LIU v. LOY, JR. 5.
When Frank Liu failed to reply, Teodoro Vao sent him another letter, dated
July 3, 2003 | Carpio, J. | Petition for Review | Rule 89
PETITIONER:Frank Liu (deceased)(substituted by surviving spouse and children)
RESPONDENT/S: Alfredo Loy, Jr., Teresita Loy, Estate of Jose Vao
SUMMARY: During the lifetime of Jose Vao, he entered into contracts to sell over
several lots with Frank Liu, through his son and attorney-in-fact Teodoro Vao.
Ultimately he filed in the settlement court. However, before his claim was approved,
Teodoro executed contracts of sale over two of the lots with the Loys. Later, the
court approved the Frank Lius claim. However, subsequent to this, the Loys filed ex
parte motions (no notice to administratrix) before the settlement court to have the
contracts of sale in their favor approved, and this was granted. The question is who
has superior right over the subject lots. SC ruled in favor of Frank Liu.
DOCTRINE:Registration of the contracts without court approval would be
ineffective to bind third persons, especially creditors of the estate;
It is mandatory that notice be served on the heirs and other interested persons of the
application for approval of any conveyance of property held in trust by the deceased
otherwise the order authorizing the conveyance, as well as the conveyance itself, is
completely void;
A sale of estate property made by an administrator without court authority is void
and does not confer on the purchaser a title that is available against a succeeding
administrator;
An administrator cannot unilaterally cancel a contract to sell made by the decedent
in his lifetime
FACTS:
1. On 13 January 1950, Teodoro Vao, as attorney-in-fact of Jose Vao (his
father), sold 7 lots of the Banilad Estate (Cebu City) to Benito Liu and
Cirilo Pangalo.
2. Teodoro Vao dealt with Frank Liu (Benito Lius brother), in the sale of the
lots to Benito Liu and Cirilo Pangalo. The lots sold to Benito Liu were Lot
Nos. 5, 6, 13, 14, and 15 of Block 12 for a total price of Php 4,900. Benito
Liu gave a down payment of Php 1,000, undertaking to pay the balance of
Php 3,900 in monthly installments of Php 100 beginning at the end of Jan.,
1950. The lots sold to Cirilo Pangalo were Lot Nos. 14 and 15 of Block 11
for a total price of Php 1,967.50. Cirilo Pangalo gave Php 400 as down
payment, undertaking to pay the balance of P1,567.50 in monthly
installments of Php 400 beginning at the end of January 1950. (Meanwhile,
Jose Vao died)
3. Benito Liu subsequently paid installments totaling Php 2,900, leaving a
balance of Php 1,000. Apparently, Benito Liu stopped further payments
because Vao admitted his inability to transfer the lot titles.
4. Later, in a letter (dated Oct. 16, 1954), Teodoro Vao informed Frank Liu that
the SC had already declared valid the will of his father. Thus, Teodoro Vao
could transfer the titles to the buyers names upon payment of balance of
purchase price.
Jan. 1, 1955, reminding him of his outstanding balance. It appears that it
was only after 9 years that Frank Liu responded through a letter (dated Jan.
25, 1964). In the letter, Frank Liu informed Teodoro Vao that he was ready
to pay the balance of the purchase price of the seven lots. He requested for
the execution of a deed of sale of the lots in his name and the delivery of the
titles to him.
6. April 22, 1966: Benito Liu sold to Frank Liu the 5 lots (Lot Nos. 5, 6, 13, 14
and 15 of Block 12) which Benito Liu purchased from Teodoro Vao.
7. Frank Liu assumed the Php 1000 balance for the five lots. Cirilo Pangalo
likewise sold to Frank Liu the two lots (Lot Nos. 14 and 15 of Block 11)
that Pangalo purchased from Teodoro Vao, the latter likewise assumed the
Php 417 balance for the two lots.
