SECOND DIVISION As such administrator of the estate, Emilio took possession of
the said parcels of land. He opened an account in the name of
JOSEPHINE OROLA, MYRNA G.R. No. 158566
OROLA, ANGELINE OROLA,
MANUEL OROLA, ANTONIO
OROLA and ALTHEA OROLA, Present:
Petitioners,
PUNO, J., Chairman,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.
THE RURAL BANK OF
PONTEVEDRA (CAPIZ), INC.,
EMILIO Q. OROLA, THE
REGISTER OF DEEDS OF CAPIZ
and THE EX-OFFICIO
PROVINCIAL SHERIFF OF Promulgated:
CAPIZ,
Respondents. September 20, 2005
x---------------------------------------x
DECISION
CALLEJO, SR., J.: Before us is a petition for review on
certiorari of the Decision[1] of the Court of Appeals (CA) in
CA-G.R. CV No. 35724 reversing, on appeal, the Decision[2] of
the Regional Trial Court (RTC) of Roxas City, Branch 15, in
Civil Case No. V-5452.
On July 16, 1969, Trinidad Laserna Orola died intestate. She
was survived by her husband Emilio Orola and their six minor
children, namely, 10-year-old Antonio, 12-year-old Josephine,
16-year-old Manuel, and other siblings, Myrna, Angeline and
Althea.
The estate consisted of property located in Pontevedra, Capiz.
It included portions of Lots 1071 and 1088 (Lot 2-B) of the
Pontevedra Cadastre, covered by Tax Declaration (T.D.) No.
7197[3] under the names of the heirs of Trinidad Orola; Lot
1088 (Lot 2) covered by T.D. No. 6901 under the name of
Trinidad Orola; Lot 1071 and portions of Lot 1088 (Lot 2-A)
of the same cadastre covered by T.D. No. 7196 under the
names of the heirs of Trinidad Orola; and Lot 1050 of the
same cadastre covered by T.D. No. 2623[4] under the name of
Trinidad Orola. Portions of the property were devoted to the
development and production of sugar. Some portions were
riceland, while some parts of the property were swampy.[5]
Emilio Orola, who, in the meantime, had married anew,
executed a waiver of all his rights and interests over the said
property in favor of his children by Trinidad Laserna, namely,
Josephine, Myrna, Angeline, Manuel, Antonio and Althea, all
surnamed Orola.[6]
In 1973, Emilio Orola retired as cashier of the Philippine
National Bank (PNB).[7] He filed a petition for his
appointment as guardian over the persons and property of
his minor children. The case was docketed as Special
Proceedings (Sp. Proc.) No. V-3526. The petition was granted,
and Emilio Orola was appointed guardian not only over the
persons of his minor children but also over their property. On
November 6, 1973, Emilio filed a petition with the RTC for the
settlement of the estate of his deceased spouse, Trinidad
Laserna, and his appointment as administrator of her estate.
The RTC issued an order appointing Emilio Orola as
administrator of the estate of his deceased spouse.
the estate with the PNB. He embarked on a massive sugar
production and, with prior approval of the court, negotiated
with banking institutions for financing loans to purchase the
required equipments. However, in 1976 and 1977, there was
a sudden collapse of the sugar industry. Emilio Orola found it
necessary to develop the swampy portion of the estate for the
production of fish. To finance the endeavor, he needed at least
P600,000.00.
On September 11, 1980, Emilio Orola filed a motion[8] in Sp.
Proc. No. V-3639 for authority to negotiate a P600,000.00
loan from the Central Bank of the Philippines for the full and
complete development of the fishpond portion of the estate,
and to transfer the sugar account of the estate from the PNB
to the Republic Planters Bank (RPB).
On September 12, 1980, the court granted the motion of the
administrator and authorized him to negotiate the loan
through the Rural Bank of Capiz (Rural Bank of Pontevedra,
Capiz) and to transfer the sugar account of the estate to the
RPB in Roxas City.[9] Emilio then filed an application with the
Rural Bank for a financing loan of P600,000.00. However, the
bank informed him that the said loan would have to be
processed by the Central Bank and that it would take some
time. He was informed that there would be no need for the
Central Bank to intervene if the loan of P600,000.00 would be
broken down into three parts of P200,000.00, each to be
applied for by three applicants to whom the property to be
used as collateral would be leased by the estate. Emilio
agreed and talked to his children, Josephine, Manuel and
Antonio, about the banks proposal. The three siblings
agreed.[10] The Estate of Trinidad Laserna, through its
administrator, Emilio, as lessor, and Josephine, Manuel and
Antonio, all surnamed Orola, as lessees, executed separate
contracts of lease over the aforesaid property of the estate.
On September 20, 1982, the intestate estate court issued an
Order approving the contracts.
However, it turned out that the lessees would not qualify for
the loans; the bank required a lease period of at least 10 years
from the time the court approved the same. On May 20, 1982,
Emilio, Antonio, Manuel and Josephine Orola filed a
Manifestation[11] with the intestate estate court, praying that
its order be amended to state that the periods of the leases
were to commence from court approval of the said contracts.
However, on December 15, 1982, the estate, through Emilio,
as lessor, and Josephine, Antonio and Manuel Orola, executed
separate Amended Contracts of Lease[12] covering the same
property. The periods of the lease were extended to 12 years,
to commence from their approval by the intestate estate
court. The lessees were also authorized to negotiate loans for
the development of the leased premises not to exceed
P200,000.00, and to bind the leased premises by way of real
estate mortgage as security therefor.
On December 15, 1982, Emilio filed an Ex Parte Motion[13] in
the intestate estate court for the approval of the amended
contracts of lease appended thereto. On December 17, 1982,
Angeline, Myrna and Althea Orola filed their Joint Affidavit of
Conformity[14] to the motion. On December 17, 1982, the
court granted the motion of Emilio and approved the
amended contracts of lease.[15] On December 20, 1982, the
Rural Bank notified Emilio that the loan applications of his
children had been approved.[16]
Antonio, Manuel and Josephine signed separate Promissory
Notes[17] on March 21, 1983 in which they promised and
bound themselves to pay their respective loans in 10 years in
stated annual installments. Antonio
Orola, for and in behalf of his father Emilio Orola, executed a
Real Estate Mortgage over Lot 1088 as security for the
payment of his loan.[18] Manuel Orola, also as attorney-in-
fact of the administrator of the estate, likewise, executed a
real estate mortgage in favor of the Rural Bank over the said
lots as security for his loan.[19] Josephine Orola, as attorney-
in-fact of the administrator of the estate, executed a separate
real estate mortgage agreement over a portion of Lot 1088
and Lot 1071 as security for her loan.[20] However, the real
estate mortgage contracts were not submitted to the
guardianship and intestate estate courts for approval. Neither
were Myrna, Angeline and Althea aware of the said loans.
The net proceeds of the loan, in the total amount of
P582,000.00, were deposited in the Rural Bank on May 9,
1983 in Emilios account.[21] From the said proceeds, the
Rural Bank deducted the amount of P229,771.20, the
accommodation loan Emilio secured from the Rural Bank.[22]
As of September 9, 1983, the balance of the said deposit
amounted to only P4,292.79.[23] Emilio, thereafter, failed to
pay the amortizations of the loans to the Rural Bank.[24]
This prompted the Rural Bank to write separate letters of
demand to Josephine, Manuel and Antonio, demanding
payment of the balance of their accounts within seven days
from the receipt thereof, otherwise the Rural
Bank would cause the extrajudicial foreclosure of the real
estate mortgages.[25] Emilio Orola pleaded to the Rural Bank
not to foreclose the mortgages. However, on June 15, 1985,
the Rural Bank filed an application with the Ex-Officio
Provincial Sheriff for the extrajudicial foreclosure of the real
estate mortgages over Lots 1071 and 1088.[26] The lots were
sold at public auction on April 14, 1986 with the Rural Bank
as the winning bidder. The Ex-Officio Provincial Sheriff
executed separate certificates of sale in favor of the Rural
Bank.[27]
On September 1, 1987, the guardianship court terminated the
guardianship and dismissed the case.[28] On September 21,
1987, Josephine, Myrna, Manuel and Antonio Orola executed a
Deed of Acceptance of Waiver or Donation in which they
accepted their fathers waiver of his rights, interests and
participation over their mothers estate.[29]
On October 1, 1987, Josephine Orola and her siblings, Myrna,
Angeline, Manuel, Antonio and Althea, filed a Complaint
against the Rural Bank, their father Emilio and the Ex-Officio
Provincial Sheriff for the nullification of the Promissory Notes
and Real Estate Mortgages executed by Josephine, Manuel and
Antonio Orola, and the sale of the property subject of the said
deed at public auction. They alleged therein that they became
the sole owners of Lots 1088 and 1071 when their father
executed a waiver of his rights over the said lots in their
favor. They also alleged that the real estate mortgage
contracts were null and void because the same were never
submitted to and approved by the RTC in Sp. Proc. Nos. V-
3526 and V-3639. Moreover, they were hoodwinked by their
father into signing the contracts of lease and amended
contracts of lease, promissory notes and deeds of real estate
mortgages as security for the P600,000.00 loan on the
assurance that they would be benefited therefrom; moreover,
they did not receive the proceeds of the said loans. As such,
the extrajudicial foreclosure of the real estate mortgages and
the sale of the property covered by the said deeds were null
and void. The plaintiffs prayed that:
(1) A Temporary Restraining Order be issued restraining in
the meantime the defendant Ex-Officio Provincial Sheriff from
executing the Sheriffs Certificates of Sales arising out of Case
No. 33 (1985), Case No. 34 (1985) and Case No. 36 (1985), all
of the Office of the Provincial Sheriff.
(2) After hearing, a writ of preliminary injunction be issued
against the defendant Provincial Sheriff for the same purpose
stated above, and that the said Preliminary Injunction be
made permanent after trial on the merits.
(3) After trial, a Judgment be rendered -
(a) Declaring the contracts of loan and/or Promissory Notes
allegedly executed by plaintiffs Josephine, Manuel and
Antonio Orola in favor of the defendant Rural Bank of
Pontevedra (Capiz), Inc. null and void ab initio.
(b) Declaring the real estate mortgages purportedly signed by
the same plaintiffs Josephine, Manuel and Antonio Orola in
favor of defendant Rural Bank of Pontevedra (Capiz), Inc. null
and void ab initio.
(c) Ordering defendant Emilio Q. Orola and defendant Rural
Bank of Pontevedra (Capiz), Inc., jointly and severally, to pay
the plaintiffs moral damages in the sum of P600,000.00,
actual damages in the sum of P10,000.00, as and for attorneys
fees in the amount of P65,000.00, as exemplary damages in
the sum of P10,000.00, and to pay the costs of this suit.
(d) Ordering the Register of Deeds for the Province of Capiz to
cancel the registration of the real estate mortgages illegally
made under Section 113 of Presidential Decree No. 1529
affecting Lots Nos. 1088 and 1050 of the Cadastral Survey of
Pontevedra, Capiz.
The plaintiffs also pray for such other reliefs and remedies
that may be considered just and equitable under the
premises.[30]
In its answer to the complaint, Rural Bank averred that the
RTC in Sp. Proc. No. V-3639 authorized and even approved
the amended contracts of sale executed by Antonio, Manuel
and Josephine Orola and the defendant Emilio Orola. It
further averred that the plaintiffs had agreed to the execution
of the mortgages of the property subject of the said deeds,
and conformed to the said amended contracts before the RTC
in the intestate estate proceedings approved the same; they
were also notified of the balance of their account, and of the
extrajudicial foreclosure of the real estate mortgages, and the
subsequent sale of the property covered by the said
mortgages at public auction after they refused to pay their
account despite demands. As such, the plaintiffs were
estopped from assailing the real estate mortgages and the
extrajudicial foreclosure thereof and the sale of the lots
covered by the said deeds at public auction. Rural Bank
prayed that:
WHEREFORE, premises considered, it is most respectfully
prayed of this Honorable Court that, after due notice and
hearing, a judgment be rendered in favor of defendant bank
dismissing the plaintiffs complaint and ordering the plaintiffs
to pay defendant bank the following:
1. As and for attorneys fees in the amount of P50,000.00;
2. As moral, compensatory and exemplary damages, an
amount to be fixed by this Honorable Court;
3. The costs of this suit.
Herein defendant bank, likewise, prays that the plaintiffs
petition for the Issuance of a Temporary Restraining Order
against the defendant Ex-Officio Provincial Sheriff restraining
him from executing the Certificates of Sheriff Sale arising out
of Case No. 33 (1985), Case No. 34 (1985) and Case No. 36
(1985), all of the Office of the Provincial Sheriff of Capiz be
denied for obvious lack of merit.

Herein defendant further prays that the extra-judicial
foreclosure of the Real Estate Mortgages recorded under
Republic Act 3344 be confirmed and declared binding and
valid affecting the Original Certificates of Title Nos. RO-801
(17658) and RO-802 (17682) covering the mortgaged Lots
Nos. 1088 and 1071 of the Cadastral Survey of Capiz.
Herein defendant finally prays for such other reliefs or
remedies which are just and equitable in the premises.[31]
In his answer to the complaint, Emilio Orola admitted that the
guardianship proceedings terminated on September 1, 1987
but specifically denied the allegations in the complaint that
the plaintiffs were the absolute owners of the lots subject
matter thereof. He alleged that he executed the Waiver of
Right on October 26, 1976 only because his brother and
sister-in-law required him to do so as a condition to their
signing the partition agreement, with their assurance that the
said waiver would take effect only after his death. He further
claimed that the plaintiffs were aware of this because they
accepted his waiver only on September 21, 1987 after they
became of age. Moreover, the plaintiffs had agreed to the
execution of the amended contracts of lease to facilitate the
early release of the loans as required by the Rural Bank. He
further alleged that the proceeds of the loans were used for
the development of the estate; the non-submission of the real
estate mortgages to the intestate estate and guardianship
courts for approval was due to the fault of Rural Bank; and his
failure to pay the amortizations of the loan was due to force
majeure, namely, typhoon Undang.
On December 29, 1989, the Rural Bank presented the Real
Estate Mortgage in the Office of the Register of Deeds.[32]
On April 19, 1991, the RTC rendered judgment in favor of the
plaintiffs. The fallo of the decision reads:
IN VIEW OF THE CONSIDERATIONS, judgment is rendered:
1. Declaring the loans of Josephine Orola, Antonio Orola,
Manuel Orola, all on March 21, 1983, with the defendant,
Rural Bank, at P200,000 each or a total of P600,000, null and
void;
2. Declaring that the real estate mortgages of [the] above
three (3) plaintiffs on (a) Lot No. 1071-part and Lot No. 1088-
part under Tax Declaration No. 7196 in the name of [the]
Heirs of Trinidad Laserna Orola to secure the loan by
Josephine Orola; (b) Lot No. 1088 known as Lot No. 2-B of the
parcellary plan under Tax Declaration No. 7197 in the name
of the Heirs of Trinidad Orola and Lot No. 1050 under Tax
Declaration No. 2623 in the name of Trinidad Orola to secure
the loan by Antonio Orola; and (c) Lot No. 1088 under Tax
Declaration No. 6901 in the name of Trinidad Laserna Orola
to secure the loan by Manuel Orola, all as Attorney-in-fact of
defendant Emilio Orola, administrator, null and void;
Both (Nos. 1 and 2) for failure to comply with the mandatory
requirements of Section 7, Rule 89, Revised Rules of Court;
3. Ordering the Office of the Registry of Land Titles and
Deeds, Province of Capiz, to cancel its registration of the real
estate mortgages affecting [the] above parcels of land.
Claims of damages and attorneys fees as well as
counterclaims are denied.
Costs against the defendants, pro indiviso.[33]
The trial court held that although the intestate estate court
authorized Emilio to negotiate a loan of P600,000.00 with
Rural Bank, he was not authorized to mortgage the real
property of the estate to the Rural Bank. The court ruled that
the September 12, 1980 Order of the intestate estate court
was null and void because the motion of the administrator for
authority to negotiate a loan with the Rural Bank was made
ex parte, that is, without notifying the plaintiffs who were the
heirs of the deceased. The court also held that the plaintiffs
were not estopped from assailing the real estate mortgage
contracts, the same being null and void. It also declared that
the issue of whether or not the plaintiffs were the co-owners
of the property should be ventilated with the proper RTC in
the exercise of its general jurisdiction in an ordinary action
for the said purpose.
Rural Banks motion for reconsideration of the decision was
denied by the trial court. It then appealed the decision to the
CA, where it alleged that:
As to Assignment on Error No. I and II
A In ruling on the nullity of the loans and mortgages in
question, the lower court confined itself to the order of the
intestate court, dated December 12, 1980, totally ignoring the
subsequent order dated December 17, 1982 (Exhs. 36 & 37)
which granted the authority to encumber the estate in the
manner required by the defendant Rural Bank of Pontevedra.
B The non-presentation of the priorly authorized mortgages
in question in court after their execution, does not nullify said
mortgages, as what is required by Sec. 7, Rule 89 is only prior
approval by the intestate court.
As to Assignment of Error No. III
Estoppel [precludes] a party from [repudiating] an obligation
voluntarily assumed after having accepted benefits
therefrom.
As to Assignment of Error No. IV
Because of their baseless complaint, defendant-appellant was
unnecessarily dragged into this litigation causing defendant-
appellant damages.[34]
The appellant bank averred that the amended contracts of
lease, which contained provisions requiring the intestate
estate courts approval, were approved by the intestate estate
court and conformed to by the other heirs of the deceased.
The bank posited that the court a quo had no jurisdiction to
nullify the order of the estate court, which was co-equal in
rank with the estate court in approving the amended
contracts of lease. It further alleged that the administrator of
the estate is not required under Section 7, Rule 89 of the
Rules of Court to secure prior authority to mortgage the real
properties or otherwise encumber the same. Rural Bank
alleged that the appellees were estopped from assailing the
real estate mortgages of the property after having been
benefited by the P600,000.00 loan.
The appellees failed to file their brief. On October 18, 2002,
the CA rendered a Decision[35] granting the appeal and
reversing the appealed decision.
The appellate court ruled that the intestate estate courts
approval of the amended contracts of lease carried with it the
approval of the real estate mortgages executed by Emilio
Orola in favor of the Rural Bank. Angeline, Myrna and Althea
even conformed to the amended contracts of lease; hence,
were estopped from assailing them, as well as the real estate
mortgage contracts.

After the appellate court denied their motion for
reconsideration of the decision, the Orola siblings, now the
petitioners, filed the instant petition for review on certiorari
with this Court, alleging that:
-I-
THE SUBJECT MORTGAGES CONSTITUTED OVER THE REAL
ESTATE PROPERTIES OF PETITIONERS-APPELLEES UNDER
SECTION 7, RULE 89 OF THE RULES OF COURT ARE VOID
FOR NON-COMPLIANCE WITH THE MANDATORY
REGULATIONS (SIC) OF THE SAID PROVISION.
-II-
ASSUMING ARGUENDO SUBSTANTIAL COMPLIANCE WITH
THE PROVISIONS OF RULE 89, SECTION 7, THE SUBJECT
MORTGAGES ARE STILL VOID FOR LACK OF AUTHORITY
FROM THE PROBATE COURT, HAVING BEEN CONSTITUTED
BY PERSONS OTHER THAN THE ADMINISTRATOR OF THE
ESTATE OF TRINIDAD LASERNA OROLA.[36]
The petitioners reiterate their argument that respondent
Emilio Orola, then administrator of the estate, failed to
comply with Section 7, Rule 89 of the Rules of Court. They
aver that this provision is mandatory in nature, including the
fixing of a time and place for hearing of the motion for the
approval of the amended contracts of lease. They point out
that respondent Orola failed to file a motion for the approval
of the real estate mortgages. The petitioners insist that even if
it is assumed that the December 17, 1982 Order of the
intestate estate court approving the amended contracts of
lease authorized the constitution of real estate mortgages
over the real property of the estate, such order is void, as it
authorized petitioners Manuel, Antonio and Josephine Orola,
and not the respondent Emilio Orola, to mortgage the said
property. They insist that they are not estopped from
assailing a void order issued by the intestate estate court.
Respondent Rural Bank insists that the petitioners had been
benefited by the loans granted to them; hence, are estopped
from assailing the real estate mortgage contracts. Respondent
Orola, for his part, avers that the one-half undivided portion
of the property subject of the real estate mortgages was the
exclusive property of the deceased, and partly the conjugal
property of the respondent and the deceased. Moreover,
respondent Orolas share in the conjugal property was not the
subject of the intestate case, as it was not included as part of
the property given as security for the loans of the petitioners-
mortgagees.
The petition is meritorious.
Section 2, Rule 89 of the Rules of Court provides that, upon
application of the administrator and on written notice to the
heirs, the court may authorize the administrator to mortgage
so much as may be necessary of the real estate for the
expenses of the administrator, or if it clearly appears that
such mortgage would be beneficial to the persons interested:
Sec. 2. When court may authorize sale, mortgage, or other
encumbrance of realty to pay debts and legacies through
personality not exhausted. When the personal estate of the
deceased is not sufficient to pay the debts, expenses of
administration, and legacies, or where the sale of such
personal estate may injure the business or other interests of
those interested in the estate, and where a testator has not,
otherwise, made sufficient provision for the payment of such
debts, expenses, and legacies, the court, on the application of
the executor or administrator and on written notice to the
heirs, devisees, and legatees residing in the Philippines, may
authorize the executor or administrator to sell, mortgage, or
otherwise, encumber so much as may be necessary of the real
estate, in lieu of personal estate, for the purpose of paying
such debts, expenses, and legacies, if it clearly appears that
such sale, mortgage, or encumbrance would be beneficial to
the persons interested; and if a part cannot be sold,
mortgaged, or otherwise encumbered without injury to those
interested in the remainder, the authority may be for the sale,
mortgage, or other encumbrance of the whole of such real
estate, or so much thereof as is necessary or beneficial under
the circumstances.
Section 7 of Rule 89 provides the rules to obtain court
approval for such mortgage:
(a) The executor or administrator shall file a written petition
setting forth the debts due from the deceased, the expenses of
administration, the legacies, the value of the personal estate,
the situation of the estate to be sold, mortgaged, or otherwise
encumbered, and such other facts as show that the sale,
mortgage, or other encumbrance is necessary or beneficial;
(b) The court shall thereupon fix a time and place for hearing
such petition, and cause notice stating the nature of the
petition, the reason for the same, and the time and place of
hearing, to be given personally or by mail to the persons
interested, and may cause such further notice to be given, by
publication or otherwise, as it shall deem proper;
(c) If the court requires it, the executor or administrator shall
give an additional bond, in such sum as the court directs,
conditioned that such executor or administrator will account
for the proceeds of the sale, mortgage, or other encumbrance;
(d) If the requirements in the preceding subdivisions of this
section have been complied with, the court, by order stating
such compliance, may authorize the executor or
administrator to sell, mortgage, or otherwise encumber, in
proper cases, such part of the estate as is deemed necessary,
and in case of sale the court may authorize it to be public or
private, as would be most beneficial to all parties concerned.
The executor or administrator shall be furnished with a
certified copy of such order;
(e) If the estate is to be sold at auction, the mode of giving
notice of the time and place of the sale shall be governed by
the provisions concerning notice of execution sale;
(f) There shall be recorded in the registry of deeds of the
province in which the real estate thus sold, mortgaged, or
otherwise encumbered is situated, a certified copy of the
order of the court, together with the deed of the executor or
administrator for such real estate, which shall be as valid as if
the deed had been executed by the deceased in his lifetime.
After the real estate mortgage is executed in accordance with
the foregoing regulations, the said deed must be submitted
for the consideration and approval or disapproval of the
court.[37]
The records show that respondent Emilio Orola notified the
petitioners of his motion for the approval of the amended
contracts of lease. Although the motion was ex parte,
nonetheless, petitioners Angeline, Myrna and Althea Orola
filed their Joint Affidavit of Conformity, in which they
declared that:
7. That on December 15, 1982, the administrator, thru
counsel, filed an ex parte motion for the admission and
approval of the amended contracts of lease in favor of our
brothers and sister changing the term from ten (10) to twelve
(12) years, copy of the amended contracts of lease [were]
shown to us;
8. That we have no objection and we voluntarily conform to
the amendment of the term from ten (10) to twelve (12)
years and freely give our consent to having the Lessees
execute a real estate mortgage over the leased property in
favor of the bank just to be able to avail with the CB: IBRD
financing loan to develop the property;
9. That we are jointly executing this affidavit for the purpose
of facilitating the immediate admission and approval of the
amended contracts of lease as prayed for in the ex parte
motion dated December 5, 1982.[38]
However, the Court agrees with the petitioners contention
that respondent Orola failed to secure an order from the
intestate estate court authorizing him to mortgage the subject
lots and execute a real estate mortgage contract in favor of
respondent Rural Bank. What the intestate estate court
approved in its December 17, 1982 Order was the authority
incorporated in the amended contracts of lease respondent
Orola gave to petitioners Josephine, Manuel and Antonio
Orola so that the said lots could be mortgaged to the
respondent Rural Bank as security for the P600,000.00 loan
under their respective names. In fine, the intestate estate
court
authorized the petitioners, not respondent Orola, to mortgage
the said lots to respondent Rural Bank. Moreover, under
Section 7 of Rule 89 of the Rules of Court, only the executor or
administrator of the estate may be authorized by the intestate
estate court to mortgage real estate belonging to the estate;
hence, the order of the estate court authorizing the
petitioners to mortgage the realty of the estate to the
respondent Rural Bank is a nullity.
The respondents must have realized that the order of the
intestate estate court authorizing petitioners Manuel, Antonio
and Josephine Orola to mortgage the lots was void because
respondent Emilio Orola caused the real estate mortgage
contracts in favor of respondent Rural Bank to be executed by
his children, petitioners Josephine, Manuel and Antonio Orola,
acting as attorneys-in-fact of the administrator of the estate.
However, the estate court had not appointed petitioners
Antonio, Josephine and Manuel Orola as attorneys-in-fact of
respondent Emilio Orola empowered to execute the said
contracts. Hence, they had no authority to execute the said
Real Estate Mortgage Contracts for and in behalf of
respondent Orola, in the latters capacity as administrator of
the estate.
Worse, respondent Orola failed to submit the real estate
mortgage contracts to the intestate estate court for its
consideration and approval. To give approval means to
confirm, ratify, or to consent to some act or thing done by
another.[39] Unless and until the said contracts are approved
by the intestate estate court, the same cannot have any
binding effect upon the estate; nor serve as basis for any
action against the estate and against the parcels of land
described in the said contracts belonging to it.[40]
It bears stressing that respondent Orola had no right or
authority to mortgage the realty belonging to the estate. He
derived his authority from the order of the estate court which
had jurisdiction to authorize the real estate mortgage thereof
under such terms and conditions and upon proper
application. Any mortgage of realty of the estate without the
appropriate authority of the estate court has no legal support
and is void.[41] The purchaser at public auction acquires no
title over the realty.[42] The real estate mortgage contracts,
as well as the extrajudicial foreclosure thereof and the sale of
the property described therein at public auction, can thus be
attacked directly and collaterally.[43]
Contrary to the contention of respondent Rural Bank, the
petitioners were not estopped from assailing the real estate
mortgage contracts, the extrajudicial foreclosure thereof and
the sale of the property to respondent Rural Bank.
Although the records show that petitioners Josephine, Manuel
and Antonio Orola received the proceeds of the loan from
respondent Rural Bank, the amount was deposited by
respondent Emilio Orola in his savings account with
respondent Rural Bank. He was obliged to deposit the said
amount in the estates account with the Republic Planters
Bank, as ordered by the intestate estate court. Worse,
respondent Rural Bank applied P229,771.20 of the loan
proceeds to liquidate the accommodation loan it granted to
respondent Emilio Orola. There is no showing in the records
that the intestate estate court ever authorized the use of the
proceeds of the loan to pay respondent Emilio Orolas
accommodation loan. The loan proceeds were to be used to
develop property belonging to the estate into a fishpond from
which income could be generated. Of the net proceeds of the
P582,000.00 loan, only P4,292.79 remained as of September
9, 1983. Respondent Emilio Orola failed to pay the
amortization of the loan for the respondent Rural Bank of the
estate.
Had the real estate mortgage contracts been submitted to the
intestate estate court for consideration and approval after
proper notice to the petitioners, the court would have been
apprised of the terms and conditions contained therein, and
that about one-half of the loan would be used to pay the
accommodation loan of respondent Emilio Orola.
Petitioners Manuel, Josephine and Antonio Orola executed the
amended contracts of lease, the promissory notes and the real
estate mortgages upon the prodding of their father,
respondent Emilio Orola, and upon the suggestion of
respondent Rural Bank, solely to facilitate the speedy
approval of the loan of the estate, which was to be the
ultimate beneficiary thereof. The petitioners acted on the
belief that the loan would be used to develop the swampy
portion of the realty into an income-generating fishpond,
impervious of the fact that almost one-half of the proceeds of
the loan had been used to pay the accommodation loan of
respondent Emilio Orola.
The claim of respondent Emilio Orola that part of the
property used as collateral for the loan was part of his and his
deceased wifes conjugal property, and that the waiver he
executed was to take effect only upon his death, is belied by
the records. Indeed, in his Waiver of Rights dated October 26,
1976, respondent Emilio Orola declared that:
1. That during the lifetime of my first wife, Trinidad Laserna,
we have acquired property by purchase from Mr. Manuel
Laserna, in co-ownership with Pedro Laserna, Dolores
Deocampo, Jesus Laserna and Emiliana Laserna affecting Lots
Nos. 1070, 1071, 1074, 1075, 1088, 1050 & 1051, all of
Pontevedra Cadastre;
2. That the said [properties] mentioned above are still under
co-ownership, pro indiviso, between and among the Vendees
whose names are mentioned above;
3. That during the marital relations between me and my
deceased wife, Trinidad Laserna, we have six (6) children,
namely, Josephine, Myrna, Angeline, Manuel, Antonio and
Althea, all surnamed Orola;
4. That the co-owners have decided to terminate the co-
ownership over the above-mentioned properties of which the
aforementioned children of the spouses, Emilio Orola and
Trinidad Laserna, became co-owners thereof in
representation of their deceased mother, Trinidad Laserna,
by operation of law and the herein undersigned desires to
give protection to his children of the first marriage which are
named above.

