G.R. No.

165554

July 26, 2010

3) To do and perform all other acts necessary to carry out the powers
hereinabove conferred.

LAZARO PASCO and LAURO PASCO vs. HEIRS OF FILOMENA DE

GUZMAN, represented by CRESENCIA DE GUZMAN-PRINCIPE

No court should shield a party from compliance with valid obligations based
on wholly unsubstantiated claims of mistake or fraud. Having refused to abide
by a compromise agreement, the aggrieved party may either enforce it or
regard it as rescinded and insist upon the original demand. This Petition for
Review on Certiorari1 assails the May 13, 2004 Decision 2 of the Court of
Appeals (CA) and its October 5, 2004 Resolution 3 in CA-G.R. SP No. 81464
which dismissed petitioners appeal and affirmed the validity of the parties
Compromise Agreement.
The present petition began with a Complaint for Sum of Money and
Damages4 filed on December 13, 2000 by respondents, the heirs of Filomena
de Guzman (Filomena), represented by Cresencia de Guzman-Principe
(Cresencia), against petitioners Lauro Pasco (Lauro) and Lazaro Pasco
(Lazaro). The case was filed before the Municipal Trial Court (MTC) of Bocaue,
Bulacan, and docketed as Civil Case No. MM-3191. 5 In their Complaint,6 herein
respondents alleged that on February 7, 1997, petitioners obtained a loan in
the amount of P140,000.00 from Filomena (now deceased). To secure the
petitioners loan, Lauro executed a chattel mortgage on his Isuzu Jeep in favor
of Filomena. Upon her death, her heirs sought to collect from the petitioners,
to no avail. Despite numerous demands, petitioners refused to either pay the
balance of the loan or surrender the Isuzu Jeep to the respondents. Thus,
respondents were constrained to file the collection case to compel the
petitioners to pay the principal amount of P140,000.00 plus damages in the
amount of 5% monthly interest from February 7, 1997, 25% attorneys fees,
exemplary damages, and expenses of litigation.
Filomenas heirs, consisting of Avelina de Guzman-Cumplido, Cecilia de
Guzman, Rosita de Guzman, Natividad de Guzman, and Cresencia de GuzmanPrincipe, authorized Cresencia to act as their attorney-in-fact through a
Special Power of Attorney7 (SPA) dated April 6, 1999. The SPA authorized
Cresencia to do the following on behalf of the co-heirs:
1) To represent us on all matters concerning the intestate estate of our
deceased sister, Filomena de Guzman;
2) To file cases for collection of all accounts due said Filomena de Guzman or
her estate, including the power to file petition for foreclosure of mortgaged
properties;

During the pre-trial of the case on February 15, 2002, the parties verbally
agreed to settle the case. On February 21, 2002, the parties jointly filed a
Compromise Agreement8 that was signed by the parties and their respective
counsel. Said Compromise Agreement, approved by the MTC in an
Order9 dated April 4, 2002, contained the following salient provisions:
1. That [petitioners] admit their principal loan and obligation to the
[respondents] in the sum of One Hundred Forty Thousand Pesos (P140,000.00)
Philippine currency; in addition to the incidental and other miscellaneous
expenses that they have incurred in the pursuit of this case, in the further
sum ofP18,700.00;
2. That, [petitioners] undertake to pay to the [respondents] their
aforementioned obligations, together with attorneys fees equivalent to ten
percentum (10%) of the total sum thereof, directly at the BULACAN OFFICE of
the [respondents] counsel, located at No. 24 Hornbill Street, St. Francis
Subdivision, Bo. Pandayan, Meycauayan, Bulacan, WITHOUT NEED OF
FURTHER DEMAND in the following specific manner, to wit:
P60,000.00 to be paid on or before May 15, 2002
P10,000.00 monthly payments thereafter, starting June 15, 2002 up
to and until the aforementioned obligations shall have been fully paid;
3. That, provided that [petitioners] shall truely [sic] comply with the
foregoing specifically agreed manner of payments, [respondents] shall forego
and waive all the interests charges of 5% monthly from February 7, 1998 and
the 25% attorneys fees provided for in Annex "AA" of the Complaint;
4. In the event of failure on the part of the [petitioners] to comply with
any of the specific provisions of this Compromise Agreement, the
[respondents] shall be entitled to the issuance of a "Writ of Execution" to
enforce the satisfaction of [petitioners] obligations, as mentioned in
paragraph 1, together with the 5% monthly interests charges and attorneys
fees mentioned in paragraph 3 thereof.10
Ruling of the Municipal Trial Court. Unfortunately, this was not the end of litigation.
On May 2, 2002, petitioners filed a verified Motion to Set Aside Decision 11 alleging that
the Agreement was written in a language not understood by them, and the terms and
conditions thereof were not fully explained to them. Petitioners further questioned the

