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THELMA M. ARANAS,
Petitioner,
FIRST DIVISION
G.R. No. 156407
Present:
-versus-
TERESITA V. MERCADO,
FELIMON V. MERCADO,
CARMENCITA M. SUTHERLAND,
SERENO, C.J.,
LEONARDO-DE CASTRO,
BERSAMIN,
VILLARAMA, JR., and
REYES, JJ.
RICHARD V. MERCADO, Promulgated:
MA. TERESITA M. ANDERSON, JAN 1 5 2014
and FRANKLIN L. MERCADO,
Respondents. i
x------------------------------------------------------------------ ------- ---------1----x
DECISION
BERSAMIN, J.:
The probate court is authorized to determine the issue of ownership of
I
properties for purposes of their inclusion or exclusion from the inventory to
be submitted by the administrator, but its determination shall only be
provisional unless the interested parties are all heirs of the decedent, d>r the
question is one of collation or advancement, or the parties consent the
assumption of jurisdiction by the probate court and the rights of third pkrties
are not impaired. Its jurisdiction extends to matters incidental or to
the settlement and distribution of the estate, such as the determination bf the
I
status of each heir and whether property included in the inventory is the
conjugal or exclusive property of the deceased spouse. I
I
I
'
Antecedents I
I
Emigdio S. Mercado (Emigdio) died intestate on January 12, i 991,
survived by his second wife, Teresita V. Mercado (Teresita), and their five
Decision 2 G.R. No. 156407


children, namely: Allan V. Mercado, Felimon V. Mercado, Carmencita M.
Sutherland, Richard V. Mercado, and Maria Teresita M. Anderson; and his
two children by his first marriage, namely: respondent Franklin L. Mercado
and petitioner Thelma M. Aranas (Thelma).

Emigdio inherited and acquired real properties during his lifetime. He
owned corporate shares in Mervir Realty Corporation (Mervir Realty) and
Cebu Emerson Transportation Corporation (Cebu Emerson). He assigned his
real properties in exchange for corporate stocks of Mervir Realty, and sold
his real property in Badian, Cebu (Lot 3353 covered by Transfer Certificate
of Title No. 3252) to Mervir Realty.

On June 3, 1991, Thelma filed in the Regional Trial Court (RTC) in
Cebu City a petition for the appointment of Teresita as the administrator of
Emigdios estate (Special Proceedings No. 3094-CEB).
1
The RTC granted
the petition considering that there was no opposition. The letters of
administration in favor of Teresita were issued on September 7, 1992.

As the administrator, Teresita submitted an inventory of the estate of
Emigdio on December 14, 1992 for the consideration and approval by the
RTC. She indicated in the inventory that at the time of his death, Emigdio
had left no real properties but only personal properties worth
P6,675,435.25 in all, consisting of cash of P32,141.20; furniture and fixtures
worth P20,000.00; pieces of jewelry valued at P15,000.00; 44,806 shares of
stock of Mervir Realty worth P6,585,585.80; and 30 shares of stock of Cebu
Emerson worth P22,708.25.
2


Claiming that Emigdio had owned other properties that were excluded
from the inventory, Thelma moved that the RTC direct Teresita to amend the
inventory, and to be examined regarding it. The RTC granted Thelmas
motion through the order of January 8, 1993.

On January 21, 1993, Teresita filed a compliance with the order of
January 8, 1993,
3
supporting her inventory with copies of three certificates
of stocks covering the 44,806 Mervir Realty shares of stock;
4
the deed of
assignment executed by Emigdio on January 10, 1991 involving real
properties with the market value of P4,440,651.10 in exchange for 44,407
Mervir Realty shares of stock with total par value of P4,440,700.00;
5
and the
certificate of stock issued on January 30, 1979 for 300 shares of stock of
Cebu Emerson worth P30,000.00.
6



1
Instead of administratrix, the gender-fair term administrator is used.
2
Rollo, p. 118.
3
Id. at 125.
4
Id. at 127-129.
5
Id. at 130.
6
Id. at 134.
Decision 3 G.R. No. 156407


On January 26, 1993, Thelma again moved to require Teresita to be
examined under oath on the inventory, and that she (Thelma) be allowed 30
days within which to file a formal opposition to or comment on the
inventory and the supporting documents Teresita had submitted.

On February 4, 1993, the RTC issued an order expressing the need for
the parties to present evidence and for Teresita to be examined to enable the
court to resolve the motion for approval of the inventory.
7


On April 19, 1993, Thelma opposed the approval of the inventory, and
asked leave of court to examine Teresita on the inventory.

With the parties agreeing to submit themselves to the jurisdiction of
the court on the issue of what properties should be included in or excluded
from the inventory, the RTC set dates for the hearing on that issue.
8


Ruling of the RTC

After a series of hearings that ran for almost eight years, the RTC
issued on March 14, 2001 an order finding and holding that the inventory
submitted by Teresita had excluded properties that should be included, and
accordingly ruled:

WHEREFORE, in view of all the foregoing premises and
considerations, the Court hereby denies the administratrixs motion for
approval of inventory. The Court hereby orders the said administratrix to
re-do the inventory of properties which are supposed to constitute as the
estate of the late Emigdio S. Mercado by including therein the properties
mentioned in the last five immediately preceding paragraphs hereof and
then submit the revised inventory within sixty (60) days from notice of
this order.

