G.R. No. 145982. July 3, 2003.

* mandatory that notice be served on the heirs and other

FRANK N. LIU, deceased, substituted by his interested persons of the application for approval of any
surviving spouse DIANA LIU, and children, namely: conveyance of property held in trust by the deceased, and
where no such notice is given, the order authorizing the
WALTER, MILTON, FRANK, JR., HENRY and
conveyance, as well as the conveyance itself, is completely
JOCKSON, all surnamed LIU, REBECCA LIU SHUI void. (Emphasis supplied)
and PEARL LIU RODRIGUEZ, 318
petitioners, vs. ALFREDO LOY, JR., TERESITA A.
LOY and ESTATE OF JOSE VAÑO, respondents. Same; Same; Same; A sale of estate property made
by an administrator without court authority is void and
Civil Law; Contracts; Sales; Rescission; Although does not confer on the purchaser a title that is available
the law allows the extra-judicial cancellation of a contract against a succeeding administrator.—In Teresita Loy’s
to sell upon failure of one party to comply with his case, her seller was the Estate of Jose Vaño. Teodoro Vaño
obligation, notice of such cancellation must still be given to executed the contract of sale in his capacity as administrator
the party who is at fault.—Although the law allows the of the Estate of Jose Vaño, the registered owner of the lots.
extra-judicial cancellation of a contract to sell upon failure The Court has held that a sale of estate property made by an
of one party to comply with administrator without court authority is void and does not
_______________ confer on the purchaser a title that is available against a
succeeding administrator.
 In Re: Petition for Dismissal from Service and/or Disbarment of
19
Same; Same; Same; An administrator cannot
Judge Baltazar R. Dizon, A.M. No. 3086, 31 May 1989, 173 SCRA 719.
 Dionisio v. Escaño, 362 Phil. 46; 302 SCRA 411 [1999].
20
unilaterally cancel a contract to sell made by the decedent
 FIRST DIVISION.
* in his lifetime.—A prior contract to sell made by the
decedent prevails over the subsequent contract of sale made
317 by the administrator without probate court approval. The
administrator cannot unilaterally cancel a contract to sell
VOL. 405, JULY 3, 2003 made by the decedent in his lifetime. Any cancellation must
Liu vs. Loy, Jr. observe all legal requisites, like written notice of
his obligation, notice of such cancellation must still cancellation based on lawful cause.
be given to the party who is at fault. The notice of
cancellation to the other party is one of the requirements for PETITION for review on certiorari of the decision and
a valid cancellation of a contract to sell, aside from the resolution of the Court of Appeals.
existence of a lawful cause.
Same; Same; Same; One who buys from a person The facts are stated in the opinion of the Court.
who is not the registered owner is not a purchaser in good
     Loyola, Rodriguez, Delos Santos & Naidas
faith.—The registration by the Loys of their contracts of
sale did not defeat the right of prior buyers because the Law Office for petitioners.
person who signed the Loys’ contracts was not the      Diores Law Offices for private respondents
registered owner. The registered owner of Lot Nos. 5 and 6 Loys.
was the “Estate of Jose Vaño.” Teodoro Vaño was the seller
in the contract of sale with Alfredo Loy, Jr. The Estate of CARPIO, J.:
Jose Vaño was the seller in the contract of sale with
Teresita Loy. Teodoro Vaño signed both contracts of sale. The Case
The rule is well-settled that “one who buys from a person This is a petition for review on certiorari of the
who is not the registered owner is not a purchaser in good Decision  dated 13 June 2000 and the Resolution dated
1

faith .”
14 November 2002 of the Court of Appeals which
Same; Same; Same; Registration of the contracts
without court approval would be ineffective to bind third affirmed the Decision  of the Regional Trial Court,
2

persons, especially creditors of the estate.—The contracts Branch 14, Cebu City. The Court of Appeals agreed
of the Loys did not convey ownership of the lots to them as with the trial court that the sales by the late Teodoro
against third persons. The contracts were binding only on Vaño to respondents Alfredo Loy, Jr. and Teresita A.
the seller, Teodoro Vaño. The contracts of the Loys would Loy of Lot Nos. 5 and 6, respectively, were valid. The
become binding against third persons only upon approval of Court of Appeals also agreed with the trial court that
the sale by the probate court and registration with the the unilateral extrajudicial rescission by the late
Register of Deeds. Registration of the contracts without Teodoro Vaño of the contract to sell involving five
court approval would be ineffective to bind third persons, lots, including Lot
especially creditors of the estate. Otherwise, this will open _______________
the door to fraud on creditors of the estate.
Same; Same; Same; Trusts; It is mandatory that  Penned by Associate Justice Jose L. Sabio, Jr., with
1

notice be served on the heirs and other interested persons Associate Justices Ramon Mabutas, Jr. and Demetrio G. Demetria
of the application for approval of any conveyance of concurring.
property held in trust by the deceased otherwise the order  Penned by Judge Renato C. Dacudao.
2

authorizing the conveyance, as well as the conveyance

319
itself, is completely void.—The failure to notify the
administratrix and other interested persons rendered the sale Nos. 5 and 6, between him and Benito Liu
to the Loys void. As explained by Justice J.B.L. Reyes (predecessor-in-interest of Frank Liu) was valid.
in De Jesus v. De Jesus: Section 9, Rule 90, however, The Facts
provides that authority can be given by the probate court to On 13 January 1950, Teodoro Vaño, as attorney-in-
the administrator to convey property held in trust by the fact of Jose Vaño, sold seven lots of the Banilad
deceased to the beneficiaries of the trust only “after notice Estate located in Cebu City to Benito Liu and Cirilo
given as required in the last preceding section”; i.e., Pangalo.  Teodoro Vaño dealt with Frank Liu, the
3

that “no such conveyance shall be authorized until notice of brother of Benito Liu, in the sale of the lots to Benito
the application for that purpose has been given personally
Liu and Cirilo Pangalo. The lots sold to Benito Liu
or by mail to all persons interested, and such further notice
has been given, by publication or otherwise, as the court were Lot Nos. 5, 6, 13, 14, and 15 of Block 12 for a
deems proper” (sec. 8, Rule 90). This rule makes it total price of P4,900. Benito Liu gave a down
payment of P1,000, undertaking to pay the balance of execution of the deed of sale in his favor but to no
P3,900 in monthly installments of P100 beginning at avail.
the end of January 1950. The lots sold to Cirilo On 19 August 1968, Teodoro Vaño sold Lot No. 6
Pangalo were Lot Nos. 14 and 15 of Block 11 for a to respondent Teresita Loy for P3,930.  The Register 12

total price of P1,967.50. Cirilo Pangalo gave P400 as of Deeds of Cebu City entered this sale in the
down payment, undertaking to pay the balance of Daybook on 24 February 1969. 13

P1,567.50 in monthly installments of P400 beginning On 2 December 1968, Frank Liu filed a complaint
at the end of January 1950. Meanwhile, Jose Vaño against Teodoro Vaño for specific performance,
passed away. execution of deed of absolute
Benito Liu subsequently paid installments totaling _______________
P2,900, leaving a balance of P1,000.  Apparently, 4

Benito Liu stopped further payments because Teodoro

8
 321
Vaño admitted his inability to transfer the lot titles to sale, issuance of certificates of title and construction
Benito Liu. Later, in a letter  dated 16 October 1954,
5
of subdivision roads, before the Court of First Instance
Teodoro Vaño informed Frank Liu  that the Supreme
6
of Davao. The case was docketed as Civil Case No.
Court had already declared valid the will of his father 6300. 14

Jose Vaño. Thus, Teodoro Vaño could transfer the On 19 December 1968, Frank Liu filed with the
titles to the buyers’ names upon payment of the Register of Deeds of Cebu City a notice of lis
balance of the purchase price. pendens on the seven lots due to the pendency of Civil
When Frank Liu failed to reply, Teodoro Vaño Case No. 6300.  However, the Register of Deeds
15

sent him another letter,  dated 1 January 1955,

7
denied the registration of the lis pendens “on the
reminding him of his outstanding ground that the property is under administration and
_______________ said claim must be filed in court.” 16

On 16 December 1969, Teodoro Vaño sold Lot

3
 Exhibit “A”, Records, pp. 6-9. No. 5 to respondent Alfredo Loy for P3,910.  The 17

4
 See Exhibits “B” and “F”, ibid., pp. 62-63 and 68. Register of Deeds of Cebu City entered this sale in the
 Exhibit “C”, ibid., p. 64.
Daybook on 16 January 1970.
5
18
6
 The contract between Teodoro Vaño and Cirilo Pangalo
provides that in case of death of the vendee, the contract shall be On 3 October 1970, the Court of First Instance of
considered as fully paid and a final deed of sale shall be made in Davao, on motion of Teodoro Vaño, dismissed Civil
favor of the beneficiary, Frank N. Liu, provided vendee is not in Case No. 6300 on the ground that Frank Liu should
arrears of not more than two months. Also, in his letter to Frank have filed the claim with the probate court.  Thus, on 19

Liu, dated 1 January 1955, Teodoro Vaño stated that: “I have

addressed my letter to you because ever since 1949, it has always 17 February 1972, Frank Liu filed before the probate
been you I dealt with, and not Mr. B. Liu, neither with Mr. C. court a claim against the Estate of Jose Vaño for
Pangalo, though the last two gentlemen were the ones who signed “Specific Performance, Execution of Deed of
the agreements for the purchase of the lots.” Absolute Sale, Issuance of Certificate of Title, and
 Exhibit “D”, Records, p. 65.
Construction of Subdivision Roads.”
7
20

320 During the proceedings, Teodoro Vaño died. His

balance. It appears that it was only after nine years widow, Milagros Vaño, succeeded as administratrix of
that Frank Liu responded through a letter,  dated 25 8 the Estate of Jose Vaño.
January 1964. In the letter, Frank Liu informed On 24 February 1976, the probate court approved
Teodoro Vaño that he was ready to pay the balance of the claim of Frank Liu. On 5 March 1976, Milagros
the purchase price of the seven lots. He requested for Vaño executed a deed of conveyance covering the
the execution of a deed of sale of the lots in his name seven lots in favor of Frank Liu, in compliance with
and the delivery of the titles to him. the probate court’s order.  The deed of conveyance
21

On 22 April 1966, Benito Liu sold to Frank Liu the included Lot Nos. 5 and 6, the same lots Teodoro
five lots (Lot Nos. 5, 6, 13, 14 and 15 of Block 12) Vaño sold respectively to Alfredo Loy, Jr. on 16
which Benito Liu purchased from Teodoro December 1969 and to Teresita Loy on 19 August
Vaño.  Frank Liu assumed the balance of P1,000 for
9 1968.
the five lots. Cirilo Pangalo likewise sold to Frank Liu 322
the two lots (Lot Nos. 14 and 15 of Block 11) that On 19 March 1976, the probate court, upon an ex-
Pangalo purchased from Teodoro Vaño. Frank Liu parte motion filed by Teresita Loy, issued an
likewise assumed the balance of P417 for the two lots. Order  approving the 16 August 1968 sale by Teodoro
22

On 21 March 1968, Frank Liu reiterated in a Vaño of Lot No. 6 in her favor. Likewise, upon an ex-
letter  his request for Teodoro Vaño to execute the
10 parte motion filed by Alfredo Loy, Jr., the probate
deed of sale covering the seven lots so he could secure court issued on 23 March 1976 an Order  approving 23

the corresponding certificates of title in his name. He the 16 December 1969 sale of Lot No. 5 by Teodoro
also requested for the construction of the subdivision Vaño in his favor.
roads pursuant to the original contract. In the letter, On 10 May 1976, the Register of Deeds of Cebu
Frank Liu referred to another letter, dated 25 June City cancelled TCT No. 44204 in the name of the
1966, which he allegedly sent to Teodoro Vaño. Estate of Jose Vaño covering Lot No. 5 and issued a
According to Frank Liu, he enclosed PBC Check No. new title, TCT No. 64522, in the name of Alfredo
D-782290 dated 6 May 1966 for P1,417, which is the Loy, Jr. and Perfeccion V. Loy.  Likewise, on the
24

total balance of the accounts of Benito Liu and Cirilo same date, the Register of Deeds cancelled TCT No.
Pangalo on the seven lots. However, Frank Liu did not 44205 in the name of the Estate of Jose Vaño covering
offer in evidence the letter or the check. Frank Liu Lot No. 6, and issued TCT No. 64523 in the name of
sent two other letters,  dated 7 June 1968 and 29 July
11 Teresita A. Loy. 25

1968, to Teodoro Vaño reiterating his request for the On 3 June 1976, Milagros Vaño, as administratrix
of the estate, filed a motion for reconsideration of the
Orders of the probate court dated 19 and 23 March 324
1976. She contended that she already complied with The Court of Appeals’ Ruling
the probate court’s Order dated 24 February 1976 to In affirming in toto the trial court’s decision, the
execute a deed of sale covering the seven lots, appellate court found no evidence of fraud or ill-
including Lot Nos. 5 and 6, in favor of Frank Liu. She motive on the part of Alfredo Loy, Jr. and Teresita
also stated that no one notified her of the motion of Loy. The Court of Appeals cited the rule that “the law
the Loys, and if the Loys or the court notified her, she always presumes good faith such that any person who
would have objected to the sale of the same lots to the seeks to be awarded damages due to the acts of
Loys. another has the burden of proving that the latter acted
On 4 June 1976, Frank Liu filed a complaint for in bad faith or ill-motive.”
reconveyance or annulment of title of Lot Nos. 5 and The Court of Appeals also held that the sales to
6. Frank Liu filed the case in the Regional Trial Court Alfredo Loy, Jr. and Teresita Loy of Lot Nos. 5 and 6,
of Cebu City, Branch 14, which docketed it as Civil respectively, were valid despite lack of prior approval
Case No. R-15342. by the probate court. The Court of Appeals declared
On 5 August 1978, the probate court denied the that Teodoro Vaño sold the lots in his capacity as heir
motion for reconsideration of Milagros Vaño on the of Jose Vaño. The appellate court ruled that an heir
ground that the conflicting claims regarding the has a right to dispose of the decedent’s property, even
ownership of Lot Nos. 5 and 6 were already under if the same is under administration, because the
litigation in Civil Case No. R-15342. hereditary property is deemed transmitted to the heir
On 8 April 1991, the Regional Trial Court of Cebu without interruption from the moment of the death of
City (“trial court”), Branch 14, rendered judgment the decedent.
against Frank Liu as follows: The Court of Appeals held that there is no basis for
_______________ the claim of moral damages and attorney’s fees. The
appellate court found that Frank Liu failed to prove
323 that he suffered mental anguish due to the actuations
“WHEREFORE, judgment is hereby rendered:
of the Loys. The Court of Appeals likewise disallowed
(1) Dismissing the complaint at bar; and
(2) Confirming the unilateral extrajudicial rescission of the award of attorney’s fees. The fact alone that a
the contract Exhibit “A” by the late Teodoro Vaño, party was compelled to litigate and incur expenses to
conditioned upon the refund by the Estate of Jose Vaño of protect his claim does not justify an award of
one-half (1/2) of what the plaintiff had paid under that attorney’s fees. Besides, the Court of Appeals held
contract. that where there is no basis to award moral damages,
The counterclaims by the defendants Alfredo A. Loy, there is also no basis to award attorney’s fees.
Jr. and Teresita A. Loy and by the defendant Estate of Jose The Issues
Vaño, not having been substantiated, are hereby denied. Petitioners  raise the following issues:
28 29

Without special pronouncement as to costs.

SO ORDERED.” 26

1. 1.Whether prior approval of the probate court

Frank Liu appealed to the Court of Appeals, which is necessary to validate the sale of Lot Nos. 5
affirmed in toto the decision of the trial court. Frank and 6 to Loys;
Liu  filed a motion for reconsideration but the Court
27
2. 2.Whether the Loys can be considered buyers
of Appeals denied the same. and registrants in good faith despite the
Hence, the instant petition. notice of lis pendens;
The Trial Court’s Ruling 3. 3.Whether Frank Liu has a superior right over
The trial court held that the contract between Teodoro Lot Nos. 5 and 6;
Vaño and Benito Liu was a contract to sell. Since title
to Lot Nos. 5 and 6 never passed to Benito Liu due to _______________
non-payment of the balance of the purchase price,
 Petitioners are Frank Liu’s spouse and children, who
ownership of the lots remained with the vendor.
28

substituted him upon his death.

Therefore, the trial court ruled that the subsequent 29
 Rollo, pp. 18-19.
sales to Alfredo Loy, Jr. and Teresita Loy of Lot Nos.
5 and 6, respectively, were valid. 325
The trial court viewed the letter of Teodoro Vaño
dated 1 January 1995 addressed to Frank Liu as a 1. 4.Whether the Court of Appeals erred in not
unilateral extrajudicial rescission of the contract to passing upon the trial court’s declaration that
sell. The trial court upheld the unilateral rescission the extra-judicial rescission by Teodoro
subject to refund by the Estate of Jose Vaño of one- Vaño of the sale in favor of Frank Liu is
half (1/2) of what Frank Liu paid under the contract. valid;
The trial court ruled that Teodoro Vaño, as 2. 5.Whether petitioners are entitled to moral
administrator of the Estate of Jose Vaño and as sole damages and attorney’s fees.
heir of Jose Vaño, acted both as principal and as agent
when he sold the lots to Alfredo Loy, Jr. and Teresita The Court’s Ruling
Loy. The probate court subsequently approved the The petition is meritorious.
sales. The trial court also found that Alfredo Loy, Jr. Whether there was a valid cancellation of the
and Teresita Loy were purchasers in good faith. contract to sell
_______________
There was no valid cancellation of the contract to sell
26
 Rollo, p. 75. because there was no written notice of the cancellation
27
 Frank Liu died on 24 January 1992 and was substituted by to Benito Liu or Frank Liu. There was even no
his legal heirs. CA Rollo, pp. 209-212. implied cancellation of the contract to sell. The trial
court merely “viewed” the alleged “unilateral  Active Realty & Development Corporation v. Daroya, G.R.
31

extrajudicial rescission” from the letter of Teodoro No. 141205, 9 May 2002, 382 SCRA 152; Leaño v. Court of
Appeals, G.R. No. 129018, 15 November 2001, 369 SCRA
Vaño, dated 1 January 1955, addressed to Frank Liu, 36; Padilla v. Paredes, G.R. No. 124874, 17 March 2000, 328
stating that: SCRA 434.
Two months, I believe, is ample for the allowance of delays  Lim v. Court of Appeals, G.R. No. 85733, 23 February
32

caused by your (sic) either too busy, or having been some 1990, 182 SCRA 564, 571, citing University of the Philippines v.
place else, or for consultations. These are the only reasons I De Los Angeles, 146 Phil. 108, 114-115; 35 SCRA 102 (1970).
can think of that could have caused the delay in your  Civil Case No. 6300, instituted by Frank Liu against
33

Teodoro Vaño, was dismissed on motion of Teodoro Vaño on the

answer, unless you do not think an answer is necessary at
ground that the remedy of Frank Liu is to file his claim in the
all, as you are not the party concerned in the matter. probate court; See Exhibits “2-Vaño” and “4-Vaño”, Folder of
I shall therefor (sic) appreciate it very much, if you will Exhibits, pp. 64 and 67.
write me within ten days from receipt of this letter, or  Exhibit “C”, Records, p. 64.
34

enterprete (sic) your silence as my mistake in having

written to the wrong party, and therefor (sic) proceed to 327
write Misters: B. Liu and C. Pangalo.  (Emphasis 30 In the same letter of 16 October 1954, Teodoro Vaño
supplied) informed Frank Liu that the titles were ready for
transfer, thus:
Obviously, we cannot construe this letter as a However, last June 30, of this year, the Supreme Court,
unilateral extrajudicial rescission of the contract to unanimously concurred in the reversal of the decision of the
sell. As clearly stated in the letter, the only action that Court of First Instance, as regard the legality of the Will of
Teodoro Vaño would take if Frank Liu did not reply my father. Now that the Will of my Father has been
was that Teodoro Vaño would write directly to Benito declared Legal, my opponents have lost their personality in
Liu and Cirilo Pangalo. The letter does not mention the case, and with it their power to harass me in court. Also,
anything about rescinding or cancelling the contract to sometime in the middle of July, also this year, the Supreme
sell. Court again declared that all the sales I have made of the
properties of my Father, were Legal, and that I should be
Although the law allows the extrajudicial
empowered to have the Titles transferred in the buyer’s
cancellation of a contract to sell upon failure of one names, should they have paid in full. A few have already
party to comply with his obligation, notice of such received their Titles. And yours can be had too in two days
cancellation must still be given to the party who is at time from the time you have paid in full.
_______________
Nevertheless, the subsequent approval by the probate
30
 Exhibit “D”, Records, p. 65. court of the sale of Lot Nos. 5 and 6 to Frank Liu
326 rendered moot any question on the continuing validity
fault.  The notice of cancellation to the other party is
31 of the contract to sell.
one of the requirements for a valid cancellation of a Whether the lis pendens in the Davao case served as
contract to sell, aside from the existence of a lawful notice to the Loys.
cause. Even the case cited by the trial court The lis pendens in the Davao case did not serve as
emphasizes the importance of such notice: notice to the Loys. The Register of Deeds of Cebu
Of course, it must be understood that the act of a party City denied registration of the lis pendens on 19
in treating a contract as cancelled or resolved on account December 1968.  Frank Liu did not appeal to the Land
35

of infractions by the other contracting party must be made Registration Commission  to keep alive the lis
36

known to the other and is always provisional, being ever pendens. Republic Act No. 1151,  which took effect
37

subject to scrutiny and review by the proper court. If the

17 June 1954, provides:
other party denies that rescission is justified, it is free to
SEC. 4. Reference of doubtful matters to Commissioner of
resort to judicial action in its own behalf, and bring the
Land Registration.—When the Register of Deeds is in
matter to court. Then, should the court, after due hearing,
doubt with regard to the proper step to be taken or
decide that the resolution of the contract was not warranted,
memorandum to be made in pursuance of any deed,
the responsible party will be sentenced to damages; in the
mortgage, or other instrument presented to him for
contrary case, the resolution will be affirmed, and the
registration, or where any party in interest does not agree
consequent indemnity awarded to the party
with the Register of Deeds with reference to any such
prejudiced.  (Emphasis supplied)
32

matter, the question shall be submitted to the

The fact that Teodoro Vaño advised Frank Liu to file Commissioner of Land Registration either upon
his claim with the probate court is certainly not the the certification of the Register of Deeds, stating the
conduct of one who supposedly unilaterally rescinded question upon which he is in doubt, or upon the
suggestion in writing by the party in interest, and
the contract with Frank Liu. 33

thereupon the Commissioner, after consideration of the

In this case, there was prior delay or default by the matter shown by the records certified to him, and in case of
seller. As admitted by Teodoro Vaño, he could not registered
deliver the titles because of a case questioning the _______________
authenticity of the will of his father. In a letter  to 34

Frank Liu dated 16 October 1954, Teodoro Vaño  See Exhibit “J-3”, Records, back of p. 78.
35

 Now Land Registration Authority.

