352 SUPREME COURT REPORTS ANNOTATED

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

*
G.R. No. 158566. September 20, 2005.

JOSEPHINE OROLA, MYRNA OROLA, ANGELINE OROLA, MANUEL OROLA, ANTONIO

OROLA and ALTHEA OROLA, petitioners, vs. THE RURAL BANK OF PONTEVEDRA (CAPIZ),
INC., EMILIO Q. OROLA, THE REGISTER OF DEEDS OF CAPIZ and THE  EX-
OFFICIOPROVINCIAL SHERIFF OF CAPIZ, respondents.

Wills and Succession; Probate Proceedings; Executors and Administrators; Mortgages; Only the executor

or administrator of the estate may be authorized by the intestate estate court to mortgage real estate belonging
to the estate.—The Court agrees with the petitioners’ contention that respondent Orola failed to secure an
order from the intestate estate court authorizing him to mortgage the subject lots and execute a real estate
mortgage contract in favor of respondent Rural Bank. What the intestate estate court approved in its
December 17, 1982 Order was the authority incorporated in the amended contracts of lease respondent
Orola gave to petitioners Josephine, Manuel and Antonio Orola so that the said lots could be mortgaged to
the respondent Rural Bank as security for the P600,000.00 loan

_______________

* SECOND DIVISION.

353

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Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

under their respective names. In fine, the intestate estate court authorized the petitioners, not
respondent Orola, to mortgage the said lots to respondent Rural Bank. Moreover, under Section 7 of Rule 89
of the Rules of Court, only the executor or administrator of the estate may be authorized by the intestate
estate court to mortgage real estate belonging to the estate; hence, the order of the estate court authorizing
the petitioners to mortgage the realty of the estate to the respondent Rural Bank is a nullity.
Same;  Same;  Same;  Same;  Unless and until the real estate mortgage contracts are approved by the
intestate estate court, the same cannot have any binding effect upon the estate; nor serve as basis for any
action against the estate and against the parcels of land described in the said contracts belonging to it.—
Respondent Orola failed to submit the real estate mortgage contracts to the intestate estate court for its
consideration and approval. To give approval means to confirm, ratify, or to consent to some act or thing
done by another. Unless and until the said contracts are approved by the intestate estate court, the same
cannot have any binding effect upon the estate; nor serve as basis for any action against the estate and
against the parcels of land described in the said contracts belonging to it.
Same; Same; Same; Same; Any mortgage of realty of the estate without the appropriate authority of the
estate court has no legal support and is void.—It bears stressing that respondent Orola had no right or
authority to mortgage the realty belonging to the estate. He derived his authority from the order of the
estate court which had jurisdiction to authorize the real estate mortgage thereof under such terms and
conditions and upon proper application. Any mortgage of realty of the estate without the appropriate
authority of the estate court has no legal support and is void. The purchaser at public auction acquires no
title over the realty. The real estate mortgage contracts, as well as the extrajudicial foreclosure thereof and
the sale of the property described therein at public auction, can thus be attacked directly and collaterally.
Contrary to the contention of respondent Rural Bank, the petitioners were not estopped from assailing the
real estate mortgage contracts, the extrajudicial foreclosure thereof and the sale of the property to
respondent Rural Bank.

354

354 SUPREME COURT REPORTS ANNOTATED

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Santiago A.R. Kapunan for petitioners.
     Aquilina B. Brotarlo for Emilio Orola.
     Stephen C. Arceno for Rural Bank of Pontevedra (Capiz).

CALLEJO, SR., J.:
1
Before us is a petition for review on certiorari of the Decision
2
 of the Court of Appeals (CA) in CA-
G.R. CV No. 35724 reversing, on appeal, the Decision  of the Regional Trial Court (RTC) of Roxas
City, Branch 15, in Civil Case No. V-5452.
On July 16, 1969, Trinidad Laserna Orola died intestate. She was survived by her husband
Emilio Orola and their six minor children, namely, 10-year-old Antonio, 12-year-old Josephine,
16-year-old Manuel, and other siblings, Myrna, Angeline and Althea.
The estate consisted of property located in Pontevedra, Capiz. It included portions of Lots 1071
and 31088 (Lot 2-B) of the Pontevedra Cadastre, covered by Tax Declaration (T.D.) No.
7197  under the names of the heirs of Trinidad Orola; Lot 1088 (Lot 2) covered by T.D. No. 6901
under the name of Trinidad Orola; Lot 1071 and portions of Lot 1088 (Lot 2-A) of the same
cadastre covered by T.D. No. 7196 under the names4
of the heirs of Trinidad Orola; and Lot 1050
of the same cadastre covered by T.D. No. 2623  under the name of Trinidad Orola. Portions of the
property were devoted to the develop-

_______________
1 Penned by Associate Justice Salvador J. Valdez, Jr., with Associate Justices Mercedes Gozo-Dadole and Sergio L.

