusion issue in a motion to dismiss.

• Pascual vs. Pascual, 73 Phil. 561 — Controlling precedent establishing the exception to the general rule that heirs have no legal standing in court upon the commencement of testate or intestate proceedings; the exception applies when the administrator fails or refuses to act, in which event the heirs may act in his place.

• Morales, et al. vs. Yanes, 98 Phil. 677 — Cited for the proposition that the Court has, under special circumstances, protected heirs' successional rights from encroachments made or attempted before the judicial declaration of heirship.

• Coroner vs. Ona, 33 Phil. 456 — Cited in support of the principle that heirs' rights may be protected before formal judicial declaration of heirship.

• Nable Jose vs. Nable Jose, 41 Phil. 713 — Cited in support of the principle that heirs' rights may be protected before formal judicial declaration of heirship.

• Velasco vs. Vizmanos, 45 Phil. 675 — Cited in support of the principle that heirs' rights may be protected before formal judicial declaration of heirship.

• Cabuyao vs. Caagbay, et al., 95 Phil. 614 — Cited in support of the principle that heirs' rights may be protected before formal judicial declaration of heirship.

• Article 777, New Civil Code — Provides that the rights to succession are transmitted to the heirs from the moment of the death of the decedent. The Court applied this provision to support the heirs' legal capacity to sue despite the lack of formal judicial declaration of heirship.

• Section 30, Rule 132, Rules of Court — The basis of the cause of action in the complaint for annulment of the foreclosure proceedings. The Court noted that the controversy on the existence or inexistence of collusion is the very core of the complaint based on this provision.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, and Fernando, JJ., concurred.