36

stated:  An Act Creating the Land Registration Commission, and

37

Some time last May, if I remember correctly, you offered to Authorizing and Appropriating the Necessary Funds Therefor.
settle the whole balance of your account if I can have the
328
Titles transferred immediately in your brother’s name, and
lands, after notice to the parties and hearing, shall enter an
to that of Mr. Pangalo’s. I cannot blame you if you were
order prescribing the step to be taken or memorandum to be
disappointed then, to know that I could not have the titles
made. His decision in such cases shall be conclusive and
transferred, even should you have paid in full. (Emphasis
binding upon all Registers of Deeds: Provided,
supplied)
however, That when a party in interest disagrees with a
_______________ ruling or resolution of the Commissioner and the issue
involves a question of law, said decision may be appealed
to the Supreme Court within thirty days from and after Section 8, Rule 89 of the 1964 Rules of
receipt of the notice thereof. (Emphasis supplied) Court  specifically requires notice to all interested
42

parties in any application for court approval to convey

Frank Liu’s failure to appeal  the denial of the
38

property contracted by the decedent in his lifetime.

registration rendered the lis pendens ineffective. The
Thus:
Court of First Instance of Davao City eventually
SECTION 8. When court may authorize conveyance of
dismissed Frank Liu’s complaint on 3 October 1970. realty which deceased contracted to convey. Notice. Effect
Whether the registration by the Loys of their of deed.—Where the deceased was in his lifetime under
contracts of sale made them the first contract, binding in law, to deed real property, or an
registrants in good faith to defeat prior buyers interest therein, the court having jurisdiction of the estate
The registration by the Loys of their contracts of sale may, on application for that purpose, authorize
the executor or administrator to convey such property
did not defeat the right of prior buyers because the
according to such contract, or with such modifications as
person who signed the Loys’ contracts was not the are agreed upon by the parties and approved by the court;
registered owner. The registered owner of Lot Nos. 5 and if the contract is to convey real property to the executor
and 6 was the “Estate of Jose Vaño.” Teodoro Vaño or administrator, the clerk of the court shall execute the
was the seller in the contract of sale with Alfredo Loy, deed. The deed executed by such executor, administrator, or
Jr. The Estate of Jose Vaño was the seller in the clerk of court shall be as effectual to convey the property as
contract of sale with Teresita Loy. Teodoro Vaño if executed by
signed both contracts of sale. The rule is well-settled _______________

that “one who buys from a person who is not the  See Baun v. Heirs of Baun, 53 Phil. 654 (1929).
41

registered owner is not a purchaser in good  The Rules then prevailing.

42

faith.”  As held in Toledo-Banaga v. Court of

39

330
Appeals: 40

the deceased in his lifetime; but no such conveyance shall

To repeat, at the time of the sale, the person from whom
be authorized until notice of the application for that
petitioner Tan bought the property is neither the registered
purpose has been given personally or by mail to all
owner nor was the former authorized by the latter to sell the
persons interested, and such further notice has been
same. She knew she was not dealing with the registered
given, by publication or otherwise, as the court deems
owner or a representative of the latter. One who buys
proper; nor if the assets in the hands of the executor or
property with full knowledge of the flaws and defects in the
administrator will thereby be reduced so as to prevent a
title of his vendor is enough proof of his bad faith and
creditor from receiving his full debt or diminish his
cannot claim that he ac-
_______________
dividend. (Rule 89, 1964 Rules of Court) (Emphasis
supplied)
38
 Under Section 117 of the Property Registration Decree (PD No.
1529), which took effect on 11 June 1978, the denial of the registration of Despite the clear requirement of Section 8 of Rule 89,
a lis pendens must be appealed within 5 days from notice of the denial. the Loys did not notify the administratrix of the
 Samonte v. Court of Appeals, G.R. No. 104223, 12 July 2001, 361
motion and hearing to approve the sale of the lots to
39