Pestaño, concurring; Rollo, pp. 28-38.

2 Penned by Judge David A. Alfeche, Jr.; Rollo, pp. 44-53.
3 Exhibit “9.”
4 Exhibit “8.”

355

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Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

ment and production

5
of sugar. Some portions were riceland, while some parts of the property
were swampy.
 Emilio Orola, who, in the meantime, had married anew, executed a waiver of all his rights and
interests over the said property in favor of his children by Trinidad6 Laserna, namely, Josephine,
Myrna, Angeline, Manuel, Antonio and Althea, all surnamed Orola. 7
In 1973, Emilio Orola retired as cashier of the Philippine National Bank (PNB).   He filed a
petition for his appointment as guardian over the persons and property of his minor children. The
case was docketed as Special Proceedings (Sp. Proc.) No. V-3526. The petition was granted, and
Emilio Orola was appointed guardian not only over the persons of his minor children but also
over their property. On November 6, 1973, Emilio filed a petition with the RTC for the settlement
of the estate of his deceased spouse, Trinidad Laserna, and his appointment as administrator of
her estate. The RTC issued an order appointing Emilio Orola as administrator of the estate of his
deceased spouse.
As such administrator of the estate, Emilio took possession of the said parcels of land. He
opened an account in the name of the estate with the PNB. He embarked on a massive sugar
production and, with prior approval of the court, negotiated with banking institutions for
financing loans to purchase the required equipments. However, in 1976 and 1977, there was a
sudden collapse of the sugar industry. Emilio Orola found it necessary to develop the swampy
portion of the estate for the production of fish. To finance the endeavor, he needed at least
P600,000.00. 8
On September 11, 1980, Emilio Orola filed a motion  in Sp. Proc. No. V-3639 for authority to
negotiate a P600,000.00 loan

_______________
5 TSN, 26 October 1989, pp. 47-49.
6 Exhibit “6-A-1.”
7 TSN, 4 September 1990, p. 2.
8 Exhibit “8.”

356

356 SUPREME COURT REPORTS ANNOTATED

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

from the Central Bank of the Philippines for the full and complete development of the fishpond
portion of the estate, and to transfer the sugar account of the estate from the PNB to the Republic
Planters Bank (RPB).
On September 12, 1980, the court granted the motion of the administrator and authorized him
to negotiate the loan through the Rural Bank of Capiz (Rural Bank of Pontevedra,
9
Capiz) and to
transfer the sugar account of the estate to the RPB in Roxas City.   Emilio then filed an
application with the Rural Bank for a financing loan of P600,000.00. However, the bank informed
him that the said loan would have to be processed by the Central Bank and that it would take
some time. He was informed that there would be no need for the Central Bank to intervene if the
loan of P600,000.00 would be broken down into three parts of P200,000.00, each to be applied for
by three applicants to whom the property to be used as collateral would be leased by the estate.
Emilio agreed and talked to his children,
10
Josephine, Manuel and Antonio, about the bank’s
proposal. The three siblings agreed.  The Estate of Trinidad Laserna, through its administrator,
Emilio, as lessor, and Josephine, Manuel and Antonio, all surnamed Orola, as lessees, executed
separate contracts of lease over the aforesaid property of the estate. On September 20, 1982, the
intestate estate court issued an Order approving the contracts.
However, it turned out that the lessees would not qualify for the loans; the bank required a
lease period of at least 10 years from the time the court approved the same. On May 20, 1982,
11
 11
Emilio, Antonio, Manuel and Josephine Orola filed a Manifestation   with the intestate estate
court, praying that its order be amended to state that the periods of the leases were to commence
from court approval of the said contracts.

_______________
9 Exhibit “29.”
10 TSN, 25 July 1990, p. 35.
11 Exhibit “27.”

357

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Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

However, on December 15, 1982, the estate, through Emilio, as lessor, 12

and Josephine, Antonio
and Manuel Orola, executed separate Amended Contracts of Lease covering the same property.
The periods of the lease were extended to 12 years, to commence from their approval by the
intestate estate court. The lessees were also authorized to negotiate loans for the development of
the leased premises not to exceed P200,000.00, and to bind the leased premises by way of real
estate mortgage as security therefor. 13
On December 15, 1982, Emilio filed an Ex Parte Motion in the intestate estate court for the
approval of the amended contracts of lease appended thereto. On14December 17, 1982, Angeline,
Myrna and Althea Orola filed their Joint Affidavit of Conformity  to the motion. On December
17, 1982,
15
the court granted the motion of Emilio and approved the amended contracts of
lease.  On December 20, 1982,16
the Rural Bank notified Emilio that the loan applications of his
children had been approved. 17
Antonio, Manuel and Josephine signed separate Promissory Notes   on March 21, 1983 in
which they promised and bound themselves to pay their respective loans in 10 years in stated
annual installments. Antonio Orola, for and in behalf of his father Emilio18 Orola, executed a Real
Estate Mortgage over Lot 1088 as security for the payment of his loan.  Manuel Orola, also as
attorney-in-fact of the administrator of the estate, likewise, executed
19
a real estate mortgage in
favor of the Rural Bank over the said lots as security for his loan.   Josephine Orola, as attorney-
in-fact of the administrator of

