Case Digest: Union Bank v.

Santibanez (452
SCRA 228)
Published by paul on June 24, 2013 | Leave a response

Case Digest:Union Bank v. Santibanez

452 SCRA 228

FACTS:

On May 31, 1980, the First Countryside Credit Corporation (FCCC) and Efraim Santibañez
entered into a loan agreement in the amount of P128,000.00. The amount was intended for the
payment of one (1) unit Ford 6600 Agricultural Tractor. In view thereof, Efraim and his son,
Edmund, executed a promissory note in favor of the FCCC, the principal sum payable in five
equal annual amortizations. On Dec. 1980, FCCC and Efraim entered into another loan
agreement for the payment of another unit of Ford 6600 and one unit of a Rotamotor. Again,
Efraim and Edmund executed a promissory note and a Continuing Guaranty Agreement for the
later loan. In 1981, Efraim died, leaving a holographic will. Testate proceedings commenced
before the RTC of Iloilo City. Edmund was appointed as the special administrator of the estate.
During the pendency of the testate proceedings, the surviving heirs, Edmund and his sister
Florence, executed a Joint Agreement, wherein they agreed to divide between themselves and
take possession of the three (3) tractors: (2) tractors for Edmund and (1) for Florence. Each of
them was to assume the indebtedness of their late father to FCCC, corresponding to the tractor
respectively taken by them. In the meantime, a Deed of Assignment with Assumption of
Liabilities was executed by and between FCCC and Union Bank, wherein the FCCC assigned all
its assets and liabilities to Union Bank.

Demand letters were sent by Union Bank to Edmund, but the latter refused to pay. Thus, on
February 5, 1988, Union Bank filed a Complaint for sum of money against the heirs of Efraim
Santibañez, Edmund and Florence, before the RTC of Makati City. Summonses were issued
against both, but the one intended for Edmund was not served since he was in the United States
and there was no information on his address or the date of his return to the Philippines. Florence
filed her Answer and alleged that the loan documents did not bind her since she was not a party
thereto. Considering that the joint agreement signed by her and her brother Edmund was not
approved by the probate court, it was null and void; hence, she was not liable to Union Bank
under the joint agreement.

Union Bank asserts that the obligation of the deceased had passed to his legitimate heirs
(Edmund and Florence) as provided in Article 774 of the Civil Code; and that the unconditional
signing of the joint agreement estopped Florence, and that she cannot deny her liability under the
said document.

In her comment to the petition, Florence maintains that Union Bank is trying to recover a sum of
money from the deceased Efraim Santibañez; thus the claim should have been filed with the
probate court. She points out that at the time of the execution of the joint agreement there was
already an existing probate proceedings. She asserts that even if the agreement was voluntarily
executed by her and her brother Edmund, it should still have been subjected to the approval of
the court as it may prejudice the estate, the heirs or third parties.

ISSUE:

W/N the claim of Union Bank should have been filed with the probate court before which the
testate estate of the late Efraim Santibañez was pending. W/N the agreement between Edmund
and Florence (which was in effect, a partition of hte estate) was void considering that it had not
been approved by the probate court. W/N there can be a valid partition among the heirs before
the will is probated.

HELD:

Well-settled is the rule that a probate court has the jurisdiction to determine all the properties of
the deceased, to determine whether they should or should not be included in the inventory or list
of properties to be administered. The said court is primarily concerned with the administration,
liquidation and distribution of the estate.

In our jurisdiction, the rule is that there can be no valid partition among the heirs until after the
will has been probated. In the present case, Efraim left a holographic will which contained the
provision which reads as follows:

In our jurisdiction, the rule is that there can be no valid partition among the heirs until after the
will has been probated. In the present case, Efraim left a holographic will which contained the
provision which reads as follows:

o (e) All other properties, real or personal, which I own and may be
discovered later after my demise, shall be distributed in the proportion indicated
in the immediately preceding paragraph in favor of Edmund and Florence, my
children.

The above-quoted is an all-encompassing provision embracing all the properties left by the
decedent which might have escaped his mind at that time he was making his will, and other
properties he may acquire thereafter. Included therein are the three (3) subject tractors. 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.

The Court notes that the loan was contracted by the decedent. The bank, 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. The plain and obvious design of
the rule is the speedy settlement of the affairs of the deceased and the early delivery of the
property to the distributees, legatees, or heirs.

Perusing the records of the case, nothing therein could hold Florence accountable for any
liability incurred by her late father. 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.

Estate of K.H. Hemady vs Luzon Surety Co.,

Inc.

Civil Law – Wills and Succession – Transmissible Obligations

Luzon Surety filed a claim against the estate of K.H. Hemady based on indemnity agreements
(counterbonds) subscribed by distinct principals and by the deceased K.H. Hemady as surety
(solidary guarantor). As a contingent claim, Luzon Surety prayed for the allowance of the value
of the indemnity agreements it had executed. The lower court dismissed the claim of Luzon
Surety on the ground that “whatever losses may occur after Hemady’s death, are not chargeable
to his estate, because upon his death he ceased to be a guarantor.”

ISSUES: What obligations are transmissible upon the death of the decedent? Are contingent
claims chargeable against the estate?

HELD: Under the present Civil Code (Article 1311), the rule is that “Contracts take effect only
as between the parties, their assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or by stipulation or by provision of
law.” While in our successional system the responsibility of the heirs for the debts of their
decedent cannot exceed the value of the inheritance they receive from him, the principle remains
intact that these heirs succeed not only to the rights of the deceased but also to his
obligations. Articles 774 and 776 of the New Civil Code expressly so provide, thereby
confirming Article 1311.
In Mojica v. Fernandez, the Supreme Court ruled — “Under the Civil Code the heirs, by virtue
of the rights of succession are subrogated to all the rights and obligations of the
deceased (Article 661) and can not be regarded as third parties with respect to a contract to
which the deceased was a party, touching the estate of the deceased x x x which comes in to their
hands by right of inheritance; they take such property subject to all the obligations resting
thereon in the hands of him from whom they derive their rights.” The third exception to the
transmissibility of obligations under Article 1311 exists when they are ‘not transmissible by
operation of law.’ The provision makes reference to those cases where the law expresses that the
rights or obligations are extinguished by death, as is the case in legal support, parental authority,
usufruct, contracts for a piece of work, partnership and agency. By contrast, the articles of the
Civil Code that regulate guaranty or suretyship contain no provision that the guaranty is
extinguished upon the death of the guarantor or the surety.

The contracts of suretyship in favor of Luzon Surety Co. not being rendered intransmissible due
to the nature of the undertaking, nor by stipulations of the contracts themselves, nor by provision
of law, his eventual liability therefrom necessarily passed upon his death to his heirs. The
contracts, therefore, give rise to contingent claims provable against his estate. A contingent
liability of a deceased person is part and parcel of the mass of obligations that must be paid if
and when the contingent liability is converted into a real liability. Therefore, the settlement or
final liquidation of the estate must be deferred until such time as the bonded indebtedness is paid.