228 SUPREME COURT REPORTS ANNOTATEDUnion Bank of the Philippines vs. Santibañez

G.R. No. 149926. February 23, 2005.*

UNION BANK OF THE PHILIPPINES, petitioner, vs.EDMUND SANTIBAÑEZ and FLORENCE SANTIBAÑEZARIOLA, respondents.

Civil Law; Settlement of Estate; Jurisdictions; Well­settled isthe rule that a probate court has the jurisdiction to determine allthe properties of the deceased, to determine whether they should orshould not be included in the inventory or list of properties to beadministered.—Well­settled is the rule that a probate court hasthe jurisdiction to determine all the properties of the deceased, todetermine whether they should or should not be included in theinventory or list of properties to be administered. The said court isprimarily concerned with the administration, liquidation anddistribution of the estate.

Same; Same; Wills; Partition; In our jurisdiction, the rule isthat there can be no valid partition among the heirs until after thewill has been probated.—In our jurisdiction, the rule is that therecan be no valid partition among the heirs until after the will hasbeen probated: In testate succession, there can be no validpartition 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 thewhole world, the right of a person to dispose of his property bywill may be rendered nugatory. The authentication of a willdecides no other question than such as touch upon the capacity ofthe testator and the compliance with those requirements orsolemnities which the law prescribes for the validity of a will.

Same; Same; Same; Same; Every act intended to put an end toindivision among co­heirs and legatees or devisees is deemed to bea partition although it should purport to be a sale, an exchange, acompromise or any other transaction.—It must be stressed thatthe probate proceeding had already acquired jurisdiction over all

the properties of the deceased, including the three (3) tractors. Todispose of them in any way without the probate court’s approval is

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* SECOND DIVISION.

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Union Bank of the Philippines vs. Santibañez

tantamount to divesting it with jurisdiction which the Courtcannot allow. Every act intended to put an end to indivisionamong co­heirs and legatees or devisees is deemed to be apartition, although it should purport to be a sale, an exchange, acompromise, or any other transaction. Thus, in executing anyjoint agreement which appears to be in the nature of an extra­judicial partition, as in the case at bar, court approval isimperative, and the heirs cannot just divest the court of itsjurisdiction over that part of the estate.

Same; Same; Same; Filing of a money claim against thedecedent’s estate in the probate court is mandatory.—The filing ofa money claim against the decedent’s estate in the probate courtis mandatory. As we held in the vintage case of Py Eng Chong v.Herrera: . . . This requirement is for the purpose of protecting theestate of the deceased by informing the executor or administratorof the claims against it, thus enabling him to examine each claimand to determine whether it is a proper one which should beallowed. The plain and obvious design of the rule is the speedysettlement of the affairs of the deceased and the early delivery ofthe property to the distributees, legatees, or heirs. The lawstrictly requires the prompt presentation and disposition of theclaims against the decedent’s estate in order to settle the affairs ofthe estate as soon as possible, pay off its debts and distribute theresidue.

PETITION for review on certiorari of a decision of theCourt of Appeals.

The facts are stated in the opinion of the Court. Miguel G. Padernal for petitioner U.B.P.

Roberto Cal Catolico for respondents.

CALLEJO, SR., J.:

Before us is a petition for review on certiorari under Rule45 of the Revised Rules of Court which seeks the reversal ofthe Decision

1 of the Court of Appeals dated May 30, 2001 in

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1 Penned by Associate Justice Bienvenido L. Reyes with AssociateJustices Eubulo G. Verzola (deceased), and Marina L. Buzon, concurring.

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230 SUPREME COURT REPORTS ANNOTATEDUnion Bank of the Philippines vs. Santibañez

CA­G.R. CV No. 48831 affirming the dismissal2 of the

petitioner’s complaint in Civil Case No. 18909 by theRegional Trial Court (RTC) of Makati City, Branch 63.