NOW, THEREFORE, for and in consideration of the love,

affection and mutual agreements, I, EMILIO Q. OROLA, by
these presents, do hereby waive and relinquish all my shares,
interests and participations over all the above-mentioned
properties in favor of my six (6) children of the first marriage,
namely, Josephine, Myrna, Angeline, Manuel, Antonio and
Althea.

It is understood that, upon the registration of the project of

partition which the co-owners will present that the shares
and participations of the undersigned shall be consolidated in
the names of the children mentioned above in equal right and
participation.[44]

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED.

The assailed Decision and Resolution of the Court of Appeals
are REVERSED AND SET ASIDE. The Decision of the Regional
Trial Court is REINSTATED. No costs.

SO ORDERED.
 THIRD DIVISION
[G.R. No. 141634. February 5, 2001]
Heirs of Spouses REMEDIOS R. SANDEJAS and ELIODORO
P. SANDEJAS SR. -- ROBERTO R. SANDEJAS, ANTONIO R.
SANDEJAS, CRISTINA SANDEJAS MORELAND, BENJAMIN R.
SANDEJAS, REMEDIOS R. SANDEJAS; and heirs of SIXTO S.
SANDEJAS II, RAMON R. SANDEJAS, TERESITA R.
SANDEJAS, and ELIODORO R. SANDEJAS JR., all
represented by ROBERTO R. SANDEJAS, petitioners,
vs. ALEX A. LINA, respondent.
DECISION
PANGANIBAN, J.:
A contract of sale is not invalidated by the fact that it is
subject to probate court approval. The transaction remains
binding on the seller-heir, but not on the other heirs who
have not given their consent to it. In settling the estate of the
deceased, a probate court has jurisdiction over matters
incidental and collateral to the exercise of its recognized
powers. Such matters include selling, mortgaging or
otherwise encumbering realty belonging to the estate. Rule
89, Section 8 of the Rules of Court, deals with the conveyance
of real property contracted by the decedent while still alive.
In contrast with Sections 2 and 4 of the same Rule, the said
provision does not limit to the executor or administrator the
right to file the application for authority to sell, mortgage or
otherwise encumber realty under administration. The
standing to pursue such course of action before the probate
court inures to any person who stands to be benefited or
injured by the judgment or to be entitled to the avails of the
suit.
The Case
Before us is a Petition for Review under Rule 45 of the Rules
of Court, seeking to reverse and set aside the Decision[1]
dated April 16, 1999 and the Resolution[2] dated January 12,
2000, both promulgated by the Court of Appeals in CA-GR CV
No. 49491. The dispositive portion of the assailed Decision
reads as follows:[3]
WHEREFORE, for all the foregoing, [w]e hereby MODIFY the
[O]rder of the lower court dated January 13, 1995, approving
the Receipt of Earnest Money With Promise to Buy and Sell
dated June 7, 1982, only to the three-fifth (3/5) portion of the
disputed lots covering the share of [A]dministrator Eliodoro
Sandejas, Sr. [in] the property. The intervenor is hereby
directed to pay appellant the balance of the purchase price of
the three-fifth (3/5) portion of the property within thirty (30)
days from receipt of this [O]rder and x x x the administrator
[is directed] to execute the necessary and proper deeds of
conveyance in favor of appellee within thirty (30) days
thereafter.
The assailed Resolution denied reconsideration of the
foregoing disposition.
The Facts
The facts of the case, as narrated by the Court of Appeals (CA),
are as follows:[4]
On February 17, 1981, Eliodoro Sandejas, Sr. filed a petition
(Record, SP. Proc. No. R-83-15601, pp. 8-10) in the lower
court praying that letters of administration be issued in his
favor for the settlement of the estate of his wife, REMEDIOS R.
SANDEJAS, who died on April 17, 1955. On July 1, 1981,
Letters of Administration [were issued by the lower court
appointing Eliodoro Sandejas, Sr. as administrator of the
estate of the late Remedios Sandejas (Record, SP. Proc. No. R-
83-15601, p. 16). Likewise on the same date, Eliodoro
Sandejas, Sr. took his oath as administrator (Record, SP. Proc.
No. R-83-15601, p. 17). x x x.
On November 19, 1981, the 4th floor of Manila City Hall was
burned and among the records burned were the records of
Branch XI of the Court of First Instance of Manila. As a result,
[A]dministrator Eliodoro Sandejas, Sr. filed a [M]otion for
[R]econstitution of the records of the case on February 9,
1983 (Record, SP. Proc. No. R-83-15601, pp. 1-5). On
February 16, 1983, the lower court in its [O]rder granted the
said motion (Record, SP. Proc. No. R-83-15601, pp. 28-29).
On April 19, 1983, an Omnibus Pleading for motion to
intervene and petition-in-intervention was filed by [M]ovant
Alex A. Lina alleging among others that on June 7, 1982,
movant and [A]dministrator Eliodoro P. Sandejas, in his
capacity as seller, bound and obligated himself, his heirs,
administrators, and assigns, to sell forever and absolutely and
in their entirety the following parcels of land which formed
part of the estate of the late Remedios R. Sandejas, to wit:
1. A parcel of land (Lot No. 22 Block No. 45 of the subdivision
plan Psd-21121, being a portion of Block 45 described on
plan Psd-19508, G.L.R.O. Rec. No. 2029), situated in the
Municipality of Makati, province of Rizal, containing an area
of TWO HUNDRED SEVENTY (270) SQUARE METERS, more
or less, with TCT No. 13465;
2. A parcel of land (Lot No. 21 Block No. 45 of the subdivision
plan Psd-21141, being a portion of Block 45 described on
plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the
Municipality of Makati, Province of Rizal, containing an area
of TWO HUNDRED SEVENTY (270) SQUARE METERS, more
or less, with TCT No. 13464;
3. A parcel of land (Lot No. 5 Block No. 45 of the subdivision
plan Psd-21141, being a portion of Block 45 described on
plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the
Municipality of Makati, Province of Rizal, containing an area
of TWO HUNDRED EIGHT (208) SQUARE METERS, more or
less, with TCT No. 13468;
4. A parcel of land (Lot No. 6, Block No. 45 of the subdivision
plan Psd-21141, being a portion of Block 45 described on
plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the
Municipality of Makati, Province of Rizal, containing an area
of TWO HUNDRED EIGHT (208) SQUARE METERS, more or
less, with TCT No. 13468;
The [R]eceipt of the [E]arnest [M]oney with [P]romise to
[S]ell and to [B]uy is hereunder quoted, to wit:
Received today from MR. ALEX A. LINA the sum of ONE
HUNDRED THOUSAND (P100,000.00) PESOS, Philippine
Currency, per Metropolitan Bank & Trust Company Chec[k]
No. 319913 dated today for P100,000.00, x x x as additional
earnest money for the following:
xxxxxxxxx
all registered with the Registry of Deeds of the [P]rovince of
Rizal (Makati Branch Office) in the name of SELLER
ELIODORO SANDEJAS, Filipino Citizen, of legal age, married to
Remedios Reyes de Sandejas; and which undersigned, as
SELLER, binds and obligates himself, his heirs, administrators
and assigns, to sell forever and absolutely in their entirety (all
of the four (4) parcels of land above described, which are
contiguous to each other as to form one big lot) to said Mr.
Alex A. Lina, who has agreed to buy all of them, also binding
on his heirs, administrators and assigns, for the consideration
of ONE MILLION (P1,000,000.00) PESOS, Philippine Currency,
upon such reasonable terms of payment as may be agreed
upon by them. The parties have, however, agreed on the
following terms and conditions:
1. The P100,000.00 herein received is in addition to the
P70,000.00 earnest money already received by SELLER from
BUYER, all of which shall form part of, and shall be deducted
from, the purchase price of P1,000,000.00, once the deed of
absolute [sale] shall be executed;
2. As a consideration separate and distinct from the price,
undersigned SELLER also acknowledges receipt from Mr. Alex
A. Lina of the sum of ONE THOUSAND (P1,000.00) PESOS,
Philippine Currency, per Metropolitan Bank & Trust Company
Check No. 319912 dated today and payable to SELLER for
P1,000.00;
3. Considering that Mrs. Remedios Reyes de Sandejas is
already deceased and as there is a pending intestate
proceedings for the settlement of her estate (Spec. Proc. No.
138393, Manila CFI, Branch XI), wherein SELLER was
appointed as administrator of said Estate, and as SELLER, in
his capacity as administrator of said Estate, has informed
BUYER that he (SELLER) already filed a [M]otion with the
Court for authority to sell the above parcels of land to herein
BUYER, but which has been delayed due to the burning of the
records of said Spec. Pro. No. 138398, which records are
presently under reconstitution, the parties shall have at least
ninety (90) days from receipt of the Order authorizing
SELLER, in his capacity as administrator, to sell all THE
ABOVE DESCRIBED PARCELS OF LAND TO HEREIN BUYER
(but extendible for another period of ninety (90) days upon
the request of either of the parties upon the other), within
which to execute the deed of absolute sale covering all above
parcels of land;
4. In the event the deed of absolute sale shall not proceed or
not be executed for causes either due to SELLERS fault, or for
causes of which the BUYER is innocent, SELLER binds himself
to personally return to Mr. Alex A. Lina the entire ONE
HUNDRED SEVENTY THOUSAND ([P]170,000.00) PESOS in
earnest money received from said Mr. Lina by SELLER, plus
fourteen (14%) percentum interest per annum, all of which
shall be considered as liens of said parcels of land, or at least
on the share therein of herein SELLER;
5. Whether indicated or not, all of above terms and conditions
shall be binding on the heirs, administrators, and assigns of
both the SELLER (undersigned MR. ELIODORO P. SANDEJAS,
SR.) and BUYER (MR. ALEX A. LINA). (Record, SP. Proc. No. R-
83-15601, pp. 52-54)
On July 17, 1984, the lower court issued an [O]rder granting
the intervention of Alex A. Lina (Record, SP. Proc. No. R-83-
15601, p. 167).
On January 7, 1985, the counsel for [A]dministrator Eliodoro
P. Sandejas filed a [M]anifestation alleging among others that
the administrator, Mr. Eliodoro P. Sandejas, died sometime in
November 1984 in Canada and said counsel is still waiting for
official word on the fact of the death of the administrator. He
also alleged, among others that the matter of the claim of
Intervenor Alex A. Lina becomes a money claim to be filed in
the estate of the late Mr. Eliodoro P. Sandejas (Record, SP.
Proc. No. R-83-15601, p. 220). On February 15, 1985, the
lower court issued an [O]rder directing, among others, that
the counsel for the four (4) heirs and other heirs of Teresita
R. Sandejas to move for the appointment of [a] new
administrator within fifteen (15) days from receipt of this
[O]rder (Record, SP. Proc. No. R-83-15601, p. 227). In the
same manner, on November 4, 1985, the lower court again
issued an order, the content of which reads:
On October 2, 1985, all the heirs, Sixto, Roberto, Antonio,
Benjamin all surnamed Sandejas were ordered to move for
the appointment of [a] new administrator. On October 16,
1985, the same heirs were given a period of fifteen (15) days
from said date within which to move for the appointment of
the new administrator. Compliance was set for October 30,
1985, no appearance for the aforenamed heirs. The
aforenamed heirs are hereby ordered to show cause within
fifteen (15) days from receipt of this Order why this Petition
for Settlement of Estate should not be dismissed for lack of
interest and failure to comply with a lawful order of this
Court.
SO ORDERED. (Record, SP. Proc. No. R-83-15601, p. 273)
On November 22, 1985, Alex A. Lina as petitioner filed with
the Regional Trial Court of Manila an Omnibus Pleading for
(1) petition for letters of administration [and] (2) to
consolidate instant case with SP. Proc. No. R-83-15601 RTC-
Branch XI-Manila, docketed therein as SP. Proc. No. 85-33707
entitled IN RE: INTESTATE ESTATE OF ELIODORO P.
SANDEJAS, SR., ALEX A. LINA PETITIONER, [for letters of
administration] (Record, SP. Proc. No. 85-33707, pp. 1-7). On
November 29, 1985, Branch XXXVI of the Regional Trial Court
of Manila issued an [O]rder consolidating SP. Proc. No. 85-
33707, with SP. Proc. No. R-83-15601 (Record, SP. Proc.
No.85-33707, p. 13). Likewise, on December 13, 1985, the
Regional Trial Court of Manila, Branch XI, issued an [O]rder
stating that this Court has no objection to the consolidation of
Special Proceedings No. 85-331707, now pending before
Branch XXXVI of this Court, with the present proceedings now
pending before this Branch (Record, SP. Proc. No. R-83-
15601, p. 279).
On January 15, 1986, Intervenor Alex A. Lina filed [a] Motion
for his appointment as a new administrator of the Intestate
Estate of Remedios R. Sandejas on the following reasons:
5.01. FIRST, as of this date, [i]ntervenor has not received any
motion on the part of the heirs Sixto, Antonio, Roberto and
Benjamin, all surnamed Sandejas, for the appointment of a
new [a]dministrator in place of their father, Mr. Eliodoro P.
Sandejas, Sr.;
5.02. SECOND, since Sp. Proc. 85-33707, wherein the
[p]etitioner is herein Intervenor Alex A. Lina and the instant
Sp. PROC. R-83-15601, in effect are already consolidated, then
the appointment of Mr. Alex Lina as [a]dministrator of the
Intestate Estate of Remedios R. Sandejas in instant Sp. Proc.
R-83-15601, would be beneficial to the heirs and also to the
Intervenor;
5.03. THIRD, of course, Mr. Alex A. Lina would be willing to
give way at anytime to any [a]dministrator who may be
proposed by the heirs of the deceased Remedios R. Sandejas,
so long as such [a]dministrator is qualified. (Record, SP. Proc.
No. R-83-15601, pp. 281-283)
On May 15, 1986, the lower court issued an order granting
the [M]otion of Alex A. Lina as the new [a]dministrator of the
Intestate Estate of Remedios R. Sandejas in this proceedings.
(Record, SP. Proc. No. R-83-15601, pp. 288-290)
On August 28, 1986, heirs Sixto, Roberto, Antonio and
Benjamin, all surnamed Sandejas, and heirs [sic] filed a
[M]otion for [R]econsideration and the appointment of
another administrator Mr. Sixto Sandejas, in lieu of
[I]ntervenor Alex A. Lina stating among others that it [was]
only lately that Mr. Sixto Sandejas, a son and heir, expressed
his willingness to act as a new administrator of the intestate
estate of his mother, Remedios R. Sandejas (Record, SP. Proc.
No. 85-33707, pp. 29-31). On October 2, 1986, Intervenor
Alex A. Lina filed his [M]anifestation and [C]ounter [M]otion
alleging that he ha[d] no objection to the appointment of Sixto
Sandejas as [a]dministrator of the [i]ntestate [e]state of his
mother Remedios R. Sandejas (Sp. Proc. No. 85-15601),
provided that Sixto Sandejas be also appointed as
administrator of the [i]ntestate [e]state of his father, Eliodoro
P. Sandejas, Sr. (Spec. Proc. No. 85-33707), which two (2)
cases have been consolidated (Record, SP. Proc. No. 85-
33707, pp. 34-36). On March 30, 1987, the lower court
granted the said [M]otion and substituted Alex Lina with Sixto
Sandejas as petitioner in the said [P]etitions (Record, SP.
Proc. No. 85-33707, p.52). After the payment of the
administrators bond (Record, SP. Proc. No. 83-15601, pp.
348-349) and approval thereof by the court (Record, SP. Proc.
No. 83-15601, p. 361), Administrator Sixto Sandejas on
January 16, 1989 took his oath as administrator of the estate
of the deceased Remedios R. Sandejas and Eliodoro P.
Sandejas (Record, SP. Proc. No. 83-15601, p. 367) and was
likewise issued Letters of Administration on the same day
(Record, SP. Proc. No. 83-15601, p. 366).
On November 29, 1993, Intervenor filed [an] Omnibus Motion
(a) to approve the deed of conditional sale executed between
Plaintiff-in-Intervention Alex A. Lina and Elidioro [sic]
Sandejas, Sr. on June 7, 1982; (b) to compel the heirs of
Remedios Sandejas and Eliodoro Sandejas, Sr. thru their
administrator, to execute a deed of absolute sale in favor of
[I]ntervenor Alex A. Lina pursuant to said conditional deed of
sale (Record, SP. Proc. No. 83-15601, pp. 554-561) to which
the administrator filed a [M]otion to [D]ismiss and/or
[O]pposition to said omnibus motion on December 13, 1993
(Record, SP. Proc. No. 83-15601, pp. 591-603).
On January 13, 1995, the lower court rendered the
questioned order granting intervenors [M]otion for the
[A]pproval of the Receipt of Earnest Money with promise to
buy between Plaintiff-in-Intervention Alex A. Lina and
Eliodoro Sandejas, Sr. dated June 7, 1982 (Record, SP. Proc.
No. 83-15601, pp. 652-654). x x x.
The Order of the intestate court[5] disposed as follows:
WHEREFORE, [i]ntervenors motion for the approval of the
Receipt Of Earnest Money With Promise To Sell And To Buy
dated June 7, 1982, is granted. The [i]ntervenor is directed to
pay the balance of the purchase price amounting to
P729,000.00 within thirty (30) days from receipt of this
Order and the Administrator is directed to execute within
thirty (30) days thereafter the necessary and proper deeds of
conveyancing.[6]
Ruling of the Court of Appeals
Overturning the RTC ruling, the CA held that the contract
between Eliodoro Sandejas Sr. and respondent was merely a
contract to sell, not a perfected contract of sale. It ruled that
the ownership of the four lots was to remain in the intestate
estate of Remedios Sandejas until the approval of the sale was
obtained from the settlement court. That approval was a
positive suspensive condition, the nonfulfillment of which
was not tantamount to a breach. It was simply an event that
prevented the obligation from maturing or becoming
effective. If the condition did not happen, the obligation
would not arise or come into existence.
The CA held that Section 1, Rule 89[7] of the Rules of Court
was inapplicable, because the lack of written notice to the
other heirs showed the lack of consent of those heirs other
than Eliodoro Sandejas Sr. For this reason, bad faith was
imputed to him, for no one is allowed to enjoy a claim arising
from ones own wrongdoing. Thus, Eliodoro Sr. was bound, as
a matter of justice and good faith, to comply with his
contractual commitments as an owner and heir. When he
entered into the agreement with respondent, he bound his
conjugal and successional shares in the property.
Hence, this Petition.[8]
Issues
In their Memorandum, petitioners submit the following issues
for our resolution:
a) Whether or not Eliodoro P. Sandejas Sr. is legally obligated
to convey title to the property referred to in the subject
document which was found to be in the nature of a contract to
sell where the suspensive condition set forth therein [i.e.]
court approval, was not complied with;
b) Whether or not Eliodoro P. Sandejas Sr. was guilty of bad
faith despite the conclusion of the Court of Appeals that the
respondent [bore] the burden of proving that a motion for
authority to sell ha[d] been filed in court;
c) Whether or not the undivided shares of Eliodoro P.
Sandejas Sr. in the subject property is three-fifth (3/5) and
the administrator of the latter should execute deeds of
conveyance therefor within thirty days from receipt of the
balance of the purchase price from the respondent; and
d) Whether or not the respondents petition-in-intervention
was converted to a money claim and whether the [trial court]
acting as a probate court could approve the sale and compel
the petitioners to execute [a] deed of conveyance even for the
share alone of Eliodoro P. Sandejas Sr.[9]
In brief, the Petition poses the main issue of whether the CA
erred in modifying the trial courts Decision and in obligating
petitioners to sell 3/5 of the disputed properties to
respondent, even if the suspensive condition had not been
fulfilled. It also raises the following collateral issues: (1) the
settlement courts jurisdiction; (2) respondent-intervenors
standing to file an application for the approval of the sale of
realty in the settlement case, (3) the decedents bad faith, and
(4) the computation of the decedents share in the realty
under administration.
This Courts Ruling
The Petition is partially meritorious.
Main Issue:
Obligation With a Suspensive Condition
Petitioners argue that the CA erred in ordering the
conveyance of the disputed 3/5 of the parcels of land, despite
the nonfulfillment of the suspensive condition -- court
approval of the sale -- as contained in the Receipt of Earnest
Money with Promise to Sell and to Buy (also referred to as the
Receipt). Instead, they assert that because this condition had
not been satisfied, their obligation to deliver the disputed
parcels of land was converted into a money claim.
We disagree. Petitioners admit that the agreement between
the deceased Eliodoro Sandejas Sr. and respondent was a
contract to sell. Not exactly. In a contract to sell, the payment
of the purchase price is a positive suspensive condition. The
vendors obligation to convey the title does not become
effective in case of failure to pay.[10]
On the other hand, the agreement between Eliodoro Sr. and
respondent is subject to a suspensive condition -- the
procurement of a court approval, not full payment. There was
no reservation of ownership in the agreement. In accordance
with paragraph 1 of the Receipt, petitioners were supposed to
deed the disputed lots over to respondent. This they could do
upon the courts approval, even before full payment. Hence,
their contract was a conditional sale, rather than a contract to
sell as determined by the CA.
When a contract is subject to a suspensive condition, its birth
or effectivity can take place only if and when the condition
happens or is fulfilled.[11] Thus, the intestate courts grant of
the Motion for Approval of the sale filed by respondent
resulted in petitioners obligation to execute the Deed of Sale
of the disputed lots in his favor. The condition having been
satisfied, the contract was perfected. Henceforth, the parties
were bound to fulfill what they had expressly agreed upon.
Court approval is required in any disposition of the decedents
estate per Rule 89 of the Rules of Court. Reference to judicial
approval, however, cannot adversely affect the substantive
rights of heirs to dispose of their own pro indiviso shares in
the co-heirship or co-ownership.[12] In other words, they can
sell their rights, interests or participation in the property
under administration. A stipulation requiring court approval
does not affect the validity and the effectivity of the sale as
regards the selling heirs. It merely implies that the property
may be taken out of custodia legis, but only with the courts
permission.[13] It would seem that the suspensive condition
in the present conditional sale was imposed only for this
reason.
Thus, we are not persuaded by petitioners argument that the
obligation was converted into a mere monetary claim.
Paragraph 4 of the Receipt, which petitioners rely on, refers
to a situation wherein the sale has not materialized. In such a
case, the seller is bound to return to the buyer the earnest
money paid plus interest at fourteen percent per annum. But
the sale was approved by the intestate court; hence, the
proviso does not apply.
Because petitioners did not consent to the sale of their ideal
shares in the disputed lots, the CA correctly limited the scope
of the Receipt to the pro-indiviso share of Eliodoro Sr. Thus, it
correctly modified the intestate courts ruling by excluding
their shares from the ambit of the transaction.
First Collateral Issue:
Jurisdiction of Settlement Court
Petitioners also fault the CA Decision by arguing, inter alia, (a)
jurisdiction over ordinary civil action seeking not merely to
enforce a sale but to compel performance of a contract falls
upon a civil court, not upon an intestate court; and (b) that
Section 8 of Rule 89 allows the executor or administrator, and
no one else, to file an application for approval of a sale of the
property under administration.
Citing Gil v. Cancio[14] and Acebedo v. Abesamis,[15]
petitioners contend that the CA erred in clothing the
settlement court with the jurisdiction to approve the sale and
to compel petitioners to execute the Deed of Sale. They allege
factual differences between these cases and the instant case,
as follows: in Gil, the sale of the realty in administration was a
clear and an unequivocal agreement for the support of the
widow and the adopted child of the decedent; and in Acebedo,
a clear sale had been made, and all the heirs consented to the
disposition of their shares in the realty in administration.
We are not persuaded. We hold that Section 8 of Rule 89
allows this action to proceed. The factual differences alleged
by petitioners have no bearing on the intestate courts
jurisdiction over the approval of the subject conditional sale.
Probate jurisdiction covers all matters relating to the
settlement of estates (Rules 74 & 86-91) and the probate of
wills (Rules 75-77) of deceased persons, including the
appointment and the removal of administrators and
executors (Rules 78-85). It also extends to matters incidental
and collateral to the exercise of a probate courts recognized
powers such as selling, mortgaging or otherwise encumbering
realty belonging to the estate. Indeed, the rules on this point
are intended to settle the estate in a speedy manner, so that
the benefits that may flow from such settlement may be
immediately enjoyed by the heirs and the beneficiaries.[16]
In the present case, the Motion for Approval was meant to
settle the decedents obligation to respondent; hence, that
obligation clearly falls under the jurisdiction of the settlement
court. To require respondent to file a separate action -- on
whether petitioners should convey the title to Eliodoro Sr.s
share of the disputed realty -- will unnecessarily prolong the
settlement of the intestate estates of the deceased spouses.
The suspensive condition did not reduce the conditional sale
between Eliodoro Sr. and respondent to one that was not a
definite, clear and absolute document of sale, as contended by
petitioners. Upon the occurrence of the condition, the
conditional sale became a reciprocally demandable obligation
that is binding upon the parties.[17] That Acebedo also
involved a conditional sale of real property[18] proves that
the existence of the suspensive condition did not remove that
property from the jurisdiction of the intestate court.
Second Collateral Issue: Intervenors Standing
Petitioners contend that under said Rule 89, only the executor
or administrator is authorized to apply for the approval of a
sale of realty under administration. Hence, the settlement
court allegedly erred in entertaining and granting
respondents Motion for Approval.
We read no such limitation. Section 8, Rule 89 of the Rules of
Court, provides:
SEC. 8. When court may authorize conveyance of realty which
deceased contracted to convey. Notice. Effect of deed.Where
the deceased was in his lifetime under contract, binding in
law, to deed real property, or an interest therein, the court
having jurisdiction of the estate may, on application for that
purpose, authorize the executor or administrator to convey
such property according to such contract, or with such
modifications as are agreed upon by the parties and approved
by the court; and if the contract is to convey real property to
the executor or administrator, the clerk of the court shall
execute the deed. x x x.
This provision should be differentiated from Sections 2 and 4
of the same Rule, specifically requiring only the executor or
administrator to file the application for authority to sell,
mortgage or otherwise encumber real estate for the purpose
of paying debts, expenses and legacies (Section 2);[19] or for
authority to sell real or personal estate beneficial to the heirs,
devisees or legatees and other interested persons, although
such authority is not necessary to pay debts, legacies or
expenses of administration (Section 4).[20] Section 8
mentions only an application to authorize the conveyance of
realty under a contract that the deceased entered into while
still alive. While this Rule does not specify who should file the
application, it stands to reason that the proper party must be
one who is to be benefited or injured by the judgment, or one
who is to be entitled to the avails of the suit.[21]
Third Collateral Issue: Bad Faith
Petitioners assert that Eliodoro Sr. was not in bad faith,
because (a) he informed respondent of the need to secure
court approval prior to the sale of the lots, and (2) he did not
promise that he could obtain the approval.
We agree. Eliodoro Sr. did not misrepresent these lots to
respondent as his own properties to which he alone had a
title in fee simple. The fact that he failed to obtain the
approval of the conditional sale did not automatically imply
bad faith on his part. The CA held him in bad faith only for the
purpose of binding him to the conditional sale. This was
unnecessary because his being bound to it is, as already
shown, beyond cavil.

