Sampilo vs. Court of Appeals

The two-year prescriptive period under Section 4, Rule 74 of the Rules of Court, barring heirs from objecting to an extrajudicial settlement, applies only to persons who participated in or had notice of the settlement, and only when the requirements of Section 1 have been strictly complied with — i.e., all heirs took part or were represented; it does not bind heirs who were excluded and had no knowledge of the proceedings.

Teodoro Tolete died intestate in January 1945, leaving four parcels of land in the cadastral survey of San Manuel, Pangasinan. His heirs included his widow, Leoncia de Leon, and several nephews and nieces who were children of deceased brothers and sisters. Felisa Sinopera was later appointed administratrix of the estate and brought the action to recover the nephews' and nieces' lawful share from the purchasers who had acquired the properties through the widow's unilateral affidavit of self-adjudication.

Teodoro Tolete died intestate in January 1945, leaving four parcels of land — lots Nos. 12006, 119967, 14352, and 12176 of the cadastral survey of San Manuel, Pangasinan. His heirs were his widow, Leoncia de Leon, and several nephews and nieces, children of deceased brothers and sisters. On July 25, 1946, without any judicial proceedings, Leoncia executed an affidavit stating that the deceased left no children, descendants, ascendants, acknowledged natural children, brothers, sisters, nephews, or nieces, and that she was the one and only person to inherit the properties. This affidavit was registered in the Office of the Register of Deeds of Pangasinan. On the same day, she executed a deed of sale of all the parcels in favor of Benny Sampilo for P10,000, which sale was likewise registered.

Benny Sampilo was a nephew of Leoncia de Leon and had been living with her. Both Sampilo and the heirs of the deceased were residents of San Manuel, Pangasinan. Sampilo accompanied Leoncia to Sison, Pangasinan, to see Notary Public Ladislao Villamil, who was Sampilo's uncle, to have the affidavit of adjudication and the deed of conveyance prepared and acknowledged before said notary public. There was no sufficient showing that the P10,000 consideration had in fact been paid. On June 17, 1950, Sampilo sold the parcels to Honorato Salacup for P50,000, and this sale was also registered with the Register of Deeds.

In March 1950, Felisa Sinopera instituted special proceedings for the administration of the estate of Teodoro Tolete (Special Proceeding No. 3694, Pangasinan), secured her appointment as administratrix, and brought the present action on June 20, 1950. A notice of lis pendens was filed and recorded on the certificates of title on June 26, 1950, subsequent to Salacup's registration on June 17, 1950. The complaint alleged that Leoncia had no right to execute the affidavit of adjudication and that neither Sampilo nor Salacup acquired any rights to the properties. Defendants filed an amended answer alleging that the complaint stated no cause of action, that if a cause existed it was barred by the statute of limitations, that defendants were innocent purchasers for value, and that the complaint was malicious, frivolous, and spurious.

• Prescription: Petitioners argued that the administratrix's right of action had prescribed and lapsed because the action was instituted almost four years after the affidavit of adjudication was registered, exceeding the two-year period prescribed in Section 4, Rule 74, citing McMicking vs. Sy Conbieng and Ramirez vs. Gmur.
• Innocent Purchaser for Value: Petitioners maintained that they were innocent purchasers for value, claiming no knowledge or notice of the heirs' claims over the land.
• Denial of Motion for New Trial: Petitioners argued that the lower court erred in denying their motion for new trial.

• Prescription: Whether the administratrix's right of action to recover the heirs' share in the lands had prescribed under Section 4, Rule 74, the action having been filed almost four years after registration of the affidavit of adjudication.
• Innocent Purchaser for Value: Whether petitioners are innocent purchasers for value entitled to protection.
• Motion for New Trial: Whether the lower court erred in denying petitioners' motion for new trial.

• Prescription: No. The two-year bar under Section 4, Rule 74 applies only to persons who participated in or had notice of the extrajudicial settlement, and only when Section 1's requirements are strictly complied with; it does not bind excluded heirs who had no knowledge thereof.
• Innocent Purchaser for Value: No. Sampilo knew of the other heirs as Leoncia's nephew living with her, and Salacup failed to investigate facts that should have prompted inquiry into the vendor's title.
• Motion for New Trial: No. The Court found no error in the Court of Appeals' decision and affirmed it in toto.

