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, SOTERO B. DIONISIO III, WILLIAM L. GO, ERLINDA
DIAZ, represented by RESTITUTO N. ABUTON Attorney-In-Fact, ESTER AIDA D.
BAS, Heirs of ROSALINDA D. BELLEZA, represented by FELICENDA D, BELLEZA,
Attorney- In-Fact, LUZMINDA D. DAJAO ADELAIDA D. NUEZA, represented by Atty.
MAURICIO O. BAS SR., Attorney-In-Fact, and FLORIDA A. NUQUI, respondents.

Felipe G. Tac-an for petitioners.

Alaric P. Acosta for private respondent as Administrator.

Eligio O. Dajao for respondent Ester Aida D. Bas.

Ramon C. Berenquel for respondent William L. Go.

CUVEAS J.:

Petition for certiorari with prayer for the declaration of nullity of the Order     dated
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February 18, 1981 of the then Court of First Instance of Misamis Occidental-Branch I
which confirmed and approved the two Deeds of Sale, both dated August 15, 1980,
involving a commercial property belonging to the estate of the deceased Rosenda
Abuton.

Petitioner spouses were promisees in a Mutual Agreement of Promise to Sell executed

between them and private respondent Sotero B. Dionisio III, son of respondent Sotero A.
Dionisio, Jr., heir and administrator of the intestate estate of the deceased, whereby the
promisor bound himself to sell the subject property to petitioners, Private respondents,
except Sotero Dionisio III and William Go, are the children and only compulsory heirs of
the deceased.

On June 25, 1980, respondent administrator Sotero Dionisio, Jr., with due notice to all his
co-heirs, filed with the Probate Court in Special Proceedings No. 842 a Motion for
Authority to Sell certain properties of the deceased to settle the outstanding obligations of
the estate.

On July 8, 1980, after hearing, there being no opposition, the lower court issued an
Order     authorizing the administrator to sell the therein described properties of the estate
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and such other properties under his administration at the best price obtainable, and
directing him to submit to the court for approval the transaction made by him

On August 15, 1980, respondent-administrator pursuant to said authorization, sold to his

son, Sotero Dionisio III, the subject property for P75,000.00 per deed of
sale     acknowledged before Notary Public Triumfo R. Velez. On the same date, Sotero
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Dionisio III executed a deed of sale   of the same property in favor of respondent William
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Go for a consideration of P80.000.00. On August 18, 1980, title was transferred to

respondent Go.
On August 27, 1980, respondent-heir Florida Nuqui, filed a Motion for
Annulment/Revocation of the Deeds of Absolute Sale for the reasons that the sale and
subsequent transfer of title of the property were made in violation of the court's order of
July 8, 1980 and that the consideration of the two sales were grossly inadequate as in
fact many are willing to buy the pr property for P400,000.00 since it is located along the
corner of two main streets in the commercial center of Oroquieta City.

The respondent-administrator filed an opposition to said motion of co-heir Nuqui alleging

that the actual consideration f the sale made by him is P200,000.00 and that it is the
agreement of the heirs that if any of the heirs or close relatives is interested in buying the
property, preference will be given to him or her in order to keep the property within the
family of the deceased.

On September 9, 1980, respondent Nuqui filed a Reply to said Opposition, stating that
the two sales were but a single transaction simultaneously hatched and consummated in
one occasion as shown by the Notary Public's document Nos. 56 & 57 and with the same
witnesses; that the sales were in reality a single deal between the administrator and
William Go, because Sotero Dionisio III is without means or income and so has no
capacity to buy the property; and that the transaction is an evidence of the administrator's
intent to defraud the estate and his co-heirs, for had it not been for the Motion for
Annulment, he would not have disclosed the true and actual consideration of the sale.

On September 10, 1980, all the co-heirs of respondent-administrator filed a Manifestation

to Adopt the Motion for Annulment/Revocation of Deeds of Absolute Sale. They likewise
filed a Manifestation on February 5, 1981 alleging that the Court order merely authorized
the sale of the subject property but did not approve the same, Thus, their prayer for the
cancellation of the registration of sale transaction between respondent- administrator and
his son, and that between the latter and respondent William Go.

Respondent Go filed a Motion for Leave to Intervene to protect his rights, manifesting
that he paid Sotero Dionisio III the actual consideration of P225,000.00 and being a
purchaser in good faith and for value, his title to the property is indefeasible pursuant to
law.