MTCs jurisdiction, arguing that the total amount allegedly covered by the Compromise
Agreement amounted to P588,500.00, which exceeded the MTCs P200,000.00
jurisdictional limit. In an Order12 dated June 28, 2002, the MTC denied the motion; it also
granted Cresencias prayer for the issuance of a writ of execution. The writ of
execution13 was subsequently issued on July 3, 2002. Petitioners Motion for
Reconsideration and to Quash Writ/Order of Execution 14 dated August 1, 2002 was
denied by the MTC in an Order15 dated September 5, 2002.
Undeterred, on October 10, 2002, petitioners filed a Petition for Certiorari and
Prohibition
with
Application
for
Temporary
Restraining
Order/Preliminary
Injunction16 before the Regional Trial Court (RTC) of Bocaue. The case was raffled to
Branch 82,17 and docketed as Civil Case No. 764-M-2002. In their petition, petitioners
argued that the MTC gravely abused its discretion in approving the Compromise
Agreement because (1) the amount involved was beyond the jurisdiction of the MTC; (2)
the MTC failed to ascertain that the parties fully understood the contents of the
Agreement; (3) Crescencia had no authority to represent her co-heirs because
Filomenas estate had a personality of its own; and (4) the Compromise Agreement was
void for failure of the judge and Cresencia to explain the terms and conditions to the
petitioners.
In their Comment18 dated October 29, 2002, respondents argued that (1) the principal
claim of P140,000.00 was within the MTCs jurisdiction; and (2) the records reveal that it
was the petitioners themselves, assisted by their counsel, who proposed the terms of
the settlement, which offer of compromise was accepted in open court by the
respondents. Thus, the Compromise Agreement merely reduced the parties agreement
into writing.
Ruling of the Regional Trial Court. The RTC initially granted petitioners prayer for
the issuance of a Temporary Restraining Order (TRO) 19 on November 18, 2002, and later
issued a preliminary injunction in an Order20 dated December 10, 2002, primarily on the
ground that the SPA did not specifically authorize Cresencia to settle the case. However,
Presiding Judge Herminia V. Pasamba later inhibited herself, 21 so the case was re-raffled
to Branch 6, presided over by Judge Manuel D.J. Siayngo. 22 The grant of the preliminary
injunction was thus reconsidered and set aside in an Order 23dated May 15, 2003. In the
same Order, the RTC dismissed the petition and held that (1) the MTC had jurisdiction
over the subject matter; (2) Cresencia was authorized to institute the action and enter
into a Compromise Agreement on behalf of her co-heirs; and (3) the MTCs approval of
the Compromise Agreement was not done in a capricious, whimsical, or arbitrary
manner; thus, petitioners resort to certiorari under Rule 65 was improper. Petitioners
MR24 was denied,25 hence they sought recourse before the CA.
Ruling of the Court of Appeals. In its Decision26 dated May 13, 2004 and
Resolution27 dated Oct. 5, 2004, the CA dismissed petitioners appeal, and held that:

3) Petitioners improperly sought recourse before the RTC through a Petition

for Certiorari under Rule 65, when the proper remedy was a Petition for Relief from
Judgment under Rule 38.

