CARMEN PARDO DE TAVERA Y LOPEZ MANZANO, PLAINTIFF AND APPELLEE, VS. EL HOGAR FILIPINO, INC., MAGDALENA ESTATE, INC. AND ERNEST BERG, DEFENDANTS; EL HOGAB FILIPINO, INC. AND MAGD…

Pardo de Tavera versus El Hogar Filipino

The Case

This is Pardo de Tavera versus El Hogar Filipino, a case about a minor's share in a parcel of land in Manila, transferred by her guardian to a corporation, and later swept up in a mortgage, a foreclosure, and successive sales. Carmen Pardo de Tavera y Lopez Manzano, who was only eleven years old when her share was conveyed, sued to annul that transfer and everything that followed from it. The case matters because it draws a sharp line between an order that is void for want of jurisdiction, which may be attacked at any time, and an order that is merely irregular, which must be attacked directly and promptly. It also teaches how a guardian's sale of a ward's real estate is tested under the old Code of Civil Procedure.

Procedural History

On 17 November 1942, Carmen Pardo de Tavera y Lopez Manzano filed an action in the Court of First Instance of Manila to annul the transfer of her right, share and interest in the property made by her guardian to Tavera-Luna, Inc. Before judgment could be rendered, the battle for the liberation of Manila supervened and the record of the case was destroyed. After the record was reconstituted, the pleadings were amended to include Magdalena Estate, Inc. and Ernest Berg as party-defendants, and the case went to trial on the merits. The Court of First Instance of Manila rendered judgment for the plaintiff. It annulled the order of the probate court that had authorized the guardian to transfer her ward's share, annulled the transfer and the subsequent transfers to El Hogar Filipino, Inc., Magdalena Estate, Inc. and Ernest Berg, and ordered the cancellation of the certificates of title issued to the transferees insofar as the ward's share was concerned. It further ordered the issuance of new certificates stating that the plaintiff's share is two-ninths, free from any lien or encumbrance, and an accounting of the income collected by the transferees during their respective periods of possession, with payment or delivery to the plaintiff insofar as her share is concerned. The defendants appealed to the Supreme Court.

Facts

A parcel of land containing an area of 2,784 square meters, described in transfer certificate of title No. 36234 issued on 6 September 1930 by the Register of Deeds of the City of Manila, was registered in the names of several co-owners, among them the minor Carmen Pardo de Tavera y Lopez Manzano, then eleven years of age and single. On 6 August 1930 the co-owners agreed to organize a corporation to be called Tavera-Luna, Inc. for the purpose of building a modern structure on the land, and to accept shares of stock in the corporation in exchange for their respective shares in the land and the building to be erected thereon. On 12 August 1930 the guardian of the minor, her mother, filed a petition in the probate court praying for approval of the agreement and for authority to accept shares of stock in exchange for the minor's share in the property. On 28 August 1930 the probate court approved the agreement as far as the minor was concerned and authorized the guardian to accept the shares of stock in exchange for the minor's share.

Tavera-Luna, Inc. was incorporated on 14 December 1930, and on 16 January 1931 the guardian transferred the minor's share in the property to the corporation. The certificate of title was cancelled and a new one was issued in the name of the corporation on 23 January 1931. On 17 January 1931 El Hogar Filipino, Inc., a loan and building association, granted the corporation a loan of 1,000,000 pesos for the purpose of erecting a concrete building in lieu of the wooden building standing thereon, secured by a first mortgage registered on the certificate. On 11 February 1932 an additional loan of 300,000 pesos was obtained on a mortgage of the same property, and the period of the first mortgage was extended. The land was later subdivided into several lots, with corresponding certificates of title issued in the name of the corporation.

Not long after the construction of the building known as the Crystal Arcade was finished, El Hogar Filipino, Inc. took over possession and management of the property to apply the rents, after deducting management expenses, to the payment of the mortgage debt. On 28 September 1933 the mortgagee foreclosed the mortgage extrajudicially and purchased the whole property at public auction for 1,363,555.37 pesos. The mortgagor failed to redeem, the mortgagee consolidated its title, and new certificates were issued in its name on 12 August 1940. On 26 August 1943, nearly nine months after the filing of the original complaint, El Hogar Filipino, Inc. sold the whole property to Magdalena Estate, Inc. for 1,400,000 pesos in Japanese war notes, and new certificates were issued in the buyer's name. On 22 September 1943 Magdalena Estate, Inc. sold a one third undivided share in the property to Ernest Berg for 466,566.66 pesos in Japanese war notes.

Issues

• Whether or not the order of the probate court of 28 August 1930 authorizing the guardian to transfer the ward's share in the property is void for lack of jurisdiction, and may therefore be attacked collaterally.
• Whether or not the requirements of Section 569 of Act No. 190, the law then in force, were complied with in the guardianship proceedings.
• Whether or not the plaintiff's action is barred by the statute of limitations.
• Whether or not El Hogar Filipino, Inc. was a purchaser for value and in good faith whose title must be protected.