_______________
12 Exhibits “32,” “33” and “34.”
13 Exhibit “30.”
14 Exhibit “35.”
15 Exhibit “37.”
16 Exhibit “31.”
17 Exhibits “5,” “7” and “15.”
18 Exhibit “1.”
19 Exhibit “3.”

358

358 SUPREME COURT REPORTS ANNOTATED

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.
the estate, executed a separate real 20estate mortgage agreement over a portion of Lot 1088 and
Lot 1071 as security for her loan.   However, the real estate mortgage contracts were not
submitted to the guardianship and intestate estate courts for approval. Neither were Myrna,
Angeline and Althea aware of the said loans.
The net proceeds of the loan, in the total
21
amount of P582,000.00, were deposited in the Rural
Bank on May 9, 1983 in Emilio’s account.  From the said proceeds, the Rural Bank deducted 22
the
amount of P229,771.20, the accommodation loan Emilio secured from the Rural Bank. 23
As of
September 9, 1983, the balance of the said deposit amounted to only 24
P4,292.79.   Emilio,
thereafter, failed to pay the amortizations of the loans to the Rural Bank.
This prompted the Rural Bank to write separate letters of demand to Josephine, Manuel and
Antonio, demanding payment of the balance of their accounts within seven days from the receipt
thereof, otherwise
25
the Rural Bank would cause the extrajudicial foreclosure of the real estate
mortgages.  Emilio Orola pleaded to the Rural Bank not to foreclose the mortgages. However, on
June 15, 1985, the Rural Bank filed an application with the Ex-OfficioProvincial26 Sheriff for the
extrajudicial foreclosure of the real estate mortgages over Lots 1071 and 1088.   The lots were
sold at public auction on April 14, 1986 with the Rural Bank as the winning bidder. 27The  Ex-
OfficioProvincial Sheriff executed separate certificates of sale in favor of the Rural Bank.

_______________
20 Exhibit “14.”
21 Exhibit “7.”
22 TSN, 25 July 1990, p. 61.
23 Exhibit “18.”
24 TSN, 25 July 1990, p. 79.
25 Exhibits “18,” “19” and “20.”
26 Exhibits “21” to “23.”
27 Exhibits “24,” “25” and “26.”

359

VOL. 470, SEPTEMBER 20, 2005 359

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

On September
28
1, 1987, the guardianship court terminated the guardianship and dismissed the
case.  On September 21, 1987, Josephine, Myrna, Manuel and Antonio Orola executed a Deed of
Acceptance of Waiver or Donation in which they accepted 29
their father’s waiver of his rights,
interests and participation over their mother’s estate.
On October 1, 1987, Josephine Orola and her siblings, Myrna, Angeline, Manuel, Antonio and
Althea, filed a Complaint against the Rural Bank, their father Emilio and the  Ex-
Officio Provincial Sheriff for the nullification of the Promissory Notes and Real Estate Mortgages
executed by Josephine, Manuel and Antonio Orola, and the sale of the property subject of the said
deed at public auction. They alleged therein that they became the sole owners of Lots 1088 and
1071 when their father executed a waiver of his rights over the said lots in their favor. They also
alleged that the real estate mortgage contracts were null and void because the same were never
submitted to and approved by the RTC in Sp. Proc. Nos. V-3526 and V-3639. Moreover, they were
hoodwinked by their father into signing the contracts of lease and amended contracts of lease,
promissory notes and deeds of real estate mortgages as security for the P600,000.00 loan on the
assurance that they would be benefited therefrom; moreover, they did not receive the proceeds of
the said loans. As such, the extrajudicial foreclosure of the real estate mortgages and the sale of
the property covered by the said deeds were null and void. The plaintiffs prayed that:
 (1) A Temporary Restraining Order be issued restraining in the meantime the defendant Ex-
Officio Provincial Sheriff from executing the Sheriff’s Certificates of Sales arising out of
Case No. 33 (1985), Case No. 34 (1985) and Case No. 36 (1985), all of the Office of the
Provincial Sheriff.