On February 6, 1981, petitioner spouses filed a "Manifestation In Intervention of Interest

to Purchase Property Authorized by the Court to be Sold", wherein they alleged that
respondent-administrator, without revealing that the property had already been sold to
William Go, entered into a Mutual Agreement of Promise to Sell     to herein petitioners,
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for the amount of P270,000 which was reduced to P220,000.00; that immediately upon
the execution of the agreement, petitioners paid the earnest money in the amount of
P70,000.00 by IBAA Check No. OQT-40063026 drawn out in favor of Sotero Dionisio III,
as requested by respondent-administrator; that it was agreed upon that the balance of
P150,000.00 shall immediately be paid upon the production of the Transfer Certificate of
Title and the execution of the final Deed of Sale; that although the agreement was
executed in the name of Sotero Dionisio III the 'latter, was merely a nominal party, for
technically according to the administrator, he executed a Deed of Absolute Sale in favor
of his son, but the negotiation and transactions were directly and personally entered into
between the administrator and petitioners; that the contract of sale has been perfected
considering that the earnest money was already paid; that despite repeated demands the
administrator refused to execute a final Deed of Sale in favor of petitioners, who later
found out that the subject property was sold to William GO; that both contracts of sale
were made to defraud the estate and the other heirs; that assuming the consideration of
P200,000.00 supplied by William Go to Sotero Dionisio III who was not gainfully
employed, then the contract of sale to Go would be without consideration, hence, it would
become fictitious and simulated and there is no other recourse left to the court but to
declare the sale null and void. Petitioners also manifested that in the event that the court
should finally declare the sale null and void, they ares till interested to purchase the
property for the same amount of P200,000.00 as previously agreed.

At th hearing of the said incident involving the questioned sales petitioners submitted a
copy of the Contract of mortgage   dated July 18, 1980 executed by respondent-
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administrator in favor of Juan Lao, one of the petitioners, whereby the former mortgaged
"all his undivided interest in the estate of his deceased mother, Rosenda Abuton Vda. de
Nuqui, subject matter of this intestate Estate No. 842, now pending before the Court of
First Instance of Oroquieta City, Branch I."

Respondent heir Florida A. Nuqui filed an Opposition to William Go's Motion to Intervene
averring therein that the deed of sale executed by Sotero Dionisio, Jr. in favor of Sotero
Dionisio III created no legal force and effect, since the validity of the sale absolutely
depended on its approval by the court; that it therefore follows that the succeeding sale to
Go and consequent issuance of the title to him are also null and void from their inception
and that the admission by William Go of the actual and true consideration of the sale at
his stage, hardly bespeaks of "innocence" or "good faith".

After several ,days of hearing, respondent Judge allowed all the interested parties to bid
for the property at the highest obtainable price pursuant to his Order of July 8, 1980.

On February 16, 1981, in open court, respondent Go offered to buy the property in the
amount of P280,000.00. Petitioners counter-offered at P282,000.00, spot cash. On that
same day, all the heirs, except the administrator, filed a Motion Ex Parte   stating among
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other things, that the offer of William Go appears the highest obtainable price and that
the offer of petitioners is not well taken as the same has not been made within a
reasonable period of five (5) days from February 11, 1981.

On February 17, 1981, all the parties, with the exception. of the Lao spouses and Sotero
Dionisio III, submitted for approval an Amicable Settlement   stating:
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xxx xxx xxx

That after the administrator, Sotero A. Dionisio, Jr., had accounted for the actual price
received by him out of the transaction between him and Sotero B. Dionisio III in the
amount of Two Hundred thousand (P200,000.00) Pesos and that in the interest of a
peaceful settlement William L. Go has offered and is ready, able and to pay to the heirs
an additional amount of Eighty Thousand (P80,000.00 ) Pesos an arrangement which is
most advantageous to the heirs and which they willingly accept to their satisfaction. the
heirs of Rosenda Abuton hereby declare that they have no objection to the confirmation
and approval of the sales/transactions executed by Sotero A. Dionisio, Jr., in favor of
Sotero B. Dionisio III and that executed by Sotero B. Dionisio III in favor of the intervenor,
William L. Go, and they likewise have no more objection to the lifting and cancellation of
the notice of lis pendens from TCT No. 8807.

WHEREFORE, it is most respectfully prayed that an order issued by this Hon. Court
confirming and approving the transaction executed by Sotero A. Dionisio, Jr., in favor of
Sotero B. Dionisio III and that between the latter and William L. Go, and to direct the
Register of Deeds of the Province of Misamis Occidental at Oroquieta City, for the
cancellation of the notice of lis pendens annotated on Transfer Certificate of Title No.
8807, and to finally consider the matter treated in the Motion of Florida A. Nuqui dated
August 27, 1980 and adopted by all the other heirs forever closed and terminated.

Oroquieta City, February 17, 1981.

xxx xxx xxx

On February 18, 1981, petitioners filed an opposition to the approval of the Amicable
Settlement on the following grounds:

(a) They have an interest in the property as vendees in a promise to sell and as
Mortgagee, of an undivided share of one of the heirs but they were not signatories to the
amicable settlement, hence it is contrary to Article 2028 of the Civil Code providing that
"A compromise is a contract whereby the parties, by making reciprocal concessions,
avoid litigation or put an end to one already commenced";

(b) The Amicable Settlement seeks the confirmation and approval of the questioned
transactions but as borne out by the pleadings and oral arguments, the Deed of Absolute
Sale executed by the administrator in favor of his son is without consideration, therefore,
it is fictitious and simulated hence it cannot be confirmed or ratified pursuant to Article
1409 of the New Civil Code;

(c) The Amicable Settlement is a device to defraud the Government of Capital Gains Tax,
charges and other fees because the Deeds of Sales do not reflect the true consideration;
and

(d) The Deeds of Sale sought to be confirmed included the undivided share of Sotero A.
Dionisio, Jr. which is presently mortgaged to herein' spouses, which was executed prior
to the sale, thus, if approved, the Court would abet the commission of the crime of estafa
as the mortgage has not yet been paid and released.

