Spec Pro Class 2020

FACTS:

On July 1, 1972, Melitona Pahamotang died. She was survived by her husband Agustin Pahamotang, and their eight (8) children, namely: Ana, Genoveva, Isabelita, Corazon, Susana, Concepcion and herein petitioners Josephine and Eleonor, all surnamed Pahamotang. On September 15, 1972, Agustin filed with the then Court of First Instance of Davao City a petition for issuance of letters administration over the estate of his deceased wife. The petition was raffled to Branch VI of said court, hereinafter referred to as the intestate court. In his petition, Agustin identified petitioners Josephine and Eleonor as among the heirs of his deceased spouse. On December 7, 1972, the intestate court issued an order granting Agustin’s petition. 

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Respondent Philippine National Bank (PNB) and Agustin executed an Amendment of Real and Chattel Mortgages with Assumption of Obligation. It appears that earlier, or on December 14, 1972, the intestate court approved the mortgage to PNB of certain assets of the estate to secure an obligation. Agustin signed the document in behalf of the estate of Melitona.

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Meanwhile, the obligation secured by mortgages on the subject properties of the estate was never satisfied hence mortgagor PNB filed a petition for the extrajudicial foreclosure of the mortgage. The petitioners Josephine and Eleanor, together with their sister Susana, filed their complaint for Nullification of Mortgage Contracts and Foreclosure Proceedings and Damages against Agustin and PNB.

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It is petitioners’ posture that the mortgage contracts entered into by Agustin with respondent PNB, as well as his subsequent sale of estate properties to PLEI and Arguna are void because they [petitioners] never consented thereto. They assert that as heirs of their mother Melitona, they are entitled to notice of Agustin's several petitions in the intestate court seeking authority to mortgage and sell estate properties. Without such notice, which the 4 orders that allowed Agustin to mortgage and sell estate properties, are void on account of Agustin’s non-compliance with the mandatory requirements of Rule 89 of the Rules of Court. The trial court declared the real estate mortgage and the sale void but both were valid with respect to the other parties. The decision was reversed by the Court of Appeals; to the appellate court petitioners committed a fatal error of mounting a collateral attack on the foregoing orders instead of initiating a direct action to annul them. 

 

ISSUE:

Whether or not petitioners can obtain relief from the effects of contracts of sale and mortgage entered into by Agustin without first initiating a direct action against the orders of the intestate court authorizing the challenged contracts

 

RULING:

Yes. the action filed by the petitioners before the trial court in Civil Case No. 16,802 is for the annulment of several contracts entered into by Agustin for and in behalf of the estate of Melitona, namely: (a) contract of mortgage in favor of respondent PNB, (b) contract of sale in favor of Arguna involving seven (7) parcels of land; and (c) contract of sale of a parcel of land in favor of PLEI.

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The trial court acquired jurisdiction over the subject matter of the case upon the allegations in the complaint that said contracts were entered into despite lack of notices to the heirs of the petition for the approval of those contracts by the intestate court.

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In the exercise of its jurisdiction, the trial court made a factual finding in its decision that petitioners were, in fact, not notified by their father Agustin of the filing of his petitions for permission to mortgage/sell the estate properties. The trial court made the correct conclusion of law that the challenged orders of the intestate court granting Agustin’s petitions were null and void for lack of compliance with the mandatory requirements of Rule 89 of the Rules of Court, particularly Sections 2, 4, 7.

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"Sec. 7. Regulations for granting authority to sell, mortgage, or otherwise encumber estate. - The court having jurisdiction of the estate of the deceased may authorize the executor or administrator to sell personal estate, or to sell, mortgage, or otherwise encumber real estate; in cases provided by these rules and when it appears necessary or beneficial, under the following regulations:

(a) The executor or administrator shall file a written petition setting forth the debts due from the deceased, the expenses of administration, the legacies, the value of the personal estate, the situation of the estate to be sold, mortgaged, or otherwise encumbered, and such other facts as show that the sale, mortgage, or other encumbrance is necessary or beneficial;

(b) The court shall thereupon fix a time and place for hearing such petition, and cause notice stating the nature of the petition, the reason for the same, and the time and place of hearing, to be given personally or by mail to the persons interested, and may cause such further notice to be given, by publication or otherwise, as it shall deem proper; 

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Settled is the rule in this jurisdiction that when an order authorizing the sale or encumbrance of real property was issued by the testate or intestate court without previous notice to the heirs, devisees and legatees as required by the Rules, it is not only the contract itself which is null and void but also the order of the court authorizing the same.