G.R. No. 47260. June 6, 1941.
THE BISHOP OF NUEVA CACERES, plaintiff, vs. EUGENIA M. SANTOS, ET AL., defendants.

FACTS

Engracio Orense died on October 8, 1918, leaving a will that devised six parcels of land to the Roman Catholic Church of Guinobatan, Albay, as trustee for charitable and educational purposes, subject to a life usufruct in favor of his surviving spouse, Eugenia M. Santos Vda. de Orense, who was also named universal testamentary heir. The will was probated, and Eugenia was appointed executrix. On January 29, 1919, as judicial administratrix, she sought and obtained court authority to mortgage estate properties to secure a loan from the Philippine National Bank (PNB) to pay for an electric plant equipment contracted by the deceased. She obtained loans totaling P20,000 (two P5,000 loans on March 11, 1919, and one P10,000 loan on April 11, 1919), secured by first and second mortgages on thirteen parcels, including the six devised to the Church. A nominal partition of the estate was approved on September 4, 1920, assigning the six parcels to the Church and the electric plant to Eugenia, but noting that legatees could not take possession while the widow lived and while estate debts remained. After this partition, without court license or the Church’s consent, Eugenia obtained additional loans from PNB totaling P30,000 (one P10,000 loan on August 1, 1921, and two P10,000 loans on March 31, 1922), secured by a third mortgage on the same properties. The mortgage debts were unpaid, leading PNB to foreclose; the properties were sold at auction to PNB on April 30, 1937, with confirmation on June 22, 1937. The Bishop of Nueva Caceres, representing the Church, filed a reivindicatory action on July 14, 1937, seeking recovery of the six parcels, arguing the mortgages were void as they were executed without the Church’s consent and secured personal obligations from the electric plant business, which had been adjudicated to Eugenia. PNB defended the mortgages as lawful and argued implied consent, estoppel, and prescription.

ISSUE

Whether the mortgages constituted by the administratrix on the properties devised to the Roman Catholic Church, without the Church’s consent and after the nominal partition, are valid and binding on the Church.

RULING

The Supreme Court affirmed the lower court’s decision, declaring the plaintiff the legitimate owner of the six parcels subject to Eugenia’s usufruct during her lifetime, and nullifying the sheriff’s sale concerning those parcels. The Court held that the mortgages executed after the nominal partition, without court license or the legatee’s consent, were invalid as to the Church’s properties. While the initial loans for the electric plant equipment were contracted by the testator and necessary to honor his obligation, the subsequent loans were obtained for the business operations of the electric plant, which had been adjudicated to Eugenia as her share. The Court emphasized public policy in protecting the rights of devisees and the orderly administration of estates. It noted that the electric plant was sold by Eugenia for a considerable sum, and it would be inequitable for the loans to burden the Church’s properties, thereby defeating the testator’s charitable and religious intentions. The titles were ordered issued to the plaintiff subject to Eugenia’s usufruct.