Issues. Before us, petitioners claim that, first, they correctly resorted to the
remedy of certiorari under Rule 65; second, the RTC gravely erred in
dismissing their Petition for Certiorari and Prohibition, when the matter under
consideration was merely the propriety of the grant of the preliminary
injunction; and third, that the SPA did not validly authorize Cresencia to enter
into the Compromise Agreement on behalf of her co-heirs.
Our Ruling. We deny the petition. The MTC had jurisdiction over the
case. It bears stressing that the question of the MTCs jurisdiction has not
been raised before this Court; hence, petitioners appear to have admitted that
the MTC had jurisdiction to approve the Compromise Agreement. In any event,
it is beyond dispute that the Judiciary Reorganization Act of 1980, or Batas
Pambansa (BP) Blg. 129,28 as amended by Republic Act No. 7691,29 fixes the
MTCs jurisdiction over cases where "the demand does not exceed Two
hundred thousand pesos (P200,000.00) exclusive of interest, damages of
whatever kind, attorney's fees, litigation expenses, and costs."30 Thus,
respondents initiatory complaint, covering the principal amount
ofP140,000.00, falls squarely within the MTCs jurisdiction.
Petitioners properly resorted to the special civil action of certiorari.
On the first question, the CA held that the proper remedy from the MTCs
Order approving the Compromise Agreement was a Petition for Relief from
Judgment under Rule 38 and not a Petition for Certiorari under Rule 65. We
recall that petitioners filed a verified Motion to Set Aside Decision on May 2,
2002,31 which was denied by the MTC on June 28, 2002. This Order of denial
was properly the subject of a petition for certiorari, pursuant to Rule 41,
Section 1, of the Rules of Court:
Section 1.
Subject of Appeal An appeal may be taken from a judgment
or final order that completely disposes of the case, or of a particular matter
therein when declared by these Rules to be appealable.
No appeal may be taken from: x x x x (e) an order denying a
motion to set aside a judgment by consent, confession or compromise on the
ground of fraud, mistake or duress, or any other ground vitiating consent.

1) the MTC had jurisdiction, since the principal amount of the loan only amounted
to P140,000.00;
2) Cresencia was duly authorized by her co-heirs to enter into the Compromise
Agreement;

In all the above instances where the judgment or final order is not appealable,
the aggrieved party may file an appropriate special civil action under Rule 65.
From the express language of Rule 41, therefore, the MTCs denial of
petitioners Motion to Set Aside Decision could not have been appealed.

Indeed, a decision based on a compromise agreement is immediately final and

executory and cannot be the subject of appeal, 32 for when parties enter into a
compromise agreement and request a court to render a decision on the basis
of their agreement, it is presumed that such action constitutes a waiver of the
right to appeal said decision. 33 While there may have been other remedies
available to assail the decision,34petitioners were well within their rights to
institute a special civil action under Rule 65.
The Regional Trial Court rightly dismissed the petition for certiorari.
On the second issue, petitioners argue that the RTC, in reconsidering the order
granting the application for writ of preliminary injunction, should not have
gone so far as dismissing the main case filed by the petitioners. They claim
that the issue in their application for writ of preliminary injunction was
different from the issues in the main case for certiorari, and that the
dissolution of the preliminary injunction should have been without prejudice to
the conduct of further proceedings in the main case. They also claim that the
RTC did not have the power to dismiss the case without requiring the parties
to file memoranda.
These assertions are belied, however, by petitioners own
submissions. Their arguments were exactly the same, whether relating to
the preliminary or permanent injunction. Identical matters were at issue the
MTCs jurisdiction, petitioners alleged vitiated consent, and the propriety of
enforcing the Compromise Agreement. The reliefs sought, too, were the same,
that is, the grant of an injunction against the enforcement of the
compromise:35
WHEREFORE, it is most respectfully prayed that:
1) A Temporary Restraining Order and/or Preliminary Injunction issue ex parte directing
the respondents to cease and desist from enforcing, executing, or implementing in any
manner the Decision dated April 4, 2002 and acting in Civil Case No. MM-3191 until
further orders from this Honorable Court.
2) After hearing, the temporary restraining order/ex parte injunction be replaced by a
writ of preliminary injunction.
3) After hearing on the merits, judgment be rendered .

a. Making the injunction permanent. Since the RTC found at the

preliminary injunction phase that petitioners were not entitled to an injunction
(whether preliminary or permanent), that petitioners arguments were
insufficient to support the relief sought, and that the MTCs approval of the
Compromise Agreement was not done in a capricious, whimsical, or arbitary
manner, the RTC was not required to engage in unnecessary duplication of
proceedings. As such, it rightly dismissed the petition.

