SPECIAL FIRST DIVISION

[G.R. No. 145982. September 13, 2004.]

FRANK N. LIU, deceased, substituted by his surviving

spouse Diana Liu, and children, namely: Walter, Milton,
Frank, Jr., Henry and Jackson, all surnamed Liu, Rebecca
Liu Shui and Pearl Liu Rodriguez, petitioners, vs. ALFREDO
LOY, JR., TERESITA A. LOY and ESTATE OF JOSE VAÑO,
respondents.

RESOLUTION

CARPIO, J : p

The Loys seek a reconsideration of the Decision dated 3 July 2003 of this
Court declaring void the deeds of sale of Lot Nos. 5 and 6 executed by Teodoro
Vaño in favor of Alfredo Loy, Jr. and Teresita Loy. We held that Lot Nos. 5 and 6
belong to Frank Liu 1 since the probate court approved his deeds of sale in
accordance with Section 8, 2 Rule 89 of the Rules of Court. The deeds of sale of
the Loys lacked a valid probate court approval. As a result, we ordered the
Estate of Jose Vaño to reimburse the Loys the amounts they paid for Lot Nos. 5
and 6, with interest at 6% annually from 4 June 1976, the date of filing of the
complaint, until finality of the decision, and 12% annually thereafter until full
payment.

The Court heard the parties on oral arguments on 10 March 2004 and
granted them time to submit their memoranda. Frank Liu filed his
memorandum on 29 March 2004 while the Loys filed their memorandum on 25
March 2004 by registered mail.
The issues that the Loys raise in their motion for reconsideration are not
new. The Court already considered and discussed extensively these issues in
the assailed Decision. We find no compelling reason to reconsider the assailed
Decision.
The Loys insist that the transaction between Teodoro Vaño and Benito Liu,
the predecessor-in-interest of Frank Liu, is a contract to sell. In contrast, the
transactions between Teodoro Vaño and Alfredo Loy, Jr. and Teresita A. Loy
were contracts of sale. According to the Loys, the contract to sell did not
transfer ownership of Lot Nos. 5 and 6 to Benito Liu or Frank Liu because it was
only a promise to sell subject to the full payment of the consideration. On the
other hand, the contracts of sale in favor of the Loys transferred ownership, as
the conveyances were absolute. 3

As we held in our Decision, a prior contract to sell made by the decedent

during his lifetime prevails over a subsequent contract of sale made by the
administrator without probate court approval. It is immaterial if the prior
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 contract is a mere contract to sell and does not immediately convey ownership.
Frank Liu's contract to sell became valid and effective upon its execution and
bound the estate to convey the property upon full payment of the
consideration.

It is apparent from Teodoro Vaño's letter 4 dated 16 October 1954 that the
reason why Frank Liu stopped further payments on the lots, leaving a balance
of P1,000, was because Teodoro Vaño could not yet transfer the titles to Benito
Liu, the predecessor-in-interest of Frank Liu. It would appear that Frank Liu and
Teodoro Vaño lost contact with each other thereafter and it was only on 25
January 1964 that Frank Liu wrote Teodoro Vaño informing the latter that he
was ready to pay the balance of the purchase price of the lots. Teodoro Vaño
did not reply to Frank Liu's letter. On 22 April 1966, Benito Liu sold to Frank Liu
the lots, including Lot Nos. 5 and 6, which Benito Liu purchased from Teodoro
Vaño on 13 January 1950. Frank Liu sent three letters dated 21 March 1968, 7
June 1968 and 29 July 1968 to Teodoro Vaño reiterating his request for the
execution of the deed of sale covering the lots in his favor but to no avail. On
19 August 1968, Teodoro Vaño sold Lot No. 6 to Teresita Loy and on 16
December 1969, he sold Lot No. 5 to Alfredo Loy, Jr. The sales to the Loys were
made 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.

The sale of the lots by Teodoro Vaño to Benito Liu was valid. The sale was
made by Teodoro Vaño on 13 January 1950 in his capacity as attorney-in-fact of
Jose Vaño. The sale to Benito Liu was made during the lifetime of Jose Vaño, not
after the death of Jose Vaño who died on 28 January 1950. 5 The power of
attorney executed by Jose Vaño in favor of Teodoro Vaño remained valid during
the lifetime of Jose Vaño. In his letter dated 16 October 1954, Teodoro Vaño
stated that on 30 June 1954, the Supreme Court allowed the probate of the will
of Jose Vaño. Teodoro Vaño likewise mentioned in the letter that in July 1954,
the Supreme Court held that all the sales made by Teodoro Vaño of the
properties of his father were legal. 6 Thus, Benito Liu's deed of sale in favor of
Frank Liu covering the lots sold to him by Teodoro Vaño constitutes a valid
charge or claim against the estate of Jose Vaño. EcTCAD

