J.L.T. Agro, Inc. v. Antonio Balansag and Hilaria Cadayday, G.R. No. 141882, March 11, 2005

Preterition.

             In J.L.T. Agro, Inc. v. Antonio Balansag and Hilaria Cadayday, G.R. No. 141882, March 11, 2005 (Tinga, J), there was a conflict of property claims between two sets of heirs. It appears that during his lifetime, Don Julian L. Teves (Don Julian) contracted marriage twice. First, with Antonia Baena and second, with Milagros Donio Teves. In the first marriage, he had two children, Josefa and Emilio. In the second marriage, he had four children, Maria, Jose, Milagros and Pedro, all surname Teves. There was a property Lot No. 63 which was originally registered under the names of Julian and Antonia (TCT 5203) forming part of their conjugal partnership. After Antonia died, Lot No. 63 was among the properties involved in an action for partition. The parties entered into a Compromise Agreement which embodied the partition of all the properties of Don Julian. The Agreement showed that a tract of land known as Hacienda Medalla Milagrosa was to be owned in common by Don Julian and his two (2) children of the first marriage which would remain undivided during his lifetime. The two children were given other properties. Lot No. 63 was retained by Don Julian.

             Paragraph 13 of the Compromise Agreement, at the heart of the present dispute, lays down the effect of the eventual death of Don Julian vis-à-vis his heirs:

             13. That in the event of death of Julian L. Teves, the properties hereinafter adjudicated to Josefa Teves Escaño and Emilio B. Teves, (excluding the properties comprised as Hacienda Medalla Milagrosa together with all its accessories and accessions) shall be understood as including not only their one-half share which they inherited from their mother but also the legitimes and other successional rights which would correspond to them of the other half belonging to their father, Julian L. Teves. In other words, the properties now selected and adjudicated to Julian L. Teves (not including his share in the Hacienda Medalla Milgrosa) shall exclusively be adjudicated to the wife in second marriage of Julian L. Teves and his four minor children, namely, Milagros Donio Teves, his two acknowledged natural children Milagros Reyes Teves and Pedro Reyes Teves and his two legitimate children Maria Evelyn Donio Teves and Jose Catalino Donio Teves. (Emphasis supplied)

             On 16 November 1972, Don Julian, Emilio and Josefa executed a Deed of Assignment of Assets with Assumption of Liabilities in favor of J.L.T. Agro, Inc. (petitioner). Less than a year later, Don Julian, Josefa and Emilio also executed an instrument entitled Supplemental to the Deed of Assignment of Assets with the Assumption of Liabilities (Supplemental Deed) dated 31 July 1973. This instrument which constituted a supplement to the earlier deed of assignment transferred ownership over Lot No. 63, among other properties, in favor of JLT Agro. On 14 April 1974, Don Julian died intestate.

             On the strength of the Supplemental Deed in its favor, JLT Agro, Inc. sought the registration of the subject lot in its name. A court, so it appeared, issued an order canceling OCT No. 5203 in the name of spouses Don Julian and Antonia on 12 November 1979, and on the same date TCT No. T-375 was issued in the name of JLT Agro. Since then, JLT Agro has been paying taxes assessed on the subject lot.

                        Meanwhile, Milagros Donio and her children had immediately taken possession over the subject lot after the execution of the Compromise Agreement. In 1974, they entered into a yearly lease agreement with spouses Antonio Balansag and Hilaria Cadayday. Lot No. 63 was sold to Antonio Balansag and Hilaria Cadayday. After the death of Don Julian, Milagros Donio and her children executed a Deed of Extrajudicial Partition of Real Estate where Lot No. 63 was allotted to Milagros and her two children, Maria and Jose. Unaware that Lot No. 63 has been registered under the name of JLT Agro, Inc., Antonio and Hilaria tried to register the deed of sale, but failed. They filed a complaint to declare the title of JLT Agro, Inc. void which was dismissed.

             The trial court ruled that the resolution of the case specifically hinged on the interpretation of paragraph 13 of the Compromise Agreement. It added that the direct adjudication of the properties listed in the Compromise Agreement was only in favor of Don Julian and his two children by the first marriage, Josefa and Emilio. Paragraph 13 served only as an amplification of the terms of the adjudication in favor of Don Julian and his two children by the first marriage.

