Spouses Berot vs. Siapno

An intestate estate has no legal personality to sue or be sued, but formal substitution of a deceased party is not required when the heirs voluntarily participate in the proceedings without timely objection, as such participation constitutes substantial compliance with due process and waives jurisdictional defects. Additionally, the concurrence of multiple debtors in a single obligation creates a presumption of joint, not solidary, liability unless the solidary nature is expressly stated in the instrument or required by law.

Macaria Berot and her son Rodolfo Berot (together with his wife Lilia) obtained a ₱250,000 loan from Felipe Siapno in May 2002, secured by a real estate mortgage over a 147-square-meter parcel of land registered in the names of Macaria and her deceased husband Pedro. Following Macaria's death in June 2003, Siapno filed a foreclosure action in July 2004 impleading Macaria as a defendant, despite her prior demise.

• The Loan and Mortgage: On May 23, 2002, Macaria Berot and spouses Rodolfo and Lilia Berot obtained a loan of ₱250,000.00 from Felipe C. Siapno, payable within one year with interest. As security, they executed a real estate mortgage over a 147-square-meter portion of land covered by Tax Declaration No. 1123, registered in the names of Macaria and her deceased husband Pedro Berot. The property served as the family home of the Berot spouses.
• Death of Macaria and Foreclosure Suit: Macaria died intestate on June 23, 2003. On July 15, 2004, Siapno instituted a foreclosure action before the Regional Trial Court of Dagupan City, alleging default on the principal and interest. The original complaint impleaded Macaria Berot as a defendant despite her prior death.
• Defenses Raised: In their Answer, the Berot spouses alleged that the mortgaged property was Rodolfo's inheritance from Pedro; that the mortgage was void for lack of written consent from the beneficiaries of the family home; that the obligation was merely joint; and that the court lacked jurisdiction over Macaria because no summons could be served on a deceased person.
• Substitution and Proceedings: With leave of court, Siapno amended the complaint to substitute the "Estate of Macaria Berot, represented by Rodolfo A. Berot" as defendant. During hearings on the Motion for Leave to File and Motion to Admit Amended Complaint on November 9, 2004, and March 18, 2005, petitioners' counsel did not object to the substitution. The RTC admitted the amended complaint and ordered service of summons on petitioners, who received the same on February 3, 2005 but failed to file an answer thereto. Throughout the trial on the merits, petitioners participated without interposing any objection to the court's jurisdiction over the estate of Macaria.
• Lower Court Rulings: The RTC ruled that the obligation was solidary and allowed foreclosure, awarding principal, interest, attorney's fees, exemplary damages, and litigation expenses. The CA affirmed the foreclosure but deleted the awards for exemplary damages, attorney's fees, and litigation expenses, holding that petitioners waived their objection to the estate's impleader.

• Legal Personality of the Estate: Petitioner maintained that the intestate estate of Macaria Berot lacks legal personality to sue or be sued, rendering its substitution as a party defendant improper and jurisdictional.
• Improper Appointment of Representative: Petitioner argued that Rodolfo Berot's appointment as representative of the estate was prejudicial to other heirs, assuming arguendo that the estate could be sued.
• Nature of the Obligation: Petitioner contended that the loan obligation was joint, not solidary, and thus the liability should be apportioned among the debtors rather than making each liable for the entire amount.
• Validity of the Mortgage: Petitioner asserted that the mortgage was void ab initio for having been constituted over the family home without the written consent of the beneficiaries who were of legal age, as required by law.
• Propriety of Damages and Fees: Petitioner challenged the awards for exemplary damages, attorney's fees, and litigation expenses as lacking factual and legal basis.

• Waiver of Objection: Respondent countered that petitioners waived any objection to the substitution of the estate and to the court's jurisdiction by failing to file a motion to dismiss or amended answer assailing the amended complaint, and by voluntarily participating in the proceedings without seasonably raising jurisdictional defenses.
• Solidary Liability: Respondent argued that the real estate mortgage evidenced a solidary obligation, as the mortgagors bound themselves jointly and severally to secure the loan, warranting foreclosure for the full amount against any of the debtors.
• Remedy Under Rule 86: Respondent maintained that as a mortgagee, he had the legal option under Section 7, Rule 86 of the Rules of Court to foreclose the mortgage and prove any deficiency as an ordinary claim against the estate.

• Substitution of Parties and Jurisdiction: Whether the intestate estate of Macaria Berot could be a proper party defendant through express or implied waiver, notwithstanding its lack of legal personality.
• Nature of Obligation: Whether the loan obligation contracted by the petitioners and Macaria Berot was joint or solidary.