The Loys reiterate their contention that Teodoro Vaño, as administrator

and sole heir to the properties, can sell the lots to them since the rights of an
heir are transmitted from the moment of death of the testator. Although a
property under estate proceedings cannot be sold without judicial approval, the
Loys allege that in their case, the probate court later approved the sales to
them, thereby ratifying the sales. 7
Well-settled is the rule that an administrator needs court approval to sell
estate property, otherwise the sale is void. 8 Court approval of the sale of
estate property is clearly required under Rule 89 of the Rules of Court, which
enumerates the instances when the court may allow the sale or encumbrance
of estate property. 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. 9
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 More importantly, Section 91 10 of Act No. 496 (Land Registration Act) and
Section 88 11 of Presidential Decree No. 1529 (Property Registration Decree)
specifically require court approval for any sale of registered land by an
executor or administrator.

The laws, Rules of Court, jurisprudence and regulations explicitly require

court approval before any sale of estate property by an executor or
administrator can take effect. 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 dated 19 and 23 March 1976 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 dated 24 February 1976
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 Vaño. In fact, the administratrix of the estate
filed a motion for reconsideration of the orders of the probate court approving
the contracts of the Loys because she already executed a deed of sale covering
Lot Nos. 5 and 6 in favor of Frank Liu.
The Loys impliedly admitted that their contracts of sale dated 19 August
1968 and 16 December 1969 were ineffective when they belatedly asked in
1976 for court approval of the sales. If the Loys believed that their deeds of
sale in 1968 and 1969 were valid, they would not have asked for court approval
in 1976. By asking for court approval, they necessarily admitted that without
court approval, the sale to them was ineffectual.
The Loys are not buyers and registrants in good faith considering that
they bought from a seller who was not a registered owner. Teodoro Vaño
signed both contracts of sale but the titles to the lots sold were in the name of
"Estate of Jose Vaño." And since the titles to Lot Nos. 5 and 6 were in name of
"Estate of Jose Vaño," the Loys were on notice that court approval was needed
for the sale of estate property. The ex-parte motion for the court approval of
the sales filed by the Loys some seven or eight years after the sales transaction
reveals a less than honest actuation, prompting the administratrix to object to
the court's approval.

WHEREFORE, we DENY the motion for reconsideration.

SO ORDERED.
Ynares-Santiago and Azcuna, JJ ., concur.
Davide, Jr., C .J ., see dissenting opinion.

Separate Opinions
DAVIDE, JR., C .J ., dissenting.

Upon a deeper evaluation of the established facts in this case, I am

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 constrained to vote to grant the motion to reconsider the Decision of 3 July
2003 and to deny the instant petition.
I agree with both the trial court and the Court of Appeals that the contract
entered into on 13 January 1950 between Teodoro Vaño, as attorney-in-fact of
Jose Vaño, and Benito Liu, which is the source of petitioner Frank Liu's claim, is
a contract to sell (an AGREEMENT, as the introductory portion thereof begins)
and not a contract of sale. From the very beginning, however, it was petitioner
Frank Liu who was the real "buyer" of the seven lots, two of which were covered
by the agreement in favor of Cirilo Pangalo, and the other five covered by the
agreement in favor of Benito Liu (Exh. A). The latter includes Lot Nos. 5 and 6.
Thus, in footnote no. 6 of our decision of 3 July 2003, we said:
The contract between Teodoro Vaño and Cirilo Pangalo provides
that in case of death of the vendee, the contract shall be considered as
fully paid and a final deed of sale shall be made in favor of the
beneficiary, Frank N. Liu, provided vendee is not in arrears of not more
than two months. Also, in his letter to Frank Liu, dated 1 January 1955,
Teodoro Vaño stated that: "I have addressed my letter to you because
ever since 1949, it has always been you I dealt with, and not Mr. B. Liu,
neither with Mr. C. Pangalo, though the last two gentlemen were the
ones who signed the agreements for the purchase of the lots."

Paragraph 5 of the agreement in favor of Benito Liu expressly provides:

Failure on the part of the VENDEE to pay three or more monthly
installments when the same fall due, VENDOR may cancel this contract
and VENDEE shall be only entitled to one-half (½) of what he has paid.

