PCIB vs.

ESCOLIN
Philippine Commercial and Industrial Bank, Administrator of the Testate
Estate of Charles Newton Hodges, vs. Hon. Venicio Escolin (CFI-Iloilo)
and Avelina A. Magno; Testate Estate of the late Linnie Jane Hodges.
Testate Estate of the late Charles Newton Hodges. PCIB, administratorappellant, vs. Lorenzo Carles, Jose Pablico, Alfredo Catedral, Salvador
Guzman, Belcesar Causing, Florenia Barrido, Purificacion Coronado,
Graciano Lucero, Ariteo Thomas Jamir, Melquiades Batisanan, Pepito
Iyulores, Esperidion Partisala, Winifredo Espada, Rosario Alingasa,
Adelfa Premaylon, Santiago Pacaonsis, and Avelina A. Magno,
appellees, Western Institute of Technology, Inc., movant-appellee
March 29, 1974; Barredo, J.
Short version: The Hodges lived in the Philippines for almost half a
century and died leaving substantial properties in Iloilo and in the US.
The missus died 5 years before the husband, providing in her will that
while her estate would go to him, upon his death, the remainder
should pass to her siblings. (They were childless.) The court held that
this testamentary provision, while probably ineffectual as a substitution
under the Civil Code, is not actually a substitution, but is a valid and
simultaneous institution of heirs, though the passing of title to the
inheritance to the others (the siblings) was made to depend on a
resolutory condition (the husbands death). Case was remanded to the
trial court for the determination of the proper application of the renvoi
principle (conflict of laws between Philippines and Texas law), and the
proper distribution of Linnies, Charles, and their conjugal estates.
Facts:
Charles Newton Hodges and Linnie Jane Hodges were originally from
Texas, USA. During their marriage, they had acquired and accumulated
considerable assets and properties in the Philippines and in Oklahoma
and Texas in the US. They both lived, worked and were domiciled in
Iloilo City for around 50 years. Before her death, Linnie Jane executed a
will leaving her estate, less her debts and funeral expenses, to her
husband Charles. Should Charles die, the will provided that the
remainder of her estate go to her brothers and sisters, share and share
alike. Should any of the brothers and sisters die before the husband,
Linnie willed that the heirs of the said sibling be substituted in the
deceaseds siblings place.
When Linnie died, Charles took the will to probate court, and was
appointed Executor, then later, Special Administrator. He moved to be
allowed to continue administering the family business, as per Linnie
Janes wishes, and to engage in sales, conveyances, leases, mortgages
and other necessary transactions. He also filed the necessary and
appurtenant administration/accounting records, and income tax
returns for the estate. Charles named seven brothers and sisters of
Linnie Jane as her heirs (Esta, Emma, Leonard, Aline, David, Sadie, Era
and Nimroy), but the order admitting the will to probate unfortunately

omitted one of the heirs, Roy (Nimroy?) Higdon, so Charles filed a

verified motion to have Roys name included.
As an executor, he was bound to file tax returns for the estate he was
administering under American law. He did file such as estate tax return
on August 8, 1958. In Schedule "M" of such return, he answered "Yes"
to the question as to whether he was contemplating "renouncing the
will". On the question as to what property interests passed to him as
the surviving spouse, he answered:
None, except for purposes of administering the Estate, paying
debts, taxes and other legal charges. It is the intention of the
surviving husband of deceased to distribute the remaining
property and interests of the deceased in their Community
estate to the devisees and legatees named in the will when the
debts, liabilities, taxes and expenses of administration are finally
determined and paid.

Charles died in Iloilo in December 1962 without having liquidated

Linnies estate, which includes her share in the conjugal partnership. A
longtime employee of the Hodges, Avelina Magno, was appointed
Administratrix (for Linnies estate) and a Special Administratrix (for
Charles). Magno was appointed, but later Harold Davies
(representative of Charles heirs in the US) was designated Co-Special
Administrator, who was then replaced by one Joe Hodges, Charles
nephew. One Atty. Mirasol was also appointed as co-administrator, and
an order of probate and letters of administration were issued to
Hodges and Mirasol.

