Julita Go Ong vs. Court of Appeals

A mortgage constituted by a surviving spouse over a conjugal property under judicial administration, without judicial approval, is valid with respect to her conjugal share and hereditary rights in the estate, because she is the absolute owner of those portions and may dispose of them under Article 493 of the Civil Code, notwithstanding the requirements of Section 7, Rule 89 of the Rules of Court.

Petitioner Julita Go Ong was the surviving spouse of Alfredo Ong Bio Hong, who died on January 18, 1975, leaving two parcels of land in Quezon City covered by Transfer Certificate of Title No. 188705 in the name of "Alfredo Ong Bio Hong married to Julita Go Ong." The properties were presumed conjugal, having been acquired during the marriage, absent evidence that they were the husband's exclusive capital brought into the marriage. After her husband's death, petitioner was appointed administratrix of his estate in Civil Case No. 107089, and the letters of administration were registered on the title on October 23, 1979. The settlement proceedings of the estate were ongoing when the mortgage subject of this case was executed.

Petitioner Julita Go Ong was the surviving spouse of Alfredo Ong Bio Hong, who died on January 18, 1975. Two parcels of land in Quezon City, Lot No. 12, Block 407, Psd 37326 (1,960.6 sq. m.) and Lot No. 1, Psd 15021 (3,660.8 sq. m.), were covered by Transfer Certificate of Title No. 188705 in the name of "Alfredo Ong Bio Hong married to Julita Go Ong." Petitioner was appointed administratrix of her husband's estate in Civil Case No. 107089, and the letters of administration were registered on the title on October 23, 1979. Thereafter, petitioner sold Lot No. 12 to Lim Che Boon, and TCT No. 188705 was partially cancelled, with TCT No. 262852 issued in favor of the buyer.

On June 8, 1981, petitioner, through her attorney-in-fact Jovita K. Yeo, mortgaged Lot No. 1 to Allied Banking Corporation to secure a loan of P900,000.00 obtained by JK Exports, Inc. The mortgage was registered on the same date with a notation requiring the mortgagee's consent in case of subsequent alienation or encumbrance. On the loan, there was due the sum of P828,000.00, and the bank tried to collect it from petitioner. Petitioner then filed a complaint alleging nullity of the contract for lack of judicial approval, which the bank had allegedly promised to secure from the court. The bank responded that it was petitioner who promised to secure the court's approval, adding that petitioner had received the sum of P300,000.00 from JK Exports, Inc., which would also take charge of the interest on the loan.

The trial court found that the property was conjugal, not the separate property of the deceased husband, and that the mortgage was constituted in the wife's personal capacity, not in her capacity as administratrix. The lower court also found that the mortgage affected only the wife's share in the community property and her inheritance in the estate of her husband. The records showed that petitioner willingly and voluntarily mortgaged the property because she received P300,000.00 from the proceeds of the loan, and that at the time she executed the real estate mortgage, there was no court order authorizing it, so she took it upon herself to secure one.

• Lack of Judicial Approval: Petitioner argued that the mortgage is void for want of judicial approval, quoting Section 7 of Rule 89 of the Rules of Court and citing several cases wherein the Court ruled that the regulations provided in the said section are mandatory.
• Entire Estate Under Administration: Petitioner cited the cases of Picardal, et al. vs. Lladas (21 SCRA 1483) and Fernandez, et al. vs. Maravilla (10 SCRA 589), arguing that in the settlement proceedings of the estate of the deceased spouse, the entire conjugal partnership property of the marriage is under administration, and thus the mortgage over such property requires judicial approval.

• Petitioner's Promise to Secure Approval: The bank averred that it was petitioner who promised to secure the court's approval, adding that petitioner informed the bank that she received the sum of P300,000.00 from JK Exports, Inc., which would also take charge of the interest on the loan.
• Validity of Mortgage: The bank maintained that the mortgage was valid, having been constituted upon the express authority of petitioner, notwithstanding the lack of judicial approval, with respect to her conjugal share and hereditary rights.

• Validity of the Mortgage: Whether the mortgage constituted over the parcel of land under petitioner's administration is null and void for want of judicial approval.

• Validity of the Mortgage: No. The mortgage is not null and void in its entirety. While Section 7, Rule 89 of the Rules of Court requires judicial approval for dispositions of property under administration, the mortgage is valid with respect to petitioner's conjugal share and hereditary rights in the estate, because she is the absolute owner of those portions and may dispose of them under Article 493 of the Civil Code.