Petitioners likewise pointed out in their opposition that respondent Judge had intimated in
open court that somebody offered to buy the property for the price of P300,000.00 but
since there was no formal offer in writing, they (petitioners) are ready and willing to buy
the property at that amount, which definitely is the best price obtainable in the market and
most beneficial to all the heirs.

Despite said opposition, respondent Judge issued an Order   on February 18, 1981
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approving the Amicable Settlement, confirming and ratifying the two questioned Deeds of
Sale. Petitioners' motion for reconsideration having been denied, they now come before
Us through the instant petition raising the issue of whether or not respondent Judge is
guilty of grave abuse of discretion in 1) approving the amicable settlement and confirming
the two (2) Deeds of Sale in question; and 2) in not accepting the offer of the petitioners
in the amount of P300,000.00 for the purchase of the lot in question.

Sotero Dionisio, Jr. is the Administrator of the estate of his deceased mother Rosenda
Abuton. As such Administrator, he occupies a position of the highest trust and
confidence, He is required to exercise reasonable diligence and act in entire good faith in
the performance of that trust, Although he is not a guarantor or insurer of the safety of the
estate nor is he expected to be infallible yet the same degree of prudence, care and
judgment which a person of a fair average capacity and ability exercises in similar
transactions of his own, serves as the standard by which his conduct is to be judged.

In the discharge of his functions, the administrator should act with utmost circumspection
in order to preserve the estate and guard against its dissipation so as not to prejudice its
editors and the heirs of the decedents who are entitled to the net residue thereof. In the
case at bar, the sale was made necessary "in order to settle other existing obligations of
the estate. This purpose is clearly manifested in the Motion for to Sell 1010 filed by Dionisio,
Jr. The subsisting obligation referred to, although not specified, must be those due and owing
to the creditors of the estate and also the taxes due the government. In order to guarantee
faithful compliance with the authority granted  1 respondent Judge, through the aforesaid
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Order made it an emphatic duty on the part of the administrator Dionisio." . . . to submit to this
Court for approval the transactions made by him."
The sale was made. But of all people, to his very son Sotero Dionisio III and for the
grossly low price of only P75,000,00, That sale was indubitably shown to be fictitious, it
clearly appearing that Dionisio III has no income whatsoever. In fact, he is still a
dependent of his father, administrator Dionisio, Jr. On top of that, not a single centavo, of
the P75,000.00 stated consideration was ever accounted for nor reported by Dionisio, Jr.
to the probate court. Neither did he submit said transaction as mandated by the order
authorizing him to sell, to the probate court for its approval and just so its validity and
fairness may be passed upon and resolved. It was only upon the filing by one of the
heirs, Florida A. Nuqui, of the "Motion for Annulment/Revocation of Deeds of Absolute
Sale"     questioning the genuineness aid validity of the transactions, that Dionisio, Jr.
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was compelled to admit that the actual consideration for the sale made by him was
P200,000.00.     This sale is one of the illegal and irregular transactions that was
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confirmed and legalized by His HONOR's approval of the assailed Amicable Settlement.
No doubt, respondent Judge's questioned approval violates Article 1409 of the New Civil
Code and cannot work to confirm nor serve to ratify a fictitious contract which is non-
existent and void from the very beginning. The fact that practically all the heirs are
parties-signatories to the said Compromise Agreement is of no moment. Their assent to
such an illegal scheme does not legalize the same nor does it impose any obligation
upon respondent Judge to approve the same to the prejudice not only of the creditors of
the estate, and the government by the non-payment of the correct amount of taxes
legally due from the estate.

The offer by the petitioner of P300,000.00 for the purchase of the property in question
does not appear seriously disputed on record. As against the price stated in the assailed
Compromise Agreement the former amount is decidedly more beneficial and
advantageous not only to the estate, the heirs of the descendants, but more importantly
to its creditors, for whose account and benefit the sale was made. No satisfactory and
convincing reason appeared given for the rejection and/or non-acceptance of said offer
thus giving rise to a well-grounded suspicion that a collusion of some sort exists between
the administrator and the heirs to defraud the creditors and the government.

IN VIEW OF THE FOREGOING CONSIDERATIONS, the assailed Order dated February

18, 1981 of the respondent Judge approving the questioned Amicable Settlement is
declared NULL and VOID and hereby SET ASIDE. Consequently, the sale in favor of
Sotero Dionisio III and by the latter to William Go is likewise declared NULL and VOID,
The Transfer Certificate of Title issued to the latter is hereby CANCELLED.

The proper Regional trial Court of Misamis Occidental to whom this case is now assigned
is hereby ordered to conduct new proceedings for the sale of the property involved in this
case.

No pronouncement as to costs.

SO ORDERED.