The Court also directs the said administratrix to render an account
of her administration of the estate of the late Emigdio S. Mercado which
had come to her possession. She must render such accounting within sixty
(60) days from notice hereof.

SO ORDERED.
9


On March 29, 2001, Teresita, joined by other heirs of Emigdio, timely
sought the reconsideration of the order of March 14, 2001 on the ground that
one of the real properties affected, Lot No. 3353 located in Badian, Cebu,
had already been sold to Mervir Realty, and that the parcels of land covered

7
Id. at 56.
8
Id. at 135.
9
Id. at 140.
Decision 4 G.R. No. 156407


by the deed of assignment had already come into the possession of and
registered in the name of Mervir Realty.
10
Thelma opposed the motion.

On May 18, 2001, the RTC denied the motion for reconsideration,
11

stating that there was no cogent reason for the reconsideration, and that the
movants agreement as heirs to submit to the RTC the issue of what
properties should be included or excluded from the inventory already
estopped them from questioning its jurisdiction to pass upon the issue.

Decision of the CA

Alleging that the RTC thereby acted with grave abuse of discretion in
refusing to approve the inventory, and in ordering her as administrator to
include real properties that had been transferred to Mervir Realty, Teresita,
joined by her four children and her stepson Franklin, assailed the adverse
orders of the RTC promulgated on March 14, 2001 and May 18, 2001 by
petition for certiorari, stating:

I
THE HONORABLE RESPONDENT JUDGE HAS COMMITTED
GRAVE ABUSE OF JURISDICTION (sic) AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN HOLDING THAT THE REAL
PROPERTY WHICH WAS SOLD BY THE LATE EMIGDIO S.
MERCADO DURING HIS LIFETIME TO A PRIVATE
CORPORATION (MERVIR REALTY CORPORATION) BE
INCLUDED IN THE INVENTORY OF THE ESTATE OF THE LATE
EMIGDIO S. MERCADO.

II
THE HONORABLE RESPONDENT JUDGE HAS COMMITTED
GRAVE ABUSE OF JURISDICTION (sic) AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN HOLDING THAT REAL
PROPERTIES WHICH ARE IN THE POSSESSION OF AND
ALREADY REGISTERED IN THE NAME (OF) PRIVATE
CORPORATION (MERVIR REALTY CORPORATION) BE
INCLUDED IN THE INVENTORY OF THE ESTATE OF THE LATE
EMIGDIO S. MERCADO.

III
THE HONORABLE RESPONDENT JUDGE HAS COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN HOLDING THAT PETITIONERS
ARE NOW ESTOPPED FROM QUESTIONING ITS JURISDICTION IN
PASSING UPON THE ISSUE OF WHAT PROPERTIES SHOULD BE
INCLUDED IN THE INVENTORY OF THE ESTATE OF THE LATE
EMIGDIO MERCADO.
12



10
Id. at 24.
11
Id. at 156.
12
Id. at 25.
Decision 5 G.R. No. 156407


On May 15, 2002, the CA partly granted the petition for certiorari,
disposing as follows:
13


WHEREFORE, FOREGOING PREMISES CONSIDERED, this
petition is GRANTED partially. The assailed Orders dated March 14,
2001 and May 18, 2001 are hereby reversed and set aside insofar as the
inclusion of parcels of land known as Lot No. 3353 located at Badian,
Cebu with an area of 53,301 square meters subject matter of the Deed of
Absolute Sale dated November 9, 1989 and the various parcels of land
subject matter of the Deeds of Assignment dated February 17, 1989 and
January 10, 1991 in the revised inventory to be submitted by the
administratrix is concerned and affirmed in all other respects.

SO ORDERED.

The CA opined that Teresita, et al. had properly filed the petition for
certiorari because the order of the RTC directing a new inventory of
properties was interlocutory; that pursuant to Article 1477 of the Civil Code,
to the effect that the ownership of the thing sold shall be transferred to the
vendee upon its actual and constructive delivery, and to Article 1498 of
the Civil Code, to the effect that the sale made through a public instrument
was equivalent to the delivery of the object of the sale, the sale by Emigdio
and Teresita had transferred the ownership of Lot No. 3353 to Mervir Realty
because the deed of absolute sale executed on November 9, 1989 had been
notarized; that Emigdio had thereby ceased to have any more interest in Lot
3353; that Emigdio had assigned the parcels of land to Mervir Realty as
early as February 17, 1989 for the purpose of saving, as in avoiding taxes
with the difference that in the Deed of Assignment dated January 10, 1991,
additional seven (7) parcels of land were included; that as to the January
10, 1991 deed of assignment, Mervir Realty had been even at the losing end
considering that such parcels of land, subject matter(s) of the Deed of
Assignment dated February 12, 1989, were again given monetary
consideration through shares of stock; that even if the assignment had been
based on the deed of assignment dated January 10, 1991, the parcels of land
could not be included in the inventory considering that there is nothing
wrong or objectionable about the estate planning scheme; that the RTC, as
an intestate court, also had no power to take cognizance of and determine the
issue of title to property registered in the name of third persons or
corporation; that a property covered by the Torrens system should be
afforded the presumptive conclusiveness of title; that the RTC, by
disregarding the presumption, had transgressed the clear provisions of law
and infringed settled jurisprudence on the matter; and that the RTC also
gravely abused its discretion in holding that Teresita, et al. were estopped
from questioning its jurisdiction because of their agreement to submit to the
RTC the issue of which properties should be included in the inventory.


