G.R. No. L-27876 April 22, 1992
ADELAIDA S. MANECLANG, in her capacity as Administrator of the Intestate Estate of the late Margarita Suri Santos, plaintiff-appellee, vs. JUAN T. BAUN and AMPARO S. BAUN, ET AL., defendants. CITY OF DAGUPAN, defendant-appellant.

FACTS

Margarita Suri Santos died intestate on June 12, 1947, survived by her husband Severo Maneclang and nine children, most of whom were minors at the time of her death. A petition for settlement of her estate was filed on July 30, 1947, docketed as Special Proceeding No. 3028. No guardian ad litem was appointed for the minor heirs. Among the properties left was Lot No. 203 covered by TCT No. 1393. On September 2, 1949, the estate administrator filed a petition for authority to sell estate properties to pay debts. Notice of this petition was given only to the surviving spouse through his counsel, but not to the heirs. On September 9, 1949, the intestate court issued an order authorizing the sale despite the lack of notice to the heirs. Pursuant to this order, the new administrator, Oscar Maneclang, executed a deed of sale on October 4, 1952, in favor of the City of Dagupan, covering a 4,415-square-meter portion of Lot No. 203 for P11,687.50. The sale was approved by the court on March 15, 1954. The City took possession, constructed a public market worth about P100,000, and has been in continuous possession since. On September 28, 1965, the new judicial administratrix, Adelaida S. Maneclang, filed an action for annulment of the sale, cancellation of title, recovery of possession, and damages against the City of Dagupan and other vendees. The trial court rendered a partial decision annulling the deed of sale, ordering cancellation of title, recovery of possession, payment of accumulated rentals, and reimbursement to the City for the purchase price and improvements. The City of Dagupan appealed.

ISSUE

The primary issue is the validity of the sale of the parcel of land by the administrator of the intestate estate made pursuant to a petition for authority to sell and an order granting it which were filed and entered, respectively, without notice to the heirs of the decedent.

RULING

The Supreme Court ruled that the order of September 9, 1949, authorizing the sale, and the subsequent deed of sale executed in favor of the City of Dagupan are null and void ab initio. The Court held that the mandatory requirement of notice to the heirs under Rule 89 of the Rules of Court (formerly Rule 90) was not complied with, as notice was given only to the surviving spouse and not to the heirs. This jurisdictional defect rendered the order void. The Court rejected the City’s defenses of estoppel, laches, and prescription, stating that estoppel cannot validate a void act, and an action to declare the nullity of a void contract does not prescribe. The City was also not a purchaser in good faith and for value, as its officials, being lawyers, were presumed to know the law and the defect in the proceedings. However, the Court modified the trial court’s decision regarding possession and compensation. It ruled that the City, as a possessor in good faith, is entitled to retain the property until reimbursed for necessary and useful improvements. Since the City had introduced improvements worth P100,000, it could retain the land until reimbursed. The Court also held that the heirs’ rights to the property were only to the extent of their hereditary shares. As some heirs had ratified the sale or were estopped from challenging it, only the shares of the minor heirs who did not ratify could be recovered. The dispositive portion ordered the annulment of the sale, cancellation of the title, and the issuance of a new title in the estate’s name. The City was ordered to deliver possession to the estate upon reimbursement of P100,000 for improvements, minus the purchase price of P11,687.50 already deducted. The estate was ordered to pay the City reasonable compensation for the use of the property corresponding to the shares of the heirs who ratified the sale, and the City was entitled to a refund of real estate taxes paid for those shares.