Wrong court

This case refers to the liability of the heirs for the indebtedness of the deceased.

The case stemmed from the two loans obtained by Elmo from FC Credit Corporation (FCCC) on May 31 and December 13, 1980 in the amounts of P128,000 and P123,156 respectively for the payment of the purchase prices of two Ford 6600 Agricultural All-Purpose Diesel Tractors and one Howard Rotamotor AR60K. Pursuant to the loan agreement, Elmo and his son Eliseo executed promissory notes for the said amounts in favor of FCCC. For the second loan obtained on December 13, 1980, father and son also signed a Continuing Surety Agreement.

Sometime in February 1981, Elmo died, leaving a holographic will and two surviving heirs, Eliseo and his sister Flora. The said will provides that all properties of Elmo, real and personal which "I own and may be discovered later after my demise" shall be distributed in favor of Eliseo and Flora. Thus in March 1981, testate proceedings were commenced before the Regional Trial Court (RTC) for the probate of the Will of Elmo where Eliseo was appointed as special administrator. During the pendency of testate proceedings, Eliseo and Flora executed a Joint Agreement wherein they agreed to divide between themselves and take possession and use the three tractors, two for Eliseo and one for Flora with each of them assuming the indebtedness of their late father to FCCC corresponding to the chattel taken by them.

On August 20, 1981, FCCC assigned all its assets and liabilities including the loans of Elmo subject of the Joint Agreement, to USM Bank, a subsidiary of UBP. Demand letters were thereafter sent by UBP to Eliseo and Flora. When its demands went unheeded, UBP filed a complaint for recovery of sum of money against Eliseo and Flora. Since Eliseo was out of the country, summons was not served on him. Accordingly only Flora became the subject of the complaint.

In her answer, Flora contended that she was not liable to UBP under the Joint Agreement because it was not approved by the probate court and therefore null and void. She also said that the loan documents did not bind her since she was not a party thereto. Was Flora correct?

Yes. In this jurisdiction, there can be no valid partition among the heirs until after the will has been probated. In this case, it is clear that the three tractors are included in Elmo’s will and therefore within the jurisdiction of the probate court. This being so any partition involving the said tractors among the heirs must have the approval of the probate court. To dispose of them in any way without the approval of the probate court is tantamount to divesting it of jurisdiction. Every act intended to put an end to in-division among co-heirs or devisees is deemed to be a partition although it purports to be a sale, an exchange, a compromise or any other transaction. Thus in executing the joint agreement which appears to be in the nature of an extrajudicial partition, as in the case at bar, court approval is imperative and the heirs cannot just divest the court of its jurisdiction over that part of the estate. Thus, for Eliseo and Flora to adjudicate unto themselves the three tractors was a premature act, and prejudicial to other possible heirs and creditors who may have a valid claim against the estate of the deceased.

The assumption of the indebtedness by Eliseo and Flora in the Joint Agreement is not binding. Such assumption of liability was conditioned upon the happening of an event; that each heir shall take possession and use their respective share of the tractors. This condition is dependent upon the validity of the partition. The partition being invalid, the heirs did not receive any such tractor. It follows that the assumption of liability cannot be given force and effect. Since the loan was contracted by the decedent Elmo, UBP should have filed its money claim with the probate court in accordance with Section 5, Rule 86 of the Rules of Court (Union Bank of the Philippines vs. Santibanez, G.R. 149926, February 23, 2005. 452 SCRA 228).

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