The Supreme Court has clarified the nuances of impleading a deceased person’s estate in legal proceedings, particularly concerning contractual obligations. The Court ruled that while a deceased person cannot be sued directly, their estate can be held liable, especially when the heirs voluntarily participate in the case without objection. This decision emphasizes the importance of timely objections in court and highlights how actions can imply a waiver of certain legal defenses. The ruling affects how mortgage foreclosures are handled when a borrower dies and underscores the need for understanding joint versus solidary obligations in loan agreements.

Can a Mortgage Outlive the Mortgagor? Estate Liability and Foreclosure

This case revolves around a loan obtained by Macaria Berot and her children, Rodolfo and Lilia, from Felipe Siapno. The loan, secured by a mortgage on a portion of land owned by Macaria and her deceased husband, Pedro, became problematic when Macaria passed away. Siapno filed a foreclosure suit against Macaria and the spouses Berot, leading to a legal battle over the validity of impleading a deceased person and the nature of the loan obligation. The central legal question is whether the estate of Macaria Berot could be properly impleaded in the foreclosure case, and to what extent the heirs are bound by the mortgage agreement. This raises critical issues about estate liability, procedural rules, and the binding nature of contracts across generations.

The initial misstep occurred when Siapno filed the foreclosure case after Macaria’s death, directly impleading her as a respondent. Petitioners correctly pointed out that the trial court lacked jurisdiction over Macaria because no summons could be served on a deceased person. As the Supreme Court reiterated, quoting Ventura v. Militante, “A deceased person does not have such legal entity as is necessary to bring action so much so that a motion to substitute cannot lie and should be denied by the court.” This principle underscores the fundamental requirement that a party to a lawsuit must be a legal person with the capacity to sue and be sued. However, the Court also acknowledged that this defense can be waived through the actions or inactions of the parties involved.

Building on this principle, the Court examined whether the petitioners had waived their right to object to the improper impleading of Macaria’s estate. After Siapno amended the complaint to substitute Macaria with her estate, represented by Rodolfo Berot, the petitioners did not raise any objections. Section 1, Rule 9 of the Rules of Court states that, “Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived.” The Court noted that the petitioners’ failure to object, coupled with their active participation in the proceedings, constituted an implied waiver of their objection to the trial court’s jurisdiction over the estate. This is consistent with the principle that voluntary appearance in a case is equivalent to service of summons, as highlighted in Gonzales v. Balikatan Kilusang Bayan sa Panlalapi, Inc.

The Court emphasized the significance of Rodolfo Berot’s dual role as an heir of Macaria and a co-borrower in the loan agreement. As a compulsory heir, Rodolfo is considered a real party in interest, as defined by Section 2, Rule 3 of the Revised Rules of Court, which states that a real party in interest is the party who stands to be benefitted or injured by the judgment in the suit. His active involvement in the proceedings, without objecting to being named as the estate’s representative, further solidified the waiver. The Court referenced Regional Agrarian Reform Adjudication Board v. Court of Appeals, noting that formal substitution of parties is unnecessary when the heirs voluntarily participate in the proceedings.

The Supreme Court also delved into the nature of the loan obligation, clarifying whether it was joint or solidary. Article 1207 of the Civil Code of the Philippines sets the general rule: “The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestations. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.” In the absence of an express agreement or legal provision indicating solidarity, the obligation is presumed to be joint. The Court found no explicit terms in the real estate mortgage demonstrating an intent to create a solidary obligation, thus ruling that the obligation was joint. This means each debtor is liable only for a proportionate part of the debt.

Given that the obligation was deemed joint, the estate of Macaria Berot was liable for a one-third share of the loan. The Court affirmed that the foreclosure of the mortgaged property could proceed, but only to the extent of Macaria’s liability. This aspect of the ruling is crucial for understanding the limits of estate liability in contractual obligations. Moreover, the Court upheld the CA’s decision to remove the award of exemplary damages, attorney’s fees, and litigation expenses, noting that the lower court did not justify the basis for awarding attorney’s fees in the body of the decision. Exemplary damages also require a finding of gross negligence, which the RTC did not establish.

FAQs

What was the key issue in this case?	The key issue was whether the estate of a deceased person could be properly impleaded in a foreclosure suit and held liable for a loan obligation.
Can a deceased person be sued in the Philippines?	No, a deceased person cannot be sued directly, as they lack the legal capacity to be a party in a lawsuit. However, their estate can be sued under certain circumstances.
What is the effect of voluntarily participating in a case?	Voluntarily participating in a case without objecting to the court’s jurisdiction can be considered a waiver of the right to later challenge that jurisdiction.
What is the difference between a joint and solidary obligation?	In a joint obligation, each debtor is liable only for their proportionate share of the debt, while in a solidary obligation, each debtor is liable for the entire debt.
How is a solidary obligation created?	A solidary obligation must be expressly stated in the contract or required by law or the nature of the obligation itself; it is never presumed.
What happens to a mortgage when the mortgagor dies?	The mortgage remains valid, and the mortgagee can either foreclose on the property or file a claim against the estate of the deceased mortgagor.
Who is considered a real party in interest in a lawsuit?	A real party in interest is someone who stands to benefit or be injured by the judgment in the suit. This typically includes heirs of a deceased person.
What legal provision governs the substitution of parties in a lawsuit?	Section 16, Rule 3 of the Revised Rules of Court governs the substitution of parties when a party dies during the pendency of a case.
What are the options for a creditor when a debtor dies?	The creditor can abandon the security and file a claim against the estate, foreclose on the mortgage, or rely solely on the mortgage and not participate in the estate’s distribution.

In conclusion, the Supreme Court’s decision in this case underscores the importance of understanding procedural rules and contractual obligations when dealing with the estate of a deceased person. It clarifies that while an estate can be held liable for valid debts, the nature of the obligation and the actions of the parties involved play a crucial role in determining the extent of that liability. The voluntary participation of heirs in legal proceedings can have significant consequences, including the waiver of certain legal defenses. Parties must ensure that procedural objections are timely raised to protect their rights.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Spouses Rodolfo Berot and Lilia Berot vs. Felipe C. Siapno, G.R. No. 188944, July 09, 2014