UNION BANK v. SANTIBAEZ (2005) J. Callejo FACTS: Efraim Santibaez and the First Countryside Credit Corp.

(FCCC) entered into 2 loan agreements to cover the purchase price of 3 tractors Efraim and his son Edmund executed Promissory Notes in favor of FCCC, for the amounts loaned. A Continuing Guaranty Agreement was executed for the 2nd Loan Agreement. Efraim died in Feb 1981, leaving a holographic will. Testate proceedings commenced before the RTC. 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, and to assume the indebtedness to FCCC. Meanwhile, FCCC assigned all its assets and liabilities to Union Bank. Union Bank sent demand letters to Edmund for the settlement of his account, but the latter refused to pay. Thus, it filed a Complaint for sum of money before the RTC against the heirs of Efraim Santibaez, Edmund and Florence. The summons intended for Edmund was not served, so the complaint was narrowed down to respondent Florence. Florences Answer: The loan documents did not bind her since she was not a party thereto. Considering that the joint agreement was not approved by the probate court, it was null and void; hence, she was not liable to the petitioner under the joint agreement. Trial on the merits ensued and a decision was subsequently rendered by the court dismissing the complaint for lack of merit. RTC: the joint agreement executed by the heirs was null and void; the petitioners cause of action against respondent Florence S. Ariola must necessarily fail. The claim of the petitioner should have been filed with the probate court before which the testate estate of the late Efraim Santibaez was pending, as the sum of money being claimed was an obligation incurred by the said decedent.

Joint Agreement executed by Edmund and Florence was, in effect, a partition of the estate of the decedent. Such agreement was void considering that it had not been approved by the probate court, and that there can be no valid partition until after the will has been probated.

CA: affirmed RTC decision. Petitioner should have filed its claim with the probate court as provided under Sections 1 and 5, Rule 86 of the Rules of Court. Page 2, par. (e) of the holographic will covered the subject properties (tractors) in generic terms when the deceased referred to them as "all other properties." Petitioner claims that: The obligations of the deceased were transmitted to the heirs as provided in Article 774 CC; 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 related thereto The holographic will of the deceased did not include nor mention any of the tractors subject of the complaint, and, as such was beyond the ambit of the said will. No need to file money claim before probate court because the active participation and resistance of respondent in the ordinary civil action against the petitioners claim amounts to a waiver ISSUES/HELD: 1) WON the partition in the Agreement executed by the heirs is valid - NO 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. RULE: There can be no valid partition among the heirs until after the will has been probated. 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, of course, presupposes that the properties to be partitioned are the same properties embraced in the will.

HERE, the deceased left a holographic will which contained, inter alia, the provision which reads as follows: (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. This provision embraces 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 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 courts approval is tantamount to divesting it with jurisdiction, which the Court cannot allow. Moreover, it is within the jurisdiction of the probate court to determine the identity of the heirs of the decedent. For Edmund and Florence 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) WON the heirs assumption of the indebtedness of the deceased is valid - NO The assumption of liability was conditioned upon the happening of an event, that is, that each heir shall take possession and use of their respective share under the agreement. It was made dependent on the validity of the partition, and that they were to assume the indebtedness corresponding to the chattel that they were each to receive. The partition being invalid, 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 filing of a money claim against the decedents estate in the probate court is mandatory The loan was contracted by the decedent. The petitioner, purportedly a creditor of the late Efraim Santibaez, should have thus filed its money claim with the probate court in accordance with Section 5, Rule 86 of the Revised Rules of Court.

Purpose: To protect 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) WON the petitioner can hold the heirs liable on the obligation of the deceased - NO 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 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. Petition DENIED.