Fourth Collateral Issue: Computation of Eliodoros Share

Petitioners aver that the CAs computation of Eliodoro Sr.s

share in the disputed parcels of land was erroneous because,
as the conjugal partner of Remedios, he owned one half of
these lots plus a further one tenth of the remaining half, in his
capacity as a one of her legal heirs. Hence, Eliodoros share
should be 11/20 of the entire property. Respondent poses no
objection to this computation.[22]

On the other hand, the CA held that, at the very least, the
conditional sale should cover the one half (1/2) pro indiviso
conjugal share of Eliodoro plus his one tenth (1/10)
hereditary share as one of the ten legal heirs of the decedent,
or a total of three fifths (3/5) of the lots in
administration.[23]

Petitioners computation is correct. The CA computed

Eliodoros share as an heir based on one tenth of the entire
disputed property. It should be based only on the remaining
half, after deducting the conjugal share.[24]

The proper determination of the seller-heirs shares requires

further explanation. Succession laws and jurisprudence
require that when a marriage is dissolved by the death of the
husband or the wife, the decedents entire estate under the
concept of conjugal properties of gains -- must be divided
equally, with one half going to the surviving spouse and the
other half to the heirs of the deceased.[25] After the
settlement of the debts and obligations, the remaining half of
the estate is then distributed to the legal heirs, legatees and
devices. We assume, however, that this preliminary
determination of the decedents estate has already been taken
into account by the parties, since the only issue raised in this
case is whether Eliodoros share is 11/20 or 3/5 of the
disputed lots.

WHEREFORE, the Petition is hereby PARTIALLY GRANTED.

The appealed Decision and Resolution are AFFIRMED with
the MODIFICATION that respondent is entitled to only a pro-
indiviso share equivalent to 11/20 of the disputed lots.

SO ORDERED.

FIRST DIVISION
[G.R. No. 145982. July 3, 2003]
FRANK N. LIU, deceased, substituted by his surviving
spouse Diana Liu, and children, namely: Walter, Milton,
Frank, Jr., Henry and Jockson, all surnamed Liu, Rebecca
Liu Shui and Pearl Liu Rodriguez, petitioners, vs.
ALFREDO LOY, JR., TERESITA A. LOY and ESTATE OF JOSE
VAO, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari of the Decision[1]
dated 13 June 2000 and the Resolution dated 14 November
2002 of the Court of Appeals which affirmed the Decision[2]
of the Regional Trial Court, Branch 14, Cebu City. The Court of
Appeals agreed with the trial court that the sales by the late
Teodoro Vao to respondents Alfredo Loy, Jr. and Teresita A.
Loy of Lot Nos. 5 and 6, respectively, were valid. The Court of
Appeals also agreed with the trial court that the unilateral
extrajudicial rescission by the late Teodoro Vao of the
contract to sell involving five lots, including Lot Nos. 5 and 6,
between him and Benito Liu (predecessor-in-interest of
Frank Liu) was valid.
The Facts
On 13 January 1950, Teodoro Vao, as attorney-in-fact of Jose
Vao, sold seven lots of the Banilad Estate located in Cebu City
to Benito Liu and Cirilo Pangalo.[3] Teodoro Vao dealt with
Frank Liu, the brother of Benito Liu, in the sale of the lots to
Benito Liu and Cirilo Pangalo. The lots sold to Benito Liu were
Lot Nos. 5, 6, 13, 14, and 15 of Block 12 for a total price of
P4,900. Benito Liu gave a down payment of P1,000,
undertaking to pay the balance of P3,900 in monthly
installments of P100 beginning at the end of January 1950.
The lots sold to Cirilo Pangalo were Lot Nos. 14 and 15 of
Block 11 for a total price of P1,967.50. Cirilo Pangalo gave
P400 as down payment, undertaking to pay the balance of
P1,567.50 in monthly installments of P400 beginning at the
end of January 1950. Meanwhile, Jose Vao passed away.
Benito Liu subsequently paid installments totaling P2,900,
leaving a balance of P1,000.[4] Apparently, Benito Liu
stopped further payments because Teodoro Vao admitted his
inability to transfer the lot titles to Benito Liu. Later, in a
letter[5] dated 16 October 1954, Teodoro Vao informed
Frank Liu[6] that the Supreme Court had already declared
valid the will of his father Jose Vao. Thus, Teodoro Vao could
transfer the titles to the buyers names upon payment of the
balance of the purchase price.
When Frank Liu failed to reply, Teodoro Vao sent him another
letter,[7] dated 1 January 1955, reminding him of his
outstanding balance. It appears that it was only after nine
years that Frank Liu responded through a letter,[8] dated 25
January 1964. In the letter, Frank Liu informed Teodoro Vao
that he was ready to pay the balance of the purchase price of
the seven lots. He requested for the execution of a deed of sale
of the lots in his name and the delivery of the titles to him.
On 22 April 1966, Benito Liu sold to Frank Liu the five lots
(Lot Nos. 5, 6, 13, 14 and 15 of Block 12) which Benito Liu
purchased from Teodoro Vao.[9] Frank Liu assumed the
balance of P1,000 for the five lots. Cirilo Pangalo likewise sold
to Frank Liu the two lots (Lot Nos. 14 and 15 of Block 11) that
Pangalo purchased from Teodoro Vao. Frank Liu likewise
assumed the balance of P417 for the two lots.
On 21 March 1968, Frank Liu reiterated in a letter[10] his
request for Teodoro Vao to execute the deed of sale covering
the seven lots so he could secure the corresponding
certificates of title in his name. He also requested for the
construction of the subdivision roads pursuant to the original
contract. In the letter, Frank Liu referred to another letter,
dated 25 June 1966, which he allegedly sent to Teodoro Vao.
According to Frank Liu, he enclosed PBC Check No. D-782290
dated 6 May 1966 for P1,417, which is the total balance of the
accounts of Benito Liu and Cirilo Pangalo on the seven lots.
However, Frank Liu did not offer in evidence the letter or the
check. Frank Liu sent two other letters,[11] dated 7 June 1968
and 29 July 1968, to Teodoro Vao reiterating his request for
the execution of the deed of sale in his favor but to no avail.
On 19 August 1968, Teodoro Vao sold Lot No. 6 to respondent
Teresita Loy for P3,930.[12] The Register of Deeds of Cebu
City entered this sale in the Daybook on 24 February
1969.[13]
On 2 December 1968, Frank Liu filed a complaint against
Teodoro Vao for specific performance, execution of deed of
absolute sale, issuance of certificates of title and construction
of subdivision roads, before the Court of First Instance of
Davao. The case was docketed as Civil Case No. 6300.[14]
On 19 December 1968, Frank Liu filed with the Register of
Deeds of Cebu City a notice of lis pendens on the seven lots
due to the pendency of Civil Case No. 6300.[15] However, the
Register of Deeds denied the registration of the lis pendens
on the ground that the property is under administration and
said claim must be filed in court.[16]
On 16 December 1969, Teodoro Vao sold Lot No. 5 to
respondent Alfredo Loy for P3,910.[17] The Register of Deeds
of Cebu City entered this sale in the Daybook on 16 January
1970.[18]
On 3 October 1970, the Court of First Instance of Davao, on
motion of Teodoro Vao, dismissed Civil Case No. 6300 on the
ground that Frank Liu should have filed the claim with the
probate court.[19] Thus, on 17 February 1972, Frank Liu filed
before the probate court a claim against the Estate of Jose Vao
for Specific Performance, Execution of Deed of Absolute Sale,
Issuance of Certificate of Title, and Construction of
Subdivision Roads.[20]
During the proceedings, Teodoro Vao died. His widow,
Milagros Vao, succeeded as administratrix of the Estate of
Jose Vao.
On 24 February 1976, the probate court approved the claim
of Frank Liu. On 5 March 1976, Milagros Vao executed a deed
of conveyance covering the seven lots in favor of Frank Liu, in
compliance with the probate courts order.[21] The deed of
conveyance included Lot Nos. 5 and 6, the same lots Teodoro
Vao sold respectively to Alfredo Loy, Jr. on 16 December 1969
and to Teresita Loy on 19 August 1968.
On 19 March 1976, the probate court, upon an ex-parte
motion filed by Teresita Loy, issued an Order[22] approving
the 16 August 1968 sale by Teodoro Vao of Lot No. 6 in her
favor. Likewise, upon an ex-parte motion filed by Alfredo Loy,
Jr., the probate court issued on 23 March 1976 an Order[23]
approving the 16 December 1969 sale of Lot No. 5 by Teodoro
Vao in his favor.
On 10 May 1976, the Register of Deeds of Cebu City cancelled
TCT No. 44204 in the name of the Estate of Jose Vao covering
Lot No. 5 and issued a new title, TCT No. 64522, in the name
of Alfredo Loy, Jr. and Perfeccion V. Loy.[24] Likewise, on the
same date, the Register of Deeds cancelled TCT No. 44205 in
the name of the Estate of Jose Vao covering Lot No. 6, and
issued TCT No. 64523 in the name of Teresita A. Loy.[25]
On 3 June 1976, Milagros Vao, as administratrix of the estate,
filed a motion for reconsideration of the Orders of the probate
court dated 19 and 23 March 1976. She contended that she
already complied with the probate courts Order dated 24
February 1976 to execute a deed of sale covering the seven
lots, including Lot Nos. 5 and 6, in favor of Frank Liu. She also
stated that no one notified her of the motion of the Loys, and
if the Loys or the court notified her, she would have objected
to the sale of the same lots to the Loys.
On 4 June 1976, Frank Liu filed a complaint for reconveyance
or annulment of title of Lot Nos. 5 and 6. Frank Liu filed the
case in the Regional Trial Court of Cebu City, Branch 14,
which docketed it as Civil Case No. R-15342.
On 5 August 1978, the probate court denied the motion for
reconsideration of Milagros Vao on the ground that the
conflicting claims regarding the ownership of Lot Nos. 5 and 6
were already under litigation in Civil Case No. R-15342.
On 8 April 1991, the Regional Trial Court of Cebu City (trial
court), Branch 14, rendered judgment against Frank Liu as
follows:
WHEREFORE, judgment is hereby rendered:
(1) Dismissing the complaint at bar; and
(2) Confirming the unilateral extrajudicial rescission of the
contract Exhibit A by the late Teodoro Vao, conditioned upon
the refund by the Estate of Jose Vao of one-half (1/2) of what
the plaintiff had paid under that contract.
The counterclaims by the defendants Alfredo A. Loy, Jr. and
Teresita A. Loy and by the defendant Estate of Jose Vao, not
having been substantiated, are hereby denied.
Without special pronouncement as to costs.
SO ORDERED.[26]
Frank Liu appealed to the Court of Appeals, which affirmed in
toto the decision of the trial court. Frank Liu[27] filed a
motion for reconsideration but the Court of Appeals denied
the same.
Hence, the instant petition.
The Trial Courts Ruling
The trial court held that the contract between Teodoro Vao
and Benito Liu was a contract to sell. Since title to Lot Nos. 5
and 6 never passed to Benito Liu due to non-payment of the
balance of the purchase price, ownership of the lots remained
with the vendor. Therefore, the trial court ruled that the
subsequent sales to Alfredo Loy, Jr. and Teresita Loy of Lot
Nos. 5 and 6, respectively, were valid.
The trial court viewed the letter of Teodoro Vao dated 1
January 1995 addressed to Frank Liu as a unilateral
extrajudicial rescission of the contract to sell. The trial court
upheld the unilateral rescission subject to refund by the
Estate of Jose Vao of one-half (1/2) of what Frank Liu paid
under the contract.
The trial court ruled that Teodoro Vao, as administrator of the
Estate of Jose Vao and as sole heir of Jose Vao, acted both as
principal and as agent when he sold the lots to Alfredo Loy, Jr.
and Teresita Loy. The probate court subsequently approved
the sales. The trial court also found that Alfredo Loy, Jr. and
Teresita Loy were purchasers in good faith.
The Court of Appeals Ruling
In affirming in toto the trial courts decision, the appellate
court found no evidence of fraud or ill-motive on the part of
Alfredo Loy, Jr. and Teresita Loy. The Court of Appeals cited
the rule that the law always presumes good faith such that
any person who seeks to be awarded damages due to the acts
of another has the burden of proving that the latter acted in
bad faith or ill-motive.
The Court of Appeals also held that the sales to Alfredo Loy,
Jr. and Teresita Loy of Lot Nos. 5 and 6, respectively, were
valid despite lack of prior approval by the probate court. The
Court of Appeals declared that Teodoro Vao sold the lots in
his capacity as heir of Jose Vao. The appellate court ruled that
an heir has a right to dispose of the decedents property, even
if the same is under administration, because the hereditary
property is deemed transmitted to the heir without
interruption from the moment of the death of the decedent.
The Court of Appeals held that there is no basis for the claim
of moral damages and attorneys fees. The appellate court
found that Frank Liu failed to prove that he suffered mental
anguish due to the actuations of the Loys. The Court of
Appeals likewise disallowed the award of attorneys fees. The
fact alone that a party was compelled to litigate and incur
expenses to protect his claim does not justify an award of
attorneys fees. Besides, the Court of Appeals held that where
there is no basis to award moral damages, there is also no
basis to award attorneys fees.
The Issues
Petitioners[28] raise the following issues:[29]
1. Whether prior approval of the probate court is necessary to
validate the sale of Lot Nos. 5 and 6 to Loys;
2. Whether the Loys can be considered buyers and registrants
in good faith despite the notice of lis pendens;
3. Whether Frank Liu has a superior right over Lot Nos. 5 and
6;
4. Whether the Court of Appeals erred in not passing upon the
trial courts declaration that the extra-judicial rescission by
Teodoro Vao of the sale in favor of Frank Liu is valid;
5.Whether petitioners are entitled to moral damages and
attorneys fees.
The Courts Ruling
The petition is meritorious.
Whether there was a valid cancellation of the
contract to sell
There was no valid cancellation of the contract to sell because
there was no written notice of the cancellation to Benito Liu
or Frank Liu. There was even no implied cancellation of the
contract to sell. The trial court merely viewed the alleged
unilateral extrajudicial rescission from the letter of Teodoro
Vao, dated 1 January 1955, addressed to Frank Liu, stating
that:
Two months, I believe, is ample for the allowance of delays
caused by your (sic) either too busy, or having been some
place else, or for consultations. These are the only reasons I
can think of that could have caused the delay in your answer,
unless you do not think an answer is necessary at all, as you
are not the party concerned in the matter.
I shall therefor (sic) appreciate it very much, if you will write
me within ten days from receipt of this letter, or enterprete
(sic) your silence as my mistake in having written to the
wrong party, and therefor (sic) proceed to write Misters: B.
Liu and C. Pangalo.[30] (Emphasis supplied)
Obviously, we cannot construe this letter as a unilateral
extrajudicial rescission of the contract to sell. As clearly
stated in the letter, the only action that Teodoro Vao would
take if Frank Liu did not reply was that Teodoro Vao would
write directly to Benito Liu and Cirilo Pangalo. The letter does
not mention anything about rescinding or cancelling the
contract to sell.
Although the law allows the extra-judicial cancellation of a
contract to sell upon failure of one party to comply with his
obligation, notice of such cancellation must still be given to
the party who is at fault.[31] The notice of cancellation to the
other party is one of the requirements for a valid cancellation
of a contract to sell, aside from the existence of a lawful cause.
Even the case cited by the trial court emphasizes the
importance of such notice:
Of course, it must be understood that the act of a party in
treating a contract as cancelled or resolved on account of
infractions by the other contracting party must be made
known to the other and is always provisional, being ever
subject to scrutiny and review by the proper court. If the
other party denies that rescission is justified, it is free to
resort to judicial action in its own behalf, and bring the matter
to court. Then, should the court, after due hearing, decide that
the resolution of the contract was not warranted, the
responsible party will be sentenced to damages; in the
contrary case, the resolution will be affirmed, and the
consequent indemnity awarded to the party prejudiced.[32]
(Emphasis supplied)
The fact that Teodoro Vao advised Frank Liu to file his claim
with the probate court is certainly not the conduct of one who
supposedly unilaterally rescinded the contract with Frank
Liu.[33]
In this case, there was prior delay or default by the seller. As
admitted by Teodoro Vao, he could not deliver the titles
because of a case questioning the authenticity of the will of
his father. In a letter[34] to Frank Liu dated 16 October 1954,
Teodoro Vao stated:
Some time last May, if I remember correctly, you offered to
settle the whole balance of your account if I can have the
Titles transferred immediately in your brothers name, and to
that of Mr. Pangalos. I cannot blame you if you were
disappointed then, to know that I could not have the titles
transferred, even should you have paid in full. (Emphasis
supplied)
In the same letter of 16 October 1954, Teodoro Vao informed
Frank Liu that the titles were ready for transfer, thus:
However, last June 30, of this year, the Supreme Court,
unanimously concurred in the reversal of the decision of the
Court of First Instance, as regard the legality of the Will of my
father. Now that the Will of my Father has been declared
Legal, my opponents have lost their personality in the case,
and with it their power to harass me in court. Also, sometime
in the middle of July, also this year, the Supreme Court again
declared that all the sales I have made of the properties of my
Father, were Legal, and that I should be empowered to have
the Titles transferred in the buyers names, should they have
paid in full. A few have already received their Titles. And
yours can be had too in two days time from the time you have
paid in full.
Nevertheless, the subsequent approval by the probate court
of the sale of Lot Nos. 5 and 6 to Frank Liu rendered moot any
question on the continuing validity of the contract to sell.
Whether the lis pendens in the Davao case
served as notice to the Loys
The lis pendens in the Davao case did not serve as notice to
the Loys. The Register of Deeds of Cebu City denied
registration of the lis pendens on 19 December 1968.[35]
Frank Liu did not appeal to the Land Registration
Commission[36] to keep alive the lis pendens. Republic Act
No. 1151,[37] which took effect 17 June 1954, provides:
SEC. 4. Reference of doubtful matters to Commissioner of
Land Registration. When the Register of Deeds is in doubt
with regard to the proper step to be taken or memorandum to
be made in pursuance of any deed, mortgage, or other
instrument presented to him for registration, or where any
party in interest does not agree with the Register of Deeds
with reference to any such matter, the question shall be
submitted to the Commissioner of Land Registration either
upon the certification of the Register of Deeds, stating the
question upon which he is in doubt, or upon the suggestion in
writing by the party in interest; and thereupon the
Commissioner, after consideration of the matter shown by the
records certified to him, and in case of registered lands, after
notice to the parties and hearing, shall enter an order
prescribing the step to be taken or memorandum to be made.
His decision in such cases shall be conclusive and binding
upon all Registers of Deeds: Provided, however, That when a
party in interest disagrees with a ruling or resolution of the
Commissioner and the issue involves a question of law, said
decision may be appealed to the Supreme Court within thirty
days from and after receipt of the notice thereof. (Emphasis
supplied)
Frank Lius failure to appeal[38] the denial of the registration
rendered the lis pendens ineffective. The Court of First
Instance of Davao City eventually dismissed Frank Lius
complaint on 3 October 1970.
Whether the registration by the Loys of their
contracts of sale made them the first registrants
in good faith to defeat prior buyers
The registration by the Loys of their contracts of sale did not
defeat the right of prior buyers because the person who
signed the Loys contracts was not the registered owner. The
registered owner of Lot Nos. 5 and 6 was the Estate of Jose
Vao. Teodoro Vao was the seller in the contract of sale with
Alfredo Loy, Jr. The Estate of Jose Vao was the seller in the
contract of sale with Teresita Loy. Teodoro Vao signed both
contracts of sale. The rule is well-settled that one who buys
from a person who is not the registered owner is not a
purchaser in good faith.[39] As held in Toledo-Banaga v.
Court of Appeals:[40]
To repeat, at the time of the sale, the person from whom
petitioner Tan bought the property is neither the registered
owner nor was the former authorized by the latter to sell the
same. She knew she was not dealing with the registered
owner or a representative of the latter. One who buys
property with full knowledge of the flaws and defects in the
title of his vendor is enough proof of his bad faith and cannot
claim that he acquired title in good faith as against the owner
or of an interest therein. When she nonetheless proceeded to
buy the lot, petitioner Tan gambled on the result of litigation.
She is bound by the outcome of her indifference with no one
to blame except herself if she looses her claim as against one
who has a superior right or interest over the property. x x x.
The Loys were under notice to inquire why the land was not
registered in the name of the person who executed the
contracts of sale. They were under notice that the lots
belonged to the Estate of Jose Vao and any sale of the lots
required court approval. Any disposition would be subject to
the claims of creditors of the estate who filed claims before
the probate court.[41]
The contracts of the Loys did not convey ownership of the
lots to them as against third persons. The contracts were
binding only on the seller, Teodoro Vao. The contracts of the
Loys would become binding against third persons only upon
approval of the sale by the probate court and registration
with the Register of Deeds. Registration of the contracts
without court approval would be ineffective to bind third
persons, especially creditors of the estate. Otherwise, this will
open the door to fraud on creditors of the estate.
Whether the probate courts ex-parte
approval of the contracts of the Loys was valid
Section 8, Rule 89 of the 1964 Rules of Court[42] specifically
requires notice to all interested parties in any application for
court approval to convey property contracted by the
decedent in his lifetime. Thus:
SECTION 8. When court may authorize conveyance of realty
which deceased contracted to convey. Notice. Effect of deed.
Where the deceased was in his lifetime under contract,
binding in law, to deed real property, or an interest therein,
the court having jurisdiction of the estate may, on application
for that purpose, authorize the executor or administrator to
convey such property according to such contract, or with
such modifications as are agreed upon by the parties and
approved by the court; and if the contract is to convey real
property to the executor or administrator, the clerk of the
court shall execute the deed. The deed executed by such
executor, administrator, or clerk of court shall be as effectual
to convey the property as if executed by the deceased in his
lifetime; but no such conveyance shall be authorized until
notice of the application for that purpose has been given
personally or by mail to all persons interested, and such
further notice has been given, by publication or otherwise, as
the court deems proper; nor if the assets in the hands of the
executor or administrator will thereby be reduced so as to
prevent a creditor from receiving his full debt or diminish his
dividend. (Rule 89, 1964 Rules of Court) (Emphasis supplied)
Despite the clear requirement of Section 8 of Rule 89, the
Loys did not notify the administratrix of the motion and
hearing to approve the sale of the lots to them. The
administratrix, who had already signed the deed of sale to
Frank Liu as directed by the same probate court, objected to
the sale of the same lots to the Loys. Thus, as found by the
trial court:
On June 3, 1976, Milagros H. Vao moved for the
reconsideration of the Order issued by Judge Ramolete on
March 19, 1976 and March 23, 1976, contending that she had
not been personally served with copies of the motions
presented to the Court by Alfredo Loy, Jr. and by Teresita Loy
seeking the approval of the sales of the lots in their favor, as
well as the Orders that were issued by the Court pursuant
thereto; that the Court in its Order of February 24, 1976 had
ordered her (Milagros H. Vao), to execute a deed of absolute
sale in favor of the plaintiff, which sale had been approved by
the Court; that she had not known of the sale of Lots 5 and 6
to any other person except to the plaintiff; that the sale of the
two lots in favor of plaintiff was made earlier, when there was
yet no litigation with the Bureau of Internal Revenue, while
those in favor of the defendant Loys were made when there
was already a prohibition by the Court against any sale
thereof; that the sales in favor of the Loys were made without
Court authority; and that if the approval of the sales had not
been obtained ex-parte she would have informed the Court of
the complication arising therefrom, and she would not have
executed the sale in favor of plaintiff, and she would have
asked the Court to decide first as to who had preference over
said lots.[43]
The failure to notify the administratrix and other interested
persons rendered the sale to the Loys void. As explained by
Justice J.B.L. Reyes in De Jesus v. De Jesus:[44]
Section 9, Rule 90, however, provides that authority can be
given by the probate court to the administrator to convey
property held in trust by the deceased to the beneficiaries of
the trust only after notice given as required in the last
preceding section; i.e., that no such conveyance shall be
authorized until notice of the application for that purpose has
been given personally or by mail to all persons interested,
and such further notice has been given, by publication or
otherwise, as the court deems proper (sec. 8, Rule 90). This
rule makes it mandatory that notice be served on the heirs
and other interested persons of the application for approval
of any conveyance of property held in trust by the deceased,
and where no such notice is given, the order authorizing the
conveyance, as well as the conveyance itself, is completely
void. (Emphasis supplied)
In this case, the administratrix, the wife of the deceased
Teodoro Vao, was not notified of the motion and hearing to
approve the sale of the lots to the Loys. Frank Liu did not also
receive any notice, although he obviously was an interested
party. The issuance of new titles to the Loys on 10 May 1976
by the Registry of Deeds did not vest title to the Loys because
the conveyance itself was completely void. The consequences
for the failure to notify the administratrix and other
interested parties must be borne by the Loys.
Necessity of court approval of sales
Indisputably, an heir can sell his interest in the estate of the
decedent, or even his interest in specific properties of the
estate. However, for such disposition to take effect against
third parties, the court must approve such disposition to
protect the rights of creditors of the estate. What the
deceased can transfer to his heirs is only the net estate, that
is, the gross estate less the liabilities. As held in Baun v. Heirs
of Baun:[45]
The heir legally succeeds the deceased, from whom he derives
his right and title, but only after the liquidation of the estate,
the payment of the debts of the same, and the adjudication of
the residue of the estate of the deceased; and in the meantime
the only person in charge by law to attend to all claims
against the estate of the deceased debtor is the executor or
administrator appointed by the court.
In Opulencia v. Court of Appeals,[46] an heir agreed to convey
in a contract to sell her share in the estate then under probate
settlement. In an action for specific performance filed by the
buyers, the seller-heir resisted on the ground that there was
no approval of the contract by the probate court. The Court
ruled that the contract to sell was binding between the
parties, but subject to the outcome of the testate proceedings.
The Court declared:
x x x Consequently, although the Contract to Sell was
perfected between the petitioner (seller-heir) and private
respondents (buyers) during the pendency of the probate
proceedings, the consummation of the sale or the transfer of
ownership over the parcel of land to the private respondents
is subject to the full payment of the purchase price and to the
termination and outcome of the testate proceedings. x x x
Indeed, it is settled that the sale made by an heir of his share
in an inheritance, subject to the pending administration, in no
wise stands in the way of such administration. (Emphasis
supplied)
In Alfredo Loys case, his seller executed the contract of sale
after the death of the registered owner Jose Vao. The seller
was Teodoro Vao who sold the lot in his capacity as sole heir
of the deceased Jose Vao. Thus, Opulencia applies to the sale
of the lot to Alfredo Loy, Jr., which means that the contract of
sale was binding between Teodoro Vao and Alfredo Loy, Jr.,
but subject to the outcome of the probate proceedings.
In Frank Lius case, as successor-in-interest of Benito Liu, his
seller was Jose Vao, who during his lifetime executed the
contract to sell through an attorney-in-fact, Teodoro Vao. This
is a disposition of property contracted by the decedent during
his lifetime. Section 8 of Rule 89 specifically governs this sale:
SECTION 8. When court may authorize conveyance of realty
which deceased contracted to convey. Notice. Effect of deed.
Where the deceased was in his lifetime under contract,
binding in law, to deed real property, or an interest therein,
the court having jurisdiction of the estate may, on application
for that purpose, authorize the executor or administrator to
convey such property according to such contract, or with
such modifications as are agreed upon by the parties and
approved by the court; x x x
Thus, Frank Liu applied to the probate court for the grant of
authority to the administratrix to convey the lots in
accordance with the contract made by the decedent Jose Vao
during his lifetime. The probate court approved the
application.
In Teresita Loys case, her seller was the Estate of Jose Vao.
Teodoro Vao executed the contract of sale in his capacity as
administrator of the Estate of Jose Vao, the registered owner
of the lots. The Court has held that a sale of estate property
made by an administrator without court authority is void and
does not confer on the purchaser a title that is available
against a succeeding administrator.[47]
Manotok Realty, Inc. v. Court of Appeals[48] emphasizes the
need for court approval in the sale by an administrator of
estate property. The Court held in Manotok Realty:
We also find that the appellate court committed an error of
law when it held that the sale of the lot in question did not
need the approval of the probate court.
Although the Rules of Court do not specifically state that the
sale of an immovable property belonging to an estate of a
decedent, in a special proceeding, should be made with the
approval of the court, this authority is necessarily included in
its capacity as a probate court.
An administrator under the circumstances of this case cannot
enjoy blanket authority to dispose of real estate as he pleases,
especially where he ignores specific directives to execute
proper documents and get court approval for the sales
validity.
Section 91 of Act No. 496 (Land Registration Act) specifically
requires court approval for any sale of registered land by an
executor or administrator, thus:
SEC. 91. Except in case of a will devising the land to an
executor to his own use or upon some trust or giving to the
executor power to sell, no sale or transfer of registered land
shall be made by an executor or by an administrator in the
course of administration for the payment of debts or for any
other purpose, except in pursuance of an order of a court of
competent jurisdiction obtained as provided by law.
(Emphasis supplied)
Similarly, Section 88 of Presidential Decree No. 1529
(Property Registration Decree) provides:
SEC. 88. Dealings by administrator subject to court approval.
After a memorandum of the will, if any, and order allowing
the same, and letters testamentary or letters of
administration have been entered upon the certificate of title
as hereinabove provided, the executor or administrator may
alienate or encumber registered land belonging to the estate,
or any interest therein, upon approval of the court obtained
as provided by the Rules of Court. (Emphasis supplied)
Clearly, both the law and jurisprudence expressly require
court approval before any sale of estate property by an
executor or administrator can take effect.
Moreover, when the Loys filed in March 1976 their ex-parte
motions for approval of their contracts of sale, there was
already a prior order of the probate court dated 24 February
1976 approving the sale of Lot Nos. 5 and 6 to Frank Liu. In
fact, the administratrix had signed the deed of sale in favor of
Frank Liu on 5 March 1976 pursuant to the court approval.
This deed of sale was notarized on 5 March 1976, which
transferred ownership of Lot Nos. 5 and 6 to Frank Liu on the
same date.[49]
Thus, when the probate court approved the contracts of the
Loys on 19 and 23 March 1976, the probate court had already
lost jurisdiction over Lot Nos. 5 and 6 because the lots no
longer formed part of the Estate of Jose Vao.
In Dolar v. Sundiam,[50] an heir sold parcels of land that were
part of the estate of the decedent. The probate court
approved the sale. Thereafter, the probate court authorized
the administrator to sell again the same parcels of land to
another person. The Court ruled that the probate court had
already lost jurisdiction to authorize the further sale of the
parcels of land to another person because such property no
longer formed part of the estate of the decedent. The Court
declared:
In our opinion, where, as in this case, a piece of property
which originally is a part of the estate of a deceased person is
sold by an heir of the deceased having a valid claim thereto,
and said piece of property is, by mistake, subsequently
inventoried or considered part of the deceaseds estate subject
to settlement, and, thereafter, with the authority and
approval of the probate court, it sold once more to another
person, a receiver of the property so sold may, during the
pendency of a motion to set aside the second sale, be
appointed by the court when in its sound judgment the grant
of such temporary relief is reasonably necessary to secure
and protect the rights of its real owner against any danger of
loss or material injury to him arising from the use and
enjoyment thereof by another who manifestly cannot acquire
any right of dominion thereon because the approving
surrogate court had already lost jurisdiction to authorize the
further sale of such property. (Emphasis supplied)
Similarly, in this case, the Loys cannot acquire any right of
dominion over Lot Nos. 5 and 6 because the probate court
had already lost jurisdiction to authorize the second sale of
the same lots. Moreover, the probate courts approval of the
sale to the Loys was completely void due to the failure to
notify the administratrix of the motion and hearing on the
sale.
Whether the Loys were in good faith when they
built on the Lots.
The Civil Code describes a possessor in good faith as follows:
Art. 526. He is deemed a possessor in good faith who is not
aware that there exists in his title or mode of acquisition any
flaw which invalidates it.
He is deemed a possessor in bad faith who possesses in any
case contrary to the foregoing.
Mistake upon a doubtful or difficult question of law may be
the basis of good faith.
Art. 1127. The good faith of the possessor consists in the
reasonable belief that the person from whom he received the
thing was the owner thereof, and could transmit his
ownership.
In Duran v. Intermediate Appellate Court,[51] the Court
explained possession in good faith in this manner:
Guided by previous decisions of this Court, good faith consists
in the possessors belief that the person from whom he
received the thing was the owner of the same and could
convey his title (Arriola vs. Gomez de la Serna, 14 Phil. 627).
Good faith, while it is always presumed in the absence of
proof to the contrary, requires a well-founded belief that the
person from whom title was received was himself the owner
of the land, with the right to convey it (Santiago vs. Cruz, 19
Phil. 148). There is good faith where there is an honest
intention to abstain from taking unconscientious advantage
from another (Fule vs. Legare, 7 SCRA 351).
The Loys were not in good faith when they built on the lots
because they knew that they bought from someone who was
not the registered owner. The registered owner on the TCTs
of the lots was the Estate of Jose Vao, clearly indicating that
the sale required probate court approval. Teodoro Vao did
not show any court approval to the Loys when they
purchased the lots because there was none. To repeat, any
one who buys from a person who is not the registered owner
is not a purchaser in good faith.[52] If the Loys built on the
lots before the court approval, then they took the risk.
Whether petitioners are entitled to award of
moral damages and attorneys fees.
The Court upholds the ruling of the trial and appellate courts
that petitioners are not entitled to moral damages. Moral
damages should not enrich a complainant at the expense of
the defendant.[57]
Likewise, as found by the trial court and the appellate court,
there is no basis to award attorneys fees. The policy of the
law is to put no premium on the right to litigate.[58] The
court may award attorneys fees only in the instances
mentioned in Article 2208 of the Civil Code. The award of
attorneys fees is the exception rather than the rule.[59] None
of the instances mentioned in Article 2208 apply to this case.
Conclusion
Since the Loys have no contract of sale validly approved by
the probate court, while Frank Liu has a contract of sale
approved by the probate court in accordance with Section 8
of Rule 89, Lot Nos. 5 and 6 belong to Frank Liu. The Estate of
Jose Vao should reimburse the Loys their payments on Lot
Nos. 5 and 6, with annual interest at 6% from 4 June 1976, the
date of filing of the complaint, until finality of this decision,
and 12% thereafter until full payment.[60]
WHEREFORE, the Decision of the Court of Appeals is SET
ASIDE and a new one is RENDERED:
1. Declaring null and void the deeds of sale of Lot Nos. 5 and 6
executed by Teodoro Vao in favor of Alfredo Loy, Jr. and
Teresita Loy, respectively.
2.Ordering the Register of Deeds of Cebu City to cancel TCT
Nos. 64522 and 64523 and to issue a new one in the name of
petitioner Frank N. Liu;
3. Ordering the Estate of Jose Vao to reimburse to respondent
Loys the amounts paid on Lot Nos. 5 and 6, with interest at
6% per annum from 4 June 1976 until finality of this decision,
and 12% per annum thereafter until full payment.