The antecedent facts are as follows:On May 31, 1980, the First Countryside Credit

Corporation (FCCC) and Efraim M. Santibañez enteredinto a loan agreement

3 in the amount of P128,000.00. The

amount was intended for the payment of the purchase priceof one (1) unit Ford 6600 Agricultural All­Purpose DieselTractor. In view thereof, Efraim and his son, Edmund,executed a promissory note in favor of the FCCC, theprincipal sum payable in five equal annual amortizations ofP43,745.96 due on May 31, 1981 and every May 31stthereafter up to May 31, 1985.

On December 13, 1980, the FCCC and Efraim enteredinto another loan agreement,

4 this time in the amount of

P123,156.00. It was intended to pay the balance of thepurchase price of another unit of Ford 6600 AgriculturalAll­Purpose Diesel Tractor, with accessories, and one (1)unit Howard Rotamotor Model AR 60K. Again, Efraim andhis son, Edmund, executed a promissory note for the saidamount in favor of the FCCC. Aside from such promissorynote, they also signed a Continuing Guaranty Agreement

5

for the loan dated December 13, 1980.Sometime in February 1981, Efraim died, leaving a

holographic will.6 Subsequently in March 1981, testate

proceedings commenced before the RTC of Iloilo City,

Branch 7, docketed as Special Proceedings No. 2706. OnApril 9, 1981, Edmund, as one of the heirs, was appointedas the special administrator of the estate of the decedent.

7

During the pend­

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2 Penned by Presiding Judge Julio R. Logarta.3 Records, pp. 8­12.4 Id., at pp. 13­18.5 Id., at pp. 19­20.6 Exhibit “7”.7 Annex “A” of the Answer, Records, p. 48.

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ency of the testate proceedings, the surviving heirs,Edmund and his sister Florence Santibañez Ariola,executed a Joint Agreement

8 dated July 22, 1981, wherein

they agreed to divide between themselves and takepossession of the three (3) tractors; that is, two (2) tractorsfor Edmund and one (1) tractor for Florence. Each of themwas to assume the indebtedness of their late father toFCCC, corresponding to the tractor respectively taken bythem.

On August 20, 1981, a Deed of Assignment withAssumption of Liabilities

9 was executed by and between

FCCC and Union Savings and Mortgage Bank, wherein theFCCC as the assignor, among others, assigned all its assetsand liabilities to Union Savings and Mortgage Bank.

Demand letters10 for the settlement of his account were

sent by petitioner Union Bank of the Philippines (UBP) toEdmund, but the latter failed to heed the same and refusedto pay. Thus, on February 5, 1988, the petitioner filed aComplaint

11 for sum of money against the heirs of Efraim

Santibañez, Edmund and Florence, before the RTC ofMakati City, Branch 150, docketed as Civil Case No. 18909.Summonses were issued against both, but the one intendedfor Edmund was not served since he was in the UnitedStates and there was no information on his address or thedate of his return to the Philippines.

12 Accordingly, the

complaint was narrowed down to respondent Florence S.

Ariola.On December 7, 1988, respondent Florence S. Ariola

filed her Answer13 and alleged that the loan documents did

not bind her since she was not a party thereto. Consideringthat the joint agreement signed by her and her brotherEdmund was not approved by the probate court, it was nulland void;

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8 Exhibit “A”.9 Exhibit “G”.10 Exhibits “E” and “F”.11 Records, p. 1.12 See Sheriff ’s Return of Service, Id., at p. 39.13 Records, p. 42.

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232 SUPREME COURT REPORTS ANNOTATEDUnion Bank of the Philippines vs. Santibañez

hence, she was not liable to the petitioner under the jointagreement.

On January 29, 1990, the case was unloaded and re­raffled to the RTC of Makati City, Branch 63.

14

Consequently, trial on the merits ensued and a decisionwas subsequently rendered by the court dismissing thecomplaint for lack of merit. The decretal portion of the RTCdecision reads:

“WHEREFORE, judgment is hereby rendered DISMISSING thecomplaint for lack of merit.