At this point, the SC was already very much confused about the gaps in
the facts, convinced that the parties representing both estates had
cooked up a modus operandi to settle money matters (a settlement
with records the Court never saw)which, however, went awry, with
more and more heirs from the US flocking to the Iloilo shores, and
lawyers (Ozaetas! Mabantas! Manglapuses!) filing their respective
claims for retainer fees. Much much later, PCIB became the
administrator of Charles estate, asserting a claim to all of his estate,
including those properties/assets that passed to him upon Linnie Janes
death. Avelina naturally opposed this, as Linnie Janes other heirs (the
HIGDONS) would be prejudiced, so she continued acting in her capacity
as administrator (entering into sales and other such conveyances). For
these acts, the PCIB dismissed her as an employee of Charles estate,
to which she responded by locking up the premises being used by PCIB
as offices, which were among the estates properties.
PCIBs Claims

Linnie Janes will should be governed by Philippine Law, with respect to

the order of succession, the amount of successional rights, and the
intrinsic validity of its testamentary provisions.
Linnie intended Philippine laws to govern her Will.
Article 16, CC, provides that "the national law of the person
whose succession is under consideration, whatever may be the
nature of the property and regardless of the country wherein
said property may be found", shall prevail. However, the Conflict
of Law of Texas, which is the "national law" of the testatrix,
Linnie Jane Hodges, provide that the domiciliary law (Philippine
law) should govern the testamentary dispositions and
successional rights over movables, and the law of the situs of
the property (also Philippine law as to properties located in the
Philippines) as regards immovables.
Thus applying the "Renvoi Doctrine", as approved and applied in
the Christensen case (1963), Philippine law should apply.
Under Philippine and Texas law, the conjugal or community
estate of spouses shall, upon dissolution, be divided equally
between them. Thus, upon Linnies death, of the entirety of
the assets of the Hodges spouses constituting their conjugal
estate pertained automatically to Charles, not by way of
inheritance, but in his own right as partner in the conjugal
partnership.
The other one-half (1/2) portion forming part of Linnies estate,
cannot, under a clear and specific provision of her Will, be
enhanced or increased by income, earnings, rents, or
emoluments accruing after her death. All rents, emoluments
and income from said estate shall belong to him (C. N. Hodges)
and he is further authorized to use any part of the principal of
said estate as he may need or desire."
Articles 900, 995 and 1001 provide that the surviving spouse of
a deceased leaving no ascendants or descendants is entitled, as
a matter of right and by way of irrevocable legitime, to at least
one-half (1/2) of the estate of the deceased, and no
testamentary disposition by the deceased can legally and validly
affect this right of the surviving spouse. In fact, her husband is
entitled to said one-half (1/2) portion of her estate by way of
legitime. (Article 886)
Clearly, therefore, immediately upon the death of Linnie Jane
Hodges, C. N. Hodges was the owner of at least 3/4 or 75%
percent of all of the conjugal assets of the spouses, 50% by way
of conjugal partnership share and 1/4 or 25% by way of
inheritance and legitime) plus all "rents, emoluments and
income" accruing to said conjugal estate from the moment of
Linnie Jane Hodges' death.
In his capacity as sole heir and successor to Linnies estate,
Charles appropriated to himself the entirety of her estate. He
operated all the assets, engaged in business and performed all
acts in connection with the entirety of the conjugal estate, in his