_______________
28 Exhibit “F.”
29 Ibid.

360

360 SUPREME COURT REPORTS ANNOTATED

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

(2) After hearing, a writ of preliminary injunction be issued against the defendant Provincial
Sheriff for the same purpose stated above, and that the said Preliminary Injunction be
made permanent after trial on the merits.
(3) After trial, a Judgment be rendered -

(a) Declaring the contracts of loan and/or Promissory Notes allegedly executed by plaintiffs
Josephine, Manuel and Antonio Orola in favor of the defendant Rural Bank of Ponte-
vedra (Capiz), Inc. null and void ab initio.
(b) Declaring the real estate mortgages purportedly signed by the same plaintiffs Josephine,
Manuel and Antonio Orola in favor of defendant Rural Bank of Pontevedra (Capiz), Inc.
null and void ab initio.
(c) Ordering defendant Emilio Q. Orola and defendant Rural Bank of Pontevedra (Capiz),
Inc., jointly and severally, to pay the plaintiffs moral damages in the sum of P600,000.00,
actual damages in the sum of P10,000.00, as and for attorney’s fees in the amount of
P65,000.00, as exemplary damages in the sum of P10,000.00, and to pay the costs of this
suit.
(d) Ordering the Register of Deeds for the Province of Capiz to cancel the registration of the
real estate mortgages illegally made under Section 113 of Presidential Decree No. 1529
affecting Lots Nos. 1088 and 1050 of the Cadastral Survey of Pontevedra, Capiz.

The plaintiffs30also pray for such other reliefs and remedies that may be considered just and equitable under
the premises.

In its answer to the complaint, Rural Bank averred that the RTC in Sp. Proc. No. V-3639
authorized and even approved the amended contracts of sale executed by Antonio, Manuel and
Josephine Orola and the defendant Emilio Orola. It further averred that the plaintiffs had agreed
to the execu-tion of the mortgages of the property subject of the said deeds, and conformed to the
said amended contracts before the RTC in the intestate estate proceedings approved the same;
they were also notified of the balance of their account, and of the

_______________
30 Records, pp. 9-11.

361
 VOL. 470, SEPTEMBER 20, 2005 361
Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

extrajudicial foreclosure of the real estate mortgages, and the subsequent sale of the property
covered by the said mortgages at public auction after they refused to pay their account despite
demands. As such, the plaintiffs were estopped from assailing the real estate mortgages and the
extrajudicial foreclosure thereof and the sale of the lots covered by the said deeds at public
auction. Rural Bank prayed that:
“WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that, after due
notice and hearing, a judgment be rendered in favor of defendant bank dismissing the plaintiffs’ complaint
and ordering the plaintiffs to pay defendant bank the following:

1. As and for attorney’s fees in the amount of P50,000.00;

2. As moral, compensatory and exemplary damages, an amount to be fixed by this Honorable Court;
3. The costs of this suit.

Herein defendant bank, likewise, prays that the plaintiffs petition for the Issuance of a Temporary
Restraining Order against the defendant Ex-Officio  Provincial Sheriff restraining him from executing the
Certificates of Sheriff Sale arising out of Case No. 33 (1985), Case No. 34 (1985) and Case No. 36 (1985), all
of the Office of the Provincial Sheriff of Capiz be denied for obvious lack of merit.
Herein defendant further prays that the extrajudicial foreclosure of the Real Estate Mortgages recorded
under Republic Act 3344 be confirmed and declared binding and valid affecting the Original Certificates of
Title Nos. RO-801 (17658) and RO-802 (17682) covering the mortgaged Lots Nos. 1088 and 1071 of the
Cadastral Survey of Capiz.
Herein 31defendant finally prays for such other reliefs or remedies which are just and equitable in the
premises.”

In his answer to the complaint, Emilio Orola admitted that the guardianship proceedings
terminated on September 1, 1987 but specifically denied the allegations in the complaint that the
plaintiffs were the absolute owners of the lots subject

_______________
31 Records, pp. 46-47.

362

362 SUPREME COURT REPORTS ANNOTATED

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

matter thereof. He alleged that he executed the Waiver of Right on October 26, 1976 only because
his brother and sister-in-law required him to do so as a condition to their signing the partition
agreement, with their assurance that the said waiver would take effect only after his death. He
further claimed that the plaintiffs were aware of this because they accepted his waiver only on
September 21, 1987 after they became of age. Moreover, the plaintiffs had agreed to the execution
of the amended contracts of lease to facilitate the early release of the loans as required by the
Rural Bank. He further alleged that the proceeds of the loans were used for the development of
the estate; the non-submission of the real estate mortgages to the intestate estate and
guardianship courts for approval was due to the fault of Rural Bank; and his failure to pay the
amortizations of the loan was due to force majeure, namely, typhoon Undang.
 On December 29, 1989,
32
the Rural Bank presented the Real Estate Mortgage in the Office of
the Register of Deeds.
On April 19, 1991, the RTC rendered judgment in favor of the plaintiffs. The  fallo  of the
decision reads:
“IN VIEW OF THE CONSIDERATIONS, judgment is rendered:
1. Declaring the loans of Josephine Orola, Antonio Orola, Manuel Orola, all on March 21, 1983, with the
defendant, Rural Bank, at P200,000 each or a total of P600,000, null and void;
2. Declaring that the real estate mortgages of [the] above three (3) plaintiffs on (a) Lot No. 1071-part and
Lot No. 1088-part under Tax Declaration No. 7196 in the name of [the] Heirs of Trinidad Laserna Orola to
secure the loan by Josephine Orola; (b) Lot No. 1088 known as Lot No. 2-B of the parcellary plan under Tax
Declaration No. 7197 in the name of the Heirs of Trinidad Orola and Lot No. 1050 under Tax Declaration
No. 2623 in the name of Trinidad Orola to secure the loan by Antonio Orola; and (c) Lot No. 1088 under Tax
Declaration No. 6901 in the name of Trinidad Laserna Orola to