13
Id. at 21-34; penned by Associate Justice Mercedes Gozo-Dadole (retired), and concurred by Associate
Justice Salvador J. Valdez, Jr. (retired/deceased) and Associate Justice Amelita G. Tolentino.
Decision 6 G.R. No. 156407


The CA further opined as follows:

In the instant case, public respondent court erred when it ruled that
petitioners are estopped from questioning its jurisdiction considering that
they have already agreed to submit themselves to its jurisdiction of
determining what properties are to be included in or excluded from the
inventory to be submitted by the administratrix, because actually, a
reading of petitioners Motion for Reconsideration dated March 26, 2001
filed before public respondent court clearly shows that petitioners are not
questioning its jurisdiction but the manner in which it was exercised for
which they are not estopped, since that is their right, considering that there
is grave abuse of discretion amounting to lack or in excess of limited
jurisdiction when it issued the assailed Order dated March 14, 2001
denying the administratrixs motion for approval of the inventory of
properties which were already titled and in possession of a third person
that is, Mervir Realty Corporation, a private corporation, which under the
law possessed a personality distinct and separate from its stockholders,
and in the absence of any cogency to shred the veil of corporate fiction,
the presumption of conclusiveness of said titles in favor of Mervir Realty
Corporation should stand undisturbed.

Besides, public respondent court acting as a probate court had no
authority to determine the applicability of the doctrine of piercing the veil
of corporate fiction and even if public respondent court was not merely
acting in a limited capacity as a probate court, private respondent
nonetheless failed to adjudge competent evidence that would have
justified the court to impale the veil of corporate fiction because to
disregard the separate jurisdictional personality of a corporation, the
wrongdoing must be clearly and convincingly established since it cannot
be presumed.
14


On November 15, 2002, the CA denied the motion for reconsideration
of Teresita, et al.
15


Issue

Did the CA properly determine that the RTC committed grave abuse
of discretion amounting to lack or excess of jurisdiction in directing the
inclusion of certain properties in the inventory notwithstanding that such
properties had been either transferred by sale or exchanged for corporate
shares in Mervir Realty by the decedent during his lifetime?

Ruling of the Court

The appeal is meritorious.



14
Rollo, pp. 32-33.
15
Rollo, p. 35.
Decision 7 G.R. No. 156407


I
Was certiorari the proper recourse
to assail the questioned orders of the RTC?

The first issue to be resolved is procedural. Thelma contends that the
resort to the special civil action for certiorari to assail the orders of the RTC
by Teresita and her co-respondents was not proper.

Thelmas contention cannot be sustained.

The propriety of the special civil action for certiorari as a remedy
depended on whether the assailed orders of the RTC were final or
interlocutory in nature. In Pahila-Garrido v. Tortogo,
16
the Court
distinguished between final and interlocutory orders as follows:


The distinction between a final order and an interlocutory order is
well known. The first disposes of the subject matter in its entirety or
terminates a particular proceeding or action, leaving nothing more to be
done except to enforce by execution what the court has determined, but the
latter does not completely dispose of the case but leaves something else to
be decided upon. An interlocutory order deals with preliminary matters
and the trial on the merits is yet to be held and the judgment rendered. The
test to ascertain whether or not an order or a judgment is interlocutory or
final is: does the order or judgment leave something to be done in the trial
court with respect to the merits of the case? If it does, the order or
judgment is interlocutory; otherwise, it is final.

The order dated November 12, 2002, which granted the application
for the writ of preliminary injunction, was an interlocutory, not a final,
order, and should not be the subject of an appeal. The reason for
disallowing an appeal from an interlocutory order is to avoid multiplicity
of appeals in a single action, which necessarily suspends the hearing and
decision on the merits of the action during the pendency of the appeals.
Permitting multiple appeals will necessarily delay the trial on the merits of
the case for a considerable length of time, and will compel the adverse
party to incur unnecessary expenses, for one of the parties may interpose
as many appeals as there are incidental questions raised by him and as
there are interlocutory orders rendered or issued by the lower court. An
interlocutory order may be the subject of an appeal, but only after a
judgment has been rendered, with the ground for appealing the order being
included in the appeal of the judgment itself.

