Inventory of Estate: Donated Property Must Be Included for Collation Among Heirs

When a parent gives property to a child during the parent's lifetime, that gift does not simply disappear from the estate. Under Philippine law, the donee-heir must bring the donated property back into the estate's inventory so that it can be counted in determining each heir's legitime and in the partition of the estate. The Supreme Court's 2010 decision in Gregorio v. Madarang (G.R. No. 185226) clarifies this rule and settles an important question: must a probate court include donated property in the inventory even when the donation deed was not notarized or registered?

The Case: A Donated Lot Left Out of the Inventory

Casimiro V. Madarang, Sr. died intestate in 1995, leaving real and personal properties worth about P200,000. His estate went through intestate proceedings before the Regional Trial Court (RTC) of Cebu City, Branch 57. His wife Dolores was appointed administratrix and submitted an Inventory Report of the estate's properties.

One of the decedent's sons, Jose, objected that the inventory omitted six lots, including Lot 829-B-4-B in Cebu City. The RTC initially ordered all six lots included, applying the presumption under Article 160 of the New Civil Code that properties acquired during marriage belong to the conjugal partnership. But the court later excluded Lot 829-B-4-B after another son, Vicente, claimed it had been donated to him by his parents through a Deed of Donation executed in August 1992.

Jose appealed, arguing that the lot should remain in the inventory because the title was still registered in the parents' names and the deed of donation was neither notarized nor registered with the Register of Deeds. The Court of Appeals, however, granted Jose's motion to withdraw his appeal and, in the process, affirmed the exclusion of the lot. The other heirs, now petitioners before the Supreme Court, challenged this ruling.

The Issue: Can a Probate Court Exclude Donated Property?

The central question was whether the probate court properly excluded Lot 829-B-4-B from the inventory of the decedent's estate, given that it was allegedly donated to Vicente during the decedent's lifetime.

The Ruling: Donated Property Stays in the Inventory

The Supreme Court granted the petition and set aside the Court of Appeals' resolution. The Court directed the administratrix to include Lot 829-B-4-B in the inventory of the estate.

The Court explained that while a probate court has special and limited jurisdiction and generally cannot rule on questions of title and ownership, it can make a provisional determination of ownership for purposes of including or excluding properties in the inventory. However, the Court noted that this case did not even require such a provisional determination, because the question presented was one of collation or advancement by the decedent to an heir.

The Rule on Collation: Article 1061 of the Civil Code

The Court anchored its ruling on Article 1061 of the Civil Code, which provides that every compulsory heir who succeeds with other compulsory heirs must bring into the mass of the estate any property or right received from the decedent during the latter's lifetime by way of donation or any other gratuitous title, so that it may be computed in the determination of the legitime of each heir and in the account of partition. The exact text of this provision is not reproduced here, but the rule as applied by the Court is clear.

The Court also cited Section 2, Rule 90 of the Rules of Court, which provides that questions as to advancements made by the deceased to any heir may be heard and determined by the court having jurisdiction over the estate proceedings.

Applying these provisions, the Court held that Lot 829-B-4-B, which was alleged to have been donated by the decedent and his wife to their son Vicente, should not have been excluded from the inventory. The fact that the deed was not notarized or registered did not change this conclusion, because the issue at that stage was simply whether the property should be listed for purposes of collation — not a final ruling on ownership.

Practical Takeaways

• Donated property is not automatically out of the estate. A gift given to a compulsory heir during the donor's lifetime must be brought into the estate's inventory for collation, so that it can be counted in determining the legitime of each heir and in the partition.
• Probate courts can provisionally determine ownership. Although probate courts have limited jurisdiction, they may make a provisional finding on ownership solely for purposes of including or excluding a property from the inventory, without prejudice to a final determination in a separate action.
• Collation questions belong in the probate court. Under Section 2, Rule 90 of the Rules of Court, the estate court itself can hear and determine questions of advancement or collation.
• A deed's formal defects do not defeat inclusion. The lack of notarization or registration of a deed of donation does not, by itself, justify excluding the donated property from the inventory where collation is at issue.
• Heirs should review the inventory carefully. An heir who believes a property was omitted from the estate inventory should raise the matter promptly, as the inventory determines how the estate will be divided.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.