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RULE 89 SALES, MORTGAGES AND OTHER ENCUMBRANCES OF PROPERTY OF DECEDENT

LAO V. GENATO, 137 SCRA 77 (1985)


FACTS: On June 25, 1980, respondent administrator Sotero
Dionisio, Jr., with due notice to all his co-heirs, filed with the
Probate Court in Special Proceedings No. 842 a Motion for Authority
to Sell certain properties of the deceased to settle the outstanding
obligations of the estate. The Court granted the same.
1. Respondent-administrator pursuant to said authorization,
sold to his son, Sotero Dionisio III, the subject property for
P75,000.00 and on the same date, Sotero Dionisio III
executed a deed of sale of the same property in favor of
respondent William Go for a consideration of P80.000.00.
2. Respondent-heir Florida Nuqui, filed a Motion for
Annulment/Revocation of the Deeds of Absolute Sale for
the reasons that the sale and subsequent transfer of title of
the property were made in violation of the court's order
and that the consideration of the two sales were grossly
inadequate as in fact many are willing to buy the property
for P400,000.00.
3. Petitioner spouses filed a "Manifestation In Intervention of
Interest to Purchase Property Authorized by the Court to be
Sold", wherein they alleged that respondent-administrator,
without revealing that the property had already been sold
to William Go, entered into a Mutual Agreement of Promise
to Sell to herein petitioners, for the amount of P220,000.00
and that petitioners already paid the earnest money in the
amount of P70,000.00
4. Respondent Judge allowed all the interested parties to bid
for the property at the highest obtainable price.
Respondent Go offered to buy the property in the amount
of P280,000.00. Petitioners counter-offered at P300,000.00.
5. An Amicable Settlement was made between Respondent
Go and the other heirs to the exclusion of the petitioners.
The RTC approved the amicable settlement and confirmed
the 2 Deeds of Sale in question.
ISSUE: WON the sale made by the respondent-administrator is
valid
HELD: No. Sotero Dionisio, Jr. is the Administrator of the
estate of his deceased mother Rosenda Abuton. As such
Administrator, he occupies a position of the highest trust
and confidence, He is required to exercise reasonable
diligence and act in entire good faith in the performance of
that trust, Although he is not a guarantor or insurer of the

safety of the estate nor is he expected to be infallible yet


the same degree of prudence, care and judgment which a
person of a fair average capacity and ability exercises in
similar transactions of his own, serves as the standard by
which his conduct is to be judged.
In the discharge of his functions, the administrator should act with
utmost circumspection in order to preserve the estate and guard
against its dissipation so as not to prejudice its editors and the
heirs of the decedents who are entitled to the net residue thereof.
In the case at bar, the sale was made necessary "in order to settle
other existing obligations of the estate
No doubt, respondent Judge's questioned approval of the
Compromise Agreement violates Article 1409 of the New Civil Code
and cannot work to confirm nor serve to ratify a fictitious contract
which is non-existent and void from the very beginning. The fact
that practically all the heirs are parties-signatories to the said
Compromise Agreement is of no moment. Their assent to such an
illegal scheme does not legalize the same nor does it impose any
obligation upon respondent Judge to approve the same to the
prejudice not only of the creditors of the estate, and the
government by the non-payment of the correct amount of taxes
legally due from the estate.
The offer by the petitioner of P300,000.00 for the purchase
of the property in question does not appear seriously
disputed on record. As against the price stated in the
assailed Compromise Agreement the former amount is
decidedly more beneficial and advantageous not only to the
estate, the heirs of the descendants, but more importantly
to its creditors, for whose account and benefit the sale was
made. No satisfactory and convincing reason appeared
given for the rejection and/or non-acceptance of said offer
thus giving rise to a well-grounded suspicion that a
collusion of some sort exists between the administrator
and the heirs to defraud the creditors and the government.

RULE 89 SALES, MORTGAGES AND OTHER ENCUMBRANCES OF PROPERTY OF DECEDENT

GODOY V. ORELLANO, 42 PHIL 347 (1921)


FACTS: In consideration of P1,000, appellant Felisa Pagilinan
executed a document giving the appellee, Eusebio A. Godoy, an
option to buy a dredge (common property of the vendor and of the
brothers Demetrio, Jose, Guillermo, Alfredo, and Paz, all surnamed
Orellano) for the sum of P10,000. The condition was that Godoy
was to pay the whole price of the dredge within twenty days
1.

Before the expiration of twenty days, the appelle was ready


to make complete payment of the price, but the appellant
failed to deliver the dredge. Then the appellee brought suit
in the Court of First Instance against the Orellanos, praying
that they be ordered to deliver the dredge, upon payment
by him of the sum of P9,000

2.

The defendants Orellano alleged that the dredge in


question was the property of the intestate estate of Julio
Orellano, and since the dredge is under judicial control, it
could not be disposed of without judicial authority

3.

The RTC ordered the defendants to pay Eusebio A. Godoy


the sum of P2,000 with legal interest thereon but the
complaint was dismissed.

ISSUE: WON the sale is valid

HELD: No. In the sale of the property of an intestate estate for the
benefit of the heirs, it is necessary to comply with the provisions of
sections 717, 718, and 722 of the Code of Civil Procedure. The said
sections prescribed the proceedings to be had before an
administrator of an intestate or testate estate may sell personal or
real property and also the conditions under which the personal or

real property pertaining to an estate may be sold or disposed of by


the administrator. Unless compliance is had with the provisions of
these sections, the sale of the aforesaid dredge by the
administratrix, or her promise to sell it is null and void.

A sale and conveyance by executors without an order of the


probate court, under a will devising property to them in trust, but
not authorizing any sale of the realty, otherwise than by a direction
to pay the debts of the testator, is void, and passes no title to the
purchase. (Huse vs. Den, 85 Cal., 390.)

A sale by an administrator of the personal property of the


estate, without the authority of an order of court, or of a
will, or under an order of court which is void for want of
jurisdiction, does not confer on the purchaser a title which
is available against a succeeding administrator. (Wyatt's
Adm'r vs. Rambo, 29 Ala., 510.)

The appellant was not, in her capacity as judicial


administratrix of the intestate estate of Julio Orellano,
legally authorized to sell, or contract to sell, any property
belonging to said estate without the authority of the court,
and the contract entered into by her with the plaintiff,
without this authority, is null and void.

RULE 89 SALES, MORTGAGES AND OTHER ENCUMBRANCES OF PROPERTY OF DECEDENT

BUENAVENTURA & DEL ROSAROP V. RAMOS, 43 PHIL 704


(1922)

ISSUE: WON the lower court committed an error in authorizing the


sale of the fishery in question, in opposition to the wishes of the
heirs?
HELD: Yes. Sec 714 to 722 of Act No. 190 provide when an
executor or administrator of the estate of a deceased person may
sell the property of the estate, both real and personal. Section 714,
provides, among other things, that when the personal estate of the
deceased is not sufficient to pay the debts and charges of
administration without injuring the business of those interested,
and when the testator has not otherwise made sufficient provision
for the payment of debts and charges against the estate, the court,
on application of the executor or administrator, with the consent
and approbation, in writing, of the heirs, devisees, and legatees,
residing in the Philippine Islands, may grant a license to sell, for

RULE 89 SALES, MORTGAGES AND OTHER ENCUMBRANCES OF PROPERTY OF DECEDENT

that purpose, in lieu of personal estate, if it clearly appears that


such sale of real estate would be beneficial to the person
interested, and will not defeat any devise of land, in which case the
assent of the devisee shall be required.
The plaintiffs in the present case not having shown the existence of
any of the facts or conditions under which the property in question
might be sold under the above quoted provisions of Act No. 190,
the lower court committed an error in granting the petition for
permission to sell, and also committed an error in authorizing the
sale and in confirming the sale after it was made.

ISSUE: WON the contract of sale and mortgage are valid


HELD: No. Settled is the rule in this jurisdiction that when an order
authorizing the sale or encumbrance of real property was issued by
the testate or intestate court without previous notice to the heirs,
devisees and legatees as required by the Rules, it is not only the
contract itself which is null and void but also the order of the court
authorizing the same.
Here, it appears that petitioners were never notified of the several
petitions filed by Agustin with the intestate court to mortgage and
sell the estate properties of his wife.
The requirements of Rule 89 ROC are mandatory and failure to
give notice to the heirs would invalidate the authority granted by
the intestate/probate court to mortgage or sell estate assets.

PAMAHOTANG V. PNB, 454 SCRA 681 (2005)


FACTS: Melitona Pahamotang died. She was survived by her
husband Agustin Pahamotang, and their eight (8) children, namely:
Ana, Genoveva, Isabelita, Corazon, Susana, Concepcion and herein
petitioners Josephine and Eleonor, all surnamed Pahamotang.
1 Agustin filed before the intestate court the authority to sell
and mortgage some of the properties for and in behalf of
the estate of Pahamotong in favor PNB, Arguna and PLEI in
which the intestate court granted.
2 However, petitioners filed a case for the annulment of
those contracts entered into by Agustin alleging that said
contracts were entered without notices to the heirs of
Pahamotong for the approval of those contracts by the
intestate court.