own name alone, just as he had been operating, engaging and

doing while the late Linnie Jane Hodges was still alive. Upon his
death on December 25, 1962, therefore, all said conjugal assets
were in his sole possession and control, and registered in his
name alone, not as executor, but as exclusive owner of all said
assets.
As the sole and exclusive heir, Charles did not need to liquidate
the estate. Neither was there any asset left to Linnies estate at
the time of Charles death, though Linnies estate may have
referred to all of the rest, residue and remainder of my estate
which would go to her siblings in the event of Charles death. The
provision is thus void and invalid at least as to Philippine assets.
There are generally only two kinds of substitution provided for
and authorized by our Civil Code (Articles 857-870), namely,
(1) simple or common substitution, sometimes referred to
as vulgar substitution (Article 859), and (2) fideicommissary
substitution (Article 863). All other substitutions are merely
variations of these. The substitution provided for by paragraph
four of the Will of Linnie Jane Hodges is not fideicommissary
substitution, because there is clearly no obligation on the part of
C. N. Hodges as the first heir designated, to preserve the
properties for the substitute heirs. At most, it is
a vulgar or simple substitution.
However,
in
order
that
a vulgar orsimple substitution can be valid, three alternative
conditions must be present, namely, that the first designated
heir (1) should die before the testator; or (2) should not wish to
accept the inheritance; or (3) should be incapacitated to do so.
None of these conditions apply to C. N. Hodges, and, therefore,
the substitution provided for by the above-quoted provision of
the Will is not authorized by the Code, and, therefore, it is
void. Manresa even said, when another heir is designated to
inherit upon the death of a first heir, the second designation can
have effect only in case the first instituted heir dies before the
testator, whether or not that was the true intention of said
testator.
The remedy of the Higdons, then, who are claiming dubious
rights to of the conjugal estate of the Hodges, is to file a claim
against the estate of Charles.
It also follows that the conveyances executed by Avelina,
claiming to be merely in continuation of the Hodges businesses,
and which corresponding deeds of sale were confirmed by the
probate court, are null and void and should be subject to
reconveyance.

Avelinas Claims
(At one point, even Linnies heirs wanted to have Avelina removed
from her capacity as administrator, but the lower court reversed its
earlier grant of the motion, on account of a previous injunction it
issued.)

Linnie Jane merely gave Charles a life-estate or a usufruct over

all her estate, and gave a vested remainder-estate or the naked
title over the same estate, to her relatives.
After Linnies death, Charles, as administrator and executor of
the will, unequivocably and clearly through oral and written
declarations and sworn public statements, renounced,
disclaimed and repudiated his life-estate and usufruct.
Since there was no separation or segregation of the interests of
Linnie and Charles in the combined conjugal estate, as there has
been no such separation or segregation, and because of Charles
repudiation, both interests have continually earned exactly the
same amount of rents, emoluments and income.

Issue:
1. Is Linnies disposition in favor of her siblings void? NO
2. How should the estate be partitioned/liquidated? REMAND!
Reasoning:
1. To a certain extent, PCIBs contention that Linnies testamentary
substitution, when viewed as a substitution, may not be given effect, is
correct. Indeed, legally speaking, Linnies will provides neither for a
simple or vulgar substitution under Article 859 of the Civil Code nor for
a fideicommissary substitution under Article 863 thereof. There is no
vulgar substitution because there is no provision for either (1)
predecease of the testator by the designated heir or (2) refusal or (3)
incapacity of the latter to accept the inheritance, as required by Article
859; and neither is there a fideicommissary substitution therein
because no obligation is imposed thereby upon Hodges to preserve the
estate or any part thereof for anyone else. But from these premises, it
is not correct to jump to the conclusion, as PCIB does, that the
testamentary dispositions in question are therefore inoperative and
invalid.
The error in PCIB's position lies simply in the fact that it views the said
disposition exclusively in the light of substitutions covered by the Civil
Code section on that subject, (Section 3, Chapter 2, Title IV, Book III)
when it is obvious that substitution occurs only when another heir is
appointed in a will "so that he may enter into inheritance in default of
the heir originally instituted," (Article 857) and, in the present case, no
such possible default is contemplated. The brothers and sisters of Mrs.
Hodges are not substitutes for Hodges because, under her will, they
are not to inherit what Hodges cannot, would not or may not inherit,
but what he would not dispose of from his inheritance; rather,
therefore, they are also heirs instituted simultaneously with Hodges,
subject, however, to certain conditions, partially resolutory insofar as
Hodges was concerned and correspondingly suspensive with reference
to his brothers and sisters-in-law. It is partially resolutory, since it
bequeaths unto Hodges the whole of her estate to be owned and
enjoyed by him as universal and sole heir with absolute dominion over
them only during his lifetime, which means that while he could

