Rule 74 – Summary Settlement of Estates

Pedrosa vs. CA (GR:  118680)

Section 4, Rule 74 provides for a two year prescriptive period (1) to persons who have participated or taken part or had notice of the extrajudicial partition, and in addition (2) when the provisions of Section 1 of Rule 74 have been strictly complied with, i.e., that all the persons or heirs of the decedent have taken part in the extrajudicial settlement or are represented by themselves or through guardians.

Petitioner, as the records confirm, did not participate in the extrajudicial partition. Patently then, the two-year prescriptive period is not applicable in her case.

The applicable prescriptive period here is four (4) years as provided in Gerona vs. De Guzman, 11 SCRA 153 (1964), which held that:

The action to annul] a deed of extrajudicial settlement upon the ground of fraud…may be filed within four years from the discovery of the fraud. Such discovery is deemed to have taken place when said instrument was filed with the Register of Deeds and new certificates of title were issued in the name of respondents exclusively.

Sps. Arenas vs. Roces (GR:  147468)

As stated above, the titles, namely, TCT Nos. 7299 and 7673, contained annotations which made reference to the provisions of Rule 74, Section 4 of the Rules of Court, viz:

SEC. 4. Liability of distributees and estate. If it shall appear at any time within two (2) years after the settlement and distribution of an estate in accordance with the provisions of either of the first two sections of this rule, that an heir or other person has been unduly deprived of his lawful participation in the estate, such heir or such other person may compel the settlement of the estate in the courts in the manner hereinafter provided for the purpose of satisfying such lawful participation. And if within the same time of two (2) years, it shall appear that there are debts outstanding against the estate which have not been paid, or that an heir or other person has been unduly deprived of his lawful participation payable in money, the court having jurisdiction of the estate may, by order for that purpose, after hearing, settle the amount of such debts or lawful participation and order how much and in what manner each distributee shall contribute in the payment thereof, and may issue execution, if circumstances require, against the bond provided in the preceding section or against the real estate belonging to the deceased, or both. Such bond and such real estate shall remain charged with a liability to creditors, heirs, or other persons for the full period of two (2) years after such distribution, notwithstanding any transfers of real estate that may have been made.

The foregoing rule clearly covers transfers of real property to any person, as long as the deprived heir or creditor vindicates his rights within two years from the date of the settlement and distribution of estate. Contrary to petitioners contention, the effects of this provision are not limited to the heirs or original distributees of the estate properties, but shall affect any transferee of the properties.

In David vs. Malay, it was held that the buyer of real property the title of which contain an annotation pursuant to Rule 74, Section 4 of the Rules of Court cannot be considered innocent purchasers for value. In the same vein, the annotation at the back of TCT No. 7299 in this case referring to Rule 74, Section 4 of the Rules of Court was sufficient notice to petitioners of the limitation on Montinolas right to dispose of the property. The presence of an irregularity which excites or arouses suspicion should prompt the vendee to look beyond the certificate and investigate the title of the vendor appearing on the face thereof. Purchasers of registered land are bound by the annotations found at the back of the certificate of title.

Hence, petitioners cannot be considered buyers in good faith and cannot now avoid the consequences brought about by the application of Rule 74, Section 4 of the Rules of Court.

PEZA vs. Hon. Fernandez (GR: 138971)

In the present case, private respondents are deemed to have been constructively notified of the extrajudicial settlement by reason of its registration and annotation in the certificate of title over the subject lot. From the time of registration, private respondents had two (2) years or until July 8, 1984, within which to file their objections or to demand the appropriate settlement of the estate.

On the matter of constructive notice vis–vis prescription of an action to contest an extrajudicial partition, a leading authority on land registration elucidates as follows:

While it may be true that an extrajudicial partition is an ex parte proceeding, yet after its registration under the Torrens system and the annotation on the new certificate of title of the contingent liability of the estate for a period of two years as prescribed in Rule 74, Section 4, of the Rules of Court, by operation of law a constructive notice is deemed made to all the world, so that upon the expiration of said period all third persons should be barred [from going] after the particular property, except where title thereto still remains in the names of the alleged heirs who executed the partition tainted with fraud, or their transferees who may not qualify as innocent purchasers for value.

The only exception to the above-mentioned prescription is when the title remains in the hands of the heirs who have fraudulently caused the partition of the subject property or in those of their transferees who cannot be considered innocent purchasers for value.

In this regard, title to the property in the present case was no longer in the name of the allegedly fraudulent heirs, but already in that of an innocent purchaser for value the government. Moreover, the government is presumed to have acted in good faith in the acquisition of the lot, considering that title thereto was obtained through a Compromise Agreement judicially approved in proper expropriation proceedings.

Even assuming that there was in fact fraud on the part of the other heirs, private respondents may proceed only against the defrauding heirs, not against petitioner which had no participation in or knowledge of the alleged fraud. The fact that the co-heirs title to the property was fraudulently secured cannot prejudice the rights of petitioner which, absent any showing that it had knowledge or participation in the irregularity, is considered a purchaser in good faith and for value.

The remedy of an owner alleged to have been prejudiced or fraudulently deprived of property that was subsequently sold to an innocent purchaser for value is an action for damages against the person or persons who perpetrated the fraud.

Cua vs. Vargas (GR:  156536)

J. Azcuna:

The procedure outlined in Section 1 of Rule 74 is an ex parte proceeding. The rule plainly states, however, that persons who do not participate or had no notice of an extrajudicial settlement will not be bound thereby. It contemplates a notice that has been sent out or issued before any deed of settlement and/or partition is agreed upon (i.e., a notice calling all interested parties to participate in the said deed of extrajudicial settlement and partition), and not after such an agreement has already been executed as what happened in the instant case with the publication of the first deed of extrajudicial settlement among heirs.

The publication of the settlement does not constitute constructive notice to the heirs who had no knowledge or did not take part in it because the same was notice after the fact of execution. The requirement of publication is geared for the protection of creditors and was never intended to deprive heirs of their lawful participation in the decedents estate. In this connection, the records of the present case confirm that respondents never signed either of the settlement documents, having discovered their existence only shortly before the filing of the present complaint. Following Rule 74, these extrajudicial settlements do not bind respondents, and the partition made without their knowledge and consent is invalid insofar as they are concerned.

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