The remedy against an interlocutory order not subject of an appeal
is an appropriate special civil action under Rule 65, provided that the
interlocutory order is rendered without or in excess of jurisdiction or with
grave abuse of discretion. Then is certiorari under Rule 65 allowed to be
resorted to.


16
G.R. No. 156358, August 17, 2011, 655 SCRA 553, 566-567.
Decision 8 G.R. No. 156407


The assailed order of March 14, 2001 denying Teresitas motion for
the approval of the inventory and the order dated May 18, 2001 denying her
motion for reconsideration were interlocutory. This is because the inclusion
of the properties in the inventory was not yet a final determination of their
ownership. Hence, the approval of the inventory and the concomitant
determination of the ownership as basis for inclusion or exclusion from the
inventory were provisional and subject to revision at anytime during the
course of the administration proceedings.

In Valero Vda. De Rodriguez v. Court of Appeals,
17
the Court, in
affirming the decision of the CA to the effect that the order of the intestate
court excluding certain real properties from the inventory was interlocutory
and could be changed or modified at anytime during the course of the
administration proceedings, held that the order of exclusion was not a final
but an interlocutory order in the sense that it did not settle once and for all
the title to the San Lorenzo Village lots. The Court observed there that:

The prevailing rule is that for the purpose of determining whether a
certain property should or should not be included in the inventory, the
probate court may pass upon the title thereto but such determination
is not conclusive and is subject to the final decision in a separate
action regarding ownership which may be instituted by the parties (3
Morans Comments on the Rules of Court, 1970 Edition, pages 448-9 and
473; Lachenal vs. Salas, L-42257, June 14, 1976, 71 SCRA 262, 266).
18

(Bold emphasis supplied)

To the same effect was De Leon v. Court of Appeals,
19
where the
Court declared that a probate court, whether in a testate or intestate
proceeding, can only pass upon questions of title provisionally, and
reminded, citing Jimenez v. Court of Appeals, that the patent reason is the
probate courts limited jurisdiction and the principle that questions of title or
ownership, which result in inclusion or exclusion from the inventory of the
property, can only be settled in a separate action. Indeed, in the cited case
of Jimenez v. Court of Appeals,
20
the Court pointed out:

All that the said court could do as regards the said properties is
determine whether they should or should not be included in the inventory
or list of properties to be administered by the administrator. If there is a
dispute as to the ownership, then the opposing parties and the
administrator have to resort to an ordinary action for a final
determination of the conflicting claims of title because the probate
court cannot do so. (Bold emphasis supplied)


17
No. L-39532, July 20, 1979, 91 SCRA 540.
18
Id. at 545-546.
19
G.R. No. 128781, August 6, 2002, 386 SCRA 216, 226-227.
20
G.R. No. 75773, April 17, 1990, 184 SCRA 367, 372.
Decision 9 G.R. No. 156407


On the other hand, an appeal would not be the correct recourse for
Teresita, et al. to take against the assailed orders. The final judgment rule
embodied in the first paragraph of Section 1, Rule 41, Rules of Court,
21

which also governs appeals in special proceedings, stipulates that only the
judgments, final orders (and resolutions) of a court of law that completely
disposes of the case, or of a particular matter therein when declared by these
Rules to be appealable may be the subject of an appeal in due course. The
same rule states that an interlocutory order or resolution (interlocutory
because it deals with preliminary matters, or that the trial on the merits is yet
to be held and the judgment rendered) is expressly made non-appealable.

Multiple appeals are permitted in special proceedings as a practical
recognition of the possibility that material issues may be finally determined
at various stages of the special proceedings. Section 1, Rule 109 of the Rules
of Court enumerates the specific instances in which multiple appeals may be
resorted to in special proceedings, viz:

Section 1. Orders or judgments from which appeals may be taken. -
An interested person may appeal in special proceedings from an order or
judgment rendered by a Court of First Instance or a Juvenile and Domestic
Relations Court, where such order or judgment:

(a) Allows or disallows a will;

(b) Determines who are the lawful heirs of a deceased person, or
the distributive share of the estate to which such person is entitled;

(c) Allows or disallows, in whole or in part, any claim against the
estate of a deceased person, or any claim presented on behalf of the estate
in offset to a claim against it;

(d) Settles the account of an executor, administrator, trustee or
guardian;

(e) Constitutes, in proceedings relating to the settlement of the
estate of a deceased person, or the administration of a trustee or guardian,
a final determination in the lower court of the rights of the party appealing,

21
Section 1, Rule 41 of the Rules of Court (as amended under A.M. No. 07-7-12-SC; effective December
27, 2007) provides:
Section 1. Subject of appeal. An appeal may be taken from a judgment or final order that
completely disposes of the case, or of a particular matter therein when declared by these Rules to be
appealable.
No appeal may be taken from:
(a) An order denying a petition for relief or any similar motion seeking relief from judgment;
(b) An interlocutory order;
(c) An order disallowing or dismissing an appeal;
(d) An order denying a motion to set aside a judgment by consent, confession or compromise on the
ground of fraud, mistake or duress, or any other ground vitiating consent;
(e) An order of execution;
(f) A judgment or final order for or against one or more of several parties or in separate claims,
counterclaims, cross-claims and third-party complaints, while the main case is pending, unless the court
allows an appeal therefrom; and
(g) An order dismissing an action without prejudice.
In any of the foregoing circumstances, the aggrieved party may file an appropriate special civil action as
provided in Rule 65.
Decision 10 G.R. No. 156407


except that no appeal shall be allowed from the appointment of a special
administrator; and

(f) Is the final order or judgment rendered in the case, and affects
the substantial rights of the person appealing, unless it be an order granting
or denying a motion for a new trial or for reconsideration.

