G.R. No. L-26170 - Government Service Insurance System vs. Romualdo

Case Summary (G.R. No. L-26170)

Factual Background and Stipulation of Facts

After responsive pleadings and a pre-trial that did not result in settlement, the parties submitted a stipulation of facts. The stipulation established that Simeon died intestate and was survived by Susana Custodio and the nephews and nieces named above. It also stated that, shortly after Simeon’s death, an undated and unsigned application form for retirement was found among his personal belongings. That application named Susana as beneficiary, but the application form was not submitted to GSIS.

The stipulation further described an Extra Judicial Settlement of Estate Among Heirs, executed on July 7, 1957 at the residence of Leon K. Tongohan, son-in-law of Susana Custodio. The deed provided, among other matters, that Susana was recognized as the decedent’s only living sister and the sole and only beneficiary of Simeon Custodio, and granted her the right to file, sign, and receive retirement pay under Republic Act 660, as amended by Republic Acts Nos. 728 and 1123, and other amendments. A significant detail was that certain heirs did not sign the deed: the stipulation indicated that Macario C., Luisa, and David did not sign the extrajudicial settlement. It also noted that there were two children named Macario (Macario A. and Macario C.), and that Macario C. was the only child of Crispin, while Luisa and David were two of six children of Jacinto.

As part of the stipulation, it was stated that on July 8, 1957, several persons—including Romualdo, Julian, Macario A., Moises, Adriano, and Celestina—wrote a letter to the GSIS Manager explaining that they had inadvertently signed on July 7 a document that made it appear they were waiving claims to benefits legally accruing to the deceased, and that a duplicate of the letter was attached as an annex.

The stipulation also reflected the relationship between the signers and non-signers. It stated that Susana clarified in her opposition to a later motion for reconsideration that she made no opposition to the division of the estate in a manner allowing Macario C., Luisa, and David to share per stirpes. The parties, however, asked the trial court to resolve only the questions of law arising from the stipulated facts.

Trial Court Proceedings

On January 2, 1960, the trial court approved the stipulation of facts and directed the interpleading defendants to submit memoranda within fifteen (15) days on a question of law, with the case to be considered submitted for decision after submission or upon expiration of the period. No other evidence was presented.

On March 10, 1960, the trial court rendered judgment in favor of Susana Custodio. It held that Susana’s designation as beneficiary in the unsigned retirement application form was invalid because the application form had not been filed with GSIS before the employee’s death, as required by regulations. Nonetheless, the trial court ruled that Susana was entitled to the retirement benefits to the exclusion of the nephews and nieces, because the latter had recognized her as sole beneficiary in the extrajudicial settlement executed on July 7, 1957, which the court presumed regular in the absence of evidence of fraud or mistake.

Appeal to the Court of Appeals and Certification

The appellants—defined as the nephews and nieces contesting Susana’s exclusive entitlement—moved for reconsideration and, upon denial, appealed to the Court of Appeals. The Court of Appeals found no question of fact and treated the dispute as involving only questions of law. It therefore certified the appeal to the Supreme Court.

In arriving at certification, the Court of Appeals emphasized that the parties’ stipulation and prayer for approval limited the trial to questions of law arising from stipulated facts, that no evidence was submitted, and that fraud was not specifically alleged in the pleadings.

The Parties’ Issues and Contentions in the Supreme Court

The appellants assigned errors that, in substance, attacked the trial court’s ruling that the extrajudicial settlement could operate to defeat the intestate shares of heirs who did not sign the deed. They specifically argued that the non-signatory intestate heirs—Macario C., Luisa, and David Custodio—could not be deemed to have recognized Susana as sole beneficiary for the retirement money. They also faulted the trial court for failing to consider circumstances surrounding the preparation and execution of the extrajudicial settlement as circumstantial evidence of fraud that allegedly secured certain signatures, and for failing to declare that the appellants were entitled to share as intestate heirs in the proceeds due from GSIS.

In support of the fraud theory, the appellants invoked several so-called “badges of fraud,” including that David Custodio was not made a party to the extrajudicial settlement nor mentioned in its recitals; that the deed did not secure signatures of David, Luisa, and Macario C.; that signers had purportedly repudiated their signatures one day after execution; alleged intervention by Leon Tongohan; and the supposed unconscionable bulk of the estate adjudicated to Susana.

The Court of Appeals’ reasoning on certification treated these matters as not properly raised as questions of fact, and it further stated that fraud had not been specifically alleged.

Legal Basis and Reasoning of the Supreme Court

The Court affirmed the Court of Appeals’ certification. The Supreme Court held, first, that the appellants’ initial assignment of error was well taken. It ruled that the non-signatory heirs—Macario C., Luisa, and David Custodio—could not be treated as having recognized Susana as the only beneficiary, absent evidence that the case had been submitted for decision below solely on a stipulation of facts containing any agreement or acceptance by those non-signatory heirs of the deed of partition. The Court rejected the trial court’s basis for exclusion because the trial court’s conclusion rested on presumptions regarding the extrajudicial settlement without the requisite showing that the non-signatories were bound by recognition of Susana.

In applying inheritance rules, the Court determined that the non-signatory heirs were required to inherit per stirpes pursuant to Article 1005 of the Civil Code. It then computed the shares using the parent lineal entitlement. As Macario C. was the only child of Crispin, he inherited by representation the one-fourth (one-fourth) share pertaining to his father. Luisa and David, being two (2) of six (6) children of Jacinto, each received one-sixth of one-fourth, corresponding to one-twenty-fourth (1/24) of the hereditary mass.