completely and absolutely dispose of any portion thereof inter vivos to

anyone other than himself, he was not free to do so mortis causa, and
all his rights to what might remain upon his death would cease entirely
upon the occurrence of that contingency, inasmuch as the right of his
brothers and sisters-in-law to the inheritance, although vested already
upon the death of Mrs. Hodges, would automatically become operative
upon the occurrence of the death of Hodges in the event of actual
existence of any remainder of her estate then.
Contrary to Avelinas view, however, it was not the usufruct alone of
Linnies estate, as contemplated in Article 869, that she bequeathed to
Charles during his lifetime, but the full ownership thereof, although the
same was to last also during his lifetime only, even as there was no
restriction whatsoever against his disposing or conveying the whole or
any portion thereof to anybody other than himself. The Court saw no
legal impediment to this kind of institution, except that it cannot apply
to the legitime of Charles as the surviving spouse, consisting of onehalf of the estate, considering that Linnie had no surviving ascendants
nor descendants. (Arts. 872, 900, and 904.)
Hodges acts of administration and accounting strongly negate PCIBs
claims that he had adjudicated to himself all of Linnies estate. While
he may have used language like herein executor (being) the only
devisee or legatee of the deceased, in accordance with the last will and
testament already probated there is no other person interested in
the Philippines of the time and place of examining herein account to be
given notice, he wouldve known that doing so would impute bad faith
unto him. Also, in his very motions, Hodges asserted the rights of
Linnies named heirs. He even moved to include Roys name included
in the probate courts order, lest Roys heirs think that they had been
omitted.
Thus, he recognized, in his own way, the separate identity of his wifes
estate from his own share of the conjugal partnership up to the time of
his death, more than 5 years after that of his wife. He never considered
the whole estate as a single one belonging exclusively to himself. The
only conclusion one can gather from this is that he could have been
preparing the basis for the eventual transmission of his wife's estate,
or, at least, so much thereof as he would not have been able to dispose
of during his lifetime, to her brothers and sisters in accordance with
her expressed desire, as intimated in his tax return in the US. And
assuming that he did pay the corresponding estate and inheritance
taxes in the Philippines on the basis of his being sole heir, such
payment is not necessarily inconsistent with his recognition of the
rights of his co-heirs. The Court thus viewed that under the peculiar
provisions of his wife's will, and for purposes of the applicable
inheritance tax laws, Hodges had to be considered as her sole heir,
pending the actual transmission of the remaining portion of her estate
to her other heirs, upon the eventuality of his death, and whatever
adjustment might be warranted should there be any such remainder