And paragraph 4 thereof expressly provides:

4. The balance of P3,000 shall be paid by VENDEE at the rate
of P100.00 per month beginning with the end of January 1950 and
every month thereafter . . .

Neither Benito Liu nor Frank Liu complied with the contract.
Thus, in our findings of facts in the Decision of 3 July 2003, we said:
Benito Liu subsequently paid installments totaling P2,900,
leaving a balance of P1,000. Apparently, Benito Liu stopped further
payments because Teodoro Vaño admitted his inability to transfer the
lot titles to Benito Liu. Later, in a letter dated 16 October 1954,
Teodoro Vaño informed Frank Liu that the Supreme Court had already
declared valid the will of his father Jose Vaño. Thus, Teodoro Vaño
could transfer the titles to the buyers' names upon payment of the
balance of the purchase price. ICaDHT

When Frank failed to reply, Teodoro Vaño sent him another letter
dated 1 January 1955, reminding him of his outstanding balance. It
appears that it was only after nine years that Frank Liu responded
through a letter dated 25 January 1964. In the letter, Frank Liu
informed Teodoro Vaño that he was ready to pay the balance of the
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 purchase price of the seven lots. He requested for the execution of a
deed of sale of the lots in his name and the delivery of the titles to him.
On 22 April 1966, Benito Liu sold to Frank Liu five lots (Lot Nos.
5, 6, 13, 14 and 15 of Block 2) which Benito Liu purchased from
Teodoro Vaño. Frank Liu assumed the balance of P1,000 for the five
lots. Cirilo Pangalo likewise sold to Frank Liu the two lots (Lot nos. 14
and 15 of Block 11) that Pangalo purchased from Teodoro Vaño. Frank
Liu likewise assumed the balance of P417 for the two lots.
On 21 March 1968, Frank Liu reiterated in a letter his request for
Teodoro Vaño to execute the deed of sale covering the seven lots so he
could secure the corresponding certificates of title in his name. He also
requested for the construction of the subdivision roads pursuant to the
original contract. In the letter, Frank Liu referred to another letter,
dated 25 June 1966, which he allegedly sent to Teodoro Vaño.
According to Frank Liu, he enclosed PBC Check No. D-782290 dated 6
May 1996 for P1,417, which is total balance of the accounts of Benito
Liu and Cirilo Pangalo on the seven lots. However, Frank Liu did not
offer in evidence the letter or the check. Frank Liu sent two other
letters, dated 7 June 1968 and 29 July 1968, to Teodoro Vaño
reiterating his request for the execution of the deed of sale in his favor
but to no avail.

It is clear then that the agreement to sell between Teodoro Vaño as

attorney-in-fact of Jose Vaño, made during the lifetime of Jose Vaño, was validly
cancelled or rescinded. It follows that Benito Liu never became the owner of the
lots covered by the agreement. Consequently, he could not sell the lots to
petitioner Frank Liu on 22 April 1966. Therefore, the sale in favor of the latter
was null and void. It could not bind the estate of Jose Vaño.
It would be grossly unfair and unjust that the estate of Jose Vaño should
be made bound to honor an agreement to sell executed on 13 January 1950 in
favor of Benito Liu who never completed the payment for the agreed purchase
price. The so-called sale in favor of petitioner was only made more than sixteen
(16) years later, or on 22 April 1966, long after the death of Jose Vaño, and long
after Teodoro Vaño had lost his authority as attorney-in-fact because the power
was not coupled with interest. Jose Vaño's death terminated Teodoro's power as
attorney-in-fact.
Likewise, it follows that Benito Liu's deed of sale in petitioner's favor did
not constitute a charge or claim against the estate of Jose Vaño.
Moreover, it is admitted that Teodoro Vaño was the sole and only heir of
Jose Vaño. In such capacity he could sell a part of his rights, share and
participation in the estate of Jose Vaño. Such sale is not void, but may only be
rendered voidable in the event claims against estate may be impaired.

Furthermore, one should not lose sight of the fact that private
respondents Alfredo Loy and Teresita Loy registered the deeds of sale in their
favor, were issued transfer certificates of title in their names, declared the lots
in their names for taxation purposes, religiously paid the taxes thereon,
occupied the same and constructed a house thereon. Upon the other hand,
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 petitioner Frank Liu did nothing of these. Article 1544 of the Civil Code
provides:
If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to

the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription the ownership shall pertain to the
person who in good faith was first in the possession; and in the
absence thereof, to the person who presents the oldest title, provided
there is good faith.

