Opulencia vs. Court of Appeals

A contract to sell real property executed by an heir over property devised to her under a will being probated is valid and binding without the approval of the probate court, because the heir acts in her personal capacity as owner of her hereditary share, not as executor or administrator of the estate. The sale's consummation, however, remains subject to the termination and outcome of the testate proceedings.

Petitioner Natalia Carpena Opulencia is the daughter and heir of the late Demetrio Carpena, whose estate was the subject of a testate proceeding pending before the Regional Trial Court, Branch 24, Biñan, Laguna. Under her father's will, Lot 2125 of the Sta. Rosa Estate in Sta. Rosa, Laguna was devised to petitioner. Private respondents Aladin Simundac and Miguel Olivan were the buyers who entered into a contract to sell with petitioner over the subject lot.

On February 3, 1989, petitioner Natalia Carpena Opulencia executed a "CONTRACT TO SELL" in favor of private respondents Aladin Simundac and Miguel Olivan covering Lot 2125 of the Sta. Rosa Estate, consisting of 23,766 square meters located in Sta. Rosa, Laguna, at P150.00 per square meter. Private respondents paid a downpayment of P300,000.00, evidenced by receipts signed by petitioner. The property formed part of the estate of petitioner's father, Demetrio Carpena, whose will was then the subject of probate proceedings before the Regional Trial Court, Branch 24, Biñan, Laguna. Both parties were aware of the pendency of the probate proceeding at the time the contract was executed.

The contract's preambular clauses stated that petitioner was the "lawful owner" of the parcel of land, that she "suffers difficulties in her living" and had "need of cash," and that the property "was only one among the other properties given to her by her late father." The contract also stipulated that petitioner's offer to sell was contingent on the "complete clearance of the court on the Last Will Testament of her father." Although the document inadvertently stated that petitioner executed the contract in her capacity as "executrix and administratrix" of the estate, the contract also contained stipulations requiring petitioner to eject tenants and to effect the conversion of the land from irrigated rice land to residential land, securing necessary government clearances.

When private respondents demanded performance, petitioner failed to comply. In her answer, petitioner admitted executing the contract and receiving the downpayment but raised affirmative defenses: the property was part of the estate under probate, the contract was not approved by the probate court, she had offered to return the downpayment which private respondents refused, and she had chosen to rescind the contract. At pre-trial, the parties stipulated that the probate court had not yet issued an order either approving or denying the sale. Private respondents presented their evidence, including the contract to sell, a machine copy of the last will and testament of Demetrio Carpena showing the property was devised to petitioner, receipts for the downpayment, and demand letters. Petitioner, instead of submitting evidence, filed a demurrer to evidence, which the trial court granted, dismissing the complaint. The Court of Appeals reversed, declaring the contract valid and binding subject to the result of the administration proceedings. A manifestation filed with the appellate court, uncontroverted by petitioner, indicated that the last will and testament of Demetrio Carpena had been approved in a final judgment in Special Proceeding No. B-979 by the Regional Trial Court, Branch 24, Biñan, Laguna.

• Inapplicability of Rule 89: Petitioner argued that the contract to sell was void because it was not approved by the probate court as required by Section 7, Rule 89 of the Rules of Court, which governs sales of estate property by an executor or administrator.
• Capacity as Executrix/Administratrix: Petitioner insisted that the stipulations in the contract required her to act in her capacity as executrix or administratrix, pointing to her obligations to eject tenants (the estate being the landlord) and to effect the conversion of the land from irrigated rice land to residential land with necessary government clearances — obligations she alleged could only be undertaken by an executor or administrator.
• Premature Distribution: Petitioner contended that sanctioning the sale would bring about a partial distribution of the decedent's estate pending the final termination of the testate proceedings, especially in light of the trial court's finding that the legitimate of one of the heirs had been impaired.