Contract to sell versus contract of sale SO ORDERED.

A prior contract to sell made by the decedent prevails over

the subsequent contract of sale made by the administrator
without probate court approval. The administrator cannot
unilaterally cancel a contract to sell made by the decedent in
his lifetime.[53] Any cancellation must observe all legal
requisites, like written notice of cancellation based on lawful
cause.[54]

It is immaterial if the prior contract is a mere contract to sell

and does not immediately convey ownership.[55] If it is valid,
then it binds the estate to convey the property in accordance
with Section 8 of Rule 89 upon full payment of the
consideration.

Frank Lius contract to sell became valid and effective upon its
execution.[56] The seller, Jose Vao, was then alive and thus
there was no need for court approval for the immediate
effectivity of the contract to sell. In contrast, the execution of
the contracts of sale of the Loys took place after the death of
the registered owner of the lots. The law requires court
approval for the effectivity of the Loys contracts of sale
against third parties. The probate court did not validly give
this approval since it failed to notify all interested parties of
the Loys motion for court approval of the sale. Besides, the
probate court had lost jurisdiction over the lots after it
approved the earlier sale to Frank Liu. Clearly, Frank Lius
contract to sell prevails over the Loys contracts of sale.
 FIRST DIVISION
[G.R. No. 125835. July 30, 1998]
NATALIA CARPENA OPULENCIA, petitioner, vs.
COURT OF APPEALS, ALADIN SIMUNDAC and MIGUEL
OLIVAN, respondents.
DECISION
PANGANIBAN, J.
Is a contract to sell a real property involved in testate
proceedings valid and binding without the approval of the
probate court?
Statement of the Case
This is the main question raised in this petition for review
before us, assailing the Decision[1] of the Court of Appeals[2]
in CA-GR CV No. 41994 promulgated on February 6, 1996 and
its Resolution[3] dated July 19, 1996. The challenged Decision
disposed as follows:
WHEREFORE, premises considered, the order of the lower
court dismissing the complaint is SET ASIDE and judgment is
hereby rendered declaring the CONTRACT TO SELL executed
by appellee in favor of appellants as valid and binding, subject
to the result of the administration proceedings of the testate
Estate of Demetrio Carpena.
SO ORDERED. [4]
Petitioners Motion for Reconsideration was denied in the
challenged Resolution.[5]
The Facts
The antecedent facts, as succinctly narrated by Respondent
Court of Appeals are:
In a complaint for specific performance filed with the court a
quo [herein private respondents] Aladin Simundac and
Miguel Oliven alleged that [herein petitioner] Natalia Carpena
Opulencia executed in their favor a CONTRACT TO SELL Lot
2125 of the Sta. Rosa Estate, consisting of 23,766 square
meters located in Sta. Rosa, Laguna at P150.00 per square
meter; that plaintiffs paid a downpayment of P300,000.00 but
defendant, despite demands, failed to comply with her
obligations under the contract. [Private respondents]
therefore prayed that [petitioner] be ordered to perform her
contractual obligations and to further pay damages, attorneys
fee and litigation expenses.
In her traverse, [petitioner] admitted the execution of the
contract in favor of plaintiffs and receipt of P300,000.00 as
downpayment. However, she put forward the following
affirmative defenses: that the property subject of the contract
formed part of the Estate of Demetrio Carpena (petitioners
father), in respect of which a petition for probate was filed
with the Regional Trial Court, Branch 24, Bian, Laguna; that at
the time the contract was executed, the parties were aware of
the pendency of the probate proceeding; that the contract to
sell was not approved by the probate court; that realizing the
nullity of the contract [petitioner] had offered to return the
downpayment received from [private respondents], but the
latter refused to accept it; that [private respondents] further
failed to provide funds for the tenant who demanded
P150,00.00 in payment of his tenancy rights on the land; that
[petitioner] had chosen to rescind the contract.
At the pre-trial conference the parties stipulated on [sic] the
following facts:
1. That on February 3, 1989, [private respondents] and
[petitioner] entered into a contract to sell involving a parcel
of land situated in Sta. Rosa, Laguna, otherwise known as Lot
No. 2125 of the Sta. Rosa Estate.
2. That the price or consideration of the said sell [sic] is
P150.00 per square meters;
3. That the amount of P300,000.00 had already been received
by [petitioner];
4. That the parties have knowledge that the property subject
of the contract to sell is subject of the probate proceedings;
5. That [as] of this time, the probate Court has not yet issued
an order either approving or denying the said sale. (p. 3,
appealed Order of September 15, 1992, pp. 109-112, record).
[Private respondents] submitted their evidence in support of
the material allegations of the complaint. In addition to
testimonies of witnesses, [private respondents] presented the
following documentary evidences: (1) Contract to Sell (Exh
A); (2) machine copy of the last will and testament of
Demetrio Carpena (defendants father) to show that the
property sold by defendant was one of those devised to her in
said will (Exh B); (3) receipts signed by defendant for the
downpayment in the total amount of P300,000.00 (Exhs C, D
& E); and (4) demand letters sent to defendant (Exhs F & G).
It appears that [petitioner], instead of submitting her
evidence, filed a Demurrer to Evidence. In essence, defendant
maintained that the contract to sell was null and void for
want of approval by the probate court. She further argued
that the contract was subject to a suspensive condition, which
was the probate of the will of defendants father Demetrio
Carpena. An Opposition was filed by [private respondents]. It
appears further that in an Order dated December 15, 1992
the court a quo granted the demurrer to evidence and
dismissed the complaint. It justified its action in dismissing
the complaint in the following manner:
It is noteworthy that when the contract to sell was
consummated, no petition was filed in the Court with notice
to the heirs of the time and place of hearing, to show that the
sale is necessary and beneficial. A sale of properties of an
estate as beneficial to the interested parties must comply
with the requisites provided by law, (Sec. 7, Rule 89, Rules of
Court) which are mandatory, and without them, the authority
to sell, the sale itself, and the order approving it, would be
null and void ab initio. (Arcilla vs. David, 77 Phil. 718, Gabriel,
et al., vs. Encarnacion, et al., L-6736, May 4, 1954; Bonaga vs.
Soler, 2 Phil. 755) Besides, it is axiomatic that where the
estate of a deceased person is already the subject of a testate
or intestate proceeding, the administrator cannot enter into
any transaction involving it without prior approval of the
probate Court. (Estate of Obave, vs. Reyes, 123 SCRA 767).
As held by the Supreme Court, a decedents representative
(administrator) is not estopped from questioning the validity
of his own void deed purporting to convey land. (Bona vs.
Soler, 2 Phil, 755). In the case at bar, the [petitioner,] realizing
the illegality of the transaction[,] has interposed the nullity of
the contract as her defense, there being no approval from the
probate Court, and, in good faith offers to return the money
she received from the [private respondents]. Certainly, the
administratrix is not estop[ped] from doing so and the action
to declare the inexistence of contracts do not prescribe. This
is what precipitated the filing of [petitioners] demurrer to
evidence.[6]
The trial courts order of dismissal was elevated to the Court
of Appeals by private respondents who alleged:
1. The lower court erred in concluding that the contract to sell
is null and void, there being no approval of the probate court.
2. The lower court erred in concluding that [petitioner] in
good faith offers to return the money to [private
respondents].
3. The lower court erred in concluding that [petitioner] is not
under estoppel to question the validity of the contract to sell.
4. The lower court erred in not ruling on the consideration of
the contract to sell which is tantamount to plain unjust
enrichment of [petitioner] at the expense of [private
respondents].[7]
Public Respondents Ruling
Declaring the Contract to Sell valid, subject to the outcome of
the testate proceedings on Demetrio Carpenas estate, the
appellate court set aside the trial courts dismissal of the
complaint and correctly ruled as follows:
It is apparent from the appealed order that the lower court
treated the contract to sell executed by appellee as one made
by the administratrix of the Estate of Demetrio Carpena for
the benefit of the estate. Hence, its main reason for voiding
the contract in question was the absence of the probate
courts approval. Presumably, what the lower court had in
mind was the sale of the estate or part thereof made by the
administrator for the benefit of the estate, as authorized
under Rule 89 of the Revised Rules of Court, which requires
the approval of the probate court upon application therefor
with notice to the heirs, devisees and legatees.
However, as adverted to by appellants in their brief, the
contract to sell in question is not covered by Rule 89 of the
Revised Rules of Court since it was made by appellee in her
capacity as an heir, of a property that was devised to her
under the will sought to be probated. Thus, while the
document inadvertently stated that appellee executed the
contract in her capacity as executrix and administratrix of the
estate, a cursory reading of the entire text of the contract
would unerringly show that what she undertook to sell to
appellants was one of the other properties given to her by her
late father, and more importantly, it was not made for the
benefit of the estate but for her own needs. To illustrate this
point, it is apropos to refer to the preambular or preliminary
portion of the document, which reads:
WHEREAS, the SELLER is the lawful owner of a certain parcel
of land, which is more particularly described as follows:
xxxxxxxxx
xxxxxxxxx
xxxxxxxxx
WHEREAS, the SELLER suffers difficulties in her living and
has forced to offer the sale of the above-described property,
which property was only one among the other properties
given to her by her late father, to anyone who can wait for
complete clearance of the court on the Last Will Testament of
her father.
WHEREAS, the SELLER in order to meet her need of cash, has
offered for sale the said property at ONE HUNDRED FIFTY
PESOS (150.00) Philippine Currency, per square meter unto
the BUYERS, and with this offer, the latter has accepted to buy
and/or purchase the same, less the area for the road and
other easements indicated at the back of Transfer Certificate
of Title No. 2125 duly confirmed after the survey to be
conducted by the BUYERs Licensed Geodetic Engineer, and
whatever area [is] left. (Emphasis added).
To emphasize, it is evident from the foregoing clauses of the
contract that appellee sold Lot 2125 not in her capacity as
executrix of the will or administratrix of the estate of her
father, but as an heir and more importantly as owner of said
lot which, along with other properties, was devised to her
under the will sought to be probated. That being so, the
requisites stipulated in Rule 89 of the Revised Rules of Court
which refer to a sale made by the administrator for the
benefit of the estate do not apply.
xxxxxxxxx
It is noteworthy that in a Manifestation filed with this court
by appellants, which is not controverted by appellee, it is
mentioned that the last will and testament of Demetrio
Carpena was approved in a final judgment rendered in Special
Proceeding No. B-979 by the Regional Trial Court, Branch 24
Binan, Laguna. But of course such approval does not
terminate the proceeding[s] since the settlement of the estate
will ensue. Such proceedings will consist, among others, in
the issuance by the court of a notice to creditors (Rule 86),
hearing of money claims and payment of taxes and estate
debts (Rule 88) and distribution of the residue to the heirs or
persons entitled thereto (Rule 90). In effect, the final
execution of the deed of sale itself upon appellants payment
of the balance of the purchase price will have to wait for the
settlement or termination of the administration proceedings
of the Estate of Demetrio Carpena. Under the foregoing
premises, what the trial court should have done with the
complaint was not to dismiss it but to simply put on hold
further proceedings until such time that the estate or its
residue will be distributed in accordance with the approved
will.
The rule is that when a demurrer to the evidence is granted
by the trial court but reversed on appeal, defendant loses the
right to adduce his evidence. In such a case, the appellate
court will decide the controversy on the basis of plaintiffs
evidence. In the case at bench, while we find the contract to
sell valid and binding between the parties, we cannot as yet
order appellee to perform her obligations under the contract
because the result of the administration proceedings of the
testate Estate of Demetrio Carpena has to be awaited. Hence,
we shall confine our adjudication to merely declaring the
validity of the questioned Contract to Sell.
Hence, this appeal.[8]
The Issue
Petitioner raises only one issue:
Whether or not the Contract to Sell dated 03 February 1989
executed by the [p]etitioner and [p]rivate [r]espondent[s]
without the requisite probate court approval is valid.
The Courts Ruling
The petition has no merit.
Contract to Sell Valid
In a nutshell, petitioner contends that where the estate of the
deceased person is already the subject of a testate or intestate
proceeding, the administrator cannot enter into any
transaction involving it without prior approval of the Probate
Court.[9] She maintains that the Contract to Sell is void
because it was not approved by the probate court, as required
by Section 7, Rule 89 of the Rules of Court:
SEC. 7. Regulations for granting authority to sell, mortgage, or
otherwise encumber estate. The court having jurisdiction of
the estate of the deceased may authorize the executor or
administrator to sell, mortgage, or otherwise encumber real
estate, in cases provided by these rules and when it appears August 20, 1997, that the legitime of one of the heirs has been
necessary or beneficial, under the following regulations: impaired.[18]

xxx Petitioners contention is not convincing. The Contract to Sell

Insisting that the above rule should apply to this case,
petitioner argues that the stipulations in the Contract to Sell
require her to act in her capacity as an executrix or
administratrix. She avers that her obligation to eject tenants
pertains to the administratrix or executrix, the estate being
the landlord of the said tenants.[10] Likewise demonstrating
that she entered into the contract in her capacity as executor
is the stipulation that she must effect the conversion of
subject land from irrigated rice land to residential land and
secure the necessary clearances from government offices.
Petitioner alleges that these obligations can be undertaken
only by an executor or administrator of an estate, and not by
an heir.[11]
The Court is not persuaded. As correctly ruled by the Court of
Appeals, Section 7 of Rule 89 of the Rules of Court is not
applicable, because petitioner entered into the Contract to
Sell in her capacity as an heiress, not as an executrix or
administratrix of the estate. In the contract, she represented
herself as the lawful owner and seller of the subject parcel of
land.[12] She also explained the reason for the sale to be
difficulties in her living conditions and consequent need of
cash.[13] These representations clearly evince that she was
not acting on behalf of the estate under probate when she
entered into the Contract to Sell. Accordingly, the
jurisprudence cited by petitioner has no application to the
instant case.
stipulates that petitioners offer to sell is contingent on the
complete clearance of the court on the Last Will Testament of
her father.[19] Consequently, although the Contract to Sell
was perfected between the petitioner and private
respondents during the pendency of the probate proceedings,
the consummation of the sale or the transfer of ownership
over the parcel of land to the private respondents is subject to
the full payment of the purchase price and to the termination
and outcome of the testate proceedings. Therefore, there is no
basis for petitioners apprehension that the Contract to Sell
may result in a premature partition and distribution of the
properties of the estate. Indeed, it is settled that the sale made
by an heir of his share in an inheritance, subject to the
pending administration, in no wise stands in the way of such
administration.[20]
Estoppel
Finally, petitioner is estopped from backing out of her
representations in her valid Contract to Sell with private
respondents, from whom she had already received P300,000
as initial payment of the purchase price. Petitioner may not
renege on her own acts and representations, to the prejudice
of the private respondents who have relied on them.[21]
Jurisprudence teaches us that neither the law nor the courts
will extricate a party from an unwise or undesirable contract
he or she entered into with all the required formalities and
with full awareness of its consequences.[22]

We emphasize that hereditary rights are vested in the heir or WHEREFORE, the petition is hereby DENIED and the assailed
heirs from the moment of the decedents death.[14] Petitioner, Decision of the Court of Appeals AFFIRMED. Costs against
therefore, became the owner of her hereditary share the petitioner.
moment her father died. Thus, the lack of judicial approval
does not invalidate the Contract to Sell, because the petitioner SO ORDERED.
has the substantive right to sell the whole or a part of her
share in the estate of her late father.[15] Thus, in Jakosalem
vs. Rafols,[16] the Court resolved an identical issue under the
old Civil Code and held:

Article 440 of the Civil Code provides that the possession of

hereditary property is deemed to be transmitted to the heir
without interruption from the instant of the death of the
decedent, in case the inheritance be accepted. And Manresa
with reason states that upon the death of a person, each of his
heirs becomes the undivided owner of the whole estate left
with respect to the part or portion which might be
adjudicated to him, a community of ownership being thus
formed among the coowners of the estate while it remains
undivided. xxx And according to article 399 of the Civil Code,
every part owner may assign or mortgage his part in the
common property, and the effect of such assignment or
mortgage shall be limited to the portion which may be
allotted him in the partition upon the dissolution of the
community. Hence, where some of the heirs, without the
concurrence of the others, sold a property left by their
deceased father, this Court, speaking thru its then Chief
Justice Cayetano Arellano, said that the sale was valid, but
that the effect thereof was limited to the share which may be
allotted to the vendors upon the partition of the estate.