             According to the trial court, the properties adjudicated in favor of Josefa and Emilio comprised their shares in the estate of their deceased mother Antonia, as well as their potential share in the estate of Don Julian upon the latter’s death. Thus, upon Don Julian’s death, Josefa and Emilio could not claim any share in his estate, except their proper share in the Hacienda Medalla Milagrosa which was adjudicated in favor of Don Julian in the Compromise Agreement. As such, the properties adjudicated in favor of Don Julian, except Hacienda Medalla Milagrosa, were free from the forced legitimary rights of Josefa and Emilio, and Don Julian was under no impediment to allocate the subject lot, among his other properties, to Milagros Donio and her four (4) children.

             The trial court further stressed that with the use of the words “shall be:, the adjudication in favor of Milagros Donio and her four (4) children was not final and operative, as the lot was still subject to future disposition by Don Julian during hid lifetime. It cited paragraph 14 of the Compromise Agreement in support of his conclusion. With Lot No. 63 being the conjugal property of Don Julian and Antonia, the trial court also declared that Milagros Donio and her children had no hereditary rights thereto except as to the conjugal share of Don Julian, which they could claim only upon the death of the latter.

             The trial court ruled that at the time of Don Julian’s death on 14 April 1974, Lot No. 63 was no longer part of his estate since he had earlier assigned it to petitioner on 31 July 1973. Consequently, the lot could not be a proper subject of extrajudicial partition by Milagros Donio and her children, and not being the owners they could not have sold it. Had respondents exercised prudence before buying the subject lot by investigating the registration of the same with the Registry of Deeds, they would have discovered that five (5) years earlier, OCT No. 5203 had already been cancelled and replaced by TCT No. T-375 in the name of petitioner, the trial court added.

             The Court of Appeals, however, reversed the trial court’s decision.

             Per the appellate court, the Compromise Agreement incorporated in CFI decision dated 31 January 1964, particularly paragraph 13 thereof, determined, adjudicated and reserved to Don Julian’s two sets of heirs their future legitimes in his estate except as regards his (Don Julian’s) share in Hacienda Medalla Milagrosa. The two sets of heirs acquired full ownership and possession of the properties respectively adjudicated to them in the CFI decision and Don Julian himself could no loner dispose of the same, including Lot No. 63. The disposition in the CFI decision constitutes res judicata. Don Julian could have disposed of only his conjugal share in the Hacienda Medalla Milagrosa.

             The CA likewise emphasized that nobody in his right judgment would preterit his legal heirs by simply executing a document like the Supplemental Deed which practically covers all properties which Don Julian had reserved in favor of his heirs from the second marriage.

             Aggrieved by the CA’s decision, JLT Agro appealed to the SC via a petition for review on certiorari, raising pure questions of law, such as:

 a)    that future legitime can be determined, adjudicated and reserved prior to the death of Don Julian;

 b)    that Don Julian had no right to dispose of or assign Lot No. 63 to petitioner because he reserved the same for his heirs from the second marriage pursuant to the Compromise Agreement;

 c)    that the Supplemental Deed was tantamount to a preterition of his heirs from the second marriage; and

 d)    that TCT No. T-375 in the name of petitioner is spurious for not containing entries on the Book No. and Page No.

 On the basis of the Compromise Agreement, the Court of Appeals ruled that the adjudication in favor of the heirs of Don Julian from the second marriage became automatically operative upon the approval of the Compromise Agreement, thereby vesting on them the right to validly dispose of Lot No. 63 in favor of respondents.

             JLT Agro argued that the appellate court erred in holding that future legitime can be determined, adjudicated and reserved prior to the death of Don Julian.

             Stated otherwise, may future legitime be determined, adjudicated and reserved prior to the death of the owner of a property? Why?

 Held: No. In Blas v. Santos, 111 Phil. 503 (1961), future legitime was defined as any property or right not in existence or capable of determination at the time of the contract, that a person may in the future acquire by succession, Article 1347, NCC provides:

             ART. 1347. All things where are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts.