G.R. No.

165554 (July 26 2010)

ISSUES and RULING

LAZARO PASCO and LAURO PASCO, Petitioners,Present: - versus - HEIRS OF

FILOMENA DE GUZMAN, represented by CRESENCIA DE GUZMAN- PRINCIPE,
LEONARDO-DE CASTRO, DEL CASTILLO, and PEREZ, JJ. Respondents.

1.

Complaint for Sum of Money and Damages[4] 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)

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 authorized Cresencia to act as their attorney-in-fact through a
Special Power of Attorney
Pre-trial: the parties verbally agreed to settle the case Compromise
Agreement (CA)
Petitioners admit principal loan of 140,000 plus miscellaneous
expenses worth 18,700
Petitioners will pay attorneys fees (10% of the total sum) without need
for further demand
P60,000 (May 15 2002)
P10,000 (June 15 2002 until fully paid)
If petitioners would comply to agreed manner of payment, respondents
shall waive all the interest charge of 5% monthly and the 25%
attorneys fees
Respondents will be issued with Writ of Execution if petitioner would not
comply.
Petitioners filed a Motion to Set Aside Decision, alleging that the Agreement was
written in a language not understood by them. They also questioned the MTCs
jurisdiction because the toal amount covered by the CA exceeded P200,000
MTC denied the motion. A writ of execution was issued
Certiorari and Prohibition +TRO before the RTC
Grounds: (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.
RTC: first granted the petition, but Presiding judge inhibit himself. The grant was
reconsidered and set aside. Thus, petition dismissed.
CA: affirm.

Whether or not MTC has jurisdiction: YES

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 of P140,000.00, falls squarely within the
MTCs jurisdiction.
2.

Whether or not the petition for certiorari was validly dismissed by the RTC:
YES
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.
3.

Whether or not the SPA validly authorized Cresencia to enter into the
Compromise Agreement on behalf of her co-heirs: YES

The SPA necessarily included the power of the attorney-in-fact to compromise the case,
and that co-heirs could not belatedly disavow their original authorization. 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.
Interest Rate
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
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, for at the moment of Filomenas death, the heirs start to
own the property, subject to the decedent's liabilities. In this connection, 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.
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. 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.

[G.R. No. 125835. July 30, 1998]

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

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.
The preamble of the contract reads:
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).

Petitioner admitted the execution of the contract in favor of plaintiffs and receipt
of P300,000.00 as downpayment.
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;
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.
Pre-trial conference

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
The Trial Court granted this demurrer and DISMISSED the complaint
a decedents representative (administrator) is not estopped from
questioning the validity of his own void deed purporting to convey land.
In the case at bar, the [petitioner,] realizing the illegality of the
transaction (for not complying with the requisites provided by law) 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
CA: reverse
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. 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.

ISSUE and RULING

Whether or not the Contract to Sell dated 03 February 1989 executed by the
petitioner and [p]rivate respondents without the requisite probate court approval is
valid: YES
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
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.
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.[
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. 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.
Hereditary rights are vested in the heir or heirs from the moment of the decedents
death.[14] Petitioner, 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.
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. 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.
Administration of the Estate Not Prejudiced by the Contract to Sell
The Contract to Sell 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
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.

[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.

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).
Rafael Ortaez filed a petition for letters of administration of the intestate estate of
Dr. Ortaez
Private respondent Ma. Divina Ortaez-Enderes and her siblings filed an
opposition. She prayed that the court would appoint a special
administrator
Judge Ernani Cruz Pao, then presiding judge of Branch 85, appointed Rafael and
Jose Ortaez joint special administrators of their fathers estate.
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 representing 50.725%
of the companys outstanding capital stock.
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). She didnt repurchase so ownership was consolidated by the
petitioner FLAG
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. Ownership was againt consolidated to FLAG
During the pendency of the intestate proceedings at the RTC, it appeared that
Juliana Ortaez and her two children Rafael and Jose entered into a
memorandum agreement for the extrajudicial settlement of the estate of the
decedent partitioning the estate (including the Philinterlife shares of stock)
among themselves.
Ma. Divina Ortaez Enderes and her siblings filed a motion for appointment of
special administrator of Philinterlife shares of stock Granted
Motion to declare partial nullity of the extrajudicial settlement of the
decedents estate Granted
Urgent motion to declare void ab ignition the deeds of the sale of
Philinterlife shares of stock

Jose Ortaez filed a motion for approval of the deeds of sale of the stocks and the
release of Enderes as administrator on the ground that there were no more
shares for her to administer Denied
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.
Ortaez: certiorari before the CA Denied
Tere was no legal justification whatsoever for the extrajudicial partition
of the estate by Jose Ortaez, Rafael Ortaez and 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.
SC: petition for review was dimissed on a techniraclity.
Meanwhile, petitioners Jose Lee and Alma Aggabao, with the rest of the FLAGcontrolled 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.
Intestate court issued a writ of execution to nullify the sale of the Philinterlife
shares to FLAG
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
Directing the President to issue stock certificates in the name of Estate
of Dr. Ortaez
Sheriff was barred by security guards in front of the office/
Petitioners Lee and Aggabo filed a petition for certiorari dismissed
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 granted

ISSUE and RULING

1. Whether or not the sale of the shares of stock to FLAG was validly nullified
by the intestate court: YES

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. 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. 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.
In the early case of Godoy vs. Orellano, (1921) 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. Moreover, 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.
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.
2.

Can the intestate or probate court execute its order nullifying the invalid
sale? Yes
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.