Estate of Amadeo Matute Olave vs. Honorable Manases G. Reyes

A judicial administrator of a decedent's estate cannot enter into any transaction involving estate property without prior approval of the probate court, which exercises exclusive jurisdiction over the settlement of the estate. Where the estate of a deceased person is already the subject of a testate or intestate proceeding, the administrator cannot convey estate property in payment of a claim without the probate court's prior approval, and any court order approving such a conveyance without that approval is void.

The estate of Amadeo Matute Olave was the subject of Special Proceeding No. 25876 in the then Court of First Instance of Manila, Branch IV, for the settlement of the decedent's estate. The estate owned a parcel of land in Davao covered by Original Certificate of Title No. 0-27. On October 25, 1966, the probate court issued an order directing the administrators to secure the probate court's approval before entering into any transaction involving the seventeen (17) titles of the estate, of which the Davao property was one.

The estate of Amadeo Matute Olave, represented by Jose S. Matute as Judicial Co-Administrator in Sp. Proc. No. 25876 of the then Court of First Instance of Manila, was the owner in fee simple of a parcel of land containing 293,578 square meters, situated in sitio Tibambam, barrio Tibambam, municipality of Sigaboy (now Governor Generoso), province of Davao, covered by Original Certificate of Title No. 0-27 of the Registry of Deeds of Davao Province.

In April 1965, private respondent Southwest Agricultural Marketing Corporation (SAMCO), as plaintiff, filed Civil Case No. 4623 with the Court of First Instance of Davao against respondents Carlos V. Matute and Matias S. Matute, as defendants, in their capacities as co-administrators of the estate, for the collection of an alleged indebtedness of P19,952.11 and for attorney's fees of P4,988.02. On May 8, 1965, the defendants filed an answer denying their lack of knowledge and questioning the legality of SAMCO's claim.

On October 25, 1966, in Sp. Proc. No. 25876, the then Court of First Instance of Manila, Branch IV, issued an order directing the administrators to secure the probate court's approval before entering into any transaction involving the seventeen (17) titles of the estate, of which the property described in OCT No. 0-27 is one. On October 20, 1967, the parties in Civil Case No. 4623 submitted to the respondent court an Amicable Settlement whereby the property of the estate covered by OCT No. 0-27 was conveyed and ceded to SAMCO as payment of its claim. The Amicable Settlement was not submitted to and approved by the probate court in Manila, nor was notice thereof made to the beneficiaries and heirs in the special proceedings.

On November 10, 1967, the respondent court, despite the opposition of other parties who sought to intervene in Civil Case No. 4623 and despite the utter lack of approval of the probate court in Manila, approved the Amicable Settlement and gave it the enforceability of a court decision, which in effect ceded the property covered by OCT No. 0-27, containing an area of 293,578 square meters and with an assessed value of P31,700.00, to SAMCO in payment of its claim for only P19,952.11. The Amicable Settlement provided that the estate was justly indebted to SAMCO in the total sum of P28,403.02, that the estate was devoid of funds to pay the obligation, and that the estate would convey the real property to SAMCO as full and complete payment of the obligation.

• Lack of Probate Court Approval: Petitioner argued that the Amicable Settlement was not submitted to and approved by the probate court in Manila, nor was notice thereof made to the beneficiaries and heirs in the special proceedings, and that the probate court has the sole jurisdiction to convey the property in custodia legis of the estate.
• Exclusive Jurisdiction: Petitioner maintained that the respondent court's Order would operate as a judgment that conveys illegally and unfairly the property of the estate without the requisite approval of the probate court of Manila, which has the sole jurisdiction to convey the property in custodia legis of the estate.

• Independent Action: Respondent SAMCO and respondent judge contended that the Amicable Settlement need not be approved by the probate court, the same having been entered into in another independent action and in another court of co-equal rank.
• Article 2032 Application: Respondents argued that Article 2032 of the Civil Code applies only to extrajudicial compromise entered into by the administrators of the estate.
• Voidable, Not Void: In the alternative, respondents contended that lack of approval of the probate court of the Amicable Settlement does not render it null and void, but at most voidable, which must be the subject matter of a direct proceeding in the proper Court of First Instance.

• Jurisdiction over Claims Against the Estate: Whether the claim of SAMCO against the estate should have been filed in the administration proceedings in the probate court rather than pursued through an independent action in another court.
• Validity of the Amicable Settlement: Whether the respondent court erred in approving the Amicable Settlement without prior approval of the probate court having exclusive jurisdiction over the estate.

• Jurisdiction over Claims Against the Estate: Yes. The claim of SAMCO, being one arising from a contract, may be pursued only by filing the same in the administration proceedings in the Court of First Instance of Manila (Sp. Proc. No. 25876) for the settlement of the estate of the deceased Amadeo Matute Olave, and the claim must be filed within the period prescribed, otherwise, the same shall be deemed "barred forever" under Section 5, Rule 86 of the Rules of Court.
• Validity of the Amicable Settlement: Yes. The respondent court erred in giving due course to Civil Case No. 4623 and in issuing the questioned Order approving the Amicable Settlement, because the probate court in Manila has exclusive jurisdiction over the estate, and the administrators cannot enter into any transaction involving estate property without prior approval of the probate court.

