FACTS:

Dr. Juvencio P. Ortaez owned ninety percent (90%) of the subscribed capital stock of Philinterlife.  

When Dr. Ortaez died, he left behind a wife(Juliana), three legitimate children (Rafael, Jose and Antonio Ortaez) and five illegitimate children (herein private respondent Ma. Divina Ortaez-Enderes and her siblings).

Rafael Ortaez filed before the CFI Quezon City Branch a petition for letters of administration of the intestate estate of Dr. Ortaez.

Judge Cruz Pao, then presiding judge of Branch 85, appointed Rafael and Jose Ortaez joint special administrators of their father’s estate. 

It appears that several years before (but already during the pendency of the intestate proceedings), Juliana and her two children, Special Administrators Rafael and Jose Ortaez, entered into a memorandum of agreement dated March 4, 1982 for the extrajudicial settlement of the estate of Dr. Ortaez, partitioning the estate (including the Philinterlife shares of stock) among themselves. 

Thereafter, Juliana and Jose Ortaez separately sold 1,014 shares and 1,011 shares respectively, in favor of petitioner Filipino Loan Assistance Group (FLAG), represented by its president, herein petitioner Jose C. Lee.

On July 12, 1995, herein private respondents Enderes et al. filed a motion for appointment of special administrator of Philinterlife shares of stock. This move was opposed by Special Administrator Jose Ortaez.

The intestate court granted the motion of private respondents Enderes et al. and appointed private respondent Enderes special administratrix of the Philinterlife shares of stock.

Thereafter, Special Administratrix Enderes filed an urgent motion to declare void ab initio the memorandum of agreement dated March 4, 1982. She likewise filed an urgent motion to declare void ab initio the deeds of sale of Philinterlife shares of stock, which was again opposed by Jose Ortaez.

The intestate court issued an order granting the motion of Special Administratrix Enderes for the annulment of the March 4, 1982 memorandum of agreement or extrajudicial partition of estate.

The intestate court declared that the ownership of FLAG over the Philinterlife shares of stock was null and void and ordered the execution of its order declaring such nullity.

Petitioners Jose Lee and Alma Aggabao, representing Philinterlife and FLAG, assail before us not only the validity of the writ of execution issued by the intestate court nullifying the sale of the 2,029 Philinterlife shares of stock made by Juliana and Jose Ortaez, in their personal capacities and without court approval, in favor of petitioner FLAG.

ISSUE:

Whether or not Court approval was necessary for the validity of any disposition of the decedent’s estate.

RULING:

The petition has no merit.

It is clear that Juliana Ortaez, and her sons invalidly entered into a memorandum of agreement extrajudicially partitioning the intestate estate among themselves, despite their knowledge that there were other heirs or claimants to the estate and before final settlement of the estate by the intestate court. Since the appropriation of the estate properties by Juliana and her children was invalid, the subsequent sale thereof by Juliana and Jose to a third party (FLAG), without court approval, was likewise void.

An heir can sell his right, interest, or participation in the property under administration under Art. 533 of the Civil Code which provides that possession of hereditary property is deemed transmitted to the heir without interruption from the moment of death of the decedent. 

However, an heir can only alienate such portion of the estate that may be allotted to him in the division of the estate by the probate or intestate court after final adjudication, that is, after all debtors shall have been paid or the devisees or legatees shall have been given their shares. This means that an heir may only sell his ideal or undivided share in the estate, not any specific property therein. 

Juliana Ortaez and Jose Ortaez sold specific properties of the estate (1,014 and 1,011 shares of stock in Philinterlife) in favor of petitioner FLAG. This they could not lawfully do pending the final adjudication of the estate by the intestate court because of the undue prejudice it would cause the other claimants to the estate, as what happened in the present case.

Juliana Ortaez and Jose Ortaez sold specific properties 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.

It being settled that property under administration needs the approval of the probate court before it can be disposed of, any unauthorized disposition does not bind the estate and is null and void. 

As early as 1921 in the case of Godoy v. Orellano (42 Phil 347), We laid down the rule that a sale by an administrator of property of the deceased, which is not authorized by the probate court is null and void and title does not pass to the purchaser.