Clearly, the assailed orders of the RTC, being interlocutory, did not
come under any of the instances in which multiple appeals are permitted.

II
Did the RTC commit grave abuse of discretion
in directing the inclusion of the properties
in the estate of the decedent?

In its assailed decision, the CA concluded that the RTC committed
grave abuse of discretion for including properties in the inventory
notwithstanding their having been transferred to Mervir Realty by Emigdio
during his lifetime, and for disregarding the registration of the properties in
the name of Mervir Realty, a third party, by applying the doctrine of piercing
the veil of corporate fiction.

Was the CA correct in its conclusion?

The answer is in the negative. It is unavoidable to find that the CA, in
reaching its conclusion, ignored the law and the facts that had fully
warranted the assailed orders of the RTC.

Under Section 6(a), Rule 78 of the Rules of Court, the letters of
administration may be granted at the discretion of the court to the surviving
spouse, who is competent and willing to serve when the person dies
intestate. Upon issuing the letters of administration to the surviving spouse,
the RTC becomes duty-bound to direct the preparation and submission of the
inventory of the properties of the estate, and the surviving spouse, as the
administrator, has the duty and responsibility to submit the inventory within
three months from the issuance of letters of administration pursuant to Rule
83 of the Rules of Court, viz:

Section 1. Inventory and appraisal to be returned within three
months. Within three (3) months after his appointment every executor or
administrator shall return to the court a true inventory and appraisal of
all the real and personal estate of the deceased which has come into
his possession or knowledge. In the appraisement of such estate, the court
may order one or more of the inheritance tax appraisers to give his or their
assistance.

Decision 11 G.R. No. 156407


The usage of the word all in Section 1, supra, demands the inclusion
of all the real and personal properties of the decedent in the inventory.
22

However, the word all is qualified by the phrase which has come into his
possession or knowledge, which signifies that the properties must be known
to the administrator to belong to the decedent or are in her possession as the
administrator. Section 1 allows no exception, for the phrase true inventory
implies that no properties appearing to belong to the decedent can be
excluded from the inventory, regardless of their being in the possession of
another person or entity.

The objective of the Rules of Court in requiring the inventory and
appraisal of the estate of the decedent is to aid the court in revising the
accounts and determining the liabilities of the executor or the administrator,
and in making a final and equitable distribution (partition) of the estate and
otherwise to facilitate the administration of the estate.
23
Hence, the RTC
that presides over the administration of an estate is vested with wide
discretion on the question of what properties should be included in the
inventory. According to Peralta v. Peralta,
24
the CA cannot impose its
judgment in order to supplant that of the RTC on the issue of which
properties are to be included or excluded from the inventory in the absence
of positive abuse of discretion, for in the administration of the estates of
deceased persons, the judges enjoy ample discretionary powers and the
appellate courts should not interfere with or attempt to replace the action
taken by them, unless it be shown that there has been a positive abuse of
discretion.
25
As long as the RTC commits no patently grave abuse of
discretion, its orders must be respected as part of the regular performance of
its judicial duty.

There is no dispute that the jurisdiction of the trial court as an intestate
court is special and limited. The trial court cannot adjudicate title to
properties claimed to be a part of the estate but are claimed to belong to third
parties by title adverse to that of the decedent and the estate, not by virtue of
any right of inheritance from the decedent. All that the trial court can do
regarding said properties is to determine whether or not they should be
included in the inventory of properties to be administered by the
administrator. Such determination is provisional and may be still revised. As
the Court said in Agtarap v. Agtarap:
26


The general rule is that the jurisdiction of the trial court, either as a
probate court or an intestate court, relates only to matters having to do
with the probate of the will and/or settlement of the estate of deceased

22
The word all means every one, or the whole number of particular; the whole number (3 Words and
Phrases 212, citing State v. Maine Cent. R. Co., 66 Me. 488, 510). Standing alone, the word all means
exactly what it imports; that is, nothing less than all (Id. at 213, citing In re Stahelis Will, 57 N.Y.S.2d 185,
188).
23
Siy Chong Keng v. Collector of Internal Revenue, 60 Phil. 493, 500 (1934).
24
71 Phil. 66 (1940).
25
Id. at 68.
26
G.R. No. 177099, June 8, 2011, 651 SCRA 455.
Decision 12 G.R. No. 156407


persons, but does not extend to the determination of questions of
ownership that arise during the proceedings. The patent rationale for this
rule is that such court merely exercises special and limited jurisdiction. As
held in several cases, a probate court or one in charge of estate
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, not by virtue of any right of inheritance from
the deceased but by title adverse to that of the deceased and his estate. All
that the said court could do as regards said properties is to determine
whether or not they should be included in the inventory of properties to be
administered by the administrator. If there is no dispute, there poses no
problem, but if there is, then the parties, the administrator, and the
opposing parties have to resort to an ordinary action before a court
exercising general jurisdiction for a final determination of the conflicting
claims of title.

