FACTS:

Emigdio S. Mercado died intestate, leaving behind his second wife Teresita and their five children, as well as two children from his first marriage. Teresita was appointed as the administrator of Emigdio's estate by the Regional Trial Court (RTC). In the inventory of the estate, Teresita indicated that Emigdio only had personal properties and no real properties. One of Emigdio's children from his first marriage, Thelma, claimed that there were additional properties that were not included in the inventory. Thelma moved for the RTC to direct Teresita to amend the inventory and be examined regarding it. The RTC granted Thelma's motion. Teresita complied with the order and submitted supporting documents for the inventory. Thelma then moved for Teresita to be examined under oath and for her to be given time to file a formal opposition or comment on the inventory. The RTC ordered Teresita to be examined and expressed the need for evidence to resolve the motion for approval of the inventory. After a series of hearings, the RTC denied the motion for approval of the inventory and ordered Teresita to revise the inventory and submit an account of her administration of the estate. Teresita sought reconsideration, but the RTC denied it, stating that the heirs had already submitted to the jurisdiction of the court on the issue of what properties should be included or excluded from the inventory. The Court of Appeals upheld the RTC's decision, prompting Teresita and the other heirs to appeal to the Supreme Court.

ISSUES:

1. Whether the order of exclusion of certain properties from the inventory of the estate is a final or interlocutory order.

2. Whether the inclusion of the properties in the inventory of the estate was proper.

3. Whether all the real and personal properties of the decedent should be included in the inventory, regardless of their being in the possession of another person or entity.

4. Whether the trial court has the discretion to determine which properties should be included in the inventory.

5. Whether the trial court has the authority to adjudicate title to properties claimed to be part of the estate and belong to third parties.

6. Whether the shares of stock of Mervir Realty Corporation owned by the administratrix should be included in the inventory of the estate of her husband.

7. Whether the bank account of the administratrix in Union Bank, which was opened when her husband was still alive, should be included in the inventory.

8. Whether Lot No. 3353 located in Badian, Cebu, registered in the name of the deceased, should be included in the inventory.

9. Whether the properties assigned by the deceased to Mervir Realty Corporation in contemplation of death should be included in the inventory.

10. • Whether the notarized deed of sale is presumed to be valid and binding
11. • Whether the properties covered by Torrens titles should be excluded from the inventory of the estate
12. • Whether the properties subject to the deed of assignment should be included in the inventory
13. • Whether the RTC had the authority to determine which properties should be included in the inventory

14. Whether the inclusion of grave abuse of discretion on the part of the RTC was warranted and correct.

RULING:

1. The order of exclusion of certain properties from the inventory of the estate is an interlocutory order as it does not settle once and for all the title to the properties. A separate action regarding ownership of the properties may be instituted to finally determine their inclusion or exclusion from the inventory.

2. The inclusion of the properties in the inventory of the estate was proper. The letters of administration may be granted to the surviving spouse, who is competent and willing to serve when the person dies intestate. The court has the discretion to grant the letters of administration to the surviving spouse. The surviving spouse, as the administrator, has the duty and responsibility to submit the inventory of the properties of the estate within three months from the issuance of letters of administration.

3. Yes, all the real and personal properties of the decedent should be included in the inventory, regardless of their being in the possession of another person or entity.

4. Yes, the trial court has the discretion to determine which properties should be included in the inventory, as long as there is no patently grave abuse of discretion.

5. No, the trial court does not have the authority to adjudicate title to properties claimed to be part of the estate and belong to third parties. The trial court's jurisdiction is limited to determining whether or not these properties should be included in the inventory.

6. Yes, the shares of stock of Mervir Realty Corporation owned by the administratrix should be included in the inventory as they are conjugal in character.

7. Yes, the bank account of the administratrix in Union Bank should be included in the inventory as it is conjugal in character.

8. Yes, Lot No. 3353 located in Badian, Cebu, registered in the name of the deceased, should be included in the inventory.

9. Yes, the properties assigned by the deceased to Mervir Realty Corporation in contemplation of death should be included in the inventory.