The right of the Loys under the second and third paragraphs of Article
1544 is sought to be defeated by the claim that they acted in bad faith.
Again, petitioner Liu has not shown that the Loys had acted with bad faith.
On the contrary, no less than the counsel for Frank Liu, Atty. Solon, candidly
admitted in open court that the latter has no "positive" evidence to prove bad
faith. Thus:
COURT
The plaintiff has some proof that the Loy spouses knew of the
former transaction?
ATTY. SOLON
Well, positive evidence, we do not have . . . because after this
transaction, the plaintiff already resided in Davao and the
communications were made between the plaintiff and Teodoro
Vaño by letters, but there was no more personal communication .
(TSN), 14 January 1977, 74–75).

More specifically, upon questioning by the court, Atty. Solon admitted that
the only possible evidence of bad faith on the part of the Loys was the "filing for
approval of a deed of sale," thus:
COURT

Your theory, Atty. Solon, is that the defendants Loys are buyers in
bad faith?

ATTY. SOLON
Yes, Your Honor.
COURT
That they knew the former defect and yet they purchased the
property?
ATTY. SOLON
Yes, Your Honor, to the extent of filing for approval of a deed of
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 sale. (TSN, 14 January 1977, 72–73). TADCSE

On the other hand, petitioner Frank Liu's acts proved that he was the one
who acted in bad faith. First, he did not answer the letter of 16 October 1954
sent by Teodoro Vaño (Exh. "C"). Second, he did not likewise respond to
Teodoro Vaño's letter of 1 January 1955 (Exh. "D"). It was only on 25 January
1964 when Liu wrote a letter to Teodoro, but only to express readiness to pay
the balance of the purchase price of the seven lots and request for the
execution of the deed of sale in his name (Exh. "E"). He did not pay. Then on
22 April 1966 and without paying the balance, he procured a deed of sale for
five (5) of the seven lots from Benito Liu. Yet, he still did not pay the balance.
And, it was only on 21 March 1968 that the petitioner reiterated in a letter to
Teodoro Vaño (Exh. "F") his request for Teodoro to execute the deed of sale. In
this letter he mentioned having enclosed in a letter dated 25 June 1966 of a
PBC Check dated 6 May 1966 in the amount of P1,417 for the unpaid balance.
Yet, he could not even offer in evidence either the letter or the check. While it is
true that he sent two letters dated 7 June 1968 and 29 July 1968 to Teodoro
Vaño reiterating his request for execution of the deed of sale, he did not make
an offer for the payment of the balance of the unpaid portion of the
consideration of the contract to sell.
If Frank Liu were sincere in his desire to pay the unpaid balance of the
agreed purchase price, he could have consigned in court the amount due.

Finally, and probably to obtain relief from behind, petitioner Frank Liu filed
before the Davao Court of First Instance on 2 December 1968 a complaint
against Teodoro Vaño for specific performance, execution of deed of absolute
sale, etc.
Needless to state, the evidence, the law and equity are on the side of the
respondents Alfredo Loy, Jr. and Teresita Loy.
Accordingly, I vote to GRANT the Motion for Reconsideration filed by
respondents Alfredo Loy, Jr. and Teresita Loy, and to DENY the instant petition.

Footnotes

1. Subsequently substituted by his heirs.

2. Section 8 of Rule 89 of the Rules of Court reads:
SEC. 8. When court may authorize conveyance of realty which
deceased contracted to convey. Notice. Effect of deed. — Where the
deceased was in his lifetime under contract, binding in law, to deed real
property, or an interest therein, the court having jurisdiction of the estate
may, on application for that purpose, authorize the executor or administrator
to convey such property according to such contract, or with such
modifications as are agreed upon by the parties and approved by the court;
and if the contract is to convey real property to the executor or
administrator, the clerk of court shall execute the deed. The deed executed
by such executor, administrator or clerk of court shall be as effectual to
convey the property as if executed by the deceased in his lifetime; but no
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 such conveyance shall be authorized until notice of the application for that
purpose has been given personally or by mail to all persons interested, and
such further notice has been given, by publication or otherwise, as the court
deems proper; nor if the assets in the hands of the executor or administrator
will thereby be reduced so as to prevent a creditor from receiving his full
debt or diminish his dividend.
3. Rollo , pp. 373–374.
4. The letter reads (emphasis supplied):
Teodoro Vaño

Juana Osmeña Ext.

