G.R. No. 146006 ; February 23, 2004
JOSE C. LEE AND ALMA AGGABAO, in their capacities as President and Corporate Secretary, respectively, of Philippines International Life Insurance Company, and FILIPINO LOAN ASSISTANCE GROUP, petitioners vs. REGIONAL TRIAL COURT OF QUEZON CITY BRANCH 85 presided by JUDGE PEDRO M. AREOLA, BRANCH CLERK OF COURT JANICE Y. ANTERO, DEPUTY SHERIFFS ADENAUER G. RIVERA and PEDRO L. BORJA, all of the Regional Trial Court of Quezon City Branch 85, MA. DIVINA ENDERES claiming to be Special Administratrix, and other persons/ public officers acting for and in their behalf, respondents.

FACTS

Dr. Juvencio P. Ortañez died in 1980, and intestate proceedings for his estate commenced. The estate included 2,029 shares of Philippine International Life Insurance Company (Philinterlife). During the pendency of the proceedings, the decedent’s wife, Juliana Ortañez, and a son, Jose Ortañez (who was a court-appointed special administrator), separately executed deeds of sale with right to repurchase covering these shares in favor of petitioner Filipino Loan Assistance Group (FLAG). They claimed ownership based on a private extrajudicial settlement agreement among some heirs. The sales were made without prior approval from the intestate court. When the sellers failed to repurchase, FLAG consolidated ownership.
Subsequently, other heirs, including private respondent Ma. Divina Ortañez-Enderes, moved to have the sales declared void. The intestate court granted the motion, ruling the sales were void for lack of court approval. It later ordered the execution of its order declaring the sales void. Petitioners challenged these orders via certiorari, arguing the shares were the sellers’ conjugal and hereditary shares, sold in their personal capacities, and thus outside probate court authority.

ISSUE

Whether the sale of shares of stock forming part of a decedent’s estate, executed by heirs without prior approval of the probate court, is valid.

RULING

The Supreme Court denied the petition and affirmed the lower courts. The legal logic is anchored on the nature of probate jurisdiction and the status of estate properties during settlement. During the pendency of intestate proceedings, the court acquires exclusive jurisdiction over all estate properties. No heir can assert individual ownership or validly alienate specific properties until the estate is fully settled and partitioned. The alleged extrajudicial settlement and the subsequent sales by Juliana and Jose Ortañez were executed without court approval while the estate was under administration.
Consequently, these transactions were void as they violated the rule requiring court approval for any disposition of estate assets. The sellers had only inchoate rights to the shares; legal title remained with the estate. Therefore, FLAG acquired no valid title. The probate court acted within its authority in declaring the sales void and ordering execution to restore the shares to the estate. The Court emphasized that allowing such unauthorized sales would undermine the orderly settlement of estates and prejudice other heirs. The cited case of Godoy vs. Orellano firmly establishes that a sale of estate property without a court order is void.