As to the related assignments of error alleging fraud or mistake, the Court held that the plea could not be entertained because fraud or mistake was not stipulated. It relied on Miranda vs. Tiangco, et al., 96 Phil. 526, and on procedural requirements requiring specific pleading of fraud. The Court invoked Rule 9, Section 9, Rules of Court, reasoning that raising fraud or mistake without specifically stipulating or pleading it unfairly surprised the adverse party and amounted to a waiver due to lack of proper averment.

Even assuming arguendo that the circumstances pressed by appellants might be suggestive of fraud or mistake, the Court found that the specific evidence and procedural posture did not support invalidation of the extrajudicial settlement as urged. It held that the failure to obtain the signatures of Luisa, David, and Macario C. could not fairly be laid at Susana’s door, given that the signers’ co-heirs were aware of the deed’s execution. It also viewed Leon Tongohan’s intervention as without particular significance because none of the signatories was described as illiterate and the deed was not notarized by him. Finally, the Court characterized the

Case Syllabus (G.R. No. L-26170)

Parties and Procedural Posture

The plaintiff was the Government Service Insurance System (GSIS), a non-stock corporation created by Commonwealth Act 186, which administered the deceased member’s retirement insurance benefits.
The defendants included Susana Custodio and several nephews and nieces who carried the surname Custodio, who contested Susana’s claim to be the sole beneficiary.
The action began in the Court of First Instance of Rizal as a complaint in interpleader docketed as Civil Case No. 5037.
The interpleader sought judicial determination of who among the defendants was entitled to retirement benefits in the amount of P8,339.36 that had fallen due to deceased member Simeon Custodio.
After proceedings at the trial level, the Court of Appeals certified the appeal to the Supreme Court because it involved only questions of law.
The Supreme Court affirmed the certification action of the Court of Appeals and proceeded to resolve the appeal.

Key Factual Allegations

Simeon Custodio died intestate in Tanay, Rizal on February 16, 1957 while being a member of the Retirement Insurance Fund administered by GSIS.
Simeon was survived by his only sister, Susana Custodio, and by nephews and nieces who were the children of Simeon’s predeceased brothers.
The parties stipulated that after Simeon’s death, an undated and unsigned application form for retirement was found among his personal belongings, naming Susana as beneficiary.
The parties further stipulated that the application form was never submitted to the GSIS prior to Simeon’s death.
The parties stipulated that on July 7, 1957, heirs including Susana and several nephews executed an “Extra judicial Settlement of Estate Among Heirs” (Annex B) recognizing Susana as “the decedent’s only living sister” and as the recognized beneficiary entitled to retirement pay under Republic Act 660 as amended.
The stipulated document included language granting Susana the right to file, sign, and receive retirement pay under Republic Act 660, as amended by Republic Acts Nos. 728 and 1123, and other amendments.
The parties stipulated that on July 8, 1957, certain nephews executed a letter to the GSIS stating they had inadvertently signed on July 7, 1957 a document that appeared to make them waive legally accruing benefits.
The heirs’ family relations were stipulated in detail: Simeon had one sister and three brothers (Vicente, Crispin, and Jacinto) who had predeceased him, and the nephews were the children of these brothers.
The stipulation reflected that two among Simeon’s brother-children were both named Macario (Macario A. and Macario C.), and that two heirs (Macario C., Luisa, and David) did not sign the extrajudicial settlement.
It was also stipulated that Macario C. was the only child of Crispin, while Luisa and David were among six children of Jacinto, and that the other signatories included Romualdo, Julian, Macario A., Moises, Adriano, Celestina, and Luisa is mentioned as a non-signatory in relation to Annex B.
The record reflected that Susana made clear in opposing a motion for reconsideration that she did not oppose division by per stirpes in the estate where Macario C., Luisa, and David would share.

Issues on Appeal

The principal issue concerned whether intestate heirs who did not sign the deed of extrajudicial settlement could be treated as having recognized Susana as sole beneficiary of Simeon’s GSIS retirement benefits.
The appellants raised issues that the trial court erred:
- in not considering alleged circumstances surrounding preparation and signing of Annex B as circumstantial evidence of fraud making the deed null and void; and
- in not holding that non-responding heirs (Romualdo, Julian, Macario A., Moises, Adriano, and Celestina) were also entitled to share as intestate heirs in the GSIS proceeds.
The Court of Appeals certified the appeal after finding that the issues were properly characterized as questions of law, and after assessing that the parties had submitted a stipulation of facts without independent evidence.
A threshold matter arose on whether fraud or mistake could be considered when it was not expressly stipulated or pleaded.

Appellants’ Contentions

The appellants contended that Macario C., Luisa, and David Custodio who did not sign Annex B could not be considered to have recognized Susana as sole beneficiary.
The appellants argued that the absence of signatory status meant those heirs could not be bound by the deed’s purported allocation and recognition.
They further argued that certain “badges of fraud” and surrounding circumstances showed fraud or mistake that should nullify Annex B and defeat Susana’s exclusive claim.
The appellants listed badges of fraud including: the alleged omission or failure to include David Custodio in the deed as party or in recitals; the failure to secure signatures not only of David but also of Luisa and Macario C.; the alleged repudiation by signatories a day after execution; the alleged intervention of Leon Tongohan; and the alleged adjudication of an unconscionable bulk of the estate to Susana.
They also maintained that these matters, if considered, would entitle the nephews and nieces to share as intestate heirs in the retirement proceeds.

GSIS Interpleader Scope

The interpleader posture framed the case as a determination of entitlement to retirement benefits under the beneficiary structure claimed by the various heirs.
The trial court’s approval of the stipulation of facts limited the adjudication to legal consequences of those stipulated facts and annexes.
The trial court required the parties to submit memoranda on the question of law after approving the stipulation, and the case was treated as submitted upon expiration or filing of memoranda.
No additional evidence was introduced beyond the stipulated facts and annexes, making the appe