OROLA V. RURAL BANK OF PONTEVEDRA, 470 SCRA 352


(2005)
FACTS: Trinidad Laserna Orola died intestate. She was survived by
her husband Emilio Orola and their six minor children, namely, 10year-old Antonio, 12-year-old Josephine, 16-year-old Manuel, and
other siblings, Myrna, Angeline and Althea.
1 Emilio was appointed as administrator of Trinidad estate.
2 Emilio, and petitioners filed an application with the Rural
Bank for a financing loan.
3 Rural Bank notified Emilio that the loan applications of his
children had been approved.
4 Petitioners for and in behalf of his father Emilio Orola,
executed a Real Estate Mortgage as security for the
payment of theirs loans.

RULE 89 SALES, MORTGAGES AND OTHER ENCUMBRANCES OF PROPERTY OF DECEDENT

However, the real estate mortgage contracts were not


submitted to the intestate estate courts for approval.
Neither were Myrna, Angeline and Althea aware of the said
loans.
For the non-payment of the said loan Rural Bank
extrajudicial foreclose the real estate mortgages.

ISSUE: WON the real estate mortgages entered into by petitioners


with Rural Bank were valid
HELD: No. Under Section 7 of Rule 89 of the Rules of Court,
only the executor or administrator of the estate may be
authorized by the intestate estate court to mortgage real
estate belonging to the estate; hence, the order of the
estate court authorizing the petitioners to mortgage the
realty of the estate to the respondent Rural Bank is a
nullity.
The respondents must have realized that the order of the intestate
estate court authorizing petitioners Manuel, Antonio and Josephine
Orola to mortgage the lots was void because respondent Emilio
Orola caused the real estate mortgage contracts in favor of
respondent Rural Bank to be executed by his children who are the
petitioners herein and only "acting as attorneys-in-fact of the
administrator of the estate." However, the estate court had not
appointed petitioners as attorneys-in-fact of respondent Emilio
Orola empowered to execute the said contracts. Hence, they had
no authority to execute the said Real Estate Mortgage Contracts for
and in behalf of respondent Orola, in the latters capacity as
administrator of the estate.
LIU V. LOY, 405 SCRA 316 (2004)
FACTS: The Loys seek a reconsideration of the Decision of the
Supreme Court declaring void the deeds of sale of Lot Nos. 5 and 6
executed by Teodoro Vao in favor of Alfredo Loy, Jr. and Teresita
Loy.
1 Jose Vano and Benito Liu entered into a contract to sell of
lots No. 5 and 6.
2 Frank Liu stopped further payments on the lots, because
Teodoro Vao, as executor, could not yet transfer the titles
to Benito Liu, the predecessor-in-interest of Frank Liu. It
would appear that Frank Liu and Teodoro Vao lost contact
with each other thereafter and then Frank Liu wrote

3
4
5

Teodoro Vao informing the latter that he was ready to pay


the balance of the purchase price of the lots. Teodoro Vao
did not reply to Frank Lius letter.
Benito Liu sold to Frank Liu Lot Nos. 5 and 6.
Frank Liu sent three letters to Teodoro Vao reiterating his
request for the execution of the deed of sale covering the
lots in his favor but to no avail.
However, Teodoro Vao, sold Lot No. 6 to Teresita Loy and
Lot No. 5 to Alfredo Loy, Jr. The sales to the Loys were
made without court approval and after Frank Liu offered to
pay the balance of the purchase price of the lots and after
he repeatedly requested for the execution of the deeds of
sale in his favor.

ISSUE: WON the contracts of the Loys are valid


HELD: No. Well-settled is the rule that an administrator
needs court approval to sell estate property, otherwise the
sale is void. Section 7 of Rule 89 of the Rules of Court even
provides for the regulations for granting authority to sell,
mortgage or otherwise encumber estate property.
The purpose of requiring court approval is to protect
creditors. In this case, Frank Liu is a creditor, and he is the
person the law seeks to protect.
The orders of the probate court approving the contracts of the Loys
are void. The orders did not ratify the sales because there was
already a prior order of the probate court approving the sale of Lot
Nos. 5 and 6 to Frank Liu. Hence, the probate court had already
lost jurisdiction over Lot Nos. 5 and 6 since the lots no longer
formed part of the Estate of Jose Vao.

RULE 89 SALES, MORTGAGES AND OTHER ENCUMBRANCES OF PROPERTY OF DECEDENT