P.O. Box 61
Cebu City, Philippines
Oct. 16, 1954
Mr. Frank Liu

Southern Motors,
Davao Branch, Davao City

Dear Mr. Liu:

Some time last May, if I remember correctly, you offered to settle the
whole balance of your account if I can have the Titles transferred
immediately in your brother's name, and to that of Mr.Pangalo's. I cannot
blame you if you were disappointed then, to know that I could not have the
titles transferred, even should you have paid in full.

At that time however, without your knowledge, you were innocently being
made the tool of an intrigue, intended to put me in hot water, by inducing me
to put in writing what we have agreed verbally. I hope I have explained the
matter to your satisfaction.

However, last June 30, of this year, the Supreme Court, unanimously
concurred in the reversal of the decision of the Court of First Instance, as
regard the legality of the Will of my father. Now that the Will of my Father has
been declared legal, my opponents have lost their personality in the case,
and with it their power to harass me in court. Also, sometime in the middle of
July, also this year, the Supreme Court again declared that all the sales I
have made of the properties of my father were legal, and that I should be
empowered to have the titles transferred in the buyer's names, should they
have paid in full. A few have already received their titles. And yours can be
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 had too in two days time from the time you have paid in full.

With the best of wishes for your continued good health and prosperity and
that of your family's, and hoping to hear from you soon, I remain,

Yours very truly,

Teodoro Vaño
(signed)
5. In the case of Vaño v. Vda. de Garces, et al., 95 Phil. 333 (1954), involving
the last will and testament of Jose Vaño, it was mentioned that Jose Vaño
died on 28 January 1950. The Supreme Court allowed probate of the last will
and testament of Jose Vaño who bequeathed all his properties to his son,
Teodoro Ceblero Vaño.

6. See Exhibit "C," Records, p. 64.

7. Rollo , pp. 388–389.
8. Dillena v. Court of Appeals, No. L-77660, 28 July 1988, 163 SCRA 630;
Manotok Realty, Inc. v. Court of Appeals, No. L-35367, 9 April 1987, 149
SCRA 174; Estate of Amadeo Matute Olave, et al. v. Hon. Reyes, et al., 208
Phil. 678 (1983); Godoy v. Orellano , 42 Phil. 347 (1921).
9. Section 7, Rule 89 of the Rules of Court reads:

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 personal
estate, or 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:
(a) The executor or administrator shall file a written petition setting
forth the debts due from the deceased, the expenses of administration, the
legacies, the value of the personal estate, the situation of the estate to be
sold, mortgaged, or otherwise encumbered, and such other facts as show
that the sale, mortgage, or other encumbrance is necessary or beneficial;
(b) The court shall thereupon fix a time and place for hearing such
petition, and cause notice stating the nature of the petition, the reason for
the same, and the time and place of hearing, to be given personally or by
mail to the persons interested, and may cause such further notice to be
given, by publication or otherwise, as it shall deem proper;

(c) If the court requires it, the executor or administrator shall give an
additional bond, in such sum as the court directs, conditioned that such
executor or administrator will account for the proceeds of the sale, mortgage,
or other encumbrance;
(d) If the requirements in the preceding subdivisions of this section
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 have been complied with, the court, by order stating such compliance, may
authorize the executor or administrator to sell, mortgage, or otherwise
encumber, in proper cases, such part of the estate as is deemed necessary,
and in case of sale the court may authorize it to be public or private, as
would be most beneficial to all parties concerned. The executor or
administrator shall be furnished with a certified copy of such order;

(e) If the estate is to be sold at auction, the mode of giving notice of

the time and place of the sale shall be governed by the provisions concerning
notice of execution sale;
(f) There shall be recorded in the registry of deeds of the province in
which the real estate thus sold, mortgaged, or otherwise encumbered is
situated, a certified copy of the order of the court, together with the deed of
the executor or administrator for such real estate, which shall be as valid as
if the deed had been executed by the deceased in his lifetime.
10. Section 91 of Act No. 496 reads:

SEC. 91. Except in case of a will devising the land to an executor to his
own use or upon some trust or giving to the executor power to sell, no sale or
transfer of registered land shall be made by an executor or by an
administrator in the course of administration for the payment of debts or for
any other purpose, except in pursuance of an order of a court of competent
jurisdiction obtained as provided by law . (Emphasis supplied)
11. Section 88 of P.D. No. 1529 reads:

SEC. 88. Dealings by administrator subject to court approval. — After a

memorandum of the will, if any, and order allowing the same, and letters
testamentary or letters of administration have been entered upon the
certificate of title as hereinabove provided, the executor or administrator
may alienate or encumber registered land belonging to the estate, or any
interest therein, upon approval of the court obtained as provided by the
Rules of Court. (Emphasis supplied)

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