_______________
32 TSN, 13 March 1990, p. 19.

363

VOL. 470, SEPTEMBER 20, 2005 363

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

secure the loan by Manuel Orola, all as Attorney-in-fact of defendant Emilio Orola, administrator, null and
void;
Both (Nos. 1 and 2) for failure to comply with the mandatory requirements of Section 7, Rule 89, Revised
Rules of Court;
3. Ordering the Office of the Registry of Land Titles and Deeds, Province of Capiz, to cancel its
registration of the real estate mortgages affecting [the] above parcels of land.
Claims of damages and attorneys fees as well 33
as counterclaims are denied.
Costs against the defendants, pro indiviso.”

The trial court held that although the intestate estate court authorized Emilio to negotiate a loan
of P600,000.00 with Rural Bank, he was not authorized to mortgage the real property of the
estate to the Rural Bank. The court ruled that the September 12, 1980 Order of the intestate
estate court was null and void because the motion of the administrator for authority to negotiate
a loan with the Rural Bank was made ex parte, that is, without notifying the plaintiffs who were
the heirs of the deceased. The court also held that the plaintiffs were not estopped from assailing
the real estate mortgage contracts, the same being null and void. It also declared that the issue of
whether or not the plaintiffs were the co-owners of the property should be ventilated with the
proper RTC in the exercise of its general jurisdiction in an ordinary action for the said purpose.
Rural Bank’s motion for reconsideration of the decision was denied by the trial court. It then
appealed the decision to the CA, where it alleged that:
As to Assignment on Error No. I and II

A—In ruling on the nullity of the loans and mortgages in question, the lower court confined itself to the
order of the intestate court, dated December 12, 1980, totally ignoring the subsequent order dated December
17, 1982 (Exhs. “36” & “37”) which granted

_______________
33 Records, pp. 354-355.
 364

364 SUPREME COURT REPORTS ANNOTATED

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

the authority to encumber the estate in the manner required by the defendant Rural Bank of Pontevedra.
B—The non-presentation of the priorly authorized mortgages in question in court after their execution,
does not nullify said mortgages, as what is required by Sec. 7, Rule 89 is only prior approval by the intestate
court.

As to Assignment of Error No. III

Estoppel [precludes] a party from [repudiating] an obligation voluntarily assumed after having accepted
benefits therefrom.

As to Assignment of Error No. IV

Because of their baseless complaint,

34
defendant-appellant was unnecessarily dragged into this litigation
causing defendant-appellant damages.

The appellant bank averred that the amended contracts of lease, which contained provisions
requiring the intestate estate court’s approval, were approved by the intestate estate court and
conformed to by the other heirs of the deceased. The bank posited that the court a quo  had no
jurisdiction to nullify the order of the estate court, which was co-equal in rank with the estate
court in approving the amended contracts of lease. It further alleged that the administrator of the
estate is not required under Section 7, Rule 89 of the Rules of Court to secure prior authority to
mortgage the real properties or otherwise encumber the same. Rural Bank alleged that the
appellees were estopped from assailing the real estate mortgages of the property after having
been benefited by the P600,000.00 loan.
The appellees
35
failed to file their brief. On October 18, 2002, the CA rendered a
Decision  granting the appeal and reversing the appealed decision.
The appellate court ruled that the intestate estate court’s approval of the amended contracts of
lease carried with it the

_______________
34 CA Rollo, p. 65.
35 Rollo, pp. 28-38.

365

VOL. 470, SEPTEMBER 20, 2005 365

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

approval of the real estate mortgages executed by Emilio Orola in favor of the Rural Bank.
Angeline, Myrna and Althea even conformed to the amended contracts of lease; hence, were
estopped from assailing them, as well as the real estate mortgage contracts.
After the appellate court denied their motion for reconsideration of the decision, the Orola
siblings, now the petitioners, filed the instant petition for review on  certiorari  with this Court,
alleging that:
-I-
THE SUBJECT MORTGAGES CONSTITUTED OVER THE REAL ESTATE PROPERTIES OF
PETITIONERS-APPELLEES UNDER SECTION 7, RULE 89 OF THE RULES OF COURT ARE VOID FOR
NON-COMPLIANCE WITH THE MANDATORY REGULATIONS (SIC) OF THE SAID PROVISION.