• Prescription: Section 4 of Rule 74 bars objections to an extrajudicial settlement after two years, but this provision applies only to persons who participated in or had notice of the settlement, and only when the requirements of Section 1 — that all heirs took part or were represented by themselves or through guardians — are strictly complied with. The extrajudicial settlement here was ex parte; no notice was given to the nephews and nieces. To extend the effects of the settlement to those who did not take part or had no knowledge thereof, without any express legal provision, would violate the fundamental right to due process. The Court relied on Ramirez vs. Gmur, which held that ex parte proceedings without notice cannot be conclusive upon persons not represented therein. Additionally, the action is based on fraud — the widow falsely declared she was the sole heir — and actions based on fraud carry a four-year prescriptive period under Section 43, par. 3, Act No. 190 and Article 1146 of the Civil Code. The defendants failed to prove that four years had elapsed from the date the interested parties acquired actual knowledge of the fraud. Section 4 is not a statute of limitations against third persons; it is only a bar against parties who took part in the extrajudicial proceedings, as the statute of limitations is found in a separate chapter of Act No. 190.
• Innocent Purchaser for Value: The Court of Appeals found, and the Supreme Court agreed, that Sampilo could not have been unaware of the other heirs. He was Leoncia's nephew, lived with her, and was a co-resident of San Manuel with the heirs. He accompanied Leoncia to the notary — his own uncle — to have the affidavit and deed prepared, and the immediate conveyance to him was a strategem to defeat the heirs' rights. The lack of proof that the P10,000 consideration was actually paid further indicated bad faith. As for Salacup, although the lis pendens was annotated after his purchase, he was bound by the well-settled rule that a purchaser of registered land who has knowledge of facts which should put him upon inquiry as to possible defects of the vendor's title and fails to investigate cannot claim to be a purchaser in good faith, citing Leung Yee vs. Strong Machinery Co. and Dayao vs. Diaz.
• Motion for New Trial: The Court found no error in the Court of Appeals' decision and affirmed it in toto, implicitly rejecting all assigned errors including the denial of the motion for new trial.

• Two-year prescriptive period under Section 4, Rule 74 — The bar against objecting to an extrajudicial settlement after two years applies only (1) to persons who participated in or had notice of the extrajudicial partition, and (2) when the provisions of Section 1 of Rule 74 have been strictly complied with, i.e., all heirs took part or were represented by themselves or through guardians. It does not bind heirs who were excluded and had no knowledge of the settlement. Applying the bar to non-participants without express legal provision would violate due process.
• Extrajudicial settlement as ex parte proceeding — An extrajudicial settlement or affidavit of self-adjudication under Section 1, Rule 74 is an ex parte proceeding and cannot be conclusive upon persons who had no knowledge of the death of the decedent or of the settlement, especially as no notice by personal service or publication is required.
• Innocent purchaser for value — duty to inquire — A purchaser of registered land who has knowledge of facts which should put him upon inquiry as to possible defects of the vendor's title and fails to make such inquiry cannot claim to be a purchaser in good faith for value and has not acquired a valid title.

• "we are of the opinion and so hold that the provisions of Section 4 of Rule 74, barring distributees or heirs from objecting to an extrajudicial partition after the expiration of two years from such extrajudicial partition, is applicable only (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 is the ratio decidendi defining the scope and limits of the two-year prescriptive period under Rule 74, distinguishing participants from non-participants.
• "To extend the effects of the settlement to them, to those who did not take part or had no knowledge thereof, without any express legal provision to that effect, would be violative of the fundamental right to due process of law." — This passage articulates the constitutional basis for limiting the binding effect of ex parte extrajudicial settlements to participants only.
• "It is well-settled rule in this jurisdiction that a purchaser of registered lands who has knowledge of facts which should put him upon inquiry and investigate as to the possible defects of the title of the vendor and fails to make such inquiry and investigation cannot claim that he as a purchaser in good faith for value and he had acquired a valid title thereto." — This states the canonical formulation of the duty-to-inquire doctrine for purchasers of registered land, as applied to defeat Salacup's claim of good faith.

• McMicking vs. Sy Conbieng, 21 Phil. 211 — Cited by petitioners in support of prescription; distinguished as inapplicable, the circumstances bearing no similarity to the case at bar.
• Ramirez vs. Gmur, 42 Phil. 855 — Cited by petitioners but relied upon by the Court to support the opposite conclusion: that ex parte proceedings without notice cannot be conclusive upon persons not represented therein; followed as controlling authority on the due process limitation.
• Leung Yee vs. Strong Machinery Co., 37 Phil. 644 — Cited for the doctrine that a purchaser with knowledge of facts warranting inquiry into title defects who fails to investigate cannot claim good faith; applied to Salacup.
• Dayao vs. Diaz, G.R. L-4106, May 29, 1952 — Cited alongside Leung Yee for the same duty-to-inquire doctrine; applied to defeat Salacup's claim of innocent purchaser status.

• Section 4, Rule 74, Rules of Court — Provides that if within two years after settlement and distribution of an estate an heir has been unduly deprived of his lawful participation, he may compel settlement in court. The Court held this bar applies only to participants or those with notice, not to excluded heirs without knowledge.
• Section 1, Rule 74, Rules of Court — Governs extrajudicial settlement by agreement between heirs or self-adjudication by a sole heir; requires that all heirs take part or are represented. The Court found this requirement was not satisfied because the nephews and nieces did not participate.
• Section 596, Act No. 190 (old Code of Civil Procedure) — Historical source of Section 1, Rule 74; required that all heirs agree in writing "and not otherwise." The Court used this to reinforce that participation of all heirs is mandatory.
• Section 43, par. 3, Act No. 190; Article 1146, Civil Code — Provide a four-year prescriptive period for actions based on fraud. The Court held the action was one for fraud and that defendants failed to prove the period had lapsed.

Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Concepcion, Reyes, J.B.L., Endencia, and Felix, JJ.