10. The Court held that the notarized deed of sale does not guarantee the legal efficacy of the transaction. The presumption of regularity can be rebutted by clear and convincing evidence. The exchange of shares of stock with real properties should be further investigated. The properties covered by Torrens titles should not be immediately excluded from the inventory, as the Torrens system is only a system of registration and does not determine ownership. The properties subject to the deed of assignment should be included in the inventory to determine their validity. The RTC, as an intestate court, has the authority to determine which properties should be included in the inventory. The CA's conclusion of grave abuse of discretion by the RTC was unwarranted and erroneous.

11. The Court ruled that the inclusion of grave abuse of discretion on the part of the RTC was unwarranted and erroneous. The Court granted the petition for review on certiorari, reversed and set aside the decision of the RTC, and reinstated the orders issued by the RTC. The Court directed the RTC to proceed with dispatch in the case and resolve it. The respondents were also ordered to pay the costs of the suit.

PRINCIPLES:

• The probate court can only pass upon questions of title provisionally, as its jurisdiction is limited. Questions of title or ownership that result in inclusion or exclusion from the inventory of the property can only be settled in a separate action. (De Leon v. Court of Appeals, Jimenez v. Court of Appeals)

• Only judgments, final orders, and resolutions that completely dispose of the case or a particular matter therein may be the subject of an appeal in due course. Interlocutory orders or resolutions are non-appealable. (Section 1, Rule 41, Rules of Court)

• Multiple appeals are permitted in special proceedings. Appeals may be taken from orders or judgments that allow or disallow a will, determine the lawful heirs, settle the account of an executor, administrator, trustee, or guardian, and constitute a final determination of the rights of the party appealing. (Section 1, Rule 109, Rules of Court)

• The letters of administration may be granted to the surviving spouse who is competent and willing to serve when the person dies intestate. The surviving spouse, as the administrator, has the duty and responsibility to submit the inventory of the properties of the estate within three months from the issuance of letters of administration. (Section 6(a), Rule 78, Rules of Court)

• The objective of requiring the inventory and appraisal of the estate of the decedent is to aid the court in revising the accounts, determining liabilities of the executor or administrator, making a final and equitable distribution of the estate, and facilitating its administration.

• The trial court, as an intestate court, cannot adjudicate title to properties claimed to be part of the estate and belong to third parties by adverse title. Its jurisdiction is limited to determining whether these properties should be included in the inventory.

• The trial court enjoys ample discretionary powers in the administration of estates of deceased persons, and its orders must be respected as long as there is no patently grave abuse of discretion.

• Exceptions to the general rule that the trial court cannot determine questions of ownership include provisional inclusion or exclusion of properties from the inventory, and resolution of issues on ownership if all interested parties are heirs to the estate, or if the question is one of collation or advancement, or if the parties consent to the assumption of jurisdiction by the probate court without impairing the rights of third parties.

• In the absence of clear, categorical, and convincing evidence of exclusive ownership of specific property acquired during the conjugal partnership, the conjugal partnership must be provisionally liquidated to determine the real owners of the affected properties and which properties should be included in the estate of the deceased.

• A property registered in the name of a corporation may still be subject to dispute and included in the estate if it is found that the registered title is in the name of the deceased.

• The execution of a notarized deed of sale does not automatically exclude the property from the inventory if there are other circumstances that justify its inclusion.

• The intention of the parties is the primary consideration in determining the true nature of a contract.

• The Torrens system is a system of registration and not a mode of acquiring titles to lands.

• The titleholder should not bear the unfavorable effects of mistakes or negligence of the State's agents, unless there is proof of complicity in fraud or manifest damage to third persons.

• The purpose of the Torrens system is to quiet title to land and put a stop to any question on the legality of the title.

• The RTC, as an intestate court, has the necessary powers to exercise its limited jurisdiction effectively.

• Compulsory heirs are required to bring into the mass of the estate any property received from the decedent by donation or other gratuitous title for computation of the legitime.

• The RTC, as an intestate court, has jurisdiction to hear and determine advancements on the legitime of an heir.

• Grave abuse of discretion is a legal concept where a court exercises its power in an arbitrary or despotic manner by reason of passion, prejudice, or personal hostility, and it must have been so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law.