8. March 21 1968: Frank Liu reiterated in a letter his request for Teodoro Vao
to execute the deed of sale covering the seven lots so he could secure the
corresponding certificates of title in his name. He also requested for the
construction of the subdivision roads pursuant to the original contract. In
the letter, Frank Liu referred to another letter, dated 25 June 1966, which he
allegedly sent to Teodoro Vao. According to Frank Liu, he enclosed a
check dated May 6, 1966 for Php 1,417, which is the total balance of the
accounts of Benito Liu and Cirilo Pangalo on the seven lots. However,
Frank Liu did not offer in evidence the letter or the check. Frank Liu sent
two other letters, dated June 7, 1968 and July 29, 1968, to Teodoro Vao
reiterating his request for the execution of the deed of sale in his favor but
to no avail.
9. Aug. 19, 1968: Teodoro Vao sold Lot No. 6 to Teresita Loy for Php 3,930.
The Register of Deeds of Cebu City entered this sale in the Daybook on
February 1969. On 2 December 1968, Frank Liu filed a complaint against
Teodoro Vao for specific performance, execution of deed of absolute.
10. Dec. 2, 1968, Frank Liu filed a complaint vs. Teodoro Vao for specific
performance, execution of deed of absolute sale, issuance of certificates of
title and construction of subdivision roads. On 19 December 1968, Frank
Liu filed with the Register of Deeds (RD) of Cebu City a notice of lis
pendens on the seven lots due to the pendency of the civil case filed by Liu
vs. Vao.
11. However, RD denied the registration of the lis pendens on the ground that
the property is under administration and said claim must be filed in court.
12. Dec. 16, 1969, Teodoro Vao sold Lot No. 5 to Alfredo Loy for Php 3,910.
RD entered this sale in the Daybook on Jan. 16, 1970.
13. Oct. 3, 1970: CFI of Davao, on motion of Teodoro Vao, dismissed the civil
case filed by Liu on the ground that Frank Liu should have filed the claim
with the probate court.
14. Feb. 17, 1972, Frank Liu filed before the probate court a claim against
the Estate of Jose Vao for Specific Performance, Execution of Deed of
Absolute Sale, Issuance of Certificate of Title, and Construction of
Subdivision Roads.
 15. During the proceedings, Teodoro Vao died. His widow, Milagros Vao,
succeeded as administratrix of the Estate of Jose Vao.
16. Feb. 24, 1976: probate court approved Frank Lius claim. On March 5,
1976, Milagros executed a deed of conveyance covering the seven lots in
favor of Frank Liu, in compliance with the probate court's order. The
deed of conveyance included Lot Nos. 5 and 6, the same lots Teodoro
Vao sold respectively to Alfredo Loy, Jr. on Dec. 16, 1969 and to
Teresita Loy on Aug. 19, 1968.
17. March 19, 1976: the probate court, upon an ex-parte motion filed by
Teresita Loy, issued an Order approving the Aug. 16, 1968 sale by
Teodoro Vao of Lot No. 6 in her favor. Likewise, upon an ex-parte
motion filed by Alfredo Loy, Jr., the probate court issued on March 23,
1976 an Order approving the Dec. 16, 1969 sale of Lot No. 5 by Teodoro
Vao in his favor.
18. On 10 May 1976, the RD of Cebu City cancelled the TCT in the name of the
Estate of Jose Vao covering Lot No. 5 and issued a new title in the name of
Alfredo Loy, Jr. and Perfeccion V. Loy. Likewise, on the same date, RD
cancelled TCT in the name of the Estate of Jose Vao covering Lot No. 6,
and issued a TCT in the name of Teresita A. Loy.
19. June 3, 1976: Milagros Vao, as administratrix of the estate, filed MR of the
Orders of the probate court approving the sale to Alfredo and Teresita Loy .
She contended that she already complied with the probate court's Order to
execute a deed of sale covering the seven lots, including Lot Nos. 5 and 6,
in favor of Frank Liu. She also stated that no one notified her of the motion
of the Loys, and if the Loys or the court notified her, she would have
objected to the sale of the same lots to the Loys.
20. June 4, 1976, Frank Liu filed a complaint for reconveyance or annulment of
title of Lot Nos. 5 and 6.
21. Aug. 5, 1978: the probate court denied Milagros MR on the ground that the
conflicting claims regarding the ownership of Lot Nos. 5 and 6 were already
under litigation in the civil case filed by Frank Liu (see Fact 20).