Administration of the Estate Not Prejudiced by the Contract

to Sell

Petitioner further contends that [t]o sanction the sale at this

stage would bring about a partial distribution of the
decedents estate pending the final termination of the testate
proceedings.[17] This becomes all the more significant in the
light of the trial courts finding, as stated in its Order dated
 THIRD DIVISION
[G.R. No. 146006. February 23, 2004]
JOSE C. LEE AND ALMA AGGABAO, in their capacities as
President and Corporate Secretary, respectively, of
Philippines Internationl Life Insurance Company, and
FILIPINO LOAN ASSISTANCE GROUP, petitioners,
vs. REGIONAL TRIAL COURT OF QUEZON CITY BRANCH 85
presided by JUDGE PEDRO M. AREOLA, BRANCH CLERK
OF COURT JANICE Y. ANTERO, DEPUTY SHERIFFS
ADENAUER G. RIVERA and PEDRO L. BORJA, all of the
Regional Trial Court of Quezon City Branch 85, MA.
DIVINA ENDERES claiming to be Special Administratrix,
and other persons/ public officers acting for and in their
behalf, respondents.
DECISION
CORONA, J.:
This is a petition for review under Rule 45 of the Rules of
Court seeking to reverse and set aside the decision[1] of the
Court of Appeals, First Division, dated July 26, 2000, in CA
G.R. 59736, which dismissed the petition for certiorari filed
by petitioners Jose C. Lee and Alma Aggabao (in their
capacities as president and secretary, respectively, of
Philippine International Life Insurance Company) and
Filipino Loan Assistance Group.
The antecedent facts follow.
Dr. Juvencio P. Ortaez incorporated the Philippine
International Life Insurance Company, Inc. on July 6, 1956. At
the time of the companys incorporation, Dr. Ortaez owned
ninety percent (90%) of the subscribed capital stock.
On July 21, 1980, Dr. Ortaez died. He left behind a wife
(Juliana Salgado Ortaez), three legitimate children (Rafael,
Jose and Antonio Ortaez) and five illegitimate children by
Ligaya Novicio (herein private respondent Ma. Divina Ortaez-
Enderes and her siblings Jose, Romeo, Enrico Manuel and
Cesar, all surnamed Ortaez).[2]
On September 24, 1980, Rafael Ortaez filed before the Court
of First Instance of Rizal, Quezon City Branch (now Regional
Trial Court of Quezon City) a petition for letters of
administration of the intestate estate of Dr. Ortaez, docketed
as SP Proc. Q-30884 (which petition to date remains pending
at Branch 85 thereof).
Private respondent Ma. Divina Ortaez-Enderes and her
siblings filed an opposition to the petition for letters of
administration and, in a subsequent urgent motion, prayed
that the intestate court appoint a special administrator.
On March 10, 1982, Judge Ernani Cruz Pao, then presiding
judge of Branch 85, appointed Rafael and Jose Ortaez joint
special administrators of their fathers estate. Hearings
continued for the appointment of a regular administrator (up
to now no regular administrator has been appointed).
As ordered by the intestate court, special administrators
Rafael and Jose Ortaez submitted an inventory of the estate of
their father which included, among other properties, 2,029[3]
shares of stock in Philippine International Life Insurance
Company (hereafter Philinterlife), representing 50.725% of
the companys outstanding capital stock.
On April 15, 1989, the decedents wife, Juliana S. Ortaez,
claiming that she owned 1,014[4] Philinterlife shares of stock
as her conjugal share in the estate, sold said shares with right
to repurchase in favor of herein petitioner Filipino Loan
Assistance Group (FLAG), represented by its president, herein
petitioner Jose C. Lee. Juliana Ortaez failed to repurchase the
shares of stock within the stipulated period, thus ownership
thereof was consolidated by petitioner FLAG in its name.
On October 30, 1991, Special Administrator Jose Ortaez,
acting in his personal capacity and claiming that he owned
the remaining 1,011[5] Philinterlife shares of stocks as his
inheritance share in the estate, sold said shares with right to
repurchase also in favor of herein petitioner FLAG,
represented by its president, herein petitioner Jose C. Lee.
After one year, petitioner FLAG consolidated in its name the
ownership of the Philinterlife shares of stock when Jose
Ortaez failed to repurchase the same.
It appears that several years before (but already during the
pendency of the intestate proceedings at the Regional Trial
Court of Quezon City, Branch 85), Juliana Ortaez and her two
children, Special Administrators Rafael and Jose Ortaez,
entered into a memorandum of agreement dated March 4,
1982 for the extrajudicial settlement of the estate of Dr.
Juvencio Ortaez, partitioning the estate (including the
Philinterlife shares of stock) among themselves. This was the
basis of the number of shares separately sold by Juliana
Ortaez on April 15, 1989 (1,014 shares) and by Jose Ortaez on
October 30, 1991 (1,011 shares) in favor of herein petitioner
FLAG.
On July 12, 1995, herein private respondent Ma. Divina
OrtaezEnderes and her siblings (hereafter referred to as
private respondents Enderes et al.) filed a motion for
appointment of special administrator of Philinterlife shares of
stock. This move was opposed by Special Administrator Jose
Ortaez.
On November 8, 1995, the intestate court granted the motion
of private respondents Enderes et al. and appointed private
respondent Enderes special administratrix of the Philinterlife
shares of stock.
On December 20, 1995, Special Administratrix Enderes filed
an urgent motion to declare void ab initio the memorandum
of agreement dated March 4, 1982. On January 9, 1996, she
filed a motion to declare the partial nullity of the extrajudicial
settlement of the decedents estate. These motions were
opposed by Special Administrator Jose Ortaez.
On March 22, 1996, Special Administratrix Enderes filed an
urgent motion to declare void ab initio the deeds of sale of
Philinterlife shares of stock, which move was again opposed
by Special Administrator Jose Ortaez.
On February 4, 1997, Jose Ortaez filed an omnibus motion for
(1) the approval of the deeds of sale of the Philinterlife shares
of stock and (2) the release of Ma. Divina Ortaez-Enderes as
special administratrix of the Philinterlife shares of stock on
the ground that there were no longer any shares of stock for
her to administer.
On August 11, 1997, the intestate court denied the omnibus
motion of Special Administrator Jose Ortaez for the approval
of the deeds of sale for the reason that:
Under the Godoy case, supra, it was held in substance that a
sale of a property of the estate without an Order of the
probate court is void and passes no title to the purchaser.
Since the sales in question were entered into by Juliana S.
Ortaez and Jose S. Ortaez in their personal capacity without
prior approval of the Court, the same is not binding upon the
Estate.
WHEREFORE, the OMNIBUS MOTION for the approval of the
sale of Philinterlife shares of stock and release of Ma. Divina
Ortaez-Enderes as Special Administratrix is hereby denied.[6]
On August 29, 1997, the intestate court issued another order
granting the motion of Special Administratrix Enderes for the
annulment of the March 4, 1982 memorandum of agreement
or extrajudicial partition of estate. The court reasoned that:
In consonance with the Order of this Court dated August 11,
1997 DENYING the approval of the sale of Philinterlife shares
of stocks and release of Ma. Divina Ortaez-Enderes as Special
Administratrix, the Urgent Motion to Declare Void Ab Initio
Memorandum of Agreement dated December 19, 1995. . . is
hereby impliedly partially resolved insofar as the
transfer/waiver/renunciation of the Philinterlife shares of
stock are concerned, in particular, No. 5, 9(c), 10(b) and
11(d)(ii) of the Memorandum of Agreement.
WHEREFORE, this Court hereby declares the Memorandum of
Agreement dated March 4, 1982 executed by Juliana S. Ortaez,
Rafael S. Ortaez and Jose S. Ortaez as partially void ab initio
insofar as the transfer/waiver/renunciation of the
Philinterlife shares of stocks are concerned.[7]
Aggrieved by the above-stated orders of the intestate court,
Jose Ortaez filed, on December 22, 1997, a petition for
certiorari in the Court of Appeals. The appellate court denied
his petition, however, ruling that there was no legal
justification whatsoever for the extrajudicial partition of the
estate by Jose Ortaez, his brother Rafael Ortaez and mother
Juliana Ortaez during the pendency of the settlement of the
estate of Dr. Ortaez, without the requisite approval of the
intestate court, when it was clear that there were other heirs
to the estate who stood to be prejudiced thereby.
Consequently, the sale made by Jose Ortaez and his mother
Juliana Ortaez to FLAG of the shares of stock they invalidly
appropriated for themselves, without approval of the
intestate court, was void.[8]
Special Administrator Jose Ortaez filed a motion for
reconsideration of the Court of Appeals decision but it was
denied. He elevated the case to the Supreme Court via
petition for review under Rule 45 which the Supreme Court
dismissed on October 5, 1998, on a technicality. His motion
for reconsideration was denied with finality on January 13,
1999. On February 23, 1999, the resolution of the Supreme
Court dismissing the petition of Special Administrator Jose
Ortaez became final and was subsequently recorded in the
book of entries of judgments.
Meanwhile, herein petitioners Jose Lee and Alma Aggabao,
with the rest of the FLAG-controlled board of directors,
increased the authorized capital stock of Philinterlife, diluting
in the process the 50.725% controlling interest of the
decedent, Dr. Juvencio Ortaez, in the insurance company.[9]
This became the subject of a separate action at the Securities
and Exchange Commission filed by private respondent-
Special Administratrix Enderes against petitioner Jose Lee
and other members of the FLAG-controlled board of
Philinterlife on November 7, 1994. Thereafter, various cases
were filed by Jose Lee as president of Philinterlife and Juliana
Ortaez and her sons against private respondent-Special
Administratrix Enderes in the SEC and civil courts.[10]
Somehow, all these cases were connected to the core dispute
on the legality of the sale of decedent Dr. Ortaezs Philinterlife
shares of stock to petitioner FLAG, represented by its
president, herein petitioner Jose Lee who later became the
president of Philinterlife after the controversial sale.
On May 2, 2000, private respondent-Special Administratrix
Enderes and her siblings filed a motion for execution of the
Orders of the intestate court dated August 11 and August 29,
1997 because the orders of the intestate court nullifying the
sale (upheld by the Court of Appeals and the Supreme Court)
had long became final. Respondent-Special Administratrix
Enderes served a copy of the motion to petitioners Jose Lee
and Alma Aggabao as president and secretary, respectively, of
Philinterlife,[11] but petitioners ignored the same.
On July 6, 2000, the intestate court granted the motion for
execution, the dispositive portion of which read:
WHEREFORE, premises considered, let a writ of execution
issue as follows:
1. Confirming the nullity of the sale of the 2,029 Philinterlife
shares in the name of the Estate of Dr. Juvencio Ortaez to
Filipino Loan Assistance Group (FLAG);
2. Commanding the President and the Corporate Secretary of
Philinterlife to reinstate in the stock and transfer book of
Philinterlife the 2,029 Philinterlife shares of stock in the name
of the Estate of Dr. Juvencio P. Ortaez as the owner thereof
without prejudice to other claims for violation of pre-emptive
rights pertaining to the said 2,029 Philinterlife shares;
3. Directing the President and the Corporate Secretary of
Philinterlife to issue stock certificates of Philinterlife for
2,029 shares in the name of the Estate of Dr. Juvencio P.
Ortaez as the owner thereof without prejudice to other claims
for violations of pre-emptive rights pertaining to the said
2,029 Philinterlife shares and,
4. Confirming that only the Special Administratrix, Ma. Divina
Ortaez-Enderes, has the power to exercise all the rights
appurtenant to the said shares, including the right to vote and
to receive dividends.
5. Directing Philinterlife and/or any other person or persons
claiming to represent it or otherwise, to acknowledge and
allow the said Special Administratrix to exercise all the
aforesaid rights on the said shares and to refrain from
resorting to any action which may tend directly or indirectly
to impede, obstruct or bar the free exercise thereof under
pain of contempt.
6. The President, Corporate Secretary, any responsible
officer/s of Philinterlife, or any other person or persons
claiming to represent it or otherwise, are hereby directed to
comply with this order within three (3) days from receipt
hereof under pain of contempt.
7. The Deputy Sheriffs Adenauer Rivera and Pedro Borja are
hereby directed to implement the writ of execution with
dispatch to forestall any and/or further damage to the Estate.
SO ORDERED.[12]
In the several occasions that the sheriff went to the office of
petitioners to execute the writ of execution, he was barred by
the security guard upon petitioners instructions. Thus,
private respondent-Special Administratrix Enderes filed a
motion to cite herein petitioners Jose Lee and Alma Aggabao
(president and secretary, respectively, of Philinterlife) in
contempt.[13]
Petitioners Lee and Aggabao subsequently filed before the
Court of Appeals a petition for certiorari, docketed as CA G.R.
SP No. 59736. Petitioners alleged that the intestate court
gravely abused its discretion in (1) declaring that the
ownership of FLAG over the Philinterlife shares of stock was
null and void; (2) ordering the execution of its order declaring
such nullity and (3) depriving the petitioners of their right to
due process.
On July 26, 2000, the Court of Appeals dismissed the petition
outright:
We are constrained to DISMISS OUTRIGHT the present
petition for certiorari and prohibition with prayer for a
temporary restraining order and/or writ of preliminary
injunction in the light of the following considerations:
1. The assailed Order dated August 11, 1997 of the
respondent judge had long become final and executory;
2. The certification on non-forum shopping is signed by only
one (1) of the three (3) petitioners in violation of the Rules;
and
3. Except for the assailed orders and writ of execution, deed
of sale with right to repurchase, deed of sale of shares of
stocks and omnibus motion, the petition is not accompanied
by such pleadings, documents and other material portions of
the record as would support the allegations therein in
violation of the second paragraph, Rule 65 of the 1997 Rules
of Civil Procedure, as amended.
Petition is DISMISSED.
SO ORDERED.[14]
The motion for reconsideration filed by petitioners Lee and
Aggabao of the above decision was denied by the Court of
Appeals on October 30, 2000:
This resolves the urgent motion for reconsideration filed by
the petitioners of our resolution of July 26, 2000 dismissing
outrightly the above-entitled petition for the reason, among
others, that the assailed Order dated August 11, 1997 of the
respondent Judge had long become final and executory.
Dura lex, sed lex.
WHEREFORE, the urgent motion for reconsideration is
hereby DENIED, for lack of merit.
SO ORDERED.[15]
On December 4, 2000, petitioners elevated the case to the
Supreme Court through a petition for review under Rule 45
but on December 13, 2000, we denied the petition because
there was no showing that the Court of Appeals in CA G.R. SP
No. 59736 committed any reversible error to warrant the
exercise by the Supreme Court of its discretionary appellate
jurisdiction.[16]
However, upon motion for reconsideration filed by
petitioners Lee and Aggabao, the Supreme Court granted the
motion and reinstated their petition on September 5, 2001.
The parties were then required to submit their respective
memoranda.
Meanwhile, private respondent-Special Administratrix
Enderes, on July 19, 2000, filed a motion to direct the branch
clerk of court in lieu of herein petitioners Lee and Aggabao to
reinstate the name of Dr. Ortaez in the stock and transfer
book of Philinterlife and issue the corresponding stock
certificate pursuant to Section 10, Rule 39 of the Rules of
Court which provides that the court may direct the act to be
done at the cost of the disobedient party by some other
person appointed by the court and the act when so done shall
have the effect as if done by the party. Petitioners Lee and
Aggabao opposed the motion on the ground that the intestate
court should refrain from acting on the motion because the
issues raised therein were directly related to the issues raised
by them in their petition for certiorari at the Court of Appeals
docketed as CA-G.R. SP No. 59736. On October 30, 2000, the
intestate court granted the motion, ruling that there was no
prohibition for the intestate court to execute its orders
inasmuch as the appellate court did not issue any TRO or writ
of preliminary injunction.
On December 3, 2000, petitioners Lee and Aggabao filed a
petition for certiorari in the Court of Appeals, docketed as CA-
G.R. SP No. 62461, questioning this time the October 30, 2000
order of the intestate court directing the branch clerk of court
to issue the stock certificates. They also questioned in the
Court of Appeals the order of the intestate court nullifying the
sale made in their favor by Juliana Ortaez and Jose Ortaez. On
November 20, 2002, the Court of Appeals denied their
petition and upheld the power of the intestate court to
execute its order. Petitioners Lee and Aggabao then filed
motion for reconsideration which at present is still pending
resolution by the Court of Appeals.
Petitioners Jose Lee and Alma Aggabao (president and
secretary, respectively, of Philinterlife) and FLAG now raise
the following errors for our consideration:
THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
ERROR:
A. IN FAILING TO RECONSIDER ITS PREVIOUS RESOLUTION
DENYING THE PETITION DESPITE THE FACT THAT THE
APPELLATE COURTS MISTAKE IN APPREHENDING THE
FACTS HAD BECOME PATENT AND EVIDENT FROM THE
MOTION FOR RECONSIDERATION AND THE COMMENT OF
RESPONDENT ENDERES WHICH HAD ADMITTED THE
FACTUAL ALLEGATIONS OF PETITIONERS IN THE PETITION
AS WELL AS IN THE MOTION FOR RECONSIDERATION.
MOREOVER, THE RESOLUTION OF THE APPELLATE COURT
DENYING THE MOTION FOR RECONSIDERATION WAS
CONTAINED IN ONLY ONE PAGE WITHOUT EVEN TOUCHING
ON THE SUBSTANTIVE MERITS OF THE EXHAUSTIVE
DISCUSSION OF FACTS AND SUPPORTING LAW IN THE
MOTION FOR RECONSIDERATION IN VIOLATION OF THE
RULE ON ADMINISTRATIVE DUE PROCESS;
B. IN FAILING TO SET ASIDE THE VOID ORDERS OF THE
INTESTATE COURT ON THE ERRONEOUS GROUND THAT
THE ORDERS WERE FINAL AND EXECUTORY WITH REGARD
TO PETITIONERS EVEN AS THE LATTER WERE NEVER
NOTIFIED OF THE PROCEEDINGS OR ORDER CANCELING ITS
OWNERSHIP;
C. IN NOT FINDING THAT THE INTESTATE COURT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO EXCESS OF JURISDICTION (1) WHEN IT ISSUED THE
OMNIBUS ORDER NULLIFYING THE OWNERSHIP OF
PETITIONER FLAG OVER SHARES OF STOCK WHICH WERE
ALLEGED TO BE PART OF THE ESTATE AND (2) WHEN IT
ISSUED A VOID WRIT OF EXECUTION AGAINST PETITIONER
FLAG AS PRESENT OWNER TO IMPLEMENT MERELY
PROVISIONAL ORDERS, THEREBY VIOLATING FLAGS
CONSTITUTIONAL RIGHT AGAINST DEPRIVATION OF
PROPERTY WITHOUT DUE PROCESS;
D. IN FAILING TO DECLARE NULL AND VOID THE ORDERS OF
THE INTESTATE COURT WHICH NULLIFIED THE SALE OF
SHARES OF STOCK BETWEEN THE LEGITIMATE HEIR JOSE S.
ORTAEZ AND PETITIONER FLAG BECAUSE OF SETTLED LAW
AND JURISPRUDENCE, I.E., THAT AN HEIR HAS THE RIGHT
TO DISPOSE OF THE DECEDENTS PROPERTY EVEN IF THE
SAME IS UNDER ADMINISTRATION PURSUANT TO CIVIL
CODE PROVISION THAT POSSESSION OF HEREDITARY
PROPERTY IS TRANSMITTED TO THE HEIR THE MOMENT OF
DEATH OF THE DECEDENT (ACEDEBO VS. ABESAMIS, 217
SCRA 194);
E. IN DISREGARDING THE FINAL DECISION OF THE
SUPREME COURT IN G.R. NO. 128525 DATED DECEMBER 17,
1999 INVOLVING SUBSTANTIALLY THE SAME PARTIES, TO
WIT, PETITIONERS JOSE C. LEE AND ALMA AGGABAO WERE
RESPONDENTS IN THAT CASE WHILE RESPONDENT MA.
DIVINA ENDERES WAS THE PETITIONER THEREIN. THAT
DECISION, WHICH CAN BE CONSIDERED LAW OF THE CASE,
RULED THAT PETITIONERS CANNOT BE ENJOINED BY
RESPONDENT ENDERES FROM EXERCISING THEIR POWER
AS DIRECTORS AND OFFICERS OF PHILINTERLIFE AND
THAT THE INTESTATE COURT IN CHARGE OF THE
INTESTATE PROCEEDINGS CANNOT ADJUDICATE TITLE TO
PROPERTIES CLAIMED TO BE PART OF THE ESTATE AND
WHICH ARE EQUALLY CLAIMED BY PETITIONER FLAG.[17]
The petition has no merit.
Petitioners Jose Lee and Alma Aggabao, representing
Philinterlife and FLAG, assail before us not only the validity of
the writ of execution issued by the intestate court dated July
7, 2000 but also the validity of the August 11, 1997 order of
the intestate court nullifying the sale of the 2,029 Philinterlife
shares of stock made by Juliana Ortaez and Jose Ortaez, in
their personal capacities and without court approval, in favor
of petitioner FLAG.
We cannot allow petitioners to reopen the issue of nullity of
the sale of the Philinterlife shares of stock in their favor
because this was already settled a long time ago by the Court
of Appeals in its decision dated June 23, 1998 in CA-G.R. SP
No. 46342. This decision was effectively upheld by us in our
resolution dated October 9, 1998 in G.R. No. 135177
dismissing the petition for review on a technicality and
thereafter denying the motion for reconsideration on January
13, 1999 on the ground that there was no compelling reason
to reconsider said denial.[18] Our decision became final on
February 23, 1999 and was accordingly entered in the book
of entry of judgments. For all intents and purposes therefore,
the nullity of the sale of the Philinterlife shares of stock made
by Juliana Ortaez and Jose Ortaez in favor of petitioner FLAG
is already a closed case. To reopen said issue would set a bad
precedent, opening the door wide open for dissatisfied
parties to relitigate unfavorable decisions no end. This is
completely inimical to the orderly and efficient
administration of justice.
The said decision of the Court of Appeals in CA-G.R. SP No.
46342 affirming the nullity of the sale made by Jose Ortaez
and his mother Juliana Ortaez of the Philinterlife shares of
stock read:
Petitioners asseverations relative to said [memorandum]
agreement were scuttled during the hearing before this Court
thus:
JUSTICE AQUINO:
Counsel for petitioner, when the Memorandum of Agreement
was executed, did the children of Juliana Salgado know
already that there was a claim for share in the inheritance of
the children of Novicio?
ATTY. CALIMAG:
Your Honor please, at that time, Your Honor, it is already
known to them.
JUSTICE AQUINO:
What can be your legal justification for extrajudicial
settlement of a property subject of intestate proceedings
when there is an adverse claim of another set of heirs, alleged
heirs? What would be the legal justification for extra-
judicially settling a property under administration without
the approval of the intestate court?
ATTY. CALIMAG:
Well, Your Honor please, in that extra-judicial settlement
there is an approval of the honorable court as to the
propertys partition x x x. There were as mentioned by the
respondents counsel, Your Honor.
ATTY. BUYCO:
No
JUSTICE AQUINO:
The point is, there can be no adjudication of a property under
intestate proceedings without the approval of the court. That
is basic unless you can present justification on that. In fact,
there are two steps: first, you ask leave and then execute the
document and then ask for approval of the document
executed. Now, is there any legal justification to exclude this
particular transaction from those steps?
ATTY. CALIMAG:
None, Your Honor.
ATTY BUYCO:
With that admission that there is no legal justification, Your
Honor, we rest the case for the private respondent. How can
the lower court be accused of abusing its discretion? (pages
33-35, TSN of January 29, 1998).
Thus, We find merit in the following postulation by private
respondent:
What we have here is a situation where some of the heirs of
the decedent without securing court approval have
appropriated as their own personal property the properties
of [the] Estate, to the exclusion and the extreme prejudice of
the other claimant/heirs. In other words, these heirs, without
court approval, have distributed the asset of the estate among
themselves and proceeded to dispose the same to third
parties even in the absence of an order of distribution by the
Estate Court. As admitted by petitioners counsel, there was
absolutely no legal justification for this action by the heirs.
There being no legal justification, petitioner has no basis for
demanding that public respondent [the intestate court]
approve the sale of the Philinterlife shares of the Estate by
Juliana and Jose Ortaez in favor of the Filipino Loan
Assistance Group.
It is an undisputed fact that the parties to the Memorandum
of Agreement dated March 4, 1982 (see Annex 7 of the
Comment). . . are not the only heirs claiming an interest in the
estate left by Dr. Juvencio P. Ortaez. The records of this case. . .
clearly show that as early as March 3, 1981 an Opposition to
the Application for Issuance of Letters of Administration was
filed by the acknowledged natural children of Dr. Juvencio P.
Ortaez with Ligaya Novicio. . . This claim by the acknowledged
natural children of Dr. Juvencio P. Ortaez is admittedly known
to the parties to the Memorandum of Agreement before they
executed the same. This much was admitted by petitioners
counsel during the oral argument. xxx
Given the foregoing facts, and the applicable jurisprudence,
public respondent can never be faulted for not approving. . .
the subsequent sale by the petitioner [Jose Ortaez] and his
mother [Juliana Ortaez] of the Philinterlife shares belonging
to the Estate of Dr. Juvencio P. Ortaez. (pages 3-4 of Private
Respondents Memorandum; pages 243-244 of the Rollo)
Amidst the foregoing, We found no grave abuse of discretion
amounting to excess or want of jurisdiction committed by
respondent judge.[19]
From the above decision, it is clear that Juliana Ortaez, and
her three sons, Jose, Rafael and Antonio, all surnamed Ortaez,
invalidly entered into a memorandum of agreement
extrajudicially partitioning the intestate estate among
themselves, despite their knowledge that there were other
heirs or claimants to the estate and before final settlement of
the estate by the intestate court. Since the appropriation of
the estate properties by Juliana Ortaez and her children (Jose,
Rafael and Antonio Ortaez) was invalid, the subsequent sale
thereof by Juliana and Jose to a third party (FLAG), without
court approval, was likewise void.
An heir can sell his right, interest, or participation in the
property under administration under Art. 533 of the Civil
Code which provides that possession of hereditary property
is deemed transmitted to the heir without interruption from
the moment of death of the decedent.[20] However, an heir
can only alienate such portion of the estate that may be
allotted to him in the division of the estate by the probate or
intestate court after final adjudication, that is, after all
debtors shall have been paid or the devisees or legatees shall
have been given their shares.[21] This means that an heir
may only sell his ideal or undivided share in the estate, not
any specific property therein. In the present case, Juliana
Ortaez and Jose Ortaez sold specific properties of the estate
(1,014 and 1,011 shares of stock in Philinterlife) in favor of
petitioner FLAG. This they could not lawfully do pending the
final adjudication of the estate by the intestate court because
of the undue prejudice it would cause the other claimants to
the estate, as what happened in the present case.
Juliana Ortaez and Jose Ortaez sold specific properties of the
estate, without court approval. It is well-settled that court
approval is necessary for the validity of any disposition of the
decedents estate. In the early case of Godoy vs. Orellano,[22]
we laid down the rule that the sale of the property of the
estate by an administrator without the order of the probate
court is void and passes no title to the purchaser. And in the
case of Dillena vs. Court of Appeals,[23] we ruled that:
[I]t must be emphasized that the questioned properties
(fishpond) were included in the inventory of properties of the
estate submitted by then Administratrix Fausta Carreon
Herrera on November 14, 1974. Private respondent was
appointed as administratrix of the estate on March 3, 1976 in
lieu of Fausta Carreon Herrera. On November 1, 1978, the
questioned deed of sale of the fishponds was executed
between petitioner and private respondent without notice
and approval of the probate court. Even after the sale,
administratrix Aurora Carreon still included the three
fishponds as among the real properties of the estate in her
inventory submitted on August 13, 1981. In fact, as stated by
the Court of Appeals, petitioner, at the time of the sale of the
fishponds in question, knew that the same were part of the
estate under administration.
xxxxxxxxx
The subject properties therefore are under the jurisdiction of
the probate court which according to our settled
jurisprudence has the authority to approve any disposition
regarding properties under administration. . . More emphatic
is the declaration We made in Estate of Olave vs. Reyes (123
SCRA 767) where We stated that when the estate of the
deceased person is already the subject of a testate or intestate
proceeding, the administrator cannot enter into any
transaction involving it without prior approval of the probate
court.
Only recently, in Manotok Realty, Inc. vs. Court of Appeals
(149 SCRA 174), We held that the sale of an immovable
property belonging to the estate of a decedent, in a special
proceedings, needs court approval. . . This pronouncement
finds support in the previous case of Dolores Vda. De Gil vs.
Agustin Cancio (14 SCRA 797) wherein We emphasized that it
is within the jurisdiction of a probate court to approve the
sale of properties of a deceased person by his prospective
heirs before final adjudication. x x x
It being settled that property under administration needs the
approval of the probate court before it can be disposed of, any
unauthorized disposition does not bind the estate and is null
and void. As early as 1921 in the case of Godoy vs. Orellano
(42 Phil 347), We laid down the rule that a sale by an
administrator of property of the deceased, which is not
authorized by the probate court is null and void and title does
not pass to the purchaser.
There is hardly any doubt that the probate court can declare
null and void the disposition of the property under
administration, made by private respondent, the same having
been effected without authority from said court. It is the
probate court that has the power to authorize and/or
approve the sale (Section 4 and 7, Rule 89), hence, a fortiori, it
is said court that can declare it null and void for as long as the
proceedings had not been closed or terminated. To uphold
petitioners contention that the probate court cannot annul
the unauthorized sale, would render meaningless the power
pertaining to the said court. (Bonga vs. Soler, 2 SCRA 755).
(emphasis ours)
Our jurisprudence is therefore clear that (1) any disposition
of estate property by an administrator or prospective heir
pending final adjudication requires court approval and (2)
any unauthorized disposition of estate property can be
annulled by the probate court, there being no need for a
separate action to annul the unauthorized disposition.
The question now is: can the intestate or probate court
execute its order nullifying the invalid sale?
We see no reason why it cannot. The intestate court has the
power to execute its order with regard to the nullity of an
unauthorized sale of estate property, otherwise its power to
annul the unauthorized or fraudulent disposition of estate
property would be meaningless. In other words, enforcement
is a necessary adjunct of the intestate or probate courts
power to annul unauthorized or fraudulent transactions to
prevent the dissipation of estate property before final
adjudication.
Moreover, in this case, the order of the intestate court
nullifying the sale was affirmed by the appellate courts (the
Court of Appeals in CA-G.R. SP No. 46342 dated June 23, 1998
and subsequently by the Supreme Court in G.R. No. 135177
dated October 9, 1998). The finality of the decision of the
Supreme Court was entered in the book of entry of judgments
on February 23, 1999. Considering the finality of the order of
the intestate court nullifying the sale, as affirmed by the
appellate courts, it was correct for private respondent-Special
Administratrix Enderes to thereafter move for a writ of
execution and for the intestate court to grant it.
Petitioners Jose Lee, Alma Aggabao and FLAG, however,
contend that the probate court could not issue a writ of
execution with regard to its order nullifying the sale because
said order was merely provisional:
The only authority given by law is for respondent judge to
determine provisionally whether said shares are included or
excluded in the inventory In ordering the execution of the
orders, respondent judge acted in excess of his jurisdiction
and grossly violated settled law and jurisprudence, i.e., that
the determination by a probate or intestate court of whether
a property is included or excluded in the inventory of the
estate being provisional in nature, cannot be the subject of
execution.[24] (emphasis ours)
Petitioners argument is misplaced. There is no question,
based on the facts of this case, that the Philinterlife shares of
stock were part of the estate of Dr. Juvencio Ortaez from the
very start as in fact these shares were included in the
inventory of the properties of the estate submitted by Rafael
Ortaez after he and his brother, Jose Ortaez, were appointed
special administrators by the intestate court.[25]
The controversy here actually started when, during the
pendency of the settlement of the estate of Dr. Ortaez, his wife
Juliana Ortaez sold the 1,014 Philinterlife shares of stock in
favor petitioner FLAG without the approval of the intestate
court. Her son Jose Ortaez later sold the remaining 1,011
Philinterlife shares also in favor of FLAG without the approval
of the intestate court.
We are not dealing here with the issue of inclusion or
exclusion of properties in the inventory of the estate because
there is no question that, from the very start, the Philinterlife
shares of stock were owned by the decedent, Dr. Juvencio
Ortaez. Rather, we are concerned here with the effect of the
sale made by the decedents heirs, Juliana Ortaez and Jose
Ortaez, without the required approval of the intestate court.
This being so, the contention of petitioners that the
determination of the intestate court was merely provisional
and should have been threshed out in a separate proceeding
is incorrect.
The petitioners Jose Lee and Alma Aggabao next contend that
the writ of execution should not be executed against them
because they were not notified, nor they were aware, of the
proceedings nullifying the sale of the shares of stock.
We are not persuaded. The title of the purchaser like herein
petitioner FLAG can be struck down by the intestate court
after a clear showing of the nullity of the alienation. This is
the logical consequence of our ruling in Godoy and in several
subsequent cases.[26] The sale of any property of the estate
by an administrator or prospective heir without order of the
probate or intestate court is void and passes no title to the
purchaser. Thus, in Juan Lao et al. vs. Hon. Melencio Geneto,
G.R. No. 56451, June 19, 1985, we ordered the probate court
to cancel the transfer certificate of title issued to the vendees
at the instance of the administrator after finding that the sale
of real property under probate proceedings was made
without the prior approval of the court. The dispositive
portion of our decision read:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the assailed
Order dated February 18, 1981 of the respondent Judge
approving the questioned Amicable Settlement is declared
NULL and VOID and hereby SET ASIDE. Consequently, the
sale in favor of Sotero Dioniosio III and by the latter to
William Go is likewise declared NULL and VOID. The Transfer
Certificate of Title issued to the latter is hereby ordered
cancelled.
It goes without saying that the increase in Philinterlifes
authorized capital stock, approved on the vote of petitioners
non-existent shareholdings and obviously calculated to make
it difficult for Dr. Ortaezs estate to reassume its controlling
interest in Philinterlife, was likewise void ab initio.
Petitioners next argue that they were denied due process.
We do not think so.
The facts show that petitioners, for reasons known only to
them, did not appeal the decision of the intestate court
nullifying the sale of shares of stock in their favor. Only the
vendor, Jose Ortaez, appealed the case. A careful review of the
records shows that petitioners had actual knowledge of the
estate settlement proceedings and that they knew private
respondent Enderes was questioning therein the sale to them
of the Philinterlife shares of stock.
It must be noted that private respondent-Special
Administratrix Enderes filed before the intestate court (RTC
of Quezon City, Branch 85) a Motion to Declare Void Ab Initio
Deeds of Sale of Philinterlife Shares of Stock on March 22,
1996. But as early as 1994, petitioners already knew of the
pending settlement proceedings and that the shares they
bought were under the administration by the intestate court
because private respondent Ma. Divina Ortaez-Enderes and
her mother Ligaya Novicio had filed a case against them at the
Securities and Exchange Commission on November 7, 1994,
docketed as SEC No. 11-94-4909, for annulment of transfer of
shares of stock, annulment of sale of corporate properties,
annulment of subscriptions on increased capital stocks,
accounting, inspection of corporate books and records and
damages with prayer for a writ of preliminary injunction
and/or temporary restraining order.[27] In said case,
Enderes and her mother questioned the sale of the aforesaid
shares of stock to petitioners. The SEC hearing officer in fact,
in his resolution dated March 24, 1995, deferred to the
jurisdiction of the intestate court to rule on the validity of the
sale of shares of stock sold to petitioners by Jose Ortaez and
Juliana Ortaez:
Petitioners also averred that. . . the Philinterlife shares of Dr.
Juvencio Ortaez who died, in 1980, are part of his estate
which is presently the subject matter of an intestate
proceeding of the RTC of Quezon City, Branch 85. Although,
private respondents [Jose Lee et al.] presented the documents
of partition whereby the foregoing share of stocks were
allegedly partitioned and conveyed to Jose S. Ortaez who
allegedly assigned the same to the other private respondents,
approval of the Court was not presented. Thus, the
assignments to the private respondents [Jose Lee et al.] of the
subject shares of stocks are void.
xxxxxxxxx
With respect to the alleged extrajudicial partition of the
shares of stock owned by the late Dr. Juvencio Ortaez, we rule
that the matter properly belongs to the jurisdiction of the
regular court where the intestate proceedings are currently
pending.[28]
With this resolution of the SEC hearing officer dated as early
as March 24, 1995 recognizing the jurisdiction of the intestate
court to determine the validity of the extrajudicial partition of
the estate of Dr. Ortaez and the subsequent sale by the heirs
of the decedent of the Philinterlife shares of stock to
petitioners, how can petitioners claim that they were not
aware of the intestate proceedings?
Futhermore, when the resolution of the SEC hearing officer
reached the Supreme Court in 1996 (docketed as G.R.
128525), herein petitioners who were respondents therein
filed their answer which contained statements showing that
they knew of the pending intestate proceedings:
[T]he subject matter of the complaint is not within the
jurisdiction of the SEC but with the Regional Trial Court;
Ligaya Novicio and children represented themselves to be the
common law wife and illegitimate children of the late Ortaez;
that on March 4, 1982, the surviving spouse Juliana Ortaez, on
her behalf and for her minor son Antonio, executed a
Memorandum of Agreement with her other sons Rafael and the writ of preliminary injunction because injunction is not
Jose, both surnamed Ortaez, dividing the estate of the designed to protect contingent rights. Said case did not rule
deceased composed of his one-half (1/2) share in the on the issue of the validity of the sale of shares of stock
conjugal properties; that in the said Memorandum of belonging to the decedents estate without court approval nor
Agreement, Jose S. Ortaez acquired as his share of the estate of the validity of the writ of execution issued by the intestate
the 1,329 shares of stock in Philinterlife; that on March 4, court. G.R. No. 128525 clearly involved a different issue and it
1982, Juliana and Rafael assigned their respective shares of does not therefore apply to the present case.
stock in Philinterlife to Jose; that contrary to the contentions
of petitioners, private respondents Jose Lee, Carlos Lee, Petitioners and all parties claiming rights under them are
Benjamin Lee and Alma Aggabao became stockholders of hereby warned not to further delay the execution of the
Philinterlife on March 23, 1983 when Jose S. Ortaez, the Orders of the intestate court dated August 11 and August 29,
principal stockholder at that time, executed a deed of sale of 1997.
his shares of stock to private respondents; and that the right
of petitioners to question the Memorandum of Agreement WHEREFORE, the petition is hereby DENIED. The decision of
and the acquisition of shares of stock of private respondent is the Court of Appeals in CA-G.R. S.P. No. 59736 dated July 26,
barred by prescription.[29] 2000, dismissing petitioners petition for certiorari and
affirming the July 6, 2000 order of the trial court which
Also, private respondent-Special Administratrix Enderes ordered the execution of its (trial courts) August 11 and 29,
offered additional proof of actual knowledge of the settlement 1997 orders, is hereby AFFIRMED.
proceedings by petitioners which petitioners never denied:
(1) that petitioners were represented by Atty. Ricardo SO ORDERED.
Calimag previously hired by the mother of private respondent
Enderes to initiate cases against petitioners Jose Lee and
Alma Aggaboa for the nullification of the sale of the shares of
stock but said counsel made a conflicting turn-around and
appeared instead as counsel of petitioners, and (2) that the
deeds of sale executed between petitioners and the heirs of
the decedent (vendors Juliana Ortaez and Jose Ortaez) were
acknowledged before Atty. Ramon Carpio who, during the
pendency of the settlement proceedings, filed a motion for the
approval of the sale of Philinterlife shares of stock to the
Knights of Columbus Fraternal Association, Inc. (which
motion was, however, later abandoned).[30] All this
sufficiently proves that petitioners, through their counsels,
knew of the pending settlement proceedings.