then is a matter that could well be taken care of by the internal

revenue authorities in due time. The Court also considered as basis of
Charles intentions several questionnaires in solemn forms in filing
estate taxes abroad, though they have not been introduced in
evidence (!!!), only referred to several times by the parties.
It is obvious, though, that Charles procrastinating in settling Linnies
estate, and his sole administration of it, commingled his and his coheirs interests, making it difficult to properly make an accounting of
their shares. PCIB, then, cannot administer the properties on its own.
What would be just and proper is for both administrators of the two
estates to act conjointly until after said estates have been segregated
from each other.
2. The parties were in disagreement as to how Article 16 of the Civil
Code should be applied. On the one hand, PCIB claimed that inasmuch
as Linnie was a resident of the Philippines at the time of her death,
under said Article 16, construed in relation to the pertinent laws of
Texas and the principle of renvoi, what should be applied here should
be the rules of succession under the Civil Code, and, therefore, her
estate could consist of no more than one-fourth of the said conjugal
properties, the other fourth being, as already explained, the legitime of
her husband (Art. 900) which she could not have disposed of nor
burdened with any condition (Art. 872). On the other hand, Avelina
denied that Linnie died a resident of the Philippines, since allegedly
she never changed nor intended to change her original residence of
birth in Texas, United States of America, and contends that, anyway,
regardless of the question of her residence, she being indisputably a
citizen of Texas, under said Article 16 of the Civil Code, the distribution
of her estate is subject to the laws of said State which, according to
her, do not provide for any legitime, hence, Linnies brothers and
sisters are entitled to the remainder of the whole of her share of the
conjugal partnership properties consisting of one-half thereof. Avelina
further maintained that, in any event, Charles had renounced his rights
under the will in favor of his co-heirs, as allegedly proven by the
documents touching on the point already mentioned earlier, the
genuineness and legal significance of which PCIB questioned.
The Court cannot decide on the claims, though, for neither the
evidence submitted by the parties appeared to be adequate enough
for it to render an intelligent comprehensive and just resolution. No
clear and reliable proof of what in fact the possibly applicable laws of
Texas are, was presented (Remember judicial notice in case of foreign
laws?). Then also, the genuineness of documents relied upon by
Avelina is disputed. In Justice, therefore, to all the parties concerned,
these and all other relevant matters should first be threshed out fully
in the trial court in the proceedings thereafter to be held for the
purpose of ascertaining and adjudicating and/or distributing the estate
of Mrs. Hodges to her heirs in accordance with her duly probated will.

Linnies estate is the remainder of 1/4 of the conjugal partnership

properties, considering that even PCIB did not maintain that the
application of the laws of Texas would result in the other heirs of Mrs.
Hodges not inheriting anything under her will. And since PCIB's
representations in regard to the laws of Texas virtually constitute
admissions of fact which the other parties and the Court are being
made to rely and act upon, PCIB is not permitted to contradict them or
subsequently take a position contradictory to or inconsistent with
them.
The only question that remains to be settled in the remand to the court
below are:
(1) whether or not the applicable laws of Texas do provide in effect for
more, such as, when there is no legitime provided therein
(2) whether or not Hodges has validly waived his whole inheritance
from Mrs. Hodges.
In the course of the deliberations, it was brought out by some
members of the Court that to avoid or, at least, minimize further
protracted legal controversies between the respective heirs of the
Hodges spouses, it is imperative to elucidate on the possible
consequences of dispositions made by Charles after Linnies death,
from the mass of the unpartitioned estates without any express
indication in the pertinent documents as to whether his intention is to
dispose of part of his inheritance from his wife or part of his own share
of the conjugal estate as well as of those made by PCIB after the death
of Hodges. After a long discussion, the consensus arrived at was as
follows:
(1) any such dispositions made gratuitously in favor of third parties,
whether these be individuals, corporations or foundations, shall be
considered as intended to be of properties constituting part of Hodges'
inheritance from his wife, it appearing from the tenor of his motions of
May 27 and December 11, 1957 that in asking for general authority to
make sales or other disposals of properties under the jurisdiction of the
court, which include his own share of the conjugal estate, he was not
invoking particularly his right over his own share, but rather his right to
dispose of any part of his inheritance pursuant to the will of his wife;
(2) as regards sales, exchanges or other remunerative transfers, the
proceeds of such sales or the properties taken in by virtue of such
exchanges, shall be considered as merely the products of "physical
changes" of the properties of her estate which the will expressly
authorizes Hodges to make, provided that whatever of said products
should remain with the estate at the time of the death of Hodges
should go to her brothers and sisters;
(3) the dispositions made by PCIB after the death of Hodges must
naturally be deemed as covering only the properties belonging to his
estate considering that being only the administrator of the estate of
Hodges, PCIB could not have disposed of properties belonging to the