22. RTC ruled against Frank. CA affirmed RTC
RTC Ruling
(1) Contract between Teodoro Vao and Benito Liu was a contract to sell - since
title to Lot Nos. 5 and 6 never passed to Benito Liu due to nonpayment of
the balance of the purchase price, ownership of the lots remained with the
vendor;
(2) Thus, the subsequent sales to Alfredo Loy, Jr. and Teresita Loy of Lot Nos. 5
and 6, respectively, were valid;
(3) Teodoro Vaos letter dated Jan. 1, 1955 addressed to Frank Liu was a
unilateral extrajudicial rescission of the contract to sell;
(4) Unilateral rescission was upheld subject to refund by the Estate of Jose Vao
of one-half (1/2) of what Frank Liu paid under the contract;
(5) Teodoro Vao, as administrator of the Estate of Jose Vao and as sole heir of
Jose Vao, acted both as principal and as agent when he sold the lots to
Alfredo Loy, Jr. and Teresita Loy. The probate court subsequently approved
the sales.
(6) Alfredo Loy, Jr. and Teresita Loy were purchasers in good faith
CA Ruling
(1) No evidence of fraud or ill-motive on the part of Alfredo, Jr. and Teresita
(2) Sales to Alfredo Loy, Jr. and Teresita Loy of Lot Nos. 5 and 6, respectively,
were valid despite lack of prior approval by the probate court - Teodoro
Vao sold the lots in his capacity as heir of Jose Vao - an heir has a right to
dispose of the decedent's property, even if the same is under administration,
because the hereditary property is deemed transmitted to the heir without
interruption from the moment of the death of the decedent.
ISSUE/S: WoN prior approval of the probate court is necessary to validate the sale
of Lot Nos. 5 and 6 to Loys - YES
WoN the Loys can be considered buyers and registrants in good faith despite the
notice of lis pendens - NO
WoN Frank Liu has a superior right over Lot Nos. 5 and 6 - YES
WoN Liu is entitled to moral damages & attys fees - NO
RULING: Petition granted . CA decision set aside.
New Decision:
(1) Declaring null and void the deeds of sale of Lot Nos. 5 and 6 executed by
Teodoro Vao in favor of Alfredo Loy, Jr. and Teresita Loy, respectively.
(2) Ordering the Register of Deeds of Cebu City to cancel TCT Nos. 64522 and
64523 and to issue a new one in the name of petitioner Frank N. Liu;
(3) Ordering the Estate of Jose Vao to reimburse to respondent Loys the
amounts paid on Lot Nos. 5 and 6, with interest at 6% per annum from 4
June 1976 until finality of this decision, and 12% per annum thereafter until
full payment
RATIO:
Valid Cancellation of Contract to Sell
1. There was no valid cancellation of the contract to sell because there was no
written notice of the cancellation to Benito Liu or Frank Liu. There was
even no implied cancellation of the contract to sell. The trial court merely
viewed the alleged unilateral extrajudicial rescission from the letter of
Teodoro Vao, dated Jan. 1, 1955, addressed to Frank Liu.
2. As clearly stated in the letter, the only action that Teodoro Vao would take if
Frank Liu did not reply was that Teodoro Vao would write directly to
Benito Liu and Cirilo Pangalo. The letter does not mention anything about
rescinding or cancelling the contract to sell.
3. Although the law allows the extrajudicial cancellation of a contract to sell
upon failure of one party to comply with his obligation, notice of such
cancellation must still be given to the party who is at fault. The notice of
cancellation to the other party is one of the requirements for a valid
cancellation of a contract to sell, aside from the existence of a lawful cause.
 4. A contract to sell upon failure of one party to comply with his obligation,
notice of such cancellation must still be given to the party who is at fault.
5. The fact that Teodoro Vao advised Frank Liu to file his claim with the
probate court is certainly not the conduct of one who supposedly
unilaterally rescinded the contract with Frank Liu.
6. In this case, there was prior delay or default by the seller. As admitted by
Teodoro Vao, he could not deliver the titles because of a case questioning
the authenticity of the will of his father, as stated in the Oct. 16, 1954 letter.