15

The trial court found that the claim of the petitioner shouldhave been filed with the probate court before which thetestate estate of the late Efraim Santibañez was pending,as the sum of money being claimed was an obligationincurred by the said decedent. The trial court also foundthat the Joint Agreement apparently executed by his heirs,Edmund and Florence, on July 22, 1981, was, in effect, apartition of the estate of the decedent. However, the saidagreement was void, considering that it had not beenapproved by the probate court, and that there can be novalid partition until after the will has been probated. The

1.

2.

3.

trial court further declared that petitioner failed to provethat it was the now defunct Union Savings and MortgageBank to which the FCCC had assigned its assets andliabilities. The court also agreed to the contention ofrespondent Florence S. Ariola that the list of assets andliabilities of the FCCC assigned to Union Savings andMortgage Bank did not clearly refer to the decedent’saccount. Ruling that the joint agreement executed by theheirs was null and void, the trial court held that thepetitioner’s cause of action against respondent Florence S.Ariola must necessarily fail.

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14 Id., at p. 83.15 Id., at p. 522.

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The petitioner appealed from the RTC decision andelevated its case to the Court of Appeals (CA), assigningthe following as errors of the trial court:

THE COURT A QUO ERRED IN FINDING THAT THEJOINT AGREEMENT (EXHIBIT “A”) SHOULD BEAPPROVED BY THE PROBATE COURT.THE COURT A QUO ERRED IN FINDING THATTHERE CAN BE NO VALID PARTITION AMONG THEHEIRS UNTIL AFTER THE WILL HAS BEENPROBATED.THE COURT A QUO ERRED IN NOT FINDING THATTHE DEFENDANT HAD WAIVED HER RIGHT TOHAVE THE CLAIM RE­LITIGATED IN THE ESTATEPROCEEDING.

16

The petitioner asserted before the CA that the obligation ofthe deceased had passed to his legitimate children andheirs, in this case, Edmund and Florence; the unconditionalsigning of the joint agreement marked as Exhibit “A”estopped respondent Florence S. Ariola, and that shecannot deny her liability under the said document; as theagreement had been signed by both heirs in their personal

capacity, it was no longer necessary to present the samebefore the probate court for approval; the propertypartitioned in the agreement was not one of thoseenumerated in the holographic will made by the deceased;and the active participation of the heirs, particularlyrespondent Florence S. Ariola, in the present ordinary civilaction was tantamount to a waiver to re­litigate the claimin the estate proceedings.

On the other hand, respondent Florence S. Ariolamaintained that the money claim of the petitioner shouldhave been presented before the probate court.

17

The appellate court found that the appeal was notmeritorious and held that the petitioner should have filedits claim

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16 CA Rollo, p. 43.17 Id., at p. 76.

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234 SUPREME COURT REPORTS ANNOTATEDUnion Bank of the Philippines vs. Santibañez

with the probate court as provided under Sections 1 and 5,Rule 86 of the Rules of Court. It further held that thepartition made in the agreement was null and void, sinceno valid partition may be had until after the will has beenprobated. According to the CA, page 2, paragraph (e) of theholographic will covered the subject properties (tractors) ingeneric terms when the deceased referred to them as “allother properties.” Moreover, the active participation ofrespondent Florence S. Ariola in the case did not amount toa waiver. Thus, the CA affirmed the RTC decision, viz.:

“WHEREFORE, premises considered, the appealed Decision ofthe Regional Trial Court of Makati City, Branch 63, is herebyAFFIRMED in toto.

SO ORDERED.”18

In the present recourse, the petitioner ascribes the followingerrors to the CA:

I.

THE HONORABLE COURT OF APPEALS ERRED INFINDING THAT THE JOINT AGREEMENT SHOULD BEAPPROVED BY THE PROBATE COURT.

II.