• Jurisdiction over Claims Against the Estate: Section 1, Rule 87 of the Rules of Court provides that "no action upon a claim for the recovery of money or debt or interest thereon shall be commenced against the executor or administrator." The purpose of presentation of claims against decedents of the estate in the probate court is to protect the estate of deceased persons. That way, the executor or administrator will be able to examine each claim and determine whether it is a proper one which should be allowed. Further, the primary object of the provisions requiring presentation is to apprise the administrator and the probate court of the existence of the claim so that a proper and timely arrangement may be made for its payment in full or by pro-rata portion in the due course of the administration, inasmuch as upon the death of a person, his entire estate is burdened with the payment of all of his debts and no creditor shall enjoy any preference or priority; all of them shall share pro-rata in the liquidation of the estate of the deceased.
• Validity of the Amicable Settlement: The main purpose of SAMCO in filing Civil Case No. 4623 in the then Court of First Instance of Davao was to secure a money judgment against the estate which eventually ended in the conveyance to SAMCO of more than twenty-nine (29) hectares of land belonging to the estate in payment of its claim, without prior authority of the probate court of Manila, in Sp. Proc. No. 25876, which has the exclusive jurisdiction over the estate. Section 1, Rule 73 of the Rules of Court expressly provides that "the court first taking cognizance of the settlement of the estate of a decedent, shall exercise jurisdiction to the exclusion of all other courts." The law is clear that where the estate of the deceased person is already the subject of a testate or intestate proceeding, the administrator cannot enter into any transaction involving it without prior approval of the probate court.

• Exclusive Jurisdiction of the Probate Court — Under Section 1, Rule 73 of the Rules of Court, the court first taking cognizance of the settlement of the estate of a decedent shall exercise jurisdiction to the exclusion of all other courts. The Court applied this doctrine to hold that the probate court in Manila had exclusive jurisdiction over the estate of Amadeo Matute Olave, and the respondent court in Davao had no authority to approve a settlement conveying estate property.
• Prohibition Against Actions on Claims Against the Estate — Under Section 1, Rule 87 of the Rules of Court, no action upon a claim for the recovery of money or debt or interest thereon shall be commenced against the executor or administrator. The Court applied this rule to hold that SAMCO's claim, being one arising from a contract, could only be pursued by filing the same in the administration proceedings, not through an independent action in another court.
• Requirement of Probate Court Approval for Transactions Involving Estate Property — Where the estate of the deceased person is already the subject of a testate or intestate proceeding, the administrator cannot enter into any transaction involving it without prior approval of the probate court. The Court applied this principle to invalidate the Amicable Settlement that conveyed estate property without the probate court's prior approval.

• "Section 1, Rule 87 of the Rules of Court, provides that 'no action upon a claim for the recovery of money or debt or interest thereon shall be commenced against the executor or administrator; ...' The claim of private respondent SAMCO being one arising from a contract may be pursued only by filing the same in the administration proceedings in the Court of First Instance of Manila (Sp. Proc. No. 25876) for the settlement of the estate of the deceased Amadeo Matute Olave; and the claim must be filed within the period prescribed, otherwise, the same shall be deemed 'barred forever.' (Section 5, Rule 86, Rules of Court)." — This passage establishes the procedural rule that claims against a decedent's estate must be pursued in the probate court, not through independent actions.
• "The purpose of presentation of claims against decedents of the estate in the probate court is to protect the estate of deceased persons. That way, the executor or administrator will be able to examine each claim and determine whether it is a proper one which should be allowed." — This passage articulates the policy rationale behind the requirement of presenting claims in the probate court.
• "Section 1, Rule 73 of the Rules of Court, expressly provides that 'the court first taking cognizance of the settlement of the estate of a decedent, shall exercise jurisdiction to the exclusion of all other courts.' (Emphasis supplied). The law is clear that where the estate of the deceased person is already the subject of a testate or intestate proceeding, the administrator cannot enter into any transaction involving it without prior approval of the probate court." — This passage states the controlling doctrine of exclusive jurisdiction and the requirement of probate court approval for transactions involving estate property.

N/A — The decision does not cite any prior jurisprudence.

• Section 1, Rule 73, Rules of Court — Provides that the court first taking cognizance of the settlement of the estate of a decedent shall exercise jurisdiction to the exclusion of all other courts. Applied to hold that the probate court in Manila had exclusive jurisdiction over the estate of Amadeo Matute Olave.
• Section 1, Rule 87, Rules of Court — Provides that no action upon a claim for the recovery of money or debt or interest thereon shall be commenced against the executor or administrator. Applied to hold that SAMCO's claim could only be pursued in the administration proceedings.
• Section 5, Rule 86, Rules of Court — Provides that claims not filed within the prescribed period shall be deemed "barred forever." Applied to emphasize the requirement that claims against the estate must be filed in the probate court within the prescribed period.
• Article 2032, Civil Code — Cited by respondents in arguing that it applies only to extrajudicial compromise entered into by administrators of the estate; the Court did not adopt this argument.

Justice Teehankee (Chairman), Justice Melencio-Herrera, Justice Plana, Justice Escolin, and Justice Gutierrez, Jr., concurred. Justice Vasquez was on leave.

N/A — No dissenting opinions were noted in the decision.