In that same letter, Teodoro Vao informed Frank Liu that the titles were
ready for transfer.
7. Nevertheless, the subsequent approval by the probate court of the sale of Lot
Nos. 5 and 6 to Frank Liu rendered moot any question on the continuing
validity of the contract to sell.
Probate Court's ex-parte Approval of the Contracts of the Loys Not Valid
Lis Pendens
8. The lis pendens in the Davao case did not serve as notice to the Loys. The
Register of Deeds of Cebu City denied registration of the lis pendens on
Dec. 19, 1968. Frank Liu did not appeal to the Land Registration
Commission to keep alive the lis pendens. Frank Lius failure to appeal the
denial of the registration rendered the lis pendens ineffective. The CFI of
Davao City eventually dismissed Frank Lius complaint on Oct. 3, 1970.
Registration by the Loys of their contracts of sale did not made them the first
registrants in good faith that may defeat prior buyers
9. The registration by the Loys of their contracts of sale did not defeat the right
of prior buyers because the person who signed the Loys contracts was not
the registered owner. The registered owner of Lot Nos. 5 and 6 was the
Estate of Jose Vao. Teodoro Vao was the seller in the contract of sale
with Alfredo Loy, Jr. The Estate of Jose Vao was the seller in the contract
of sale with Teresita Loy. Teodoro Vao signed both contracts of sale. One
who buys from a person who is not the registered owner is not a purchaser
in good faith.
10. The Loys were under notice to inquire why the land was not registered in the
name of the person who executed the contracts of sale. They were under
notice that the lots belonged to the Estate of Jose Vao and any sale of the
lots required court approval. Any disposition would be subject to the claims
of creditors of the estate who filed claims before the probate court.
11. The contracts of the Loys did not convey ownership of the lots to them as
against third persons. The contracts were binding only on the seller, Teodoro
Vao. The contracts of the Loys would become binding against third
persons only upon approval of the sale by the probate court and registration
with RD. Registration of the contracts without court approval would be
ineffective to bind third persons, especially creditors of the estate.
12. Section 8, Rule 89 of the 1964 Rules of Court specifically requires notice to
all interested parties in any application for court approval to convey
property contracted by the decedent in his lifetime.
13. Despite the clear requirement of Section 8 of Rule 89, the Loys did not
notify the administratrix of the motion and hearing to approve the sale of
the lots to them. The administratrix, who had already signed the deed of sale
to Frank Liu as directed by the same probate court, objected to the sale of
the same lots to the Loys.
14. The failure to notify the administratrix and other interested persons rendered
the sale to the Loys void. In this case, the administratrix, the wife of the
deceased Teodoro Vao, was not notified of the motion and hearing to
approve the sale of the lots to the Loys. Frank Liu did not also receive any
notice, although he obviously was an interested party. The issuance of new
titles to the Loys on May 10, 1976 by the Registry of Deeds did not vest
title to the Loys because the conveyance itself was completely void.
15. Indisputably, an heir can sell his interest in the estate of the decedent, or
even his interest in specific properties of the estate. However, for such
disposition to take effect against third parties, the court must approve such
disposition to protect the rights of creditors of the estate. What the deceased
can transfer to his heirs is only the net estate, that is, the gross estate less the
liabilities.
16. Opulencia v. CA: an heir agreed to convey in a contract to sell her share in
the estate then under probate settlement. In an action for specific
performance filed by the buyers, the seller-heir resisted on the ground that
there was no approval of the contract by the probate court. SC ruled that the
contract to sell was binding between the parties, but subject to the outcome
of the testate proceedings.
17. Alfredo Loy, Jr.: his seller executed the contract of sale after the death of the
registered owner Jose Vao. The seller was Teodoro Vao who sold the lot
in his capacity as sole heir of the deceased Jose Vao. Opulencia applies
to the sale to Alfredo Loy, Jr., which means that the contract of sale was
binding between Teodoro Vao and Alfredo Loy, Jr., but subject to the
outcome of the probate proceedings.
