G.R. No. 26008 , November 4, 1926
GREGORIO MONTINOLA, plaintiff-appellee, vs. MARIA PIEDAD VILLANUEVA, ET AL., defendants-appellants.

Ponente: VILLAMOR, J.

FACTS

1. In the intestate proceedings of Manuel Seijo, Gregorio Montinola filed a claim for P16,337.70 against the estate. The claim was approved by the committee on appraisal and claims, and this approval was confirmed by the court. No appeal was taken from this approval.
2. During the pendency of the estate settlement, several lots were adjudicated and registered in the names of the minor children of Manuel Seijo (the defendants-appellants) in cadastral proceedings, subject to the usufruct of their mother, Maria Piedad Villanueva.
3. The court in the intestate proceedings authorized the administrator to sell these lots to pay Montinola’s claim. However, the sale could not proceed because the titles were already in the names of the heirs. The administrator’s petition to cancel these titles was denied.
4. Consequently, the court ordered the administrator to return the lots to the heirs, leaving Montinola’s claim unpaid. Montinola then filed this separate action to enforce his claim against the lots.
5. The defendants argued that the lots, being registered in their names without any lien annotated on the titles, could not be sold to pay the debt. They also presented a counterclaim, alleging that Montinola was actually a debtor of the estate.

ISSUE

1. Whether the debt of the estate to Montinola, as established in the intestate proceedings, is binding on the heirs and constitutes a lien on the properties they inherited, even if such properties are already registered under the Torrens system in their names.
2. Whether the defendants’ counterclaim against Montinola can be entertained in the present action.

RULING

1. ON THE LIEN AND LIABILITY OF THE HEIRS:
YES. The Supreme Court ruled in favor of Montinola.
* The debt of the estate to Montinola, having been duly approved in the intestate proceedings and not appealed, is indisputable and conclusive (*res judicata*).
* Under the law (Section 70 of Act No. 496 , the Land Registration Act), registered land is subject to the same burdens and incidents as unregistered land. The Torrens system does not relieve registered land from liability for the lawful debts of the deceased owner.
* Applying the Code of Civil Procedure (Section 731) and established jurisprudence (*Pavia v. De la Rosa, Suiliong & Co. v. Chio Taysan, Lopez v. Enriquez*), heirs are liable for the debts of the deceased but only to the extent of the value of the property they received from the estate. They are not personally liable with their own property. The hereditary property comes to the heirs charged with the debts of the deceased.
* Therefore, the properties adjudicated to the minor heirs, though already registered in their names, remain subject to the payment of the estate’s lawful debt to Montinola. The debt constitutes a legal lien on said properties.

2. ON THE COUNTERCLAIM:
NO. The Supreme Court disallowed the counterclaim.
* Section 696 of the Code of Civil Procedure requires that claims *in favor of the estate* against a creditor must be presented by the administrator as an offset when that creditor presents his claim to the committee on appraisal and claims.
* Since the defendants’ counterclaim was not presented in the intestate proceedings during the proper time and before the proper committee, it is now barred. The issue cannot be raised for the first time in this separate action (*Bayot v. Zurbito*).

DISPOSITIVE PORTION:
The judgment of the lower court was MODIFIED. The Court held that Montinola’s claim is a legal lien on the properties described in the specified certificates of title. The defendants (heirs) are ordered to pay the amount of P16,337.70 out of the said properties, but only to the extent of the value of the same. Costs against the appellants.