SCRA 173; Egao v. Court of Appeals, G.R. No. 79787, June 29, 1989, 174

SCRA 484; Rivera v. Tirona, 109 Phil. 505 (1960); Revilla and Fajardo v. them. The administratrix, who had already signed the
Galindez, 107 Phil. 481 (1960); Mirasol v. Gerochi, 93 Phil. deed of sale to Frank Liu as directed by the same
480 (1953); Mari v. Bonilla, 83 Phil. 137 (1949).
40
 G.R. No. 127941, 28 January 1999, 302 SCRA 331, 345. probate court, objected to the sale of the same lots to
the Loys. Thus, as found by the trial court:
329 On June 3, 1976, Milagros H. Vaño moved for the
quired title in good faith as against the owner or of an reconsideration of the Order issued by Judge Ramolete on
interest therein. When she nonetheless proceeded to buy the March 19, 1976 and March 23, 1976, contending that she
lot, petitioner Tan gambled on the result of litigation. She is had not been personally served with copies of the motions
bound by the outcome of her indifference with no one to presented to the Court by Alfredo Loy, Jr. and by Teresita
blame except herself if she looses her claim as against one Loy seeking the approval of the sales of the lots in their
who has a superior right or interest over the property. x x x. favor, as well as the Orders that were issued by the Court
pursuant thereto; that the Court in its Order of February 24,
The Loys were under notice to inquire why the land 1976 had ordered her (Milagros H. Vaño), to execute a deed
was not registered in the name of the person who of absolute sale in favor of the plaintiff, which sale had
executed the contracts of sale. They were under notice been approved by the Court; that she had not known of the
that the lots belonged to the “Estate of Jose Vaño” and sale of Lots 5 and 6 to any other person except to the
any sale of the lots required court approval. Any plaintiff; that the sale of the two lots in favor of plaintiff
disposition would be subject to the claims of creditors was made earlier, when there was yet no litigation with the
of the estate who filed claims before the probate Bureau of Internal Revenue, while those in favor of the
court. 41 defendant Loys were made when there was already a
The contracts of the Loys did not convey prohibition by the Court against any sale thereof; that the
ownership of the lots to them as against third persons. sales in favor of the Loys were made without Court
authority; and that if the approval of the sales had not been
The contracts were binding only on the seller,
obtained ex-parte she would have informed the Court of the
Teodoro Vaño. The contracts of the Loys would complication arising therefrom, and she would not have
become binding against third persons only upon executed the sale in favor of plaintiff, and she would have
approval of the sale by the probate court and asked the Court to decide first as to who had preference
registration with the Register of Deeds. Registration of over said lots. 43

the contracts without court approval would be

ineffective to bind third persons, especially creditors The failure to notify the administratrix and other
of the estate. Otherwise, this will open the door to interested persons rendered the sale to the Loys void.
fraud on creditors of the estate. As explained by Justice J.B.L. Reyes in De Jesus v.
Whether the probate court’s ex-parte approval De Jesus: 44

_______________
of the contracts of the Loys was valid
 43
 Rollo, p. 188. administration, in no wise stands in the way of such
44
 G.R. No. L-16553, 29 November 1961, 3 SCRA 548, 551. administration.’ (Emphasis supplied)
331 In Alfredo Loy’s case, his seller executed the contract
Section 9, Rule 90, however, provides that authority can be of sale after the death of the registered owner Jose
given by the probate court to the administrator to convey
property held in trust by the deceased to the beneficiaries of
Vaño. The seller was Teodoro Vaño who sold the lot
the trust only “after notice given as required in the last in his capacity as sole heir of the deceased Jose Vaño.
preceding section”; i.e., that “no such conveyance shall be Thus, Opulencia applies to the sale of the lot to
authorized until notice of the application for that Alfredo Loy, Jr., which means that the contract of sale
purpose has been given personally or by mail to all was binding between Teodoro Vaño and Alfredo Loy,
persons interested, and such further notice has been Jr., but subject to the outcome of the probate
given, by publication or otherwise, as the court deems proceedings.
proper” (sec. 8, Rule 90). This rule makes it mandatory In Frank Liu’s case, as successor-in-interest of
that notice be served on the heirs and other interested Benito Liu, his seller was Jose Vaño, who during his
persons of the application for approval of any conveyance lifetime executed the contract to sell through an
of property held in trust by the deceased, and where no
attorney-in-fact, Teodoro Vaño. This is a disposition
such notice is given, the order authorizing the
conveyance, as well as the conveyance itself, is completely of property contracted by the decedent during his
void. (Emphasis supplied) lifetime. Section 8 of Rule 89 specifically governs this
sale:
In this case, the administratrix, the wife of the SECTION 8. When court may authorize conveyance of
deceased Teodoro Vaño, was not notified of the realty which deceased contracted to convey. Notice. Effect
motion and hearing to approve the sale of the lots to of deed.—Where the deceased was in his lifetime under
the Loys. Frank Liu did not also receive any notice, contract, binding in law, to deed real property, or an interest
although he obviously was an interested party. The therein, the court having jurisdiction of the estate may, on
application for that purpose, authorize the executor or
issuance of new titles to the Loys on 10 May 1976 by
administrator to convey such property according to such
the Registry of Deeds did not vest title to the Loys contract, or with such modifications as are agreed upon by
because the “conveyance itself” was “completely the parties and approved by the court; x x x
void.” The consequences for the failure to notify the
administratrix and other interested parties must be Thus, Frank Liu applied to the probate court for the
borne by the Loys. grant of authority to the administratrix to convey the
Necessity of court approval of sales lots in accordance
_______________
Indisputably, an heir can sell his interest in the estate
of the decedent, or even his interest in specific  355 Phil. 124; 293 SCRA 385 (1998).
46

properties of the estate. However, for such disposition

to take effect against third parties, the court must 333
approve such disposition to protect the rights of with the contract made by the decedent Jose Vaño
creditors of the estate. What the deceased can transfer during his lifetime. The probate court approved the
to his heirs is only the net estate, that is, the gross application.
estate less the liabilities. As held in Baun v. Heirs of In Teresita Loy’s case, her seller was the Estate of
Baun: 45 Jose Vaño. Teodoro Vaño executed the contract of
The heir legally succeeds the deceased, from whom he sale in his capacity as administrator of the Estate of
derives his right and title, but only after the liquidation of Jose Vaño, the registered owner of the lots. The Court
the estate, the payment of the debts of the same, and the has held that a sale of estate property made by an
adjudication of the residue of the estate of the deceased; and administrator without court authority is void and does
in the meantime the only person in charge by law to attend not confer on the purchaser a title that is available
to all claims against the estate of the deceased debtor is the against a succeeding administrator. 47

executor or administrator appointed by the court.