• Substitution of Parties and Jurisdiction: The estate of a deceased person has no legal personality to be sued, and a decedent cannot be made a defendant in a court action. However, the defense of lack of jurisdiction over the person is waived when not timely raised before the court. Petitioners' failure to object to the amended complaint impleading the estate, and their continued participation in the proceedings without filing an amended answer or motion to dismiss, constituted an implied waiver of jurisdictional objections. Rodolfo Berot, as compulsory heir of Macaria, is the real party in interest who stands to be benefited or injured by the judgment. Formal substitution of heirs is not necessary when the heirs themselves voluntarily appear and participate in the proceedings, as such participation constitutes substantial compliance with the procedural requirement and satisfies due process.
• Nature of Obligation: The obligation is joint, not solidary. Under Article 1207 of the Civil Code, the concurrence of two or more debtors in a single obligation creates a presumption of joint liability; solidary liability must be expressly stated or required by law. The real estate mortgage contained no express terms characterizing the obligation as solidary, and respondent failed to prove by preponderance of evidence that the parties intended solidary liability. Rodolfo Berot's testimony merely established the existence of the loan and his admission of liability therefor, but did not indicate a solidary undertaking. Consequently, the estate of Macaria Berot is liable only for its proportionate share (one-third) of the joint obligation.

• Legal Personality of Intestate Estates — An intestate estate is not a legal entity and lacks the capacity to sue or be sued. A deceased person does not possess the legal personality necessary to be a party in a civil action, and a motion to substitute the estate in place of the decedent cannot cure this defect because the estate itself lacks juridical capacity.
• Waiver of Jurisdictional Objections — The defense of lack of jurisdiction over the person is waivable. A party waives this defense by failing to seasonably raise it through a motion to dismiss or in the answer. Voluntary appearance in the action and participation in the proceedings without objecting to jurisdiction constitutes implied waiver.
• Substantial Compliance in Substitution of Parties — Formal substitution of heirs in place of a deceased party is not required when the heirs voluntarily appear, participate in the proceedings, and present evidence in defense of the decedent's estate. Such voluntary participation constitutes substantial compliance with the procedural rule on substitution, satisfies due process requirements, and confers jurisdiction by estoppel.
• Presumption of Joint Obligations — Under Article 1207 of the Civil Code, the concurrence of two or more debtors in one and the same obligation does not imply solidarity; the obligation is presumed joint unless the instrument expressly states that it is solidary, or unless the law or the nature of the obligation requires solidarity. Solidary obligations cannot be inferred lightly and must be positively and clearly expressed.

• "A deceased person does not have such legal entity as is necessary to bring action so much so that a motion to substitute cannot lie and should be denied by the court. An action begun by a decedent's estate cannot be said to have been begun by a legal person, since an estate is not a legal entity; such an action is a nullity and a motion to amend the party plaintiff will not, likewise, lie, there being nothing before the court to amend."
• "The defense of lack of jurisdiction over the person of the defendant is one that may be waived by a party to a case. In order to avail of that defense, one must timely raise an objection before the court."
• "Formal substitution of the parties in this case is not necessary."
• "The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestations. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity."

• Ventura v. Militante, G.R. No. 63145, 374 Phil. 562 (1999) — Controlling precedent establishing that a decedent's estate lacks legal personality to sue or be sued, and that capacity to be sued is correlative to capacity to sue.
• Gonzales v. Balikatan Kilusang Bayan sa Panlalapi, Inc., G.R. No. 150859, 494 Phil. 105 (2005) — Followed for the principle that voluntary appearance in an action is equivalent to service of summons and that lack of jurisdiction over the person may be waived expressly or impliedly.
• Regional Agrarian Reform Adjudication Board v. Court of Appeals, G.R. No. 165155, 618 SCRA 181 (2010) — Followed for the doctrine that formal substitution of parties is not necessary when the heirs voluntarily appeared, participated, and presented evidence during the proceedings.
• Vda. de Salazar v. Court of Appeals, 332 Phil. 373 (1995) — Followed for the ruling that formal substitution of heirs is not required when heirs actively participate in the defense of the deceased, as such participation constitutes substantial compliance with due process.
• PH Credit Corporation v. Court of Appeals, G.R. No. 109648, 421 Phil. 821 (2001) — Followed for the principle that solidary obligations must be positively and clearly expressed and cannot be inferred lightly.

• Section 1, Rule 9, 1997 Revised Rules on Civil Procedure — Provides that defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived; applied to hold that petitioners waived their objection to jurisdiction over the estate by failing to seasonably raise it.
• Section 2, Rule 3, 1997 Revised Rules on Civil Procedure — Defines real party in interest as the party who stands to be benefited or injured by the judgment; applied to establish Rodolfo Berot as the real party in interest as compulsory heir.
• Section 16, Rule 3, 1997 Revised Rules on Civil Procedure — Mandates substitution of deceased party by heirs or legal representatives; interpreted to allow substantial compliance through voluntary participation without formal substitution.
• Section 7, Rule 86, 1997 Revised Rules on Civil Procedure — Governs mortgage debts due from estates; provides that a creditor holding a claim secured by mortgage may foreclose the mortgage by action in court, making the executor or administrator a party defendant, and may claim any deficiency judgment as an ordinary claim.
• Article 1207, Civil Code of the Philippines — Presumes joint liability when two or more debtors concur in one obligation; requires express statement, law, or nature of obligation to establish solidary liability; applied to reclassify the obligation as joint.

Teresita J. Leonardo-De Castro, Lucas P. Bersamin, Martin S. Villarama, Jr., and Bienvenido L. Reyes.