G.R. No. 160792 - Alejano vs. Cabuay

The petitioners, who are the heirs of the late Fausto Barredo, sought to collect from the intestate estate of Charles A. McDonough the face value of a promissory note amounting to P20,000.00 with 12% interest per annum starting from December 21, 1949, in addition to attorney’s fees and costs of P2,000.00.
The promissory note was secured by a mortgage executed on December 31, 1940, in favor of Fausto Barredo over certain leasehold rights and four houses constructed by McDonough on a registered land located at Dungalo, Parañaque, Rizal.

The lease contract between Constantino Factor (the owner of the land) and McDonough was originally for a ten-year term beginning September 1, 1936, which was later extended in December 1940 to run until August 31, 1961.
The original lease, its extension, and the mortgage were duly inscribed on the back of the certificate of title for the land, making the secured interest public.

Upon Fausto Barredo’s death on October 8, 1942, his heirs performed an extrajudicial partition wherein they adjudicated themselves the secured credit; this adjudication was recorded on the certificate of title.
In August 1944, amid the Japanese occupation, Manuel H. Barredo was compelled by an officer of the Japanese Imperial Army to present all documents pertaining to the mortgage.

He was paid P20,000.00 in Japanese war notes by the occupation authorities.
Manuel H. Barredo signed a certification in exchange for the payment, requesting that the Register of Deeds cancel the mortgage, which was then duly annotated (cancelled) on the certificate of title.

Charles A. McDonough died on March 15, 1945, sparking the commencement of Special Proceedings No. 70173 in the Court of First Instance of Manila.
The administrator of the estate published a notice to creditors in the “Philippine Progress” on August 23, August 30, and September 6, 1945, requiring claims (including that of the Barredo heirs) to be filed within six months from the first publication, expiring on February 23, 1946.

The heirs of Fausto Barredo filed their claim on October 22, 1947, which was clearly beyond the six-month period fixed by the probate court.
Although a trial court admitted and allowed the tardy claim on the ground that cause might exist for failure to present it on time, the Court of Appeals reversed this decision.

The petitioners contended in their appeal that the Court of Appeals erred in computing the one-month period provided for late claims from the expiration of the six-month notice period.
They also argued that the payment of P20,000.00 by the Japanese military authorities was made in redemption of the promissory note secured by the mortgage on the four buildings.
The respondent administrator maintained that the one-month period as contemplated under Section 2, Rule 87 of the Rules of Court is to be counted from the issuance of an order allowing the late filing, not from the expiration of the six-month period, a proposition later clarified in Paulin vs. Aquino.

The petitioners justified their delay by asserting that they had only recently recovered the relevant mortgage documents from the possession of a deceased lawyer.
The Court found this excuse insufficient in light of the pre-existing annotation on the certificate of title and the payment by the Japanese authorities, indicating that the secured claim was known and had been acted upon.

Whether the trial court erred in admitting and allowing the belated claim of the Barredo heirs despite its late filing.

The discussion centers on the discretionary power of the court to allow a tardy claim under Section 2, Rule 87, of the Rules of Court.

The proper interpretation and computation of the one-month period for filing a late claim.

Is this period to be counted from the expiration of the six-month period fixed by the published notice or from the issuance of an order authorizing the filing of the claim?

Whether the payment of P20,000.00 by the Japanese military authorities was intended to discharge or remediate the promissory note secured by the mortgage on the property.

This issue remains secondary as the ruling ultimately pivots on the admissibility of the tardy claim.