G.R. No. L-56451. June 19, 1985.
JUAN LAO and CANDELARIA C. LAO, petitioners, vs. HON. MELECIO A. GENATO, as Presiding Judge, Court of First Instance, Branch 1, Misamis Occidental, SOTERO A. DIONISIO, JR., as Administrator of the Intestate Estate of ROSENDA ABUTON, et al., respondents.

FACTS

The petitioners, spouses Juan and Candelaria Lao, entered into a Mutual Agreement of Promise to Sell with Sotero Dionisio III, son of the estate administrator Sotero Dionisio, Jr., for a commercial property of the intestate estate of Rosenda Abuton. The probate court had authorized the administrator to sell estate properties to settle obligations. Pursuant to this, the administrator sold the property to his son, Sotero Dionisio III, for P75,000 on August 15, 1980. On the same day, Dionisio III sold it to respondent William Go for P80,000. The petitioners, who had paid earnest money under their agreement, later intervened, alleging the sales were fraudulent and that their higher offer of P270,000 (later P220,000) was rejected. Several heirs moved to annul the sales, citing gross inadequacy of price and violation of the court order, noting the property’s value was around P400,000. The administrator claimed the actual consideration was P200,000 and that family preference justified the transaction.

ISSUE

Whether the respondent judge acted with grave abuse of discretion in confirming and approving the two deeds of sale executed by the estate administrator, which were allegedly fictitious and executed under fraudulent circumstances.

RULING

The Supreme Court granted the petition, annulling the probate court’s order of approval. The legal logic centered on the nature of the sales and the court’s duty in overseeing estate administration. The series of transactions—the administrator’s sale to his son and the immediate resale to William Go on the same day for a marginally higher price—were deemed indicative of a simulated or fictitious sale. Such contracts, being contrary to law and public policy, are void under Article 1409 of the Civil Code from the beginning and cannot be ratified or confirmed, even by court approval or heir assent. The court emphasized the administrator’s fiduciary duty to secure the best price for the estate, especially to benefit creditors. The gross inadequacy of the stated consideration (P75,000 and P80,000) compared to the property’s evident value and the petitioners’ serious offer of P300,000 demonstrated a scheme to defraud the estate and its creditors. The probate court’s approval of this arrangement, despite clear irregularities and a more advantageous offer, constituted grave abuse of discretion. Consequently, the sales were declared null and void, the title issued to Go was ordered cancelled, and the case was remanded for new sale proceedings to ensure a proper and beneficial disposition of the estate property.