• Validity of the Mortgage: The Court applied the well-settled rule that findings of fact of the trial court are entitled to great respect, carrying even more weight when affirmed by the Court of Appeals. The lower court found: (1) that the property under administration is a community property and not the separate property of the deceased; (2) that the mortgage was constituted in the wife's personal capacity and not in her capacity as administratrix; and (3) that the mortgage affects the wife's share in the community property and her inheritance in the estate of her husband. While petitioner's assertion regarding the mandatory nature of Section 7, Rule 89 may have merit insofar as the rest of the estate of her husband is concerned, the same is not true as regards her conjugal share and her hereditary rights in the estate. The Court applied Article 493 of the Civil Code, where the heirs as co-owners shall each have full ownership of his part and the fruits and benefits pertaining thereto, and may therefore alienate, assign or mortgage it, with the effect of the alienation or mortgage limited to the portion allotted to him in the division upon termination of the co-ownership. The fact that the property was in custodia legis is immaterial insofar as her conjugal share and hereditary share are concerned, because she was the absolute owner thereof, and this ownership is not disputed, nor is there any claim that the rights of the government or any heir or anybody else have been prejudiced or impaired. The Court cited Jakosalem vs. Rafols, et al. (73 Phil. 618), where Justice Moran stated that the prohibition on levying upon property in custodia legis does not mean that one of the heirs may not sell the right, interest or participation which he has or might have in the lands under administration. The reference to judicial approval in Section 7, Rule 89 cannot adversely affect the substantive rights of petitioner to dispose of her ideal share in the co-heirship and/or co-ownership formed between her and the other heirs/co-owners, her conjugal share not being inchoate, for the conjugal partnership ended with her husband's death, and her hereditary rights accrued from the moment of the death of the decedent under Article 777 of the Civil Code. Moreover, petitioner is estopped from questioning the mortgage, as an estoppel may arise from the making of a promise even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice.

• Co-ownership under Article 493 of the Civil Code — Each co-owner has full ownership of his part and the fruits and benefits pertaining thereto, and may alienate, assign, or mortgage it, with the effect of the alienation or mortgage limited to the portion which may be allotted to him in the division upon the termination of the co-ownership. The Court applied this provision to hold that the surviving spouse, as co-owner of the conjugal property, could validly mortgage her conjugal share and hereditary rights without judicial approval.
• Property in custodia legis — The ordinary execution of property in custodia legis is prohibited to avoid interference with the possession by the court, but this does not mean that one of the heirs may not sell the right, interest, or participation which he has or might have in the lands under administration. The sale made by an heir of his share in an inheritance, subject to the result of the pending administration, in no wise stands in the way of such administration.
• Estoppel — An estoppel may arise from the making of a promise even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice. The Court applied this doctrine to hold that petitioner, having willingly and voluntarily mortgaged the property and received P300,000.00 from the loan proceeds, was estopped from questioning the mortgage.

• "The reference to judicial approval in Sec. 7, Rule 89 of the Rules of Court cannot adversely affect the substantive rights of private respondent to dispose of her Ideal [not inchoate, for the conjugal partnership ended with her husband's death, and her hereditary rights accrued from the moment of the death of the decedent (Art. 777, Civil Code) share in the co-heirship and/or co-ownership formed between her and the other heirs/co-owners (See Art. 493, Civil Code, supra.)." — This passage articulates the core ratio decidendi: the procedural requirement of judicial approval cannot defeat the substantive ownership rights of the surviving spouse over her conjugal and hereditary shares.
• "That the land could not ordinary be levied upon while in custodia legis, does not mean that one of the heirs may not sell the right, interest or participation which he has or might have in the lands under administration." — Quoted from Jakosalem vs. Rafols, this passage establishes that property under judicial administration may still be the subject of disposition by heirs as to their respective shares.
• "Moreover, petitioner is already estopped from questioning the mortgage. An estoppel may arise from the making of a promise even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice." — This passage states the alternative ground for the decision, applying the doctrine of estoppel against petitioner who voluntarily mortgaged the property and received benefits from the loan proceeds.

• Philippine National Bank vs. Court of Appeals, 98 SCRA 207 (1980) — Cited as authority for applying Article 493 of the Civil Code, where heirs as co-owners may alienate, assign, or mortgage their respective shares, with the effect limited to the portion allotted to them in the division upon termination of the co-ownership.
• Jakosalem vs. Rafols, et al., 73 Phil. 618 — Cited for the principle that property in custodia legis may still be the subject of a sale by an heir of his share in an inheritance, subject to the result of the pending administration, as such sale does not interfere with the court's possession.
• Picardal, et al. vs. Lladas, 21 SCRA 1483 — Cited by petitioner for the proposition that in settlement proceedings, the entire conjugal partnership property is under administration; the Court distinguished this, holding that this fact alone is not sufficient to invalidate the whole mortgage.
• Fernandez, et al. vs. Maravilla, 10 SCRA 589 — Cited by petitioner for the same proposition; the Court likewise distinguished it.
• Gonzalo Sy Trading vs. Central Bank, 70 SCRA 570 — Cited for the doctrine of estoppel arising from a promise made without consideration, where reliance and injustice would result from refusal to enforce it.

• Section 7, Rule 89, Rules of Court — Requires judicial approval for the sale or mortgage of property under administration. The Court held that this provision is not applicable to the surviving spouse's conjugal and hereditary shares, as the mortgage was constituted in her personal capacity and not in her capacity as administratrix.
• Article 493, Civil Code — Provides that each co-owner has full ownership of his part and the fruits and benefits pertaining thereto, and may alienate, assign, or mortgage it, with the effect limited to the portion allotted to him in the division upon termination of the co-ownership. The Court applied this to validate the mortgage as to petitioner's conjugal and hereditary shares.
• Article 777, Civil Code — Provides that hereditary rights accrue from the moment of the death of the decedent. The Court cited this to show that petitioner's hereditary rights were not inchoate but had already accrued upon her husband's death.

Yap (Chairman), Melencio-Herrera, Padilla, and Sarmiento, JJ., concurred.