Manotok Realty, Inc. v. Court of
_______________ Appeals  emphasizes the need for court approval in the
48

sale by an administrator of estate property. The Court

45
 Supra, see note 41. held in Manotok Realty:
332 We also find that the appellate court committed an error of
In Opulencia v. Court of Appeals,  an heir agreed to
46
law when it held that the sale of the lot in question did not
need the approval of the probate court.
convey in a contract to sell her share in the estate then Although the Rules of Court do not specifically state
under probate settlement. In an action for specific that the sale of an immovable property belonging to an
performance filed by the buyers, the seller-heir estate of a decedent, in a special proceeding, should be
resisted on the ground that there was no approval of made with the approval of the court, this authority is
the contract by the probate court. The Court ruled that necessarily included in its capacity as a probate court.
the contract to sell was binding between the parties, An administrator under the circumstances of this case
but subject to the outcome of the testate proceedings. cannot enjoy blanket authority to dispose of real estate as he
The Court declared: pleases, especially where he ignores specific directives to
x x x Consequently, although the Contract to Sell was execute proper documents and get court approval for the
perfected between the petitioner (seller-heir) and private sale’s validity.
respondents (buyers) during the pendency of the probate
proceedings, the consummation of the sale or the transfer of Section 91 of Act No. 496 (Land Registration Act)
ownership over the parcel of land to the private respondents specifically requires court approval for any sale of
is subject to the full payment of the purchase price and to registered land by an executor or administrator, thus:
the termination and outcome of the testate proceedings. x SEC. 91. Except in case of a will devising the land to an
x x Indeed, it is settled that ‘the sale made by an heir of his executor to his own use or upon some trust or giving to the
share in an inheritance, subject to the pending executor power to sell, no sale or transfer of registered
land shall be made by an executor or by an administrator subsequently inventoried or considered part of the
in the course of administration for the payment of debts deceased’s estate subject to settlement, and, thereafter, with
or for any other purpose, except in pursuance of an order the authority and approval of the probate court, it sold once
of a court of competent jurisdiction obtained as more to another person, a receiver of the property so sold
provided by law. (Emphasis supplied) may, during the pendency of a motion to set aside the
second sale, be appointed by the court when in its sound
_______________ judgment the grant of such temporary relief is reasonably
necessary to secure and protect the rights of its real owner
 Dillena v. Court of Appeals, G.R. No. L-77660, 28 July
47

against any danger of loss or material injury to him arising

1988, 163 SCRA 630; Estate of Amadeo Matute Olave, v. Hon.
Reyes, 208 Phil. 678; 123 SCRA 167 (1983); Godoy v. from the use and enjoyment thereof by another who
Orellano, 42 Phil. 347 (1921). manifestly cannot acquire any right of dominion thereon
 G.R. No. L-35367, 9 April 1987, 149 SCRA 174, 179-180.
48 because the approving surrogate court had already lost
jurisdiction to authorize the further sale of such
334 property. (Emphasis supplied)
Similarly, Section 88 of Presidential Decree No. 1529
(PropertyRegistration Decree) provides: Similarly, in this case, the Loys cannot acquire any
SEC. 88. Dealings by administrator subject to court right of dominion over Lot Nos. 5 and 6 because the
approval.—After a memorandum of the will, if any, and probate court had already lost jurisdiction to authorize
order allowing the same, and letters testamentary or letters the second sale of the same lots. Moreover, the
of administration have been entered upon the certificate of probate court’s approval of the sale to the Loys was
title as hereinabove provided, the executor or completely void due to the failure to notify the
administrator may alienate or encumber registered land administratrix of the motion and hearing on the sale.
belonging to the estate, or any interest therein, upon
approval of the court obtained as provided by the Rules of Whether the Loys were in good faith when they built
Court. (Emphasis supplied) on the Lots.
The Civil Code describes a possessor in good faith as
Clearly, both the law and jurisprudence expressly follows:
require court approval before any sale of estate Art. 526. He is deemed a possessor in good faith who is not
property by an executor or administrator can take aware that there exists in his title or mode of acquisition any
effect. flaw which invalidates it.
Moreover, when the Loys filed in March 1976 He is deemed a possessor in bad faith who possesses in
their ex-parte motions for approval of their contracts any case contrary to the foregoing.
of sale, there was already a prior order of the probate _______________
court dated 24 February 1976 approving the sale of
Lot Nos. 5 and 6 to Frank Liu. In fact, the  148 Phil. 630; 38 SCRA 616 (1971).
50

administratrix had signed the deed of sale in favor of

336
Frank Liu on 5 March 1976 pursuant to the court
Mistake upon a doubtful or difficult question of law may be
approval. This deed of sale was notarized on 5 March the basis of good faith.
1976, which transferred ownership of Lot Nos. 5 and Art. 1127. The good faith of the possessor consists in
6 to Frank Liu on the same date. 49
the reasonable belief that the person from whom he
Thus, when the probate court approved the received the thing was the owner thereof, and could
contracts of the Loys on 19 and 23 March 1976, the transmit his ownership.
probate court had already lost jurisdiction over Lot
Nos. 5 and 6 because the lots no longer formed part of In Duran v. Intermediate Appellate Court,  the Court
51

