G.R. No. 145982 ; September 13, 2004
FRANK N. LIU, et al., petitioners, vs. ALFREDO LOY, JR., TERESITA A. LOY and ESTATE OF JOSE VAÑO, respondents.

FACTS

The case involves conflicting claims over Lot Nos. 5 and 6. Benito Liu purchased the lots from Teodoro Vaño, the attorney-in-fact of the owner Jose Vaño, on January 13, 1950, before Jose Vaño’s death. Benito Liu later sold his rights to Frank Liu. Frank Liu made partial payment but stopped after Teodoro Vaño indicated he could not yet transfer the titles. Years later, Frank Liu offered to pay the balance and repeatedly requested execution of the deed of sale.
Despite these demands, Teodoro Vaño, who later became the administrator of Jose Vaño’s estate, sold Lot No. 6 to Teresita Loy in 1968 and Lot No. 5 to Alfredo Loy, Jr. in 1969. The probate court subsequently issued conflicting orders: it first approved the sale to Frank Liu on February 24, 1976, and later, in March 1976, approved the earlier sales to the Loys. Frank Liu sought the annulment of the deeds in favor of the Loys.

ISSUE

Whether the subsequent sales of the estate properties by the administrator to the Loys, without prior valid probate court approval, are valid against the prior contract to sell in favor of Frank Liu.

RULING

The Supreme Court denied the Loys’ motion for reconsideration and affirmed its prior decision declaring their deeds of sale void. The legal logic rests on the hierarchy of rights and the mandatory requirement for court approval of estate sales. First, the contract to sell between Teodoro Vaño (acting under a valid power of attorney) and Benito Liu, assigned to Frank Liu, was executed during Jose Vaño’s lifetime. This created a valid charge against the estate, obligating it to convey the property upon full payment. Frank Liu’s subsequent offers to pay solidified his claim as a creditor of the estate.
Second, the subsequent sales by Teodoro Vaño as administrator to the Loys were void for lack of the required prior probate court approval under Rule 89 of the Rules of Court and relevant property registration laws. The purpose of this requirement is to protect creditors and ensure orderly settlement of the estate. The probate court’s later approval in March 1976 could not ratify the void sales, especially since the court had already lost jurisdiction over the lots by virtue of its prior February 1976 order approving their sale to Frank Liu. Consequently, the prior contract to sell prevails over the subsequent void contracts of sale. The Estate of Jose Vaño was ordered to reimburse the Loys.