THE COURT OF APPEALS ERRED IN FINDING THATTHERE CAN BE NO VALID PARTITION AMONG THE HEIRSOF THE LATE EFRAIM SANTIBAÑEZ UNTIL AFTER THEWILL HAS BEEN PROBATED.

III.

THE COURT OF APPEALS ERRED IN NOT FINDING THATTHE RESPONDENT HAD WAIVED HER RIGHT TO HAVETHE CLAIM RE­LITIGATED IN THE ESTATE PROCEEDING.

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18 Rollo, p. 30.

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IV.

RESPONDENTS CAN, IN FACT, BE HELD JOINTLY ANDSEVERALLY LIABLE WITH THE PRINCIPAL DEBTOR THELATE EFRAIM SANTIBAÑEZ ON THE STRENGTH OF THECONTINUING GUARANTY AGREEMENT EXECUTED INFAVOR OF PETITIONER­APPELLANT UNION BANK.

V.

THE PROMISSORY NOTES DATED MAY 31, 1980 IN THESUM OF P128,000.00 AND DECEMBER 13, 1980 IN THEAMOUNT OF P123,000.00 CATEGORICALLY ESTABLISHEDTHE FACT THAT THE RESPONDENTS BOUNDTHEMSELVES JOINTLY AND SEVERALLY LIABLE WITHTHE LATE DEBTOR EFRAIM SANTIBAÑEZ IN FAVOR OFPETITIONER UNION BANK.

19

The petitioner claims that the obligations of the deceasedwere transmitted to the heirs as provided in Article 774 ofthe Civil Code; there was thus no need for the probate

court to approve the joint agreement where the heirspartitioned the tractors owned by the deceased andassumed the obligations related thereto. Since respondentFlorence S. Ariola signed the joint agreement without anycondition, she is now estopped from asserting any positioncontrary thereto. The petitioner also points out that theholographic will of the deceased did not include normention any of the tractors subject of the complaint, and,as such was beyond the ambit of the said will. The activeparticipation and resistance of respondent Florence S.Ariola in the ordinary civil action against the petitioner’sclaim amounts to a waiver of the right to have the claimpresented in the probate proceedings, and to allow any oneof the heirs who executed the joint agreement to escapeliability to pay the value of the tractors under considerationwould be equivalent to allowing the said heirs to enrichthemselves to the damage and prejudice of the petitioner.

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19 Id., at pp. 7­8.

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236 SUPREME COURT REPORTS ANNOTATEDUnion Bank of the Philippines vs. Santibañez

The petitioner, likewise, avers that the decisions of boththe trial and appellate courts failed to consider the factthat respondent Florence S. Ariola and her brotherEdmund executed loan documents, all establishing thevinculum juris or the legal bond between the late EfraimSantibañez and his heirs to be in the nature of a solidaryobligation. Furthermore, the Promissory Notes dated May31, 1980 and December 13, 1980 executed by the lateEfraim Santibañez, together with his heirs, Edmund andrespondent Florence, made the obligation solidary as far asthe said heirs are concerned. The petitioner also proffersthat, considering the express provisions of the continuingguaranty agreement and the promissory notes executed bythe named respondents, the latter must be held liablejointly and severally liable thereon. Thus, there was noneed for the petitioner to file its money claim before theprobate court. Finally, the petitioner stresses that bothsurviving heirs are being sued in their respective personal

capacities, not as heirs of the deceased.In her comment to the petition, respondent Florence S.

Ariola maintains that the petitioner is trying to recover asum of money from the deceased Efraim Santibañez; thusthe claim should have been filed with the probate court.She points out that at the time of the execution of the jointagreement there was already an existing probateproceedings of which the petitioner knew about. However,to avoid a claim in the probate court which might delaypayment of the obligation, the petitioner opted to requirethem to execute the said agreement.