In addition, nothing in the Rules of Court commands the RTC to require the
parties to file Memoranda. Indeed, Rule 65, Sec. 8 is explicit in that the court
"may dismiss the petition if it finds the same to be patently without merit,
prosecuted manifestly for delay, or that the questions raised therein are too
unsubstantial to require consideration."36
Cresencia was authorized to enter into the Compromise Agreement.
As regards the third issue, petitioners maintain that the SPA was fatally
defective because Cresencia was not specifically authorized to enter into a
compromise agreement. Here, we fully concur with the findings of the CA that:
x x x It is undisputed that Cresencias co-heirs executed a Special
Power of Attorney, dated 6 April 1999, designating the former as their
attorney-in-fact and empowering her to file cases for collection of all the
accounts due to Filomena or her estate. Consequently, Cresencia entered into
the subject Compromise Agreement in order to collect the overdue loan
obtained by Pasco from Filomena. In so doing, Cresencia was merely
performing her duty as attorney-in-fact of her co-heirs pursuant to the Special
Power of Attorney given to her.37
Our ruling in Trinidad v. Court of Appeals 38 is illuminating. In Trinidad, the heirs
of Vicente Trinidad executed a SPA in favor of Nenita Trinidad (Nenita) to be
their representative in litigation involving the sale of real property covered by
the decedents estate. As here, there was no specific authority to enter into a
Compromise Agreement. When a compromise agreement was finally reached,
the heirs later sought to invalidate it, claiming that Nenita was not specifically
authorized to enter into the compromise agreement. We held then, as we do
now, that the SPA necessarily included the power of the attorney-in-fact to
compromise the case, and that Nenitas co-heirs could not belatedly disavow
their original authorization.39 This ruling is even more significant here, where
the co-heirs have not taken any action to invalidate the Compromise
Agreement or assail their SPA.
Moreover, we note that petitioners never assailed the validity of the SPA
during the pre-trial stage prior to entering the Compromise Agreement. This
matter was never even raised as a ground in petitioners Motion to Set Aside
the compromise, or in the initial Petition before the RTC. It was only months
later, in December 2002, that petitioners rather self-servingly - claimed that
the SPA was insufficient.
The stated interest rate should be reduced. Although the petition is unmeritorious,
we find the 5% monthly interest rate stipulated in Clause 4 of the Compromise
Agreement to be iniquitous and unconscionable. Accordingly, the legal interest of 12%
per annum must be imposed in lieu of the excessive interest stipulated in the
agreement. As we held in Castro v. Tan: 40

In several cases, we have ruled that stipulations authorizing iniquitous or

unconscionable interests are contrary to morals, if not against the law. In Medel v. Court
of Appeals, we annulled a stipulated 5.5% per month or 66% per annum interest on
a P500,000.00 loan and a 6% per month or 72% per annum interest on a P60,000.00
loan, respectively, for being excessive, iniquitous, unconscionable and exorbitant.
In Ruiz v. Court of Appeals, we declared a 3% monthly interest imposed on four separate
loans to be excessive. In both cases, the interest rates were reduced to 12% per annum.
In this case, the 5% monthly interest rate, or 60% per annum, compounded monthly,
stipulated in the Kasulatan is even higher than the 3% monthly interest rate imposed in
the Ruiz case. Thus, we similarly hold the 5% monthly interest to be excessive,
iniquitous, unconscionable and exorbitant, contrary to morals, and the law. It is
therefore void ab initio for being violative of A1306 of the Civil Code.

The proceeds of the loan should be released to Filomenas heirs only

upon settlement of her estate. Finally, it is true that Filomenas estate has
a different juridical personality than that of the heirs. Nonetheless, her heirs
certainly have an interest in the preservation of the estate and the recovery of
its properties,41 for at the moment of Filomenas death, the heirs start to own
the property, subject to the decedent's liabilities. Article 777 of the Civil Code
states that "[t]he rights to the succession are transmitted from the moment of
the death of the decedent."42
Unfortunately, the records before us do not show the status of the
proceedings for the settlement of the estate of Filomena, if any. But to allow
the release of the funds directly to the heirs would amount to a distribution of
the estate; which distribution and delivery should be made only after, not
before, the payment of all debts, charges, expenses, and taxes of the estate
have been paid.43 We thus decree that respondent Cresencia should deposit
the amounts received from the petitioners with the MTC of Bocaue, Bulacan
and in turn, the MTC of Bocaue, Bulacan should hold in abeyance the release
of the amounts to Filomenas heirs until after a showing that the proper
procedure for the settlement of Filomenas estate has been followed.
WHEREFORE, the petition is DENIED. The May 13, 2004 Decision of the
Court of Appeals and its October 5, 2004 Resolution are AFFIRMED with
MODIFICATIONS that the interest rate of 5% per month (60% per annum) is
ordered reduced to 12 % per annum. Respondent Cresencia De GuzmanPrincipe is DIRECTED to deposit with the Municipal Trial Court of Bocaue,
Bulacan the amounts received from the petitioners. The Municipal Trial Court
of Bocaue, Bulacan is likewise DIRECTED to hold in abeyance the release of
any amounts recovered from the petitioners until after a showing that the
procedure for settlement of estates of Filomena de Guzmans estate has been
followed, and after all charges on the estate have been fully satisfied. SO
ORDERED.