• Contract Not Covered by Rule 89: Private respondents argued that the contract to sell was not covered by Rule 89 of the Revised Rules of Court because it was made by petitioner in her capacity as an heir, of a property devised to her under the will sought to be probated, and not for the benefit of the estate but for her own needs.
• Estoppel: Private respondents argued that petitioner was estopped from questioning the validity of the contract and from reneging on her obligations, having already received P300,000.00 as downpayment.
• Unjust Enrichment: Private respondents argued that the trial court erred in not ruling on the consideration of the contract, which was tantamount to plain unjust enrichment of petitioner at their expense.

• Validity of the Contract to Sell: Whether the Contract to Sell dated February 3, 1989, executed by petitioner in favor of private respondents without the requisite probate court approval, is valid and binding.

• Validity of the Contract to Sell: Yes. The contract to sell is valid and binding. Section 7, Rule 89 of the Rules of Court does not apply because petitioner entered into the contract in her capacity as an heiress and owner of the property devised to her, not as executrix or administratrix of the estate. The lack of judicial approval does not invalidate the contract because hereditary rights vest in the heir from the moment of the decedent's death.

• Validity of the Contract to Sell: The Court was not persuaded by petitioner's contention that Section 7, Rule 89 of the Rules of Court applied. The Court of Appeals correctly ruled that the contract was not covered by Rule 89 because petitioner entered into the contract in her capacity as an heiress, not as executrix or administratrix. In the contract, petitioner represented herself as the "lawful owner" and seller of the subject parcel of land, and she explained the reason for the sale as "difficulties in her living" conditions and consequent "need of cash." These representations clearly evince that she was not acting on behalf of the estate under probate. The Court emphasized that hereditary rights are vested in the heir or heirs from the moment of the decedent's death under Article 777 of the Civil Code. Petitioner became the owner of her hereditary share the moment her father died. Thus, the lack of judicial approval does not invalidate the contract because petitioner has the substantive right to sell the whole or a part of her share in the estate. Citing Jakosalem vs. Rafols, the Court noted that under Article 440 of the old Civil Code, possession of hereditary property is deemed transmitted to the heir without interruption from the instant of the decedent's death, and each heir becomes the undivided owner of the whole estate with respect to the part which might be adjudicated to him. Under Article 399 of the old Civil Code, every part owner may assign or mortgage his part in the common property, with the effect limited to the portion allotted to him upon partition.

• Administration of the Estate Not Prejudiced: The Court rejected petitioner's contention that the sale would bring about a partial distribution of the estate pending final termination of the testate proceedings. The contract to sell stipulated that petitioner's offer to sell was contingent on the "complete clearance of the court on the Last Will Testament of her father." Consequently, although the contract was perfected during the pendency of the probate proceedings, the consummation of the sale or the transfer of ownership is subject to the full payment of the purchase price and to the termination and outcome of the testate proceedings. The Court cited the settled rule that "the sale made by an heir of his share in an inheritance, subject to the pending administration, in no wise stands in the way of such administration."

• Estoppel: The Court held that petitioner is estopped from backing out of her representations in her valid contract to sell with private respondents, from whom she had already received P300,000.00 as initial payment of the purchase price. Petitioner may not renege on her own acts and representations to the prejudice of private respondents who have relied on them. The Court cited the principle that neither the law nor the courts will extricate a party from an unwise or undesirable contract entered into with all the required formalities and with full awareness of its consequences.

• Vesting of Hereditary Rights — Under Article 777 of the Civil Code, the rights to succession are transmitted from the moment of the death of the decedent. The Court applied this doctrine to hold that petitioner became the owner of her hereditary share the moment her father died, and therefore had the substantive right to sell the whole or a part of her share in the estate without probate court approval.

• Sale by Heir of Hereditary Share — A sale made by an heir of his share in an inheritance, subject to the pending administration, in no wise stands in the way of such administration. The Court applied this principle to hold that the contract to sell, being contingent on the outcome of the testate proceedings, did not result in premature partition or distribution of the estate.