Finally, petitioners filed several criminal cases such as libel

(Criminal Case No. 97-7179-81), grave coercion (Criminal
Case No. 84624) and robbery (Criminal Case No. Q-96-67919)
against private respondents mother Ligaya Novicio who was
a director of Philinterlife,[31] all of which criminal cases were
related to the questionable sale to petitioners of the
Philinterlife shares of stock.

Considering these circumstances, we cannot accept

petitioners claim of denial of due process. The essence of due
process is the reasonable opportunity to be heard. Where the
opportunity to be heard has been accorded, there is no denial
of due process.[32] In this case, petitioners knew of the
pending instestate proceedings for the settlement of Dr.
Juvencio Ortaezs estate but for reasons they alone knew, they
never intervened. When the court declared the nullity of the
sale, they did not bother to appeal. And when they were
notified of the motion for execution of the Orders of the
intestate court, they ignored the same. Clearly, petitioners
alone should bear the blame.

Petitioners next contend that we are bound by our ruling in

G.R. No. 128525 entitled Ma. Divina Ortaez-Enderes vs. Court
of Appeals, dated December 17, 1999, where we allegedly
ruled that the intestate court may not pass upon the title to a
certain property for the purpose of determining whether the
same should or should not be included in the inventory but
such determination is not conclusive and is subject to final
decision in a separate action regarding ownership which may
be constituted by the parties.

We are not unaware of our decision in G.R. No. 128525. The

issue therein was whether the Court of Appeals erred in
affirming the resolution of the SEC that Enderes et al. were
not entitled to the issuance of the writ of preliminary
injunction. We ruled that the Court of Appeals was correct in
affirming the resolution of the SEC denying the issuance of
 FIRST DIVISION
WT CONSTRUCTION, INC., G.R. No. 157287
Petitioner,
Present:
- versus - PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
LEONARDO-DE CASTRO, JJ.
HON. ULRIC R. CAETE,
Presiding Judge, RTC, Mandaue
City, Branch 55, and the ESTATE
OF ALBERTO CABAHUG, thru
its Administratrix, JULIANA VDA.
DE CABAHUG,
Respondents.
Promulgated:
February 12, 2008
X ------------------------------------------------------------------------- X
DECISION
AZCUNA, J.: This is a petition for review[1] of the Decision and
Resolution of the Court of Appeals (CA), dated July 25, 2002
and February 12, 2003, respectively, in CA-G.R. SP No. 65592
entitled WT Construction, Inc. vs. Hon. Ulric R. Caete, in his
capacity as Presiding Judge of the Regional Trial Court of
Mandaue City, Branch 55, et al.
The facts are as follows:[2]
Juliana vda. De Cabahug filed a case for the settlement of the
estate of her deceased husband, Alberto Cabahug,[3] before
the Regional Trial Court (RTC) of Mandaue City, Branch 55,
presided by public respondent, Judge Ulric R. Caete.
On January 10, 1992, Ciriaco Cabahug, the administrator of
the estate and heir of Alberto, was granted the authority to
sell one of the properties of the estate to defray the expenses
for the payment of taxes due from the estate. The property to
be sold was the parcel of land subject of the petition, Lot 1,
FLS-322-D, situated in Looc, Mandaue City, covered by Tax
Declaration No. 00272 with an estimated area of 17,382
square meters.
Ciriaco entered into an Agreement for Sale of Land with
Downpayment with petitioner for P8,691,000 on September
23, 1996. In accordance with the agreement, petitioner made
a down payment of fifty percent (50%) of the purchase price
or P4,431,600 [should be P4,345,500]. The balance of the
purchase price was to be paid immediately after the land is
free from all occupants/obstructions. The contract likewise
stipulated the following:
5. That the seller shall undertake the clearing of the
land herein sold of its present occupants and/or eject the
squatters therein within a period of one (1) year reckoned
from the receipt of the advance payment, provided however,
that if the buyer will be the one to handle the clearing or
ejectment of occupants, all the expenses incurred thereto
shall be charged to and be deducted from the remaining
balance payable.
6. Upon receipt of the 50% advance payment of the
purchase price, the buyer shall be authorized to enter the
property, utilize the same and introduce improvements
thereon.
Subsequently, petitioner took steps in clearing the property
of its occupants by filing a complaint for ejectment in 1998
with the Municipal Trial Court in Cities, Branch 3, Mandaue
City.
It was later discovered that Ciriaco did not inform his co-heirs
of the sale. He appropriated the amount paid by petitioner, so
public respondent issued an Order on August 19, 1997,
relieving Ciriaco of his functions as administrator and
directing him to render an accounting of all the properties
and assets of the estate.
Consequently, Administrator Linda Cabahug-Antigue, along
with her co-heirs, demanded from petitioner the payment of
the balance of the purchase price. Referring to the provision
of the agreement relating to the payment of the balance of the
purchase price conditioned upon the removal of occupants
and obstructions in the property, petitioner refused to pay
the remaining balance.
On July 6, 2000, public respondent issued an Order,[4]
stating:
WHEREFORE, premises considered, WT Construction is
ordered to manifest in court within five (5) days from receipt
of this order whether it wants the Contract of Sale rescinded.
If no manifestation is filed within said period, WT
Construction is further ordered to pay the estate of Alberto
Cabahug the amount of P4,259,400.00 less expenses incurred
in the ejectment case within a period of fifteen (15) days,
otherwise, failure to do so will prompt the court to issue a
writ of execution as prayed for by movant-administratrix.
Petitioner filed a Motion for Reconsideration and/or
Extension of Time to Manifest Option to Rescind on July 31,
2000. An Opposition to the motion was filed by private
respondent on August 2, 2000.[5]
The motion for reconsideration was denied, and a Writ of
Execution[6] to implement the above Order[7] was issued by
public respondent on October 5, 2000. The writ issued to
Sheriff IV of RTC, Branch 55, Mandaue City, Veronico C.
Ouano, stated the following:
WHEREFORE, you are hereby commanded that of the goods
and chattels of WT CONSTRUCTION, not exempt from
execution, you cause to be made the sum of P4,259,400.00,
liable to pay the estate of Alberto Cabahug minus the
expenses incurred by WT Construction in ejecting the
occupants of the land.
But if sufficient personal properties could be found to satisfy
this writ, then of the land and buildings of the defendants you
cause to be made the said sums of money in the manner
required of you by law.[8]
On November 17, 2000, petitioner filed an Urgent Motion to
Quash the Writ of Execution claiming that the issuance of the
writ is premature for the following reasons: (1) the expenses
to be deducted from the purchase price could not be
ascertained as there are still squatters on the land who have
yet to be evicted; (2) the existence of an action for Quieting of
Title, Injunction and Damages[9] for ownership and
possession of a portion of the property in question or 4,690
square meters; and (3) the balance of the purchase price
would be significantly reduced if the claim of the plaintiffs in
the aforesaid action will be granted.[10]
During the pendency of the motion, the plaintiffs in the action
for quieting of title, namely, Antonia Flores, Andrea Lumapas,
Emilio Omobong and Constancia O. Tolo, filed a Motion for
Leave to Intervene contending that they have a right to a
portion or to 4,690 square meters of the subject lot. The
group also moved for the quashing of the writ of
execution.[11]
On May 15, 2001, public respondent issued an Order denying
petitioners motion:
There being no merits to the urgent Motion to Quash the Writ
of Execution, the same is denied.
SO ORDERED.[12]
Petitioners motion for reconsideration was likewise denied in
an Order dated June 28, 2001.
Petitioner went to the CA on a petition for certiorari under
Rule 65 but the CA dismissed the petition on July 25, 2002.
The pertinent portions of the Decision of the CA read:
The resolution of the ejectment case came in the wake of
apparently persistent efforts of the estate to collect the
balance of the purchase price from the petitioner. The
developments were chronicled in an Order of July 6, 2000
issued by respondent Judge Ulric O. Caete. It appears that on
October 15, 1999, he directed petitioner to pay P4,259,400 to
the estate minus expenses incurred by it in ejecting the
occupants of the land. The implementation of the Order was
held in abeyance when the petitioner went on certiorari to
the Court of Appeals. The Fifteenth Division of the Court
dismissed the petition prompting the estate to pray for the
immediate execution of the Order of October 15, 1999. But it
also asked that the petitioners Willy Te be required to
manifest if he would prefer to have the sale rescinded and the
amount advanced returned. Judge Caete was thus constraint
on July 6, 2000 to give the petitioner an opportunity within a
certain period to manifest its willingness to rescind the
agreement. He finally said:
If no manifestation is filed within said period, WT
Construction is further ordered to pay the estate of Alberto
Cabahug the amount of P4,259,400.00 less expenses incurred
in the ejectment case within a period of fifteen (15) days,
otherwise, failure to do so will prompt the court to issue writ
of execution as prayed for by movant-administratrix.
When the Order was issued, the petitioner had already
obtained a decree of ejectment from the MTCC. A week before
the writ of execution in the ejectment case was served on the
occupants, the estate was able to obtain its own Order from
Judge Caete denying the motion for reconsideration of the
petitioner and ordering the latter, in view of the lapse of the
grace period, to pay the stated amount less expenses. On
October 5, 2000, the writ of execution was issued.
The determination of petitioner to resist payment of the
balance was as dogged as ever. In November 2000, it filed a
motion to quash the writ, citing the existence of a complaint
filed by third parties for ownership and possession of a
portion of the property in question and the failure of the
estate to exclude another portion from the computation of the
balance as allegedly stipulated in the sales agreement. In
February 2001, some parties sought to intervene in the
Special Proceedings 3562-R and asked, in so many words,
that their interest in the purchase price to be paid to the
estate be recognized and respected.
On May 15, 2001, the assailed Order was handed down
denying the Motion to Quash Writ of Execution, followed by
the Order of June 28, 2001 denying the Motion for
Reconsideration. The petitioner arrayed several issues
against these Orders, to wit:[13]
1. Public respondent gravely abused his discretion in failing
to state the facts and the law which served as the basis for his
Order of June 28, 2001 denying herein petitioners urgent
motion to quash writ of execution;
2. Public respondent gravely abused his discretion in not
quashing the writ of execution for being prematurely issued;
3. Public respondent gravely abused his discretion in not
quashing the writ of execution on the ground that the Order
sought to be executed was conditional and incomplete; and
4. Public respondent gravely abused his discretion in not
quashing the writ of execution on the ground that a change in
the situation of the parties had occurred.
We rule against the petitioner.
The disposition of the first argument turns on an
understanding of the kind of issuances that must contain the
relevant facts and law that support them. The requirement
appears in Section 4, Article 8 of the 1987 Constitution which
says that no decision shall be rendered by any court without
expressing therein clearly and distinctly the facts and the law
on which it is based, and Section 1, Rule 36 of the 1997 Rules
of Civil Procedure, that a judgment or final order determining
the merits of the case shall (state) clearly and distinctly the
facts and the law on which it is based. In fine, only decisions
and final orders on the merits need to reflect the relevant
facts and law. The second paragraph of the cited provision of
the Constitution specifies two other issuances to which a
different requirement applies. These are denials of petitions
for review and motions for reconsiderations of decisions, for
which it is enough that the legal basis is stated. The
Constitution and the Rules of Court are silent as to all other
issuances.
There are nonetheless Supreme Court decisions, promulgated
before the 1987 Constitution, which frown on minute orders
by trial courts. In Continental Bank vs. Tiangco, 94 SCRA 715,
the order did not contain any reason for granting a motion to
dismiss a complaint, in Eastern Assurance and Surety
Corporation vs. Cui, 195 SCRA 622, it only said that the
motion to dismiss a third-party complaint was well-taken,
and in Barrera vs. Militante, 114 SRA 325, it held that the
motion for reconsideration of an order of dismissal was
without merit. These orders were actually reviewed by the
High Court in spite of the fact that they were found to be
minute orders, and the third was upheld for being supported
with good reasons.
Subsequent cases have taken the concept of legal basis in a
liberal light. Lack of merit was considered a legal basis for the
denial of a motion for reconsideration of a decision.
Prudential Bank vs. Castro, 158 SCRA 646, and order of
dismissal of appeal, United Placement International vs. NLRC,
257 SCRA 404, while it should be deemed inferred from the
statement of the High Court, in refusing due course to a
petition for certiorari, that the petitioner had failed to show
grave abuse of discretion in the action taken below. Nunal vs.
Commission on Audit, 169 SCRA 356.
Applying these precepts, it is clear that the assailed Order of
May 15, 2001, being merely a resolution of the motion to
quash the writ of execution, is neither a decision nor a final
order on the merits. As stated in Puertollano vs. Intermediate
Appellate Court, 156 SCRA 188, a final judgment or order is
one that finally disposes of and determines the rights of the
parties, either on the entire controversy or a segment thereof,
and concludes them until it is revised or set aside. The Order
in question does not purport to settle a right but assumes it
already. The respondents are correct in pointing out that it
was the Order of October 15, 1999 that settled the rights of
the parties to the matter of the balance of the purchase price
and became the subject of the writ of execution. The
intervening proceeding was nothing more than an attempt by
the trial court to thresh out a settlement by the parties, which
did not push through because of the intransigence of the
petitioner, leaving the court no choice but to enforce the
terms of the original order upon motion of the estate. On the
basis of present jurisprudential trends, the expression no
merit may safely be used for ordinary motions such as the
one in issue here.
Neither may it be said that the writ had been prematurely
issued, simply because the ejectment case, the expenses of
which were to be deducted from the balance of the purchase
price, was not yet terminated. The respondent estate had
correctly pointed out that the litigation expenses could be
determined beforehand. To allow petitioner to defer payment
until it wound up the ejectment case would only place in its
hands a potestative power to determine the enforceability of
its own obligations under the contract.
The order sought to be enforced by the writ is not, as argued,
the Order of July 6, 2000. Even a cursory reading of this
issuance will tell us that what the estate was praying for was
the enforcement of the October 15, 1999 Order. The trial
court categorically stated that it would grant the writ as
prayed for by movant-administratrix if petitioner would not
exercise the option extended to it by the estate within a
certain period. Nowhere do we see an instruction that the
enforcement of the order of payment would have to defend
on the eviction of the occupants.
Finally, it is not meet for petitioner to argue its way out of its
obligation by citing the intervention of other parties in the
case to claim a portion of the property. As it appears in their
pleading, these parties expect to be prejudiced by the
turnover of the purchase price to the estate. They can take
care of themselves, and evidently, they are doing so by such
intervention.
IN VIEW OF THE FOREGOING, the petition is dismissed.
SO ORDERED.
Petitioners motion for reconsideration was denied in a
resolution dated February 12, 2003.
Petitioner raises the following issues:[14]
I obligations under such a deed of sale. Otherwise, they would
WHETHER OR NOT THE TRIAL COURT CAN DELEGATE THE
AUTHORITY TO HEAR AND DETERMINE THE AMOUNT TO
BE LEVIED IN A WRIT OF EXECUTION TO THE SHERIFF; AND
II
WHETHER OR NOT A PROBATE COURT HAS THE
JURISDICTION TO DETERMINE THE RIGHTS AND
OBLIGATIONS OF THE PARTIES IN A CONTRACT, ONE OF
WHICH IS A PRIVATE CORPORATION.
Petitioner argues as follows:
1. the writ of execution dated October 5, 2000 sought to be
quashed by petitioner is inherently defective, as it gives the
sheriff the authority to determine the amount to be levied in
violation of the mandatory provision of Section 8(e), Rule 39
of the 1997 Rules of Civil Procedure;
2. the quashal of the writ of execution issued by public
respondent is necessary and proper because, aside from
being inherently defective, it is the product of a null and void
proceedings because the jurisdiction to determine the rights
and obligations of petitioner and private respondent under
the Agreement for Sale of Land with Downpayment
exclusively belongs to courts of general jurisdiction;
3. the writ of execution sought to be quashed by petitioner
is not one of those allowed to be issued by probate courts
under Section 6, Rule 88; Section 3, Rule 90 and Section 13,
Rule 142 of the Revised Rules of Court;
4. the writ of execution violates the doctrine that a contract
is the law between parties, and courts have no choice but to
enforce such contract so long as it is not contrary to law,
morals, customs or public policy;
5. there was a supervening cause which made the
implementation of the subject writ of execution unjust and
inequitable; and
6. certiorari is the appropriate remedy to assail the subject
orders of public respondent for being issued outside or in
excess of his jurisdiction.
The petition is denied.
As correctly held by the CA, there was no discretion given to
the sheriff as to the amount to be paid or executed on under
the writ of execution. While the writ of execution did say . . .
the sum of P4,259,400.00, . . . minus the expenses incurred by
WT Construction in ejecting the occupants of the land, this
simply means that petitioner was being given a chance by the
court to reduce the aforementioned amount upon proof of
said deductible expenses, after which an alias writ would be
issued. In the absence of such proof, the sheriff would have to
execute for the full amount. And as noted by the CA, petitioner
failed to prove such expenses within the period given by the
probate/estate court. The issue is, therefore, moot.
As to petitioners argument that the probate/estate court
cannot adjudicate the rights and obligations of the parties
under the deed of sale, the CA rightly found that this was a
new issue not raised in the probate/estate court.
Furthermore, the deed of sale in question is the sale of the
property of the estate to pay for taxes, a matter definitely
within the power of the probate/estate court to order.
It is but logical that probate/estate courts can enforce
not be able to secure the proceeds to pay for the taxes and
this would defeat the purpose of the proceedings to settle the
estate. Stated otherwise, the power to enforce obligations
under the deed of sale of a property ordered sold to pay debts
of the estate is but a necessary incident of the power of a
probate/estate court to order and effect such sale in the first
place.
In fine, this Court sees no error on the part of the CA in
dismissing petitioners special civil action for certiorari.
WHEREFORE, the petition is DENIED and the Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 65592
dated July 25, 2002 and February 12, 2003, respectively, are
hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.
 BONAGA VS SOLER
GR L-15717
June 30 1961
112 Phil. 651
REYES, J.B.L., J.:
From the order dated April 30, 1959 dismissing the complaint
in Civil Case No. 2123 of the Court of First Instance of
Camarines Sur, Julian Boñaga, Administrator of the estate of
the deceased spouses Alejandro Ros and Maria Isaac, appeals
directly to this Court.
It appears that following the death of the spouses Alejandro
Ros and Maria Isaac in 1935 and 1940, respectively, intestate
proceedings for the settlement of their estate were
commenced in the Court of First Instance of Camarines Sur,
Special Proceeding No. 7194 of that court. In time, Juan Garza
was appointed administrator of the estate. Upon application,
Juan Garza was authorized by the probate court on August 29,
1944 (Annex "X") to sell certain parcels of land pertaining to
the estate. Pursuant thereto, Garza sold said parcels of land
on August 30, 1944 in favor of appellee Roberto Soler (Annex
"A"), which sale was subsequently approved on October 9,
1944 (Annex "B"). On October 14, 1944, the heirs of the
deceased wife, Maria Isaac, after having been declared as such
(Annex "B"), sold all their shares and interest over certain
parcels of land in favor of appellee Soler (Annex "C").
Sometime during the war, the records of Special Proceeding
No. 7194 were destroyed. Upon reconstitution of these
records by court order, Julian Boñaga was issued letters of
administration on September 6, 1951. On May 9, 1952, the
instant action was filed by Boñaga in his capacity as
administrator, seeking to annul the sales of August 30, 1944
and October 14, 1944 in favor of Roberto Soler on the ground
that said transactions were fraudulent, made without notice
to the heirs of Alejandro Ros of the hearing of the application
to sell, and that the sales were not beneficial to the heirs for
various reasons, and praying for reconveyance of the lands
sold, since they were fraudulently registered under Act 496 in
the name of Roberto Soler on December 17, 1949 and on
January 2, 1952, and for recovery of damages.
A motion to dismiss interposed by Soler on August 29, 1952,
alleging lack of legal capacity to sue and failure to state a
cause of action as grounds, was denied on September 17,
1952. Soler then filed his answer and counter-claim on
September 26, 1952. On June 11, 1953, Soler filed his second
motion to dismiss, raising the same grounds contained in the
first motion; this was again denied on August 29, 1953. On
July 18, 1955, Soler filed his third motion to dismiss, for the
first time raising estoppel, prescription of the action, and non-
inclusion of necessary parties, as grounds. Upon an order for
plaintiff to include the vendors in the sales as parties to the
case, the court, on August 22, 1955, denied the motion to
dismiss, but apparently without resolving the issues of
estoppel and prescription. On February 9, 1959, Soler sought
a resolution of his third motion to dismiss. On April 30, 1959,
and over plaintiff's objections, the court ordered the dismissal
of the action, sustaining the contention that as administrator
of the estate succeeding Juan Garza, plaintiff was estopped to
file an action to annul the sales, and, moreover, that the action
had prescribed. Hence, this appeal.
The sale on August 30, 1944 appears to be of 21 parcels of
abaca, coconut, forest and pasture lands, covering an
aggregate area of more than 1,001 hectares for the lump sum
of P142,800.00, Japanese currency (Annex "A"). Plaintiff-
appellant alleges (and the record nowhere indicates the
contrary), that these lands comprised almost the entire
estate. Nothing in the record would show whether, as
required by Rule 90, sections 4 and 7, the application for
authority to sell was set for hearing, or that the court ever
caused notice thereof to be issued to the heirs of Alejandro
Ros. Incidentally, these heirs seem not to have gotten any part
of the purchase price since they were then allegedly in Spain.
Yet, in the order of declaration of heirs of the wife and
approving the sale to Soler (Annex "B"), the declaration of the
heirs of the husband Alejandro Ros was expressly held in
abeyance, indicating a recognition of their existence.
Appellees maintain that the sale was made for the purpose of
paying debts, but this, at least, is controversial. Appellant
asserts that the total outstanding debts of the estate at the
time of the sale amounted to only P4,641.48, a relatively
meager sum compared to the large tracts of land sold.
We think the lower court erred in dismissing the action
without a hearing on the merits. A sale of properties of an
estate as beneficial to the interested parties, under Sections 4
and 7, Rule 90, must comply with the requisites therein
provided, which are mandatory. Among these requisites, the
fixing of the time and place of hearing for an application to
sell, and the notice thereof to the heirs, are essential; and
without them, the authority to sell, the sale itself, and the
order approving it, would be null and void ab initio (Arcilla
vs. David, 77 Phil., 718; Gabriel, et al. vs. Encarnacion, et al.,
94 Phil., 917; 50 Off. Gaz., [6] 2440, and others cited therein).
Rule 90, Section 4, does not distinguish between heirs
residing in and residing outside the Philippines. Therefore, its
requirements should apply regardless of the place of
residence required to be notified under said rule.
The contention that the sale was made under Section 2, Rule
90 (wherein notice is required only to those heirs, etc.,
residing in the Philippines), is not substantiated by the
record. Neither the deed of sale on August 30, 1944, nor the
orders issued by the probate court in connection therewith,
show whether, as required by said Section 2, the personal
properties were insufficient to pay the debts and expenses of
administration. There is not even a showing, to start with,
that the sale was made for the purpose of paying debts or
expenses of administration (or legacies), a condition which
circumscribes the applicability of that section. On the face of
the reamended complaint at any rate, it does not appear that
the contested sale was one under section 2 of Rule 90; and the
same can not be invoked to sustain the motion to dismiss.
Without reception of further evidence to determine whether
the requisites of the applicable provisions of the Rules had
been followed, the dismissal of the action was erroneous and
improvident. Plaintiff should at least have been given a
chance to prove his case.
As to the plea of estoppel, the rule is that a decedent's
representative is not estopped to question the validity of his
own void deed purporting to convey land (Chase vs.
Cartwright, 22 Am. St. Rep. 207, and cases cited; Meeks vs.
Olpherts, 25 L. Ed. [U. S.] 735; 21 Am. Jur. 756, s 667); and if
this be true of the administrator as to his own acts, a fortiori,
his successor can not be estopped to question the acts of his
predecessor that are not conformable to law (cf. Walker vs.
Portland Savings Bank, LRA 1915 E, p. 840; 21 Am. Jur. p. 820
s. 785).
We also find untenable the claim of prescription of the action.
Actions to declare the inexistence of contracts do not
prescribe (Art. 1410, N.C.C.), a principle applied even before
the effectivity of the new Civil Code (Eugenio, et al. vs.
Perdido, et al., 97 Phil., 41; citing Tipton vs. Velasco, 6 Phil., 67
and Sabas vs. Garma, 66 Phil., 471). The sale on October 14,
1944 by the heirs of Maria Isaac of whatever interests or
participation they might have in the four parcels of land
covered by the deed may be valid (De Guanzon vs. Jalandoni
and Ramos, 93 Phil., 1089; 49 Off. Gaz., [12] 5435; De Jesus vs.
Daza, 77 Phil., 152; Cea vs. C.A., 84 Phil., 798), yet it could not
have effected an immediate and absolute transfer of title to
appellee Soler over any part of the parcels of land
themselves,much less over their entirety. Necessarily, the sale
was subject to the result of the administration proceedings, a
contingency upon which the deed of sale itself expressly
founded the transaction. By its terms, not only was the
existence of possible heirs of Alejandro Ros recognized, but it
also provided for the contingency that said heirs could yet be
declared or adjudicated in the administration proceedings as
the sole owners of the four parcels being sold.