However, this general rule is subject to exceptions as justified by
expediency and convenience.

First, the probate court may provisionally pass upon in an
intestate or a testate proceeding the question of inclusion in, or
exclusion from, the inventory of a piece of property without prejudice
to final determination of ownership in a separate action. Second, if the
interested parties are all heirs to the estate, or the question is one of
collation or advancement, or the parties consent to the assumption of
jurisdiction by the probate court and the rights of third parties are
not impaired, then the probate court is competent to resolve issues on
ownership. Verily, its jurisdiction extends to matters incidental or
collateral to the settlement and distribution of the estate, such as the
determination of the status of each heir and whether the property in the
inventory is conjugal or exclusive property of the deceased spouse.
27

(Italics in the original; bold emphasis supplied)

It is clear to us that the RTC took pains to explain the factual bases for
its directive for the inclusion of the properties in question in its assailed
order of March 14, 2001, viz:

In the first place, the administratrix of the estate admitted that
Emigdio Mercado was one of the heirs of Severina Mercado who, upon
her death, left several properties as listed in the inventory of properties
submitted in Court in Special Proceedings No. 306-R which are supposed
to be divided among her heirs. The administratrix admitted, while being
examined in Court by the counsel for the petitioner, that she did not
include in the inventory submitted by her in this case the shares of
Emigdio Mercado in the said estate of Severina Mercado. Certainly, said
properties constituting Emigdio Mercados share in the estate of Severina
Mercado should be included in the inventory of properties required to be
submitted to the Court in this particular case.

In the second place, the administratrix of the estate of Emigdio
Mercado also admitted in Court that she did not include in the inventory

27
Id. at 471-473, citing, among others, Coca v. Pizarras Vda. De Pangilinan, No. L-27082, January 31,
1978, 81 SCRA 278, 283; Alvarez v. Espiritu, No. L-18833, August 14, 1965, 14 SCRA 892, 899;
Cunanan v. Amparo, 80 Phil. 227 (1948); and Pascual v. Pascual, 73 Phil. 561 (1942).
Decision 13 G.R. No. 156407


shares of stock of Mervir Realty Corporation which are in her name and
which were paid by her from money derived from the taxicab business
which she and her husband had since 1955 as a conjugal undertaking. As
these shares of stock partake of being conjugal in character, one-half
thereof or of the value thereof should be included in the inventory of the
estate of her husband.

In the third place, the administratrix of the estate of Emigdio
Mercado admitted, too, in Court that she had a bank account in her name
at Union Bank which she opened when her husband was still alive. Again,
the money in said bank account partakes of being conjugal in character,
and so, one-half thereof should be included in the inventory of the
properties constituting as estate of her husband.

In the fourth place, it has been established during the hearing in
this case that Lot No. 3353 of Pls-657-D located in Badian, Cebu
containing an area of 53,301 square meters as described in and covered by
Transfer Certificate of Title No. 3252 of the Registry of Deeds for the
Province of Cebu is still registered in the name of Emigdio S. Mercado
until now. When it was the subject of Civil Case No. CEB-12690 which
was decided on October 19, 1995, it was the estate of the late Emigdio
Mercado which claimed to be the owner thereof. Mervir Realty
Corporation never intervened in the said case in order to be the owner
thereof. This fact was admitted by Richard Mercado himself when he
testified in Court. x x x So the said property located in Badian, Cebu
should be included in the inventory in this case.

Fifthly and lastly, it appears that the assignment of several parcels
of land by the late Emigdio S. Mercado to Mervir Realty Corporation on
January 10, 1991 by virtue of the Deed of Assignment signed by him on
the said day (Exhibit N for the petitioner and Exhibit 5 for the
administratrix) was a transfer in contemplation of death. It was made two
days before he died on January 12, 1991. A transfer made in
contemplation of death is one prompted by the thought that the transferor
has not long to live and made in place of a testamentary disposition (1959
Prentice Hall, p. 3909). Section 78 of the National Internal Revenue Code
of 1977 provides that the gross estate of the decedent shall be determined
by including the value at the time of his death of all property to the extent
of any interest therein of which the decedent has at any time made a
transfer in contemplation of death. So, the inventory to be approved in this
case should still include the said properties of Emigdio Mercado which
were transferred by him in contemplation of death. Besides, the said
properties actually appeared to be still registered in the name of Emigdio
S. Mercado at least ten (10) months after his death, as shown by the
certification issued by the Cebu City Assessors Office on October 31,
1991 (Exhibit O).
28


Thereby, the RTC strictly followed the directives of the Rules of
Court and the jurisprudence relevant to the procedure for preparing the
inventory by the administrator. The aforequoted explanations indicated that
the directive to include the properties in question in the inventory rested on
good and valid reasons, and thus was far from whimsical, or arbitrary, or
capricious.

