Union Bank v.
Santibañez FACTS:
23 Feb 2005 | Callejo, Sr., J. | Need probate court’s approval to partition
PETITIONER​: Union Bank of the Philippines
RESPONDENTS​: Edmund Santibañez and Florence Santibañez Ariola
SUMMARY​:
In 1980, decedent Efraim incurred 2 loan obligations with FCCC in order to
pay for 3 tractors he purchased. He signed promissory notes and a continuing
guaranty agreement with his son Edmund. Efraim died in 1981 so his 2 children
executed an agreement to divide the tractors 2-1 and assume the corresponding
liabilities. Meanwhile, FCCC assigned its rights and liabilities to USMB. UBP,
claiming to be USMB’s successor-in-interest, tried to collect the sums due from
Edmund but Edmund failed to pay. UBP then filed a complaint for sum of
money against Efraim’s children - Edmund and Florence. The complaint was
narrowed down to Florence since summons could not be served upon Edmund.
Florence argued that she was not a party to the contracts executed and should not
be held liable for her father’s obligations. She also claims that the agreement she
entered into with Edmund was null and void since it was not approved by the
probate court. UBP argues that by virtue of Art. 774 of the Civil Code, Efraim’s
obligations passed to his heirs.
The SC affirmed the lower courts’ dismissal of the case. UBP’s claim should
have been filed with the probate court since it was a claim against the decedent.
The JA between Florence and Edmund is not valid since it was tantamount to a
partition of the decedent’s properties, which cannot be done without the probate
court’s approval (because the agreement might prejudice the estate, heirs, or
third parties.)
DOCTRINE:
[TVT Outline] Pecuniary obligations are paid for first (hence, technically not
transmitted through inheritance) before heirs receive (what remains of) their
inheritance.
1. Timeline of incurring obligations:
a. 31 May 1980 → Efraim Santibañez got a Php 128,000.00 loan
from First Countryside Credit Corporation (FCCC) in order to
pay for one unit of tractor..
i. Efraim and his son Edmund executed a promissory
note in favor of FCCC (pay the sum in 5 annual
amortizations)
b. 13 Dec 1980 → second loan agreement for Php 123,156.00 so
that the Santibañezes can pay the balance of another unit of
tractor (w/ accessories) and one unit of Howard Rotamotor
Model AR 60K.
i. Efraim and Edmund signed another promissory note
and they also executed a continuing guaranty
agreement
2. Feb 1981 → Efraim died, leaving a holographic will.
3. Testate proceedings commenced. During the pendency of the case,
Edmund and his sister Florence executed a Joint Agreement (JA), where
they agreed ​“to divide among themselves and take possession and use the
above-described chattel and each of them to assume the indebtedness
corresponding to the chattel taken as hereinafter stated which is in favor
of FCCC​” (2 for Edmund, 1 for Florence)
4. 20 Aug 1981 → FCCC assigned all its assets and liabilities to Union
Savings and Mortgage Bank (USMB).
5. Union Bank of the Philippines (UBP) sent demand letters to Edmund, but
Edmund failed to pay.
6. So UBP filed a complaint for sum of money against Efraim’s heirs -
Edmund and Florence. Summons was not served on Edmund because he
was in the US (and no info on his address). Thus, the complaint was
narrowed down to Florence.
7. Arguments of Florence:
a. Loan documents did not bind her since she was not a party
 b.
Joint agreement between her and Edmund was null and void
since it was not approved by the probate court. Therefore, she
was not liable to UBP
8. RTC dismissed the complaint. Ruling:
a. UBP should have filed the claim with the probate court where
the testate estate of Efraim was pending because the obligation
was incurred by the decedent.
b. Joint agreement was void because it was not approved by the
probate court. There can be no valid partition until after a will is
probated.