The subsequent registration of those lands covered by the

sale of October 14, 1944 and that of August 30, 1944,
allegedly in the exclusive name of appellee Roberto Soler,
gave rise to an action for reconveyance based on trust.
Assuming that this case is one of constructive trust, and under
the theory that actions to recover property held in
constructive trust would prescribe, there is here no showing
as to when the alleged fraud was discovered (Article 1391,
N.C.C.). Hence, it cannot be said that prescription has tolled
the action.

Finally, neither in the first motion to dismiss on August 29,

1952; nor in the Answer on September 26, 1952; nor in the
second motion to dismiss on June 11, 1953, was the defense
of prescription raised. From the time the complaint was filed
on May 9, 1952 to the third motion to dismiss on July 18,
1955, was a period of more than three (3) years in which it
took Soler just to raise prescription as an issue. Not having
been set up in the two (2) motions to dismiss or in the answer
as affirmative defense, it is deemed to have been waived
(Rule 9, Sec. 10; Rule 26, Sec. 8; Pascua vs. Capuyoc, 104 Phil.,
837; 57 Off. Gaz., [22] 4084). Obviously, prescription in this
case does not appear on the face of the pleadings, where
failure to plead it would not have constituted a waiver (Chua
Lamko vs. Dioso, et al., 97 Phil., 821). On the contrary, it
would appear to raise an issue of fact not contained in the
pleadings, i.e., the time the fraud was discovered. And this,
furthermore, necessitates reception of evidence.

Wherefore, the appealed order dismissing the complaint in

Civil Case No. 2123 of the court below is reversed, and the
case remanded, with instructions to proceed in accordance
with this decision. Costs against appellee Roberto Soler.

Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes,

Dizon, De Leon, and Natividad, JJ., concur.

