Sanchez vs. Court of Appeals

A compromise agreement is a consensual contract perfected upon the meeting of minds of the parties, and judicial approval is not required for its validity or binding effect; moreover, a probate court may only provisionally determine questions of title to properties and cannot adjudicate ownership with finality, such that its act of nullifying deeds of sale with finality constitutes excess of jurisdiction correctible by certiorari.

Juan C. Sanchez was legally married to Maria Villafranca, out of whose wedlock Rosalia S. Lugod was born as their sole legitimate child. Juan C. Sanchez also had six illegitimate children, including petitioners Rolando, Florida Mierly, Alfredo, and Myrna, all surnamed Sanchez. Maria Villafranca died on September 29, 1967, and Juan C. Sanchez died on October 21, 1968, both leaving intestate estates. Two separate intestate proceedings were initiated: Special Proceedings No. 44-M for the estate of Maria Villafranca and Special Proceedings No. 1022 for the estate of Juan C. Sanchez. The dispute centered on the division of the decedents' properties, including certain deeds of sale executed by the spouses in favor of Rosalia and her children, which the petitioners alleged were simulated and fictitious and therefore collationable.

Juan C. Sanchez was legally married to Maria Villafranca, who bore him one legitimate child, Rosalia S. Lugod. He also had six illegitimate children: Patricio Alburo, Maria Ramoso Sanchez, Rolando Pedro T. Sanchez, Florida Mierly T. Sanchez, Alfredo T. Sanchez, and Myrna T. Sanchez. Maria Villafranca died on September 29, 1967. On January 22, 1968, Rosalia filed a petition for letters of administration over her mother's estate and her father's estate (he being then in a state of senility) in the Court of First Instance of Misamis Oriental, docketed as Special Proceedings No. 44-M. On September 30, 1968, Rosalia submitted an inventory and appraisal of her late mother's real and personal estate.

Before the administration proceedings could be formally terminated, Juan C. Sanchez died on October 21, 1968. On January 14, 1969, the illegitimate children filed a separate petition for letters of administration over his intestate estate, docketed as Special Proceedings No. 1022, which Rosalia opposed. On October 30, 1969, however, the parties — assisted by their respective counsels — executed a compromise agreement dividing the properties of the late Juan C. Sanchez. The agreement allotted to the six illegitimate children, in equal pro-indiviso shares, a 48-hectare agricultural land (Tax Decl. No. 06453), while Rosalia received all the rest of the enumerated real and personal properties, with certain cessions in favor of the illegitimate children. The illegitimate children waived all rights to properties not listed in the agreement and confirmed transfers previously made by the spouses. Rosalia assumed the estate's indebtedness to Lugod Enterprises, Inc. and the advances made to the illegitimate children. On November 3, 1969, Rosalia was appointed administratrix of her father's estate.

On January 19, 1970, the petitioners filed a motion to require Rosalia to deliver a deficiency of 24 hectares or to set aside the compromise agreement. On April 13, 1970, the parties executed a memorandum of agreement modifying the compromise, correcting the area allotted to the illegitimate children from 48 hectares to 36 hectares, with each receiving 6 hectares. Thereafter, the parties took possession of their respective shares, as evidenced by tax declarations issued in 1972 in the petitioners' names. Nine years later, on October 25, 1979, the petitioners filed a motion to defer approval of the compromise agreement on the ground of fraud, alleging concealment of properties by Rosalia. Their counsel later moved to withdraw this motion, but new counsel subsequently filed a motion to change administratrix.

After the parties submitted position papers and memoranda, the trial court, presided by Judge Vivencio A. Galon, rendered a decision on June 26, 1991. The trial court declared as simulated and fictitious all deeds of absolute sale executed by the spouses Juan C. Sanchez and Maria Villafranca on July 26, 1963 and June 26, 1967 in favor of Rosalia and her children, ruled that the properties covered thereby were collationable, disregarded the compromise agreement for lack of judicial approval, ordered redistribution of the estate, directed Rosalia to render an accounting, and awarded exemplary damages and attorney's fees in favor of the petitioners. The trial court subsequently declared its decision final and executory on September 3, 1991. Rosalia elevated the matter to the Court of Appeals via a petition for certiorari under Rule 65, which initially dismissed the petition but later reinstated it. On November 23, 1992, the Court of Appeals granted the petition, annulled the trial court's decision, and declared the modified compromise agreement valid and binding, deeming the intestate proceedings closed and terminated.