the Estate of Jose Vaño. explained possession in good faith in this manner:
_______________ Guided by previous decisions of this Court, good faith
consists in the possessor’s belief that the person from whom
49
 The Civil Code provides: he received the thing was the owner of the same and could
Art. 1477. The ownership of the thing sold shall be transferred to the convey his title (Arriola vs. Gomez de la Serna, 14 Phil.
vendee upon the actual or constructive delivery thereof. 627). Good faith, while it is always presumed in the
Art. 1496. The ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways specified in
absence of proof to the contrary, requires a well-founded
Articles 1497 to 1501, or in any other manner signifying an agreement that belief that the person from whom title was received was
the possession is transferred from the vendor to the vendee. himself the owner of the land, with the right to convey it
Art. 1498. When the sale is made through a public instrument, the (Santiago vs. Cruz, 19 Phil. 148). There is good faith where
execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the contrary does not appear or
there is an honest intention to abstain from taking
cannot clearly be inferred. unconscientious advantage from another (Fule vs. Legare, 7
xxx SCRA 351).
335 The Loys were not in good faith when they built on
In Dolar v. Sundiam,  an heir sold parcels of land that
50
the lots because they knew that they bought from
were part of the estate of the decedent. The probate someone who was not the registered owner. The
court approved the sale. Thereafter, the probate court registered owner on the TCTs of the lots was the
authorized the administrator to sell again the same “Estate of Jose Vaño,” clearly indicating that the sale
parcels of land to another person. The Court ruled that required probate court approval. Teodoro Vaño did
the probate court had already lost jurisdiction to not show any court approval to the Loys when they
authorize the further sale of the parcels of land to purchased the lots because there was none. To repeat,
another person because such property no longer any one who buys from a person who is not the
formed part of the estate of the decedent. The Court registered owner is not a purchaser in good faith.  If 52

declared: the Loys built on the lots before the court approval,
In our opinion, where, as in this case, a piece of property then they took the risk.
which originally is a part of the estate of a deceased person
is sold by an heir of the deceased having a valid claim
Contract to sell versus contract of sale
thereto, and said piece of property is, by mistake,
A prior contract to sell made by the decedent prevails accordance with Section 8 of Rule 89, Lot Nos. 5 and
over the subsequent contract of sale made by the 6 belong to Frank Liu. The Estate of Jose Vaño should
administrator without probate court approval. The reimburse the Loys their payments on Lot Nos. 5 and
administrator cannot unilaterally cancel a contract to 6, with annual interest at 6% from 4 June 1976, the
sell made by the decedent in his lifetime.  Any 53
date of filing of the complaint, until finality of this
cancellation must observe all legal requisites, like decision, and 12% thereafter until full payment.
60

written notice of cancellation based on lawful cause. 54

WHEREFORE, the Decision of the Court of
_______________ Appeals is SET ASIDE and a new one is
RENDERED:
 G.R. No. L-64159, 10 September 1985, 138 SCRA 489, 494.
51

 See note 39.
52

 Lim v. Court of Appeals, G.R. No. 85733, 23 February

53 1. 1.Declaring null and void the deeds of sale of
1990, 182 SCRA 564. Lot Nos. 5 and 6 executed by Teodoro Vaño
 Active Realty & Development Corporation v. Daroya,
54
in favor of Alfredo Loy, Jr. and Teresita
supra, see note 31.
Loy, respectively.
337 2. 2.Ordering the Register of Deeds of Cebu City
It is immaterial if the prior contract is a mere contract to cancel TCT Nos. 64522 and 64523 and to
to sell and does not immediately convey issue a new one in the name of petitioner
ownership.  If it is valid, then it binds the estate to
55 Frank N. Liu;
convey the property in accordance with Section 8 of 3. 3.Ordering the Estate of Jose Vaño to
Rule 89 upon full payment of the consideration. reimburse to respondent Loys the amounts
Frank Liu’s contract to sell became valid and paid on Lot Nos. 5 and 6, with interest at
effective upon its execution.  The seller, Jose Vaño,
56 6% per annum from 4 June 1976 until
was then alive and thus there was no need for court finality of this decision, and 12% per
approval for the immediate effectivity of the contract annum thereafter until full payment.
to sell. In contrast, the execution of the contracts of
sale of the Loys took place after the death of the SO ORDERED.
registered owner of the lots. The law requires court      Davide, Jr. (C.J., Chairman), Vitug, Ynares-
approval for the effectivity of the Loys’ contracts of Santiago and Azcuna, JJ., concur.
sale against third parties. The probate court did not
_______________
validly give this approval since it failed to notify all
interested parties of the Loy’s motion for court 339
approval of the sale. Besides, the probate court had Judgment set aside.
lost jurisdiction over the lots after it approved the Note.—Mutual restitution is required in rescission,
earlier sale to Frank Liu. Clearly, Frank Liu’s contract but this presupposes that both parties may be restored
to sell prevails over the Loys’ contracts of sale. in their original situation. (Asuncion vs.
Whether petitioners are entitled to award of Evangelista, 316 SCRA 848 [1999])
moral damages and attorney’s fees.
The Court upholds the ruling of the trial and appellate ——o0o——
courts that petitioners are not entitled to moral
damages. Moral damages should not enrich a
complainant at the expense of the defendant. 57

Likewise, as found by the trial court and the

appellate court, there is no basis to award attorney’s
fees. The policy of the law is to put no premium on
the right to litigate.  The court may award attorney’s
58

fees only in the instances mentioned in Article 2208 of

_______________

 See Adelfa Properties, Inc. v. Court of Appeals, 310 Phil.

55

623; 240 SCRA 565 (1995).

 Article 1315 of the Civil Code provides:
56

Art. 1315. Contracts are perfected by mere consent, and from that moment
the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature,
may be in keeping with good faith, usage and law.

 People v. Sanchez, G.R. Nos. 121039-45, 18 October

57

2001, 367 SCRA 520.

 Country Bankers Ins. Corp. v. Lianga Bay and Community
58

MultiPurpose Cooperative, Inc. G.R. No. 136914, 25 January

2002, 374 SCRA 653; Padillo v. Court of Appeals, G.R. No.
119707, 29 November 2001, 371 SCRA 27.

338
the Civil Code. The award of attorney’s fees is the
exception rather than the rule.  None of the instances
59

mentioned in Article 2208 apply to this case.

Conclusion
Since the Loys have no contract of sale validly
approved by the probate court, while Frank Liu has a
contract of sale approved by the probate court in