• Estoppel Against a Party to a Valid Contract — Neither the law nor the courts will extricate a party from an unwise or undesirable contract entered into with all the required formalities and with full awareness of its consequences. The Court applied this doctrine to hold that petitioner, having received P300,000.00 as downpayment, was estopped from reneging on her contractual obligations.

• "We emphasize that hereditary rights are vested in the heir or heirs from the moment of the decedent's death. Petitioner, therefore, became the owner of her hereditary share the moment her father died. Thus, the lack of judicial approval does not invalidate the Contract to Sell, because the petitioner has the substantive right to sell the whole or a part of her share in the estate of her late father." — This passage articulates the core ratio decidendi: the heir's vested hereditary rights render probate court approval unnecessary for a sale of the heir's share.

• "The Contract to Sell stipulates that petitioner's offer to sell is contingent on the 'complete clearance of the court on the Last Will Testament of her father.' Consequently, although the Contract to Sell was perfected between the petitioner and private respondents during the pendency of the probate proceedings, the consummation of the sale or the transfer of ownership over the parcel of land to the private respondents is subject to the full payment of the purchase price and to the termination and outcome of the testate proceedings." — This passage explains why the contract does not prejudice the administration of the estate: the sale's consummation remains contingent on the outcome of the testate proceedings.

• "Finally, petitioner is estopped from backing out of her representations in her valid Contract to Sell with private respondents, from whom she had already received P300,000 as initial payment of the purchase price. Petitioner may not renege on her own acts and representations, to the prejudice of the private respondents who have relied on them." — This passage states the estoppel ground, barring petitioner from repudiating her contractual obligations after receiving the downpayment.

• Jakosalem vs. Rafols, 73 Phil. 628 (1942) — Controlling precedent cited for the proposition that hereditary property is deemed transmitted to the heir upon the decedent's death, and that an heir may validly sell his share in the inheritance, with the effect limited to the portion allotted to him upon partition.

• Go Ong vs. Court of Appeals, 154 SCRA 270 (1987) — Cited for the settled rule that "the sale made by an heir of his share in an inheritance, subject to the pending administration, in no wise stands in the way of such administration."

• De Borja vs. Vda. de Borja, 46 SCRA 577 (1972) — Cited in support of the principle that hereditary rights vest in the heir from the moment of the decedent's death.

• Laureano Investment and Development Corporation vs. Court of Appeals, 272 SCRA 253 (1997) — Cited for the estoppel principle that a party may not renege on his own acts and representations to the prejudice of those who have relied on them.

• Esguerra vs. Court of Appeals, 267 SCRA 380 (1997) — Cited for the principle that neither the law nor the courts will extricate a party from an unwise or undesirable contract entered into with all the required formalities and with full awareness of its consequences.

• Article 777, Civil Code — Provides that the rights to succession are transmitted from the moment of the death of the decedent. Applied to hold that petitioner became the owner of her hereditary share upon her father's death, giving her the substantive right to sell her share without probate court approval.

• Section 7, Rule 89, Rules of Court — Governs the regulations for granting authority to sell, mortgage, or otherwise encumber estate property by an executor or administrator. Held inapplicable because petitioner acted in her capacity as an heir, not as executrix or administratrix.

• Article 440, Old Civil Code — Provides that the possession of hereditary property is deemed transmitted to the heir without interruption from the instant of the decedent's death, in case the inheritance be accepted. Cited through Jakosalem vs. Rafols to support the vesting of hereditary rights.

• Article 399, Old Civil Code — Provides that every part owner may assign or mortgage his part in the common property, with the effect limited to the portion allotted to him upon partition. Cited through Jakosalem vs. Rafols to support the validity of an heir's sale of his share.

Justices Davide, Jr., Bellosillo, Vitug, and Quisumbing concurred with the decision penned by Justice Panganiban.