According to the respondent, the trial court and the CAdid not err in declaring that the agreement was null andvoid. She asserts that even if the agreement wasvoluntarily executed by her and her brother Edmund, itshould still have been subjected to the approval of the courtas it may prejudice the estate, the heirs or third parties.Furthermore, she had not waived any rights, as she evenstated in her answer in the court a quo that the claimshould be filed with the probate

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court. Thus, the petitioner could not invoke or claim thatshe is in estoppel.

Respondent Florence S. Ariola further asserts that shehad not signed any continuing guaranty agreement, norwas there any document presented as evidence to showthat she had caused herself to be bound by the obligation ofher late father.

The petition is bereft of merit.The Court is posed to resolve the following issues: a)

whether or not the partition in the Agreement executed bythe heirs is valid; b) whether or not the heirs’ assumptionof the indebtedness of the deceased is valid; and c) whetherthe petitioner can hold the heirs liable on the obligation ofthe deceased.

At the outset, well­settled is the rule that a probatecourt has the jurisdiction to determine all the properties ofthe deceased, to determine whether they should or shouldnot be included in the inventory or list of properties to beadministered.

20 The said court is primarily concerned with

(e)

the administration, liquidation and distribution of theestate.

21 In our jurisdiction, the rule is that there can be no

valid partition among the heirs until after the will has beenprobated:

In testate succession, there can be no valid partition among theheirs until after the will has been probated. The law enjoins theprobate of a will and the public requires it, because unless a willis probated and notice thereof given to the whole world, the rightof a person to dispose of his property by will may be renderednugatory. The authentication of a will decides no other questionthan such as touch upon the capacity of the testator and thecompliance with

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20 See Ortega v. Court of Appeals, 153 SCRA 96 (1987); See also Morales v.Court of First Instance of Cavite, Br. V, 146 SCRA 373 (1986).

21 See De la Cruz v. Camon, 16 SCRA 886 (1966).

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238 SUPREME COURT REPORTS ANNOTATEDUnion Bank of the Philippines vs. Santibañez

those requirements or solemnities which the law prescribes forthe validity of a will.

22

This, of course, presupposes that the properties to bepartitioned are the same properties embraced in the will.

23

In the present case, the deceased, Efraim Santibañez, left aholographic will

24 which contained, inter alia, the provision

which reads as follows:

All other properties, real or personal, which I ownand may be discovered later after my demise, shallbe distributed in the proportion indicated in theimmediately preceding paragraph in favor ofEdmund and Florence, my children.

We agree with the appellate court that the above­quoted isan all­encompassing provision embracing all the propertiesleft by the decedent which might have escaped his mind atthat time he was making his will, and other properties hemay 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 jointagreement

25 executed by Edmund and Florence,

partitioning the tractors among themselves, is invalid,specially so since at the time of its execution, there wasalready a pending proceeding for the probate of their latefather’s holographic will covering the said tractors.

It must be stressed that the probate proceeding hadalready acquired jurisdiction over all the properties of thedeceased, including the three (3) tractors. To dispose ofthem in any way without the probate court’s approval istantamount to divesting it with jurisdiction which theCourt cannot allow.

26 Every act intended to put an end to

indivision among

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22 Vda. de Kilayko v. Tengco, 207 SCRA 600 (1992).23 Ralla v. Untalan, 172 SCRA 858 (1989).24 Exhibit “7”.25 Exhibit “A”.26 See Sandoval v. Santiago, 83 Phil. 784 (1949).

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co­heirs and legatees or devisees is deemed to be apartition, although it should purport to be a sale, anexchange, a compromise, or any other transaction.

27 Thus,

in executing any joint agreement which appears to be inthe nature of an extrajudicial partition, as in the case atbar, court approval is imperative, and the heirs cannot justdivest the court of its jurisdiction over that part of theestate. Moreover, it is within the jurisdiction of the probatecourt to determine the identity of the heirs of thedecedent.

