Case Digest: Union Bank of the Philippines vs. Santibañez, G.R. No. 149926, February 23, 2005

                                        Art. 774, 776 | Succession, Probate Court

Provision:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law.

Art. 776. The inheritance includes all the property, rights and obligations of a person which are not extinguished by his death.

Ponente:

Callejo, Sr., J.

Facts:

In May and December 1980, the First Countryside Credit Corporation (FCCC) and Efraim M. Santibañez entered into loan agreements for the payment of the purchase price of three units of agricultural tractor. During the two transactions, Efraim and his son, Edmund, executed a promissory note in favor of the FCCC. They also signed a Continuing Guaranty Agreement for the loan.

In February 1981, Efraim died leaving a holographic will. Efraim's death led to testate proceedings involving his heirs, including Edmund and Florence Santibañez-Ariola. Edmund was appointed as the special administrator of the estate of the decedent. Edmund and Florence executed a Joint Agreement to divide the tractors and assume their father's debts.

FCCC and Union Savings and Mortgage Bank executed a Deed of Assignment with Assumption of Liabilities. Union Bank of the Philippines (UBP) sent demand letters to Edmund, who refused to pay, resulting in a Complaint for sum of money against the heirs. The case was filed against the heirs of Efraim Santibañez, but was only served to Florence due to Edmund's unavailability.

Florence claimed that the loan documents were not binding to her since she was not a party thereto and the joint agreement was null and void since it was not approved by the probate court.

RTC Makati:

Complaint dismissed.

(1) The petitioner should have filed the claim in the probate court, which the testate estate of the late Efraim Santibañez was pending.

(2) The joint agreement was void considering that it had not been approved by the probate

court. No valid partition could occur until after probate.

(3)  The list of assets and liabilities of the FCCC assigned to Union Savings and Mortgage Bank did not clearly refer to the decedent’s account.

CA:

Decision affirmed.

Nature:

Petition for review on certiorari under Rule 45.

 

Issues:

(1) WoN the Joint Agreement should be approved by probate court. (YES)

(2) WoN the heirs’ assumption of the indebtedness of the decedent is binding. (NO)

(3) WoN the executed continuing guarantee agreement and promissory notes jointly and severally bound the respondents with the late debtor in favor of petitioner. (NO)

Arguments:

(1) The obligations of the deceased were transmitted to the heirs as provided in Article 774 of the Civil Code. There was thus no need for the probate court to approve the joint agreement where the heirs partitioned the tractors owned by the deceased and assumed the obligations.

(3) Considering the express provisions of the continuing guaranty agreement and the promissory notes executed by the respondents, the latter must be held liable jointly and severally liable thereon. Thus, there was no need for the petitioner to file its money claim before the probate court.

Held:

Petition denied.

(1) A probate court has the jurisdiction to determine all the properties of the deceased. The said court is primarily concerned with the administration, liquidation and distribution of the estate.21

In testate succession, there can be no valid partition among the heirs until after the will has been probated. The law enjoins the probate of a will and the public requires it, because unless a will is probated and notice thereof given to the whole world, the right of a person to dispose of his property by will may be rendered nugatory.

This being so, any partition involving the said tractors among the heirs is not valid. The joint agreement executed by Edmund and Florence, partitioning the tractors among themselves, is invalid, specially so since at the time of its execution, there was already a pending proceeding for the probate of their late father’s holographic will covering the said tractors.

It must be stressed that the probate proceeding had already acquired jurisdiction over all the properties of the deceased, including the three (3) tractors. To dispose of them in any way without the probate court’s approval is tantamount to divesting it with jurisdiction which the Court cannot allow.

When it was executed, the probate of the will was still pending before the court and the latter had yet to determine who the heirs of the decedent were. Thus, for Edmund and respondent Florence S. Ariola to adjudicate unto themselves the three (3) tractors was a premature act, and prejudicial to the other possible heirs and creditors who may have a valid claim against the estate of the deceased.

(2) The partition being invalid as earlier discussed, the heirs in effect did not receive any such tractor. It follows then that the assumption of liability cannot be given any force and effect.

The Court notes that the loan was contracted by the decedent. The petitioner, purportedly a creditor of the late Efraim Santibañez, should have thus filed its money claim with the probate court in accordance with Section 5, Rule 86 of the Revised Rules of Court.

The filing of a money claim against the decedent’s estate in the probate court is mandatory.

This requirement is for the purpose of protecting the estate of the deceased by informing the executor or administrator of the claims against it, thus enabling him to examine each claim and to determine whether it is a proper one which should be allowed. 

(3) The documentary evidence presented, particularly the promissory notes and the continuing guaranty agreement, were executed and signed only by the late Efraim Santibañez and his son Edmund. As the petitioner failed to file its money claim with the probate court, at most, it may only go after Edmund as co-maker of the decedent under the said promissory notes and continuing guaranty, of course, subject to any defenses Edmund may have as against the petitioner. As the court had not acquired jurisdiction over the person of Edmund, we find it unnecessary to delve into the matter further.