18. Frank Liu: as successor-in-interest of Benito Liu, his seller was Jose
Vao, who during his lifetime executed the contract to sell through an
attorney-in-fact, Teodoro Vao. This is a disposition of property
contracted by the decedent during his lifetime. Section 8 of Rule 89
specifically governs this sale (Where the deceased was in his lifetime under
contract, binding in law, to deed real property, or an interest therein, the
court having jurisdiction of the estate may, on application for that purpose,
authorize the executor or administrator to convey such property according
to such contract, or with such modifications as are agreed upon by the
parties and approved by the court; x x x)
19. Frank Liu applied to the probate court for the grant of authority to the
administratrix to convey the lots in accordance with the contract made by
the decedent Jose Vao during his lifetime. The probate court approved the
application.
 20. Teresita Loy: her seller was the Estate of Jose Vao. Teodoro Vao
executed the contract of sale in his capacity as administrator of the
Estate of Jose Vao, the registered owner of the lots. The Court has held
that a sale of estate property made by an administrator without court
authority is void and does not confer on the purchaser a title that is available
against a succeeding administrator. Both the law (Sec. 91, Act No. 496; Sec.
88, PD 529) and jurisprudence expressly require court approval before any
sale of estate property by an executor or administrator can take effect.
21. Moreover, when the Loys filed in March 1976 their ex-parte motions for
approval of their contracts of sale, there was already a prior order of the
probate court dated Feb. 24, 1976 approving the sale of Lot Nos. 5 and 6 to
Frank Liu. In fact, the administratrix had signed the deed of sale in favor of
Frank Liu on March 5, 1976 pursuant to the court approval. This deed of
sale was notarized on March 5, 1976, which transferred ownership of Lot
Nos. 5 and 6 to Frank Liu on the same date.
22. Thus, when the probate court approved the contracts of the Loys on March
19 and 23, 1976, the probate court had already lost jurisdiction over Lot
Nos. 5 and 6 because the lots no longer formed part of the Estate of Jose
Vao.
23. The Loys cannot acquire any right of dominion over Lot Nos. 5 and 6
because the probate court had already lost jurisdiction to authorize the
second sale of the same lots. Moreover, the probate courts approval of the
sale to the Loys was completely void due to the failure to notify the
administratrix of the motion and hearing on the sale.
Loys Not Possessors in Good Faith
24. The Loys were not in good faith when they built on the lots because they
knew that they bought from someone who was not the registered owner.
The registered owner on the TCTs of the lots was the Estate of Jose Vao
clearly indicating that the sale required probate court approval.
25. Teodoro Vao did not show any court approval to the Loys when they
purchased the lots because there was none. Any one who buys from a
person who is not the registered owner is not a purchaser in good faith.
Frank Lius Prior Contract to Sell Prevails Over Loys Subsequent Contracts of
Sale
26. A prior contract to sell made by the decedent prevails over the subsequent
contract of sale made by the administrator without probate court approval.
The administrator cannot unilaterally cancel a contract to sell made by the
decedent in his lifetime.
27. Any cancellation must observe all legal requisites, like written notice of
cancellation based on lawful cause. It is immaterial if the prior contract is a
mere contract to sell and does not immediately convey ownership.If it is
valid, then it binds the estate to convey the property in accordance with
Section 8 of Rule 89 upon full payment of the consideration.
28. Frank Lius contract to sell became valid and effective upon its execution.
The seller, Jose Vao, was then alive and thus there was no need for court
approval for the immediate effectivity of the contract to sell. In contrast, the
execution of the contracts of sale of the Loys took place after the death of
the registered owner of the lots. The law requires court approval for the
effectivity of the Loys contracts of sale against third parties. The probate
court did not validly give this approval since it failed to notify all interested
parties of the Loys motion for court approval of the sale. Besides, the
probate court had lost jurisdiction over the lots after it approved the earlier
sale to Frank Liu.
29. CA ruling affirmed insofar as the refusal to award moral damages and
attys fees are concerned. Frank Liu failed to prove that he suffered mental
anguish due to the actuations of the Loys. The fact alone that a party was
compelled to litigate and incur expenses to protect his claim does not
justify an award of attorney's fees. Where there is no basis to award moral
damages, there is also no basis to award attorney's fees.