c. UBP failed to prove that it is USMB (which is the assignee of
FCCC)
9. UBP appealed to CA. UBP argued that:
a. Efraim’s obligation passed to his legitimate children and heirs
as provided in Art. 7741 of the Civil Code; hence, no need for
probate court’s approval of the JA
b. The siblings’ unconditional signing of the JA estopped Florence
from denying liability under the document
c. Property partitioned is not enumerated in the will
10. CA affirmed the RTC decision. Hence, this petition before the SC.
ISSUES:
1. Whether the tractors in question are embraced in the will - YES
2. Whether the Joint Agreement between Edmund and Florence is valid? -
NO
3. Whether UBP’s claim should have been filed with the probate court -
YES
4. Whether UBP has proved its personality to file the complaint? - NO
1
Article 774. Succession is a mode of acquisition by virtue of which the property, rights and
obligations to the extent of the value of the inheritance, of a person are transmitted through his death to
another or others either by his will or by operation of law. (n)
RATIO:
Whether the tractors in question are embraced in the will​ - ​YES
1. Efraim left an all-encompassing provision in his will:
“(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.”
2. Provision (e) covers the 3 tractors in question. Consequently, any
partition involving the tractors is not valid since at the time the JA was
executed, the probate proceeding was already pending.
Whether the Joint Agreement between Edmund and Florence is valid? - ​NO
1. The probate court already acquired jurisdiction over all properties of
Efraim. Thus, to dispose of them in any way without the probate court’s
approval is tantamount to divesting the probate court of its jurisdiction.
2. In executing any joint agreement which appears to be in the nature of an
extra-judicial partition, court approval is imperative.
3. There was also no showing that the signatories in the JA were the only
heirs of Efraim. The probate court had yet to determine who Efraim’s
heirs actually are. Therefore, the siblings’ act of adjudicating unto
themselves the 3 tractors was premature and prejudicial to other possible
heirs and creditors who may have a valid claim against the estate of the
deceased.
4. Edmund and Florence’s assumption of liability under the JA was
conditioned on possession and use of their share (in other words,
dependent on the validity of the partition). Since the partition was invalid
and neither received any tractor, assumption of liability cannot be given
force and effect.
Whether UBP’s claim should have been filed with the probate court - ​YES
1. A probate court has 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. It is primarily
 concerned with the administration, liquidation, and distribution of the c. To settle the affairs of the estate ASAP, pay off its debts and
estate. distribute the residue
2. There can be no valid partition among the heirs until after the will has 7. Nothing in the records could hold Florence accountable for her father’s
been probated. liabilities. The promissory notes and continuing guaranty was signed by
3. The law enjoins the probate of a will and the public requires it, because her father and Edmund. Since UBP did not file its claim with the probate
unless a will is probated and notice thereof given to the whole world, the court, it can only go after Edmund as co-maker of the PN. (But the court
right of a person to dispose of his property by will may be rendered has no jurisdiction over Edmund so no more further discussion)
nugatory.
4. The authentication of a will decides no other question than such as touch ​ O
Whether UBP has proved its personality to file the complaint? - N
upon the capacity of the testator and the compliance with the solemnities 1. No sufficient showing that UBP is the successor-in-interest of USMB
required by law. 2. USMB, not UBP, is the assignee of FCCC
5. Since the loan was contracted by the decedent and UBP purports to be
his creditor, the money claim should have been filed with the probate SEPARATE OPINIONS: ​None
court, in accordance with Sec. 5, Rule 86 of the Revised Rules of Court.2
6. Filing of money claim against the decedent’s estate in the probate court
is mandatory. Why?
a. To protect the decedent’s estate 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.
b. For speedy settlement of affairs of the deceased & early delivery
of the property to the distributees, legatees, or heirs

2
Section 5. ​Claims which must be filed under the notice. If not filed, barred; exceptions. — All claims
for money against the decedent, arising from contract, express or implied, whether the same be due,
not due, or contingent, all claims for funeral expenses and expense for the last sickness of the decedent,
and judgment for money against the decedent, must be filed within the time limited in the notice;
otherwise they are barred forever, except that they may be set forth as counterclaims in any action that
the executor or administrator may bring against the claimants. Where an executor or administrator
commences an action, or prosecutes an action already commenced by the deceased in his lifetime, the
debtor may set forth by answer the claims he has against the decedent, instead of presenting them
independently to the court as herein provided, and mutual claims may be set off against each other in
such action; and if final judgment is rendered in favor of the defendant, the amount so determined shall
be considered the true balance against the estate, as though the claim had been presented directly
before the court in the administration proceedings. Claims not yet due, or contingent, may be approved
at their present value.