28
Rollo, pp. 139-140.
Decision 14 G.R. No. 156407



Firstly, the shares in the properties inherited by Emigdio from
Severina Mercado should be included in the inventory because Teresita, et
al. did not dispute the fact about the shares being inherited by Emigdio.

Secondly, with Emigdio and Teresita having been married prior to the
effectivity of the Family Code in August 3, 1988, their property regime was
the conjugal partnership of gains.
29
For purposes of the settlement of
Emigdios estate, it was unavoidable for Teresita to include his shares in the
conjugal partnership of gains. The party asserting that specific property
acquired during that property regime did not pertain to the conjugal
partnership of gains carried the burden of proof, and that party must prove
the exclusive ownership by one of them by clear, categorical, and
convincing evidence.
30
In the absence of or pending the presentation of such
proof, the conjugal partnership of Emigdio and Teresita must be
provisionally liquidated to establish who the real owners of the affected
properties were,
31
and which of the properties should form part of the estate
of Emigdio. The portions that pertained to the estate of Emigdio must be
included in the inventory.

Moreover, although the title over Lot 3353 was already registered in
the name of Mervir Realty, the RTC made findings that put that title in
dispute. Civil Case No. CEB-12692, a dispute that had involved the
ownership of Lot 3353, was resolved in favor of the estate of Emigdio, and
Transfer Certificate of Title No. 3252 covering Lot 3353 was still in
Emigdios name. Indeed, the RTC noted in the order of March 14, 2001, or
ten years after his death, that Lot 3353 had remained registered in the name
of Emigdio.

Interestingly, Mervir Realty did not intervene at all in Civil Case No.
CEB-12692. Such lack of interest in Civil Case No. CEB-12692 was
susceptible of various interpretations, including one to the effect that the
heirs of Emigdio could have already threshed out their differences with the
assistance of the trial court. This interpretation was probable considering that
Mervir Realty, whose business was managed by respondent Richard, was
headed by Teresita herself as its President. In other words, Mervir Realty
appeared to be a family corporation.

Also, the fact that the deed of absolute sale executed by Emigdio in
favor of Mervir Realty was a notarized instrument did not sufficiently justify
the exclusion from the inventory of the properties involved. A notarized
deed of sale only enjoyed the presumption of regularity in favor of its

29
See. FAMILY CODE, Art. 105, 116.
30
Dewara v. Lamela, G.R. No. 179010, April 11, 2011, 647 SCRA 483, 490, citing Coja v. Court of
Appeals, G.R. No. 151153, December 10, 2007, 539 SCRA 517, 528.
31
See Alvarez v. Espiritu, No. L-18833, August 14, 1965, 14 SCRA 892, 899.
Decision 15 G.R. No. 156407


execution, but its notarization did not per se guarantee the legal efficacy of
the transaction under the deed, and what the contents purported to be. The
presumption of regularity could be rebutted by clear and convincing
evidence to the contrary.
32
As the Court has observed in Suntay v. Court of
Appeals:
33


x x x. Though the notarization of the deed of sale in question vests in its
favor the presumption of regularity, it is not the intention nor the function
of the notary public to validate and make binding an instrument never, in
the first place, intended to have any binding legal effect upon the parties
thereto. The intention of the parties still and always is the primary
consideration in determining the true nature of a contract. (Bold
emphasis supplied)

It should likewise be pointed out that the exchange of shares of stock
of Mervir Realty with the real properties owned by Emigdio would still have
to be inquired into. That Emigdio executed the deed of assignment two days
prior to his death was a circumstance that should put any interested party on
his guard regarding the exchange, considering that there was a finding about
Emigdio having been sick of cancer of the pancreas at the time.
34
In this
regard, whether the CA correctly characterized the exchange as a form of an
estate planning scheme remained to be validated by the facts to be
established in court.

The fact that the properties were already covered by Torrens titles in
the name of Mervir Realty could not be a valid basis for immediately
excluding them from the inventory in view of the circumstances admittedly
surrounding the execution of the deed of assignment. This is because:

The Torrens system is not a mode of acquiring titles to lands; it is
merely a system of registration of titles to lands. However, justice and
equity demand that the titleholder should not be made to bear the
unfavorable effect of the mistake or negligence of the States agents, in the
absence of proof of his complicity in a fraud or of manifest damage to
third persons. The real purpose of the Torrens system is to quiet title to
land and put a stop forever to any question as to the legality of the title,
except claims that were noted in the certificate at the time of registration
or that may arise subsequent thereto. Otherwise, the integrity of the
Torrens system shall forever be sullied by the ineptitude and inefficiency
of land registration officials, who are ordinarily presumed to have
regularly performed their duties.
35