estate of his wife. Neither could such dispositions be considered as

involving conjugal properties, for the simple reason that the conjugal
partnership automatically ceased when Linnie died, and by the peculiar
provision of her will, under discussion, the remainder of her share
descended also automatically upon the death of Hodges to her
brothers and sisters, thus outside of the scope of PCIB's administration.
Accordingly, these constructions of Linnies will should be adhered to
by the trial court in its final order of adjudication and distribution
and/or partition of the two estates in question.
Disposition
Remand for determination of proper application of Art. 16, CC (renvoi),
and of Charles alleged renunciation of his ineritance under Linnies
will. Avelina remains to be the administrator of Linnies estate. The said
estate consists of of the community properties of the said spouses,
as of the time of Linnies death on May 23, 1957, minus whatever the
husband had already gratuitously disposed of in favor of third persons
from said date until his death, provided, first, that with respect to
remunerative dispositions, the proceeds thereof shall continue to be
part of the wife's estate, unless subsequently disposed of gratuitously
to third parties by the husband, and second, that should the purported
renunciation be declared legally effective, no deductions whatsoever
are to be made from said estate. PCIB and Avelina should act
thenceforth always conjointly, never independently from each other, as
administrators.
CONCURRING OPINIONS
Fernandoconcurred with procedural aspect of the decision.
Teehankeeagreed with most parts but had substantial differences in
the reasoning:
C. N. Hodges could not validly make gratuitous dispositions of any part
or all of his wife's estate "completely and absolutely dispose of any
portion thereof inter vivos to anyone other than himself" in the
language of the main opinion and thereby render ineffectual and
nugatory her institution of her brothers and sisters as her designated
heirs to succeed to her whole estate "at the death of (her) husband."
If according to the main opinion, Hodges could not make such
gratuitous "complete and absolute dispositions" of his wife Linnie's
estate "mortis causa," it would seem that by the same token and
rationale he was likewise proscribed by the will from making such
dispositions of Linnie's estate inter vivos.
I believe that the two questions of renvoi and renunciation should be
resolved preferentially and expeditiously by the probate court ahead of
the partition and segregation of the minimum one-fourth of the
conjugal or community properties constituting Linnie Jane
Hodges' separate estate, which task considering that it is now

seventeen (17) years since Linnie Jane Hodges' death and her conjugal
estate with C. N. Hodges has remained unliquidated up to now might
take a similar number of years to unravel with the numerous items,
transactions and details of the sizable estates involved.
Such partition of the minimum one-fourth would not be final, since if
the two prejudicial questions of renvoi and renunciation were resolved
favorably to Linnie's estate meaning to say that if it should be held that
C. N. Hodges is not entitled to any legitime of her estate and at any
rate he had totally renounced his inheritance under the will), then
Linnie's estate would consist not only of the minimum one-fourth
but one-half of the conjugal or community properties of the Hodges
spouses, which would require again the partition and segregation of
still
another
one-fourth
of
said
properties
to complete Linnie's separate estate.
Justice Teehankee also drew up suggested guidelines for application in
the probate court. Please see original case.
Makalintal, CJ.
Regardless of whether or not C. N. Hodges was entitled to a legitime in
his deceased wife's estate which question, still to be decided by the
said probate court, may depend upon what is the law of Texas and
upon its applicability in the present case the said estate consists of
one-half, not one-fourth, of the conjugal properties. There is neither a
minimum of one-fourth nor a maximum beyond that. It is important to
bear this in mind because the estate of Linnie Hodges consists of her
share in the conjugal properties, is still under administration and until
now has not been distributed by order of the court.
The reference in both the main and separate opinions to a one-fourth
portion of the conjugal properties as Linnie Hodges minimum share is
a misnomer and is evidently meant only to indicate that if her husband
should eventually be declared entitled to a legitime, then the
disposition made by Linnie Hodges in favor of her collateral relatives
would be valid only as to one-half of her share, or one-fourth of the
conjugal properties, since the remainder, which constitutes such
legitime, would necessarily go to her husband in absolute ownership,
unburdened by any substitution, term or condition, resolutory or
otherwise. And until the estate is finally settled and adjudicated to the
heirs who may be found entitled to it, the administration must continue
to cover Linnie's entire conjugal share.