LUI vs. LOY, JR.

RULE 89
FACTS

 Jose Vano during his lifetime entered into two separate contracts to sell his seven
lots of the Banilad Estate in Cebu City, with buyers Benito Liu and Cirilo Pangalo
with terms of payment as follows: 50% down payment and payment of the
balance in installments.
 Teodoro Vano acted as agent of Jose Vano
 Frank Liu acted as agent of Benito Liu
 The lots sold to Benito were Lot Nos. 5,6,13,14 and 15 of Block 12
 The lots sold to Cirilo were Lot Nos. 14 and 15 of Block 11
FACTS

 Jose Vano died before the lots were fully paid.

 After decedent died, Teodoro Vano, as administrator of the Estate of Jose Vaño
and as sole heir of Jose Vaño, acted both as principal and as agent sold Lots 5
and 6 to Alfredo Loy, Jr. and Teresita Loy, respectively.
FACTS

 Upon an ex parte motion filed by the second set of buyers (Loys) of estate
properties, the probate court approved the sale in their favor.
 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 conveyance/annulment of title with the RTC.
 The trial court dismissed the complaint and the Court of appeals affirmed the
dismissal.
RTC Ruling

 Contract between Teodoro Vano and Benito Liu was a contract to sell – since title to
Lots 5 and 6 never passed to Benito Liu due to nonpayment of the balance of the
purchase price.
 Thus, subsequent sales to Alfredo Loy, Jr and Teresita Loy of Lots 5 and 6,
respectively, are valid.
 Teodoro Vano’s letter was a unilateral extrajudicial rescission of the contract to sell
 Unilateral extrajudicial rescission was upheld subject to refund by the Estate of Jose
Vano of ½ of what Frank Liu paid under the contract.
 Teodoro Vano, as administrator of the Estate of Jose and as sole heir of Jose, acted
both as principal and agent when he sold the lots to Alfredo Loy, Jr and Teresita Loy.
 Alfredo Loy, Jr and Teresita Loy are purchasers in good faith.
CA Ruling

 No evidence of ill-motive on the part of Alfredo Loy, Jr. and Teresita Loy
 Sales to Alfredo Loy, Jr and Teresita Loy were valid despite lack of prior
approval by the probate court – an heir has the right to dispose of the
decedent’s property
ISSUES

1. WON prior approval of the probate court is necessary to validate

the sale of Lots 5 and 6.
2. WON application for court approval thereof requires notice to all
interested parties.
3. WON the probate court’s ex-parte approval of the contract of sale
in favor of the Loys was valid.
4. WON Frank Liu has superior right over Lots 5 and 6.
SALE OF ESTATE PROPERTY BY AN ADMINISTRATOR WITHOUT
COURT APPROVAL IS VOID.

 Yes, prior approval of the probate court is necessary to validate the

sale of Lots 5 and 6.
 Where, as in the case of Teresita Loy, her seller was the Estate of
Jose Vaño and Teodoro Vaño executed the contract of sale in his
capacity as administrator of the Estate of Jose Vaño, the registered
owner of the lots in question, 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.
(citing Manotok Realty, Inc. v. Court of Appeals, G.R. No. L-35367, 9
April 1987, 149 SCRA 174, 179-180.)
APPLICATION FOR COURT APPROVAL THEREOF REQUIRES
NOTICE TO ALL INTERESTED PARTIES

 Section 8, Rule 89 of the 1964 Rules of Court specifically requires

notice to all interested parties in any application for court approval
to convey property contracted by the decedent in his lifetime.
 In Frank Liu's case, as successor-in-interest of Benito Liu, his seller
Jose Vaño, who during his lifetime executed the contract to sell
through an attorney-in-fact, Teodoro Vaño. This is a disposition of
property contracted by the decedent during his lifetime.
APPLICATION FOR COURT APPROVAL THEREOF REQUIRES
NOTICE TO ALL INTERESTED PARTIES (Cont.)

 There was no valid cancellation of the contract to sell, not even an

implied one where there was no written notice of the cancellation
given to Benito Liu or Frank Liu. Obviously, the letter of Teodoro
Vaño clearly stating that the only action Teodoro Vaño would take
if Frank Liu did not reply was that Teodoro Vaño would write directly
to Benito Liu and Cirilo Pangalo, cannot be construed as a
unilateral extrajudicial rescission of the contract to sell. The letter
does not mention anything about rescinding or canceling the
contract to sell.
APPLICATION FOR COURT APPROVAL THEREOF REQUIRES
NOTICE TO ALL INTERESTED PARTIES (Cont.)

A prior contract to sell made by the decedent prevails

over 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.
APPLICATION FOR COURT APPROVAL THEREOF REQUIRES
NOTICE TO ALL INTERESTED PARTIES (Cont.)

Any cancellation must observe all legal requisites:

written notice of cancellation
Basis should be a lawful cause.
It is immaterial if the prior contract is a mere contract to
sell and does not immediately convey ownership. If it is
valid, then it binds the estate to convey the property in
accordance with Section 8, Rule 89 upon full payment of
the consideration.
EX-PARTE APPROVAL WITHOUT PRIOR NOTICE - VOID

 No, the probate court’s ex-parte approval of the sale of properties

was not valid.
 Sec. 8, Rule 90 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.
EX-PARTE APPROVAL WITHOUT PRIOR NOTICE - VOID

 In this case, the administratrix, the wife of the deceased Teodoro

Vaño, 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.
PRIOR CONTRACT TO SELL PREVAILS OVER
SUBSEQUENT CONTRACTS OF SALE

 Frank Liu's contract to sell became valid and effective upon its
execution. The seller, Jose Vaño, 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 to 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.
PRIOR CONTRACT TO SELL PREVAILS OVER
SUBSEQUENT CONTRACTS OF SALE

 The probate court did not validly give the approval since it failed to
notify all interested parties of the Loy's 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 Liu's contract to sell prevails over Loys' contracts of
sale.
DOCTRINES

Registration of the contracts without court approval would

be ineffective to bind third persons, especially creditors of
the estate.
It is 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
otherwise the order authorizing the conveyance, as well as
the conveyance itself, is completely void.
DOCTRINES

A sale of estate property made by an administrator without

authority is void and does not confer on the purchaser a title
that is valid against a succeeding administrator.
An administrator cannot unilaterally cancel a contract to sell
made by the decedent in his lifetime.
 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
Vaño 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 Vaño 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.

SO ORDERED.