[G.R. No. 156403. March 31, 2005]
JOSEPHINE PAHAMOTANG and ELEANOR PAHAMOTANG-
BASA, petitioners, vs. THE PHILIPPINE NATIONAL BANK
(PNB) and the HEIRS OF ARTURO ARGUNA, respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this appeal by way of a
petition for review on certiorari under Rule 45 of the Rules of
Court are the following issuances of the Court of Appeals in
CA-G.R. CV No. 65290, to wit:
1. Decision dated March 20, 2002,[1] granting the appeal and
reversing the appealed August 7, 1998 decision of the
Regional Trial Court at Davao City; and
2. Resolution dated November 20, 2002, denying herein
petitioners' motion for reconsideration.[2]
The factual background:
On July 1, 1972, Melitona Pahamotang died. She was survived
by her husband Agustin Pahamotang, and their eight (8)
children, namely: Ana, Genoveva, Isabelita, Corazon, Susana,
Concepcion and herein petitioners Josephine and Eleonor, all
surnamed Pahamotang.
On September 15, 1972, Agustin filed with the then Court of
First Instance of Davao City a petition for issuance of letters
administration over the estate of his deceased wife. The
petition, docketed as Special Case No. 1792, was raffled to
Branch VI of said court, hereinafter referred to as the
intestate court.
In his petition, Agustin identified petitioners Josephine and
Eleonor as among the heirs of his deceased spouse. It appears
that Agustin was appointed petitioners' judicial guardian in
an earlier case - Special Civil Case No. 1785 also of the CFI of
Davao City, Branch VI.
On December 7, 1972, the intestate court issued an order
granting Agustins petition.
On July 6, 1973, respondent Philippine National Bank (PNB)
and Agustin executed an Amendment of Real and Chattel
Mortgages with Assumption of Obligation. It appears that
earlier, or on December 14, 1972, the intestate court
approved the mortgage to PNB of certain assets of the estate
to secure an obligation in the amount of P570,000.00. Agustin
signed the document in behalf of (1) the estate of Melitona;
(2) daughters Ana and Corazon; and (3) a logging company
named Pahamotang Logging Enterprises, Inc. (PLEI) which
appeared to have an interest in the properties of the estate.
Offered as securities are twelve (12) parcels of registered
land, ten (10) of which are covered by transfer certificates of
title (TCT) No. 2431, 7443, 8035, 11465, 21132, 4038, 24327,
24326, 31226 and 37786, all of the Registry of Deeds of
Davao City, while the remaining two (2) parcels by TCTs No.
(3918) 1081 and (T-2947) 562 of the Registry of Deeds of
Davao del Norte and Davao del Sur, respectively.
On July 16, 1973, Agustin filed with the intestate court a
Petition for Authority To Increase Mortgage on the above
mentioned properties of the estate.
In an Order dated July 18, 1973, the intestate court granted
said petition.
On October 5, 1974, Agustin again filed with the intestate
court another petition, Petition for Declaration of Heirs And
For Authority To Increase Indebtedness, whereunder he
alleged the necessity for an additional loan from PNB to
capitalize the business of the estate, the additional loan to be
secured by additional collateral in the form of a parcel of land
covered by Original Certificate of Title (OCT) No. P-7131
registered in the name of Heirs of Melitona Pahamotang. In
the same petition, Agustin prayed the intestate court to
declare him and Ana, Genoveva, Isabelita, Corazon, Susana,
Concepcion and herein petitioners Josephine and Eleonor as
the only heirs of Melitona.
In an Order of October 19, 1974, the intestate court granted
Agustin authority to seek additional loan from PNB in an
amount not exceeding P5,000,000.00 to be secured by the
land covered by OCT No. P-7131 of the Registry of Deeds of
Davao Oriental, but denied Agustins prayer for declaration of
heirs for being premature.
On October 22, 1974, a real estate mortgage contract for
P4,500,000.00 was executed by PNB and Agustin in his
several capacities as: (1) administrator of the estate of his late
wife; (2) general manager of PLEI; (3) attorney-in-fact of
spouses Isabelita Pahamotang and Orlando Ruiz, and spouses
Susana Pahamotang and Octavio Zamora; and (4) guardian of
daughters Concepcion and Genoveva and petitioners
Josephine and Eleonor. Offered as securities for the additional
loan are three (3) parcels of registered land covered by TCTs
No. T-21132, 37786 and 43264.
On February 19, 1980, Agustin filed with the intestate court a
Petition (Request for Judicial Authority To Sell Certain
Properties of the Estate), therein praying for authority to sell
to Arturo Arguna the properties of the estate covered by TCTs
No. 7443, 8035, 11465, 24326 and 31226 of the Registry of
Deeds of Davao City, and also TCT No. (T-3918) T-1081 of the
Registry of Deeds of Davao del Norte.
On February 27, 1980, Agustin yet filed with the intestate
court another petition, this time a Petition To Sell the
Properties of the Estate, more specifically referring to the
property covered by OCT No. P-7131, in favor of PLEI.
In separate Orders both dated February 25, 1980, the
intestate court granted Agustin authority to sell estate
properties, in which orders the court also required all the
heirs of Melitona to give their express conformity to the
disposal of the subject properties of the estate and to sign the
deed of sale to be submitted to the same court. Strangely, the
two (2) orders were dated two (2) days earlier than February
27, 1980, the day Agustin supposedly filed his petition.
In a motion for reconsideration, Agustin prayed the intestate
court for the amendment of one of its February 25, 1980
Orders by canceling the requirement of express conformity of
the heirs as a condition for the disposal of the aforesaid
properties.
In its Order of January 7, 1981, the intestate court granted
Agustins prayer.
Hence, on March 4, 1981, estate properties covered by TCTs
No. 7443,11465, 24326, 31226, 8035, (T-2947) 662 and (T-
3918) T-1081, were sold to respondent Arturo Arguna, while
the property covered by OCT No. P-7131 was sold to PLEI.
Consequent to such sales, vendees Arguna and PLEI filed witt
the intestate court a motion for the approval of the
corresponding deeds of sale in their favor. And, in an Order
dated March 9, 1981, the intestate court granted the motion.
Thereafter, three (3) daughters of Agustin, namely, Ana,
Isabelita and Corazon petitioned the intestate court for the
payment of their respective shares from the sales of estate
properties, which was granted by the intestate court.
Meanwhile, the obligation secured by mortgages on the
subject properties of the estate was never satisfied. Hence, on
the basis of the real estate mortgage contracts dated July 6,
1973 and October 22, 1974, mortgagor PNB filed a petition
for the extrajudicial foreclosure of the mortgage.
Petitioner Josephine filed a motion with the intestate court
for the issuance of an order restraining PNB from
extrajudicially foreclosing the mortgage. In its Order dated
August 19, 1983, the intestate court denied Josephines
motion. Hence, PNB was able to foreclose the mortgage in its
favor.
Petitioners Josephine and Eleanor, together with their sister
Susana Pahamatong-Zamora, filed motions with the intestate
court to set aside its Orders of December 14, 1972 [Note: the
order dated July 18, 1973 contained reference to an order
dated December 14, 1972 approving the mortgage to PNB of
certain properties of the estate], July 18, 1973, October 19,
1974 and February 25, 1980.
In an Order dated September 5, 1983, the intestate court
denied the motions, explaining:
"Carefully analyzing the aforesaid motions and the grounds
relied upon, as well as the opposition thereto, the Court holds
that the supposed defects and/or irregularities complained of
are mainly formal or procedural and not substantial, for
which reason, the Court is not persuaded to still disturb all
the orders, especially that interests of the parties to the
various contracts already authorized or approved by the
Orders sought to be set aside will be adversely affected.[3]
Such was the state of things when, on March 20, 1984, in the
Regional Trial Court at Davao City, petitioners Josephine and
Eleanor, together with their sister Susana, filed their
complaint for Nullification of Mortgage Contracts and
Foreclosure Proceedings and Damages against Agustin, PNB,
Arturo Arguna, PLEI, the Provincial Sheriff of Mati, Davao
Oriental, the Provincial Sheriff of Tagum, Davao del Norte and
the City Sheriff of Davao City. In their complaint, docketed as
Civil Case No. 16,802 which was raffled to Branch 12 of the
court, the sisters Josephine, Eleanor and Susana prayed for
the following reliefs:
"1.) The real estate mortgage contracts of July 6, 1973 and
that of October 2, 1974, executed by and between defendants
PNB AND PLEI be declared null and void ab initio;
2.) Declaring the foreclosure proceedings conducted by
defendants-sheriffs, insofar as they pertain to the assets of
the estate of Melitona L. Pahamotang, including the auction
sales thereto, and any and all proceedings taken thereunder,
as null and void ab initio;
3.) Declaring the Deed of Absolute Sale, Doc. No. 473; Page
No.96; Book No.VIII, Series of 1981 of the Notarial Registry of
Paquito G. Balasabas of Davao City evidencing the
sale/transfer of the real properties described therein to
defendant Arturo S. Arguna, as null and void ab initio;
4.) Declaring the Deed of Absolute Sale, Doc. No. 474; Page No.
96, Book No. VIII, series of 1981 of the Notarial Registry of
Paquito G. Balasabas of Davao City, evidencing the
sale/transfer of real properties to PLEI as null and void ab
initio;
5.) For defendants to pay plaintiffs moral damages in such
sums as may be found to be just and equitable under the
premises;
6.) For defendants to pay plaintiffs, jointly and severally, the
expenses incurred in connection with this litigation;
7.) For defendants to pay plaintiffs, jointly and severally
attorney's fees in an amount to be proven during the trial;
8.) For defendants to pay the costs of the suit.[4]
PNB moved to dismiss the complaint, which the trial court
granted in its Order of January 11, 1985.
However, upon motion of the plaintiffs, the trial court
reversed itself and ordered defendant PNB to file its answer.
Defendant PNB did file its answer with counterclaim,
accompanied by a cross-claim against co-defendants Agustin
and PLEI.
During the ensuing pre-trial conference, the parties
submitted the following issues for the resolution of the trial
court, to wit:
"1. Whether or not the Real Estate Mortgage contracts
executed on July 6, 1973 and October 2, 1974 (sic) by and
between defendants Pahamotang Logging Enterprises, Inc.
and the Philippine National Bank are null and void?
2. Whether or not the foreclosure proceedings conducted by
defendants-Sheriffs, insofar as they affect the assets of the
Estate of Melitona Pahamotang, including the public auction
sales thereof, are null and void?
3. Whether or not the Deed of Absolute Sale in favor of
defendant Arturo Arguna entered as Doc. No. 473; Page No.
96; Book No. VIII, series of 1981 of the Notarial Register of
Notary Public Paquito Balasabas is null and void?
4. Whether or not the Deed of Absolute Sale in favor of
defendant Pahamotang Logging Enterprises, Inc. entered as
Doc. No. 474; Page No. 96; Book No. VIII, series of 1981 of the
Notarial Register of Notary Public Paquito Balasabas is null
and void?
5. On defendant PNB's cross-claim, in the event the mortgage
contracts and the foreclosure proceedings are declared null
and void, whether or not defendant Pahamotang Logging
Enterprises, Inc. is liable to the PNB?
6. Whether or not the defendants are liable to the plaintiffs
for damages?
7. Whether or not the plaintiffs are liable to the defendants
for damages?[5]
With defendant Arturo Argunas death on October 31, 1990,
the trial court ordered his substitution by his heirs: Heirs of
Arturo Alguna.
In a Decision dated August 7, 1998, the trial court in effect
rendered judgment for the plaintiffs. We quote the decisions
dispositive portion:
"WHEREFORE, in view of all the foregoing, judgment is
hereby rendered as follows:
1. Declaring the Mortgage Contracts of July 6, 1973 and
October 22, 1974, as well as the foreclosure proceedings, void
insofar as it affects the share, interests and property rights of
the plaintiffs in the assets of the estate of Melitona
Pahamotang, but valid with respect to the other parties;
2. Declaring the deeds of sale in favor of defendants
Pahamotang Logging Enterprises, Inc. and Arturo Arguna as
void insofar as it affects the shares, interests and property
rights of herein plaintiffs in the assets of the estate of
Melitona Pahamotang but valid with respect to the other
parties to the said deeds of sale.
3. Denying all the other claims of the parties for lack of strong,
convincing and competent evidence.
No pronouncement as to costs.
SO ORDERED.[6]
From the aforementioned decision of the trial court, PNB,
PLEI and the Heirs of Arturo Arguna went on appeal to the
Court of Appeals in CA-G.R. CV No. 65290. While the appeal
was pending, the CA granted the motion of Susana
Pahamatong-Zamora to withdraw from the case.
As stated at the threshold hereof, the Court of Appeals, in its
Decision dated March 20, 2002,[7] reversed the appealed
decision of the trial court and dismissed the petitioners
complaint in Civil Case No. 16,802, thus:
WHEREFORE, the appeal is hereby GRANTED. The assailed
August 07, 1998 Decision rendered by the Regional Trial
Court of Davao City, Branch 12, is hereby REVERSED and SET
ASIDE and a new one is entered DISMISSING the complaint
filed in Civil Case No. 16,802.
SO ORDERED.
The appellate court ruled that petitioners, while ostensibly
questioning the validity of the contracts of mortgage and sale
entered into by their father Agustin, were essentially
attacking collaterally the validity of the four (4) orders of the
intestate court in Special Case No. 1792, namely:
1. Order dated July 18, 1973, granting Agustins Petition for
Authority to Increase Mortgage;
2. Order dated October 19, 1974, denying Agustins petition
for declaration of heirs but giving him authority to seek
additional loan from PNB;
3. Order dated February 25, 1980, giving Agustin permission
to sell properties of the estate to Arturo Arguna and PLEI; and
4. Order dated January 7, 1981, canceling the requirement of
express conformity by the heirs as a condition for the
disposal of estate properties.
To the appellate court, petitioners committed a fatal error of
mounting a collateral attack on the foregoing orders instead
of initiating a direct action to annul them. Explains the Court
of Appeals:
"A null and void judgment is susceptible to direct as well as
collateral attack. A direct attack against a judgment is made
through an action or proceeding the main object of which is to
annul, set aside, or enjoin the enforcement of such judgment,
if not carried into effect; or if the property has been disposed
of, the aggrieved party may sue for recovery. A collateral
attack is made when, in another action to obtain a different
relief, an attack on the judgment is made as an incident in said
action. This is proper only when the judgment, on its fact, is
null and void, as where it is patent that the court which
rendered such judgment has no jurisdiction. A judgment void
on its face may also be attacked directly.
xxx xxx xxx
Perusing the above arguments and comparing them with the
settled ruling, the plaintiffs-appellees [now petitioners], we
believe had availed themselves of the wrong remedy before
the trial court. It is clear that they are collaterally attacking
the various orders of the intestate court in an action for the
nullification of the subject mortgages, and foreclosure
proceedings in favor of PNB, and the deeds of sale in favor of
Arguna. Most of their arguments stemmed from their
allegations that the various orders of the intestate court were
issued without a notification given to them. An examination,
however, of the July 18, 1973 order shows that the heirs of
Melitona have knowledge of the petition to increase mortgage
filed by Agustin, thus:
`The petitioner testified that all his children including those
who are of age have no objection to this petition and, as
matter of fact, Ana Pahamotang, one of the heirs of Melitona
Pahamotang, who is the vice-president of the logging
corporation, is the one at present negotiating for the increase
of mortgage with the Philippine National Bank.'
The presumption arising from those statements of the
intestate court is that the heirs were notified of the petition
for the increase of mortgage.
The same can be seen in the October 19, 1974 order:
`The records show that all the known heirs, namely Ana,
Isabelita, Corazon, Susana, including the incompetent
Genoveva, and the minors Josephine, Eleanor and Concepcion
all surnamed were notified of the hearing of the petition.'
On the other hand, the February 25, 1980 order required
Agustin to obtain first express conformity from the heirs
before the subject property be sold to Arguna. The fact that
this was reconsidered by the intestate court in its January 07,
1981 is of no moment. The questioned orders are valid having
been issued in accordance with law and procedure. The
problem with the plaintiffs-appellees is that, in trying to
nullify the subject mortgages and the foreclosure proceedings
in favor of PNB and the deeds of sale in favor of Arguna, they
are assailing the aforesaid orders of the intestate court and in
attacking the said orders, they attached documents that they
believe would warrant the conclusion that the assailed orders
are null and void. This is a clear collateral attack of the orders
of the intestate court which is not void on its face and which
cannot be allowed in the present action. The defects alleged
by the plaintiff-appellees are not apparent on the face of the
assailed orders. Their recourse is to ask for the declaration of
nullity of the said orders, not in a collateral manner, but a
direct action to annul the same.[8]
The same court added that petitioners failure to assail said
orders at the most opportune time constitutes laches:
"In their complaint below, plaintiffs, appellees are assailing in
their present action, four orders of the intestate court namely:
July 18, 1973, October 19, 1974, February 25, 1980 and
January 07, 1981 orders which were then issued by Judge
Martinez. It should be recalled that except for the January 07,
1981 order, Judge Jacinto, upon taking over Sp. No. 1792,
denied the motion of the plaintiffs-appellees to set aside the
aforesaid orders. Aside from their motion before Judge
Jacinto, nothing on the records would show that the plaintiffs-
appellees availed of other remedies to set aside the
questioned orders. Further, the records would not show that
the plaintiffs-appellees appealed the order of Judge Jacinto. If
an interval of two years, seven months and ninety nine days
were barred by laches, with more reason should the same
doctrine apply to the present case, considering that the
plaintiffs-appellees did not avail of the remedies provided by
law in impugning the various orders of the intestate court.
Thus, the questioned orders of the intestate court, by
operation of law became final. It is a fundamental principle of
public policy in every jural system that at the risk of
occasional errors, judgments of courts should become final at
some definite time fixed by law (interest rei publicae ut finis
sit litum). The very object of which the courts were
constituted was to put an end to controversies. Once a
judgment or an order of a court has become final, the issues
raised therein should be laid to rest. To date, except as to the
present action which we will later discuss as improper, the
plaintiff-appellees have not availed themselves of other
avenues to have the orders issued by Judge Martinez and
Judge Jacinto annulled and set aside. In the present case,
when Judge Jacinto denied the motion of the plaintiffs-
appellees, the latter had remedies provided by the rules to
assail such order. The ruling by Judge Jacinto denying
plaintiffs-appellees motion to set aside the questioned orders
of Judge Martinez has long acquired finality. It is well
embedded in our jurisprudence, that judgment properly
rendered by a court vested with jurisdiction, like the RTC, and
which has acquired finality becomes immutable and
unalterable, hence, may no longer be modified in any respect
except only to correct clerical errors or mistakes. Litigation
must have and always has an end. If not, judicial function will
lose its relevance.
In time, petitioners moved for a reconsideration but their
motion was denied by the appellate court in its Resolution of
November 20, 2002.
Hence, petitioners present recourse, basically praying for the
reversal of the CA decision and the reinstatement of that of
the trial court.
We find merit in the petition.
It is petitioners posture that the mortgage contracts dated
July 6, 1973 and October 22, 1974 entered into by Agustin
with respondent PNB, as well as his subsequent sale of estate
properties to PLEI and Arguna on March 4, 1981, are void
because they [petitioners] never consented thereto. They
assert that as heirs of their mother Melitona, they are entitled
to notice of Agustin's several petitions in the intestate court
seeking authority to mortgage and sell estate properties.
Without such notice, so they maintain, the four orders of the
intestate court dated July 18, 1973, October 19, 1974,
February 25, 1980 and January 7, 1981, which allowed
Agustin to mortgage and sell estate properties, are void on
account of Agustins non-compliance with the mandatory
requirements of Rule 89 of the Rules of Court.
Prescinding from their premise that said orders are
completely void and hence, could not attain finality,
petitioners maintain that the same could be attacked directly
or collaterally, anytime and anywhere.
For its part, respondent PNB asserts that petitioners cannot
raise as issue in this proceedings the validity of the subject
orders in their desire to invalidate the contracts of mortgage
entered into by Agustin. To PNB, the validity of the subject
orders of the intestate court can only be challenged in a direct
action for such purpose and not in an action to annul
contracts, as the petitioners have done. This respondent adds
that the mortgage on the subject properties is valid because
the same was made with the approval of the intestate court
and with the knowledge of the heirs of Melitona, petitioners
included.[9]
Upon the other hand, respondent Heirs of Arturo Arguna
likewise claim that petitioners knew of the filing with the
intestate court by Agustin of petitions to mortgage and sell
the estate properties. They reecho the CAs ruling that
petitioners are barred by laches in filing Civil Case No.
16,802.[10]
As we see it, the determinative question is whether or not
petitioners can obtain relief from the effects of contracts of
sale and mortgage entered into by Agustin without first
initiating a direct action against the orders of the intestate
court authorizing the challenged contracts.
We answer the question in the affirmative.
It bears emphasizing that the action filed by the petitioners
before the trial court in Civil Case No. 16,802 is for the
annulment of several contracts entered into by Agustin for
and in behalf of the estate of Melitona, namely: (a) contract of
mortgage in favor of respondent PNB, (b) contract of sale in
favor of Arguna involving seven (7) parcels of land; and (c)
contract of sale of a parcel of land in favor of PLEI.
The trial court acquired jurisdiction over the subject matter
of the case upon the allegations in the complaint that said
contracts were entered into despite lack of notices to the
heirs of the petition for the approval of those contracts by the
intestate court.
Contrary to the view of the Court of Appeals, the action which
petitioners lodged with the trial court in Civil Case No. 16,802
is not an action to annul the orders of the intestate court,
which, according to CA, cannot be done collaterally. It is the
validity of the contracts of mortgage and sale which is directly
attacked in the action.
And, in the exercise of its jurisdiction, the trial court made a
factual finding in its decision of August 7, 1998 that
petitioners were, in fact, not notified by their father Agustin
of the filing of his petitions for permission to mortgage/sell
the estate properties. The trial court made the correct
conclusion of law that the challenged orders of the intestate
court granting Agustins petitions were null and void for lack
of compliance with the mandatory requirements of Rule 89 of
the Rules of Court, particularly Sections 2, 4, 7 thereof, which
respectively read:
Sec. 2. When court may authorize sale, mortgage, or other
encumbrance of realty to pay debts and legacies through
personalty not exhausted. - When the personal estate of the
deceased is not sufficient to pay the debts, expenses of
administration, and legacies, or where the sale of such
personal estate may injure the business or other interests of
those interested in the estate, and where a testator has not
otherwise made sufficient provision for the payment of such
debts, expenses, and legacies, the court, on the application of
the executor or administrator and on written notice to the
heirs, devisees, and legatees residing in the Philippines, may
authorize the executor or administrator to sell, mortgage, or
otherwise encumber so much as may be necessary of the real
estate, in lieu of personal estate, for the purpose of paying
such debts, expenses, and legacies, if it clearly appears that
such sale, mortgage, or encumbrance would be beneficial to
the persons interested; and if a part cannot be sold,
mortgaged, or otherwise encumbered without injury to those
interested in the remainder, the authority may be for the sale,
mortgage, or other encumbrance of the whole of such real
estate, or so much thereof as is necessary or beneficial under
the circumstances.
Sec. 4. When court may authorize sale of estate as beneficial
to interested persons. Disposal of proceeds. - When it appears
that the sale of the whole or a part of the real or personal
estate, will be beneficial to the heirs, devisees, legatees, and
other interested persons, the court may, upon application of
the executor or administrator and on written notice to the
heirs, devisees and legatees who are interested in the estate
to be sold, authorize the executor or administrator to sell the
whole or a part of said estate, although not necessary to pay
debts, legacies, or expenses of administration; but such
authority shall not be granted if inconsistent with the
provisions of a will. In case of such sale, the proceeds shall be
assigned to the persons entitled to the estate in the proper
proportions.
Sec. 7. Regulations for granting authority to sell, mortgage, or
otherwise encumber estate. - The court having jurisdiction of
the estate of the deceased may authorize the executor or
administrator to sell personal estate, or to sell, mortgage, or
otherwise encumber real estate; in cases provided by these
rules and when it appears necessary or beneficial, under the
following regulations:
(a) The executor or administrator shall file a written petition
setting forth the debts due from the deceased, the expenses of
administration, the legacies, the value of the personal estate,
the situation of the estate to be sold, mortgaged, or otherwise
encumbered, and such other facts as show that the sale,
mortgage, or other encumbrance is necessary or beneficial;
(b) The court shall thereupon fix a time and place for hearing
such petition, and cause notice stating the nature of the
petition, the reason for the same, and the time and place of
hearing, to be given personally or by mail to the persons
interested, and may cause such further notice to be given, by
publication or otherwise, as it shall deem proper; (Emphasis
supplied).
xxx xxx xxx
Settled is the rule in this jurisdiction that when an order
authorizing the sale or encumbrance of real property was
issued by the testate or intestate court without previous
notice to the heirs, devisees and legatees as required by the
Rules, it is not only the contract itself which is null and void
but also the order of the court authorizing the same.[11]
Thus, in Maneclang vs. Baun,[12] the previous administrator
of the estate filed a petition with the intestate court seeking
authority to sell portion of the estate, which the court granted
despite lack of notice of hearing to the heirs of the decedent.
The new administrator of the estate filed with the Regional
Trial Court an action for the annulment of the sales made by
the previous administrator. After trial, the trial court held
that the order of the intestate court granting authority to sell,
as well as the deed of sale, were void. On appeal directly to
this Court, We held that without compliance with Sections 2,
4 and 7 of Rule 89 of the Rules of Court, the authority to sell,
the sale itself and the order approving it would be null and
void ab initio.
In Liu vs. Loy, Jr.,[13] while the decedent was still living, his
son and attorney-in-fact sold in behalf of the alleged decedent
certain parcels of land to Frank Liu. After the decedent died,
the son sold the same properties to two persons. Upon an ex
parte motion filed by the 2nd set of buyers of estate
properties, the probate court approved the sale to them of
said properties. Consequently, certificates of title covering the
estate properties were cancelled and new titles issued to the
2nd set of buyers. Frank Liu filed a complaint for
reconveyance/ annulment of title with the Regional Trial
Court. The trial court dismissed the complaint and the Court
of Appeals affirmed the dismissal. When the case was
appealed to us, we set aside the decision of the appellate
court and declared the probate court's approval of the sale as
completely void due to the failure of the 2nd set of buyers to
notify the heir-administratrix of the motion and hearing for
the sale of estate property.
Clearly, the requirements of Rule 89 of the Rules of Court are
mandatory and failure to give notice to the heirs would
invalidate the authority granted by the intestate/probate
court to mortgage or sell estate assets.
Here, it appears that petitioners were never notified of the
several petitions filed by Agustin with the intestate court to
mortgage and sell the estate properties of his wife.
According to the trial court, the [P]etition for Authority to
Increase Mortgage and [P]etition for Declaration of Heirs and
for Authority to Increase Indebtedness, filed by Agustin on
July 16, 1973 and October 5, 1974, respectively, do not
contain information that petitioners were furnished with
copies of said petitions. Also, notices of hearings of those
petitions were not sent to the petitioners.[14] The trial court
also found in Civil Case No. 16,802 that Agustin did not notify
petitioners of the filing of his petitions for judicial authority to
sell estate properties to Arturo Arguna and PLEI.[15]
As it were, the appellate court offered little explanation on
why it did not believe the trial court in its finding that
petitioners were ignorant of Agustins scheme to mortgage
and sell the estate properties.
Aside from merely quoting the orders of July 18, 1973 and
October 19, 1974 of the intestate court, the Court of Appeals
leaves us in the dark on its reason for disbelieving the trial
court. The appellate court did not publicize its appraisal of
the evidence presented by the parties before the trial court in
the matter regarding the knowledge, or absence thereof, by
the petitioners of Agustins petitions. The appellate court
cannot casually set aside the findings of the trial court
without stating clearly the reasons therefor. Findings of the
trial court are entitled to great weight, and absent any
indication to believe otherwise, we simply cannot adopt the
conclusion reached by the Court of Appeals.
Laches is negligence or omission to assert a right within a
reasonable time, warranting the presumption that the party
entitled to assert it has either abandoned or declined the
right.[16] The essential elements of laches are: (1) conduct on
the part of the defendant, or of one under whom he claims,
giving rise to the situation of which complaint is made and for
which the complaint seeks a remedy; (2) delay in asserting
the complainant's rights, the complainant having had
knowledge or notice of the defendant's conduct and having
been afforded an opportunity to institute a suit; (3) lack of
knowledge or notice on the part of the defendant that the
complainant would assert the right on which he bases his
suit; and (4) injury or prejudice to the defendant in the event
relief is accorded to the complainant, or the suit is not held
barred.[17]
In the present case, the appellate court erred in appreciating
laches against petitioners. The element of delay in
questioning the subject orders of the intestate court is sorely
lacking. Petitioners were totally unaware of the plan of
Agustin to mortgage and sell the estate properties. There is
no indication that mortgagor PNB and vendee Arguna had
notified petitioners of the contracts they had executed with
Agustin. Although petitioners finally obtained knowledge of
the subject petitions filed by their father, and eventually
challenged the July 18, 1973, October 19, 1974, February 25,
1980 and January 7, 1981 orders of the intestate court, it is
not clear from the challenged decision of the appellate court
when they (petitioners) actually learned of the existence of
said orders of the intestate court. Absent any indication of the
point in time when petitioners acquired knowledge of those
orders, their alleged delay in impugning the validity thereof
certainly cannot be established. And the Court of Appeals
cannot simply impute laches against them.
WHEREFORE, the assailed issuances of the Court of Appeals
are hereby REVERSED and SET ASIDE and the decision dated
August 7, 1998 of the trial court in its Civil Case No. 16,802
REINSTATED. SO ORDERED.
 CORITO OCAMPO TAYAG VS. CA
G.R. No. 95229
REGALADO, J.:
The instant petition seeks to reverse and set aside the
decision[1] of respondent Court of Appeals in CA-G.R. SP No.
20222, entitled "Corito Ocampo Tayag vs. Hon. Norberto C.
Ponce, Judge, Regional Trial Court of San Fernando,
Pampanga and Emilie Dayrit Cuyugan," promulgated on May
10, 1990, and its resolution denying petitioner's motion for
reconsideration.[2] Said decision, now before us for review,
dismissed petitioner's Petition for Certiorari and Prohibition
with Preliminary Injunction on the ground that the denial of
the motion to dismiss Civil Case No. 7938 of the court a quo is
an interlocutory order and cannot be the subject of the said
special civil action, ordinary appeal in due time being
petitioner's remedy.
In said Civil Case No. 7938, herein private respondent, in her
capacity as mother and legal guardian of minor Chad D.
Cuyugan, filed on April 9, 1987 a complaint denominated
"Claim for Inheritance" against herein petitioner as the
administratrix of the estate of the late Atty. Ricardo Ocampo.
The operative allegations in said complaint are as follows:
xxx
"2. Plaintiff is the mother and legal guardian of her minor son,
Chad Cuyugan, by the father of the defendant, the late Atty.
Ricardo Ocampo; and the defendant is the known
administratrix of the real and personal properties left by her
deceased father, said Atty. Ocampo, who died intestate in
Angeles City on September 28, 1983;
"3. Plaintiff has been estranged from her husband, Jose
Cuyugan, for several years now and during which time,
plaintiff and Atty. Ricardo Ocampo had illicit amorous
relationship with each other that, as a consequence thereof,
begot a child who was christened Chad Cuyugan in
accordance with the ardent desire and behest of said Atty.
Ocampo;
"4. Chad, the son of plaintiff by the late Atty. Ricardo Ocampo,
who was born in Angeles City on October 5, 1980 had been
sired, showered with exceptional affection, fervent love and
care by his putative father for being his only son as can be
gleaned from indubitable letters and documents of the late
Atty. Ocampo to herein plaintiff, excerpts from some of which
are hereunder reproduced:
'x x x Keep good keep faith keep Chad and yourself for me
alone and for me all the time. As I have now I shall save my
heart to you and to Chad.'
'x x x Please take good care and pray to Sto. Niño for our sake
and for the child sake.'
'x x x Keep him. Take good care of him.'
'x x x I'm proud that you are his mother ...I'm proud of him
and you. Let me bless him by my name and let me entitle him
to all what I am and what I've got.'
'x x x I have vowed to recognize him and be my heir.'
'x x x How is CHAD and you...'
'x x x Why should we not start now to own him, jointly against
the whole world. After all we love each other and CHAD is the
product of our love."
"5. The minor, Chad D. Cuyugan, although illegitimate is
nevertheless entitled to a share in the intestate estate left by
his deceased father, Atty. Ricardo Ocampo as one of the
surviving heirs;
"6. The deceased Atty. Ricardo Ocampo, at the time of his
death was the owner of real and personal property, located in
Baguio City, Angeles City and in the Province of Pampanga
with approximate value of several millions of pesos;
"7. The estate of the late Atty. Ocampo has not as yet been
inventoried by the defendant and the inheritance of the
surviving heirs including that of said Chad has not likewise
been ascertained;
"8. The only known surviving heirs of the deceased Atty.
Ricardo Ocampo are his children, namely: Corito O. Tayag,
Rivina O. Tayag, Evita O. Florendo, Felina Ocampo, and said
minor Chad, for and in whose behalf this instant complaint is
filed;
"9. Plaintiff has no means of livelihood and she only depends
on the charity of friends and relatives for the sustenance of
her son, Chad, such that it is urgent, necessary and imperative
that said child be extended financial support from the estate
of his putative father, Atty. Ricardo Ocampo;
"10. Several demands, verbal and written, have been made for
defendant to grant Chad's lawful inheritance, but despite said
demands, defendant failed and refused and still fails and
refuses to satisfy the claim for inheritance against the estate
of the late Atty. Ocampo;"[3]
xxx
Plaintiff thereafter prays, among others, that judgment be
rendered ordering defendant to render an inventory and
accounting of the real and personal properties left by Atty.
Ricardo Ocampo; to determine and deliver the share of the
minor child Chad in the estate of the deceased; and to give
him support pendente lite.
Petitioner, as defendant therein, filed her answer with
counterclaim on June 3, 1987, disputing the material
allegations in the complaint. She maintained by way of
affirmative defenses, inter alia, that the complaint states no
cause of action; that the action is premature; that the suit is
barred by prescription; that respondent Cuyugan has no legal
and judicial personality to bring the suit; that the lower court
has no jurisdiction over the nature of the action; and that
there is improper joinder of causes of action.[4]
After the hearing of the motion to dismiss on the grounds
asserted as affirmative defenses, the trial court issued the
following order on October 20, 1987:
xxx
"The Court is of the considered opinion that there is a need of
further proceedings to adduce evidence on the various claims
of the parties so as to hear their respective sides.
"WHEREFORE, resolution on the preliminary hearing which
partakes of the nature of a motion to dismiss requiring
additional evidence is in the meantime held in abeyance. The
Motion to Dismiss is hereby denied and the case is set for pre-
trial x x x ."[5]
With the denial of her motion for reconsideration of said
order on November 19, 1987,[6] petitioner filed on December
10, 1987 a petition for certiorari and prohibition before the
Court of Appeals, docketed therein as CA-G.R. SP No. 13464,
which was granted by the Sixth Division of respondent court
on August 2, 1989 and enjoined respondent judge to resolve
petitioner's motion praying for the dismissal of the complaint
based on the affirmative defenses within ten (10) days from
notice thereof.[7]
In compliance with said decision of respondent court, the trial
court acted on and thereafter denied the motion to dismiss,
which had been pleaded in the affirmative defenses in Civil
Case No. 7938, in an order dated October 24, 1989, resolving
the said motion in the following manner:
xxx
"The Court now resolves:
No. 1. The complaint sufficiently shows that a cause of action
exists in favor of the plaintiff. A cause of action being the
'primary right to redress a wrong' (Marquez vs. Valera, 48 OG
5272), which apparently on the face of the complaint, plaintiff
has a right to enforce through this case. Defendant's
protestation that there is no sufficient cause of action is
therefore untenable.
No. 2. The present action, despite the claim of defendant is
not premature. It is exactly filed in order to prove filiation,
and then recognition. To go about the step by step procedure
outlined by the defendant by filing one action after another is
definitely violative of the prohibition against splitting a cause
of action.
No. 3. It is not the plaintiff that is now bringing the case
before the Court. It is (her) spurious child that she represents
as natural guardian that is instituting the action.
No. 4. Prescription has not set in if we consider that a
spurious child may file an action for recognition within four
years from his attainment of majority (New Civil Code, Art.
285, No. 2). Whether the letters of the putative father, Atty.
Ocampo, is evidence, that should be inquired into in a hearing
on the merits.
No. 5. Several causes of action may be joined in one complaint
as was done in this case. The defendant's claim that there was
a misjoinder is untenable.
No. 6. The Court being a court of general jurisdiction, and of
special jurisdiction, such as a probate court has capacity to
entertain a complaint such as the one now before it.
"The nature of the case 'CLAIM FOR INHERITANCE' does not
control the body of the complaint.
"From all the foregoing, the Court finds that the complaint is
sufficient in form and substance and, therefore, the motion to
dismiss could not be granted until after trial on the merits in
which it should be shown that the allegations of the complaint
are unfounded or a special defense to the action exists.
"WHEREFORE, the Motion to Dismiss is hereby DENIED."[8]
Petitioner's motion for reconsideration of said order was
denied by the trial court on January 30, 1990.[9] As a
consequence, another petition for certiorari and prohibition
with preliminary injunction was filed by petitioner on March
12, 1990 with respondent court, docketed as CA-G.R. SP No.
20222, praying that the orders dated October 24, 1989 and
January 30, 1990 of the trial court be annulled and set aside
for having been issued with grave abuse of discretion
amounting to lack or excess of jurisdiction.
On May 10, 1990, as earlier stated, respondent court
promulgated its decision dismissing the petition, and likewise
denied petitioner's motion for reconsideration in a resolution
dated September 5, 1990, hence the present petition for
review on certiorari.
In elevating the case before us, petitioner relies on these
grounds:
"a. The Honorable Respondent Court of Appeals dismissed
Petitioner's Petition for Certiorari and Prohibition in UTTER
DISREGARD OF APPLICABLE DECISIONS OF THIS
HONORABLE COURT providing clear exceptions to the
general rule that interlocutory orders may not be elevated by
way of the special civil action of certiorari;
"b. Respondent Court refused to resolve certain issues raised
by Petitioner before the Regional Trial Court and before
Respondent Court of Appeals involving QUESTIONS OF
SUBSTANCE not theretofore determined by this Honorable
Court, such as the interpretation and application of Art. 281 of
the Civil Code requiring judicial approval when the
recognition of an illegitimate minor child does not take place
in a record of birth or in a will; of Art. 175, Par. 2, in relation
to Art. 172, Par. 2 of the Family Code, providing for the
prescriptive period with respect to the action to establish
illegitimate filiation; and of Art. 285 of the Civil Code,
providing for the prescriptive period with respect to the
action for recognition of a natural child; and
"c. Respondent Court has sanctioned a DEPARTURE by the
Regional Trial Court from the accepted and usual course of
judicial proceedings."[10]
Petitioner contends that the action to claim for inheritance
filed by herein private respondent in behalf of the minor
child, Chad Cuyugan, is premature and the complaint states
no cause of action. She submits that the recognition of the
minor child, either voluntarily or by judicial action, by the
alleged putative father must first be established before the
former can invoke his right to succeed and participate in the
estate of the latter. Petitioner asseverates that since there is
no allegation of such recognition in the complaint
denominated as "Claim for Inheritance," then there exists no
basis for private respondent's aforesaid claim and,
consequently, the complaint should be dismissed.
The instant case is similar to the case of Paulino vs. Paulino, et
al.,[11] wherein the petitioner, as plaintiff, brought an action
against the private respondents, as defendants, to compel
them to give her share of inheritance in the estate of the late
Marcos Paulino, claiming and alleging, inter alia, that she is
the illegitimate child of the deceased; that no proceedings for
the settlement of the deceased's estate had been commenced
in court; and that the defendants had refused and failed to
deliver her share in the estate of the deceased. She
accordingly prayed that the defendants therein be ordered to
deliver her aforesaid share. The defendants moved for the
dismissal of her complaint on the ground that it states no
cause of action and that, even if it does, the same is barred by
prescription.
The only difference between the aforecited case and the case
at bar is that at the time of the filing of the complaint therein,
the petitioner in that case had already reached the age of
majority, whereas the claimant in the present case is still a
minor. In Paulino, we held that an illegitimate child, to be
entitled to support and successional rights from the putative
or presumed parent, must prove his filiation to the latter. We
also said that it is necessary to allege in the complaint that the
putative father had acknowledged and recognized the
illegitimate child because such acknowledgment is essential
to and is the basis of the right to inherit. There being no
allegation of such acknowledgment, the action becomes one
to compel recognition which cannot be brought after the
death of the putative father. The ratio decidendi in Paulino,
therefore, is not the absence of a cause of action for failure of
the petitioner to allege the fact of acknowledgment in the
complaint, but the prescription of the action.
Applying the foregoing principles to the case at bar, although
petitioner contends that the complaint filed by herein private
respondent merely alleges that the minor Chad Cuyugan is an
illegitimate child of the deceased and is actually a claim for
inheritance, from the allegations therein the same may be
considered as one to compel recognition. Further, that the
two causes of action, one to compel recognition and the other
to claim inheritance, may be joined in one complaint is not
new in our jurisprudence.
As early as 1922, we had occasion to rule thereon in Briz vs.
Briz, et al.,[12] wherein we said:
"The question whether a person in the position of the present
plaintiff can in any event maintain a complex action to compel
recognition as a natural child and at the same time to obtain
ulterior relief in the character of heir, is one which in the
opinion of this court must be answered in the affirmative,
provided always that the conditions justifying the joinder of
the two distinct causes of action are present in the particular
case. In other words, there is no absolute necessity requiring
that the action to compel acknowledgment should have been
instituted and prosecuted to a successful conclusion prior to
the action in which that same plaintiff seeks additional relief
in the character of heir. Certainly, there is nothing so peculiar
to the action to compel acknowledgment as to require that a
rule should be here applied different from that generally
applicable in other cases. x x x .
"The conclusion above stated, though not heretofore
explicitly formulated by this court, is undoubtedly to some
extent supported by our prior decisions. Thus, we have held
in numerous cases, and the doctrine must be considered well
settled, that a natural child having a right to compel
acknowledgment, but who has not been in fact legally
acknowledged, may maintain partition proceedings for the
division of the inheritance against his coheirs x x x; and the
same person may intervene in proceedings for the
distribution of the estate of his deceased natural father, or
mother x x x. In neither of these situations has it been thought
necessary for the plaintiff to show a prior decree compelling
acknowledgment. The obvious reason is that in partition suits
and distribution proceedings the other persons who might
take by inheritance are before the court; and the declaration
of heirship is appropriate to such proceedings."
The next question to be resolved is whether the action to
compel recognition has prescribed.
Petitioner argues that assuming arguendo that the action is
one to compel recognition, private respondent's cause of
action has prescribed for the reason that since filiation is
sought to be proved by means of a private handwritten
instrument signed by the parent concerned, then under
paragraph 2, Article 175 of the Family Code, the action to
establish filiation of the illegitimate minor child must be
brought during the lifetime of the alleged putative father. In
the case at bar, considering that the complaint was filed after
the death of the alleged parent, the action has prescribed and
this is another ground for the dismissal of the complaint.
Petitioner theorizes that Article 285 of the Civil Code is not
applicable to the case at bar and, instead, paragraph 2, Article
175 of the Family Code should be given retroactive effect. The
theory is premised on the supposition that the latter
provision of law being merely procedural in nature, no vested
rights are created, hence it can be made to apply
retroactively.
Article 285 of the Civil Code provides:
"Art. 285. The action for the recognition of natural children
may be brought only during the lifetime of the presumed
parents, except in the following cases:
(1) If the father or mother died during the minority of the
child, in which case the latter may file the action before the
expiration of four years from the attainment of his majority;"
xxx
On the other hand, Article 175 of the Family Code reads:
"Art. 175. Illegitimate children may establish their illegitimate
filiation in the same way and on the same evidence as
legitimate children.
The action must be brought within the same period specified
in Article 173, except when the action is based on the second
paragraph of Article 172, in which case the action may be
brought during the lifetime of the alleged parent."
Under the last-quoted provision of law, therefore, if the action
is based on the record of birth of the child, a final judgment,
or an admission by the parent of the child's filiation in a
public document or in a private handwritten signed
instrument, then the action may be brought during the
lifetime of the child. However, if the action is based on the
open and continuous possession by the child of the status of
an illegitimate child, or on other evidence allowed by the
Rules of Court and special laws, the view has been expressed
that the action must be brought during the lifetime of the
alleged parent.[13]
Petitioner submits that Article 175 of the Family Code applies
in which case the complaint should have been filed during the
lifetime of the putative father, failing which the same must be
dismissed on the ground of prescription. Private respondent,
however, insists that Article 285 of the Civil Code is
controlling and, since the alleged parent died during the
minority of the child, the action for filiation may be filed
within four years from the attainment of majority of the
minor child.
Article 256 of the Family Code states that "[t]his Code shall
have retroactive effect insofar as it does not prejudice or
impair vested or acquired rights in accordance with the Civil
Code or other laws." It becomes essential, therefore, to
determine whether the right of the minor child to file an
action for recognition is a vested right or not.
Under the circumstances obtaining in the case at bar, we hold
that the right of action of the minor child has been vested by
the filing of the complaint in court under the regime of the
Civil Code and prior to the effectivity of the Family Code.[14]
We herein adopt our ruling in the recent case of Republic of
the Philippines vs. Court of Appeals, et al.[15] where we held
that the fact of filing of the petition already vested in the
petitioner her right to file it and to have the same proceed to
final adjudication in accordance with the law in force at the
time, and such right can no longer be prejudiced or impaired
by the enactment of a new law.
Even assuming ex gratia argumenti that the provision of the
Family Code in question is procedural in nature, the rule that
a statutory change in matters of procedure may affect
pending actions and proceedings, unless the language of the
act excludes them from its operation, is not so pervasive that
it may be used to validate or invalidate proceedings taken
before it goes into effect, since procedure must be governed
by the law regulating it at the time the question of procedure
arises especially where vested rights may be prejudiced.
Accordingly, Article 175 of the Family Code finds no proper
application to the instant case since it will ineluctably affect
adversely a right of private respondent and, consequentially,
of the minor child she represents, both of which have been
vested with the filing of the complaint in court. The trial court
is, therefore, correct in applying the provisions of Article 285
of the Civil Code and in holding that private respondent's
cause of action has not yet prescribed.
Finally, we conform with the holding of the Court of Appeals
that the questioned order of the court below denying the
motion to dismiss is interlocutory and cannot be the subject
of a petition for certiorari. The exceptions to this rule invoked
by petitioner and allegedly obtaining in the case at bar, are
obviously not present and may not be relied upon.
WHEREFORE, the petition at bar is DENIED and the assailed
decision and resolution of respondent Court of Appeals are
hereby AFFIRMED in toto.
SO ORDERED.