• Propriety of Certiorari: Petitioners argued that the Court of Appeals erred in allowing private respondents' recourse to certiorari under Rule 65, contending that certiorari may not substitute for a lost appeal and that the grounds invoked were merely errors of judgment, not correctable by certiorari, especially since the trial court's decision had become final and executory.
• Validity of Compromise Agreement: Petitioners maintained that the compromise agreement was void and unenforceable because it was not approved by the intestate court and had been seasonably repudiated on the ground of fraud. They further contended that the minority of Florida Mierly, Alfredo, and Myrna, who were represented only by their mother/natural guardian Laureta Tampus, necessitated judicial approval under Article 2032 of the Civil Code.
• Waiver of Unknown Properties: Petitioners assailed as void the waiver provision in the compromise agreement (paragraph 8), arguing that it constituted a relinquishment of rights to properties which were not known, contrary to law, public policy, morals, or good custom.
• Fraud in Execution: Petitioners alleged that Rosalia committed fraud and deception by concealing some of the decedent's properties, which attended the execution of the compromise agreement.
• Collation of Deeds of Sale: Petitioners contended that the Court of Appeals erred in ignoring the trial court's findings that the conveyances of real properties made by the spouses just before their death in favor of Rosalia and her children were tainted with fraud or made in contemplation of death, hence collationable.
• Termination of Proceedings: Petitioners argued that the Court of Appeals erred in declaring the intestate proceedings closed and terminated, asserting that there was no order of distribution of the estate pursuant to Rule 90 and that they had not received their full share.
• Deficiency in Delivery: Petitioners faulted the Court of Appeals for not directing Rosalia to deliver the deficiency of eight hectares due them under the compromise agreement and for not directing the provisional inclusion of the deficiency in the inventory for collation purposes.

• Jurisdiction of Probate Court: Private respondents contended that the trial court had no authority to disturb the compromise agreement and acted without jurisdiction in annulling the deeds of sale between Rosalia's children and Juan C. Sanchez without affording them their day in court.
• Impossibility of Accounting: Private respondents argued that the trial court arbitrarily faulted Rosalia for an alleged failure to render an accounting which was impossible.
• Errors of Jurisdiction: Private respondents maintained that the trial court's errors were not merely errors of judgment but errors of jurisdiction, warranting certiorari.
• Validity of Compromise: Private respondents asserted the validity and binding effect of the compromise agreement, which the parties had freely and knowingly entered into with the assistance of counsel.

• Propriety of Certiorari: Whether a petition for certiorari under Rule 65 is the proper remedy to challenge the trial court's decision, notwithstanding that the ordinary remedy of appeal was available and the decision had been declared final and executory.
• Validity of Compromise Agreement: Whether a compromise agreement executed by the parties during the pendency of intestate proceedings, partitioning inherited properties, is valid and binding even without judicial approval by the probate court.
• Fraud and Collation: Whether the deeds of sale executed by the decedents in favor of Rosalia and her children are collationable and whether fraud attended the execution of the compromise agreement.

• Propriety of Certiorari: Yes. Certiorari was proper because the trial court, acting as a probate court, exceeded its jurisdiction by adjudicating title to properties with finality and by disregarding the compromise agreement, constituting grave abuse of discretion correctible by certiorari.
• Validity of Compromise Agreement: Yes. The compromise agreement is valid and binding even without judicial approval, being a consensual contract perfected upon the meeting of minds of the parties, and functioning as a valid partition under Section 1, Rule 74 of the Rules of Court.
• Fraud and Collation: No. There was no sufficient evidence of fraud in the execution of the compromise agreement or in the deeds of sale, and the deeds of sale being contracts perfected during the decedents' lifetime, the properties conveyed are not collationable under Article 1061 of the Civil Code.

• Propriety of Certiorari: The general rule that certiorari is not a substitute for a lost appeal admits of exceptions, including where the lower court acted in excess of or without jurisdiction. A petition for certiorari under Rule 65 requires that the writ be directed against a tribunal exercising judicial functions, that such tribunal acted without or in excess of jurisdiction or with grave abuse of discretion, and that there is no plain, speedy, and adequate remedy in the ordinary course of law. All these requisites were met. As a probate court, the trial court had only limited jurisdiction and could resolve questions of title only provisionally. By declaring the deeds of sale simulated and fictitious, nullifying them with finality, and determining ownership of the properties subject thereof, the trial court clearly overstepped its jurisdiction. A probate court cannot adjudicate or determine title to properties claimed to be part of the estate and claimed by outside parties; it can only determine whether they should be included in the inventory. Furthermore, the trial court committed grave abuse of discretion by disregarding the compromise agreement on the ground that it was not judicially approved, which amounted to an evasion of positive duty. Since the trial court exceeded its jurisdiction, certiorari was a proper remedy, and the void judgment could be challenged at any time.

