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Post-Mortem estate planning is important, too.
(Article published in the June 11, 2001 issue of TODAY, Business Section)

Giving away property, especially one’s inheritance, is an art. If you do not do it right, you could end up stuck with what you thought you had parted with. This is the lesson learned by Helen and her son, the only heirs of Simeon, a naturalized American, who died in 1968.

Simeon left an estate consisting of, among other items, several parcels of land in Sta. Maria, Bulacan. Two years after Simeon’s death, Helen and David, both americans, executed on 29 December 1970 a Deed of Extrajudicial Settlement of the Estate of Simeon adjudicating to themselves Simeon’s real properties. This they could do because while land in the Philippines is ordinarily reserved by the Constitution to Filipinos and to corporations 60% owned by Filipinos, Section 7 of Article XII permits alien acquisition in cases of hereditary succession. After payment of the estate tax, the relevant titles on the parcels of land were accordingly registered in the name of Helen and David in undivided equal shares.

Eleven years later, on 10 December 1981, Helen executed a quitclaim deed which sought to transfer to her son David her undivided share in the lands formerly owned by Simeon. Since, this deed was not registered, Helen, on advice of counsel, executed on 9 August 1989, another deed of quitclaim confirming what was done eight years earlier. On 18 October 1989, David executed a special power of attorney authorizing his lawyer to sell or otherwise dispose of the lots.

 










 

Despite of, or more precisely, because of all that, Supreme Court in the case of Republic v. Guzman and the Register of Deeds, G.R. No. 132964, promulgated on 18 February 2000 ruled that Helen, not David nor the government, remained the owner of the land under litigation.

The government had its eyes on the land because if it could prove that Helen transferred her share in the land to David, an american, in violation of the Constitution, the subject property would be considered "res nullius" or nobody’s property, and, therefore belonged to the State.

The process of taking over its possession is a judicial proceeding called "escheat" under Rule 91 of the Rules of Court. It was crucial for the government, therefore, to show that when Helen executed those quitclaim deeds in 1981 and 1989, she was not merely relinquishing her rights but was in effect making a donation to David, who was not in a position to legally receive it.

David, who obviously did not wish the government to take over his mother’s share in father’s land and who was himself interested in asserting ownership, took the position that his mother did not try to transfer anything to him but merely relinquished her rights as heir to Simeon’s estate.

Under Article 1015 of the Civil Code, when an heir renounces his share in an the estate, his share is added to those of the remaining heirs. The right of the remaining heirs is called "accretion" and the law considers them receiving the property not from the renouncing heir but directly from the decedent. David, under that scenario, took the land, not by way of donation from his mother Helen, but by hereditary succession to his father Simeon.

The Supreme Court did not agree with the government view that Helen, by executing the deeds of quitclaim, made a donation.

Besides reducing the store of wealth of the donor and increasing the assets of the donee, a valid donation must be characterized by the intent on the part of the donor to perform an act of liberality or what is called by lawyers trying to impress their clients, as "animus donandi".

The language of the deeds executed by Helen clearly showed that she intended to waive or renounce her rights in favor of David. She knew, and in fact thought that it was a bit strange, that under the Philippine law she could not donate the land to David, although she may sell it and donate the proceeds to him.

The dominant intent of Helen was to keep the land in Simeon’s family. In her deposition, she said: "I felt that the properties came from the labor of Simeon’s forebears…Since the properties came from his family, I thought it was only fair that they should remain with them". Does that mean then that David inherited what could have been Helen’s share in the land directly from Simeon by the process of accretion?

No, sir, said the Supreme Court. Helen’s share did not accrue to David’s at all. When Helen and David, in 1970, executed a Deed of Extrajudicial Settlement of the Estate of Simeon, and by that document divided the estate equally between the two of them, she in fact and in law accepted her inheritance from Simeon.

An acceptance of an inheritance (as well as a repudiation, for that matter), once made, is irrevocable and can be impugned only if made under circumstances that vitiate consent (Art. 1056, Civil Code), such as, mistake, violence, intimidation, undue influence or fraud (Art. 1330, Civil Code).

Helen did not once claim that the consent she gave to the Deed of Extrajudicial Settlement of the Estate of Simeon in 1970 was in any way flawed. On the contrary, she affirmed her free consent to the settlement by holding her share in the concept of an owner for the next eleven years. Consequently, the quitclaim documents she executed had no legal effect and were no more than, as lawyers love to say, mere scraps of paper.

Since she did not attempt to donate the property to David (and therefore did not try to transfer real estate to an alien in violation of the Constitution) and since she was not in a legally tenable position to waive her inheritance, Helen remained at square one. She was what she was before the whole the mess started. Owner of her one-half undivided share in Simeon’s real estate.

This goes to show that post-mortem estate planning is just as crucial as estate planning before the death of the estate owner. Transactions among the heirs carelessly entered into and haphazardly executed could be just as disastrous as the decedent’s failure to sytematically think out, while he still had the opportunity, how his property was to be distributed upon his death.

 

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