Union Bank of the Philippines v.

Santibañez 001
GR No. 149926, 23 Feb 2005, Callejo, Sr., J.
Digested by Eliane Miranda • Law 105 – Succession
Topic: CC Arts. 774, 776, 728
During the pendency of their deceased father’s testate proceedings, siblings Edmund and
Florence executed a Joint Agreement distributing to themselves the tractors the decedent
obtained through loan agreements with FCCC. The said agreement further provided that the
heirs will assume the debt corresponding to the tractor they took. Union Bank, FCCC’s assignee
of all its assets and liabilities, sued the siblings for failure to pay the debts upon demand. The
Court held that a decedent’s creditor should file its claim with the probate court and that the
siblings cannot be made liable under the joint agreement which was declared void for not having
been approved by the probate court.

FACTS
• Efraim Santibañez and First Countryside Credit Corporation (FCCC) entered into two
loan agreements for the purchase of tractors and both times, Efraim and his son, Edmund,
executed promissory notes in favor of FCCC. An additional Continuing Guaranty
Agreement was signed by Efraim and Edmund only for the second loan.
o 1st loan (P128,000 payable in 5 annual amortizations)– for the purchase of 1 unit
of Ford 6600 Agricultural All-Purpose Diesel Tractor
o 2nd loan (P123,156) – another unit of abovementioned tractor and 1 unit of
Howard Rotamator Model AR 60K
• Efraim died leaving a holographic will.
• During the pendency of the testate proceedings, Efraim’s surviving heirs, Edmund and
sister Florence Santibañez Ariola, executed a Joint Agreement.
o The siblings divided between themselves the 3 tractors (2 for Edmund, 1 for
Florence).
o Each of them was to assume the debt to FCCC corresponding to the tractor they
took.
• FCCC executed a Deed of Assignment in favor of Union Savings and Mortgage Bank
(now defunct), assigning all its assets and liabilities to the latter.
• Union Bank of the Philippines (UBP) filed a complaint against a sum of money against
the heirs, Edmund and Florence, after their failure to pay the debts upon demand.
o Edmund was dropped from the complaint because he was not served with
summons since he was in the US and there was no information on his address or
date of return.
o Florence argued that: (1) she was not a party to the loans and (2) the Joint
Agreement void for not being approved by the probate court.
• RTC: dismissed the complaint for lack of merit.
o Claim should have been filed with the probate court.
o Joint Agreement void for not being approved by the probate court.
 o UBP failed to prove that it was the now defunct Union Savings and Mortgage
Bank to which FCCC had assigned its assets and liabilities.
o FCCC’s list of assets and liabilities assigned to Union Savings and Mortgage
Bank did not clearly refer to the decedent’s account.
• CA: affirmed RTC.

ISSUES & HOLDING

• Whether or not the partition in the Agreement executed by the heirs is valid? – NO. A
Joint Agreement in the nature of an Extrajudicial Partition executed during the
pendency of testate proceedings requires approval of the probate court to be valid.
• Whether or not the heirs’ assumption of the indebtedness of the deceased is binding? –
NO. Such was conditioned upon the possession and use of the heirs’ share in the
Joint Agreement which was found null and void.
• Whether or not UBP can hold the heirs liable on the obligation of the deceased? – NO.
The creditor of the decedent should file its money claim with the probate court.

RATIO
The Joint Agreement is null and void. A Joint
Agreement in the nature of an Extrajudicial Partition
executed during the pendency of testate proceedings
requires approval of the probate court to be valid.
• The rule is that there can be no valid partition among the heirs until after the will has
been probated.
• To dispose of the properties without the probate court’s approval is tantamount to
divesting it with jurisdiction which the SC cannot allow.
• Moreover, there was no proof that Edmund and Florence were the only heirs of the
decedent. Their agreement was premature and prejudicial to other possible heirs and
creditors who may have claims against the decedent’s estate.

The heirs’ assumption of indebtedness is not binding.

Such was conditioned upon their use and possession of
the properties they distributed to themselves through
the void Joint Agreement.
• The assumption of liability was made dependent on the validity of the partition and that
the heirs were to assume the indebtedness corresponding to the property they were to
receive.
• The partition being invalid, the heirs did not receive the properties. It therefore follows
that the assumption of liability cannot be given any force and effect.
UBP cannot hold the heirs liable on the obligation of the
deceased. A decedent’s creditor should file its claim
with the probate court.
• Citing a case, the court said that the filing of a money claim against the decedent’s estate
in the probate court is mandatory.
• Further, the court noted that (1) there was nothing in the records that could hold Florence
accountable for her father’s liability; (2) jurisdiction over the person of Edmund was not
acquired; and (3) UPB failed to show that it was Union Savings and Mortgage Bank’s
successor-in-interest to which FCCC assigned its assets and liabilities.

DISPOSITIVE
Petition denied, assailed decision
affirmed.