• Validity of Compromise Agreement: A compromise agreement, defined under Article 2028 of the Civil Code as a contract whereby parties make reciprocal concessions to avoid or end litigation, is a consensual contract perfected upon the meeting of minds. Judicial approval is not required for its perfection or binding effect; it has the effect of res judicata even if not judicially approved. In this case, the parties knowingly and freely entered into the agreement after four months of negotiation through four drafts, assisted by their respective counsels. The document, though denominated a compromise agreement, was essentially a deed of partition under Article 1082 of the Civil Code. The requisites for a valid partition under Section 1, Rule 74 were all present: the decedent left no will; debts were assumed by Rosalia; the heirs were of age or represented by their guardian; and the partition was made by public instrument. The issue of minority was raised for the first time on appeal and was therefore barred by estoppel. The waiver of hereditary rights to unknown properties was valid because the rights to succession are transmitted from the moment of death under Article 777, and an heir may waive a vested hereditary right even if the actual extent of the share is not yet determined. The parties had already consummated and availed themselves of the benefits of the compromise, and a party who has enjoyed the benefits cannot seek rescission. The nine-year delay before questioning the compromise further estopped the petitioners. Courts have no jurisdiction to look into the wisdom of a compromise or render a decision different therefrom.

• Fraud and Collation: There was no substantial and convincing evidence of fraud on the part of Rosalia. The petitioners' allegation of fraud based on the deficiency in land area was untenable because they subsequently executed a memorandum of agreement reducing their share from 48 to 36 hectares, which belied any deception. The legal presumption of validity of the notarized deeds of sale was not overcome. Fraud is not presumed but must be proved by clear and convincing evidence. The deeds of sale were contracts perfected during the decedents' lifetime, not gratuitous transfers of future inheritance; hence, the properties conveyed are not collationable, because collation under Article 1061 contemplates properties conveyed inter vivos by the decedent to an heir by way of donation or other gratuitous title. The allegations of deficiency, concealment, and fraud were factual in nature and not reviewable by the Supreme Court in a petition under Rule 45.

• Certiorari as substitute for lost appeal — The general rule that certiorari is not a substitute for a lost appeal admits of exceptions, including where the lower court acted in excess of or without jurisdiction, where the order is a patent nullity, or where the decision will avoid future litigations. A void judgment for want of jurisdiction is no judgment at all and may be challenged at any time.

• Limited jurisdiction of probate courts — A probate court or one in charge of intestate proceedings cannot adjudicate or determine title to properties claimed to be part of the estate and claimed by outside parties with finality. It may only determine provisionally whether properties should or should not be included in the inventory. Conflicting claims of title must be resolved in an ordinary action, not by the probate court.

• Compromise agreement as consensual contract — A compromise agreement is a consensual contract perfected upon the meeting of minds of the parties. Judicial approval is not required for its perfection or binding effect. It has the effect of res judicata even if not judicially approved. To be valid, it need only be based on real claims and actually agreed upon in good faith.

• Compromise as deed of partition — A document denominated a compromise agreement but intended to end indivision among co-heirs is deemed a partition under Article 1082 of the Civil Code. A valid partition under Section 1, Rule 74 requires: (1) the decedent left no will; (2) the decedent left no debts, or all debts were paid; (3) the heirs are all of age or represented by their judicial guardian or legal representatives; and (4) the partition was made by means of a public instrument or affidavit duly filed with the Register of Deeds.

• Waiver of hereditary rights — The rights to succession are transmitted from the moment of the decedent's death (Article 777, Civil Code). An heir may waive his or her hereditary share even if the actual extent of such share is not determined until the subsequent liquidation of the estate. A waiver of a known and existing hereditary interest is valid.

• Estoppel from questioning compromise after enjoying benefits — A party to a compromise cannot ask for rescission after having enjoyed its benefits. The law does not relieve a party from the effects of an unwise, foolish, or disastrous contract entered into with all required formalities and full awareness. Courts have no power to relieve parties from obligations voluntarily assumed simply because their contracts turned out to be disastrous deals.

• Collation under Article 1061 — Collation contemplates properties conveyed inter vivos by the decedent to an heir by way of donation or other gratuitous title. Contracts of sale perfected by the decedents during their lifetime are not gratuitous transfers and therefore the properties conveyed thereby are not collationable.

• Issues raised for the first time on appeal — An issue raised for the first time on appeal and not raised timely in the lower court is barred by estoppel. Questions raised on appeal must be within the issues framed by the parties.

• "A compromise is a consensual contract. As such, it is perfected upon the meeting of the minds of the parties to the contract. And from that moment not only does it become binding upon the parties, it also has upon them the effect and authority of res judicata even if not judicially approved." — This passage, quoting Mayuga vs. Court of Appeals, articulates the controlling doctrine on the validity of compromise agreements without judicial approval, central to the Court's ruling on the second issue.

