J.L.T. AGRO, INC. vs ANTONIO BALANSAG and HILARIA CADAYDAY FACTS Don Julian L.

Teves (Don Julian) contracted two marriages, first with Antonia Baena (Antonia), and after her death, with Milagros Donio Teves (Milagros Donio). Don Julian had two children with Antonia, namely: Josefa Teves Escao (Josefa) and Emilio Teves (Emilio). He had also four (4) children with Milagros Donio, namely: Maria Evelyn Donio Teves (Maria Evelyn), Jose Catalino Donio Teves (Jose Catalino), Milagros Reyes Teves (Milagros Reyes) and Pedro Reyes Teves (Pedro). When Antonia died, the land was among the properties involved in an action for partition and damages docketed as Civil Case No. 3443 entitled "Josefa Teves Escao v. Julian Teves, Emilio B. Teves, et al. Milagros Donio, the second wife of Don Julian, participated as an intervenor. Thereafter, the parties to the case entered into a Compromise Agreement which embodied the partition of all the properties of Don Julian. The CFI decision declared a tract of land known as Hacienda Medalla Milagrosa as property owned in common by Don Julian and his two (2) children of the first marriage. The property was to remain undivided during the lifetime of Don Julian. Josefa and Emilio likewise were given other properties at Bais, including the electric plant, the "movie property," the commercial areas, and the house where Don Julian was living. The remainder of the properties was retained by Don Julian, including Lot No. 63. On 16 November 1972, Don Julian, Emilio and Josefa executed a Deed of Assignment of Assets with Assumption of Liabilities in favor of J.L.T. Agro, Inc. (petitioner). This instrument which constitutes a supplement to the earlier deed of assignment transferred ownership over Lot No. 63, among other properties, in favor of petitioner. On 14 April 1974, Don Julian died intestate. On the strength of the Supplemental Deed in its favor, petitioner sought the registration of the subject lot in its name. A court, so it appeared, issued an order cancelling OCT No. 5203 in the name of spouses Don Julian and Antonia on 12 November 1979, and on the same date a new TCT was issued. Since then, petitioner has been paying taxes assessed on the subject lot. Meanwhile, Milagros Donio and her children had immediately taken possession over the subject lot after the execution of the Compromise Agreement. Subsequently, Milagros Donio and her children executed a Deed of Extrajudicial Partition of Real Estate dated 18 March 1980. In the deed of partition, Lot No. 63 was allotted to Milagros Donio and her two (2) children, Maria Evelyn and Jose Catalino. Unaware that the subject lot was already registered in the name of petitioner in 1979, respondents bought Lot No. 63 from Milagros Donio as evidenced by the Deed of Absolute Sale of Real Estate dated 9 November 1983.

At the Register of Deeds while trying to register the deed of absolute sale, respondents discovered that the lot was already titled in the name of petitioner. After hearing, the trial court dismissed the complaint filed by respondents. The trial court, among others, ordered respondents to vacate the subject land, particularly identified as Lot No. 63 registered under Transfer Certificate of Title No. It added that the direct adjudication of the properties listed in the Compromise Agreement was only in favor of Don Julian and his two children by the first marriage, Josefa and Emilio. According to the trial court, the properties adjudicated in favor of Josefa and Emilio comprised their shares in the estate of their deceased mother Antonia, as well as their potential share in the estate of Don Julian upon the latters death. Thus, upon Don Julians death, Josefa and Emilio could not claim any share in his estate, except their proper share in the Hacienda Medalla Milagrosa which was adjudicated in favor of Don Julian in the Compromise Agreement. As such, the properties adjudicated in favor of Don Julian, except Hacienda Medalla Milagrosa, were free from the forced legitimary rights of Josefa and Emilio, and Don Julian was under no impediment to allocate the subject lot, among his other properties, to Milagros Donio and her four (4) children. With Lot No. 63 being the conjugal property of Don Julian and Antonia, the trial court also declared that Milagros Donio and her children had no hereditary rights thereto except as to the conjugal share of Don Julian, which they could claim only upon the death of the latter. On appeal, the Court of Appeals, however, reversed the trial courts decision. Per the appellate court, the Compromise Agreement incorporated in CFI decision dated 31 January 1964, particularly paragraph 13 thereof, determined, adjudicated and reserved to Don Julians two sets of heirs their future legitimes in his estate except as regards his (Don Julians) share in Hacienda Medalla Milagrosa. The disposition in the CFI decision constitutes res judicata. Don Julian could have disposed of only his conjugal share in the Hacienda Medalla Milagrosa. The appellate court likewise emphasized that nobody in his right judgment would preterit his legal heirs by simply executing a document like the Supplemental Deed which practically covers all properties which Don Julian had reserved in favor of his heirs from the second marriage. Aggrieved by the appellate courts decision, petitioner elevated it to this Court via a petition for review on certiorari, raising pure questions of law. ISSUE: Whether future legitime can be determined, adjudicated and reserved prior to the death of Don Julian. RATIO As a general rule, no. [The Courts] declaration in Blas v. Santos is relevant, where [it] defined future inheritance as any property or right not in existence or capable of determination at the time of the contract, that a person may in the future acquire by succession. Article 1347 of the New Civil Code explicitly provides:

ART. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. Well-entrenched is the rule that all things, even future ones, which are not outside the commerce of man may be the object of a contract. The exception is that no contract may be entered into with respect to future inheritance, and the exception to the exception is the partition inter vivos referred to in Article 1080 (Perillo, et al v. Perillo, et al.). For the inheritance to be considered "future," the succession must not have been opened at the time of the contract. A contract may be classified as a contract upon future inheritance, prohibited under the second paragraph of Article 1347, where the following requisites concur: (1) That the succession has not yet been opened; (2) That the object of the contract forms part of the inheritance; and (3) That the promissor has, with respect to the object, an expectancy of a right which is purely hereditary in nature. The first paragraph of Article 1080, which provides the exception to the exception and therefore aligns with the general rule on future things, reads: ART. 1080. Should a person make a partition of his estate by an act inter vivos, or by will, such partition shall be respected, insofar as it does not prejudice the legitime of the compulsory heirs. In interpreting this provision, Justice Edgardo Paras advanced the opinion that if the partition is made by an act inter vivos, no formalities are prescribed by the Article. The partition will of course be effective only after death. It does not necessarily require the formalities of a will for after all it is not the partition that is the mode of acquiring ownership. Neither will the formalities of a donation be required since donation will not be the mode of acquiring the ownership here after death; since no will has been made it follows that the mode will be succession (intestate succession). Besides, the partition here is merely the physical determination of the part to be given to each heir. Article 1056 of the old Civil Code (now Article 1080) authorizes a testator to partition inter vivos his property, and distribute them among his heirs, and this partition is neither a donation nor a testament, but an instrument of a special character, sui generis, which is revocable at any time by the causante during his lifetime, and does not operate as a conveyance of title until his death. It derives its binding force on the heirs from the respect due to the will of the owner of the property, limited only by his creditors and the intangibility of the legitime of the forced heirs (Albela and Aebuya v. Albela and Allones).

The partition inter vivos of the properties of Don Julian is undoubtedly valid pursuant to Article 1347. However, considering that it would become legally operative only upon the death of Don Julian, the right of his heirs from the second marriage to the properties adjudicated to him under the compromise agreement was but a mere expectancy. It was a bare hope of succession to the property of their father. Being the prospect of a future acquisition, the interest by its nature was inchoate. It had no attribute of property, and the interest to which it related was at the time nonexistent and might never exist (Johnson v. Breeding). Evidently, at the time of the execution of the deed of assignment covering Lot No. 63 in favor of petitioner, Don Julian remained the owner of the property since ownership over the subject lot would only pass to his heirs from the second marriage at the time of his death. Thus, as the owner of the subject lot, Don Julian retained the absolute right to dispose of it during his lifetime. His right cannot be challenged by Milagros Donio and her children on the ground that it had already been adjudicated to them by virtue of the compromise agreement.