G.R. No. L-31979 August 6, 1980
FILOMENA G. PIZARRO, ET AL., petitioners, vs. THE HONORABLE COURT OF APPEALS, ET AL., respondents.

FACTS

This case involves the intestate estate of Aurelio Pizarro, Sr. The probate court appointed a judicial administrator who, to settle estate debts, sought authority to sell estate properties. The court authorized the sale of an Agdao lot to respondent Alfonso Angliongto under a conditional contract requiring the vendor to eject all occupants by a specified date. Several heirs, the petitioners, consistently opposed the sales as improvident and unnecessary, arguing the estate’s obligations were exaggerated and other properties could cover them. Despite objections, the probate court approved the conditional sale. Petitioners later filed a motion in the probate court for rescission of this sale, citing the administrator’s failure to eject occupants and the vendee’s alleged failure to pay installments. The probate court denied the motion, ruling rescission was not within its authority and should be filed as a separate action.
Acting on this ruling, petitioners filed a separate civil action for rescission (Civil Case No. 5762) before the Court of First Instance. However, the respondent judge in that separate case dismissed it on grounds of res judicata and lack of cause of action, holding that the probate court’s approval of the sale was final and that the separate action constituted a collateral attack on that final order. Petitioners then filed a petition for certiorari and mandamus with the Court of Appeals, which dismissed it. They elevated the matter to the Supreme Court.

ISSUE

Whether the Court of First Instance, in a separate civil action, correctly dismissed the complaint for rescission of the contract of sale approved by the probate court on the grounds of res judicata and lack of cause of action.

RULING

No. The Supreme Court reversed the Court of Appeals and ordered the trial court to hear the rescission case on its merits. The legal logic is anchored on the distinction between the jurisdiction of a probate court and that of a court in an ordinary civil action. A probate court, acting as a settlement court, has the authority to approve the sale of estate properties. This approval, however, pertains to the propriety of the sale for the purpose of settling the estate and is conclusive on that matter. It does not extend to adjudicating the contractual rights and obligations arising from the implemented sale itself, such as claims for breach of contractual conditions.
The separate action for rescission filed by the petitioners was not an attack on the probate court’s order of approval. Instead, it was an action in personam against the vendee based on alleged violations of the terms of the conditional contract of sale, specifically the failure to eject occupants and the failure to pay installments. These are causes of action that are distinct from the question of whether the sale should have been authorized. The probate court itself recognized this distinction when it correctly ruled that the rescission issue should be litigated in a separate action. Therefore, the dismissal of that separate action by the Court of First Instance on grounds of res judicata was a reversible error, as there was no identity of causes of action between the probate proceedings and the rescission suit. The case was remanded for trial on the merits of the contractual dispute.