Applicable Provisions

Section 579 of Act No. 190, on the period for recovering estate sold by a guardian, provides:

No action for the recovery of any estate sold by a guardian can be maintained by the ward, or by any person claiming under him, unless it is commenced within three years next after the termination of the guardianship, or, when a legal disability to sue exists by reason of minority or otherwise, at the time when the cause of action accrues, within three years next after the removal of such disability.

This provision fixes the deadline for the ward's action, and the Court notes that the plaintiff brought suit within it.

Section 569 of Act No. 190, on the sale of a ward's real estate, provides in its alternative requirement:

It is enough, as the other alternative of the law provides, that it appears to the satisfaction of the court that it is for the benefit of the ward that his real estate or some part thereof should be sold, and the proceeds thereof put out at interest, or invested in some productive security.

This is the ground on which the guardian's petition rested, and it is the test the Court applies to the probate court's order.

Ruling

On the first issue, the Court holds that the probate court had jurisdiction over the petition filed by the guardian, and that only upon the ground of lack of jurisdiction may an order entered by a court be assailed collaterally. If the court had jurisdiction, irregularities in the proceedings which would or could invalidate the court's order may be assailed directly by means of an appeal, but not collaterally. Lack of verification of a petition filed in a probate court for the sale of real property belonging to the estate of a minor is not a jurisdictional defect; it should have been attacked directly and not collaterally.

On the second issue, the Court holds that the requirements of Section 569 were substantially complied with. The guardian alleged that the transfer of her ward's share to the corporation then to be organized would be for her benefit, and that the construction of a new building would enhance the value of the ward's share and increase her income. It was not necessary to allege that the income of the estate was insufficient to maintain the ward, because it was enough that it appeared to the satisfaction of the court that the sale was for the benefit of the ward. The requirement of notice to the next of kin and all persons interested in the estate was substantially complied with, because the next of kin to the ward was her own guardian and mother, and all persons interested in the estate were her uncles and aunt, who had themselves agreed to transfer their shares to the corporation. There were no creditors of the ward's estate. Hearing on the petition does not necessarily mean that witnesses testify or documents be produced or exhibited; if the court was satisfied that the allegations of the petition were true and the close relatives of the ward did not object because they themselves were interested in the scheme, the provisions of the law on hearing were complied with.

On the third issue, the Court notes that the point that the action is barred by the statute of limitations is no longer urged, because the plaintiff became of age and was released from guardianship on 19 November 1940 and the action was brought on 17 November 1942, within the three-year period fixed by Section 579 of Act No. 190.

On the fourth issue, the Court finds it unnecessary to pass upon whether El Hogar Filipino, Inc. was a purchaser for value and in good faith. It suffices to say that even if the loan was granted when the certificate of title was still in the name of the plaintiff and her co-owners, the fact that the loan was applied for by an entity that was in the process of organization and by the same persons who were the registered owners of the property meant that the mortgagee was entitled to rely upon the order of the probate court granting authority to the guardian to make the transfer, and was not bound to inquire further to find out whether there were irregularities committed or defects or vices that would render the order null and void.

Doctrine

First, an order of a probate court may be attacked collaterally only on the ground of lack of jurisdiction. Where jurisdiction exists, mere irregularities in the proceedings must be raised directly, by appeal, and not in a collateral action. Lack of verification of a petition for the sale of a minor's real estate is not a jurisdictional defect.

Second, under Section 569 of Act No. 190, it is enough for the grant of authority to sell the ward's real estate that it appears to the satisfaction of the court that the sale is for the benefit of the ward, and the proceeds are to be put out at interest or invested in some productive security. The requirement of notice to the next of kin and all persons interested in the estate is substantially complied with where those persons are the guardian herself and the ward's close relatives who consented to the scheme.

Third, a mortgagee dealing with registered owners may rely on a valid subsisting order of the probate court authorizing the transfer, and is not bound to inquire into possible irregularities behind it.

Fourth, under Section 579 of Act No. 190, the ward's action to recover estate sold by a guardian must be brought within three years after the termination of the guardianship, or, where a legal disability exists, within three years after the removal of the disability.

Disposition

The Supreme Court reversed the judgment appealed from and dismissed the complaint, with costs against the appellee, so that the defendants prevailed.

Remember This

The one line to memorize is that only lack of jurisdiction opens a court order to collateral attack; mere irregularities must be raised on direct appeal. Examiners use this case to test the distinction between void and voidable orders, the requirements for a guardian's sale of a ward's real estate, and the three-year period for the ward's action after guardianship ends.