TESTATE ESTATE OF JOSE M. VALERO.  FLORA VALERO VDA. DE RODRIGUEZ AND ROSIE VALERO DE GUTIERREZ, PETITIONERS-APPELLANTS, VS. COURT OF APPEALS AND CARMEN VALERO-RUSTIA, RESPONDEN…

Valero Vda. de Rodriguez versus Court of Appeals

The Case

This is a petition for review of a decision of the Court of Appeals in a dispute over the settlement of the estate of Jose M. Valero. The petitioners are his legitimate children, Flora Valero Vda. de Rodriguez and Rosie Valero de Gutierrez. The respondents are the Court of Appeals and Carmen Valero-Rustia, the adopted daughter of the testator's predeceased wife. The case began as a motion to exclude two parcels of land in San Lorenzo Village, Makati, from the inventory of the testator's estate. It matters because it clarifies the limited authority of a probate court over questions of title and collation during the inventory stage of estate proceedings.

Procedural History

The testator, Jose M. Valero, died testate in October 1972. His will was probated in the Court of First Instance of Manila. The executor submitted an inventory that included the two San Lorenzo Village lots. Carmen Valero-Rustia moved to exclude them, and the probate court granted the motion on August 9, 1973, but with the understanding that the lots remained subject to collation. Upon Mrs. Rustia's motion for reconsideration, the probate court issued an order on December 14, 1973, excluding the lots unconditionally and declaring that they were not subject to collation. Mrs. Rodriguez moved for reconsideration, but the probate court denied the motion. The petitioners then filed a petition for certiorari in the Court of Appeals, which held that the order of August 9, 1973 was interlocutory and could be modified at any time, and that collation was immaterial because Mrs. Rustia was not an heir of the testator. The petitioners appealed to the Supreme Court. The appeal was initially denied due course, but upon motion for reconsideration, it was later allowed.

Facts

The spouses Beatriz Bautista and Jose M. Valero had no children of their own. In 1951, Beatriz adopted Carmen Bautista. Jose wanted to adopt her as well, but because he had two children from a previous marriage, Flora and Rosie, he was disqualified. He consented, however, to Carmen's use of his surname Valero.

On September 18, 1964, Jose donated to Carmen, then married to Doctor Sergio Rustia, his one-half proindiviso share in two conjugal lots in San Lorenzo Village, Makati. His wife Beatriz consented, but the deed of donation was not registered. On January 13, 1966, Jose executed his last will and testament. He did not mention the donation. He devised to his wife properties sufficient to constitute her legitime and bequeathed the remainder to his two children, Flora and Rosie.

About a month later, on February 15, 1966, the Valero spouses sold the same two lots to Carmen by a deed of absolute sale for one hundred twenty thousand pesos. The sale was registered the next day, and transfer certificates of title were issued in Carmen's name. In December 1967, Carmen mortgaged the lots to the Quezon City Development Bank to secure a loan of fifty thousand pesos. Beatriz died intestate in September 1972. Jose died testate in October 1972. His will was probated, and the executor included the two lots in the inventory of his estate. Carmen moved to exclude them, leading to the probate court's orders and the present appeal.

Issues

• Whether or not the probate court's order of exclusion dated August 9, 1973 was a final and appealable order, or merely interlocutory and subject to modification.
• Whether or not the probate court and the Court of Appeals erred in ruling that the two San Lorenzo Village lots are not subject to collation.

Applicable Provisions

Article 1061 of the Civil Code provides:

Article 1061. Every compulsory heir, who succeeds with other compulsory heirs, must bring into the mass of the estate any property or right which he 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.

This provision defines who must collate and under what circumstances, and it bears on the Court's conclusion that collation is not yet justiciable at the inventory stage.

Ruling

On the first issue, the Court held that the order of exclusion dated August 9, 1973 was not a final order. It was interlocutory because it did not settle once and for all the title to the San Lorenzo Village lots. The Court stated:

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.

On the second issue, the Court held that the rulings of the Court of Appeals and the probate court that the lots are not subject to collation were unnecessary to the disposition of the case. The issue of collation was not yet justiciable at that early stage of the testate proceeding. The Court explained that whether collation may exist and whether Mrs. Rustia's Torrens titles are indefeasible are matters that may be raised later or may not be raised at all. The proceedings had not yet reached the stage of partition and distribution when the legitimes of the compulsory heirs have to be determined. The Court also noted that the intestate and testate proceedings for the settlement of the estates of the deceased Valero spouses were consolidated, and that the net remainder of their conjugal estate had not yet been determined.

Doctrine

Two rules emerge from this case. First, for the purpose of determining whether a certain property should be included in the inventory of an estate, 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. Second, the issue of collation under Article 1061 of the Civil Code is not justiciable at the inventory stage of estate proceedings. It may be raised only at the time of partition and distribution when the legitimes of the compulsory heirs have to be determined. Any ruling on collation made before that stage is a supererogation and should be deleted.

Disposition

The Supreme Court affirmed the decision of the Court of Appeals and the orders of the lower court dated August 9 and December 14, 1973, excluding the two San Lorenzo Village lots from the inventory of Jose M. Valero's estate, but deleted from that decision and the two orders any ruling regarding collation, which may be passed upon by the probate court at the time when it is seasonably raised by the interested parties, if it is ever raised at all. No costs.

Remember This

The single line worth memorizing is that a probate court's determination of title for inventory purposes is not conclusive, and collation is not justiciable until the partition stage. Examiners like to use this case to test the jurisdiction of probate courts and the proper timing for raising the issue of collation under Article 1061 of the Civil Code.