-II-

ASSUMING  ARGUENDO  SUBSTANTIAL COMPLIANCE WITH THE PROVISIONS OF RULE 89,

SECTION 7, THE SUBJECT MORTGAGES ARE STILL VOID FOR LACK OF AUTHORITY FROM THE
PROBATE COURT, HAVING BEEN CONSTITUTED BY PERSONS 36
OTHER THAN THE
ADMINISTRATOR OF THE ESTATE OF TRINIDAD LASERNA OROLA.

The petitioners reiterate their argument that respondent Emilio Orola, then administrator of the
estate, failed to comply with Section 7, Rule 89 of the Rules of Court. They aver that this
provision is mandatory in nature, including the fixing of a time and place for hearing of the
motion for the approval of the amended contracts of lease. They point out that respondent Orola
failed to file a motion for the approval of the real estate mortgages. The petitioners insist that
even if it is assumed that the December 17, 1982 Order of the intestate estate court approving the
amended contracts of lease

_______________
36 Rollo, p. 17.

366

366 SUPREME COURT REPORTS ANNOTATED

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

authorized the constitution of real estate mortgages over the real property of the estate, such
order is void, as it authorized petitioners Manuel, Antonio and Josephine Orola, and not the
respondent Emilio Orola, to mortgage the said property. They insist that they are not estopped
from assailing a void order issued by the intestate estate court.
Respondent Rural Bank insists that the petitioners had been benefited by the loans granted to
them; hence, are estopped from assailing the real estate mortgage contracts. Respondent Orola,
for his part, avers that the one-half undivided portion of the property subject of the real estate
mortgages was the exclusive property of the deceased, and partly the conjugal property of the
respondent and the deceased. Moreover, respondent Orola’s share in the conjugal property was
not the subject of the intestate case, as it was not included as part of the property given as
security for the loans of the petitioners-mortgagees.
The petition is meritorious.
Section 2, Rule 89 of the Rules of Court provides that, upon application of the administrator
and on written notice to the heirs, the court may authorize the administrator to mortgage so
much as may be necessary of the real estate for the expenses of the administrator, or if it clearly
appears that such mortgage would be beneficial to the persons interested:
Sec. 2. When court may authorize sale, mortgage, or other encumbrance of realty to pay debts and legacies
through personality not exhausted.—When the personal estate of the deceased is not sufficient to pay the
debts, expenses of administration, and legacies, or where the sale of such personal estate may injure the
business or other interests of those interested in the estate, and where a testator has not, otherwise, made
sufficient provision for the payment of such debts, expenses, and legacies, the court, on the application of the
executor or administrator and on written notice to the heirs, devisees, and legatees residing in the
Philippines, may authorize the executor or administrator to sell, mortgage, or otherwise, encumber so much
as may be necessary of the real estate, in lieu of personal estate, for the purpose of paying such debts,
expenses, and legacies,

367

VOL. 470, SEPTEMBER 20, 2005 367

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if it clearly appears that such sale, mortgage, or encumbrance would be beneficial to the persons interested;
and if a part cannot be sold, mortgaged, or otherwise encumbered without injury to those interested in the
remainder, the authority may be for the sale, mortgage, or other encumbrance of the whole of such real
estate, or so much thereof as is necessary or beneficial under the circumstances.

Section 7 of Rule 89 provides the rules to obtain court approval for such mortgage:
(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;
(c) If the court requires it, the executor or administrator shall give an additional bond, in such sum as
the court directs, conditioned that such executor or administrator will account for the proceeds of the
sale, mortgage, or other encumbrance;
(d) If the requirements in the preceding subdivisions of this section have been complied with, the court,
by order stating such compliance, may authorize the executor or administrator to sell, mortgage, or
otherwise encumber, in proper cases, such part of the estate as is deemed necessary, and in case of
sale the court may authorize it to be public or private, as would be most beneficial to all parties
concerned. The executor or administrator shall be furnished with a certified copy of such order;
(e) If the estate is to be sold at auction, the mode of giving notice of the time and place of the sale shall
be governed by the provisions concerning notice of execution sale;
(f) There shall be recorded in the registry of deeds of the province in which the real estate thus sold,
mortgaged, or otherwise encumbered is situated, a certified copy of the order of the court,

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368 SUPREME COURT REPORTS ANNOTATED

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

together with the deed of the executor or administrator for such real estate, which shall
be as valid as if the deed had been executed by the deceased in his lifetime.