• "[A] probate court or one in charge of proceedings whether testate or intestate cannot adjudicate or determine title to properties claimed to be a part of the estate and which are claimed to belong to outside parties. All that the said court could do as regards said properties is to determine whether they should or should not be included in the inventory or list of properties to be administered by the administrator." — This passage defines the jurisdictional limits of probate courts, the basis for the Court's ruling that the trial court exceeded its jurisdiction and that certiorari was proper.

• "A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no legal effect. Hence, it can never become final and any writ of execution based on it is void." — This passage establishes the principle that a judgment rendered without jurisdiction is void and may be attacked at any time, supporting the Court's conclusion that certiorari was available notwithstanding the trial court's declaration of finality.

• "The law does not relieve a party from the effects of an unwise, foolish, or disastrous contract, entered into with all the required formalities and with full awareness of what he was doing." — This passage articulates the doctrine that courts cannot relieve parties from obligations voluntarily assumed, underpinning the Court's refusal to nullify the compromise agreement despite the petitioners' claim that they were shortchanged.

• Mayuga vs. Court of Appeals, 154 SCRA 309 (1987) — Controlling precedent followed for the doctrine that a compromise agreement is a consensual contract perfected upon meeting of minds and binding even without judicial approval, with the effect of res judicata.

• Jimenez vs. Intermediate Appellate Court, 184 SCRA 367 (1990) — Followed for the doctrine that a probate court's jurisdiction over questions of title is merely provisional and that ownership is an extraneous matter which the probate court cannot resolve with finality.

• Ortega vs. Court of Appeals, 153 SCRA 96 (1987) — Followed for the principle that a probate court cannot adjudicate title to properties claimed by outside parties and can only determine whether they should be included in the inventory.

• Leonor vs. Court of Appeals, 256 SCRA 69 (1996) — Followed for the doctrine that a void judgment for want of jurisdiction is no judgment at all and can never become final.

• Santiago Esquivel, et al. vs. Court of Appeals, G.R. No. L-8825 (1956) — Followed for the requisites of a valid partition under Section 1, Rule 74 of the Rules of Court.

• De Borja vs. Vda. de de Borja, 46 SCRA 577 (1972) — Followed for the principle that an heir may waive his or her hereditary share even if the actual extent of such share is not determined until the subsequent liquidation of the estate.

• Favor vs. Court of Appeals, 194 SCRA 308 (1991) — Followed for the principle that deeds of sale perfected during the decedent's lifetime are not gratuitous transfers and the properties conveyed are not collationable.

• Caltex (Philippines), Inc. vs. Court of Appeals, 212 SCRA 448 (1992) — Followed for the rule that issues raised for the first time on appeal are barred by estoppel.

• Article 2028, Civil Code — Defines a compromise agreement as a contract whereby parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. Applied to establish that the compromise is a consensual contract perfected upon meeting of minds.

• Article 2037, Civil Code — Provides that a compromise has the effect of res judicata. Applied to support the binding effect of the compromise even without judicial approval.

• Article 2032, Civil Code — Relates to compromises entered into by guardians on behalf of wards. Petitioners invoked this provision, but the Court found the issue was raised for the first time on appeal and was barred.

• Article 1082, Civil Code — Provides that every act intended to end indivision among co-heirs is deemed a partition, although it purports to be a sale, exchange, compromise, or other transaction. Applied to characterize the compromise agreement as essentially a deed of partition.

• Article 777, Civil Code — Provides that rights to succession are transmitted from the moment of the decedent's death. Applied to uphold the validity of the waiver of hereditary rights as a waiver of a known and vested interest.

• Article 1061, Civil Code — Governs collation of properties conveyed inter vivos by the decedent to an heir by donation or gratuitous title. Applied to rule that the deeds of sale, being onerous contracts perfected during the decedents' lifetime, were not collationable.

• Article 1409(2), Civil Code — Provides that acts prohibited by law are void and inexistent. Cited by the trial court in nullifying the deeds of sale, but the Supreme Court found the trial court exceeded its jurisdiction in doing so.

• Article 2029, Civil Code — Mandates that courts endeavor to persuade litigants in civil cases to agree upon a fair compromise. Applied to support the policy favoring compromise as a vehicle for settlement.

• Section 1, Rule 65, Rules of Court — Defines the requisites for a petition for certiorari. Applied to determine that all requisites were met, warranting the writ.

• Section 1, Rule 74, Rules of Court — Sets forth the conditions for a valid partition: (1) decedent left no will; (2) no debts or all debts paid; (3) heirs are of age or represented by judicial guardian; (4) partition made by public instrument or affidavit filed with Register of Deeds. Applied to validate the compromise agreement as a partition.

• Rule 90, Rules of Court — Governs the distribution of the estate's residue after payment of debts, funeral charges, expenses of administration, allowance to the widow, and inheritance tax. Applied to support the closure and termination of the intestate proceedings.

Narvasa, C.J., Romero, Melo, and Francisco, JJ., concurred.