G.R. No. 125835 July 30, 1998

NATALIA CARPENA OPULENCIA, vs. COURT OF APPEALS, ALADIN
SIMUNDAC and MIGUEL OLIVAN

Is a contract to sell a real property involved in restate proceedings valid and

binding without the approval of the probate court? This is the main question
raised in this petition for review before us, assailing the Decision 1 of the Court
of Appeals2 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
Petitioner's Motion for Reconsideration was denied in the challenged
Resolution. 5 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, attorney's 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 (petitioner's 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.
[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 (defendant's 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 defendant's 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 decedent's 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 [petitioner's] demurrer
to evidence. 6

The trial court's 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 Respondent's Ruling. Declaring the Contract to Sell valid, subject to

the outcome of the testate proceedings on Demetrio Carpena's estate, the
appellate court set aside the trial court's 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 court's 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:
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 BUYER's 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.
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 Bian,
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 plaintiff's 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 Court's 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 necessary or beneficial, under the
following regulations: xxx xxx xxx
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 petitioners has no
application to the instant case.
We emphasize that hereditary rights are vested in the heir or heirs from the
moment of the decedent's death. 14Petitioner, therefore, became the owner of
her hereditary share the moment her father died. Thus, the lack of judicial
approval does not invalidate the Contract to Sell, because the petitioner 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:
Art. 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." . . . 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 decedent's estate pending the final
termination of the testate proceedings." 17 This becomes all the more
significant in the light of the trial court's finding, as stated in its Order dated
August 20, 1997, that "the legitimate of one of the heirs has been
impaired." 18 Petitioner's contention is not convincing. The Contract to Sell
stipulates that petitioner's 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 petitioner's 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.22WHEREFORE, the petition is hereby DENIED and the assailed
Decision of the Court of Appeals AFFIRMED. Costs against petitioner. SO
ORDERED

G.R. No. 146006

February 23, 2004

JOSE C. LEE AND ALMA AGGABAO, in their capacities as President and

Corporate Secretary, respectively, of Philippines International 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.

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.
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).

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
1,0115 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.

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).

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.

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, 2,0293 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

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 ;
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 ofGodoy
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. x x x
xxx
xxx
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 respondentSpecial 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
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 Godoyand 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. x x x
xxx
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?
Furthermore, when the resolution of
Supreme Court in 1996 (docketed as
were respondents therein filed their
showing that they knew of the pending

the SEC hearing officer reached the

G.R. 128525), herein petitioners who
answer which contained statements
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 Jose, both surnamed Ortaez, dividing the
estate of the deceased composed of his one-half (1/2) share in the conjugal
properties; that in the said Memorandum of Agreement, Jose S. Ortaez
acquired as his share of the estate the 1,329 shares of stock in Philinterlife;
that on March 4, 1982, Juliana and Rafael assigned their respective shares of
stock in Philinterlife to Jose; that contrary to the contentions of petitioners,
private respondents Jose Lee, Carlos Lee, Benjamin Lee and Alma Aggabao
became stockholders of Philinterlife on March 23, 1983 when Jose S. Ortaez,
the principal stockholder at that time, executed a deed of sale of his shares of
stock to private respondents; and that the right of petitioners to question the
Memorandum of Agreement and the acquisition of shares of stock of private
respondent is barred by prescription.29
Also, private respondent-Special Administratrix Enderes offered additional
proof of actual knowledge of the settlement proceedings by petitioners which

petitioners never denied: (1) that petitioners were represented by Atty.

Ricardo Calimag previously hired by the mother of private respondent Enderes
to initiate cases against petitioners Jose Lee and Alma Aggabao 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 the writ of preliminary injunction
because injunction is not designed to protect contingent rights. Said case
did not rule on the issue of the validity of the sale of shares of stock
belonging to the decedents estate without court approval nor of the validity

of the writ of execution issued by the intestate court. G.R. No. 128525 clearly
involved a different issue and it does not therefore apply to the present case.
Petitioners and all parties claiming rights under them are hereby warned not
to further delay the execution of the Orders of the intestate court dated
August 11 and August 29, 1997. WHEREFORE, the petition is hereby DENIED.

The decision of the Court of Appeals in CA-G.R. S.P. No. 59736 dated July 26,
2000, dismissing petitioners petition for certiorari and affirming the July 6,
2000 order of the trial court which ordered the execution of its (trial courts)
August 11 and 29, 1997 orders, is hereby AFFIRMED.SO ORDERED.