After the real estate mortgage is executed in accordance with the foregoing regulations,
37
the said
deed must be submitted for the consideration and approval or disapproval of the court.
The records show that respondent Emilio Orola notified the petitioners of his motion for the
approval of the amended contracts of lease. Although the motion was  ex parte, nonetheless,
petitioners Angeline, Myrna and Althea Orola filed their Joint Affidavit of Conformity, in which
they declared that:
 7. That on December 15, 1982, the administrator, thru counsel, filed an ex parte motion for
the admission and approval of the amended contracts of lease in favor of our brothers and
sister changing the term from ten (10) to twelve (12) years, copy of the amended contracts
of lease [were] shown to us;
8. That we have no objection and we voluntarily conform to the amendment of the term from
ten (10) to twelve (12) years and freely give our consent to having the Lessees execute a
real estate mortgage over the leased property in favor of the bank just to be able to avail
with the CB: IBRD financing loan to develop the property;
9. That we are jointly executing this affidavit for the purpose of facilitating the immediate
admission and approval of the amended 38
contracts of lease as prayed for in the  ex
parte motion dated December 5, 1982.

However, the Court agrees with the petitioners’ contention that respondent Orola failed to secure
an order from the intestate estate court authorizing him to mortgage the subject lots and execute
a real estate mortgage contract in favor of respondent Rural Bank. What the intestate estate
court ap-

_______________
37 Regalado, Remedial Law Compendium, Vol. II, 9th Revised Ed., p. 95.
38 Exhibit “35-A.”

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VOL. 470, SEPTEMBER 20, 2005 369

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

proved in its December 17, 1982 Order was the authority incorporated in the amended contracts
of lease respondent Orola gave to petitioners Josephine, Manuel and Antonio Orola so that the
said lots could be mortgaged to the respondent Rural Bank as security for the P600,000.00 loan
under their respective names. In fine, the intestate estate court authorized the petitioners, not
respondent Orola, to mortgage the said lots to respondent Rural Bank. Moreover, under Section 7
of Rule 89 of the Rules of Court, only the executor or administrator of the estate may be
authorized by the intestate estate court to mortgage real estate belonging to the estate; hence,
the order of the estate court authorizing the petitioners to mortgage the realty of the estate to the
respondent Rural Bank is a nullity.
The respondents must have realized that the order of the intestate estate court authorizing
petitioners Manuel, Antonio and Josephine Orola to mortgage the lots was void because
respondent Emilio Orola caused the real estate mortgage contracts in favor of respondent Rural
Bank to be executed by his children, petitioners Josephine, Manuel and Antonio Orola, “acting as
attorneys-in-fact of the administrator of the estate.” However, the estate court had not appointed
petitioners Antonio, Josephine and Manuel Orola as attorneys-in-fact of respondent Emilio Orola
empowered to execute the said contracts. Hence, they had no authority to execute the said Real
Estate Mortgage Contracts for and in behalf of respondent Orola, in the latter’s capacity as
administrator of the estate.
Worse, respondent Orola failed to submit the real estate mortgage contracts to the intestate
estate court for its consideration and approval.
39
To give approval means to confirm, ratify, or to
consent to some act or thing done by another.  Unless and until the said contracts are approved
by the intes-
_______________
39 Ramos v. Court of Appeals, G.R. No. 42108, 29 December 1989, 180 SCRA 635.

370

370 SUPREME COURT REPORTS ANNOTATED

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

tate estate court, the same cannot have any binding effect upon the estate; nor serve as basis for
any action against
40
the estate and against the parcels of land described in the said contracts
belonging to it.
It bears stressing that respondent Orola had no right or authority to mortgage the realty
belonging to the estate. He derived his authority from the order of the estate court which had
jurisdiction to authorize the real estate mortgage thereof under such terms and conditions and
upon proper application. Any mortgage of realty of41the estate without the appropriate authority
of the estate court has
42
no legal support and is void.  The purchaser at public auction acquires no
title over the realty.  The real estate mortgage contracts, as well as the extrajudicial foreclosure
thereof and the sale of 43the property described therein at public auction, can thus be attacked
directly and collaterally.
Contrary to the contention of respondent Rural Bank, the petitioners were not estopped from
assailing the real estate mortgage contracts, the extrajudicial foreclosure thereof and the sale of
the property to respondent Rural Bank.
Although the records show that petitioners Josephine, Manuel and Antonio Orola received the
proceeds of the loan from respondent Rural Bank, the amount was deposited by respondent
Emilio Orola in his savings account with respondent Rural Bank. He was obliged to deposit the
said amount in the estate’s account with the Republic Planters Bank, as ordered by the intestate
estate court. Worse, respondent Rural Bank applied P229,771.20 of the loan proceeds to liquidate
the accommodation loan it granted to respondent Emilio Orola. There is no showing in the
records that the intestate

_______________
40 Haliliv. Lloret, 95 Phil. 78 (1954).
41 Williams v. Williams, 497 S.W.2d 415 (1973); Crumpacker v. Howes, 222 N.E.2d 296 (1966).
42 Andrews v. Koch, 702 S.W.2d 584 (1986).
43 Ibid.

