LEE v.

RTC of QC [2004] On Jul 12, 1995, Ma Divina and siblings filed a motion for
the appointment of special administrator of the Philinterlife
[Corona, J] stocks. This was granted and Ma. Divina was appointed
special administratrix of the said shares. On Dec 20,
I. FACTS
1995, Ma. Divina filed an urgent motion to declare the
Decedent: Dr. Juvencio Ortañez 1982 Memorandum of Agreement null and void. She also
Wife: Juliana Ortañez filed a motion to declare partial nullity of the extrajudicial
Legitimate Children: Rafael, Jose, Antonio settlement of the estate, and an urgent motion to nullify
Illegitimate Children: Ma. Divina, Jose, Romeo, the deed of sale of Philinterlife stocks.
Enrico Manuel, Cesar
Petitioners: Jose Lee (President of On Feb 4, 1997, Jose Ortañez filed an omnibus motion for
Philinterlife); the approval of the deed of sale and the release of Ma.
Alma Aggabao (Secretary of Divina as special administratrix on the ground that there
Philinterlife); and were no longer any shares for her to administer.
Filipino Loan Assistance
Group (FLAG) The intestate court denied Jose’s motion and partially
declared the MOA void ab initio insofar as the
Dr. Juvencio Ortanez incorporated the Philippine Life transfer/waiver/renunciation of the shares are concerned.
Insurance Company, Inc. (Philinterlife). He died on July
21, 1980 leaving behind his wife, three legitimate children, Aggrieved, Jose filed a petition for certiorari in the CA but
and 5 illegitimate children. the CA denied his petition. The Court held that since the
shares were invalidly appropriated by Juliana and Jose
On September 24, 1980, Rafael filed a petition before the without the approval of the court, the sale to FLAG was
RTC-QC a petition for letters of administration of the void. The case went up to the Supreme Court and Jose’s
intestate estate of Dr. Ortañez. This was opposed by Ma. petition was dismissed. This decision became final.
Divina and her siblings and prayed for the appointment of
a special administrator. Ma. Divina and her siblings then filed a motion for
execution of the orders of the intestate court nullifying the
On March 10, 1982, the presiding judge (Judge Paño) sale. However, FLAG officers Lee and Aggabao ignored
appointed Rafael and Jose (legitimate) as joint special the orders. Ma. Divina filed a motion to cite Lee and
administrators of their father’s estate. (Up to the time of Aggabao in contempt.
decision, no regular administrator has been appointed)
Lee and Aggabao filed a petition for certiorari with the CA
The special administrators submitted an inventory of their alleging that the interstate court gravely abused its
father’s estate which included 2,029 shares in Philinterlife. discretion in declaring that FLAG’s ownership over the
On Apr 15, 1989, Juliana, claiming that she owned 1,014 shares was void, ordering the execution of its order, and
Philinterlife shares as her conjugal share in the state, sold depriving petitioners of their right to due process.
said shares with right to repurchase in favor of herein However, this was dismissed outright so petitioners
petitioner Filipino Loan Assistance Group (FLAG) elevated the case to the SC.
represented by its president Jose Lee. On Oct 30, 1991,
Special Administrator Jose, claiming that he owned 1,011 II. ISSUE
Philinterlife shares, also sold shares with right to
repurchase to FLAG. The basis for the partitioning of the WON the sale of the shares to FLAG was valid- NO
shares was the 1982 Memorandum of Agreement (MOA)
for the extrajudicial settlement of the estate, entered into WON the probate court may execute its order or issue
by Juliana and her two sons Rafael and Jose (this was a writ of execution with regard to its order nullifying
already during the pendency of the intestate proceedings the sale- YES
at the RTC-QC). Both Juliana and Jose failed to
repurchase the shares and ownership was consolidated
in the name of FLAG.
III. RATIONALE Jurisprudence is clear that (1) any disposition of estate
property by an administrator or prospective heir pending
It is clear that Juliana Ortañez, and her three sons, Jose, final adjudication requires court approval and (2) any
Rafael and Antonio, all surnamed Ortañez, invalidly unauthorized disposition of estate property can be
entered into a memorandum of agreement extrajudicially annulled by the probate court, there being no need for a
partitioning the intestate estate among themselves, separate action to annul the unauthorized disposition.
despite their knowledge that there were other heirs or
claimants to the estate and before final settlement of the Lee, Aggabao, and FLAG contended that the probate
estate by the intestate court. Since the appropriation of court could not issue a writ of execution with regard to its
the estate properties by Juliana Ortañez and her children order nullifying the sales because said order was merely
(Jose, Rafael and Antonio Ortañez) was invalid, the provisional. The Court ruled that the intestate court has
subsequent sale thereof by Juliana and Jose to a third the power to execute its order with regard to the nullity of
party (FLAG), without court approval, was likewise void. an unauthorized sale of estate property, otherwise its
power to annul the unauthorized or fraudulent disposition
An heir can sell his right, interest, or participation in the of estate property would be meaningless. In other words,
property under administration under Art. 533 of the Civil enforcement is a necessary adjunct of the intestate or
Code which provides that possession of hereditary probate court's power to annul unauthorized or fraudulent
property is deemed transmitted to the heir without transactions to prevent the dissipation of estate property
interruption from the moment of death of the decedent. before final adjudication.
However, an heir can only alienate such portion of the
estate that may be allotted to him in the division of the Lee et al also claimed denial of due process but the Court
estate by the probate or intestate court after final was not persuaded. The essence of due process is the
adjudication, that is, after all debtors shall have been paid reasonable opportunity to be heard. Where the
or the devisees or legatees shall have been given their opportunity to be heard has been accorded, there is no
shares. This means that an heir may only sell his ideal or denial of due process. In this case, petitioners knew of the
undivided share in the estate, not any specific property pending intestate proceedings for the settlement of Dr.
therein. In the present case, Juliana Ortañez and Jose Juvencio Ortañez's estate but for reasons they alone
Ortañez sold specific properties of the estate (1,014 and knew, they never intervened. When the court declared the
1,011 shares of stock in Philinterlife) in favor of petitioner nullity of the sale, they did not bother to appeal. And when
FLAG. This they could not lawfully do pending the final they were notified of the motion for execution of the
adjudication of the estate by the intestate court because Orders of the intestate court, they ignored the same.
of the undue prejudice it would cause the other claimants Clearly, petitioners alone should bear the blame.
to the estate, as what happened in the present case.
IV. DISPOSITIVE
Juliana Ortañez and Jose Ortañez sold specific properties
Petition DENIED.
of the estate, without court approval. It is well-settled that
court approval is necessary for the validity of any
disposition of the decedent's estate. In the early case of
Godoy vs. Orellano, the Court 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. It goes without saying that the
increase in Philinterlife's authorized capital stock,
approved on the vote of petitioners' non-existent
shareholdings and obviously calculated to make it difficult
for Dr. Ortañez's estate to reassume its controlling interest
in Philinterlife, was likewise void ab initio.