28 In the instant case, there is no showing that the

signatories in the joint agreement were the only heirs ofthe decedent. When it was executed, the probate of the willwas still pending before the court and the latter had yet todetermine who the heirs of the decedent were. Thus, forEdmund and respondent Florence S. Ariola to adjudicateunto themselves the three (3) tractors was a premature act,and prejudicial to the other possible heirs and creditorswho may have a valid claim against the estate of the

deceased.The question that now comes to fore is whether the

heirs’ assumption of the indebtedness of the decedent isbinding. We rule in the negative. Perusing the jointagreement, it provides that the heirs as parties thereto“have agreed to divide between themselves and takepossession and use the abovedescribed chattel and each ofthem to assume the indebtedness corresponding to thechattel taken as herein after stated which is in favor of FirstCountryside Credit Corp.”

29 The assumption of liability was

conditioned upon the happening of an event, that is, thateach heir shall take possession and use of their respectiveshare under the agreement. It was made dependent on thevalidity of the partition, and that they were to assume theindebtedness corresponding to the chattel that they wereeach to receive. The partition being invalid as earlierdiscussed, the heirs in effect did not receive any such

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27 Article 1082, New Civil Code.28 See Reyes v. Ysip, 97 Phil. 11 (1955).29 See Exhibit 7.

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240 SUPREME COURT REPORTS ANNOTATEDUnion Bank of the Philippines vs. Santibañez

tractor. It follows then that the assumption of liabilitycannot be given any force and effect.

The Court notes that the loan was contracted by thedecedent. The petitioner, purportedly a creditor of the lateEfraim Santibañez, should have thus filed its money claimwith the probate court in accordance with Section 5, Rule86 of the Revised Rules of Court, which provides:

Section 5. Claims which must be filed under the notice. If not filedbarred; exceptions.—All claims for money against the decedent,arising from contract, express or implied, whether the same bedue, not due, or contingent, all claims for funeral expenses for thelast sickness of the decedent, and judgment for money against thedecedent, must be filed within the time limited in the notice;otherwise they are barred forever, except that they may be setforth as counterclaims in any action that the executor or

administrator may bring against the claimants. Where anexecutor or administrator commences an action, or prosecutes anaction already commenced by the deceased in his lifetime, thedebtor may set forth by answer the claims he has against thedecedent, instead of presenting them independently to the courtas herein provided, and mutual claims may be set off against eachother in such action; and if final judgment is rendered in favor ofthe defendant, the amount so determined shall be considered thetrue balance against the estate, as though the claim had beenpresented directly before the court in the administrationproceedings. Claims not yet due, or contingent, may be approvedat their present value.

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

30 As we held in the vintage

case of Py Eng Chong v. Herrera:31

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

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30 See De Bautista v. De Guzman, 125 SCRA 676 (1983).31 70 SCRA 130 (1976).

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plain and obvious design of the rule is the speedy settlement ofthe affairs of the deceased and the early delivery of the propertyto the distributees, legatees, or heirs. ‘The law strictly requiresthe prompt presentation and disposition of the claims against thedecedent's estate in order to settle the affairs of the estate as soonas possible, pay off its debts and distribute the residue.

32

Perusing the records of the case, nothing therein could holdprivate respondent Florence S. Ariola accountable for anyliability incurred by her late father. The documentaryevidence presented, particularly the promissory notes andthe continuing guaranty agreement, were executed andsigned only by the late Efraim Santibañez and his son

Edmund. As the petitioner failed to file its money claimwith the probate court, at most, it may only go afterEdmund as co­maker of the decedent under the saidpromissory notes and continuing guaranty, of course,subject to any defenses Edmund may have as against thepetitioner. As the court had not acquired jurisdiction overthe person of Edmund, we find it unnecessary to delve intothe matter further.

We agree with the finding of the trial court that thepetitioner had not sufficiently shown that it is thesuccessor­in­interest of the Union Savings and MortgageBank to which the FCCC assigned its assets andliabilities.

33 The petitioner in its complaint alleged that “by

virtue of the Deed of Assignment dated August 20, 1981executed by and between First Countryside CreditCorporation and Union Bank o