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VOL. 470, SEPTEMBER 20, 2005 371

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

estate court ever authorized the use of the proceeds of the loan to pay respondent Emilio Orola’s
accommodation loan. The loan proceeds were to be used to develop property belonging to the
estate into a fishpond from which income could be generated. Of the net proceeds of the
P582,000.00 loan, only P4,292.79 remained as of September 9, 1983. Respondent Emilio Orola
failed to pay the amortization of the loan for the respondent Rural Bank of the estate.
Had the real estate mortgage contracts been submitted to the intestate estate court for
consideration and approval after proper notice to the petitioners, the court would have been
apprised of the terms and conditions contained therein, and that about one-half of the loan would
be used to pay the accommodation loan of respondent Emilio Orola.
Petitioners Manuel, Josephine and Antonio Orola executed the amended contracts of lease, the
promissory notes and the real estate mortgages upon the prodding of their father, respondent
Emilio Orola, and upon the suggestion of respondent Rural Bank, solely to facilitate the speedy
approval of the loan of the estate, which was to be the ultimate beneficiary thereof. The
petitioners acted on the belief that the loan would be used to develop the swampy portion of the
realty into an income-generating fishpond, impervious of the fact that almost one-half of the
proceeds of the loan had been used to pay the accommodation loan of respondent Emilio Orola.
The claim of respondent Emilio Orola that part of the property used as collateral for the loan
was part of his and his deceased wife’s conjugal property, and that the waiver he executed was to
take effect only upon his death, is belied by the records. Indeed, in his Waiver of Rights dated
October 26, 1976, respondent Emilio Orola declared that:

1. That during the lifetime of my first wife, Trinidad Laserna, we have acquired property by
purchase from Mr. Manuel Laserna, in co-ownership with Pedro Laserna, Dolores
Deocampo, Jesus Laserna and Emiliana Laserna affecting Lots Nos. 1070, 1071, 1074,
1075, 1088, 1050 & 1051, all of Pontevedra Cadastre;

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372 SUPREME COURT REPORTS ANNOTATED

Orola vs. Rural Bank of Pontevedra (Capiz), Inc.

2. That the said [properties] mentioned above are still under co-ownership,  pro indiviso,
between and among the Vendees whose names are mentioned above;
3. That during the marital relations between me and my deceased wife, Trinidad Laserna,
we have six (6) children, namely, Josephine, Myrna, Angeline, Manuel, Antonio and
Althea, all surnamed Orola;
4. That the co-owners have decided to terminate the co-ownership over the above-mentioned
properties of which the aforementioned children of the spouses, Emilio Orola and
Trinidad Laserna, became co-owners thereof in representation of their deceased mother,
Trinidad Laserna, by operation of law and the herein undersigned desires to give
protection to his children of the first marriage which are named above.

NOW, THEREFORE, for and in consideration of the love, affection and mutual agreements, I, EMILIO Q.
OROLA, by these presents, do hereby waive and relinquish all my shares, interests and participations over
all the above-mentioned properties in favor of my six (6) children of the first marriage, namely, Josephine,
Myrna, Angeline, Manuel, Antonio and Althea.
It is understood that, upon the registration of the project of partition which the co-owners will present
that the shares and participations of the undersigned
44
shall be consolidated in the names of the children
mentioned above in equal right and participation.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Decision and
Resolution of the Court of Appeals are REVERSED AND SET ASIDE. The Decision of the
Regional Trial Court is REINSTATED. No costs.
SO ORDERED.

     Puno (Chairman), Austria-Martinez, Tinga and Chico-Nazario, JJ., concur.

 Petition granted, assailed decision and resolution reversed and set aside.

_______________
44 Exhibit “6-A-1.”

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VOL. 470, SEPTEMBER 20, 2005 373

Doldol vs. People

Notes.—The need for approval by the probate court exists only where specific properties of the
estate are sold and not when only ideal and indivisible shares of an heir are disposed of—during
the period of indivision of a decedent’s estate, each heir, being a co-owner, has full owneship of his
part and may therefore alienate it. Hereditary rights in an estate can be validly sold without
need of court approval. (Heirs of Pedro Escanlar vs. Court of Appeals, 281 SCRA 176 [1997])
It is decisively clear that the declaration of heirship can be made only in a special proceeding
inasmuch as it involves the establishment of a status or right. A civil action is one by which a
party sues another for the enforcement or protection of a right, or the prevention or redress of a
wrong, while a special proceeding is a remedy by which a party seeks to establish a status, a
right, or a particular fact. (Heirs of Guido and Isabel Yaptinchay vs. Del Rosario,  304 SCRA
18 [1999])

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