32
San Juan v. Offril, G.R. No. 154609, April 24, 2009, 586 SCRA 439, 445-446 citing Nazareno v.
Court of Appeals, G.R. No. 138842, October 18, 2000, 343 SCRA 637, 652.
33
G.R. No. 114950, December 19, 1995, 251 SCRA 430, 452-453, cited in Nazareno v. Court of
Appeals, G.R. No. 138842, October 18, 2000, 343 SCRA 637, 652.
34
Rollo, p. 138.
35
Rabaja Ranch Development Corporation v. AFP Retirement and Separation Benefits System, G.R. No.
177181, July 7, 2009, 592 SCRA 201, 217, citing Republic v. Guerrero, G.R. No. 133168, March 28, 2006,
485 SCRA 424, 445.
Decision 16 G.R. No. 156407


Assuming that only seven titled lots were the subject of the deed of
assignment of January 10, 1991, such lots should still be included in the
inventory to enable the parties, by themselves, and with the assistance of the
RTC itself, to test and resolve the issue on the validity of the assignment.
The limited jurisdiction of the RTC as an intestate court might have
constricted the determination of the rights to the properties arising from that
deed,
36
but it does not prevent the RTC as intestate court from ordering the
inclusion in the inventory of the properties subject of that deed. This is
because the RTC as intestate court, albeit vested only with special and
limited jurisdiction, was still deemed to have all the necessary powers to
exercise such jurisdiction to make it effective.
37


Lastly, the inventory of the estate of Emigdio must be prepared and
submitted for the important purpose of resolving the difficult issues of
collation and advancement to the heirs. Article 1061 of the Civil Code
required every compulsory heir and the surviving spouse, herein Teresita
herself, to bring into the mass of the estate any property or right which he
(or she) may have received from the decedent, during the lifetime of the
latter, by way of donation, or any other gratuitous title, in order that it may
be computed in the determination of the legitime of each heir, and in the
account of the partition. Section 2, Rule 90 of the Rules of Court also
provided that any advancement by the decedent on the legitime of an heir
may be heard and determined by the court having jurisdiction of the estate
proceedings, and the final order of the court thereon shall be binding on the
person raising the questions and on the heir. Rule 90 thereby expanded the
special and limited jurisdiction of the RTC as an intestate court about the
matters relating to the inventory of the estate of the decedent by authorizing
it to direct the inclusion of properties donated or bestowed by gratuitous title
to any compulsory heir by the decedent.
38


The determination of which properties should be excluded from or
included in the inventory of estate properties was well within the authority
and discretion of the RTC as an intestate court. In making its determination,
the RTC acted with circumspection, and proceeded under the guiding policy
that it was best to include all properties in the possession of the administrator
or were known to the administrator to belong to Emigdio rather than to
exclude properties that could turn out in the end to be actually part of the
estate. As long as the RTC commits no patent grave abuse of discretion, its
orders must be respected as part of the regular performance of its judicial
duty. Grave abuse of discretion means either that the judicial or quasi-
judicial power was exercised in an arbitrary or despotic manner by reason of
passion or personal hostility, or that the respondent judge, tribunal or board
evaded a positive duty, or virtually refused to perform the duty enjoined or
to act in contemplation of law, such as when such judge, tribunal or board

36
Reyes-Mesugas v. Reyes, G.R. No. 174835, March 22, 2010, 616 SCRA 345, 350, citing Pio Barretto
Realty Development, Inc. v. Court of Appeals, No. L-62431-33, August 3, 1984, 131 SCRA 606.
37
Pio Barretto Realty Development, Inc. v. Court of Appeals, supra at 621.
38
Gregorio v. Madarang, G.R. No. 185226, February 11, 2010, 612 SCRA 340, 345.
Decision 17 G.R. No. 156407
exerc1smg judicial or quasi-judicial powers acted in a capnc10us or
whimsical manner as to be equivalent to lack of jurisdiction.
39
In light of the foregoing, the CA's conclusion of grave abuse of
discretion on the part of the R TC was unwarranted and erroneous.
WHEREFORE, the Court GRANTS the petition for review on
certiorari; REVERSES and SETS ASIDE the decision promulgated on
May 15, 2002; REINSTATES the orders issued on March 14, 2001 and
May 18, 2001 by the Regional Trial Court in Cebu; DIRECTS the Regional
Trial Court in Cebu to proceed with dispatch in Special Proceedings No.
3094-CEB entitled Intestate Estate of the late Emigdio Mercado, Thelma
Aranas, petitioner, and to resolve the case; and ORDERS the respondents to
pay the costs of suit.
SO ORDERED.
WE CONCUR:
MARIA LOURDES P.A. SERENO
Chief Justice
J,AJA:r:1 ~ v ~
TiYRESJX J. LEONARDO-DE CASTRO
Associate Justice
. BIENVENIDO L. REYES
Associate Justice
39
Delos Santos v. Metropolitan Bank and Trust Company, G.R. No. 153852, October 24, 2012, 684
SCRA 410, 422-423.
Decision 18 G.R. No. 156407
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that
the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's
Division.
MARIA LOURDES P.A. SERENO
Chief Justice